Klabin (KLBAY) to Buy Arauco's Forestry Operations in Parana
Klabin KLBAY announces the acquisition of some of Arauco's forestry operations in Paraná for $1.16 billion. The deal entails the purchase of 150,000 hectares of land (of which 85,000 hectares are productive) and 31.5 million tons of standing wood, as well as forestry machinery and equipment. The obtained timber will be used to supply Klabin’s factories, thus reducing its dependence on third parties for wood and will help lower costs.
The conclusion of the deal is subject to customary closing conditions, including approval by Brazil’s antitrust body, CADE.
This buyout aligns with Klabin’s objective of achieving a 75% self-sufficiency target in wood in Paraná. The company will expand land in the region, which will significantly reduce future investments, and capitalize on operational synergies. Following the first cycle harvest, Klabin expects to exceed its self-sufficiency goal by approximately 60,000 productive hectares. The company plans to monetize this land.
This move underscores Klabin's commitment to operational efficiency and prudent capital allocation. The company maintains its solid financial position characterized by robust liquidity and an extended debt profile.
Klabin S.A. is the largest producer and exporter of packaging papers in Brazil and the leader in the manufacture of paperboard packaging. It has 22 industrial units in Brazil and one in Argentina. It is the only company in the Brazilian market to offer solutions in short and long fiber/fluff pulps and is the leader in the markets for corrugated boxes and industrial bags. Klabin boasts an annual paper production capacity of 2.1 million tons and an annual market pulp production capacity of 1.6 million tons.
In the third quarter of 2023, the company’s pulp sales totaled 426 thousand tons, the second-highest volume since the startup of the Puma Unit in Parana. Adjusted EBITDA per ton in the paper and packaging business grew 7% in the first nine months of 2023 from the same period last year. This was mainly driven by the company’s efforts to improve efficiency in its operations.
In September 2023, the company inaugurated the Puma II project that marked the expansion of its Puma Unit in Ortigueira, Paraná. Puma II is the largest investment in the company’s history, with R$12.9 billion invested in the installation of two new paper machines — MP27 and MP28 — both operational and with a total annual production capacity of 910,000 tons of paper. The MP28 machine also marked Klabin’s debut in the white paperboard market, reinforcing the expansion of its product portfolio. Apart from boosting production capacity, this project has improved the quality of the company’s products through its cutting-edge technology.
Price Performance
Shares of Klabin have gained 13% in the past year compared with the industry’s 11.4% growth.
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Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the basic materials space are Axalta Coating Systems Ltd. AXTA, Universal Stainless & Alloy Products, Inc. USAP and Alamos Gold Inc. AGI.
AXTA sports a Zacks Rank #1 (Strong Buy), and USAP and AGI each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Axalta Coating’s 2023 earnings is pegged at 44 cents per share. The consensus estimate for 2023 earnings has moved 23% north in the past 60 days. Shares of AXTA have gained 31% in a year.
Universal Stainless & Alloy Products has an average trailing four-quarter earnings surprise of 44.4%. The Zacks Consensus Estimate for USAP’s 2023 earnings is pegged at 27 cents per share. Earnings estimates have been unchanged in the past 60 days. Shares of USAP have rallied 153% in the last year.
The consensus estimate for Alamos’ current fiscal year earnings is pegged at 53 cents per share, indicating a year-over-year surge of 89.3%. AGI beat the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 25.6%. The company’s shares have gained 37% in the past year.
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