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Fibria Celulose SA (NYSE:FBR)

Q4 2013 Earnings Call

January 30, 2014 9:00 am ET

Executives

Marcelo Strufaldi Castelli - Chief Executive Officer, President, Member of Board of Executive Officers and Member of Innovation Committee

Guilherme Perboyre Cavalcanti - Chief Financial Officer, Member of Board of Executive Officers, Investors Relations Officer and Coordinator of Finance Committee

Henri Philippe Van Keer - Commercial & International Logistics Officer and Member of Board of Executive Officers

Analysts

Josh Milberg - Deutsche Bank AG, Research Division

Carlos de Alba - Morgan Stanley, Research Division

Juan G. Tavarez - Citigroup Inc, Research Division

Karel Luketic - BofA Merrill Lynch, Research Division

André Pinheiro - Itaú Corretora de Valores S.A., Research Division

Operator

Good morning, ladies and gentlemen, and welcome to Fibria's conference call to present the results of the fourth quarter of 2013. In case anybody needs a copy of the press release, please visit the Fibria Investor link at www.fibria.com.br/ir. We would like to inform you that this transmission is being recorded. [Operator Instructions]

Before we go on, we would like to clarify that any statements, that may be made during this conference call related to Fibria's business prospects, forecasts and operating and financial goals, constitute beliefs and assumptions of the company's management, as well as information currently available. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not take place. Investors should understand that overall economic and industry conditions as well as other operational factors may affect Fibria's future performance and lead to results that are materially different from those expressed in these forward-looking statements.

Mr. Marcelo Castelli, CEO, will begin the conference call. At the end of the conference call, we will be open for the Q&A session. Mr. Castelli, you may proceed.

Marcelo Strufaldi Castelli

Good morning, everyone. Thank you for participating in Fibria's Fourth Quarter '13 Earnings Conference Call. Here with me are Guilherme Cavalcanti, CFO and IRO; Henri Philippe, Commercial and International Logistics; and other members of Fibria's Executive Board.

Moving on to Slide 4, I would like to begin by saying that 2013 was market by the progress of our business strategy and company's financial strengthening, focusing mainly on obtaining investment grade status. In 2013, Standard & Poor's degraded Fibria's rating to BB+, while Fitch and Moody's changed its outlook to positive. The company is currently one notch away from obtaining the investment grade by the 3 rating agencies. In line with this goal, gross debt has continued to fall through the repurchase of $897 million in loans with unattractive coupons, with no significant impact on the average terms of our debt, leading to an annual saving of $67 million in interest payments. It has also been essential to maintain our philosophy of operating excellence embodied by competitive cost management and investment in innovative solutions to meet our client needs and seek new sources of value creation for our assets.

In 2013, we also improved our corporate governance by installing the Statutory Audit Committee and drafting a specific anti-corruption in transactions with related parties policies, both approved by the Board of Directors, in order to ensure high levels of integrity and transparency when conducting our businesses.

We also have invested in innovation capital by creating important partnerships with Embraer for technological cooperation in the renewable materials segment and with the SweTree Technologies for the development of improved eucalyptus clones. Our work received important recognitions in 2013. We received the Company of the Year, Valor Award 1000. We are the sector leader in the New York Stock Exchange, Dow Jones Sustainability Indices, awards in emerging markets, we're listed on the BM&FBOVESPA’s Corporate Sustainability Index and we're selected as the best company in the industry by Guia EXAME de Sustentabilidade.

Fibria was also distinguished in RobecoSAM's publication, The Top 10 Game Changers, catering to institution and investors who take sustainability aspects into account in their investment decisions, as one of the visionary companies that are worldwide ahead of their peers regarding social, environmental and governance aspects.

In 2013, Fibria's risk factors related to tax claims have been substantially reduced. In late November, the company joined the government's tax debt refinancing program, REFIS, on profit earnings abroad. Fibria has opted for a tax payment with 100% reductions in fines, interest and charges. Totaling the recognitions of BRL 560 million in company's income statement.

Given the possibility of a 30% reduction due to the tax-loss carryforward, the actual cash disbursement was BRL 392 million. Fibria's capital structure has become robust with the recent monetization of part of its lands and has positioned the company to expand its production capacity with the project for the expansion of the unit in Três Lagoas in Mato Grosso do Sul estate at an opportune time in line with the strategy of disciplined growth.

Moving on to Slide 5. We will go into more details on the pulp market. The positive prospects for the pulp market in 2013 were confirmed during the year. Despite the new pulp capacities, the closing of mills in several regions have mitigated the impact of the entry of new volumes in the market as new paper machines fueled demand for pulp in important markets. According to the PPPC, in 2013, global pulp sales increased by 2.5% or 1,100,000 tons over 2012. I would like to highlight that the excellent performance of the global pulp market was mainly driven by higher eucalyptus pulp sales, which correspond to around 80% of the additional volume mentioned.

In 2013, eucalyptus pulp sales increased by 6%, representing an additional demand of 844,000 tons. Sales grew significantly in most of the regions of the world, especially in China and North America. The Tissue segment was chiefly responsible for the substantial demand for eucalyptus pulp, mainly fueled by the startup of new capacities. There was a decline in producer hardwood inventories as of August, which was intensified in fourth quarter '13 due to period seasonality, closing the year at 39 days in line with the historical average.

Another interesting aspect for the current market analysis referred to the stimulus for the replacement of the types of fiber represented by the prices spread between the long fiber and the short fiber, which increased significantly in the fourth quarter '13, closing the year at $136, 53% above the historical average of $88.

After a very positive year of the pulp market, we are expecting some challenges for 2014. Despite the startup of new pulp mills, the prospect of the better economic performance in the United States and Europe compared to the previous years, combined with the new paper machines that began operations in 2013 and the other investments earn [ph] market for the year, should support an increase on demand levels. In addition, some planned events in 2014 of capacity closures can make a positive contribution to a market equilibrium.

I now will give the floor to Guilherme Cavalcanti, who will proceed with this live presentation.

Guilherme Perboyre Cavalcanti

Good morning, everyone. Moving on to Slide 6. We will talk about the results for the fourth quarter and full year of 2013. Full production totaled 1,358,000 tons in the fourth quarter 2013, 1% up on the third quarter 2013, chiefly due to the lack of scheduled maintenance downtimes partially offset by the impacts caused by the rains in the Aracruz unit in the Espírito Santo state. Such impacts also explained the 1% decline in production in relation to the fourth quarter 2012. In 2013, production added down by 1% over 2012, mainly due to the fewer number of days in the year and the impact of rains in the Aracruz unit that we have just mentioned.

Pulp sales totaled 1,441,000 tons in the fourth quarter 2013, 11% up on the third quarter 2013 due to the period seasonality led by higher sales through Europe, an increase of 70,000 tons. Sales were 5% lower than in the fourth quarter of 2012. When we have record sales and an inventory turnover below 50 days, we generated a need for inventory rebuilding in 2013. The later, combined with the lower production volume available, pushed down Fibria's sales volume by 3% over 2012 to 5.2 million tons in 2013. Pulp sales volume accounted for 106% of production output in the fourth quarter 2013 and 98% of production volume in 2013.

The fourth quarter 2013 net revenue was a record, totaling BRL 1,958 million, 6% higher than in the previous quarters due to the increased sales volume. In relation to the fourth quarter 2012, net revenue moved up by 6% due to the 11% increase in the average net price in reais, in turn arising from the 11% average exchange rate depreciation in the period.

In 2013, net revenue was a record of BRL 6,970,000,000, 12% higher than in 2012. In the fourth quarter of 2013, the cash production cost was BRL 466 per ton, 7% lower than in the third quarter 2013, chiefly due to the lack of scheduled maintenance downtimes and the lower share of the third-party wood partially offset by the effect of the rains in the Aracruz unit that accounted for BRL 7 per ton. In relation to the same period of the previous year, the 5% increase was mainly due to higher costs of wood transportation and higher input consumption, largely explained by the rains in the Aracruz unit, in addition to the exchange rate effect of BRL 7 per ton.

It is worth noting that the average exchange rate depreciated by 11% in the last 12 months, while inflation, measured by the IPCA, rate was 5.9% in 2013. The cash production cost in 2013 was BRL 505 per ton, 6.7% higher than in 2012. Excluding the impact of the exchange rate and the rains in the Aracruz unit, the cash cost increase was below the annual inflation at 4.6%.

Fibria continues seeking opportunities to control costs and improve operating efficiency. EBITDA was a record BRL 823 million in the fourth quarter 2013, with a 42% margin. In quarter-over-quarter terms, EBITDA climbed by 8%, fueled by the higher sales volume. The 9% year-on-year EBITDA increase was due to the already mentioned higher pulp price in reais, partially offset by the lower sales volume. EBITDA totaled BRL 2,796,000,000 in 2013, 24% up on 2012, the best result since the company's inception.

We will now talk about Fibria's debt. Please move on to the Slide 7. The company's net debt closed 2013 at BRL 7.8 billion, equivalent to $3.4 billion. These amounts represent a decline in leverage to 2.8x in reais and 2.6x in dollars, the lowest historical level since the company's inception. If we consider the remaining BRL 903 million that the company expects to receive in the first quarter of 2014 from the sale of land, the company leverage falls to 2.5x in reais and 2.3x in dollars, bringing the net debt to BRL 6.9 billion.

In line with the strategy of reducing its debt, in 2013, Fibria's repurchased BRL 1,851 million of bonds, equivalent to $897 million maturing mainly in 2020 and 2021, whose coupons were not attractive. These operations resulted in a 21% decline in the dollar-denominated gross debt in the last 12 months and will lead to annual savings of $67 million in interest payments. The debt average term did not change significantly, closing 2013 at 52 months. As you know, Fibria announced the repurchase of 100% of the outstanding balance of bonds in 2020, equivalent to $690 million at 7.5%. The settlement will occur in March 2014, mainly with cash from the sale of land. This transaction will lead to 34% decline in the company's total denominated gross debt over December 2012. A reduction of the average cost of the debt denominated in foreign currencies from the current 4.6% to 4%, an annual savings on interest totaling approximately $52 million.

The company's cash closed the fourth quarter 2013 at BRL 1,924,000,000 including the mark-to-market of hedge instruments, we generated a negative BRL 464 million. The company has around BRL 1,500,000,000 in unused revolving credit lines giving a liquidity position of approximately BRL 3.4 billion, equivalent to 2.3x its short-term debt.

Now, we will talk about the net results for the quarter. Please move on to Slide 8. In fourth quarter 2013, the company recorded a net loss of BRL 185 million, chiefly due to the nonrecurring effects of the negative financial results, in turn impacted by the effect of the appreciation of the dollar against the real.

Another effect that contributed was the increase in the income tax and social contribution after the company's adhesion to REFIS. The same factors are largely responsible for the loss of BRL 698 million recorded in the year. Excluding a nonrecurring effect, net income was approximately BRL 323 million in the fourth quarter 2013 and BRL 834 million in 2013.

Moving on to next slide, we will talk about the company's free cash flow. In 2013, free cash flow generation was, BRL 1,268,000,000, 50% higher than in 2012, chiefly due to the improving working capital and increased EBITDA with a free cash flow viewed of 8.3%. CapEx totaled BRL 1,287 million in line with the guidance of BRL 1,244,000,000 provided to the market.

Now we will talk a little bit more about free cash flow. Please move on to the Slide 10. As you can see, in the last 3 years, the company's free cash flow has been growing substantially, mainly due to the increase in the EBITDA caused by the appreciation in the average dollar. As approximately 85% of Fibria's cash cost and 8% of its CapEx are exposed to the local currency, the capacity for generating cash is leveraged when the dollar goes up. Also important that managing initiatives, the constant pursuit of cost reductions in a competitive manner, CapEx discipline and better working capital have helped the company to reach growing levels of free cash flow generating a virtuous business cycle.

Just to wrap up the presentation, I would like to comment that as of this quarter, Fibria's financial statements have the Transparency Trophy granted by ANEFAC-FIPECAFI-SERASA EXPERIAN in 2013. I give the floor over to the moderator to begin our question-and-answer session.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Josh Milberg with Deutsche Bank.

Josh Milberg - Deutsche Bank AG, Research Division

My first question is just on the issue of your cash cost which was discussed on the Portuguese call. I was just hoping you could repeat how much you expect your dependence on third-party wood to increase from last year to this year, and if you could just quantify the impact. Also, if you could give some color on where there may be opportunities to offset any pressure there, just as far as operational improvements go. That's my first question.

Marcelo Strufaldi Castelli

This is Castelli speaking. Just to remind you that, first of all, our third-party wood will arise from 30%, that was the current, 2013 year, to 40%. That will be mainly affecting the CapEx. We have the disclosure that this is a nonrecurring effect that will imply, I mean, a BRL 85 million on top of our CapEx, okay? So this is not really hurting the cash cost. That's the first point. And then the cash cost, we are still -- despite the wood cost, the transportation of wood cost dependent on the source and that the distance -- average distance can increase a little bit for 2 years or 2.5 years. We have other numbers to really reduce like the chemicals, like, I mean, energy, especially considering that Jacarei, we had one event with one of the gas turbine that will be back in a couple of days. And after, I mean, in March or the end of the February, we're going to have better results in terms of energy, expenses in Jacarei that will help with the total cost of Fibria. So many other actions like services and so on, general shutdowns that we are committed to, really, pursue, more efficient ways to do things. So we reaffirm that our cash cost will be under control and its increase will be less than inflation.

Josh Milberg - Deutsche Bank AG, Research Division

Okay. Castelli, very helpful. My second question is just on the issue of consolidation. I imagine that you may not be able to say much, but I was just hoping you could give your updated perspective on the potential there. Some time ago, management -- you and other senior management of the company had expressed a good deal of optimism, I think, that 2014 could be a year in which we might see something there. Do you think there's still significant potential or if there is potential, is it more something that would occur down the road maybe from 2015 beyond?

Marcelo Strufaldi Castelli

Let's get back to the forecast of the landscape that's we are facing, all players in the market. First of all, consolidation. It's understood, for all of the players. It's a value creation move that smoothes out all of us. As executive and maybe shareholders, we understand the value creation of consolidation. So this is -- requires time and I'm still optimistic and I see opportunities. But it's difficult to predict the time. I think the 2014 environment will help the move to consolidation. That's what I'm saying and that's what I believe. But it's difficult to say when.

Josh Milberg - Deutsche Bank AG, Research Division

Okay. And then, Castelli, just a related point, you had commented on -- with respect to the potential for Três Lagoas II, that Klabin's project was not in any way conflictive with your potential expansion project. Does that hold true in your view also with respect to the potential that Eldorado may go ahead with its second line? Would -- if, in fact, that were to occur, would that change your view in anyway?

Marcelo Strufaldi Castelli

This is -- first of all, we think that our project, it's ready to go, and potentially, we will take a decision if we decide to move on previous to the Eldorado or other competitors that, as you know guys, our project, it's ready to go. And we have, right now, many actions with the suppliers to really to understand and to secure a more accurate levels in our CapEx. This is the first point. I cannot mention how will be -- what's the Eldorado decision or the other decision. With regarding to the Klabin's project, they are moving on. They are dealing with the suppliers and they will start up in a certain time in 2016, that should be very early in 2016, and our projects will be more positioned on the fourth quarter of 2016, as we have already mentioned. That means that the learning curve, the total capacity -- market pulp capacity of Klabin, as we understood, that's not the full capacity of the project and just a part of it, and our learning curve, et cetera. And looking through the market window, I see pretty much no disturbance in the market. So we have a place for both, for Fibria and for Klabin without any pressure -- additional pressure in the market. That's our eminent view.

Operator

The next question is from Carlos de Alba with Morgan Stanley.

Carlos de Alba - Morgan Stanley, Research Division

My first question is very short, maybe for Guilherme. Guilherme, could you tell us how much do you expect the cost of redeeming the bonds will be assuming we'll be booking in the first quarter?

Guilherme Perboyre Cavalcanti

Okay. Well, the principle amount, as we announced, will be USD 690 million, but with the accrued interest plus the premium that we will pay, this number will be around USD 780 million. So it's around USD 100 million more in interest accrued and premium that we pay because we are redeeming at 111% of the face value. That's the premium of the make-whole provision of the bonds. And again, this premium that we pay, as you know, will increase our negative financial results on our financial statement. But moving forward, we have, annually, an annual savings of $52 million by redeeming this bond in net interest expenses.

Carlos de Alba - Morgan Stanley, Research Division

All right. And Castelli, maybe this question is for you, on the growth starting of the company. I think we all agree and you just said that consolidation is probably the best-case scenario for everyone, and yet, the company continues to pursue an alternative route, which is going on with the expansion of Três Lagoas. So let me just put it out there, why would not Fibria or management suggest to wait -- to pay dividends in the meantime and wait until the scenario of consolidation plays out, and that will be better for pricing, that will better for withdrawals and it will be better for shareholders in the meantime our dividends go up? What is wrong with that alternative scenario? If you could elaborate your thoughts, that will be very, very useful, just because I think some shareholders will be interested on that one.

Marcelo Strufaldi Castelli

Okay. Very interesting and given the chance to, really, clarify the way that we think, the management thinking is absolutely to maximize the return, the total shareholder return, this is important. So we have been managing the company since we created Fibria to really to deleverage and the deleveraging means value creation to the shareholder. We are fighting, really, very hard as you can -- well, if you follow up with our history, to reach these periods that we are today, to reach that moment. That means very close, and we don't -- we cannot preside [ph] how long that it will take to get back the investment grade. But one thing is for sure, the debt cost is going down, and we have been able also to -- as a liability management or our cost of debt, it's very close to an investment grade company. The market's perceiving that we are going to do what we promised and we have launched the repurchase all of the bonds of 2020. Okay, this is the value creation, no regrets move. When we calculate several alternatives, we also -- we are considering in our decision-making process this alternative that you suggested, okay? Several alternatives that will create further value for the shareholders. This is one of them. The other one is to wait and to see the market conditions for consolidation. And if this will take too long, we then will not pursue to wait too long. Wait too long means that the company must grow, to keep the value and value creation growth. So that's alternative we have remembering that Três Lagoas II reach the top performance will reduce the cost of Fibria. We have a brownfield, and we have a unique platform for organic growth. So I mean, at the end of the day, Carlos, we have several good options for value creation for shareholders, okay? And yes, this alternative that you mentioned, it's one of those that maybe we are considering. So when we go back to -- until the middle of the this year and then we're going to discuss with the Fibria board, we are going to consider all alternatives. And to be more precisely, one of them should be this one that you have disclosed.

Carlos de Alba - Morgan Stanley, Research Division

And how many mills, or new pulp mills do you think Brazil could handle? I mean, is Klabin, is Três Lagoas II perhaps, I mean, realistically, how much -- how many more mills can Brazil handle with the land that is available in a way that is it is economically attractive to develop? Because the Brazil, Chile, Uruguay, perhaps Argentina, if they fix their problems, are at the bottom, together with Indonesia, are at the bottom of the cost curve. And it seems to me that we're getting to some sort of saturation level. But I just want to -- your views on how much -- how many more mills can Brazil handle?

Marcelo Strufaldi Castelli

Okay. I mean, in the longer run, okay, always in the longer run, the way we're thinking is that Chile, it's done. It's saturated. Uruguay, despite we're going to build Grosso [ph] will grow, we have already 2 mills that we referred to there. We still have a lot of potential for plantation there but the lack of infrastructure will limit for a long time, and I see that's in a couple of -- I mean, 10 years, that's -- say, 10 years in front, just one more mill in Uruguay. And this is it. And because the other potential expansion will be limited, severely limited by the logistics for the infrastructure inside. From Brazil, a lot of potential. Okay, I'm not mentioning the other countries in the Latin America that can be, depending on the place of the new projects, can be profitable, et cetera, et cetera. Believe me, I believe that Brazil, specifically, we can have a more 5 mills, around $1.5 million tons. But it's in the right time. This is not going to grow right now, and I see the market, a lot of [indiscernible] . They're going to start up a renewal. They're going to try to build forestry assets to really to invest, to bring capital. With those new projects, especially starting from the forestry side, they are trying to get attention from investment to really to secure a portion of investment upfront to grow the forest. This is -- will take 7 years, 5 years. And so, we are talking about the next decade. For this decade, we see that Klabin is ready, launches of -- Guaíba is ready, and we are ready. This is it. And Veracel, [ph] maybe, but Veracel [ph] will be only 750,000 tons, that will not hurt the market. So if we have discipline, we can handle -- Brazil can handle more 5 -- at least more 5 mills, state-of-the-art, in the right time. Not now. So a lot of talking but not in this decade, it should be more than 3, 2 or 3 more. We have announced, okay? So let's keep attention, I would like to send a message, let's keep attention. The real potential because we have a -- we are dealing with forestry that is fast growing but it takes time to grow. And if those guys say that they're going to buy wood from the market, be my guest. Because they will have a lot of problems with the product, stability. And to wrap up, companies using 4 years, the age of the wood, that's not going to give it strength. They're going to sell this wood for -- I don't know who will buy this wood. I'm talking about the end user application, okay.

Operator

Our next question is from Juan Tavarez with Citi.

Juan G. Tavarez - Citigroup Inc, Research Division

Just 2 questions from me. My first question, just to on the third-party wood cost. If you can give a little bit of clarity in terms of how has the trend progressed, I guess, for 2013, specifically given that you're going to be increasing how much you obtain from third parties, I'm wondering if they are also suffering the same issues with transportation, and if you're seeing a trend in wood cost from third parties above inflation in that?

Marcelo Strufaldi Castelli

Okay. Let's talk about the third wood participation, and let's get back in 2012 and 2013. For instance, first quarter 2012, 11%; second quarter '12, 14%; third quarter '12, 20%; fourth quarter '12, 25%; and the average of the 2012, it's about 19%. We have disclosed that from '13, '14 and '15, we're going to increase a little bit. First quarter '13, 22%; second quarter '13, 27%; third quarter '13, 26%; fourth quarter '13, 25%, with the average around 25%. So we rose from '12 to '13, from 19% to 25%. Our forecast in the 2014 will be about 38%, about 40% maximum, but the business this will not be stable because as you can see in our previous public number, we make our harvesting trend and our transportation trend according to our best efficient [indiscernible] can vary from one quarter to another. But the figure, the year, will be around 40%. Okay, and going down and down the other years. We have one very interesting good problem in our hands because we did a [indiscernible] 2 pilot programs, and guess what? They are producing more wood than we expected. So let's do it. We are going to comply with the contract, so that's another reason that we are buying more third-party woods to really to perform the contract that we have agreed. So on the other hand, when we buy more wood, we have less wood for the own wood, and we are accelerating on top of it, the replacement of old clones to new clones to reach, again, as I've mentioned previously, our target for 2025. That means, we are managing NPV positive numbers here when we see the longer perspective.

Juan G. Tavarez - Citigroup Inc, Research Division

Okay. But just to understand, are those third-party wood contracts -- are the prices already set? Or are they indexed to inflation? Or just to understand how that pricing is?

Marcelo Strufaldi Castelli

We have several combinations that I will not disclose to you. Some of them, they are price disclosed. Others will not -- will be depending on the market circumstances, although we have already purchased a portion of the wood because we transfer to them our financial support, and for Fibria instance will buy 5% to 10% of the wood that will be harvested in the future. Those longer will affect our CapEx, mainly our CapEx, mainly BRL 5 million in the 2014 as we disclosed on the Fibria Day in New York.

Juan G. Tavarez - Citigroup Inc, Research Division

Okay, great, understood. And my second question, just on pulp demand, if maybe we can get a little bit of your view on both China and [indiscernible] I guess, specifically on China, if you can give us a sense of your expectation of their activity after the Chinese New Year. I guess I'm trying to gauge if we should expect typical seasonality or are their mindsets already shifting to the expectation of this new pulp capacity? I mean, maybe we see seasonality a bit difference this year in terms of the Chinese buyers.

Guilherme Perboyre Cavalcanti

Very good question about the demand in China after the Chinese New Year. I mean, that's the big, of course, question mark. What we can tell you is that, what happened in January, I mean, there is this concern about the Chinese economy going down, I mean, the credit concerning China and the central government being forced to interfere. But as a matter of fact, I mean, we haven't seen any decrease in the demand in China for the month of January. Next to the contrary, I mean, the volumes going -- flowing to China were a little bit above the historical demand there. So we are quite confident that what is happening in China, the concern that is happening in China will not continue after Chinese New Year. But of course, it remains to be seen. On the other hand, I mean, we are quite well surprised by Europe and the U.S. So all in all, I mean, we are quite positive, and we have a feeling that this positive period that we see and we were forecasting during the first quarter of this year might extend by a few more months. Because there are also some hiccups on the supply side. I mean, you have some disruption factors like the slide in Chile that is over right now but we might be feeling the positive impact in 1 or 2 months. You have also some disruption supplies of wood in Indonesia, which is forcing, I mean, the groups over there to take some downtime. And we have a feeling as well that they might have some delays on the impact of the new capacities. So all in all, I mean, we are quite positive. And we, as a leader, we are quite committed to make sure that we have a sustainable scenario. This is why, as I mentioned during the Portuguese call, we are fighting for the increase, that's the price increase, that we have announced. We are not fully implementing it, that's because we are very committed to the volumes. We want to see the volumes -- if the volume is flowing, and we want to make sure that we are creating a sustainable scenario because, again, we have the impression that the positive cycle of this year might be extended by a few months.

Juan G. Tavarez - Citigroup Inc, Research Division

Okay, great. And just -- if I may, just one follow-up. I know you've mentioned already that you expect a challenging 2014 for pulp fundamentals. But just looking at your maintenance schedule, I'm wondering if there's flexibility there for you to anticipate some maintenance if the market gets weaker? Or you're not going to be taking any market-related downtime in that environment?

Marcelo Strufaldi Castelli

The answer is yes. We have a certain flexibility. Normally, we can, in fact, anticipate. It's more difficult to postpone. But yes, we can anticipate, if we think that the market is tight. But it's not, as we said, our view in the coming months. The market, it's very positive. Let's wait after the Chinese New Year. Remembering that, yes, the shutdown can be anticipated, certain flexibility in that respect, but Fibria prepared itself to really not to be the first mover to make market-related downtime. We don't have any need to do that. So we are prepared and we generate, in all scenarios, a very strong free cash flow.

Operator

Our next question is from Thiago Lofiego with BoA Merrill Lynch.

Karel Luketic - BofA Merrill Lynch, Research Division

This is actually Karel Luketic again. So, my first question is coming back to the growth issue. Would you be willing to partner up with any company on a specific projects if, for example, those companies wouldn't have the financial capability to finance their own project, for example? That's my first question.

Marcelo Strufaldi Castelli

When we talk about consolidation and if we have one company that intends to grow, can be one platform to do consolidation. But this will depend, of course, the time, the attractiveness of the project, who is the partner, et cetera, et cetera. So normally, yes. So we are open to consider that but within certain conditions.

Karel Luketic - BofA Merrill Lynch, Research Division

And my second question is if there any other potential assets sales that we can see along the year to help the continued deleveraging, anything left there?

Guilherme Perboyre Cavalcanti

We always have some forests that we have -- that we've been selling, but not significantly as the last field. We're talking around BRL 50 million per year in non-operational asset sales.

Operator

Next question is from André Pinheiro with Itaú BBA.

André Pinheiro - Itaú Corretora de Valores S.A., Research Division

My first question actually is basically on pulp on Europe. Talking about the paper market, I mean, we've seen a tough market over the last few years, and we've seen also some capacity closures in the paper market, and especially in the printing and writing segment. If Henri could answer this, do you believe that the capacity shutdowns in the paper market in Europe have already occurred and that there is low downside on that front for pulp demand in Europe, we've probably reached the bottom of that and we're probably only going to recover going forward. Or is there still room for adjustments in the market? That's my first question.

Henri Philippe Van Keer

On the printing and writing side, I mean, there might be some further closures, I mean, especially if we see some consolidation on this sector. I mean, if there is no consolidation, then there is more needed in Europe. There will be some closures, no doubt. It doesn't mean that this will be affecting, I mean, our fiber. It could be -- printing and writing is not only about the wood-free fibers, it's not only about the short fibers, the driver, the engine of this industry, of the eucalyptus industry is more related to the specialty business and also tissue business. But, again, answering your question about closure, there might be some more closures in Europe, no doubt.

André Pinheiro - Itaú Corretora de Valores S.A., Research Division

And my second question also on the fiber spread that we've been seeing, I mean, fiber spreads have been increasing significantly over the last few months. And we've seen them reach nearly $140 per ton. How do you guys observed the trend evolving going forward? Should we see fiber spreads declining again, probably reaching a level more towards the historical average? And should they close more on the softwood side? I mean, is softwood declining or shall we should see hardwoods rising and closing the spread on that side?

Henri Philippe Van Keer

As you mentioned, I mean, the gap between the long fiber and short fiber in Europe is almost $140, $80 in China, I mean, Asia. It's quite a big gap. So the trend, I would say, would be to narrow this gap from now on. But again, this is good for us. I mean because we see some increase for price increases and even if there is some pressure on long fiber, I mean, it doesn't mean that this will affect right away the short fiber. So I would say that the trend would be to narrow instead of increasing. We know that there are some resistance to those slight increases on the long fiber side in Asia, that, again, it doesn't mean that this is negative for us.

Operator

[Operator Instructions] This concludes the question-and-answer session. At this time, I would like to turn the floor over to Mr. Guilherme Cavalcanti for closing remarks. Mr. Guilherme, you may proceed.

Guilherme Perboyre Cavalcanti

Thank you, all for your participation and support. If you have any additional questions, feel free to contact our Investor Relations team. Good morning.

Operator

Thank you. This concludes Fibria's 4Q '13 Results Conference Call. You may disconnect your lines at this time.

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