• Net Revenue: 5 billion BRL, up 14% year-on-year.

• Adjusted EBITDA: 1,805 million BRL, with an EBITDA margin of 36%, expanding by 5 percentage points from Q3 2023.

• Total Cash Cost per Ton: 3,179 BRL in Q3, a 4% increase year-on-year.

• Net Debt: 29.5 billion BRL, an increase of approximately 5.7 billion BRL quarter-on-quarter.

• Leverage Ratio: Net debt over adjusted EBITDA at 3.9 times.

• Liquidity: 2.2 billion BRL, with 7.5 billion BRL in cash.

• Dividend Payment: 425 million BRL to be paid on November 21st, with a dividend yield of 6%.

• Warning! GuruFocus has detected 8 Warning Signs with KLBAY.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Klabin SA (KLBAY) reported a 14% year-on-year increase in net revenue for the third quarter of 2024, reaching 5 billion BRL, driven by higher pulp and kraft liner prices and increased sales volume.

• The company achieved an adjusted EBITDA of 1,805 million BRL, with an EBITDA margin expansion of 5 percentage points compared to the third quarter of 2023.

• Klabin SA (KLBAY) successfully integrated the KTE project ahead of schedule, achieving a new cost level and operational efficiencies.

• The company is experiencing strong demand in the corrugated boxes market, particularly in Brazil, with expectations of continued growth in the fourth quarter.

• Klabin SA (KLBAY) has a robust liquidity position, ending the quarter with 2.2 billion BRL, supported by 7.5 billion BRL in cash and an undrawn revolving credit facility.

Negative Points

• Klabin SA (KLBAY) faces ongoing logistical challenges, including global shipping delays and capacity constraints at Brazilian container terminals, impacting shipment volumes.

• The company's net debt increased by approximately 5.7 billion BRL quarter-on-quarter, primarily due to the payment for the KTE project.

• There is uncertainty in the Chinese market affecting short fiber pulp prices, with expectations of a slight drop in the fourth quarter.

• Despite improvements, the company still faces pressure from high OCC costs in the domestic market, affecting profitability in the corrugated boxes segment.

• Klabin SA (KLBAY) is not considering asset sales to accelerate deleveraging, relying instead on cost reductions and cash generation from ongoing projects.

Q & A Highlights

Q: Can you discuss Klabin's capital allocation strategy and the potential for increasing fluff capacity given market needs? A: Cristiano Teixeira, CEO, explained that Klabin is focused on deleveraging and sees long fiber fluff as a strategic product for future investment. Despite market needs, the company will not change its two-year trajectory focused on reducing debt and generating cash before considering new investments.