Priority is expansion of fluff pulp, a market in which the company is already among the fourth largest in the world


Cristiano Teixeira — Foto: Silvia Zamboni

Cristiano Teixeira — Foto: Silvia Zamboni

The largest producer and exporter of packaging paper in Brazil and leader in the paper packaging market, Klabin has chosen Santa Catarina State for its next cycle of growth. The investment will start with fluff pulp, used in the production of menstrual pads and disposable diapers, but will also cover paper and packaging.

With three growth projects underway – in Paraná, São Paulo, and Ceará – the company is designing a future expansion round in the state where it already has industrial operations. The plan is to install between 1 million and 1.2 million tonnes per year of additional capacity of different products, such as fluff pulp, sack kraft, and kraft liner, in the Otacilio Costa and Correia Pinto plants, in the next few years.

Klabin does not yet disclose investment forecasts for this new cycle. However, based on similar projects and considering recent inflation which has further affected machinery and equipment costs, market sources heard by Valor estimate that a package with these features are expected to demand investments of $3 billion to $3.3 billion.

Klabin’s management had already indicated its intention to expand the production of fluff pulp. With the Puma I project, in Ortigueira (Paraná state), the company has become the fourth largest in the world in this segment, whose production is concentrated mainly in North America.

“We did not present a proposal about the fluff to the Board of Directors, but we are carrying out studies and we foresee fluff and long fiber as the main products in which the company is likely to invest in the future,” said CEO Cristiano Teixeira at the opening of Klabin Day, on Wednesday.

According to the executive, the risk of global recession has led the company to postpone the discussions about the new growth cycle, so a formal project may be submitted for approval by the board only at the end of next year or the beginning of 2024. Initially, the project was expected to be submitted for approval in the first half of 2023, but the global context has changed. If approved, the investment would start to be executed in 2024, and operate after 24 months.

In the pulp sector, the big bet in the short and medium term is on fluff. According to Alexandre Nicolini, head of Klabin’s pulp business, this type of pulp currently represents 10% of the global market, and specialized consulting firms project an expansion of 3.5% per year until 2040.

Just as it did in the Puma II project, which is in the construction phase of the second paper machine, the MP 28, the plan is to also to execute the new expansion cycle in stages.

According to the initial design, the new fluff pulp line would have priority and an installed capacity of 500,000 to 600,000 tonnes per year, together with a sack kraft machine of 200,000 to 250,000 tonnes per year. The kraft liner investment would come in the second phase.

The forest base to cope with the expansion is estimated at 100,000 to 120,000 hectares and Klabin has begun to prepare it. In Santa Catarina, the planting has begun on an additional 35,000 hectares for the project.

The company plans to invest R$5.4 billion in 2023, of which R$2.2 billion in maintenance and R$1.1 billion in special projects, including Figueira and Horizonte plants, said Marcos Ivo, the company’s financial and investor relations director.

The Puma II project, the largest investment in the company’s history, is expected to receive another R$2.1 billion over the next year. Puma II’s second paper machine, the MP 28, focused on paper boards, will go into operation in the second quarter of next year.

“The modernization or substitution of the Monte Alegre plant boiler is still under study, and we have two alternatives that indicate a lower investment than expected. The forecast is to conclude the studies and submit them to the board of directors for approval during the first half of the year,” said Mr. Teixeira.

If the project is approved, the disbursements planned for 2023 will refer to preparatory works and are already included in the total investment announced for the year.

According to the executive, the company’s sales volume in the next five years will benefit from the new capacities that have already started to operate, increasing the share of corrugated cardboard packaging and paper in the revenues.

“Historically and structurally, the Ebitda of packaging is more resilient and stable, especially in corrugated paper and paper board,” said the executive, adding that, for 2023, the vision for the average price of board in the international market implies at least a double-digit increase.

Given the new projects, the return on invested capital (ROIC) should continue to advance in the coming years, added Mr. Ivo. Between 2016 and 2022, this indicator was 14% on average, compared to 9% in previous years. From 2023 on, the forecast is for an average ROIC above that 14%.

“Looking ahead, we are confident in indicating that the ROIC will be higher as the projects since Puma I mature,” said the executive.

*By Stella Fontes — São Paulo

Source: Valor International
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The second quarter is still expected to be marked by sluggish activity on the domestic market, although a “slight” upturn in demand for paper packaging has already been perceived, due to more favorable seasonality, says Klabin CEO Cristiano Teixeira. International trade, on the other hand, is likely to remain firm.

“The domestic market is still likely to go slowly because of the inflation scenario,” he said in a conference call with analysts. In the first quarter, the company’s sales to the Brazilian market represented 55% of the 900,000 tonnes sold in total, against 56% in the fourth quarter and 61% in the same period of 2021.

At the beginning of the year, Klabin benefited mainly from price increases realized in recent quarters and from the reallocation of volumes to the overseas market, which offset the greater pressure of costs and the seasonally weaker consumption of cardboard boxes in the country. As a result, net revenue rose 28%, to R$4.42 billion, and the EBITDA advanced 35%, to R$1.73 billion.

According to the company’s head of the pulp business unit, Alexandre Nicolini, the readjustments announced for hardwood pulp as of May 1, in China, the United States and Europe, have already been applied. In the Chinese market, the increase announced by the company was $30, to $810 per tonne.

Traditionally, Suzano, the world’s largest producer of eucalyptus pulp, used to lead the movement of readjustments by South American producers in the different regions. In recent months, however, Klabin has taken the lead. “The company had a vision of the difference between the resale price and the market price in China and, therefore, there was room for a new increase,” Mr. Nicolini justified.

In Europe, mentioned Mr. Nicolini, an increase of $50 per tonne was applied for May and there is a new increase, of $50 per tonne, announced for June. “The market remains quite resilient, although the situation in China is a little more delicate, because of the lockdowns. Even so, Klabin does not feel any reduction in the demand for its products,” he said.

According to the executive, the company anticipated a higher pressure on pulp prices in China compared to other regions and, last year, decided to increase the volumes for the other markets, including Brazil. The strategy proved to be right, and the realized prices were above the industry average.

In the corrugated cardboard business, said head of packaging Douglas Dalmasi, Klabin opted to forgo volume and concentrate on prices during the first quarter. “We don’t look at specific market share. Our vision is more medium-term. We underperformed the market in terms of volume, but prices were above the sector’s average because we favor profitability,” he said.

In the kraftliner market, Flavio Deganutti, head of the paper business, declared it is possible to see the first signs of a resumption in U.S. exports of this type of paper, but a major announcement of capacity closures contributes to maintaining the fairer relationship between global supply and demand. “We don’t see any major movement [of change in this scenario] in the coming months,” he added.

Source: Valor International