Economic Performance - Summary GRI

Forestry​

Klabin handled approximately 16 million tons of pine and eucalyptus logs and chips for processing and sale to the market, as well as biomass for power generation, supplying the domestic demand for pulp and paper manufacturing.

Due to the increase in pulp and paper production capacity and the consequent targeting of wood for greater internal consumption for operations, Klabin reduced the sale of logs to third parties. In 2022, the volume of log sales reached 1 million tons, generating a net revenue of BRL 192 million.

Pulp​

Klabin's pulp business unit maintained strong performance in 2022, operating beyond the plant's nominal capacity, the result of debottlenecking initiatives combined with manufacturing productivity gains. The production volume reached 1,586 thousand tons, down 4% from the volume of the previous year, as there was no general maintenance stoppage in 2021 and this unit follows a 15-month campaign. According to FOEX, the average price for bleached pulp delivered in China in 2022 was USD 796/ton for hardwood and USD 935/ton for softwood, representing an increase of 22% and 10%, respectively, compared to the average of the previous year. In Europe, the U.S. and the domestic market, which follow the FOEX Europe reference price, the increase was 22% in 2022 compared to the 2021 average for both hardwood and softwood.

At Klabin, net pulp revenue reached BRL 6.995 billion in 2022, a 21% increase compared to 2021 and operating cash generation, measured by EBITDA, of BRL 3.964 billion for the year, 8% higher than the previous year, the best result since the Puma startup in 2016, despite similar volume in 2021 and appreciation of the Brazilian currency against the US dollar.

Papers​

After a year of strong growth, the card market remained heated in 2022. Data released by the Brazilian Tree Industry (IBÁ) indicated a 2% increase in cumulative product sales from January to November compared to the same period in 2021, excluding sales of cards for liquids, which were not included in this bulletin. Klabin is operating at its maximum card production capacity and, despite the high market demand, has kept its sales volume virtually unchanged when compared to the years 2022 and 2021. Revenue from card sales, BRL 3.538 billion in 2022, increased by 15% compared to the previous year, reflecting the implementation of price adjustments made throughout the year, which more than made up for the negative effect of currency exchange in the period.

The kraftliner market started the year 2022 with high price levels, close to all-time highs, after a year of strong growth. In the first six months, new price hikes were driven by cost pressures from producers in the northern hemisphere, primarily due to the energy matrix in Europe. In the second half of the year, however, the decrease in demand, the increase in supply, and the higher level of customer inventories due to improved logistics initiated the price correction. In this context, according to FOEX data, the average price of kraftliner in Europe was USD 969/ton in 2022, 14% higher than in the previous year, ending the year with a final price of USD 866/ton.

In light of this situation, starting in the fourth quarter of the year, Klabin utilized its ability to integrate paper into packaging, reducing the production of recycled paper and increasing the conversion of kraftliner into corrugated board. As a result, the sales volume of containerboard was 568,000 tons in 2022, a 35% increase from the 2021 volume, primarily due to the increased volume of Eukaliner® from MP27. Net revenue reached BRL 2.820 billion, a 75% year-on-year growth, due to the combination of increased volume sold and price adjustments that counteracted the negative impact of foreign exchange during this period.

Packaging​

After two years of pandemic, the return to normal activities has brought about the economic reopening and the recovery of the services sector on the market side. If, on the one hand, the services sector has re-emerged, e-commerce and consumer goods have slowed, as expected. The year was also marked by a decline in tobacco and fruit harvests due to weather and market-related issues, particularly in Europe, areas in which Klabin has a significant presence. This scenario was also complicated by reduced consumption of proteins by China, driven by the country's closure due to its zero-covid policies. These factors, combined with a lower market share in the sale of sheets and a decrease in packaging weight due to the increased use of lighter-weight papers provided by MP27, resulted in Klabin's corrugated board packaging sales volume reaching 876,000 tons in 2022, down 8% compared to the previous year. Net revenue, in turn, was BRL 4.973 billion in the year, an increase of 7% compared to 2021, reflecting price transfers made throughout the year to compensate for cost inflation.

Klabin's industrial bags business continues to operate at full capacity, propelled by the increasing demand for sustainable packaging, particularly the substitution of single-use plastic. In 2022, there was a 4% decrease in the industrial bag sales volume compared to 2021, due to a shift in the product mix, with an increased volume sales for new applications, such as animal feed, sugar, coffee, and flour. These types, because they are smaller and lighter than bags for civil construction, when measured in tons, they represent lower volume and have a higher added value. As a result, net revenue reached BRL 1.217 billion in 2022, a 17% increase due to a better mix of sales and price transfers in order to offset the cost inflation during the period.

Largest producer and exporter of packaging paper in Brazil, leader in the production of cardboard, corrugated packaging and industrial bags in Brazil, it is also the only one in the country to offer the market the best solution in short fiber, long fiber and fluff pulps.

The commitment to sustainable development is a premise for Klabin’s business. In line with consumer macro trends, the Company is prepared to offer the market solutions in safe, light, efficient, recyclable packaging from renewable, biodegradable and flexible sources. For more information, see:

Forestry: https://klabin.com.br/negocios-e-produtos/florestal

Celulose: https://klabin.com.br/negocios-e-produtos/cellulose

Papers: https:// klabin.com.br/negocios-e-produtos/papeis

Packaging: https://klabin.com.br/negocios-e-produtos/embalagens

Forestry: Responsible for the management of forests planted by Klabin, which includes planning, planting, harvesting and transport for the supply of raw material to the company’s pulp and paper mills. The basis of Klabin’s business is trees, which is why we responsibly take care of our source of raw material. As a result, we have become a world reference in forest management, preserving approximately 333 thousand hectares of native forests in our forest areas. With 278 thousand hectares of planted pine and eucalyptus forests in Paraná, Santa Catarina and São Paulo, we were the 1st pulp and paper company in Latin America to ensure the origin of the raw material used in the manufacture of our products with Forest Stewardship certification Council® – FSC®. In addition to meeting the demand for raw material for Klabin’s pulp and paper production, our Forestry Unit also leads the sale of logs for sawmills and laminators, serving the furniture and civil construction markets. Committed to sustainable development, mosaic planting is our trademark, a system that mixes vast areas of preserved native forests – which correspond to almost half of our forest area – with planted forests at different ages. This management helps protect natural resources, improves the production potential of forests and collaborates with the conservation of biodiversity through ecological corridors, which favor the circulation of hundreds of species of wild animals.

Pulp: we are the only company to produce and supply three different types of pulp: hardwood (eucalyptus), softwood (pine) and fluff, in a single industrial unit entirely designed for this purpose, generating multiple solutions that are part of our day. the day.

Our products meet the most diverse characteristics and quality requirements demanded by our customers, suitable for the manufacture of sanitary papers, disposable absorbent products, packaging papers, printing and writing papers and even special applications, through tailored solutions. to add even more value to the final product. PineCel™ is the only 100% pine long fiber pulp on the national market, being the ideal solution for different segments such as tissue (toilet paper, towels and napkins), packaging and special papers such as filters and fiber cement products. LyptusCel ™, our hardwood pulp produced from eucalyptus wood, is the ideal solution for segments such as tissue (toilet paper, facial tissues, napkins, etc.), printing and writing papers, paperboard, packaging and special, as it guarantees resistance to traction and bursting, softness, resistance to the passage of air, opacity and printability. PineFluff™, manufactured on a large scale for the first time in Brazil from long pine fiber, can be used in hygienic products, such as feminine and incontinence pads, infant and adult diapers, daily protectors, wet wipes, among others. Its production was designed to provide the stability, homogeneity and quality that the segment requires, giving the product the best properties such as low shredding energy, high absorption capacity and speed, liquid retention and uniformity. As a result of our pioneering spirit, absorbent product manufacturers located in Brazil are able to use 100% national raw material, reducing or eliminating the pulp import step. Paper: We produce paper and board from our own short and long fiber pulp, which allows us to obtain products and final packaging with excellent performance, structure, machinability and printability, meeting global quality standards and exceeding our customers’ expectations. customers. We produce cardboard, kraft paper and recycled papers. Klabin’s paperboard line uses different compositions of virgin pine and eucalyptus fibers to obtain the best relationship between stiffness, structure, tear resistance and print quality. Each version of Klabin paperboard has been carefully developed to produce the best results in our customers’ processes and to highlight the final product at the point of sale. The Klabin Kraftliner line is made up of differentiated papers, produced 100% from a mix of virgin pine and eucalyptus fibers. In different presentations, this product line offers high quality printing and structure, providing excellent results in the most diverse applications. Klabin has two lines of recycled paper that are ideal for building corrugated cardboard packaging: Ekoflute and Ekoliner. The first is perfect for application on brains and the second, for use on covers. Klabin’s recycled papers are produced from pre- and post-consumer scrap using modern machines, which guarantees excellent results throughout the chain.

Packaging: Converts kraftliner and sack kraft papers into Corrugated Cardboard and Sack Kraft packaging – a segment in which we are market leaders in Brazil – we deliver unique differentials that make our products more than packaging. Whether it’s the smart solution, the exclusive customization, the guarantee of delivery according to the region or the commitment to sustainability, everything is designed to exceed expectations and improve the results of our customers. We develop customized solutions in sack kraft packaging for any type of segment, whose differential is resistance, porosity, elasticity, an excellent finish and printing quality. In addition, our bags are printed with water-based ink and structured with ecological glue that do not contaminate the soil, resulting in a product with high biodegradability that reintegrates into the ecosystem in a few months. We are the largest industrial bag converter in Brazil and also leaders in Argentina. We supply products that meet the highest quality requirements in the market, according to the customer’s specifications, for all business sectors. Our Corrugated Cardboard packages are resistant to the most diverse storage and transport conditions, such as humid and low temperature environments, ensuring the integrity of the goods until the final destination. In addition, more than providing a package, we deliver a unique solution for your brand through e-commerce. That’s why we customize Corrugated Cardboard and Sack Kraft packaging in your own way, to increase the results of your business, as we already do in the coffee sector or in the marketplace segment. And you can still count on the quality, strength and logistical ease that characterize all packaging made by Klabin. It is important to highlight the recent launch of the water-dispersible bag: The innovative water-dispersible packaging for cement bags is the result of a partnership between Klabin and Votorantim Cimentos and was designed to bring practicality and productivity to civil construction, allied, always, with sustainability. The new packaging is: biodegradable, produced from renewable sources, 100% recyclable and guarantee greater safety, resistance and palletization.

Klabin’s products are mainly aimed at industries in the industrialized and fresh food segments (milk, frozen meat, fruits, among others), health and personal hygiene (toilet paper, tissues, diapers, toothpaste, among others), hygiene and cleaning (washing powder and soap, for example), construction and electronics. In addition to spearheading the Brazilian market, the company also ships its products to over 80 countries worldwide. There is also the Klabin for You channel, which is geared towards the end consumer, and E-Klabin, which provides innovative and sustainable solutions for e-commerce - a segment that has seen significant growth in recent years.

The year 2022 was marked by major milestones for Klabin's paper business. The operation of Paper Machine 27 (MP27) of the Puma II Project completed one year since its startup with an impressive learning curve and has solidified a new product in its portfolio: Eukaliner®, made from 100% hardwood, with quality verified by customers. This operation certainly paves the way for other innovative Klabin initiatives. Another milestone is related to MP28, the new card machine of the Puma II Project in Ortigueira (PR), expected to come online in the second quarter of 2023. In 2022, according to a notice to the market released on December 6, a complementary investment was approved in the machine for the production of white paperboard of virgin fibers, which represents an addressable market estimated at more than USD 20 billion. MP28 tends to generate significant results and opportunities for Klabin, confirming trends of strong growth in demand for sustainable products and paper packaging.

In line with the consumer demands of customers and society, the provision of innovative solutions has progressed, featuring products from renewable sources, recyclable and biodegradable. EkoFlex, the first paper for flexible packaging, is one such initiative. Produced from the softwood fibers, it offers better performance and more resistance and serves different market segments. PineFluff eXcel, another launch, with fluff cellulose made from the mix of hardwood and softwood fibers, focuses on the hygiene product market.

In addition, the Puma gasification/biomass plant came online, which helps reduce the consumption of fuel oil, replacing it with synthesis gas and helping in the reduction of greenhouse gas (GHG) emissions, expressed as CO2e. In the second quarter, the sulfuric acid plant also came online, which allows the burning of elemental sulfur and concentrated non-condensable gases (CNCG), captured during the pulp production process, as well as the start-up of the potassium sulfate removal plant.

In July 2022, the Figueira Project was approved to build a new state-of-the-art corrugated board plant with an incremental net capacity of about 100,000 tons per year, reinforcing Klabin's belief in the Brazilian market, especially in corrugated board packaging.

Last quarter, Klabin's port terminal in Paranaguá (PR) began operations. It is planned to ship up to 1 million tons of pulp and paper annually from the plants in Paraná and Santa Catarina. For the plants in Paraná, there is also the differential of being units with direct rail connection to the terminal, without the need for road transshipment. The terminal also brings productivity and competitiveness to Klabin in the break bulk modal, a type of cargo transport without the use of containers that can accommodate large volumes loaded directly onto ships.

Distribution of the economic value generated (R$ million)

Percentage of economic value generated​