Earnings call transcript: Dexco Q3 2025 reveals EPS surprise and stock dip

Dexco SA reported a surprising earnings per share (EPS) of $0.0438 for Q3 2025, significantly surpassing the forecasted EPS of -$0.0206. Despite this unexpected positive result, the company’s revenue fell slightly short of expectations, coming in at $2.22 billion compared to the anticipated $2.23 billion. Following the earnings announcement, Dexco’s stock experienced a decline, closing at $5.47, a 1.28% drop from the previous session, amidst broader market challenges and sector-specific headwinds.

Key Takeaways

• Dexco’s EPS exceeded expectations by 312.62%, marking a significant surprise.
• Revenue slightly missed forecasts, falling short by 0.45%.
• Stock price dropped by 1.28% post-earnings despite the EPS beat.
• High interest rates and leverage continue to challenge financial performance.
• Strategic focus on premium products and operational efficiency.

Company Performance

Dexco’s Q3 2025 performance showcased resilience in earnings despite a challenging economic environment characterized by high interest rates and competitive pressures in the wood panel and ceramic tiles markets. The company’s strategic emphasis on premium product segments and operational adjustments has begun to show potential, although revenue growth remains a concern.

Financial Highlights

• Revenue: $2.22 billion, slightly below forecast.
• Earnings per share: $0.0438, significantly above forecast.
• Positive cash flow: $46 million.
• Leverage: Approximately 3x EBITDA.

Earnings vs. Forecast

Dexco’s actual EPS of $0.0438 far exceeded the forecasted -$0.0206, resulting in a surprise of 312.62%. This marks a notable deviation from expectations and reflects the company’s ability to manage costs and improve margins despite revenue shortfalls. Historically, such a large EPS surprise is uncommon for Dexco, highlighting effective financial management.

Market Reaction

Despite the EPS beat, Dexco’s stock fell by 1.28% to $5.47 following the earnings release. This decline suggests that investors remain cautious, possibly due to the revenue miss and ongoing macroeconomic challenges. The stock is trading closer to its 52-week low of $4.96, indicating persistent market concerns.

Outlook & Guidance

Looking ahead, Dexco is targeting improvements in EBITDA margins, with strategic plans to enhance efficiency and reduce leverage. The company is also contemplating potential asset sales and dividend considerations for 2026, aiming to strengthen its financial position amidst ongoing market challenges.

Executive Commentary

• "Cash is king," emphasized Luciana, CFO, highlighting the company’s focus on cash flow management.
• CEO Raul stated, "We have a lot of urgency, and we know that it’s hard to grow, so we need to take action," underscoring the proactive measures being taken to navigate current challenges.
• Raul also noted, "Our objective is simple... Consistency is key. Focus is vital," reflecting the company’s strategic priorities.

Risks and Challenges

• High interest rates continue to constrain cash generation.
• Competitive pressures in the wood panel and ceramic tiles markets.
• Potential volatility in export volumes.
• Need to manage leverage effectively.
• Execution risks associated with strategic transformation initiatives.

Q&A

During the earnings call, analysts focused on Dexco’s debt reduction strategies, potential asset sales, and improvements in return on invested capital (ROIC). The discussion also touched on profitability challenges across different business segments, highlighting investor concerns about sustainable growth and financial stability.

Full transcript - Dexco SA (DXCO3) Q3 2025:

Executive (Unidentified), Dexco: Selling, higher-end products. You’ll see many of the effects from this, so reduced headcount, downtime, suboptimal production. 2026 will have a closer match to our capacity. At the end of the year, we’re going to stop all lines to adjust our inventories and working capital to sell our inventory and prepare our plans for the next year. Looking at metals and sanitary ware. With metals, I think we found our path forward. We’ve been gaining market share in the luxury segment. Our services have improved, and I think clients are starting to recognize that. Revenue has also increased, especially in the premium segment. We also made a decision, especially in sanitary ware, to reduce our participation in the super-competitive segment, which looks at price first, and we need to protect our portfolio in order for others not to go into the premium segment. It’s not a very.

Competitive sector, but we reduced our offer in a number of parts. We stepped out of the electric showers industry last year, but also we reduced our participation in sanitary ware, which is a very competitive segment. We’ve been improving our margins significantly, and this is only possible if you have all the rest in order: good service level, ability to deliver, quality, if you are close to specifiers and customers. We’re starting to see sequential price increases, which haven’t been fully reflected in this quarter’s results. We have a lot of potential to see that in the fourth quarter and especially next year. There’s a significant lag between the raw material price increases like copper until we can pass this on to our products.

We’re starting to see Deca, which is an absolute market leader, taking its space in metals, and Deca Sanitary Ware now has a good share and a good mix. In sanitary ware, we have to make a big effort in reducing costs and recover our plants. We now have two plants after closing one in Paraíba. With these two plants, we can make about what we made with five plants a few years ago. There was a silent effort of creating efficiency, improving our assets and industrial footprint. We’ve been also making an effort to rebuild our competitive capacity. With that, Deca is posting similar results to what we had last year. Metals have a much better result than that, and sanitary ware is still rebuilding its results.

We’ve seen the same running rates in October, but in November, and we expect it in November, but in December, we’re going to have holidays, downtime for maintenance. We will start seeing better deliveries on a quarterly basis in 2026. Occupation is not very relevant when we’re talking about serial production, where you can increase and decrease it very quickly. I just want to say that sanitary ware has improved significantly. We are at 66%. There’s one piece of equipment stopped in Recife, but we can start it back up when the market grows. There’s a lot of equipment that can be rebuilt, and we can also bring in imported goods to recompose our portfolio. With the same industrial structure we have, we can grow in metals and in sanitary ware.

The advantage of the investment cycle that we’re finishing this year is that the company is now prepared for any growth it needs to have. Adjusting our utilization to the lower demand is very important in order not to burn cash throughout this period. Adjusting our demand to the supply, or our supply to the demand, is essential in order to pilot the business and drive it forward. That concludes the toughest part of the presentation. Adauto will talk about the wood division, which is following its plan very well and posting very good results. Hi, everyone. It’s a pleasure to be here with you again. There are many of you I hadn’t seen in person for a while. Let’s get started. Talking about the wood division, just to give you a market overview, this is still a solid market, and it has been advancing gradually.

We’re finally reaching a point in which we are understanding our seasonal pattern. We had lost that reference. The second half of 2024 was very strong. What was normal in the past became unstable for a few years. In the domestic market, we’re still seeing a small growth, which is okay. Considering the circumstances, this is very positive. We saw a reduction in export volumes. This is impacted by the U.S., but it’s not only the U.S. With improved profitability in the domestic market, naturally, the wood panels industry is looking towards the domestic market and trying to balance things out. We know that there are logistics bottlenecks in Brazil, and unfortunately, that affects us. With MDP and MDF, we have been advancing strongly in our operation, Duratex and Dexco Wood. The highlights, and again, we’re working at high capacity utilization rates. That is very relevant.

You might remember times in which we were at 60-70% capacity utilization, and it’s very hard to extract value from that, especially in an operation that has such huge assets and so much invested capital. We’ve been making price readjustments systematically, which is also a good new thing in the market. The competitors are becoming more rational, and we have as well, but this is not by chance. Costs are higher. Wood availability has generated a lot of pressure. The huge variations that we saw in the past are no longer happening. Naturally, we see a lot more competition. Everyone is fighting for the same market, but people are being more rational and logical, which makes it easier for us when we try to profit from our portfolio. Another significant highlight is that despite the fact that there wasn’t.

Any standing wood sales operations that were significant, and, you know, that became common in the last few quarters. The basic changes, so producing forests, cutting and transforming them into wood panels and flooring, is generating the same operational results, which is very positive. Our EBITDA is healthy, and we’re not seeing those extraordinary results.

Raul, CEO, Dexco: We will keep on working on opportunities, as Raul said, but we are happy because there was a significant difference in the foundation of our profitability. Which is something we believe is being adjusted. As you can see, we have a smaller volume as compared to the market. Basically, we are talking about exports. We are favoring the domestic market. There is a difference between MDF and MDP. The furniture industry is really rocking. Lots of expectation about Black Friday. Retail. Wood retail is picking up. The large stores like Bahia and Magalu, once again, focusing on the essence of the retail business: furniture. Household appliances. Trying to focus on what sets them apart. We see very relevant activities like the partnership between Casas Bahia and Mercado Livre. A big surprise to me, showing interest in looking for alternatives. Our industry customers are working actively in on e-commerce.

Some of our large customers are among our top five, operating 100% of their sales via e-commerce. That means more health and less risk in their operation. We are very pleased. Our number one challenge now is to maintain those results and to evolve, as we have said earlier. Productivity, what we can control, improved mix, and that is happening. Some activities are not that obvious to the market because they are tactical moves. We are emphasizing added value products, and that has made a difference for us to preserve our margin. Additional information, another excellent piece of news. We have here the operation for LD Cellulose. First, I would like to say that we are very pleased with their operations, the operating results. Lenzing and Dexco, each with their expertise, brought a winning formula. We are working.

With a capacity above what we had designed in our business case. Obviously, we were faced with a number of challenges in the construction of our plant because of the pandemic, because of increased interest rates. We know it’s a leveraged operation, but the work that was done to restructure the debt, to reschedule our financial flow, and mainly the operating delivery. The situation is very positive. When we look at the numbers year to date, even with a maintenance downtime in July for 10 days, we show a larger ship volume. Because of that downtime, we may have lost about 5,000 tons, which is not that significant. That shows planning. Unlike Dexco, where we have scheduled maintenances in the same quarters, the maintenance cycle in the cellulose industry, in the pulp industry, is longer. It doesn’t necessarily match the quarter in the previous period.

It might be 15 or 18 months. It depends on the need, but it’s not every 12 months as we have for panels. Another highlight, we had a slight exchange effects variation since last year, nothing that significant. I could say that the big point of attention, if I may say so, was the amount earmarked for general maintenance. So we conclude the wood market performing solidly, and we expect the year to be very strong and positive in order to support Dexco in our turnaround. With that, I turn it over to Raul to conclude with the outlook for the future. In a nutshell, what do we have? Nothing very different from what we have been saying. We need to speed up our deleveraging operations. We’ve been at three times our EBITDA for quite some time.

What makes it difficult for us to accelerate is the cost of this business. We work a lot to get to 100%, but the problem is the foundation. There is always something like 15%, and that’s very high, taking away our ability to generate cash. Luciana already gave us some color in that regard, based on what we can say. That’s why that’s the point number one: deleveraging. We have key activities in product portfolio and ceramic tiles that will simplify for customers to choose products as industrial efficiency. We’re taking 600 items out of about 1,600, so we will be left with 1,000 products. It’s a large portfolio. It simplifies life for the plant. It makes it easier for us to manage, focusing on products that can deliver margin, that are different, that cannot be found everywhere, and that will allow us to sell a stronger mix.

We are recovering margin, and we are no longer building inventory. Our downtime had that objective in mind, not to build inventory. I’ve said a few times that our production capacity is in line with our sales capacity. We have an eye on it. There is no point building stocks. We will stop for maintenance in sanitary and metalware divisions in Q4. It’s important to do that so that plants are prepared for next year. Unlike continuous production, you can choose when to stop. Obviously, there are non-absorbed, fixed costs that will impact Q4. Everyone goes on vacation. We sell inventory, so that will be important. We believe that the demand for panels will continue strong. We have seen discipline in the sector, even in the competition. The cost of wood reduces the cushion we have to go wild in our prices.

Dexco has a policy to defend its market share in line with our capacity share. We have seen that whenever we make some price adjustment, the competition does the same. Whenever there is a cost increase, and we have done a good price exercise, LD Cellulose has found its production model. It’s been gaining production capacity. We built it for 500,000. We are way above that. This downtime, there will be several quarters without any downtime. Prices are recovering. I think our prices are less volatile than market pulp. This year, we saw price drops, but more linear. The price has been recovered. Starting in Q4, we will see better pulp prices without the cost of downtime. We are paying careful attention. If there is an interest, we will start thinking about dividends next year, but this is something that we must develop along with the partners.

Productivity and operational efficiency. Haddad mentioned a few times we should control what we can. There are countless efficiency activities. What we did was to remove what hurt our performance. Our performance is in line with the market on the industry side for ceramic tiles, just like in wood. We have to keep on using well the assets we have available, the collective intelligence that we have. The cost that a sophisticated company like Dexco has has to be paid through different initiatives like digital and cost reduction. I would like to conclude with something important to us. We celebrated 75 years in 2021. We changed our name from Duratex to Dexco, creating a robust plan. We are about to celebrate 75 years. It is going to be next year.

Among the initiatives to prepare Dexco for those 75 years, we launched that structured transformation plan. Our objective is simple. There is nothing super different from what we had been doing. As I have said, consistency is key. Focus is vital. Under that umbrella, we will have an office with structured transformation, with dedicated people, with the incentives tied to prioritized projects. We will guide the organization towards a focus. We will do this and not much more than what’s not here. To run well, business as usual, and spend our energy here and not develop new different things that will drain our resources. The current times require focus above business as usual. This transformation plan, beginning with financial deleveraging, with strong activities. We have several non-operational assets, tax credits, stake in other companies, and operating businesses that can be reassessed to accelerate this transformation.

Go to market. We already see some results in Q3. With a better mix, we have to look at channels. Where we sell better to understand the role of our retail initiative. Next year, we will start with 12 franchises that are historic conversions. How are they performing? To what extent will we accelerate that next year? We want to capture margin. And gain market share. In the retail market. The tiles turnaround is still a key topic. Apparently, we have found the ideal size of the operations, but there is still a lot to be done. 1.5-1.6 million in total capacity for tiles production. That’s the demand. What we need to do is to reduce our inventories and the capital employed, but we should focus on the production of this new mix to accelerate products that we just launched. Botucatu started now. We started developing products there.

We ended. We will end 2025 with a concluded ramp-up of the plant. From that plant, we will get what we need in our go-to-market to recover market in the premium segment. Wood. We are very pleased with what the wood division is doing, looking at all its capabilities. It’s an innovation machine looking for efficiency, creating increasingly successful performance plans. We can’t fool ourselves. In order to attract new talents, in order to give more space to the existing talents and to build the future, we must design the future of wood. There are several initiatives in R&D. Benchmarking initiatives. What can we do better in our ability to develop forest? Dexco is the most efficient company in forest development in the world. In Brazil, as Brazil is the most efficient, Dexco ends up being the most efficient in the world.

A relative good implementation cost and with enormous competence. What can we do with that? One of the things is to look at the forestry business as part of our business, as Haddad mentioned. It’s important to say that there is no wood left. There are no more forests left for us to have great deals, but we have opportunities to buy, sell, trade, develop forests, and drive the business. Should there be a weakening in the demand for panels, our core, our forests, we turn forests into panels very well, but what else can be done? What else can be done with the panel? Lighter panels, more durable, more resistant, with other configurations. We have 20,000 hectares of forest in Alagoas. So that’s a ticket to growth with a yield comparable to what we have in the Southeast. This market won’t stand still. It will still be.

A big locomotive for quite some time, but we have to see what needs to be done in the future. Our Deca competitiveness, metalware has been gaining. Market, recovering market share with good volumes, good mixes. Margins falling short of what we need. What do we do with our industrial footprint? Do we add imported products to our portfolio? What do we develop in new products in-house? What segments can we tackle with what footprint? There is a lot of room to gain competitiveness and to have a business with consistent margins. Deca above 20 in the two divisions, tiles between 15-20. These are ambitions for the midterm. Where we need consistency. I think that was it. That’s the idea for the five-year plan. To drive those 75 years. Very well for Dexco to get to 80 years in a different shape.

Paraphrasing Abel Ferreira, who said that 90 minutes is a lot in soccer, a year is a long time for us at Dexco. We have a lot to do. Before we open for questions, let me reinforce a few messages. As Luciana said. You should remember that. This quarter, we generated positive cash flow. The consumption of the year is still large, especially because of projects, but in terms of operations and even projects, we generated $46 million in cash. Is it enough to lower the debt? No, but it is a sign of what is happening in terms of operations in EBITDA management. $1.5 billion of the ventures we can run from the 2026 window. We no longer need to raise money in election year. We know that in an election year the market is more volatile, so we can escape that. It is important to have competitive cost.

The venture increases the average maturity of the debt. It reduces costs on the financial side. As Raul said, Deca is at a different level in Q4. There are things that will affect the result, but the level we achieved in Q3 is what we will consider for 2026. Possibly blanket vacations, maintenance, and in working days of lower sales in December will be affected, but October and November is just like what we had in Q3. Our big challenge is in tiles. There will be recovery, but a slow one. We have inventories, and over 2026, we need a recovery with a new footprint, a new production volume. We will find the way. Wood, as Haddad mentioned, we are solid, robust. Our estimates show that. We have had consistent results, margins above capital costs. We can generate value to shareholders, and we are opening a new front.

What is our biggest strength? The Dexco strength is our forests. We have an opportunity to explore more our forests. What else can we do with our forests? That’s very important. The last point, the transformation plan Raul alluded to, is very relevant. These are fronts that are going to give a lot of value to the company in the next few years, and we’re working to make them tangible, to give more numbers and more color about this, but this is what we can say for now. I’d just like to say that the order of the day for Dexco is the sense of urgency. We have a lot of urgency, and we know that it’s hard to grow, so we need to take action. We heard about deleveraging. We’ve told you what we can tell so far, but there’s a lot happening.

There’s a lot on the pipeline, and we have a huge sense of urgency. We’ll continue now with the Q&A. If anyone has a question. I’ll start with Marcelo and then Ricardo. Please introduce yourself, Marcelo. Thank you, everyone. My name is Marcelo Arazi from BTG. My question is for Raul. One year ago, we were at Dexco Day, and you introduced yourself to the market. You mentioned that you were focusing on reducing costs and deleveraging the company. Now, looking retrospectively, what were you able to deliver in this first year and also your future outlook? What is your main pain point today? What do you spend your time on the most? Finally, what was the relationship with Itaúza like in this first year? If I can also ask Luciana a question. We know that selling assets is a hot topic.

Everyone asks about that. We have been speaking to the rest of the market about this as well. We talk a lot about the operation in Colombia as a possible asset to be sold. I would like to hear from you how you balance these things, having the possibility of selling an asset that generates EBITDA versus the cash benefit that it could provide in the short term. I can start off. That was well remembered. I took over this role six months ago, and I had been named for it about a year ago. The challenges I found are still the same. I do not think a lot has changed. I was already in the organization. I had already been working in the wood division for two years. I also worked for two years in the finishings area.

That gave me an understanding of the battles to be faced, and they remain the same. There is a relevant topic here, which is the fact that any turnaround happening from now on needs to resolve things in the short term, of course. I think that’s what keeps us up at night, having a company with this cost of debt. That removes possibilities for growth, for investing. The entire machine that we have prepared for investing is unable to run because we are limited by these things. Indebtedness is an important factor, but we need to reduce indebtedness without compromising the company’s future. What I mean to say is that we are keeping our eye on the ball without compromising our future, and that’s how we’ve always done things. The two main challenges are certainly indebtedness, and everything related to deleveraging will involve.

Looking at our possibilities very carefully. We have a large number of small levers which build up to a positive result, but there are some large levers that have very clear trade-offs on the short and long term. This is the first topic. We’re always looking at that. We’re starting to gain traction with non-operational assets. Many things will happen from now until the first quarter of 2026, which will relieve us but not resolve everything. Of course, they will allow us to make structuring choices with a lot of grounding and calm leave. That’s the first part. The second part is that in ceramic tiles, there have been some changes. I thought the market was at its lowest last year, and then during the first quarter, and I thought that the second half would have healthier demand, but that has not happened yet.

We had this plan to reduce capacities until the middle of the year. We had to do this quickly because the demand did not bounce back as we expected. We’re still waiting. I mean, it’s not possible for a market of this size to lose 25% of its volume in such a short amount of time. A part of it was because a lot of the demand was advanced during the COVID pandemic, and that demand was not structural, was not constant. I think they advanced a part of that demand, but I think we need to see growth levels at least matching our consumption. Now, inventories are more closely matched, are better adjusted, capacity is being adjusted by many players in the industry. We can expect that this will be better, but we can’t expect that we’ll have a lot of growth.

What scares us is the aggressiveness in price, which is only possible if you’re selling at no margins. We will need to accelerate our share of the premium segment. These are the two main elements for me: deleveraging and doing it right, doing everything we can do to have a bit more tranquility, but of course, also keeping an eye on structuring alternatives. Of course, understanding the trade-offs very well. When it comes to Itaúza, contrary to many of the other companies that we’ve invested in, we have people on the board who were already in Itaúza. We got many of the inputs firsthand, but we have been creating a closer relationship with them. Itaúza has a lot of intelligence and can help us throughout several processes, and we have a very healthy relationship.

We’re very close and consistent, and I don’t think it can be any different. The company turned 50. Dexco will turn 75. Itaúza will turn 100. This is a part of a group that is very solid, that has a long-term perspective, and that believes in Brazil. No surprises there. Good morning, Marcelo. Thank you for your question. In line with what I stated during my presentation, right now, with the sense of urgency that we’re having with deleveraging and the cash generation that we’re pursuing, we’re reassessing all of our assets, whether they are operational or not. Right now, there are many studies on our table, but we haven’t decided on absolutely anything right now. This is important to share with you.

For the sake of transparency, yes, we are assessing several assets, operational or not, but right now, we have not decided on anything that we can share with you. Thank you. We will hand it over to Ricardo from Safra. Hi, my name is Ricardo Montegali from Safra. I have two questions, and the first is for Luciana. Still speaking about debt and deleveraging, I know that this is a recent thing, and it might not be ready, but what are your goals, or how do you imagine they will be for the future? For leverage. Gross debt, net debt, do you have an ideal EBITDA to cash flow conversion rate, or what is the cost of debt that you think Dexco should have? That is my first question. My second question is for Raul. On several occasions, we talked about return on invested capital, and there are two ways of growing that.

You’ve done both more in some segments than others. What would be the next steps? Are you at the right, are you at the optimal return levels? If you can break this down per sector, and what will be your next steps? Do you think that this is still relevant to re-rating your shares or not? Let me start. When we talk about deleveraging, it’s important to say that we have a huge sense of urgency. Like I said, there is a lot more management on working capital. We’re reducing our inventories and reassessing our optimal inventory level without compromising our operation. We need to be consistent with what we did this year. Our goal was to increase inventories in metals and sanitary ware. We are not placing our operation at risk. That is not the case, but we are reassessing it.

There is some of the risk that we lost. Since we talked about the IOF tax, we ended up consuming some of our cash. There are some quick wins with working capital that we have to mention. We’re focusing on continuing to have the sense of urgency and controlling what we can control in our operation. When it comes to the indebtedness level, no, we are not happy with what we have right now. Repeating what Raul said, 15% interest rates are extremely high in order to generate cash for the operation. We’re generating cash, but that comes at a high cost, high financial cost. There’s an internal demand to reduce our indebtedness. We don’t have a minimal value that we can share with you, but we understand that a healthy leverage would be about 2.5. You said it, so that’s true.

Most companies do not get scared when they get to 3, but with these interest rates, this is insufficient for what we want to do. We have a very clear top-line element, which helps to answer your question on return on invested capital. We are very far from the level that we believe is acceptable for our business. About a month ago, we presented our strategic plan, and ROIC is one of the main points to be executed. We have three main topics for our business, and ROIC is the first one. Some of the initiatives have already started, some will take one or two years, and some will take a bit longer, closer to that five-year period. Yes, this is a key point for us. I do think that it can be a leverage for unlocking our shares, but yes, there are two things.

First, we need to generate positive free cash flow. That’s our number one priority for next year. Which is to stop any cash burn, recurring or non-recurring. In general, we need to generate cash to at least reduce some of this debt. The second element that will unlock value is to really show concrete actions towards deleveraging. Whatever we can reduce in cost of debt will generate cash. Once we start generating enough cash to organically reduce indebtedness, as we grow our top line and generate more cash, that means that we can increase our top line by reducing debt payments. That will make it more organic, or we might need to do structuring work to accelerate this. Just to underscore, our focus is cash is king. If there’s one measure that is at the top of our mind, that is cash.

Okay, Stefano will ask the last question. He’s from Citibank, but I want to remind you of what Adauto said when he joined. He had a button that said, "I love free cash flow." I think that is our motto. In 2016, we also faced a very difficult moment, closing the plant in Ita Pichininga. We saw that leverage was high during that time. Many things happened. There was a COVID pandemic, but again, this is a very important metric, and Luciana has been bringing this to the center of our discussions at Dexco. Stefano, your question. Thank you. I’m from Citibank, and I’d just like to ask again about improving profitability at Deca.

You had talked about outsourcing and other events, and I’d like to know if that front has advanced, if this has been contributing to the improvement we saw in your margins and what we can expect for 2026. When it comes to LD Cellulose, we had talked about asset sales, if we should expect that for next year, if you can give us some color for 2026 and beyond. Thank you. As I said during my presentation, there are several factors that prove that we have been able to advance this investment return cycle. We do not have specific numbers for next year and 2027, but after the operation is stabilized at the current volume, the cost-effectiveness, Raul mentioned that prices have been more resilient than traditional pulp. Especially after restructuring our debt, we expect that we will pay dividends in three years in advance.

This will be gradual. We’re not going to solve cash issues with dividends from LD, but we’re very happy to advance it. It’s a solid movement. It’s the kind of business in which you can’t have radical changes very quickly. You’re depending on forests, and they are a very complex variable right now. We’re fully supplied currently. The last few movements allow us to make bets, and we believe that next year we will start the dividends cycle, but we need to take it one step at a time. When it comes to margins, I think there are two things that are important to mention. First, you need to improve your mix. Operational efficiency. We’ve been able to do that in our plants. You need to use outsourcing as a driver for that.

Outsourcing allows us to bring in products that our plant is not as able to manufacture. We have a very flexible basis of plants, which makes us a very broad company. That gives us more competitive advantage versus people who only do outsourcing. If you’re buying 1,000 pieces in China, that’s one thing, but if you’re buying 500,000, that’s different. That allows our service level to be better. We’re convinced that as we’re selling forests, outsourcing will be important, except for ceramic tiles, which do not make sense to import. They’re very competitive in Brazil. The side effect of that is that when you start a project, that impacts your working capital. You have a longer import cycle, and some of the working capital that you built here was used to build up inventory for outsourcing products.

As you create S&OP, intelligence, and supply chain management, you can bring these inventories to better levels. That allows us to reduce the working capital at the plant. When you make products abroad, the supplier will carry the copper and the intermediate raw material. We transform that process. Besides, we can use financial tools to be able to finance those operations with very interesting interest levels that are more competitive cost-wise with more competitive capital than we have in Brazil. Outsourcing will be an integral part of our business. It is a very successful initiative with the potential to grow, but also with the potential to add products we do not sell today, and that would help with Deca accessories and products for mirrors, for a number of kitchen products that we could import and use the Deca brand without immobilizing capital or the plant. Wonderful.

With that, we conclude our Q&A session. I have the pleasure of inviting Ricardo Martins, Executive President of Abrimacki, from Abrimacki, to give us one more seal. Thank you, Raul. Thank you, Guilherme. I would like to thank the whole executive team, the IR team. Thank you for the information. Abrimacki started out of that need to bring analysts and companies together and then develop all that market according to what we needed. It’s important to underscore that information is our raw material, and the partnership with Duratex and Dexco is part of our 55 years of history. A lot of information, many examples to be followed, many examples, and above all, transparency. The information, whatever it is, at whatever time, it is a long-term partnership. We commend you for that. To celebrate this moment and to celebrate, this is the highest seal, 39 years of relationship.

We would like for everyone to join us in this celebration. One more important date next year. It is going to be 40 years that we will have been with you. Before we conclude, special thanks to the Dexco House team that welcomed us. On behalf of the Dexco employees, on my behalf. Thank you very much for having us, this wonderful house that you offered us. I want to thank everyone for joining us today, saying that the executive committee and the IR team will always be available to answer your questions. We have a security team that will prevent you from leaving through that door. You have to go through this door and buy something.

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