Earnings call transcript: Celulose Irani Q3 2025 earnings miss prompts stock dip

Celulose Irani SA reported its Q3 2025 earnings, revealing a slight miss in both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.2302 compared to the expected $0.2353, and revenue of $437.6 million against a forecast of $441.89 million. Following the announcement, the stock experienced a 2.24% decline, closing at $8.72.

Key Takeaways

• Celulose Irani missed EPS and revenue forecasts slightly, with a 2.17% and 0.97% surprise respectively.
• The stock price fell by 2.24% post-earnings announcement.
• The company achieved a strong EBITDA margin of 33.7% and revenue growth of 4.7% year-over-year.
• Strategic projects like the Gaia platform are nearing completion, while a machine shutdown is planned for early 2026.

Company Performance

Celulose Irani demonstrated robust operational efficiency with a 33.7% EBITDA margin and a year-over-year revenue growth of 4.7%. Despite missing earnings expectations, the company’s strategic focus on the paper for packaging and corrugated cardboard segments continues to drive its market position. The company’s deleveraging process and share buyback program highlight its commitment to financial health.

Financial Highlights

• Revenue: $437.6 million, up 4.7% year-over-year
• EPS: $0.2302, slightly below the forecast of $0.2353
• Net Income: $42.06 million
• Adjusted EBITDA: $446 million
• Net Debt to EBITDA Ratio: 2.06, improved from 2.3

Earnings vs. Forecast

Celulose Irani’s Q3 2025 earnings showed a small miss with an EPS surprise of -2.17% and a revenue surprise of -0.97%. While these misses are minor, they contrast with the company’s previous quarters, where expectations were met or exceeded.

Market Reaction

The stock price of Celulose Irani fell by 2.24% following the earnings announcement, reflecting investor caution. The decline positions the stock closer to its 52-week low of $6.45, indicating potential concerns about the company’s future performance amidst strategic shifts.

Outlook & Guidance

Looking ahead, Celulose Irani expects stable pricing through the year-end and anticipates a volume recovery in the second semester of 2026. The company continues to advance its Gaia platform projects and is considering the launch of the Neos platform, contingent on interest rates.

Executive Commentary

Sergio, an executive at Celulose Irani, emphasized the company’s pricing strategy, stating, "We have a price maintenance strategy. We try to not perform price reductions." Another executive highlighted resilience, saying, "Our expectation is that results should be more resilient and better."

Risks and Challenges

• Potential impact of planned machine shutdown on production capacity.
• Ongoing volume reduction strategy might limit growth potential.
• Market conditions and interest rates could affect future platform launches.
• Fluctuations in scrap prices might influence cost structures.
• Global economic uncertainties could impact export revenues, which constitute 10.5% of total revenue.

Q&A

During the earnings call, analysts inquired about the dynamics of scrap prices, the rationale behind volume reduction strategies, and challenges in the flexible packaging segment. The company’s dividend distribution policy also attracted attention, reflecting investor interest in returns amidst strategic changes.

Full transcript - Celulose Irani SA (RANI3) Q3 2025:

Company Presenter: As we begin our earnings call for the 2025, we’ll begin with a quick presentation of our results in this quarter. And then after, we’ll open up to Q and A. And this can be done by the chat or even by mic open. We also have translation into English, and this will be a rate provided on the company’s IR. And so this will we’ll start off with our presentation.

We had a net revenue of $433,453,000 with an adjusted EBITDA of 446,000,000 and a margin of 33.7% and a net income of $42.00 $6.00. And the ROIC in the last twelve months ended with 12.9%, and the cost of debt also in the last twelve months for income tax and social contributions of 8.7. Then the adjusted net debt to EBITDA ratio, 2.06, an important drop, which had dropped from 2.3. And then when we look at the total, we have an elevation and 4.7% in regards to the ’4. Then we have 10.5%, which was the representation of the exports in the third quarter, 10.7% in ’twenty five and seven point four percent in this quarter.

And the EBITDA, we had an elevation of 15.9 compared to the 2024 and fourteen point six percent in regards to the 2025. So this is a very significant result and a margin of 33.7%. When we look at our net income, we had an increment. Just to give you an idea, the dark green is the recurring profit without biological assets. The light green are the biological greens, and they have a tax credit of IPI that are not recurring as we had a lawsuit in the 2025 that we won.

And we were we registered. Right? So we had a recurring profit of 72.3 compared to the second quarter, 32.8% in regards to the ’24. Biologicals had significant increase in value, which was lower than in the previous quarter where we recognized also the acquisition of the forest assets that we have in here in. And the third quarter ended with a total of 42,076,000 reals of net income.

When we get into the second round for packages, the sale of packaging and cardboard, the market as a whole had major evolution in regards to the ’24, 0.9%, And in regards to the second quarter, 7.5%, which is mainly due to the seasonality in the period. So in square meters, evolution was significantly similar, and we had a seven and a half percent in regards to the ’24 ’25. Sorry. So when we look at Adeniyah specifically, we had a drop in volumes in regards to last year and an evolution of 2.5% in regards to the ’25. This drop is mainly due to our policy to value profitability, the detriment of volumes.

We had a drop in volumes because we were very firm in price transfers over the last year. I will see up ahead. This was an evolution that was very significant and the recovery of the volumes that takes place naturally as the market becomes more heated in the second semester. So when we look at this in square meters, we had an evolution of 3% and a drop of 8.3 in the of the ’24. So that represents about 83,000,000.

And our prices, as I mentioned, we had an evolution, and we closed with 6,000 a 192 reais per ton and 2.1% above the second income second quarter. And we had an elevation in the pricing, which is the residual of the price increase we had. And then in regards to the ’4, we had an evolution of 14.1%. So this is very significant, quite higher a bit higher than the inflation in the period. And also due to the increase in scraps, which elevated our costs, and that made our price transfer become a little more intense.

And this is the average price. And that’s 1.6% above the second quarter and fourteen point six percent above the ’24. So that’s one of our main reasons for the profitability to evolve. However, this price transfer was really important for our profitability in the company over the period. Now when we get into the paper for packaging, which is what we sell to the market, we had an evolution in our total sales of 0.8% in regards to ’24 with 33,000 a 104 per cents.

165¢. Sorry. And 37¢ from the flexible packaging and 6,145 of rigid cardboard. And most of this is transferred. There’s 12 volumes that we sold.

And and so it’s a little bit better than in the second quarter because we transferred a bit more paper, but we had substantial evolution also in this sale of paper for flexible packaging of 7% and a bit above what we did in the third quarter last semester. And so then we see the paper for flexible packaging, and we had a drop of 1.6% in regards to the second quarter in ’twenty five and an evolution of 0.2% to the ’24. This drop in regards to the second quarter is mainly due to the depreciation of the dollar. So that influences in revenue from exports due to the drop that the dollar had during this period. And the average prices of the rigid packaging had an evolution of 15.6% in regards to the ’24, and that’s mainly due to the increase in the scraps.

And so the scraps were a lot higher than inflation in the period. And in regards to the second quarter, we had an evolution of 1.4%, reaching per tonne. The price of the scraps was a significant evolution of 70.1% in one year. As we ended the third quarter with $11.99 dollars and that’s the overall market. And Gucci is the statistical agency that works with the numbers of the scraps in the market, and a drop of 5.6% in regards to ’25.

So that was very significant. And this drop is going to remain in the next months due to a bigger offer of scraps in the market. When we look at Edeni, we had an evolution of 17.4% in the year and a drop of 7% compared to the previous quarter, ending at $10.93 per FOP. When we look at the leverage, we had a drop that was very significant, 2.36206. And this drop in leverage was already foreseen in our projections, our financial projections for the cycle of investments is here, as you can see in the Gaia platform.

This was done after the re IPO in 2020, and they’re at the final stretch with some projects that are still being conducted within the Gaia platform. But most of the investments already happened, and now we’ll enter in the phase of deleveraging before we begin any new cycle for investments. So we have a gross debt of $1,752,000,000 a cash position of $181,000,000 and a net debt of $1,717,160,000 And most of this is in national currency. Only 1% is foreign currency, and most 89% is long term, and only 11% is short term. So our financial situation is very stable and very well controlled within parameters we’ve established in our financial policy management policy.

Our ROI starts evolving when it comes to the worst moment, let’s say, when we were still performing investments in 2024. So there is a substantial drop, but now they start off with a peak trend. And this quarter, we ended at 12.9%, and the constant debt was at 8.1% after income tax and social contribution. So we had 1.1 percentage points in regards to the second quarter and 2.1 percentage points in regards to 2024. So this evolution is also expected to happen and should take place throughout the next quarters.

And when it comes to dividends, we distributed in the third quarter $26,318,000 reaching 0.3%. And in the last twelve months, which we’re completing in the third quarter, we distributed $169,000,000 0.79%, a dividend yield of 9.85. And that’s considering the price of the shares for the closing date of the 09/30/2024. Then we completed the buyback program and we were able to wrap up the business And we canceled 9,328,000 ordinary or common shares, and the average price was at 7.62% per share. And the share capital was, after the cancellation of the shares was at 250,000,501.

And this is a measure that we’ve been implementing over the last few years as we understand that the value of the shares in the market does not reflect the intrinsic value of the company, and that ends up being the capital allocation is very efficient at this moment. And so we relaunched the buyback program in 2025, which began in the same day in the transition of the prior program with a period of eighteen months and a limit for acquisition with an total amount of ordinary shares. So we also have an initial debentures to be able to handle the guy of five projects with our small hydro power plants, and this is what was already expected among the Gaia platforms. But we also had the license to begin with this, so it’s just longer than what we expected. But we were able to get the license.

And this issuance of a 120,000,000 worth investments over fifteen years from the date of admission, we were able to have an IPCA plus 6.76% a year, and that’s considering a CDI minus 1.13 per year, which is a very It’s very competitive, and that really improves our debt level as this cost of debt is lower than the average cost we have for the debt as a whole. So this is important fundraising for us here and really helped us handle this investment. So when we look at the Gaia platform projects, we have our main initiatives complete, but we’re also beginning with the re potential addition of Sao Luis, Gaia five, and we’re wrapping up on the last phase of Gaia four. And that’s why we started to begin this.

And so we had 125,000,000 in the 01/1931. Now we still have two projects that are at the final phase. And and a new printer, back to the folder, is a final or cutting edge version from Mitsubishi with 87% for our case. It’s already in the performance phase. And the guy 11, where we already have seven 65% advancing, and the the machine has a plan shut down for January 2026.

And that’s what’s how we’re gonna be completing this. Our main machine, which is gonna increase paper for coordinated cardboard, and it’s very competitive machine. And so with this, we were able to complete the 11 projects expected in Zaya platform. And we had to investment tranches, and we’re completing the second round. So in the third quarter, we had some important highlights.

For the for the third consecutive year, we were able to conquer acknowledgment from the Epica magazine on diversity along with Essos. And that’s on diversity, equity and inclusion. We’re the best company in the paper and pulp segment. For the fifth consecutive year, we were recognized and acknowledged as the transparency trophy of refund in the liquid category of up to €5,000,000,000. And this year, we were among the 10 companies, and we were the highlighted company for the year, five years winning the prize.

And this year, we were the highlight. So that means we were the company that had, let’s say, the best performance among those that had revenue below €5,000,000. And we’re the third company that’s most innovative in the vapor and pulp sector. And for Brazil, ’25, and we were able to keep up with this position and then we were finalists also and in fact award for best practice in ESG and this recognizes ESG practices that are very innovative in different companies and sectors. So then our team here also for IR and investor relations and accounting and financial company, which is always available to our investors.

And Ojibar is our CFO and Andres, our Investor Relations Manager Mario is our Investor Relations Analyst as well as Daniella and Izzo and Giovanni and Aris in Investor Relations and New Business and then we have Ivan Do, our accounting manager in elect. And in the financial area, we have Marcos, our financial manager, and Emmanuel, who’s a specialist as well, that’s working on behalf of our investors. So great, guys. When it comes to presentations, that’s pretty much it. And I will open up to have a period for Q and A to answer any questions that the team might have.

Thank you, Sergio. Good afternoon, everyone. It’s a pleasure to be with you guys once again in another webinar. You could send me the questions here in the Q and A, in the chat or raise hand. I’ll open up your mic.

And so the first question comes from Jeremy. It’s at XP, and he’s saying, look. On the, the demand for credit cardboard, and he wanted to hear a little bit of the dynamic on this and the prices and which sectors have been really pushing demand and what’s the expectation for volumes and prices throughout the fourth quarter of this year. And also, if you could talk about the expectation for 2026. And then you have first, we can talk about demand, and then we’ll get into the second one on cost.

That’s okay? Yes. The demand for the second quarter, as expected, has come in line with expectations. The month of October was really good when it comes to closing for the market as a whole. And so the numbers disclosed by Inkopal were in line with expectations.

And so they’re all in line with the seasonality expected for the second semester. And our expectation is that this will be kept till the end of the year, so no big surprises. But for next year, the projections that Incafal has disclosed, they have a projection strongly supported by the Vision to Lovagos Foundation. And the projection for this is about 2% growth in 2026. Sectors have really been levering demand.

One of them is one where we have pretty good exposure to, which is the batteries and animal protein sector. So even with the rate the American rates, there’s been redirecting to other markets. And we’ve really had excellent demand besides, of course, the food sector, which has had significant performance as well. And so that’s mainly due to the salary levels that have been kept at the peak. Numbers were disclosed yesterday.

Unemployment continues at historical minimum rates, and this, of course, helps a lot with the segment for the food in the food sector. And, of course, there’s still a debt level among families, which is concerning. So we don’t see we haven’t been feeling any kind of stress for demand in the food sector, which is responsible 70% of our specific demand and another 50%, I’d say, of the market as a whole. So, Linzoma? He’s also asking about the prices.

Sure. We already cover that. Yeah. So I think you were very clear on the evolution of this segment for corrugated cardboard. I would just add on that in regards to prices, we’ve been able to keep up with our prices and adjustments and have been implemented at the end of the year.

We don’t see any perspectives on a drop when it comes to pricing, but we’ll consider the maintenance of the prices till the end of the year. So I don’t think we’re gonna have any major pressure considering that the demand in the second semester is basically occupying the capacity in the market as a whole. And if it’s if there’s still some capacity, it’s very small. Right? But our concern is always, as you can see in the beginning of the year, lower seasonality.

And even the drop in scraps also generates a bit of pressure. But we do have a policy of not reducing the prices. And we believe this is something that’s conquered, and it’s going be very difficult for us recover conquered prices. So we are really firm with managing our prices, and we should keep these stabilized during the next quarters. Perfect.

Well, the second part of this question is from Miami is And a few quarters ago, we talked about the reduction of the price scraps, and we were starting to cover the numbers that hit any margin performance in the company. So we can imagine part of this is remaining due to the reduction in volumes. In some players stopped their protection. But I wanted to understand with you all what you guys think, what’s the balance point on the price of scraps that would not encourage the recovery and the production of recycled goods considering the price of carbon at different levels.

Right? Well, I want to consider the level of the price of scraps that will maybe motivate or restart the machines and recycle goods. Well, that’s one point. And another point is what you’ve been seeing when it comes to the price of the scraps and if you could if we should expect more reductions up ahead. Well, the scraps got into a rupture cycle, let’s say.

The trend is that there should be a reduction in the first quarter, And probably in the June ’26, but normally, the drops between the we have this point of dropping cycles and increasing cycles. But we imagine this will remain since we haven’t seen much pressure in this market even at this moment with higher demand. So we do expect scraps to continue to drop at a pace that’s very similar to what has gone on in the last few months. This is the expectation. Of course, this will help us when it comes to profitability in the next quarter.

So what else to keep on? Well, the balance point. The average price of the scraps historically is 900 reais per ton. And so today, we’re above BRL 1,000. So the expectation is that this should be close to the average price.

Of course, we can remember that this is a market that has a bit of volatility. So it’s around some peak moments, right, downwards and upwards. And so it’s also related to the kraftliner dynamic. When we consider why we have space for the kraftliner and here in the packages, this can lead to this closure of recycled goods. So it’s not just a proxy of the scrap prices, but also related to the kraftliner prices.

Well, as market and exporters of kraftliners have had relevant exports in the last few months, if they redirect paper to the internal market because externally the market’s a little weaker, this would end up making scrap prices go down. But we’ve seen some closings in recycled operations, and we’ve also been adding more virgin fiber paper into the market. So that helps also with the scraps market to intensify the drops. Well, thank you. Here we have Edgar from How’s it going, Edgar?

Can you open up your mic? I’m well. Great. Thank you all so much for the questions. Congrats on the results and sharing a bit of your deleverage journey, a lot of returns to shareholders and the buyback strategy.

And so Let’s get back to the questions. The first question is if you could explore a bit of the value of revolving strategy. And it becomes very clear in the company’s results, but you guys have been able to retain pricing. There’s an increase in the average price of card and cardboard, but on the other hand, and so I want to understand up until what point you guys would accept losing market share to the detriment of pricing. So is there some, like, optimal calculation of what would be the volume you should be operating with when it comes to this and operational capacity versus installed capacity.

It really makes sense maybe to give up on market share to the detriment of price. I wanted to hear you guys talk about this a bit and how you consider the strategy and how the decision making takes place in a sense and even how this should be in 2026. And then I also wanted to get into a little more details about the scraps. Right? Obviously, we have this balance point, maybe the historical price of BRL per ton, but also a point that ends up being a driver for the market dynamics, which is the spread between the price of for covered boxes and scraps.

And I think maybe there’s a sweet spot. Maybe there’s a delta that makes sense. And then from one point in time, you would start having more pressure. Right? But, of course, the other factors is demand and all of this.

If we consider this level, is there already some pressure maybe on reduction of prices in the industry? And that kind of meets the first question with the strategy of value over volume. Right? So And what’s the scrap price that would be a sweet spot for you guys? That wouldn’t pressure price and would still maybe bring in an increase in profitability, let’s say.

And last, if possible, I would just like to know if there’s an update on the Nails platform. We see you guys are getting close to the completion of major Gaia projects and of course, you have two ECHs. We’re close to completing most of the projects now. So for now, we do expect some news this year that these uncertainties in the market maybe have led to a decision up ahead. And so is there like a day that you where you would expect to make a decision?

Or if you have any new updates in regards to this, that would help a lot. Thank you so much. Okay. Thanks, XR. Thanks for the questions.

That really clarifies a lot of our strategy in valuing profitability to the detriment of volumes, and this has been a strategy that we’ve been implementing historically. And so we have a lot of experience when it comes to this corrugated carbon market. And whenever there is an opportunity to have an increase in prices, we’ll always give up on volumes, simultaneously to not generate any losses due to price increase processes, right? So it can be implemented vigorously. And as soon as the price cycle is complete, we start the recovery of the volumes in a very careful manner.

And so we start learning with volumes that have smaller profitability in portfolio, trying to readjust prices and search for more volume, and we’re gonna work on prospecting as well. So we’re very careful with new prospects, right, especially when it comes to seasonality periods that are lower to avoid a market price reduction that could be retro retrofitting a systemic value destruction process. So we try to do this in a very cautious manner after the price increase cycle. So we have a price maintenance strategy. We try to not perform price reductions, especially in the box market.

Then that the the sheets are maybe a little more related to the scraps or closer ratio. But when it comes to prices of boxes, we don’t want to perform any adjustments with this variation of the scrap prices. And with this, we recover volumes and taking advantage of them seasonality moments. They’re a little better. So it could be that we’ll go through the next quarter with a little less volume than what we had last year or this year maybe in the first But focusing on from the second semester next year with a bit more of a recovery in volumes, if the seasonality helps, of course.

Right? So this strategy of coexisting capacity and keeping up with the prices modified, really helping you to have a bigger control on the cost variables and performing some adjustments here and there, working less extra hours, and that all makes your process more efficient. So bringing in volumes with profitability that’s lower maybe and maybe would lead to a distraction of value so that we’re very careful in this process when it comes to implementing prices so that we could really get the most out of the price increase cycle. And, also, in the volume reduction process, we’re very careful because we know the market has seasonality in the second semester and volumes in the we have recovering. So part of the volumes you see that are lower in the third quarter are going to be recovered in the fourth quarter due to seasonality and part of them throughout next year.

So when it comes to the price of scraps that you referred to, typically, this relationship between the price of corrugated cardboard and the scraps price are around six times of the historical average. We had some important variations in a few months. Right? And so that went to about 12 times where the scraps dropped a lot, and corrugated carbon prices also went up a lot. But this is atypical.

Right? If you look at this long term horizon, you’ll see the average of six times is seems to be more consistent than the variations that took place in the short term. So we’re very close to this balance point between the price of scraps and corrugated carbon prices. But considering the market dynamic, we believe there’s gonna be a drop in scrap prices, and it should be closer to stability in the next quarters. And so what was the last question?

And what about now now? This is really what we were talking about. We have the engineering work done, all the projects that’s running, and this is all part of this initial funding process in the M and A platform. But we’re just gonna start disclosing the context at the moment when we understand this is adequate, and the current moment is really bad due to the high interest rates. And so and also a lot of uncertainty in the horizon.

So we plan to be more conscious as we launch through the cycle and make the deleveraging happen a little stronger throughout the next year. And with this, we’re prepared, and we have the ready engineering to launch the Neos platform as soon as we see a more intense drop in interest rates and, of course, the uncertainties we’re all experiencing. Okay. Perfect. Thanks, guys.

Not sure if I answered everything, but I think so. The next is Stefan from Citi. Hi there, Stefan. Well, good morning. And let’s thanks thanks for the taking the question.

And so first, I wanted to explore about the flexible segment. And so you talked about the price in the quarter that was impacted by the value of the dollar, but we wanted to look at what you guys are seeing in the 2026 and and on costs as well. I think that was already pretty well explored with the drop in staff and possible continuation of this movement. But correct me if I’m wrong, this movement in the third quarter seems to be a little more accelerating in the end of the last quarter. So there was considered that affected all of the drop in the quarter?

Or is there still something that was kind of impacted by the fourth quarter? So once again, the drop in cost in the third quarter already reflected the lower scrap prices? Or is there still a little more to come? Those are my two questions. Thanks.

So what we discussed there is the average price. Right? So naturally, we would have a new level of prices, and we have this dropping curve. And then you also have, in the fourth quarter, more of a drop in scraps that we’re expecting to happen due to the market dynamics. So you start off with a lower average price.

And then we also have an expected drop in the next month. So and then in regards to flexible packaging, we have to split this market. We sell paper first, flexible experience. The packaging and also in the showroom bags, we have papers in machine two, which are the papers for bags. And then we have papers for machine four, which are the thinner papers.

And that’s where we have the price transfers that are above inflation. And this is a market where we have leadership, and those are the papers that that’s for bakeries and other basic other businesses that use this kind of thinner paper. You know, we’ve been able to transfer prices for inflation actually. Then we have the bags market machine two that we refurbished in the Gaia platform. And then we have excellent performance, and the market has had really good dynamics.

So we’ve been able to transfer prices, and there’s also this other ingredient of scraps in the competition of the papers. But most is virgin fiber. We’re able to transfer prices and pass along prices for machines from paper for machines one has been a little more challenging. And that’s because companies that have the bad conversion, they have a market that is maybe a little worse than what they expected, and they’re replacing spot papers in the market, which has been leading to a bit more of a difficulty to pass on prices in this specific segment, which is that of industrial bags. This is important for us, and we have a premium price in regards to the average in the market considering our leadership in this segment, but also because we are the only company that provides paper in a safe manner to small and medium sized converters because the companies that produce this type of paper typically have a conversion operation, especially for our cement bags, and they come in and out as the market becomes better or worse.

So at this moment, there’s been a bigger offering of this type of paper in the market. With this, we’ve had a bigger challenge to transfer prices in the market where we have leadership and premium prices. So and he keep Well, yeah, think it’s just to add on. The fourth quarter is maybe very similar to the fourth to the fifth. But maybe as a slight variation, we have the Christmas periods.

October, November is really really been strong. And in the other segments, as mentioned, if you have this variation from the third to the fourth, it’s gonna be very small. And then the biggest influence in this issue is the dollar, of course, which had a significant drop. And so Sorry. I got up too quick here, but we have still other questions here to answer.

Then we have Angelo here. He also has a question. Congratulations on the results. I wanna see what the scenarios for profitability in the end of this year considering the increase recently in prices and the the scenario with the drop in scrap prices fall. The answers in the questions, since we have a drop in scrap prices taking place and the average price is also starting off with a lower price than the average in the previous quarter, then it’s natural we’ll have an evolution in the profitability because volumes do not have too much of a modification.

The number of December is shorter when it comes to volumes for packaging and the operation of cartons and the smaller operations of converters will be working till the twenty seventh, people get into vacation. And that affects the orders in the month of December. But that is our typical seasonality rate. So the fourth quarter could have a little less volume in the third quarter due to the month of December. But when it comes to profitability, our profitability grown since prices are stable, and the cost of scraps have been dropping as well.

Great. So then we have done third year, and there are a bunch of questions here. So, anyways, what would be the average of fair price in the market in the long term? Well, this is something we can foresee. Right?

Because fair pricing depends on so many different conditions. Right? But what we can say is that the average history of the price of scraps and decals are about R900 per ton, and the price will vary around this much. Then the other part of the question is that the company ended the third quarter with about EUR $525,000,000 of profit reserves and another EUR 180,000,000 in accumulated profits, 700,000,000 in total. And since the last earnings call for 2025 and if there is an approval of the exemption of in the income tax, what would be the challenges of having the company distribute additional dividends?

Could these these dividends reach 700,000,000 considering the possibility for the payment of the dividend? I think I can answer this one, Sergio. Actually, well, Sergio, we have a distribution dividend policy of already distributing 50% of our profits ever since leveraging the company as long as it’s below 2.5 times. So the objective here is to optimize capital structure to leverage returns for shareholders over time. The exemption of dividends and we understand this is important, but this is only valid for individuals, And for companies, an additional distribution of dividends will not interact with our strategy for optimization of all of this capital structure.

As we already distribute 50% of our profits every year and as the company wants to grow, we the other 2% that retained are directed to expansion projects because we have a lot of expansion projects return rates that are way above the cost of capital. So we don’t have anything in regards to mention in regards to this, the dividend distribution. But we’ve been keeping up with this. And this hasn’t even approved been approved definitely by this by congress. Right?

We think it’s gonna be approved unanimously, but it is a topic we’ve been keeping up with. We haven’t really seen opportunities in regards to it so far. So, Sergio, do you wanna talk about anything? No. We have no decision in this regard, really.

And we should fulfill our billing policy. And as established, right, there’s no decision yet. And if there is, of course, we’ll communicate about it, but there’s no discussion underway at this moment. Great. So let me have him move in there.

He’s asking about greater pressure on the prices of recycled paper and scrims. Have you guys seen a drop in prices of paper in this quarter? Oh, it could be. And if the scraps continue to drop at this pace, there is a strong correlation. But, of course, since demand is still pretty good and we have customers that are very safer, We’ll be controlling this all very well.

But he he can add on and explain how the market’s doing. Okay. Well, that’s exactly it. But, of course, it depends on the supply and demand. When you have a drop in the scraps, sometimes you drop in something related to paper, but it’s dropping at a rate that’s lower.

So probably in the first quarter, we’ll have a slight drop in the price of recycled paper, but very little in my view. And we’re not so exposed to this market right now, 6,000 tons per year. And most of the recycled papers produced by the company are transferred to the packaging units. Well, here he has another question, and he said, well, the scraps have a significant participation of share in the cost of paper and recorded cardboard. What’s your analysis of prices for the fourth quarter?

Well, we’ve already talked about this when it comes to this dropping cycle in the spreader. So that’s pretty much the same question. Then for 2026, that’s the trend. So at a peak or drop in prices and still the supply of this raw material. So here, you can also see that she manages the paper and cardboard units, and that’s from the Northeast.

Right? But, anyways, we’re expecting this continuity in the South. 2026 is a big question mark. Right? It’s gonna depend on internal demand, external market for kraftliner paper and the amount of operations.

So there’s still so many variables that could influence this. But up until where we can see, all these variables demonstrate this drop. The international market has had more of a difficulty. And the exports are still very resilient for craft partners. And so if there is a drop in the international market, of course, the products would be redirected to the internal Medicare.

With that, you have more of a supply for papers and Bergen Fibrains in the market. So that influences supply a lot. Great. So our next question complement. Did you wanna say something now?

Okay. Our next one here is from Ozeel Swadis. What are the reasons for an increase in production costs in the third quarter? Well, an increase in production costs, that would be I think in the third quarter. Maybe we can help with this one here.

Right? Maybe it’s the paper mix. No. No. We had a level of depreciation we had in the quarter.

Well, there was not any issue really. That was more structural. Well, it’s about cost of production where we’re pretty much stable. Some inputs that have a dollar influence still have not led to direct influence on the prices, but they should drop if the dollar keeps up at this pace and and scraps, which would be one of our main direction calls when it comes to variable costs, have been dropping. And so then, know, first about the rates and could we expect this behavior for 2026?

And the second one is about the announced platform. About the Gael platform, they were already expecting a drop in the ROIC at the level of about 10%. And and they start this peak or growing trend getting back to historical levels of the half. But all of this depends on this dynamic for results next year. And if everything keeps up as it is and we evolve in profitability with a drop in scraps and volumes continue to keep up with the projections, we don’t expect a shift in this trajectory when it comes to deleveraging or increase of the ROIC.

That should keep up. Perfect. Then our projection for EBITDA margins are really in line with what’s going on this quarter and should evolve a little more in regards to the next quarter, in line with what we’ve been expecting for the Gai platform. So this GAD platform recovery starts configuring in a stronger manner as they get back to normality levels. Alright.

Perfect. And the next part was about the Nalance platform, but that was already answered. And if you have any questions, I think that’s already been answered. Last question we have for today is from someone, Miguel Hennings, he’s asking about what’s about the last latest buyback program and if there’s, a ceiling of the lowest acquisition. We assess this together with the Board, and we will we define this as things take place month by month.

We don’t have like a specific target, but we assess the market, we assess stock behavior and other variables to define till where we’re headed to when it comes to the buyback process. Right? Also when we consider this so we can buy back as well. That’s below with what is internal. Alright.

No other questions? Alright, guys. Thank you so much for your presence. I think it was a really good quarter, and our expectation is that results will continue to get better with the drop in scraps, which have significant influence when there’s a peak has occurred in the last few months. But the expectation is that results should be more resilient and better and, of course, capturing the total returns for the Dia platform.

We still have a few points of returns to be captured, especially machines, machine one, but that’s gonna happen over time. So with this, I mean, investments that were made from the IPO, the company changed the size, and this has been captured in an ongoing manner and more consistently over the quarters. When the launch of new projects, of course, depends on these macroeconomic variables and also the drops in the interest rates and uncertainties also around the world. So I think that’s pretty much it on our side. And do the directors have any other points?

No? Okay. So we wanna thank you all for your presence, and we’re always available with our teams to meet you in the best way possible. Thank you.

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