Version: 7 Reference Form- 2021- KLABIN S. A.
Disclaimer
This English version is a free translation of the original in Portuguese provided for reference and information purposes only. In case of discrepancy, inaccuracy or inconsistency, the Portuguese original will prevail and it shall not be cause for any claim or liability against the Company.
Contents
1. Persons responsible for the Form 1.0 – Identification of persons responsible for the Form 6 1.1 – Statement from the Chief Executive Officer 7 1.2- Statement from the Investor Relations Officer 8 1.3- Statement from the Chief Executive /Investor Relations Officer 9
2. Independent Auditors 2.1/2.2 – Auditors’ Identification and Fees 10 2.3- Other Relevant Information 11
3. Selected Financial Information 3.1 -Financial Information 12 3.2 – Non-Accounting Metrics 13 3.3 - Events Subsequent to the Latest Annual Financial Statements 16 3.4 – Income Appropriation Policy 18 3.5 – Dividends Distribution and Net Earnings Retained 21 3.6 – Dividends Declared on Retained Earnings or Reserves Accounts 22 3.7- Indebtedness 23 3.8- Liabilities 24 3.9- Other Relevant Information 25
4. Risk factors 4.1 –Description of Risk factors 26 4.2 – description of the Main Market Risks 42 4.3 - Material and non-secret court, administrative or arbitration proceedings 51 4.4- Non-Secret Court, Administrative or Arbitration Proceedings where the Opposing Parties are Managers, Former Managers, Controllers, Former Controllers, or Investors 61 4.5- Material Secret Proceedings 62 4.6- Collectively Material Non-Secret, Repetitive or Enjoindered Court, Administrative or Arbitration Proceedings 63 4.7 – Other Material Contingencies 64 4.8 - Country-of-Origin rules and Rules of the Country where the Securities are Held in Custody 65
5. Risk Management and Internal Controls 5.1 - Risk-management policy 66 5.2 - Market Risk Management Policy 70
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5.3- Description of Internal Controls 76 5.4- Integrity Program 80 5.5 -Material changes 83 5.6- Other Relevant Information – Risk management and internal controls 84
6. Issuer’s History 6.1 /6.2/6.4- Issuer’s Incorporation, Duration and Date of Registration with the CVM 85 6.3 – Brief History 86 6.5- Information on Petition for Bankruptcy provided it was based on a Significant Amount or Judicial or Extrajudicial Recovery 89 6.6- Other Relevant Information 90
7. Issuer Activities 7.1 - Description of the activities carried on by the Company and by its subsidiaries 91 7.1.a- Specific information on mixed economy corporations 92 7.2- Information on Operational Segments 93 7.3- Information on Products and Services with respect to the Operational Segments 97 7.4- Clients Responsible for more than 10% of Total Net Revenue 109 7.5 - Key Impacts of State Regulation on the Activities 110 7.6- Significant Revenue from Overseas 114 7.7- Effects of Overseas Regulations on Activities 116 7.8 - Social and Environmental Policies 117 7.9- Other Relevant Information 118
8. Extraordinary Business 8.1 - Extraordinary Business 125 8.2 - Significant Changes in the Conduct of the Issuer’s Businesses 126 8.3 - Significant Agreements Executed by the Issuer and its Subsidiaries not Directly Related to its Operational Activities 127 8.4- Other Relev. Inf. - Extraord. Business. 128
9. Relevant Assets 9.1 - Relevant Non-Current Assets- Other 129 9.1 - Relevant Non-Current Assets /9.1.a- Fixed Assets 130 9.1 - Relevant Non-Current Assets /9.1.b- Intangible assets 131 9.1 - Relevant Non-Current Assets /9.1.c- Equity Holdings 162 9.2- Other Relevant Information 163
10. Executive Management Comments 10.1 – Overall Financial and Equity Conditions 164 10.2 – Operational and Financial Income 185 10.3 - Effective or expected events with effects on financial statements 187 10.4 - Significant changes in accounting practices and Auditors’ Reservations and Emphasis 189 10.5 – Critical Accounting Policies 190 10.6 – Material Off-Balance Sheet Items 193
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10.7 – Comments on Material Off-Balance Sheet Items 194 10.8 – Business Plan 195 10.9- Other Materially Influential Factors 201
11. Forecasts 11.1 – Disclosed Forecasts and Assumptions 202 11.2 - Tracking of and Amendments to Disclosed Forecasts 203
12. General Meeting and Management 12.1 - Description of the Management Structure 204 12.2 - Rules, policies and practices governing the General Meeting 213 12.3 - Rules, policies and practices governing the Board of Directors 216 12.4 - Description of the Commitment Clause for Arbitration-Based Dispute Resolution 218 12.5/6- Membership and Professional Background of the Management and Fiscal Council 219 12.7/8- Committees Membership 237 12.9 - Marriage, Common-Law Marriage, or Kinship up to 2nd Degree with Managers of the Issuer, Subsidiaries and Controlling Shareholders 241 12.10 - Subordination, Retainer or Control Ties between Managers, Subsidiaries, Controlling Entities and Others 242 12.11 - Agreements, including Insurance Policies, to Pay or Reimburse Expenses Borne by the Managers 243 12.12 -Other relevant information 244
13. Management Compensation 13.1 - Description of the compensation policy or practice, including as concerns the non- Statutory Executive Board 245 13.2 - Total Compensation of the Board of Directors, Statutory Executive Board and Fiscal Council 253 13.3 - Variable Compensation of the Board of Directors, Statutory Executive Board and Fiscal Council 255 13.4 - Share-based compensation plan for the Board of Directors and Statutory Executive Board 256 13.5 – Share-Based Compensation 260 13.6 –Outstanding Options 264 13.7- Options Exercised and Shares Delivered 268 13.8- Share/Option Pricing 271 13.9 – equity Holdings by Corporate Body 272 13.10- Information on Retirement Plans Granted to Members of the Board of Directors and Statutory Officers 273 13.11 - Minimum, Maximum and Average Compensation of the Board of Directors, Statutory Executive Board and Fiscal Council 274 13.12 - Manager Compensation or Indemnity Mechanisms in the Event of Removal or Retirement 275 13.13- Percentage of Total Compensation Accruing to Managers and Members of the Fiscal Council who Are related parties Vis-à-Vis the Controlling Shareholders 276 13.14 - Compensation Earned by Managers and Members of the Fiscal Council, Broken down by Corporate Body for any Reason other than the Position Held 277
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13.15 - Compensation Earned by Managers and Members of the Fiscal Council recognized in the Financials of Directly or Indirectly Controlling Shareholders, Jointly Controlled Entities, or Subsidiaries of the Issuer 278 13.16- Other Relevant Information 279
14. Human Resources 14.1 – Description of Human Resources 280 14.2 –Relevant Changes – Human Resources 282 14.3 - Description of the Employee Compensation Policy 283 14.4- Description of the Issuer’s Relationship with Unions 285 14.5- Other Relevant Information- Human resources 286
15. Control and Conglomerate 15.1 /15.2 - Share Ownership 287 15.3 - Capital Distribution 293 15.4 - Shareholders and Conglomerate Organization Chart 294 15.5 -Shareholders agreement filed at the issuer’s registered offices to which the controlling shareholder is a party 295 15.6- Relevant changes to the equity stakes of members of the controlling group and managers of the Company 301 15.7 – Main Corporate Operations 302 15.8- Other Relevant Information- Control and Conglomerate 305
16. Transactions with Related Parties 16.1 - Description of the Issuer’s Rules, Policies and Practices Governing Transactions with Related Parties 306 16.2- Information on Transactions with Related Parties 307 16.3 - Identification of Steps Taken to Address Conflicts of interest and Substantiation of the Strictly Mutual Nature of the Agreed Conditions or of Appropriate Compensation Payment 309 16.4- Other Relevant Information- Transactions with Related Parties 310
17. Equity Capital 17.1 – equity Capital Information 311 17.2 -Capital Increases 312 17.3- Information on Stock Splits, Reverse Splits and Bonus Shares 313 17.4 – Information on Capital Reductions 314 17.5- Other Relevant Information 315
18. Securities 18.1 - Share Rights 313 18.2 - Description of any Statutory Rules Limiting the Voting Rights of Significant Shareholders of Forcing them to Hold Public Offerings 318 18.3 - Description of Exception and Suspension Clauses for Equity or Political Rights under the Bylaws 319 18.4 - Trading Volumes and Highest and Lowest Quotes of Securities Traded 320 18.5 -Other Securities Issued in Brazil 323 Page 4 of 348
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18.5.a- Number of Security Holders 328 18.6 - Brazilian Markets where Securities are Listed for Trading 329 18.7 -Information on Security Classes and Types Listed for Trading Overseas 330 18.8 -Securities Issued Overseas 331 18.9 –Public Distribution Offerings 334 18.10 - Allocation of Funds Raised in Public Offerings 335 18.11 –Public Purchase Offerings 336 18.12- Other Relevant Information - Securities 337
19. Repurchase/Treasury Plans 19.1 - Information on Issuer Share Repurchase Plans 338 19.2- Trades in Treasury Securities 339 19.3- Other Relevant Information – Repurchase Treasury 342
20. Trading Policy 20.1 –Information on the Securities Trading Policy 343 20.2- Other Relevant Information 344
21. Disclosure Policy 21.1 - Description of internal standards, guidelines or procedures governing disclosure 345 21.2- Description of the material act or fact policy and of procedures governing secrecy over undisclosed material information 346 21.3 - Managers responsible for Implementing, Maintaining, Evaluating and Overseeing the Disclosure Policy 347 21.4- Other Relevant Information 348
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1. Persons responsible for the Form 1.0 – Identification of persons responsible for the Form
Name of the person responsible for the contents of the form
Cristiano Cardoso Teixeira
Position
Chief Executive Officer
Name of the person responsible for the contents of the form
Marcos Paulo Conde Ivo
Position
Investor Relations Officer
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1.1- Statement from the Chief Executive Officer
Statement from the Chief Executive Officer
CRISTIANO CARDOSO TEIXEIRA, a citizen of Brazil, married, holder of a Bachelor’s Degree in Foreign Trade, bearer of ID Card (RG) No. 16.771.543-4-SSP/SP and Taxpayer ID (CPF) No. 128.996528-50, with place of residence and domicile in the city and state of São Paulo, with business address at Avenida Brigadeiro Faria Lima n° 3600 – 5th floor, city and state of São Paulo, as Chief Executive Officer of Klabin S/A (the "Company"), pursuant to the contents of Schedule 24 of CVM Instruction No. 480, of December 7, 2009, as amended and in force (“ICVM 480/09”), hereby states that:
I. He has reviewed the Company’s Reference Form (“Reference Form”);
II. All of the information therein is in compliance with the contents of ICVM 480/09, and in particular Articles 14-19 thereof; and
III. The information provided in the Reference Form truthfully, accurately and completely portrays the Company’s economic and financial standing and the risks inherent to its activities and to any securities it may have issued.
São Paulo, April 30, 2021
CRISTIANO CARDOSO TEIXEIRA
Chief Executive Officer
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1.2- Statement from the Investor Relations Officer
Statement by the Chief Financial and Investor Relations Officer
MARCOS PAULO CONDE IVO, a citizen of Brazil, married, Economist, with place of residence and domicile in the city and state of São Paulo, with business address at Avenida Brigadeiro Faria Lima, No. 3600 – 4th floor, city and state of São Paulo, holder of Taxpayer ID (CPF) No. 220.481.088-65, as Chief Financial and Investor relations Officer of Klabin S/A (the “Company”), pursuant to the contents of Schedule 24 of CVM Instruction No. 480, of December 7, 2009, as amended and in force (“ICVM 480/09”), hereby states that:
I. He has reviewed the Company’s Reference Form (“Reference Form”);
II. All of the information therein are in compliance with the contents of ICVM 480/09, and in particular Articles 14-19 thereof; and
III. The information provided in the Reference Form truthfully, accurately and completely portrays the Company’s economic and financial standing and the risks inherent to its activities and to any securities it may have issued.
São Paulo, April 30, 2021
MARCOS PAULO CONDE IVO
Chief Financial and Investor relations Officer
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1.3 Statement from the Chief Executive/Investor Relations Officer
Not applicable because different individuals hold the positions of the Company’s Chief executive Officer and Investor relations Officer. These Officers’ individual statements are provided in items 1.1 and 1.2 of the present Reference Form.
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2. Independent Auditors
2.1/2.2 – Auditors’ Identification and Fees
Has an auditor been retained? YES CVM Registration Code 471-5 Auditor type Domestic Ernst & Young Auditores Name/Corporate name Independentes S.S Taxpayer ID (CPF/CNPJ) 61.366.936/0001-25 Date of retainer Jan/01/2017 Audit of the Fiscal Year ending 12/31/2020 and review of year’s Description of the services retained quarterly financials.
Audit fess in 2020: BRL Total amount of the independent auditors’ fees by service retained 2,068,457.41
Reason for replacement Reasons provided by the auditors in the event of dispute concerning the issuer’s reason for replacement
Name of the auditor in charge Rita C Freitas Date of retainer start 01/01/2017 Taxpayer ID (CPF) 669.103.745-68 Av. Presidente Juscelino Kubitschek, 1.909- Torre Norte,10th floor ,Vila Nova Conceição, City Address And state of São Paulo, Brazil, CEP 04543-011, Phone No. (11) 25733000, e-mail: [email protected]
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2.3. Other relevant information:
Relationship with independent auditors
Pursuant to CVM Instruction No. 381/03, the Company reports that auditors Ernst & Young Auditores Independentes S.S., responsible for \auditing its financial statements, provided services unrelated to independent auditing in amounts exceeding 5% of their total fees, as described below:
Date of % of Service description Period Amount retainer auditing fees
Support to the forest operations department implementing S&OP (monthly harvest planning) and S&OE (weekly harvest planning) processes. We BRL 625 February/2020 9 months 12% tracked the process of continually improving forest thousand productivity analyses and actions proposed by Klabin for their evolution.
Review of the mathematical calculations of the safety inventory (for monitoring purposes) needed to absorb BRL 405 February/2020 2 months 8% forest chain variability and not used in the thousand costing/accounting process.
Support to the forest operations department reviewing roles and responsibilities for production planning and control, process standardization in the areas involved (commercial, logistics, harvest, loading, inventories); support to management concerning definition of BRL 442 November/2020 3 months 8% communication models (meeting and reporting thousand intervals) and alignment of service levels with other areas, in addition to suggesting improvements for the information systems and indicators currently in use, without generating any accounting information.
Aside from the services described above, the independent auditors were not retained for any other services exceeding 5% of fees.
The Company’s policy for retaining the independent auditors to render services unrelated with external audit is based on principles to preserve the professionals’ independence. These principles abide by internationally accepted guidelines are as follows: (a) auditors are not to audit their own work, (b) auditors are not to perform managerial roles for the client; and (c) auditors are not to promote clients’ interests.
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3. Selected Financial Information
3.1 - Financial Information -Consolidated
(BRL) Fiscal Year (12/31/2020) Fiscal Year (12/31/2019) Fiscal Year (12/31/2018) Equity 4,384,761,000.00 6,501,273,000.00 6,533,230,000.00 Total Assets 35,270,261,000.00 34,703,082,000.00 29,633,743,000.00 Net Rev./Rev from Fin. Int./Ins. Prem. Received 11,948,794,000.00 10,271,839,000.00 10,016,461,000.00 Gross Income 4,721,884,000.00 3,420,658,000.00 4,302,422,000.00 Net revenue - 2,389,490,000.00 714,618,000.00 186,818,000.00 Number of Shares, Ex- Treasury Shares (Units) 5,485,248,166.00 5,270,170,115 5,263,208,410 Share Equity Value (BRL/Unit) 0.799373 1.233598 1.241302 Basic earnings per common share - 0.4537 0.1300 0.0300 Diluted earnings per common share - 0.45 0.13 0.03
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3.2. Non-accounting metrics:
a) Non-accounting metrics
The Company uses the non-accounting metric EBITDA (earnings before interest taxes, depreciation and amortization), as a means to provide a measure of its operational economic performance, which consists in operational income minus net financial income, equity income, depreciation, depletion and amortization and variation in the fair value of biological assets.
Generally accepted accounting practices in Brazil do not recognize EBITDA, and the metric does not represent the cash flow for the fiscal years presented, and must not be considered as a basis for dividends distribution, an alternative to net earnings, or a liquidity indicator.
The Company abides by the definitions for the disclosure of EBITDA as provided in CVM Instruction 527/12, and provides reconciled balances pursuant to the guidelines provided in said Instruction.
b) Reconciliation of amounts disclosed and amounts as in the audited financial statements
Consolidated 12/31/2020 12/31/2019 12/31/2018 (=) Net earnings (2,389,490) 714,618 186,818 (+) Income tax and social contribution (1,424,875) 149,908 (255,399) (+/-) Net financial income 7,029,131 1,661,848 3,052,186 (+) Amortization, depreciation and depletion on earnings 2,382,911 2,193,414 1,673,347 EBITDA 5,597,677 4,719,788 4,656,952
Adj. pursuant to CVM Inst 527/12 (+/-)Variation in the fair value of biological assets (658,389) (390,053) (628,367) (+/-) Equity income (33,123) (7,237) (5,964) (+/-) EBITDA from jointly held subsidiary - - 1,798 Adjusted EBITDA 4,906,165 4,322,498 4,024,419
(+/-) Ganho de ICMS na base de PIS/COFINS (iii) - (620,833) - (+/-) Ganho de compra vantajosa (iv) (206,061) - - LAJIDA (EBITDA) - ajustado (excluindo efeitos não recorrentes) 4,700,104 3,701,665 4,024,419
Adjustments for the purposes of the definition of adjusted EBITDA: (i) Change in the fair value of biological assets The change in the fair value of biological assets corresponds to gains or losses from the biological transformation of forest assets up until they can be used/sold during the formation cycle. Because this concerns an expected value of assets reflected in the Company’s income/loss, calculated based on assumptions included in the respective discounted cash flow with no cash effect upon booking, the fair-value change is excluded from adjusted EBITDA calculations.
(ii) Equity income and adjusted EBITDA from jointly held subsidiaries The equity income reflected in the Company’s income reflects the subsidiary’s profits/losses as recognized in its individual financial statements, calculated according to the Company’s
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percentage stake therein. In consolidated results, the equity income entry concerns jointly held subsidiaries. The profits/losses of jointly held subsidiaries is under the influence of items not included in EBITDA calculations, such as: net financial income, income tax and social contribution, amortization, depreciation and depletion, and change in the fair value of biological assets. For this reason, equity income is excluded from the calculations. Instead, the Company adds the adjusted EBITDA from jointly held subsidiaries, calculated in the same manner, and corresponding to the Company’s equity stake therein.
(iii) Exclusion of ICMS from the PIS/COFINS taxable base As discussed in the Material Fact announced to the market on August 22, 2019, there has been a final ruling granting the Company’s request to exclude the ICMS from the PIS and Cofins taxable base. This led to the addition of BRL 621 million to the Company’s income. This gain is characterized as non-recurring for its topical nature, and has been excluded from EBITDA calculations for comparative purposes and for the analysis of the Company’s nominal operations.
(iv) Gains from beneficial acquisition AS discussed in the Announcement to the Market released on March 29, 2020, the Company acquired the Brazilian packaging papers and corrugated cardboard business of International Paper do Brasil (“IP”). For this operation, the fiscal year’s income recognized a gain from beneficial acquisition in the amount of BRL 206 million during the measurement of the fair value of the assets and liabilities acquired. Said gain is characterized as non-recurring for its topical nature, and has been excluded from EBITDA calculations for comparative purposes and for analysis of the Company’s nominal operations.
c) Explain why the Company understands that this metric is more appropriate for the proper understanding of its financial standing and of income from its operations The Company’s management uses adjusted EBITDA as a performance metric and understands that disclosure thereof is more appropriate for the proper understanding of the Company’s financial standing, as it is a convenient measure of operational performance and enables comparisons with other companies in the same segment, even if they may calculate the metric differently. Adjusted EBITDA demonstrates the Company’s performance free from the influence of factors associated with the following, among others: (i) its capital structure, including interest expenses on its debt and the effects of foreign exchange rate variations on financial income; (ii) its tax structure, such as income tax and social contribution; (iii) the depreciation, depletion and amortization expense on its high balance of fixed and biological assets; (iv) changes in the fair value of biological assets that do not affect the Company’s cash position; and (v) exclusion of non-recurring items topically affecting income, so that the indicator can be compared evenly across different fiscal years.
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The Company’ understands that these characteristics make adjusted EBITDA a more convenient and appropriated performance metric, recognizing income arising exclusively from the performance of its activities.
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3.3. Events subsequent to the latest annual financial statements that materially affect those statements:
The individual and consolidated financial statements for the fiscal year ending December 31, 2020 were approved for publication on February 9, 2021. After the end of the fiscal year, the following noteworthy subsequent events took place:
Takeover of Riohold Papel e Celulose S.A
As discussed in an Announcement to the Market released on January 4, 2021, an Extraordinary General Meeting approved the takeover of Riohold Papel e Celulose S.A. The takeover did not cause a capital increase or new shares to be issued, as the Company’ holds the entirety of Riohold’s equity capital. The takeover was part of Management’s strategy of integrating assets acquired from International Paper do Brasil Ltda.
2031 Bonds (Notes)
As discussed in an Announcement to the Market released on January 6, 2021, the Company concluded raising USD 500 million in 10-year Sustainability Linked Bonds (SLB) maturing in 2031 with 3.20% annual coupon for the purposes of the early buyback of the Bond maturing in 2024 and accomplishment of the Company’s general objectives.
On January 13, 2021, through an acquisition offering held by wholly-owned subsidiary Klabin Finance, the proposed buyback of the Bonds maturing in 2024 was concluded, in the amount of USD 98 million.
Aroeira Reflorestadora S.A.
As discussed in an Announcement to the Market released on January 26, 2021, the Company executed the required agreements for association with a Timber Investment Management Organization (“TIMO”) into Aroeira Reflorestadora SPE S.A. The Company’s contribution to the society’s equity shall take place by means of the provision of approximately 9.7 thousand hectares of planted forests, whereas TIMO shall contribute an amount of up to BRL 500 million in cash, a portion of which upon execution of the deal and the remainder in up to three years.
The resources injected into the SPE shall be used to acquire and lease approximately 19.5 thousand hectares for effective planting, as well as financing the planting (chiefly of pine trees) in the areas at hand. Klabin shall have preemptive rights to the purchase of the wood produced by the SPE, among other rights typically assigned to the controlling shareholders of such societies. Completion of the operation is contingent upon a series of ordinary conditions precedent, including approval by the relevant regulatory authorities. The association shall enable the Company to expand its forests park in the State of Santa Catarina in a capital- efficient manner. The expansion is intended to supply the region’s existing factories, as well as
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to enable future expansion projects.
Nova Campina Disposal
The sale of Nova Campina (SP) was completed on January 29, 2021, after a joint closing with the Klingele Paper & Packaging Group. Of the transaction’s total BRL 196 million, BRL 132 million were received on the same date and the remainder shall be received in two annual payments of the same amount.
With this operation, 100% of the shares of wholly-owned subsidiary Embacorp Soluções em Embalagens de Papel Ltda., the holder of the Nova Campina (SP) unit, with production capacity for 162 thousand tons of kraftliner, and part of the assets acquired from International Paper, became the property of the Klingele Paper & Packaging Group.
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3.4. Income appropriation policy for the past three fiscal years:
a) Rules governing retained earnings
Rule in force since Fiscal Year 2014 – approved at the EGM held on November 28, 2012 after the effective debentures issue of January 7, 2014.
Pursuant to Art.196 of Law 6.404/76, as amended by Law 11.638/07, the Annual Shareholders’ Meeting may resolve to retain a portion of the fiscal year’s earnings, to be allocated to payment of expenses as provided in a previously approved capital budget. Under the Company’s Bylaws, a fiscal year’s income must be appropriated as follows:
- Five (5) percent to forming legal reserves until it reaches an amount equivalent to twenty (20) percent of the equity capital;
- Constitution of other reserves according to the Law;
- Formation of Investment and Working Capital Reserves to be created for the allocation of the effects of the fair-value variation of the biological asset while financially unrealized, at a variable rate between five (5) percent and seventy-five (75) percent of adjusted net earnings as provided by the Law, provided the limit set forth in Article 199 of Law 6.404176, to ensure funds for investment in permanent assets and additions to working capital, including by means of debt amortization, irrespective of earnings retained in association with capital budgets. The balance may be allocated to absorbing losses as needed, to distribution of dividends at any time, to stock redemption, reimbursement or repurchase operations as authorized under the Bylaws, or for incorporation into the Company’s equity capital;
- Formation of the Biological Assets Reserve from the appropriation of the fiscal year’s earnings, free from tax effects, arising from revenues from the fair-value valuation of own biological assets and fair-value valuation of Controlled Entities’ biological assets as contained in the equity income recognized by the controlling entity;
- the Company's General Meeting will decide on the destination to be given to the eventual net income balance calculated in the year.
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a.i) Amount of the Earnings Retained
a.ii) Percentage relative to total recognized earnings
Fiscal Year ending 12/31/2020 Fiscal Year ending 12/31/2019 Fiscal Year ending 12/31/2018 Out of the net losses recognized in Out of the net earnings recognized in Out of the net earnings recognized in the fiscal year ending 12/31/2020, in the fiscal year ending 12/31/2019 in the fiscal year ending 12/31/2018 in the amount of BRL 2,488 million: the amount of BRL 676 million: the amount of BRL 137 million: - BRL 600 were absorbed by the - constitution of a Tax Benefits - constitution of a Tax Benefits investment and working capital Reserve, BRL 49 million, 7% of Net Reserve, BRL 59 million, 43% of Net resreves; Earnings; Earnings; - constitution of Legal Reserves, BRL - constitution of Legal Reserves, BRL - BRL 470 were absorbed by the 31 million, 5% of Net Earnings after 4 million, 5% of Net Earnings after gains from biological asssets constitution of the Tax Benefits constitution of the Tax Benefits reserves; Reserve; Reserve; - realization (net of constitution) of - constitution (net of realization) of - BRL 185 were absorbed by the own and controlled entities’ own and controlled entities’ required reserves; Biological Asset Reserve, BRL 345 Biological Asset Reserve, BRL 75 million, 51% of Net Earnings; million, 55% of Net Earnings; - constitution of Investment and - realization of cost assigned to fixed - BRL 239 were absorbed by the tax Working Capital Reserve, BRL 33 assets, BRL 1 million, 1% of Net benefits reserves; million, 4% of Net Earnings; Earnings; The above earnings appropriation The above earnings appropriation - BRL 23 were paid as anticipated will be submitted to the approval of was approved at the AGM of dividends on February 20, 2020; the AGM on 07/31/2020 04/30/2019. - BRL 994 were booked as losses to be absorbed in the subsequent fiscal year; Distribution of the losses as above shall be submitted to the AGM for approval on 03/24/2021
b) Rules governing dividends distribution
Rule in force since Fiscal Year 2014 – approved at the EGM held on November 28, 2012 after the effective debentures issue of January 7, 2014.
Allocation to shareholders, each fiscal year, of dividends of no less than twenty-five (25) percent of earnings adjusted according to the Law and further adjusted by the constitution, realization and reversal, in the respective fiscal year, of the Biological Assets Reserve and by the realization of the "Equity Valuation Adjustments" account.
The adjustment of net earnings as basis for the distribution of dividends for the constitution, realization and reversal of the Biological Assets Reserve is provided for under the Bylaws and required to adjust the Company’s procedures to the principles that drive the adoption of International Accounting Standard IFRS, particularly as concerns the recognition of biological assets with earnings effects, of revenues and expenses from the fair-value adjustment of biological assets, which cause no cash in- or outflows in the same fiscal year they are recognized.
All shareholders on the date of dividends declaration shall be entitled to receive such dividends. Pursuant to the contents of the Corporations Law, annual dividends shall be paid within 60 days from declaration thereof, except where the shareholders may elect a different payment date. In any case, payment of dividends shall take place before the end of the fiscal year in which they Page 19 of 348
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are declared. Shareholders shall have a period of three years from the date of payment of the dividends to claim payment of dividends or interest on shareholders’ equity associated with the shares they hold, after which period the amount of unclaimed dividends shall reverse to the Company.
Dividends and Interest on Shareholders’ Equity Policy
In addition to the corporate rules set forth in Law No. 6.404/76 and conveyed on the Company’s Bylaws as concerns applicability, on June 24, 2020, the Company’s Board of Directors approved the Company’s Dividends and Interest on Shareholders’ Equity Policy, setting forth the guidelines for proposed distribution of dividends and interest on shareholders’ equity and setting distribution parameters and targets.
Provided the rules governing required dividends, as per the Bylaws and corporations law, the Company’s Board of Directors shall propose dividends and/or interest on shareholders’ equity so that the total of dividends and interest on shareholders’ equity shall correspond to a target- percentage in the 15%-25% range of adjusted EBITDA, provided, however, that this shall not the Board of Directors’ discretionary ability to – extraordinarily , and in line with the macroeconomic situation and the Company’s economic and financial circumstances (current and projected), as well as the status of the markets in which the Company operates, at no loss to the Company’s other policies – resolve on the distribution of dividends and/or interest on shareholders’ equity beyond the target established in the relevant policy.
c) Frequency of dividends distribution
The dividends distribution period shall be annual, provided the rules under the Corporations Law and the Company’s Bylaws, and interim dividends may be distributed at shorter intervals, in line with the Dividends and Interest on Shareholders’ Equity Policy as approved by the Board of Directors on June 24, 2020.
d) Restrictions on dividends distribution from special laws or regulations applicable to the Company, as well as any contracts, or administrative, court, or arbitration rulings
There are no restrictions on the distribution of dividends from special laws or regulations applicable to the Company, nor from contracts, or administrative, court or arbitration rulings.
e) If the issuer has a formally approved income allocation policy in place, inform the body responsible for approval and date of approval, and, if the issuer discloses such a policy, the World Wide Web locations where the document may be viewed.
The Company has an income allocation policy in place as approved by the Board of Directors on June 24, 2020, available at https://ri.klabin.com.br.
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3.5 – Dividends Distribution and Net Earnings Retained
Fiscal Year Fiscal Year ending ending Fiscal Year (BRL) 12/31/2020 12/31/2019 ending 12/31/2018
Adjusted net earnings - 940,257,000 - Dividend distributed from 0.00% 96.46% 0.00% adjusted net earnings (%) rate of Return on the issuer's -56.74% 10.99% 2.86% equit (%) Total Dividends distributed (BRL) 23,000,000 907,000,000 919,000,000
Net earnings retained - 33,257,000 - Date of aproval of retainet 03/24/2021 07/31/2020 04/30/2019 earnings
Payments 2018 Amount Dividend Payment ON 56,467,703 05/14/2018 BRL 152,000,000 PN 95,532,297
PN 11/14/2018 BRL 265,000,000 166,552,800 Interest on Equity ON 02/22/2019 BRL 125,000,000 46,437,359 Interest on Equity PN 78,562,641 Interest on Equity ON 46,437,359 02/22/2019 BRL 125,000,000 PN 78,562,641
Payments 2019 Amount Dividend Payment ON 7,429,989 02/25/2019 BRL 20,000,000 PN 12,570,011 ON 74,625,436 05/17/2019 BRL 201,000,000 PN 126,374,564 ON 71,283,999 08/19/2019 BRL 192,000,000 PN 120,716,001 ON 72,027,658 11/14/2019 BRL 194,000,000 PN 121,972,342 ON 37,127,659 Interest on Equity 11/14/2019 BRL 100,000,000 PN 62,872,341 Interest on Equity ON 74,254,446 Interest on Equity 02/20/2020 BRL 200,000,000 PN 125,745,554 Interest on Equity
Payments 2020 Amount Dividend Payment ON 8,539,258 02/20/2020 BRL 23,000,000 PN 14,460,742
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3.6 Dividends declared on the retained earnings or reserves accounts constituted in the past three fiscal years:
In 2020, the Company distributed dividends in the amount of BRL 23 million from the earnings reserve account, as approved by the Extraordinary General Meeting held February 5, 2020, paid on February 20, 2020.
In 2019, the Company distributed dividends in the amount of BRL 607 million from the earnings reserve account. The Extraordinary General Meeting of February 06, 2019, approved payment of BRL 20 million, paid on February 25, 2019; the EGM of April 30 approved payment of BRL 201 million, paid on May 07; the EGM of August 05 approved payment of BRL 192 million, paid on August 19, 2019, and the EGM of November 01, 2019, approved payment of BRL 194 million, paid on November 14, 2019. BRL 300 million were distributed as interest on shareholders’ equity from the Earnings Reserve account. The Extraordinary General Meeting of November 01 approved payment of BRL 100 million, paid on November 14, 2019, and the EGM of December 23, 2019 approved payment of BRL 200 million, paid on February 20, 2020.
Dividends in the amount of BRL 529 million were paid in 2018 from the Earnings Reserve account. The Extraordinary General Meeting of April 25, 2018, approved payment of BRL 152 million, paid on May 15, 2018; the EGM of July 31 de approved payment of BRL 177 million, paid on August 15; the EGM of October 29 approved payment of BRL 75 million, paid on November 14, 2018, and the EGM of December 11, 2018, approved payment of BRL 125 million, paid on February 22, 2019. BRL 390 million were distributed as interest on shareholders’ equity from the Earnings Reserve account. The Extraordinary General Meeting of October 29 approved payment of BRL 265 million, paid on November 14, 2018 and the EGM of December 11, 2018, approved payment of BRL 125 million, paid on February 22, 2019.
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3.7 – Indebtedness
Sum of Current and Fiscal Year Non- Current Ratio type Ratio Description and reason for the other indebtedness ratio
Liabilities 12/31/2020 30,885,500,000.00 Indebtedness ratio 0.86000000
Net Debt-to-Adjusted EBITDA – Leverage Ratio. The Company understands that this is a commonplace ratio in the market, used as a means to determine 0.00 Other ratios 4.00000000 its leverage level as net debt divided by Adjusted EBITDA. The latter
corresponds to the Company’s operational cash generation
0.00 Other ratios 0.69000000 Net indebtedness = net debt (loans, financings and debentures minus cash, cash equivalents and securities) / (total assets - cash). The Company understands that this indec better represents indebtedness, as it considers the company’s debt nt of cash.
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3.8 –Liabilities
Fiscal Year (12/31/2020) Other Guarantee Liability Type guarantee or Under one year One to three years Three to five years Over five years Total Type privilege
Financing Collateral 216,325,000 697,462,000 1,051,058,000 1,043,653,000 3,008,498,000
Loan Unsecured 316,100,000 213,033,000 4,973,849,000 12,800,534,000 18,303,516,000 Other guarantee Loan Unsecured or privilege 233,979,000 1,476,685,000 550,000,000 2,766,312,000 5,026,976,000 Total 766,404,000 2,387,180,000 6,574,907,000 16,610,499,000 26,338,990,000 Notes
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3.9. Other relevant information:
Indebtedness index – item 3.7
The 0.86 indebtedness index as at 12/31/2020 was calculated as net equity divided by the sum of current and non-current liabilities.
Covenants
In the fiscal years ending December 31, 2020, 2019 and 2018, the Company and its subsidiaries were party to no financing agreements featuring covenants creating obligations to maintain financial indices as concerns income, liquidity and leverage, where noncompliance makes the debt immediately due and payable.
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4.1. Description of risk factors
Investment in securities issued by Klabin S.A. intrinsically involves exposure to certain risks. Before deciding to invest in any securities issued by the Company, potential investors must meticulously examine the information provided in the present Reference Form, the risks mentioned, the Company’s financial statements, and the respective audit notes.
The Company and its controlled entities are subject to several risks inherent to the segments in which they operate, which stem from possible changes in competitive, economic, political, social and weather-related conditions that may harm their business, operational results, and financial standing. Although the risks listed ahead are not the only ones that the Company and its controlled entities may face, they are, according to the best understanding of Management at the time of the publication of the present Reference Form, those with the highest degrees of relevance and exposure.
Notwithstanding, according to the layout of the present section "4. Risk factors", certain risk factors mentioned in one item may also apply to other items.
a) Concerning operations
Risks affecting the Company and the paper and packaging industry in general
Development of the Covid-19 pandemic declared by the World Health Organization (WHO), its perceived effects, and the manner in which the pandemic shall affect our business shall depend on future developments regarding contingency measures and external factors that may adversely affect the predictability and stability of our business, financial standing, operational results, cash flows, and delivery of expected results.
On December, 2019, the first case of the coronavirus disease (Covid-19) caused by the severe acute respiratory syndrome 2 (SARS-CoV-2) was reported in Wuhan, China. On March 11, 2020, the WHO declared a Covid-19 pandemic due to its rapid dissemination to other continents, including Europe, the Middle East and the Americas. The WHO also stated that its member countries should put in place effective measures to contain the spread and treat the infected population.
In response to the Covid-19 pandemic, government authorities implemented severe restrictive measures, including in areas where we operate. The measures were taken to protect the population, resulting in restrictions against the flow of people, quarantines and blockades, restrictions on travel and public transportation, lengthy shutdown of workplaces, supply chain interruptions, retail shutdowns, and generalized reduction of consumption by the population.
Our business and operations face the risk of material interruptions as a result of, without limitation, quarantines, cyber-attacks, employee absence due to illness or other factors, such as social distancing measures, travel restrictions, or other. If a significant share of our workforce is unable to work, for reasons including, without limitation, disease, travel restrictions, or pandemic-related government restrictions, our operations may be adversely affected. A lengthy period of remote working may also increase our operational risks, including, without limitation, cyber security risks that may jeopardize our ability to manage and operate the business.
Any disease outbreak that affects the population’s behavior or requires public policy placing limitation on circulation flows and/or social contact may adversely affect our business and the
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Brazilian economy. Disease outbreaks may also prevent workers from moving into our facilities (including due to restrictions or the large-scale contamination of our workforce), which would hamper the routine performance of our business. The total extent of the impact of the Covid-=19 pandemic on our business and operational results depends on future developments, including, without limitation, the duration and scope of the pandemic, which are uncertain and unpredictable, particularly in Brazil. These factors include the impact thereof on the capital and financial markets, any new information that may emerge on the severity of the virus, its spread to other regions, and the measures taken to contain it, including the effectiveness of any vaccine, among other factors.
We cannot guarantee that no more regional and/or global outbreaks shall take place, nor that there shall be no more Covid-19 waves. In the presence of any of the foregoing, we cannot guarantee the ability to take the measures needed to prevent negative impact on our business of a similar or even greater magnitude than that of the Covid-19 pandemic.
Finally, the impact of the Covid-19 pandemic may also trigger or aggravate other risks discussed in this section.
The Company may be unable to fully carry out its business strategy and maintain stable operational results and growth rates.
The Company’s ability to implement a business strategy and maintain stable operational results and growth rate depends on several factors, including the ability to:
keep existing customers and attract new ones;
establish and maintain partnerships;
hire and retain skilled workers; and
increase its ability to operate in existing markets and expand into new ones.
The Company’s loss, even if temporary, of any of the above, be it due to competitive difficulties or cost-related factors, and its potential inability to balance risks, uncertainties and problems, may limit its ability to fully carry out its business strategy and affect its ability to effectively compete in the market, with negative impacts on its operational results.
Successful operations depend on the ability to maintain existing customers and obtain new ones. Any failure to maintain or obtain clients may adversely affect the Company’s business, financial standing and operational results.
As a global producer of paper past, paper packaging materials and pine and eucalyptus logs, the Company’s operational performance depends on its ability to identity. Attract and maintain customer in each of the regions where it operates. This, in turn, depends on (1) research and development to maintain the ability to innovate; (2) sales and marketing efforts to increase market share and expand into new markets; and (3) the quality and reliability of the products made to meet customers’ demand. The ability to carry out these activities requires time and planning, and involves expenses, and the inability to execute any one of them successfully, given the competitiveness of the pulp, paper and packaging industry, may affect the Company in a materially adverse manner.
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The loss of key members of Management or the inability to hire and retain skilled employees, or properly train our personnel may negatively affect the Company.
The Company’s ability to maintain its competitive position largely depends on the experience of key members of Management. The Company does not enter into employment agreements or do- not-compete agreements with any members at the managerial or tactical level. There can be no assurance that the Company will be able to maintain the current members of Management, and the loss of any member, or the inability to attract and maintain experienced executives may materially and negatively affect the Company’s business, financial standing and operational results.
Furthermore, as part of its expansion strategy, the Company hires, trains and retains new employees for its operations. The Company is subject to material competition in its efforts to hire such employees, and there can be no assurance that it will be able to attract and train skilled employees in sufficient numbers to meet existing and upcoming business demands. In addition, the Company may have trouble retaining employees if it is unable to maintain an attractive business culture and competitive compensation levels. The hiring, training and retention of skilled labor is believed to be a critical factor for long-term success and business growth, and dissatisfying or faulty implementation of its strategy may materially and negatively affect the Company’s business, operational results or financial standing.
The loss of any member of management, or the inability to attract and retain experienced executives may adversely affect the Company’s business, financial standing and operational results.
The Company’s business includes relevant operational risks that, upon materialization, may partly stop its activities and adversely impact its results and financial standing.
The Company’s operations are subject to the risks associated with the production, storage and disposal of chemical waste, pressure containers and dams, and may experience situations including explosions, fires, wear and tear over time and due to the exposure to weather and natural disasters, mechanical failure, insufficient time for unscheduled maintenance or repairs, freight interruptions, chemical leaks, and other environmental hazards. The occurrence of any of the foregoing may cause injury or death, severe damages to property, the destruction of machinery and equipment, and environmental damages, leading to partial or full interruption of commercial and/or industrial activities, as well as to liability including damages and indemnity owed to third parties, with a potentially significant effect on financial results.
Among the main operational risks, are included:
i. Pressure vessel equipment: The Company uses equipment that is fundamental to the production process and that contains fluids and is designed to safely withstand internal pressures other than atmospheric pressure, such as: recovery boilers, steam and tanks with chemical products. In the event of a rupture and / or explosion, it may generate interruptions in production and also result in bodily injury or death;
ii. Fire in the manufacturing area: The Company is subject to fires considering the business in which it operates and the products and equipment used in the production process. The occurrence of fire in any of the factories may interrupt production, causing an increase in the costs of the process, generating significant adverse effects on the Page 28 of 348
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business;
iii. Explosion of chemical products: The risk of explosion is located in the Company's plants, mainly in the paper and cellulose units due to the large volume of chemical products used in production. The high amount of flammable products in plants can, if not properly handled, critically impact people and also the environment.
Wood shortages for the manufacturing process
Wood is the main input for the production of paper and cellulose, and any event that may affect the forest base may directly influence the production of paper and cellulose, and / or increase production costs. With the expansion of production forecasted by the Company in the coming years, the planning and acquisition of forest assets are essential to achieve Klabin's strategic objective. Deviations in this prognosis can bring losses and uncertainties to the business. Pests and diseases are also other drivers of loss of forest base, in addition to possible competition with other crops (soy, sugar cane and others) can also lead to a decrease in the processes of expansion of the forest base.
Expansion, investment and acquisition projects may require additional funding that may not be available, or may not offer good cost-benefit ratios.
Expansion projects are capital-intensive and require significant additional funding, which may be obtained by means of the issuance of shares, or debt, or through bank financing, including funding from development banks, multilateral institutions, and/or export credit agencies. We cannot guarantee the availability of additional funding and, even if available, access to additional funding on competitive terms. Lacking access to funding under competitive terms may restrict the future growth and development of the business, as well as any expansion or acquisition projects, which may adversely affect the Company’s business, financial standing and operational results.
Delays expanding existing plants or building new ones may affect costs and operational business performance.
As part of the Company’s strategy to increase its market share and improve its competitiveness through greater economies of scale, it may expand or upgrade its facilities. Plant expansion or construction involves countless risks, including those associated with engineering, construction, regulation, and others arising from material challenges that may delay or prevent a project’s proper functioning, or significantly increase the costs and investments involved. The ability to successfully complete any expansion or new construction project in time is also subject to financing risk and other risks, in particular:
The Company may be unable to complete any expansion or construction project on schedule or on budget, or may be forced by market circumstances or other factors to delay construction start or extend the completion schedule of new projects or expansions;
New or modified facilities may not operate at predicted capacity, or may lead to higher than expected operational costs
The Company may be unable to sell its additional output at attractive prices; and
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growth plans.
The materialization of these or other risks may adversely affect the Company’s business, financial standing and operating results.
Indebtedness may negatively affect the Company’s financial health and operational flexibility.
The Company has taken on significant debt (from short- and long-term loans and debentures, aside from other interest-bearing liabilities, or any other liabilities). At yearend 2020, gross debt was BRL 26.7 billion, and we may incur significant additional debt, including: (i) through investment in expansion projects, (ii) in connection with discussions underway with financial institutions with which we are actively involved (consisting mainly in debt-management exercise) or (iii) otherwise. The Company’s debt and other financial obligations increase the potential for us to be unable to generate sufficient cash to make principal, interest and other debt payments as they come due. Debt may also have other significant consequences, such as:
increasing the Company’s vulnerability to generally adverse economic, competitive and industrial conditions;
limiting the Company’s ability to secure additional funding under satisfactory terms in the future for its working capital, investments, debt service, service needs, acquisitions, general corporate purposes, and/or other purposes;
requiring the Company to allocate a significant portion of its operational cash flow to debt service, thereby reducing the funds available for operations, capital expenditures, and any future business opportunities;
exposing the Company to a risk of higher interest rates, as a portion of the loans and financings are taken at floating interest rates;
exposing the Company to the risk of accelerating outstanding debt, should we default on the terms of the contracts underlying our debt;
limiting the Company’s ability to carry out strategic acquisitions, or forcing it to undertake non-strategic divestments;
limiting the planning flexibility or ability to react to changes in the businesses and industries in which the Company operates;
limiting the Company’s ability to adapt to evolving market conditions and to react to competitive pressures and adverse regulatory changes;
limiting the ability to refinance debt or increasing the cost thereof;
limiting the ability to carry out marketing and risk-coverage operations, reducing the number of counterparties with which such operations may be conducted, as well as the volume thereof, and
placing the Company at a competitive disadvantage relative to competitors facing lower debt and other obligations, or better access to funding.
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Several other risks may have materially adverse effects on operational and financial results.
Operations are subject to several other risks affecting forests and manufacturing processes, including fires, climate change, disease, strikes, port stoppages, freight stoppages, electric failure, and industrial explosions, any of which may materially and adversely affect operational and financial results.
Failures affecting the Information Technology systems of the Company or its suppliers, including as concerns information security, may compromise operations.
The Company and its suppliers depend on IT systems to serve customers, perform cost analyses and set appropriate prices. IT system problems, security failures, or inadequate maintenance and updates may interrupt the operations of the Company or its suppliers, cause the Company to lose customers, contribute to disputes with customers, lead to breach of applicable regulations, increase administrative expenses, compromise the security of internal or customer data, or cause other adverse consequences. Insofar as technology controls, policies, procedures and safeguards may be insufficient, these and other significant changes in IT systems may adversely affect the Company’s business, financial standing and operating results.
IT systems are used at the administrative and operational business levels and at each operational stage. Insofar as technology controls, policies, procedures and safeguards may be insufficient, the regular operation of IT systems may be compromised by unpredictable circumstances, human and programming error, the infrastructure of the Company and/or of data processing service providers, and force majeure, including fire, explosion, disasters, and any other event or incident beyond the Company’s control.
Furthermore, the security of the IT systems or, as has been the case in the past, of the IT systems of IT service providers may be compromised, exploited or corrupted by experienced programmers or hackers, harming the IT operations of the Company or its IT server providers. In such cases, insofar as technology controls, policies, procedures and safeguards may be insufficient, such third parties may also capture or disclose confidential information of the Company and/or its customers. Any such event may adversely affect the Company’s operations, operating results, and/or reputation.
The Company’s insurance coverage may be insufficient to cover potential losses, or fail to cover certain damages, such as those caused by forest blights.
The Company aims to retain insurance coverage in line with the understanding of best international practices for similar operations and assets.
Factories are covered by fire and general operational liability insurance policies. Coverage also includes damages caused by natural events, such as unexpected events, floors, lightning strikes, and aircraft accidents. In addition, the Company’s insurance covers domestic and international merchandise shipments, including domestic and international general liability. Other risk factors, such as landslides, contamination and cave-ins are regularly analyzed for their technical probability of occurrence before any decision is made in connection with the purchase of insurance against them.
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inadequate to cover all damages. In addition, the Company may be unable to maintain or renew its existing insurance policies at terms and prices it deems appropriate.
Furthermore, the Company may endure damages from loss events not covered by the insurance policies purchased, such as forest blights. In the event of loss events not covered by the insurance policies in force, the Company shall be entitled to no indemnity to support the resulting costs.
In any such case, the Company’s financial capacity may be adversely and significantly affected.
The Company may incur losses and spend time and money defending against pending litigation or administrative proceedings, each of which may materially and negatively affect it.
The Company is currently party to several legal and administrative proceedings associated with tax, administrative, environmental, civil and labor disputes, involving a total of approximately BRL 5 billion as at yearend 2020. Out of this, approximately BRL 52 million are provisioned for and deemed probable losses by the Company’s legal counsel. The Company’s financial standing may be partly affected in the event of unfavorable rulings in such court and administrative proceedings.
In addition, the Company is the beneficiary of tax benefits whose suspension, expiration, recall or non-renewal may adversely affect the Company’s income and/or net cash generation.
We are subject to labor risks, including increased labor costs and labor stoppages.
The Company incurs significant payroll expenses (payroll, cost of goods sold, sales expenses and general and administrative expenses), that were among our largest expenses for the fiscal years ending December 31, 2020, 2019, and 2018, in a total of BRL 2.2 billion, 1.7 billion, and BRL 1.6 billion, respectively. Our payroll expenses include total direct compensation paid to employees, severance expenses, and other benefits.
In addition, Klabin’s employees are unionized and covered by collective bargains, or similar arrangements, subject to periodical renegotiation. We have occasionally endured work stoppages. Furthermore, the Company may be unable to satisfactorily conclude labor negotiations, which may lead to a significant increase in labor costs, or to work stoppages or labor mobilizations that may disturb operations and affect returns. For example, in 2018, the Company faced a 21-day labor stoppage at its Puma plant, the economic effects of which have not been quantified.
Due to the competitiveness and to the influence of labor unions, the Company may face pressures to increase employee wages, as well the amount of benefits provided thereto. If the Company’s payroll expenses increase significantly, or if it faces labor mobilizations, its activities, financial standing and operational results may be adversely affected.
The Company is subject to strict environmental requirements and compliance with existing and future regulations may demand significant capital expenses and increase our operational costs.
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The Company is subject to strict environmental laws and regulations in Brazil, at the federal, state and local levels. These regulations provide for complex rules governing environmental controls, including the disposal of hazardous materials and toxic waste. Amendments to environmental laws and regulations, or changes in the policy of enforcement of existing environmental laws and regulations may negatively affect it. The Company’s operations are supervised by government agencies that are responsible for enforcing pollution control, laws and regulations. These agencies may act against the Company if it fails to abide by the applicable environmental regulations, or in the event of hazardous accidents. As a consequence, the Company’s ability to operate may be suspended or negatively affected. Furthermore, failure to comply with such laws, regulations and licenses may lead to criminal charges against the Company and its employees, including liability for the related environmental reparation costs, which may be substantial and materially adverse to our financial standing and operational results.
In addition, environmental laws are becoming stricter in Brazil and internationally. As a result, the investments and expenses needed to comply with environmental laws may significantly increase in the future, which may materially and adversely affect the Company’s financial standing and operational results.
Failure to secure the required permits and licenses may negatively affect our operations.
The Company depends on the granting of licenses and permits from government agencies to perform some of its activities. This often requires certain conservation investments to offset probable impacts. In addition, the Company needs licenses to, among other activities, operate its plants and carry out activities that rely on chemicals. Licenses to operate require, among other duties, periodic reporting of compliance with emissions standards as set forth by environmental agencies. Failure to secure, renew, or comply with licenses to operate may delay the implementation of new activities, increase costs, lead to monetary penalties, or even suspend the activity in question, which may materially and adversely affect the Company.
Construction and maintenance costs in excess of those expected may negatively affect our financial standing and the results from our operations.
As part of its strategy to increase its share of the global market and improve competitiveness through economies of scale, Klabin has completed the Puma project, and is building the Puma II Project, and may continue to expand its existing production facilities or build one or more additional facilities. Expansion or construction of a production unit involves several risks. The ability to (i) complete projects on schedule; and (ii) obtain the expected efficiency from the machinery used to produce the Company’s products is subject, among other factors, to changes in the prices of labor and raw materials, changes in the economy at large, the Company’s ability to secure financing as needed, regulatory challenges, unsatisfactory performance on the part of contractors and subcontractors, and situations arising from unpredictable engineering issues.
These factors may significantly increase costs and affect the Company’s business, financial standing, and operational results.
The Company is subject to LIBOR-related risks.
On July 27, 2017, the head of the Financial Conduct Authority – FCA, announced an intent to Page 33 of 348
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discontinue the use of the London Interbank Rate by the end of 2021. Because the statements of the head of the FCA are recent, no definitive information exists on the future use of the LIBOR or any other rate in particular that may replace it. Given this, the potential effect of any such event on the Company’s net financial results cannot yet be determined and, at the present time, it is impossible to predict the effect of the establishment of any alternative reference rates, or any other LIBOR changes that may be enacted in the United Kingdom or elsewhere.
Uncertainty surrounding these potential changes, alternative reference rates, or other reforms may materially affect the Company’s business, financial standing, and operating results.
b) Concerning its shareholder, directly or indirectly controlling shareholder, or controlling group
Some of our shareholders have the ability to determine the outcome of business actions or decisions, which may affect security holders.
Klabin Irmãos SA and Niblak Participações SA hold the majority of the voting capital of Klabin, and their votes, as well as those of their elected representatives on the Company's board of directors, are linked to decisions taken previously at a general meeting or meeting of the board of directors. management of Klabin Irmãos SA, pursuant to the shareholders' agreement of Klabin Irmãos SA As a result, these shareholders have the ability, in addition to electing the majority of the Company's Board of Directors, to determine decisions about the election of the Executive Board and future operations , including decisions regarding acquisitions and other business opportunities, the declaration of dividends that exceed the minimum requirements of the Bylaws and the Brazilian Corporate Law, and the issuance of additional shares and other securities. The decisions made by the controllers may be in conflict with the interests of the other shareholders of the Company.
Trades carried out by the shareholders may affect the market value of the Company’s shares
The Company’s shareholders may freely trade their shares as provided by the applicable law. If these shareholders trade material volumes of their shares, the shares’ market value may be adversely affected, in a manner beyond the Company’s ability to predict.
The Brazilian stock market’s volatility and lacking liquidity may substantially limit investors’ ability to sell their securities issued by the Company at a price and time of their choosing
Investment in securities traded in emerging markets, as is the case of Brazil, often involves a greater risk compared with more mature international securities markets. This is explained by the fact that the Brazilian market is significantly smaller, less liquid, more volatile and more concentrated. This volatility and lacking liquidity substantially limit the ability of the holders of the Company’s securities to sell them at a price and a time of their choosing, and may thereby negatively affect the market prices of securities issued by the Company.
The Company may require additional capital in the future, and raising additional capital by means of securities issues may dilute an investor’s share of total equity.
The Company may require additional funds in the future and may choose to raise such funds by means of public or private issues of securities. Any funds raised by means of the public
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placement of shares or share-convertible securities may affect share price and result in the dilution of an investor’s share of total equity.
The holders of the Company’s shares may not receive dividends, or may receive dividends below the minimum provided in the Bylaws.
Shareholders are entitled to a minimum 25% of the Company’s annual net earnings as calculated and adjusted pursuant to the Company’s Bylaws, to be paid as dividends. However, under certain circumstances, the Company may be unable to pay dividends, or may pay less than the required amount once such a measure has been approved at the Annual General Meeting. Such circumstances may include:
Where net earnings are capitalized, used to offset losses, or retained as provided in the Corporations law;
Where the Company’s financial standing is inconsistent with the payment of dividends; and/or
Where the controlled entities’ cash flow and earnings, as well as distribution of such earnings as dividends, does not occur, causing the required dividends to exceed the realized portion of the fiscal year’s net earnings.
c) Concerning the Company’s subsidiaries and affiliates
The risks associated with subsidiaries and affiliates are the same as discussed in connection with the Company.
d) Concerning suppliers
The Company relies on the supply of inputs, raw materials and services to operate. Higher input prices may increase production cost and reduce the Company’s return
Klabin’s operational units receive supplies from several domestic and international suppliers and services providers. Many factors influence the Company’s competitive standing, including plant efficiency, operating ratios and the availability, quality and cost of certain inputs, such as chemicals, raw materials and services. The availability, quality or cost of such inputs may negatively affect the Company’s operational and financial performance.
Input prices may increase, which may lead to reduced returns for the Company, if it is unable to pass on any cost increases to customers. In addition, any changes in tax laws with higher tax rates may lead to higher input prices. The ability to pass on costs to customers through price increases or other adjustments is uncertain and depends on market conditions and may adversely affect the Company’s operating results and financial standing, where unavailable.
e) Concerning customers
Changes in the Company’s customers’ credit rating may negatively affect operations.
In the markets where the Company operates, it is customary, and sometimes required for competitive participation, for producers to make term sales. When term sales are made to customers, the company becomes exposed to credit risk. Therefore, changes in the Page 35 of 348
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macroeconomic environment, on the conditions of the market in which the customers operate, and problems associated with customers’ management, may significantly affect their ability to pay the Company, affecting it directly and negatively.
The Company may also make advances to suppliers in connection with future expansion projects. Such advances are also subject to the same risks.
Any increase in the credit risk posed by customers may significantly affect the Company’s assets, cash flow and operational results.
The Company’s sales in the liquid packaging board segment are relatively concentrated.
The Company has relevant concentration of revenues in a single customer. In fiscal year 2020, sales to this customer answered for 12% of the Company’s net revenues.
The customer is under no contractual obligation to purchase any portion of the Company’s production. Therefore, should this customer for any reason cease to purchase the Company’s liquid packaging board, the Company’s operational results and financial standing may be negatively affected in a relevant manner.
f) Concerning the industries in which the issuer operates
The Company faces significant domestic and international competition from paper producers with substantial resources, which may adversely affect market share and profitability.
Most of the segments in which Klabin operates are highly competitive. In the packaging paper segment, the main competitors are WestRock, International Paper, Irani and Trombini. In the cardboard segment (except for liquid packaging board, the main domestic competitors are Suzano (who merged with another competitor, Fibria), Ibema and Papirus, with Klabin as the only domestic producer of liquid packaging board. In the corrugated cardboard boxes segment, the main domestic competitors are WestRock, Smurfit, Kappa, Irani and Trombini. In the bag and industrial bag paper segment, the main competitors are Trombini, Tedesco, Cocelpa, Conpel and Iguaçu. In the pulp segment, the main competitors are Suzano (which merged with Fibria), Cenibra, Lwarcel and Eldorado.
The Company’s main competitors in the international paper and cardboard market are: WestRock, Graphic Packaging and International Paper (North America); B. Korsnäs, Stora Enso and Metsä Board (Europe), and Cartulinas CMPC (Latin America). In the kraftliner market, its main international competitors are Smurfit Kappa, SCA and Portucel (Europe); Sappi (Africa), WestRock and International Paper (North America). In the industrial bags chain, the main competitor is Mondi. In the pulp segment (short- and long fiber, and fluff), the main competitors are Arauco and CMPC (Latin America), International Paper and Georgia Pacific (North America). In addition, the Company also faces competition in Brazil from many smaller manufacturers.
There can be no assurance that the Company will be able to maintain its competitive position. Should it be unable to maintain its status among the leaders of the above markets, its financial standing and operating results may be adversely affected.
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Paper and pulp prices are cyclical and subject to factors beyond the Company’s control. Changes in the prices of packaging paper and board may affect revenues and operational results.
The prices that the Company can charge for its pulp and packaging products depend on the going world prices for such products. The world prices of paper and pulp products have been historically cyclic, subject to significant fluctuations over short periods of time, depending on a series of factors beyond the Company’s control, including:
World demand for pulp and packaging products;
Customers’ current inventory levels;
Global production capacity;
The strategies embraced by the main pulp producers; and
Availability of substitute products.
Price fluctuations do not take place year on year alone, but also within a certain year as a result of global and regional economic circumstances, capacity restrictions, plant openings and shutdowns, and the supply and demand of and for raw materials and finished products, among other factors.
Producers often grant discounts on listed prices to significant buyers. Market prices for packaging products may drop in the future, or there may be insufficient demand for the products that the Company makes, to enable economically operating production facilities.
There can be no assurance that product prices will stabilize of cease to drop in the future, or that the demand for the products that Klabin makes will not drop in the future. As a result, there can be no assurance that the Company will be able to operate its production facilities profitably in the future. The Company’s business, financial standing and operating results would be adversely and relevantly affected if procut prices dropped significantly.
Competition for land from producers or non-producers of eucalyptus and pine, or the loss of long-term land lease agreements may affect the Company’s expansion capacity and have material adverse effects.
The majority of the wood used in production processes is provided by own forest operations, which include planted forest areas in the vicinity of the production facilities. An increase in global demand for certain raw materials or grazelands may lead to increased competition for the land that the Company requires to maintain or expand its forest operations, which may in turn increase use-of-land costs.
The production of plants or crops other than eucalyptus and pine or the development of land for pasture may be economically superior to forest activities and, therefore, the increased price of land may inhibit expansion of the Company’s forest operations. For the same reason, the Company may face difficulties convincing third parties to lease land or maintain exiting long- term lease agreements to begin or expand eucalyptus cultivation. A reduction in the amount of land available or let in the regions where the Company operates may have materially adverse Page 37 of 348
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effects on it.
The advent of new technologies, competing products and new consumer habits may lead to the substitution of the Company’s products for others of a lower price or with distinctive technology.
The advent of new technologies, as well as consumer habit changes, may cause the Company’s products to become obsolete, leading to the replacement of its products for others that are innovative, efficient, high-quality, or competitively priced. If the Company fails to anticipate the industry’s trends, or is unable to introduce or develop products and services at least at the same time as its competitors, the Company’s customers may cease to use its products, replacing them with competitors’. This may adversely affect the Company’s financial standing and operational results
Competitors’ investments in increased production capacity in the coming years may negatively affect the Company’s business.
The Company’s competitors recently announced several investments to expand production capacity. If some or all of these announcements result in increased competitor ´production capacity, there may be an imbalance of supply and demand that may lead to a decrease in product prices. Therefore, any significant price decreases may adversely affect the Company’s operating margins, profitability, and return on capital.
Furthermore, given an increase in market supply of products, Klabin may be forced to temporarily adjust its production volume to meet reduced demand, incurring the risk of operating with idle capacity and, therefore, with higher production costs.
g) Concerning regulation of the industries in which the issuer operates
The Company may incur higher environmental compliance costs.
The Company is subject to strict environmental laws and regulations at the federal, state and local levels. This set of rules contains complex environmental control standards, including standards governing the storage and disposal of hazardous materials and the emission of liquid, solid and gas pollutants. Noncompliance with these laws or regulations, or the occurrence of accidents affecting the environment may lead to administrative, civil and/or criminal penalties, with the imposition of fines, indemnities and/or financial disbursements on the Company, which may adversely affect its operational results and financial standing.
Note, also, that environmental law is becoming stricter in Brazil and internationally, and the investments and expenses required for compliance may increase significantly in the future, which may adversely affect the Company’s financial standing and operational results.
The Company is subject to anti-corruption, anti-bribery, anti- money laundering, and antitrust laws, regulations, and sanctions. Noncompliance with such laws or regulations may materially and adversely affect the Company’s reputation, operational results and financial standing.
Klabin is bound by applicable Brazilian anti-corruption, anti-bribery, anti-money laundering,
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environmental, and other laws, regulations and sanctions, and may be subject to laws and regulations in other jurisdictions. There can be no assurance that internal policies and procedures will be sufficient to prevent or detect inappropriate practices, fraud, or breaches of such laws and regulations by affiliates, employees, officers, executives, partners, agents and service providers, nor that any such will not act in a manner in breach of our policies and procedures. Any breach of such laws and regulations committed by the Company or any of its subsidiaries, employees, officers, executives, partners, agents and service providers may have a materially adverse effect on the Company’s business, reputation, operational results and financial standing.
h) concerning foreign countries where the issuer operates
The Company’s business and operational results may be partly affected by the performance of certain economies.
In the fiscal year ending December 31, 2020, exports answered for 41% of the period’s net revenues (40% of net revenues in FY 2019), and were shipped to 88 countries. If the economy is negatively affected in these countries, the Company’s operational results may be partly affected.
Furthermore, if such a situation occurs in a certain recipient of exports, the Company may redirect its sales elsewhere.
The Company’s exports are exposed to political and economic risks in foreign nations.
Exports expose the Company to risks not faced by companies whose operations are limited to Brazil or any single given country. For example, exports may be affected by restrictions and import tariffs, other trade protection measures, and import or export licensing requirements.
Future financial performance will depend significantly on the economic, political and social conditions of the main export markets. Other risks associated with international activities include:
Reduced global demand for pulp, paper and packaging ´products, which may lead to reduced sales, operating results, and cash-flow generation;
Changes in foreign exchange and inflation rates in the countries where the Company operates;
Currency controls;
Changes in the political or economic circumstances of a certain country or region, particularly developing markets;
Adverse consequences of changes to regulatory requirements, including environmental standards and regulations;
Difficulties and costs associated with compliance with and enforcement of a wide range of complex international laws, treaties and regulations;
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Higher distribution costs, marine freight volatility, or reduced availability for merchandise shipment;
Strike or other events that may affect ports and transportation; and
Trade blockades.
i) Concerning socio-environmental matters
Expropriation of land and occupation thereof by social movements may impact the use of the Company’s forest and industrial properties.
Several activist groups defend the redistribution of property by means of the trespass and occupation of privately held land, which could interrupt the Company’s operations. In addition, the Company’s lands may be subject to expropriation by the Brazilian Government. According to Brazilian laws, the Federal Government may expropriate land not in conformity with its “social purpose”, including rational and appropriate exploration, proper use of natural resources, preservation of the environment, compliance with labor laws, etc. If the Brazilian Government expropriates any of the Company’s properties, the Company’s operational results may be adversely affected insofar as compensation from the Government prose insufficient.
Operational events that may generate environmental impacts.
As indicated in item 'a', the Company's operations are subject to certain weather conditions, the effects of which, if materialized, may adversely impact the company's equity and financial position. Some of these items, although of operational origin, were classified in the Company's risk map as “socio-environmental”.
i. Breaking of any of the water dams: The Company has 3 water dams (2 located in Paraná and 1 in Santa Catarina), and the breach mainly of the dam located in Telêmaco Borba, in Harmonia lagoon could cause loss of life, property and environmental , in addition to adversely affecting the Company's business and reputation;
ii. Large-scale forest fire: Much of the wood used in the Company's production process is supplied by its own forestry operations, which include planting areas located close to its factories. The occurrence of large-scale fires may reduce the supply of wood to the Company or result in higher prices for the wood that is purchased. In addition to these points, we may have environmental impacts and loss of biodiversity, negatively affecting the Company's reputation and image;
iii. Contamination of the environment with chemicals: In its production process, the Company uses chemicals that can be harmful to the environment. In the event of contamination in the soil and / or rivers, springs or groundwater, expenses that are not expected to remedy the consequences may occur, in addition to negatively impacting the Company's image and reputation, due to losses of biodiversity.
Events associated with water scarcity
The Company’s production process is highly water-dependent. Droughts in some regions of Brazil, resulting in water scarcity or rationing, particularly in the areas where the Company has manufacturing units, may adversely impact the Company’s business and results.
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Forest planting and wood harvesting activities may be influenced by weather-related issues that may adversely affect supply of the wood used in the Company’s production chain.
The weather-related events with the most risk exposure are as follows:
El Niño: the high rainfall volume hampers withdrawal of wood from the field. To avoid this risk, the Company resorts to interim warehouses to which the wood harvested from the field is transferred during the dry season, providing a stockpile for periods of intense rainfall where withdrawing wood from the field is more difficult;
La Niña: a dry period that poses a risk of loss of saplings (planting), which creates a future risk of dearth. This risk is mitigated with the use of hydrogel and irrigation systems;
Fires: the areas face a risk of fires in the dry season. In connection with this, the Company employs surveillance teams with firefighting training. In parallel, the Company is examining implementation of long-range surveillance cameras, which would assist in monitoring; and
Frost and wind damage: some forest regions are prone to microclimates that may damage crops. The Research and Development team has been carrying out genetic improvements to the quality of the material to be planted, in parallel with a study of each region’s soil.
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4.2 Description of the main market risks
The Company’s ordinary course of business is subject to market risks. Such risks are mainly associated with adverse foreign exchange and interest rate changes, the industry in general, activities and regulation of its area of operations, and the environmental licenses required to perform.
Currency instability may harm the Brazilian economy as well as the Company
Because of several pressures, the Brazilian currency has been enduring recurring oscillation relative to the US Dollar, the Euro, and other strong currencies over the past several years. These changes have affected and will continue to affect the Company’s financial standing and operational results. Over the past three years, the following exchange rate variations were observed (sell rate)
Currency 2020 2019 2018 2020/2019 2019/2018 Pair BRL/USD BRL/USD BRL/USD % % USD Avg. 5.39 3.95 3.66 31% 8% USD yearend 5.20 4.03 3.87 29% 4%
The Company’s export revenues are directly affected by exchange rate variations. The Brazilian Real’s depreciation relative to the US Dollar negatively affects the Company’s foreign currency-denominated debt, but has a positive impact on its export revenues (when denominated in Brazilian Reais in either case), thereby improving operational income. The opposite occurs when the Brazilian Real appreciates, reducing the principal and service of foreign currency- denominated debt, but negatively affecting export revenues and operating results (when denominated in Brazilian Reais, in each case).
In addition, certain operating costs and expenses are also affected by variations in the value of the Brazilian Real versus the US Dollar, including export insurance, freight cost, and the cost of certain chemicals used as raw materials. The Brazilian Real’s depreciation versus the US Dollar will increase these costs, whereas an appreciation of the Brazilian real will reduce them. Furthermore, we do not generally use derivatives to hedge against the exposure to this kind of foreign exchange rate risk.
Sensitivity analysis of the foreign exchange variation as shown below is calculated on the net foreign currency exposure (basically foreign currency-denominated loans and financings, accounts receivable from customers and accounts payable to suppliers). The scenarios disregard the effects of forecast export sales, which will to an extent offset any future foreign currency- related losses when realized.
It is important to emphasize that financing contracts are not set to mature in 2021 in any substantive manner. As such, foreign exchange variations will not affect the cash arising from this analysis. As the Company makes exports in foreign currency, it receives the foreign- currency funds needed to honor outlays from such financings, which protects its cash from such changes. Page 42 of 348
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Furthermore, for fiscal year 2021, the Company embraced hedge accounting based on the cash flow from highly probable expected transactions, designating its revenues in US Dollars as a hedging instrument for its US Dollar-denominated debt. The practice is in line with Management’s risk management and strategy, pursuing equalization of the effects of foreign exchange rate variations on income statements insofar as they are effectively realized with the respective cash effects.
For the purposes of the sensitivity analysis, scenario I assumes the forward market rate as of the period when the financial statements as of December 31, 2020, were prepared; scenario II adjusts the rate up by 25%; and scenario III adjusts it up by 50%. Other variables remaining constant, the figure next illustrates the simulated effects of foreign currency variations on the future 12-month results:
At 12/31/2020 Scenario I Scenario II Scenario III US$ Rat e R$ gain (loss) Rat e R$ gain (loss) Rat e R$ gain (loss) A sset s Cash and cash equivalents 1 9 8,81 3 5 .2 6 1 2 ,9 2 3 6 .5 8 2 7 5 ,01 8 7 .89 5 3 5 ,4 6 3 Trade receiv ables, net of 1 08,3 84 5 .2 6 7 ,04 5 6 .5 8 1 4 9 ,9 2 8 7 .89 2 9 1 ,9 1 1 allowance for doubtful debts Other assets and liabilities (1 1 0,2 6 2 ) 5 .2 6 (7 ,1 6 7 ) 6 .5 8 (1 5 2 ,5 2 6 ) 7 .89 (2 9 6 ,9 6 9 ) Financing (3,660,696) 5 .2 6 (2 3 7 ,9 4 5 ) 6 .5 8 (5,063,840) 7 .89 (9,859,352)
Net effect on finance results (225,144) (4,791,420) (9,328,947) The effect of exchange rate variation from financial instruments designated in hedge accounting (loans and financings) applicable from 2021, is booked under shareholder’s equity, in the “Equity valuation adjustments’ line, net of applicable income taxes. The amounts accumulated in shareholders’ equity are booked in the income statement in the “Net revenues from sales” line, insofar as effective outlay associated with the designated loans and financings has taken place, with the generation of the respective revenue in US Dollars designated under the hedge to offset the US Dollar cash outlay, at which point the hedging instrument’s foreign exchange variation is recognized in income/loss.
Due to inflation pressures, the Brazilian Real depreciated periodically against the US Dollar and other foreign currencies. In the past, the Brazilian Government adopted several economic plans and used a series of exchange rate policies, including sudden devaluations, periodical mini- devaluations whose frequency ranged from daily to monthly, floating exchange rate systems, foreign exchange controls, and exchange rate markets. Occasionally, significant changes take place in the exchange rate between the Brazilian real and the US Dollar and other currencies. In addition, the Central Bank of Brazil has occasionally intervened to control unsteady foreign exchange rate moves.
One cannot tell whether or not the Central Bank of Brazil will continue to allow the Brazilian real to freely float. As a consequence, one cannot tell the impact that the Brazilian Government’s foreign exchange policies may have on the Company. There can be no assurance that, in the future, the Brazilian Government will refrain from imposing a range within which the real Brazilian Real-to-US Dollar exchange rate may vary, or from imposing fixed exchange rates, nor can one predict the impact such an event may have on the Company’s business, financial standing, or operating results.
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Some of the Company’s products are deemed to be commodities, that is, there is little control over their effective prices.
At the cellulose business unit, the Company’s prices are at a level with international market prices, which are set mainly by the supply-demand balance, by the global production capacity, and by world economy conditions. That is, by factors exogenous to the Company’s Management that may have significant impact on the Company’s results, affecting operating margins, profitability and return on invested capital. EBITDA, for example, tends to vary up or down approximately US$ 16 million per year, as the average price of cellulose varies 10 US Dollars per ton. In the paper and packaging segment, kraftliner is closest to a commodity, following listed prices in Europe as measured by the FOEX. In this case, the same 10 US Dollars variation in the average price of kraftliner will cause an impact of approximately US$ 4.5 million per year.
Production costs may be partly affected by commodity prices.
Some of the Company’s costs may be affected by exogenous factors such as the price of the commodities that form the production cost of the items that the Company markets. One example is fuel, where the Company is exposed to changes in international oil prices over which it has no control. Another example is surplus energy production, which the Company trades and uses to reduce the production cost of cellulose. The price of energy may be affected by market prices.
A downturn in domestic and world economic activity and consequent stagnation or deceleration of local or world GDP growth may reduce the demand for the Company’s products.
The Company’s operational results are affected by the level of economic activity in Brazil and worldwide. An economic downturn in Brazil and around the world typically results in reduced industrial output, which, by its turn, implies reduced consumption of the Company’s products. Should the Brazilian and world economy experience a downturn, the Company’s operational results may be adversely affected.
High interest rates or interest rates at persistently high levels may have adverse effects for the Brazilian economy and the Company.
The Company is exposed to interest rate risk, as the majority of its financial obligations is pegged to floating rates (long-term interest rate as defined by the Central Bank of Brazil and Interfinancial Rate). The Brazilian short-term interest rate, which derives from the short-term interest rate set by the Central Bank of Brazil, has been at high levels in recent years. The Funds rate is the basic rate payable to holders of certain securities issued by the Brazilian Government and traded on the Sistema Especial de Liquidação e Custódia (SELIC). The funds rate has been occasionally kept at levels deemed incompatible with sustained economic growth.
On December 31, 2020, 2019 and 2018, the SELIC rates were at 2%, 5.97% and 6.43% p.a., respectively.
Should the Federal Government increase the interest rates, including the long-term interest rate, or take other monetary policy steps leading to a significant increase in interest rates, the Company’s financial expense may significantly increase because of its indexation to the
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applicable rates, adversely affecting its economic and financial standing.
Financial investments and financings are pegged to the CDI (Interfinancial) post-fixed interest rate, with the exception of those pegged to the TJLP. For the purposes of the sensitivity analysis below, the Company assumes the rates in force on dates close to the submission of the financial statements as of December 31, 2020, using the same rates in Scenario I for the Selic, IPCA and CDI, due to the proximity of the dates. The rates were adjusted up by 25% for Scenario II and by 50% for Scenario III.
Therefore, other variables remaining equal, the figure next illustrates the simulated effects of interest rate changes on future 12-month results:
At 12/31/2020 Scenario I Scenario II Scenario III R$ Rat e R$ gain (loss) Rat e R$ gain (loss) Rat e R$ gain (loss) Financial investments CDBs CDI 4 ,1 3 3 ,3 9 3 2 .7 7 % 1 1 4 ,4 9 5 3 .4 6 % 2 8,6 2 4 4 .1 6 % 5 7 ,2 4 7 LFTs Selic 6 2 6 ,5 6 6 2 .7 7 % 1 7 ,3 5 6 3 .4 6 % 4 ,3 3 9 4 .1 6 % 8,6 7 8 NTN - B IPCA 7 08,6 9 1 4 .3 8% 3 1 ,04 1 5 .4 8% 7 ,7 6 0 6 .5 7 % 1 5 ,5 2 0 Financing Export Credit Notes - NCE (R$) and Agribuisiness Receiv ables Certificate - CRA CDI (4,623,091) 2 .7 7 % (1 2 8,06 0) 3 .4 6 % (3 2 ,01 5 ) 4 .1 6 % (6 4 ,03 0) BNDES TJLP (1,169,546) 4 .5 5 % (5 3 ,2 1 4 ) 5 .6 9 % (1 3 ,3 04 ) 6 .83 % (2 6 ,6 07 ) Debentures IPCA (1,832,803) 4 .3 8% (80,2 7 7 ) 5 .4 8% (2 0,06 9 ) 6 .5 7 % (4 0,1 3 8) Export prepay ment and Finnvera Libor (5,588,808) 0.3 4 % (1 9 ,03 7 ) 0.4 3 % (4 ,7 5 9 ) 0.5 1 % (9 ,5 1 9 )
Net effect on finance results (117,696) (29,424) (58,849)
The Brazilian Government has exerted and continues to exert significant influence on the local economy. This influence, as well as the Brazilian economic and political situation, may adversely affect the Company.
The Brazilian economy has been characterized by intervention from the Brazilian Government, which has frequently changed monetary, credit, and other policies to influence the domestic economy. The Brazilian Government’s actions to control inflation and affect other policies often involve wages and prices controls, devaluations of the Brazilian real, control on overseas funds transfers, fluctuations of the Central Bank of Brazil’s Funds Rate, among other measures. The Company has no control over the measures or policies that the Brazilian Government may adopt in the future, and no means to predict what they may be. The Company’s business, financial standing, operating results and prospects may be harmed by relevant changes in policies or standards involving or affecting factors such as:
expansion or contraction of the global or Brazilian economy;
currency controls and restrictions against foreign transfers;
economic and social instability;
political elections;
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import and export controls;
relevant foreign exchange changes;
fiscal and tax regime changes;
labor law changes;
liquidity of the domestic financial and capital markets;
interest rates;
inflation;
monetary policy;
regulatory environment affecting the Company’s activities;
fiscal policy; and
other political, diplomatic, social and economic developments that may take place in or affect Brazil.
Uncertainty regarding the Brazilian Government’s adoption of changes to policies or standards affecting these or other factors in the future may contribute to the local economic uncertainty and to increasing the volatility of the Brazilian securities market and of the securities issued abroad by Brazilian companies. Such uncertainties and other future developments in the Brazilian economy may affect the Company.
Brazilian politics has historically affected the performance of the Brazilian economy, and previous political crises have affected the confidence of investors and the public at large, usually leading to deceleration of the economy and volatility of securities issued by Brazilian companies. Political crises have affected and continue to affect the confidence of investors and the public at large, leading to deceleration of the economy and volatility of securities issued by Brazilian companies.
New and amended Brazilian policy and regulations, be it in response to new demonstrations, as a result of the recent elections, or otherwise, may have materially adverse effects on the Company’s business, financial standing and operating results.
Furthermore, uncertainty regarding the incumbent administration’s future political power or will to implement additional and necessary policies or regulations affecting the factors above or others may also contribute to economic uncertainty and to the increase volatility of securities issued abroad by Brazilian companies.
Corruption scandals have adversely affected the Brazilian economy and the Company’s business, operating results and common share trading prices.
Brazilian markets have been more volatile due to uncertainty arising from the corruption scandals currently under Federal Prosecution investigation. These investigations affect the Brazilian economy and the political environment. Countless members of the administration and
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Congress, as well as ranking officials of large public- and private-sector companies have been sentenced for or are facing charges of corruption for allegedly corrupting government officials with bribes linked with contracts granted by the government to several companies in the infrastructure, oil & gas, and construction industries as well as other crimes over the years. Proceeds from these bribes financed political parties’ campaigns remained undeclared or undisclosed, and were misappropriated by recipients of funds in the bribery scheme. As a result, several ranking politicians, including members of Congress, and employees of some of the main state-owned and private-sector companies in Brazil stepped down or were arrested and sentenced, and several public officials (including ranking members of Congress) are under investigation of unethical and illegal behaviors identified during the Lava-Jato probe and other investigations.
The outcome of the investigations is uncertain, but they have already had adverse effect on the image and reputation of the companies involved and on the market’s overall perception of the Brazilian economy, political environment, and capital markets. The ongoing investigations have adversely affected, and continue to affect, the Company’s business, financial standing, operating results and common-share trading prices. One cannot tell whether or not such allegations will cause additional political and economic instability, or whether or not new allegations against government officials and other large companies will emerge.
Newspapers, social and online media, publications and reports allege that certain Brazilian industries and conglomerates were involved in the conducts addressed by some of these investigations. Insofar as such reports and publications, or additional developments of or allegations connected to them or to the investigations mentioned before concern the Company or any of its affiliates, executives, or officers, the Company’s public perception, reputation, and security trading prices may be materially and adversely affected.
The Brazilian Government’s initiatives to control inflation may significantly contribute to economic uncertainty in Brazil and reduce demand for the Company’s products.
The Brazilian Government’s inflation-control efforts have frequently included adoption of a restrictive monetary policy with high interest rates, thereby restricting credit availability and economic growth. Inflation, measure to combat it, and public speculation on potential additional actions have also contributed significantly to economic uncertainty in Brazil in the past, and to increased volatility in Brazilian securities markets.
Potential future steps on the part of the Brazilian Government, including interest rate cuts, intervention in the foreign exchange market, and steps to adjust of set the value of the Brazilian real, may lead to increased inflation. If Brazil experiences increased inflation in the future, the Brazilian Government may choose to raise official interest rates.
An interest rate increase may have an adverse effect on the Company’s activities and payment capacity for the following reasons: (i) periods of higher inflation may decelerate the Brazilian economic growth rate, which may reduce demand for the Company’s products in Brazil and reduced net sales revenues; (ii) the Company may be unable to adjust the prices it charges from its customers and obligors to offset the effects of inflation on its cost structure; (iii) rising inflation rates may lead to higher domestic interest rates, with direct impact on the Company’s cost of funding, as well as its financing cost, increasing the cost of servicing the Company’s
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BRL-denominated debt and thereby leading to lower net profits, and (iv) rising inflation rates and their effect on the domestic interest rate may reduce the Company’s liquidity in domestic capital and credit markets, directly affecting its ability to refinance its debt. Any decrease in net revenues or net earnings, and any deterioration of the Company’s economic and financial standing may affect its payment capacity.
Political, economic and social developments and perceived risks in other countries may harm the market price of Brazilian securities, including the market price of the Company’s securities.
The market for the securities issued by Brazilian companies is influenced by the economic and market conditions in Brazil and, in varying degrees, by market conditions elsewhere, including Latin America and other developing countries. Although economic circumstances are different in each country, investor reactions to events in one country may cause the capital markets of other countries to vary. Events or conditions in other countries, including developing counties, have occasionally and significantly affected the availability of credit in the Brazilian economy and led to sizeable funds flights and reductions in the amount of foreign currency invested in Brazil, as well as to limited access to capital markets, all of which may materially and adversely affect the Company’s ability to secure loans at an acceptable interest rate or to raise capital if and when needed. The volatility of the market prices for Brazilian securities has increased from time to time, and investor perceptions as to increased risk due to crises elsewhere may also lead to a reduction in the market price of notes. The recent investment and entry of speculative capital resulted in the devaluation of the real against the US dollar, affecting the Company's revenue.
Customer credit risk in connection with payment of the Company’s outstanding receivables
The Company’s customers may fail to honor their obligations, creating financial losses arising from the non-realization of the balance of sales made, due to financial hardship. The Company’s portfolio of customers is diversified across the domestic and international markets.
Credit quality as concerns the Company’s operational activities is managed based on specific customer acceptance standards, credit review, and establishment of exposure limits by customer, all of which are periodically revised to ascertain customers’ financial health and payment capacity. Overdue invoices are promptly monitored to pursue payment, and estimated losses from bad credits are recognized for items that may not see payment
The Company has since April 2017 maintained insurance against domestic and international market receivables for all of its business units, except wood customers of the forest unit, in addition to certain customers that fail to meet specific risk requirements, such as continuity and liquidity, which the insurance company analyzes for incorporation under the policy. The Policy currently in force expires in October 2021.
On December 31, 2020, the Company’s maximum exposure to credit risk from customer receivable was BRL 1.9 billion. The amount of bad credit losses relative to the total was BRL 76 million
A possible global economic downturn may negatively affect the demand for and price of cellulose, paper and packaging.
Demand for the Company’s products is directly connected with global economic conditions and the economic conditions of the markets in which its products are traded. Continued economic activity decline, be it domestic or international, may have a negative effect on the demand for
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and price of the Company’s products, with materially adverse effects.
Deterioration of the Brazilian and global economic conditions may, among other results:
negatively affect global demand for cellulose and paper, or have a negative effect on these markets’ prices;
make it harder or more expensive for the company to secure funding for operations or investments, or to refinance its debt in the future;
harm the financial standing of customers, suppliers, or other stakeholders involved with the Company;
reduce the return on new investments; and
harm the financial viability of insurance companies.
Outbreaks of highly contagious diseases around the world, such as the ongoing Covid-19 pandemic, may lead to increase volatility in the world capitals market and cause downwards pressure on the world economy and, consequently, the Brazilian economy as well, with impact on the market where the Company’s shares are traded.
Outbreaks and diseases with a global potential (such as the Covid-19 pandemic, for example) may have an adverse effect on the global capital markets and economy, affecting the interests of investors in Brazilian assets, including the Company’s shares.
As discussed in foregoing item 4.1, in March 2020, the World Health Organization – WHO declared that the Covid-19 outbreak had been recategorized as a global pandemic, and government authorities in every country took steps to reduce the spread of the virus.
These measures directly affected the workforce, consumer financial capacity, and global financial markets, in addition to causing supply-chain problems (parts and raw materials). The long-term impacts of the Covid-19 pandemic are yet to be determined.
The extent of the effects of Covid-19 on the global economy and on the Brazilian economy in particular, and on the financial system and the financial and capital markets cannot yet be ascertained, which may lead to a severe crises with the potential to adversely and materially affect the Company’s business and results.
Furthermore, a significant increase in Covid-19 cases in regions of brazil where the Company has factories, and the measures that may be taken to contain the spread of the disease may, among other results, reduce output, with impacts on the Company’s operations.
Changes in Brazilian tax laws, may adversely impact the taxes levied on the Company.
The Brazilian Government frequently adopts tax-regime changes that may adversely affect the Company and its customers. This may include changes to the tax rates in force and, on occasion, the adoption of temporary taxes intended for specified Government purposes. Some such Page 49 of 348
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changes may result in increased tax bills for the Company, which may adversely affect profitability and increase product prices, limit the ability to do business in existing and potential markets, and harm financial results. There can be no assurance that the Company will be able to maintain its predicted cash flow and profitability after any increases in applicable Brazilian taxes.
In addition, the Company enjoys certain tax benefits due to production units and investment projects in underdeveloped regions of Brazil. There are also tax benefits arising from State laws that may be subject to legal challenge based on the argument that benefits granted to the Company require the unanimous approval of the National tax Policy Council (Conselho Nacional de Política Fazendária – CONFAZ) a federal collegiate body made up of each state’s revenue secretaries.
There can be no assurance that the tax benefits that the Company currently enjoys will stand or be renewed, or that new tax benefits may be secured under favorable conditions. In the event of noncompliance with specific obligations to which the Company is subject in connection with the above tax benefits, such benefits may be suspended or reversed, or the Company may be compelled to pay the taxes due in full, with additional fines, which may have adverse results. Furthermore, there can be no assurance that these tax benefits will be renewed upon expiration, or that additional tax benefits will be secured under favorable conditions. The Federal and State governments often adopt tax regime changes, such as tax rate changes, that may adversely affect the Company and its customers. If the existing tax benefits are cancelled or are not renewed, the Company may also suffer adverse effects.
Stricter trade barriers in the Company’s main export markets may adversely affect it.
Brazilian exporters may be affected by measures adopted by importing countries to protect local producers. The Competitiveness of Brazilian companies has been causing certain countries to raise trade barriers to prevent Brazilian companies from accessing their markets or even subsidizing local producers. Trade quotas such as these may adversely affect the Company’s exports. For example, in the first quarter of 2016, the US Trade Department and the International Trade Commission announced decisions on dumping cases against several countries, Brazil included. Among other measures, the US Trade Department and the International Trade Commission applied anti-dumping margins on the sales of uncoated paper from the countries under investigation. The Company may request an annual review of the decision in line with the applicable law. Any of the above restrictions may affect the Company’s export volume and, thereby, its sales in export markets and financial standing. In the case of recently created trade barriers in Klabin’s main export markets, it may become difficult for the Company to sell its products elsewhere under favorable conditions, which may have materially adverse effects.
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4.3. Material and non-secret court, administrative or arbitration proceedings
General
Em December 31, 2020, the Company era parte em 1.547 processos administrativos e judiciais de natureza cível, ambiental, fiscal, previdenciária e trabalhista, no polo passivo, cujo valor agregado representava BRL 5 billion, dos quais BRL 52 million are provisioned. The Company, based on the opinion of its lawyers, set up a provision for tax, social security, labor and civil risks in an amount considered necessary to cover losses that may arise from the outcome of the lawsuits in progress.
The table below shows the consolidated position of the Company’s risks, its provisions and judicial deposits as of December 31, 2020:
December 31, 2020 (BRL thousand) Type Total risk(*) Probable risk Special escrow Regular deposit Civil 106,858 8,179 2,578 - Tax 4,935,481 10,846 10,846 90,101 Labor 395,738 32,926 15,318 - Total 5,438,077 51,951 28,742 90,101 (*) Sum of cases deemed as remote, possible or probable losses.
The Company presents below a brief description of the processes in which it appears as a party to the liability, according to its nature, defined as relevant by the amounts involved or risk of loss, in accordance with Management's judgment:
Processes of an environmental nature
Em December 31, 2020, the Company was included in the passive pole of 3 (three) actions of an environmental nature.
Below is a brief description of the action:
Case No. 0002640-33.2009.8.16 0165 Venue District of Telêrnaco Borba- PR- Civil Law and Ancillaries Office Level District Level Date filed June 30, 2009
Plaintiff APAP – Paraná State Association of Environmental Fishermen et alii
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Class Action filed in 2009 by the Paraná State Association of Environmental Fishermen – APAP in the face of alleged damages to the Tibagi River (PR) due to the disposal of charred coke waste, which the Company used until 1998. Despite the absence of proven environmental damages, the court found against the Company in December 2015, sentencing it to remove the charred coke deposits Purpose from the riverbed. The case is currently in its sentence execution phase, and the Company awaits statements from the State Attorney’s Office and, then, from the Court itself, in connection with the expert opinion provided, indicating that the sentence cannot be carried out without causing damages to the environment. Only once this phase has been completed will we be able to estimate the amount of the potential losses.
Chance of loss Probable Impact in the event of Amount to the determined as the sentence is carried out loss
Case No. 0004107-66.2017.8.16.0165
Venue District of Telêrnaco Borba - PR- Civil Law and Ancillaries Office
Level District Level Date filed July 12, 2017
Plaintiff APAP – Paraná State Association of Environmental Fishermen et al
Class action filed by the Paraná State Association of Environmental Fishermen against Klabin, claiming the recovery of land and a permanent preservation area affected by a spill of lye used by the Purpose Company to treat coke in an industrial landfill in the District of Telêmaco Borba - PR. Case in its discovery phase, no sentence awarded. Chance of loss Remote Impact in the event of Amount to the determined upon sentencing loss
Case No. 0001247-58.2018.8.16.0165 Venue Public Finance Office of Telêmaco Borba PR Level District Level Date filed 02/19/2018 Plaintiff APAP – Paraná State Association of Environmental Fishermen
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APAP filed a class action against Klabin S.A and Consórcio Energético Cruzeiro do Sul C.E.C.S, requesting that the defendants be sentenced to maintain water depth at 15 cm at the Presidente Vargas Purpose Klabin Hydro Plant reservoir every day of the year to ensure survival of water species in the Tibagi River, and that the defendant C.E.C.S. be sentenced to build a fish traversing mechanism – STP on the Tibagi River.
Chance of loss Possible Impact in the event of Amount to the determined upon sentencing loss
Civil Cases
As of December 31, 2020, the Company was a defendant in 138 civil proceedings, most of which were claims for damages. The total amount of the cases, considering the value assigned to each, is approximately BRL 106.7 million of which BRL 8 million have been provisioned for because the Company’s legal counsel deems them probable losses. The Company understands that the cases deemed probable or possible losses do not entail amounts capable of adversely and materially affecting its results.
The Company provides, next, a summary of the case it deems relevant:
Case No. 0001179-50.2002.8.24.0035 Venue 1st Civil Law Office of ltuporanga – SC Level District Level Date filed May 21, 2002 Plaintiff José Hi1ário Harnes and Vilrnar da Silva
Indemnity and repossession claim due to the planting and harvesting of trees by former Companhia de Papel e Celulose Catarinense and subsequently by Klabin on a plot of approximately 10 hectares that the Plaintiffs own. A land survey mistake led to entry into a verbal agreement with the Plaintiffs that, because of the mandatory lease, provided for sparing 50% of the planted trees, a condition that the Purpose Plaintiffs claim has been breached. With the sentence having become res judicata, the case is not in its executory phase, in which an argument is under way regarding excess recovery based on the Plaintiffs incorrect calculations. An amount of BRL 2,522,366.07 associated with unchallenged monies previously held in escrow has already been withdrawn by the Plaintiffs.
Chance of loss Probable Impact in the event of BRL 4,161,886.92 loss
Administrative and Judiciary Tax Proceedings
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As of December 31, 2020, the Company was a party to 234 tax-related administrative and court cases. The total amount involved, based on the declared amount of the cases, is approximately BRL 4.9 billion, of which BRL 10.8 million have been provisioned for because the Company’s legal advisors have deemed them probable losses.
The Company provides, next, a summary description of the cases it deems relevant:
Case No. 5009384-28.2018.4.03.6182 Venue Federal Justice – Federal Tax Collections Office – SP Level District Level Date filed July 13, 2018 Plaintiff Federative Union Tax claim filed by the Federative Union in connection with Corporate Income Tax arising from allegedly inappropriate deductions arising Purpose from royalties for the use of brands and premium linked with the acquisitions of Klarnasa and Igaras. Chance of loss Possible Impact in the event of BRL 1,296,197,523.66 loss
Tax Collection Claims No.s 0902179-33.2011.8.24.0039; 0902180-18.2011.8.24.0039; 0902181-03.20118.24.0039; Case No. 0902182-85.2011.8.24.0039; 0904074-87.2015. 8.24.0039; 0900729-45.2017.8.24.0039; 0305789-77.2019.8.24.0039 and 1099/215 e 11377/2014. Tax, Tax Claims, Occupational Accidents and Registries Office of the Venue District of Lages- SC. Level District Level 12/06/2011 – 04/04/2012 - 12/07/2011 – 12/07/2011- Date filed 12/16/2015 – 09/06/2017 – 07/16/2019 Plaintiff City of Lages – SC Seven Tax Claims filed by the City of Lages – SC, whose purpose is to collect ISS (service tax) on the manufacture of packaging materials Purpose with personalized printing, from January 2001 to December 2004 and from January to December 2010. Chance of loss Possible Impact in the event of BRL 1,699,131,136.28 loss
12157.000143/2008-82; 12157.000169/2008-21; 12157.000170/2008-55; 12157.000254/2008-99; Case No. 12157.000280/2008-17 and 12157.000371/2008-52. Associated with Injunction Relief No. 0006686-17.2003.4.03.6100. 17.2003.4.03.6100. Venue Court Rulings Tracking Team -DERAI- SP Page 54 of 348
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Level District Level Date filed September 30, 2005 Plaintiff Brazilian Federal Revenue Service
Six administrative proceedings with collection claims for a 2.6% contribution on gross revenue from the sale of the output of agro- industrial activities, pursuant to Art. 22-A, which Law 8.212/91 made an amendment to Law I O. 256/200I. The Company filed for Injunction Relief to recognize the Purpose unconstitutional nature of demands for contributions on gross revenues or sales, and that the company is not liable for FUNRURAL payment because it is not categorized as an agro-industrial entity, and therefore its Social Security payments must be based on payroll, as is the case with other industrial companies.
Chance of loss Possible Impact in the event of BRL 369,573,004.50 loss
Case No. 0197377-25.2010.8.19.0001 Venue 12th Public Revenue Office Level District Level Date filed June 14, 2010 Plaintiff City of Rio de Janeiro Tax Claim filed by the City of Rio de Janeiro - RJ to collect ISS Purpose (service tax) on the manufacture of packaging materials with personalized printing from September 1996 to October 2001. Chance of loss Possible Impact in the event of BRL 233,464,034.34 loss
Case No. 10314.720588/2018-79 Venue CARF – Administrative Tax Appeals Council Level Appeal Notice date September, 2018 Plaintiff Brazilian Federal Revenue Service Administrative proceedings for adjustment to the taxable bases of IRPJ and CSLL (respectively income tax and social contribution) for Purpose calendar year 2013, claiming that the company made undue deductions due to a foreign exchange regime change. Chance of loss Possible Impact in the event of BRL 238,555,177.51 loss
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Case No. 16692.721318/2017-73 DERAT – SP – São Paulo State Special tax Administration Office of Venue the Brazilian Federal Revenue Service Level District Level Notice date May 29, 2019 Plaintiff Brazilian Federal Revenue Service FINSOCIAL offsetting challenge in the face of a dispute concerning Purpose the restatement criteria for the court-accredited credit. Chance of loss Possible Impact in the event of BRL 118,620,931.68 loss
Case No. 16349.000457/2010-01 DERAT – SP – São Paulo State Special tax Administration Office of Venue the Brazilian Federal Revenue Service Level District Level Notice date November 23, 2010, and September 08, 2011 Plaintiff Brazilian Federal Revenue Service COFINS offsetting challenge arising from excess payments associated Purpose with the taxable base extension pursuant to Law 9.718/98. Chance of loss Possible Impact in the event of BRL 54,270,213.95 loss
Case No. 0059297-08.2008.4.04.0000 Venue Higher Court of Appeals Level Higher Court Level Date filed March 03, 2008 Plaintiff Federative Union
Motion to set aside judgment fined by the Federative Union against Klabin S/A and Aracruz Celulose S/A to set aside a Court of Appeals Purpose finding on a civil lawsuit to prevent the application of the SELIC rate, as well as the tax rates provided in CIEX resolution No. 2/79 in connection with IPI (Tax on Manufactured Goods) premium credit.
Chance of loss Possible Impact in the event of BRL 103,924,800.00 loss
Case No. 5003895-10.2018.4.03.6182 Venue 4th Federal Tax Collections Office of São Paulo Level District Level Date filed September 27, 2018 Plaintiff Federative Union Page 56 of 348
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Tax collection proceedings filed by the Federative Union to collect tax bills arising from an administrative proceedings that upheld the Purpose citation of the company for an indirect trade involving the companies Norske Skog Pisa Ltda. And Lille Holdings S/A, with penalty aggravated from 75% to 150% Chance of loss Possible Impact in the event of BRL 91,487,078.56 loss
Labor Claims
As of December 31, 2020, the Company is a defendant in 1,172 labor claims. The main requests are related to overtime, unhealthy and hazardous work premium, moral damage, FGTS, fine - articles 467/477 and severance pay.
The total amount involved in the proceedings, considering the amount attributed to the claims, is approximately BRL 394.3 million, of which BRL 32.9 million are provisioned, as they are classified as probable by the legal advisors.
The Company believes that, although the number of labor claims is high, no single action is sufficiently relevant to the extent that it could adversely and substantially impact its results.
Case No. 0000336. 66-2014.5.09.0671 Venue Labor Claims Office of Telêmaco Borba- PR Level District Level Date filed April 08, 2014 Plaintiff Prosecutor’s Office of Ponta Grossa (PR) Class Action demanding adjustment of the Telêmaco Borba manufacturing Purpose complex to NR12 and punitive damages for collective harassment. Possible (Punitive Damages For Collective Harassment) I remote (Adjustment to Chance of loss NR12) Punitive Damages BRL 1,000,000.00. Expenses adjusting the facility to NR12 to Impact in the event of loss be determined by expert opinion.
Case No. 0133200-78.2008.5.09.0671 Venue Labor Claims Office of Telêmaco Borba- PR Level District Level Date filed October 21, 2008 Plaintiff Union of Paper and Pulp Workers of Telêmaco Borba
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Overtime and Night-Shift Overpay (midnight-8:00 a.m. shift) and Mid-Shift Break. The Higher Court of Labor Appeals upheld the Circuit Court of Labor Appeals ruling deeming the Union a legitimate Purpose party and finding for Night-time Overpay. It found for the Appellant, adjusting the previous sentence to 1 daily hour Mid-Shift Break. The case file will remand to the District Level for the sentence to be carried out.
Chance of loss Probable I Possible Impact in the event of BRL 57,788.09/ BRL 2,118,850.76 loss
Case No. 0133300-33.2008.5.09.0671 Venue Labor Claims Office of Telêmaco Borba- PR Level District Level Date filed October 21, 2008 Plaintiff Union of Paper and Pulp Workers of Telêmaco Borba Overtime and Night-Time Overpay (4:p.m.-midnight shift). This is a class action in its sentence execution phase. Because of the number of Purpose replaced workers involved, the judge found that each must file for execution individually. So far, none of the replaced workers have claimed the monies awarded. Chance of loss Possible Impact in the event of BRL 1,703,826.09 loss
Case No. 0045500-30.2009.5.09.0671 Venue Labor Claims Office of Telêmaco Borba- PR Level District Level Date filed April 07, 2009 Sinconvert – Sindicato dos Motoristas, Condutores de Veículos Urbanos e em Plaintiff Geral, Trabalhadores em Transportes Rodoviários de Telêmaco Borba Nighttime work bonus, Overtime – Beyonid 8th daily and 40th weekly hour, Purpose Overtime– in-shift, Overtime – off-shift Chance of loss Probable / Possible Impact in the event of BRL 259,673.14 / BRL 1,596,989.84 loss
Case No. 0000976-69.2014.5.09.0671 Venue Labor Claims Office of Telêmaco Borba – PR Level District Level Date filed October 07, 2014
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Sinconvert – Sindicato dos Motoristas, Condutores de Veículos Urbanos e em Plaintiff Geral, Trabalhadores em Transportes Rodoviários de Telêmaco Borba– 81.393.142/0001-68 Purpose Punitive damages, Overtime - 7th/8th hour, standard fine Chance of loss Possible Impact in the event of BRL 2,257,377.03 loss
Case No. 0001095-30.2014.5.09.0671 Venue Labor Claims Office of Telêmaco Borba – PR Level District Level Date filed November 04, 2014 Sinconvert – Sindicato dos Motoristas, Condutores de Veículos Urbanos e em Plaintiff Geral, Trabalhadores em Transportes Rodoviários de Telêmaco Borba– 81.393.142/0001-68 Purpose Punitive damages, Overtime - 7th/8th hour, standard fine Chance of loss Possible Impact in the event of BRL 2,243,320.05 loss
Case No. 0001104-89.2014.5.09.0671 Venue Labor Claims Office of Telêmaco Borba – PR Level District Level Date filed November 07, 2014 Sinconvert – Sindicato dos Motoristas, Condutores de Veículos Urbanos e em Plaintiff Geral, Trabalhadores em Transportes Rodoviários de Telêmaco Borba– 81.393.142/0001-68 Purpose Punitive damages, Overtime - 7th/8th hour, standard fine Chance of loss Possible Impact in the event of BRL 2,243,320.05 loss
Case No. 0001138-64.2014.5.09.0671 Venue Labor Claims Office of Telêmaco Borba – PR Level District Level Date filed 17 de novembro de 2014 Sinconvert – Sindicato dos Motoristas, Condutores de Veículos Urbanos e em Plaintiff Geral, Trabalhadores em Transportes Rodoviários de Telêmaco Borba– 81.393.142/0001-68 Purpose Punitive damages, Overtime - 7th/8th hour, standard fine Chance of loss Possible Impact in the event of BRL 2,243,320.05 loss
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Case No. 0001954-51.2013.5.12.0007 Venue 1st Labor Claims Office of Lages – SC Level 2ª Instância Date filed July 03, 2013 Plaintiff União Federal 00.394.460/0117-71 Purpose Executory Chance of loss Probable / Possible Impact in the event of BRL 82,179.19 / BRL 1,136,263.57 loss
Case No. 0003112-35.2020.5.12.0060 Venue 3rd Labor Claims Office of Lages – SC Level District Level Date filed November 25, 2020 Sinpoc – Sindicato dos Trabalhadores nas Indústrias de Papel, Papelão e Plaintiff Cortiça de Otacílio Costa
Purpose Hazardous work bonus, compensated weekly rest, FGTS, attorney’s fees
Chance of loss Possible Impact in the event of BRL 1,864,165.90 loss
Case No. 0175000-24.2009.5.15.0012 Venue 1st Labor Claims Office of Piracicaba – SP Level District Level Date filed October 20, 2009 Plaintiff Alexandre Rodrigues Françoso Re-integration / re-admission or indemnity, accumulated jobs/positions, hazardous work bonus, punitive damages, Overtime – 7th/8th hour, Overtime Purpose – off-shift, expert fees, lifetime pension, reimbursement, re-integration / re- admission or indemnity, salary, salary for accumulated jobs/positions, hazardous work bonus, Overtime – in-shift. Chance of loss Probable / Possible Impact in the event of BRL 80,575.45 / BRL 1,394,563.41 loss
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4.4. Non-secret court, administrative or arbitration proceedings where the opposing parties are managers or former managers, controlling shareholders or former controlling shareholders, or investors The Company and its controlled entities are not parties to any court, administrative or arbitration proceedings where the opposing parties are managers or former managers, controlling shareholders or former controlling shareholders, or investors.
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4.5. Material Secret Proceedings
The Company and its controlled entities are not parties in any material secret proceedings not disclosed above.
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4.6. Collectively material non-secret, repetitive or enjoindered court, administrative or arbitration proceedings
As of December 31, 2020 the Company was a defendant in 1,172 labor claims, 613 of which its own and 559 of which third parties’ (as joint-and-several or subsidiary obligor).
We list, next, the main claims by number of cases:
Overtime 842
Moral damage 580
FGTS 550
467/477 411
Hazard pay 411
Severance pay 382
ACT / CCT 345
Joint and several liability 263
Additional for Hazardousness 245
Civil Lawsuits
The Company is party to no civil-law court, administrative or arbitration proceedings that can be deemed repetitive or enjoindered and are relevant to its business.
Tax Cases
In the Tax Law realm, the Company is party to ten proceedings that can be regarded as repetitive and are relevant to its business, as follows:
Tax Collection Suits have been filed by the Cities of Lages – SC and Rio de Janeiro – RJ, where the claim originates from the ISQN – Tax on Services of All Natures allegedly applicable to the manufacture of packaging materials with personalized printing, which tax agents have categorized as “print industry services ". See item 4.3 hereof for additional details.
.
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4.7. Other material contingencies
On December 31, 2020 the Company was on the active pole of 286 lawsuits, of which, 221 were civil, mostly represented by collection actions and 65 were tax claims where refunds are sought, actions to remove restrictions imposed by the Tax Authorities and actions declarations that there is no legal relationship. All relevant and pertinent information about the Company’s contingencies has been disclosed in the items above.
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4.8. Country-of-Origin rules and Rules of the Country where the Securities are Held in Custody
Not applicable as the Company has its legal domicile in Brazil.
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5.1 Risk-management policy
a) Indicate whether or not the issuer has a formal risk-management policy in place. If affirmative, indicate the body that approved it and its date of approval; if negative, provide the reasons why the issuer has not adopted such a policy;
The Company has a Risk Management Policy approved by the Board of Directors, which has as principle the alignment of strategic objectives and their structure, with the best practices of the market, in order to enable the fulfillment of the objectives established by the Management, since uncertainties and future events cannot be predicted or accurately measured and may impact business activities and perpetuity.
It should be noted that the Risk Management Policy is in the process of being revised and updated due to the recent process of creating the advisory committees of the Board of Directors.
Additionally, in addition to the formal policy for risk management, the Company adopts a series of actions and procedures in order to mitigate any risks to which it is exposed.
b) Where a risk-management policy is in place, its objectives and strategies, including:
i. The risks against which protection is sought
The risks against which the Company seeks to protect are mainly those described in item 4.1 hereof, and mainly include risks associated with:
business strategy execution operational activities maintenance assets’ insurance coverage court rulings compliance with environmental laws new technologies
According to Klabin’s internal methodology, risks are rated into five classes, as follows:
Strategic: risks affecting strategic objectives and that can be strongly influenced by external factors, but are also subject to internal ones. Financial: events that may have a negative impact on the Company’s cash flow, Financials, and access to capital. Operational: associated with the Company’s and controlled entities’ infrastructure (processes, people and technology), affecting their operational efficiency and the effective and efficient use of their resources. Compliance, Regulatory and Legal: risks associated with compliance with the law, given industry-specific laws and the Law more generally. Socio-environmental: risks arising from actions or events that may lead to harm to the environment or society, with impacts on native peoples and communities and the protection of human health, of cultural heritage, and of biodiversity.
ii. Instruments used for protective purposes
Risks are assessed according to their criticality, which is defined based on two aspects:
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i. Impact: reflects the consequences associated with the potential materialization of risks, and ii. Vulnerability: reflects the magnitude (whether financial or not) of the exposure of Klabin and its Subsidiaries to risk.
Each risk’s impact level and the Company’s vulnerability to them are defined based on objective criteria that Klabin internally standardizes and validates.
Risk-handling procedures may include: reduce, transfer and/or share, retain, accept, or explore. In addition to aspects under the purview of the Risk Management area, Klabin embraces several actions and procedures that it deems needed to control and mitigate risks, such as:
- Management approval of the Budgeting Plant, with timely tracking; - continued and preventive asset-maintenance procedures, including annual plant stoppages and constant employee development; - valid insurance policies covering assets and lost profits (partial); - formal contingencies updating procedure with legal advisors; - supplier development, with no concentration, according to a formal quoting and decision- making jurisdictions process; - Planning and Development area to track strategies and the market in which Klabin operates; - Internal Audit area to review and track Klabin’s processes; - Controllership area to make sure that operational areas are compliant with internal control standards and ensure accurate and secure financial-statement information, including in terms of the respective controls framework; - Integrity area to act upon and track conduct-related practices and anti-corruption and anti-trust laws - General Meeting-elected Fiscal Council in place to defend shareholders’ interests.
To make sure that the main risks inherent to Klabin’s activities are identified, evaluated, treated, monitored and communicated, both strategically and operationally, Risk Management follows the steps listed next.
Risk identification is the purview of the Risk and Internal Controls Area, together with Business areas. This includes interviews, self-assessments, critical data and action-plan analysis as applicable, strategic scenarios, and the conditions of the markets in which Klabin operates.
Any risks identified are assessed as to their criticality, which depends on the respective impact and vulnerability degree as defined in the internal risk-management procedure.
After each risk’s impact and severity levels are determined based on the respective evaluation criteria, the risk is included in the “heat map” to determine its criticality and prioritize handling thereof. Risks may be rated as low, medium, high, and critical.
According to the methodology Klabin uses, the following decisions may be made about how to handle the criticality of each risk: reduce, transfer and/or share, retain, accept, and explore.
Risk handling will involve action plans from the affected areas, as well as the respective internal controls and/or metrics.
The Company’s most relevant risks are monitored by the Executive Board, Risk Commission, and Board of Directors.
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iii. Organizational structure of risk management
Klabin has in place the following risk-management structures and responsibilities:
Board of Directors:
approve the Risk Management Policy; define, support and disseminate the risk-management culture; Approve the risks prioritized for monitoring the Company; and resolve on any matter submitted thereto or, as it deems needed, on risks and any action plans.
Audit Committee and Related Parties:
Evaluate the mechanisms for controlling the company's risk exposures, and may require information on policies and procedures related to the topic.
Executive Board:
disseminate and promote the risk-management culture; monitor the Company’s and its subsidiaries’ Risk Management based on information periodically reported by the Risk Commission, maintaining the proper functioning thereof and taking steps eventually needed to improve it; validate the risks reported to the Risk and Internal Controls Area by the relevant Business areas; make sure that material and human resources are available at appropriate levels to enable effective compliance with the Policy and risk-management procedures in general in the relevant Business Areas; support the Risk Commission’s risk handling; and support the relevant Business Areas as they carry out action plans, as well as in the implementation of any risk management-related recommendations or measures.
Risk Commission:
recommend the Risk Management Policy to the Board of Directors and, in this context, establish the internal procedures to be used by the Company and its controlled entities for risk-management purposes; evaluate and monitor the more relevant risks reported by the Risk and Internal Controls Area, as well as its action plans; validate the action plans proposed by Business Areas and Executive Board once validated by the Risk and Internal Controls Area; and report to the Executive Board and to the Board of Directors, periodically or as it deems needed, relevant information associated with risk management at the Company and its controlled entities.
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Risk and Internal Controls Area:
propose the a Risk Management Policy and updates thereto; periodically identify, monitor and control risks, including as concerns deployment of action plans; report Risks and the respective Action Plans to the Risk Commission; support the Business Areas and the Executive Board in designing and implementing internal controls or risk-management indicators; perform a critical analysis of the action plans drawn by business areas for risk-mitigation purposes; provide training programs and a communication plan in connection with Risk Management.
Business Areas:
monitor risks associated with the respective activities and inform the Risk and Internal Controls Area, through the manager in charge, of any change in their business processes that may give rise to new risks, or change the status of risks already identified; support the Risk and Internal Controls Area in risk identification, support the Risk Committee (or Commission) in risk handling; carry out action plans; establish appropriate risk-management controls and/or indicators; and make sure that the recommendations from the Risk and Internal Controls Area, the Risk Committee (or Commission) and the Executive Board are effectively followed and that deviations from the Risk-management policy and internal procedures applicable to risk management are readily identified and reported.
c) Adequacy of the operational and internal controls structure while determining the selected policy’s effectiveness.
The effectiveness of the Company’s selected procedures lies in the verification, oversight and critical observation of how those procedures are carried out, involving preparation of monitoring reports and risk-checking by the Risk Management area and processes review by the Internal Controls area. In addition, it is the purview of Internal Audit to independently report the results of its own analyses to the Business areas by means of specific reports to include evaluation of the Company’s Risk Management process.
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5.2. Market Risk Management Policy
a) Indicate whether or not the issuer has a formal market risk management policy in place. If affirmative, indicate the body that approved it and its date of approval; if negative, provide the reasons why the issuer has not adopted such a policy.
As indicated in item 5.1 hereof, the Company has a Management-approved risk-management policy in place that lists risk rating types, including market risks.
It should be noted that the Risk Management Policy is in the process of being revised and updated due to the recent process of creating the advisory committees of the Board of Directors, which took place in November 2020, and the process validation and risk prioritization in December 2020 by the Board of Directors Management.
b) The market risk management policy’s objectives and strategies, where applicable, including:
i. market risks against which the Company seeks protection
The Company and its Subsidiaries are parties to operations that involve financial instruments, all of which are booked in equity accounts, and are intended to meet their operational needs, as well as to reduce exposure to financial risks, in particular credit, currency and interest rate risks.
Management does not expect to increase or reduce risks but simply seeks alternatives to control and mitigate risks.
The main market risks capable of affecting the Company’s operations are:
Credit risk and funds allocation risk
These risks are managed based on specific customer acceptance standards, credit review, and establishment of exposure limits by customer. Overdue invoices are promptly monitored. In addition, Management-approved analyses and standards apply to financial investments with financial institutions and the investment types available from the financial market, pursuing conservative and safe investing.
The Company has since April 2017 maintained insurance against domestic and international market receivables for all of its business units, except wood customers of the forest unit, in addition to certain customers that fail to meet specific risk requirements, such as continuity and liquidity, which the insurance company analyzes for incorporation under the policy. The Policy currently in force expires in August 2021.
Exposure to foreign exchange variations
The Company has foreign currency-denominated operations (substantially US Dollars) that are exposed to market risks arising from changes in the foreign exchange rates for the respective currencies.
The Company maintains no derivatives as hedging instruments against the long-term foreign exchange rate exposure. To address this net exposure, the Company maintains a sales plan whose projected export revenues flow is an approximate USD 1 billion annually and receipts from it, if realized, exceed or approximate the payments flow associated with the respective Page 70 of 348
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liabilities, offsetting the cash effect of this future foreign exchange exposure.
The Company’s only derivatives are currency and interest rate swaps pegged to issues of certain letters of export credit and the 12th debentures issue.
For sensitivity-analysis purposes, Scenario I assumes the market forward rate in force during preparation of the financial statements as of December 31, 2020; Scenario II adjusts the rate by 25% and Scenario III adjusts it by 50%.
All other variables remaining constant, the table below shows the simulated effect of foreign exchange variations on the balance sheet:
At 12/31/2020 Scenario I Scenario II Scenario III US$ Rat e R$ gain (loss) Rat e R$ gain (loss) Rat e R$ gain (loss) A sset s Cash and cash equivalents 1 9 8,81 3 5 .2 6 1 2 ,9 2 3 6 .5 8 2 7 5 ,01 8 7 .89 5 3 5 ,4 6 3 Trade receiv ables, net of 1 08,3 84 5 .2 6 7 ,04 5 6 .5 8 1 4 9 ,9 2 8 7 .89 2 9 1 ,9 1 1 allowance for doubtful debts Other assets and liabilities (1 1 0,2 6 2 ) 5 .2 6 (7 ,1 6 7 ) 6 .5 8 (1 5 2 ,5 2 6 ) 7 .89 (2 9 6 ,9 6 9 ) Financing (3,660,696) 5 .2 6 (2 3 7 ,9 4 5 ) 6 .5 8 (5,063,840) 7 .89 (9,859,352)
Net effect on finance results (225,144) (4,791,420) (9,328,947) Interest rate risk
The Company has loans from BNDES that are indexed to the TJLP, loans with other financial institutions that are indexed to the Libor, and working capital and financial investments indexed to the CDI, exposing the respective assets and liabilities to interest-rate variations. The Company has not executed derivatives to hedge/swap against this risk, but consistently monitors market rates to determine an eventual need for derivatives to protect against the risk of interest rate volatility. Furthermore, the Company believes that the high cost associated with securing pre-fixed rates under the Brazilian macroeconomic scenario justifies its choice of floating rates.
For sensitivity analysis purposes, the Company assumes for Scenario I the rates in force on dates close to the release of its financial statements for December 31, 2020, using the same rate for SELIC, IPCA and CDI, as the rates are very similar; Scenario II adjusts these rates by 25%, and Scenario III adjusts them by em 50%.
All other variables remaining constant, the table below shows the simulated effects of interest rate changes on income 12 months into the future:
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At 12/31/2020 Scenario I Scenario II Scenario III R$ Rat e R$ gain (loss) Rat e R$ gain (loss) Rat e R$ gain (loss) Financial investments CDBs CDI 4 ,1 3 3 ,3 9 3 2 .7 7 % 1 1 4 ,4 9 5 3 .4 6 % 2 8,6 2 4 4 .1 6 % 5 7 ,2 4 7 LFTs Selic 6 2 6 ,5 6 6 2 .7 7 % 1 7 ,3 5 6 3 .4 6 % 4 ,3 3 9 4 .1 6 % 8,6 7 8 NTN - B IPCA 7 08,6 9 1 4 .3 8% 3 1 ,04 1 5 .4 8% 7 ,7 6 0 6 .5 7 % 1 5 ,5 2 0 Financing Export Credit Notes - NCE (R$) and Agribuisiness Receiv ables Certificate - CRA CDI (4,623,091) 2 .7 7 % (1 2 8,06 0) 3 .4 6 % (3 2 ,01 5 ) 4 .1 6 % (6 4 ,03 0) BNDES TJLP (1,169,546) 4 .5 5 % (5 3 ,2 1 4 ) 5 .6 9 % (1 3 ,3 04 ) 6 .83 % (2 6 ,6 07 ) Debentures IPCA (1,832,803) 4 .3 8% (80,2 7 7 ) 5 .4 8% (2 0,06 9 ) 6 .5 7 % (4 0,1 3 8) Export prepay ment and Finnvera Libor (5,588,808) 0.3 4 % (1 9 ,03 7 ) 0.4 3 % (4 ,7 5 9 ) 0.5 1 % (9 ,5 1 9 )
Net effect on finance results (117,696) (29,424) (58,849)
Liquidity risk
The Company tracks the risk of a scarcity of funds, managing its capital by means of a recurring liquidity planning tool so that there will be funds available to duly meet its obligations, which are largely concentrated in financing agreements with financial institutions.
The table below shows the maturity schedule of the Company’s financial liabilities according to the consolidated balance sheet, including principal and upcoming interest owed on the transactions, calculated using the interest rates and indices in force as of December 31, 2020 (amounts in BRL thousands):
2027 And 2021 2022 2023 2024 2025 2026 Total subsequent Suppliers (2,003,029) (2,003,029) Financing/Debentures (1,435,979) (2,335,344) (2,095,154) (2,832,020) (2,930,750) (3,530,121) (23,751,961) (38,911,329) Total (3,439,008) (2,335,344) (2,095,154) (2,832,020) (2,930,750) (3,530,121) (23,751,961) (40,914,358) Budget forecasts for the coming fiscal years as approved by the Board of Directors show the Company’s ability to honor its obligations, if realized.
ii. Hedging strategy The Company undertakes no operations involving financial instruments for speculative purposes, nor specific long-term cash flow hedges. The Company only has two swaps in place, pegged to specific operations (two export credit notes and the 12th debentures issue) originally issued in Brazilian Reais and with swaps being used for conversion into US Dollars as a means to optimize the banking costs involved in the operation.
These risks are managed by means of strategies drawn by the Financial Area and approved by the Company’s Management, together with the establishment of control systems and position limits. To face this net liability exposure, the Company has in place a sales plan with export revenues of approximately USD 1 billion per year, the proceeds of which, if realized, are greater than or close to the payments flow of the respective liabilities, offsetting this exchange-rate exposure’s cash effect in the future.
iii. Hedging instruments In December 2018 the Company raised a new export credit note with Banco Bradesco in the amount of BRL 1,879 million, maturing in 2026 and paying 114% of CDI, without collateral or covenants, pegged to two FX-interest rate swaps in the same amount, but denominated in USD Page 72 of 348
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and paying interest at 5.6%, with the same maturity as the credit note. None of the instruments may be separately redeemed. In May 2020 the Company raised another BRL 1,125 million in the same manner and under the same terms and conditions.
In March 2019, the Company executed a swap with Banco Itaú with an asset position of 114.65% of CDI and a liability position in USD at .40% p.a. The operation is pegged to the 12th debentures issue, in the amount of BRL 1 billion, and executed in April 2019.
Gains and losses from derivatives are market to market and correspond to the respective fair value as recognized in financial results.
The operations were executed to optimize banking costs and are not for hedging purposes.
Furthermore, starting on January 04, 2021, the Company adopted the cash flow hedge accounting policy, deeming its highly probable revenues in US Dollars as hedge subjects and outstanding loans and financings denominated in US Dollars as hedge instruments. The purpose of the policy is to mitigate the effects of exchange rate variations on the Company’s results, with the effects of exchange rate variations on loans and financings involved in the hedge allocated to shareholders’ equity until the effective liquidation thereof, as export revenues occur.
iv. Parameters in place for managing these risks Information concerning setting limits for market risk exposures are dynamic and depend on the Company’s chosen strategy.
As concerns credit risk, the Company relies on its Credit Policy, which sets parameters for credit to be extended to each customer. The risk associated with the use of funds is addressed by the Financial Investments Risk, which determines the Company’s allowed banks and operation types. Liquidity risks are addressed by the Company’s Financial Debt Policy. Public policies are available on the website: https://ri.klabin.com.br/governanca-corporativa/estatuto-codigos-e- politicas/.
Exchange rate and interest rate variation risks are under continued monitoring by the Financial area and reported to the CFO for decisions regarding the need to set exposure limits not provided under a specific policy as a means to protect the Company and its cash flow against any such risks.
v. Whether or not the issuer operates financial instruments for purposes other than hedging, and what these purposes are The Company undertakes no operations involving speculative financial instruments or specific equity-hedging instruments.
vi. Organizational structure for market risk management control The Company manages its risks in an ongoing manner, requiring compliance with formal, Management-approved policies that drive risk-related transactions. It relies on a Risk Commission made up of members of the Executive Board and responsible for risk assessment and management, together with the Risk and Internal Controls Area, the Internal Audit department and an Integrity area. This structure manages and verifies policies, procedures and Page 73 of 348
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practices applicable to risk management.
In addition, monthly indicators are drawn to consolidate all of the Company’s financial transactions and operational data, so that Management can monitor risk exposure and verify the effectiveness of risk-monitoring actions and policies
Pursuant to item 5.1.b.iii, Klabin has in place the following risk-management structures and responsibilities:
Board of Directors:
Approve the Risk Management Policy; Define, support and disseminate the risk-management culture; and Resolve on any matter submitted thereto or, as it deems required, on risks and any action plans.
Audit Committee and Related Parties:
Evaluate the mechanisms for controlling the company's risk exposures, and may require information on policies and procedures related to the topic. Executive Officers
Disseminate and promote the risk-management culture; Monitor, based on information periodically reported by the Risk Commission, the risk management of the Company and its subsidiaries, watching over its proper operation and taking any steps needed for improvement. Validate the risks reported to Risk Management and Internal Controls by the respective Business areas; Ensure the presence of material and human resources at the appropriate levels to enable compliance with the present Policy and risk-management procedures in general at the respective Business areas; Assist the Risk Commission’s handling of risks; and Assist the respective Business areas in their execution of business plans, as well as of any risk management-related recommendations or measures.
Risk Commission:
recommend the Risk Management Policy to the Board of Directors and, in this context, establish the internal procedures to be used by the Company and its controlled entities for risk-management purposes; evaluate and monitor the more relevant risks reported by the Risk and Internal Controls Area, as well as its action plans; validate the action plans proposed by Business Areas and Executive Board once validated by the Risk and Internal Controls Area; and
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report to the Executive Board and to the Board of Directors, periodically or as it deems needed, relevant information associated with risk management at the Company and its controlled entities.
Risk Management and Internal Controls
propose the Risk Management Policy and updates thereto; periodically identify, monitor and control risks, including as concerns deployment of action plans; report Risks and the respective Action Plans to the Risk Commission; support the Business Areas and the Executive Board in designing and implementing internal controls or risk-management indicators; perform a critical analysis of the action plans drawn by business areas for risk-mitigation purposes; provide training programs and a communication plan in connection with Risk Management.
Business Areas:
monitor risks associated with the respective activities and inform the Risk and Internal Controls Area, through the manager in charge, of any change in their business processes that may give rise to new risks, or change the status of risks already identified; support the Risk and Internal Controls Area in risk identification, support the Risk Committee (or Commission) in risk handling; carry out action plans; establish appropriate risk-management controls and/or indicators; and make sure that the recommendations from the Risk and Internal Controls Area, the Risk Committee (or Commission) and the Executive Board are effectively followed and that deviations from the Risk-management policy and internal procedures applicable to risk management are readily identified and reported.
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5.3. Description of internal controls
a) Principal internal control practices and their effectiveness, indicating any imperfections and the steps taken for correction;
The Company operates at BM&FBovespa’s level 2 corporate governance and is a component of the Business Sustainability Index (Índice de Sustentabilidade Empresarial – ISE) portfolio, a tool for comparative analysis of the corporate sustainability performance of BM&FBOVESPA- listed companies, based on economic efficiency, environmental balance, social justice and corporate governance for companies that meet the index’s acceptance criteria.
The Company’s principal internal control practices involve its entire framework of procedures, formal policies, Management-approved purviews, audit reviews, process mapping based on key area controls, integrity assessments, analysis of access security against virtual attacks, analysis of access to SAP system operational transactions, and analysis of function segregation conflicts. The areas that carry out these activities are: Information Security, which is managed by the Information Technology department; the Internal Audit department; the Integrity area; and the Risk Management and Internal Controls area.
b) Organizational structures involved;
The organizational structure involved in the assessment of the internal controls environment includes: (i) the Risk Management and Internal Controls area; (ii) the Integrity area; (iii) the Information Security area; (iv) Internal Audit; (v) Audit Committee; and (vi) Controllership, materializing the concept of three lines of defense from the business areas to the evaluation areas.
Evaluation of the internal controls environment is primarily the responsibility of the Risk Management and Internal Controls area.
The area maintains a tracking schedule with the independent auditors to discuss and present measures to address points raised in the Letter of Recommendations, as well as to carry out walkthroughs in connection with processes that the Independent Auditors deem relevant. Therefore, together with the independent auditors, the Company monitors the presence of any control deficiencies identified in audit exams during the fiscal year, and remains vigilant to act preemptively and correct deficiencies.
The Integrity area prevents detects and remedies breaches of the Code of Conduct and other policies where noncompliance may go against Klabin’s integrity principles and values. The area is also in charge of managing the Company’s Integrity Program, structured as several pillars that contribute to strengthening ethical conduct within the Company. The pillars are: Senior Management commitment and support; integrity training; third-party reputation assessment; integrity risks assessment; communication; Code of Conduct, Policies and Integrity Procedures, Integrity Channel and Ombudsmanship; Integrity Commission; and continued monitoring.
Information security is monitored by the Information Technology area, including dissemination of the policy to all of the Company's employees, maintaining system adherence, including operational continuity plans, incident management, and information security crisis management.
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and procedure monitoring in all of the Company’s Business Units and their operations.
The Audit Committee supervises the activities of the internal controls area, internal audit, and preparation of the Company’s financial statements. It also monitors the quality and integrity of the internal control mechanisms, of Company’s quarterly information, semi-annual statements, and financial statements, as well as of information and metrics announced based on adjusted accounting data and non-accounting data not provided for in the framework for the regular financial reporting. The Committee also guarantees and recommends the Internal Controls and Internal Audit framework to the Board of Directors.
Controllership makes sure that the operational areas are compliant with internal control standards and guarantees the accuracy and security of the information provided in financial statements, including as concerns the respective controls framework.
c) Whether or not, and how, the issuer’s management supervises internal controls efficiency, indicating the positions of the individuals responsible for tracking thereof;
The following bodies monitor the internal controls environment:
Risk Management and Internal Controls: Risk and Internal Controls Department: policies and procedures review, mapping processes to meet the requirements of CVM Instruction 522 and based on specific demand from the Company and criticality, reviewing the Company’s decision-making purviews, granting and monitoring critical access to the ERP environment, and tracking points addressed by the independent auditors;
Internal Audit: works according to Audit Standards and audited processes, with the respective results reported in Audit Reports to the Company’s Management, as well as to managers, with recommended adjustments needed for adequacy to procedures and controls;
Integrity: Management of the Integrity Program through activities structured as acting pillars intended to prevent, detect and remedy breaches of the Company’s integrity system;
Controllership: tracking the outcomes of the company’s planning to ensure continued process improvement and provide decision-making security. Guarantees accurate and secure information so that management can make strategic business decisions;
Financial Planning: holding financial feasibility analysis for projects by means of the preparation and analysis of managerial reports for the purposes of the financial tracking of the various areas; preparing from budgets to analysis of effective vs predicted costs; and preparing scenarios for the Company’s decision-making process; accounting reconciliation and preparation and planning of financial models for the Company; support diagnosing the Company’s financial standing and presenting solutions for Page 77 of 348
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problems and focal points for improvement, assessing and indicating the best opportunities for investment; cost analyses and pursuit of actions to help promote greater savings, supporting the strategic decision-making process;
Information Security: for mitigation purposes, Klabin’s Information Security relies on standards such as ISO 270001 and IEC 62.443, GDPR and LGPD. It has therefore defined the following action fronts:
Perimeter security: technology used to strengthen edge security solutions (first line of protection against the outside world) and segregate the infrastructure, in an effort to protect the environment from external threats that may compromise the Company’s systems.
Network security: network monitoring and management solutions, including protection from threats, secure and controlled, access, content filter and environment segregation.
Endpoint security: A solution to protect servers, workstations, smartphones and tablets from advanced threats, including: viruses, rootkits, worms and spyware.
Application security: a solution that protects critical applications, acting preemptively through secure development, source-code review and remediation with virtual patching and application firewall.
Data security: technology that protects critical information throughout the lifecycle, as well as at the location where it may be: data bank, e-mail, file service, cloud, printed, etc.
Monitoring and response: a process responsible for monitoring the information security technology and process by means of incident management, performance indicators and forensics.
Prevention and management: information security based on risk management, governance, architecture, training, awareness building and compliance.
Patch management, advanced threats and prevention of and response to incidents, with cyber- security and hardening actions.
Access security: the process responsible for the lifecycle of user access, service accounts, administrative accounts, and password vault.
Risk Commission: recommend the Risk Management Policy to the Board of Directors and, given this context, establish internal risk-management procedures used by the Company and its controlled entities; evaluate and monitor the more relevant risks reported by the Risk and Internal Controls Area, as well as to evaluate the respective Action Plans; To validate the Action Plans proposed by the Business Areas and Executive Board, after validation from Risk Management and Internal Controls; and to report, periodically or as it deems needed, to the Executive board and the Board of Directors, relevant information associated with risk management at the Company and its controlled entities;
Fiscal Council: provide opinions on matters referred to it by the Board of Directors and on the Company’s annual report; and
Audit and Related Parties Committee: evaluate the mechanisms for controlling the company's risk exposures, and may require information on policies and procedures related to the topic. Page 78 of 348
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d) Internal controls deficiencies and recommendations present in the substantiated report prepared and submitted to the issuer by the independent auditors pursuant to CVM regulations on independent audit registration and exercise;
The internal controls report prepared by the independent auditors for the year ended December 31, 2020 only presents a significant deficiency related to the weakness in the review control and timeliness of recording specific unusual transactions.
e) Comments of the Executive Officers on deficiencies indicated in the substantiated report prepared by the independent auditors and on corrective steps taken;
Management has worked intensively over the past few years to review the controls implemented and their effectiveness in the face of new scenarios resulting from the Company's growth. In 2020, the Company identified an event that resulted in the lack of proper accounting treatment, correcting it within the year. The latter demonstrated that internal controls have evolved, being capable of correcting and adapting the Company's accounting records.
During fiscal year 2021, the Company will carry out a review of practices and the mapping of its accounting processes using the experience of market specialists. Although the event identified and corrected in 2020 was classified as immaterial for the Company, the review works aim to certify that all processes have been duly reviewed together with their respective operating areas, that the flow of accounting information is effective, and that any complex transactions or unusual ones without proper accounting records are identified and corrected.
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5.4. Concerning the issuer’s internal integrity mechanisms and procedures to prevent, detect and remedy deviations, fraud, irregularities and unlawful acts against the Public Administration, whether domestic or foreign, inform:
a. Whether or not the issuer has rules, policies, procedures or practices in place to prevent, detect and remedy fraud and unlawful acts against the Public Administration, identifying, if affirmative:
i. The main integrity mechanisms and procedures adopted and their adequacy to the profile and risks identified by the issuer, informing the frequency at which risks are reassessed and policies, procedures and practices are adapted.
Klabin has an Integrity Program in place aligned with best market practices and, in particular, with its own Code of Conduct and with anti-corruption and anti-trust laws. The program covers several pillars and activities, some of which undergoing implementation, intended to prevent, detect and remedy acts that may be in breach of the Code of Conduct and the applicable law.
At the end of the 2018 financial year, an integrity risk assessment process was conducted, which will be again carried out in 2021, aiming at the continuous improvement of the Integrity Program. Possible risks related, identified in the daily scenario of activities, for example, in the Integrity Channel and Ombudsman, are dealt with in a timely manner by the Company.The Integrity Program’s activities have been undergoing periodical improvements, in the light of previously identified risks as well as based on the demand created by the growth and strengthening of the Company’s integrity culture.
Klabin provide training programs for its employees to prevent breaches and behaviors that go against the Company’s values. In 2020, training programs were held on “Anti-Corruption” and “Competition Ethics”, using Webinars and pre-recorded sessions on an internal portal, mostly intended for managers. The Company also provides, for broad access, Anti-Corruption, Ethics, and Code of Conduct e-learning programs, and held the 5th Klabin Ethics Week, an annual event intended to build awareness of and reflections on ethics and integrity.
The Company’s whistleblower channel is run by an independent third party, under the managerial purview of the Integrity area. It also relies on joint efforts from Internal Audit to investigate specific topics reported by means of the channel.
The Integrity Commission, made up of Officers and with participants from Internal Audit and the Integrity area, meets quarterly to monitor, address and resolve on, as needed, topics arising from whistleblower reports and other related matters.
The integrity policies and procedures, including Klabin’s Code of Conduct, are monitored for the need for updates, submitted to the internal approvals pipeline and, as needed to the Board of Directors for approval. In 2020, the Company approved its Integrity Policy, which formalizes and consolidates the area’s guidelines and responsibilities and ensures implementation of the Company’s Integrity Program.
ii. The organizational structures involved in monitoring the functioning and efficiency of internal integrity mechanisms and procedures, indicating their purviews, whether or not their creation has been formally sanctioned, the issuer’s corporate bodies to which they report, and the mechanisms in place to ensure their managers’ independence, if any
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Klabin’s integrity mechanisms are subject to the Office of the Legal & Integrity Officer, as per the minutes of the Meeting of the Board of Directors held 04/25/2018. This, in turn, reports to the Executive Board and the Board of Directors.
iii. Whether or not the issuer has a formally approved code of ethics or conduct, indicating:
If it applies to all Officers, members of the Fiscal Council, members of the Board of Directors, and employees, and if it also comprehends third parties, such as suppliers, service providers, intermediaries, and associates
The Code of Conduct in force at Klabin was approved by the Board of Directors on 06/27/2013, and applies to all members of the Board of Directors and other employees, affiliates and subsidiaries, suppliers, customers, shareholders, service providers, competitors, public authorities, financial institutions, the press, and the public at large.
If and how often the officers, members of the Fiscal Council, members of the Board of Directors, and employees receive training on the code of ethics or conduct and on other related standards
Training is provided annually to Officers and other employees covering the contents of the Code of Ethics. Furthermore, the Klabin Ethics Week is held annually, featuring presentations that reinforce the guidelines provided in the Code of Conduct and Anti-Corruption Manual and an expert keynote speaker with widespread recognition on ethics-related matters.
Penalties in the event of breach of the code or other standards governing the matter, identifying the document that provides for such penalties
The Klabin Code of Conduct provides that breaches of the Code and other internal standards are subject to the penalties under the Law, including termination.
The corporate body approving the code, the date of approval and, where the issuer discloses its code of conduct, the Web locations where the document can be viewed
The Klabin Code of Conduct was approved by the Board of Directors on 06/27/2013. A copy of the Code is given to every employee upon hiring, and the Code is available on the Company’s Website:
https://klabin.com.br/wp-content/uploads/2019/10/manual_codigo_de_conduta_WEB.pdf
b. Whether or not the issuer has a whistleblower channel, indicating, where affirmative:
If the whistleblower channel is internal or entrusted to third parties
The Klabin Integrity and Ombudsmanship Channel is run by an independent third party that ensures the anonymity, transparency and impartiality needed for appropriate handling of reports.
if the channel is open to reports from third parties or only takes them from employees
The contact channels to log reports are available on Klabin’s Website, and enables access to employees, third parties, suppliers, communities and other stakeholders.
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If there are anonymity and protection mechanisms in place for good-faith whistleblowers
There is a mechanism in place to preserve the identity and protect good-faith whistleblowers, as provided under and guaranteed by the Code of Conduct. The Klabin Integrity and Ombudsmanship Channel enables anonymous reporting via both the Website and telephone.
Issuer body responsible for investigating reports
Responsibility for investigating reports is currently shared by the Integrity and Internal Audit teams, depending on the reported topic, or with support from the areas in charge when relevant. In the latter case, information provided by parties responsible for other sectors of the Company are reviewed by Integrity before any final decision and response to the reporting parties, which are kept on record at the third-party provider’s platform.
c. Whether or not the issuer adopts, in connection with merger, acquisition and restructuring processes, procedures do identify vulnerabilities and the risk of irregular practices at the legal entities involved.
Any and all merger, acquisition or other corporate operations can only be carried out by the Company after a due diligence process covering the integrity, environmental, legal, financial, tax and accounting aspects of the relevant assets. Klabin checks the target company’s accounting status – that is, if the accounting entries correspond to reality –, finances, existing contracts, court or administrative proceedings underway, potential risks of an environmental, labor, tax or other nature, and checks for any irregularities. All analyses aim to review the target asset’s operations and situation, including detection of unlawful or unethical conduct.
d. If the issuer lacks rules, policies, producers or practices intended to prevent, detect and remedy fraud and unlawful acts against the Public Administration, indicate the reasons why the issuer has failed to adopt such controls.
As indicated in the response to letter "a", Klabin does have the procedures above in place.
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5.5. Material changes
In the fiscal years 2020, 2019 and 2018 the main market risk affecting the Company’s results were BRL-USD foreign exchange rate fluctuations, creating significant negative and positive effects on the periods’ income because of the foreign currency-denominated liability exposure made up significantly of foreign currency financing, as the Figure next shows:
Amounts in BRL thousand Fiscal Year ending 12/31/2020 12/31/2019 12/31/2018
FX variation – assets 582,031 318,800 156,759 FX Variation - liabilities (4,202,765) (729,071) (2,155,558) Net effect on financial income (3,620,734) (410,271) (1,998,799)
In fiscal year 2020, the exchange rate varied up, reaching yearend at BRL 5.20/USD (BRL 4.03 as of December 31, 2019). This change had a BRL 3.620,7 million negative impact on net foreign exchange variations.
In fiscal year 2019 the exchange rate varied up, reaching yearend at BRL 4.03/USD (BRL 3.87 on December 31, 2018). This change had a BRL 410.3 million negative impact on net foreign exchange variations.
In fiscal year de 2018 the exchange rate varied up, reaching yearend at BRL 3.87/USD (BRL 3.31 on December 31, 2017). This had a BRL 1,998.8 million negative impact on net foreign exchange variations.
Furthermore, the Company has a natural hedge from operations that enables honoring foreign currency obligations through cash flows from exports, which, when made, eliminated the cash effect of foreign exchange variations, so that the change in the balance of debt owed corresponds to the variation in receivables from exports. The Company purchases no derivatives for this specific purpose.
The only derivative purchased by the Company concerns currency and interest swaps pegged to the issue of a certain export credit note and a certain debenture that converts debt from BRL into USD.
For fiscal year 2021, the Company adopted cash flow hedge accounting for highly probable expected transactions, designating its revenues in US dollars as hedge object for debt (hedge instrument) also denominated in US Dollars|. The purpose of the practice is to equalize the effects of foreign exchange variations on the income statement as they are effectively recognized along with their cash effects.
Despite the foregoing, the Company is not aware of any material changes to its risk exposure, and adopts a practice of constantly monitoring business risks capable of adversely impacting its operations and results, including macro-economic and sectoral scenario changes capable of affecting its activities, analyzing price and economic activity indices, as well as the supply of and demand for the Company’s products.
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5.6. Other material information – Risk management and internal controls
There is no additional material information on the present item "5".
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6.1 /6.2 /6.4 - Issuer’s Incorporation, Duration and Date of Registration with the CVM
Date of Issuer’s Incorporation 11/08/1978 Type of Business Organization Incorporated as a publicly held company. Country of Incorporation Brazil Duration Indeterminate Registration Date with the CVM 08/06/1997
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6.3. Brief history of the issuer:
Klabin Irmãos S.A.’s history of more than a century begins in 1899, when it was founded by the Klabin-Lafer family in São Paulo to sell paper, office supplies and printing materials. Three years later with business prospering, the Company leased a small printer’s paper plant and made its debut in the segment in which it operates to this day: the production of paper. Companhia Fabricadora de Papel was incorporated in 1909. By the 1920s, it had become one of the three largest paper manufacturers in Brazil. The strategy adopted by the entrepreneurs was one of innovation, requiring regular trips to Europe in search of new production techniques. With this end in view, the company took a great leap forward in 1934, acquiring Fazenda Monte Alegre in the state of Paraná to build Brazil’s first integrated pulp and paper mill, called Indústrias Klabin do Paraná de Celulose (IKPC). The company’s first planted forest plan had its beginnings in 1943, initially using araucaria and eucalyptus, followed by pine in the 1950s, with the inauguration of large pine wood plantations. Parallel to this, in 1946, manufacturing activities began with the production of newsprint and packaging paper. This was a landmark event in the history of the sector in Brazil. For the first time, part of domestic market demand was to be supplied by an indigenous manufacturer. Currently, the Company is the largest producer and exporter of packaging paper in Brazil. It is leader in the segments for paper and paper boards for packaging, corrugated paper and industrial bags as well as producing short fiber, long fiber and fluff pulps in one of the most modern and sustainable industrial plants in the world, unveiled in 2016. Klabin’s annual pulp and paper production is 3.7 million tons. The Company has 23 industrial units in Brazil and one in Argentina as well as commercial offices in ten Brazilian states and in North America and Europe. Klabin directly and indirectly employs approximately 25 thousand. The Puma II Project was approved in April 2019, and consists in the construction of two packaging paper machines with integrated cellulose production in the city of Ortigueira – PR, where the Puma Unit is also located. The machines’ total capacity will be 910 thousand annual tons of paper, with BRL 12.9 billion in gross investment. The project is divided into two phases, with the first machine set to start up in July 2021 and the second in the second quarter of 2023. The first stage consists in the construction of a main fiber line to produce 100% eucalyptus non- bleached cellulose integrated with a kraftliner machine with the capacity for 450 thousand annual tons. The second contemplates the construction of a complementary fiber line integrated with another paperboard machine, with capacity of 460 thousand tons per year and expansion of some support structures. As the leader of the Brazilian corrugated board and sack kraftboard markets, the company offers exclusive products tailored to the need of the client and is equipped to meet the most demanding requirements. In line with world standards, Klabin’s paper board product is manufactured from a mix of pine and eucalyptus which is transformed into high value-added paper board with greater rigidity, tear resistance and printing quality. Klabin is a global benchmark for forestry management and productivity due to the care taken since inception to ensure that its pine and eucalyptus plantations are interspersed with preserved native forest in a mosaic format. The formation of this ecological corridor protects the fauna and flora, as well as preserving the river headwaters. Klabin has 266 thousand hectares of planted forests and 243 thousand hectares of preserved forests. That is, more than 40% of its total area comprises indigenous forest. In 1998, the company was the first in the Southern Hemisphere in the pulp and paper sector to receive FSC® (Forest Stewardship Council) certification for its Forestry Unit in the state of Paraná. Today, the Company’s forests and all its productive
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processes are certified by the entity – confirmation that it conducts its activities according to the highest social and environmental standards. The strategy and actions in Klabin’s business plan include climate change mitigation and adaptation. To this end, Klabin has signed up to the United Nations “Business Ambition for 1.5°C” global initiative, under which it commits to a science-based target for reducing emissions, contributing to the collective efforts of containing temperature increases to 1.5°C. In addition, in relation to emissions from its productive processes, the Company successfully reduced specific emissions by 60% (kgC02eq/ton product) between 2003 and 2019. Furthermore, Klabin has a carbon balance of 4.7 million, that is, its planted and native forest stands remove and store more carbon (11.1 kgC02eq/ton product) than its industrial processes emit (6.4 kgC02eq/ton product). In 2016, Klabin voluntarily joined the United Nations’ Sustainable Development Goals (SDG). This initiative gathers governments, civil society and the private sector around a global agenda for people, the planet, peace and prosperity, setting global priorities and aspirations for 2030. Since then, Klabin has been working not only to demonstrate the initiatives it already has in place supporting this agenda, but also to identify new opportunities for action and foster incresing integration of the SDGs into the Company’s strategic plan. In 2020, the Company made progress in its commitment to the UN Sustainable Development Goals. To ensure and catalyze their implementation at the Company, Klabin launched the Klabin Sustainable Development Goals (“Objetivos Klabin para o Desenvolvimento Sustentável” – KODS), with short-, medium- and long-term targets organizing environmental, social and governance milestones by priority and adherence to the strategic growth plan and the Company’s long-term vision. All of these initiatives by Klabin are public and reinforce the Company’s commitment to transparency before the market, as well as its egalitarian treatment of shareholders. As a result, it has since 2014 been a component of corporate governance level 2 of B3, the São Paulo stock exchange. This segment lists the shares of companies that embrace distinctive governance practices. The company has also been a component of B3’s Corporate Sustainability Index for eight consecutive years. The IS undertakes a comparative analysis of the corporate sustainability performance of B3 listed companies, based on economic efficiency, environmental balance, social justice and corporate governance. Klabin was selected as a component of the 2020/2021 edition of the Dow Jones Sustainability Index (DJSI) portfolio. The Company thus enters the index in two categories, World Index and Emerging Markets Index, and is the only Brazilian company listed in the global category. This recognition is a milestone for Klabin, the fruit of 120 years of commitment to the environment, care for people, and management driven by climate science, with bold targets for greenhouse gas emissions reduction and efficient use of natural resources. Another important 2020 milestone was the approval, at the General Meeting of November 26, of the takeover of Sociedade Geral de Marcas Ltda. (Sogemar), thereby ceasing the payment of royalties for the Klabin brands. In addition to creating shareholder value, the operation was an important step towards improved corporate governance practices because of the cessation of a relevant transaction with related parties. The process was conducted in line with the recommendations of a task force made up exclusively of independent Directors with no direct or indirect stakes in Sogemar, relying on independent valuations and informational disclosure for due consideration of minority shareholders. Subsequently, in December, the Company approved the creation of three advisory committees to the Board of Directors: the Audit and Related Parties Committee, the Sustainability Committee and the Compensation Committee with the election of the respective members. Also on the corporate governance front, two financial Page 87 of 348
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policies were approved and released, to govern debt and dividends, adding even more transparency before the Company’s relevant publics. At 122 years, Company is proud to remain under the control of its founders’ family and to be a Brazilian company with international recognition for the high quality of its products and the commitment to sustainability that is a part of its DNA.
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6.5. Information on petition for bankruptcy provided it was based on a significant amount or judicial or extrajudicial recovery:
There has been no petition for bankruptcy or for judicial or extrajudicial recovery from the Company.
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6.6. Other relevant information
Projeto de expansão - Puma II
As announced to the market in a Material Fact notice of April 16, 2019 and May 5, 2021, approval was given for work to start on a capacity expansion project in the packaging papers segment known as the “Puma II Project", covering the building of two paper machines with integrated pulp production, located at Klabin’s industrial unit in Ortigueira (PR) (Puma Unit).
The installation of the Puma II Project will be divided into two phases:
(i) Phase One – consists of the construction of the main fiber line to produce unbleached pulp integrated with a kraftliner paper and white kraftliner paper machine. The products will be sold under the eukaliner brand, with an annual capacity of 450 thousand tons. This phase also includes complementary supporting facilities for the recovery and utilities areas’ new lines and plants.
(ii) Phase Two – covers the construction of a complementary fiber line integrated to a kraftliner paper machine with an annual capacity of 460 thousand tons and the expansion of certain support facilities.
According to the construction schedule, works on each stage will last for 24 months, and works on the second phase will begin as soon as the first is completed. Consequently, startup of the first machine is slated for the second quarter of 2021, and the second machine is expected to begin operations in the second quarter of 2023.
Gross investment has been budgeted for the construction of the Puma II Project at BRL 12.9 billion, subject to exchange rate oscillations and inflation restatements, to be disbursed between 2019 and 2023. Of this total, approximately BRL 1.2 billion concern recoverable taxes. Since the bulk of the equipment is to be installed during the first phase of the project, approximately two thirds of the disbursements will take place between 2019 and 2021. The project will be financed from the Company’s cash position and cash flow from existing business. Additional funding may come from financing as long as the conditions are attractive in terms of cost and duration.
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7.1. Brief description of the activities carried on by the Company and by its subsidiaries:
Klabin is Brazil’s largest producer, exporter and recycler of packaging paper according to the Brazilian Tree Industry - IBÁ and internal estimates, and is one of the largest integrated paper manufacturers in Latin America, according to internal estimates, based on its 2019 production capacity of two million tons of packaging and packaging paper. Further, the Company is also the only Brazilian company to simultaneously sell hardwood pulp (eucalyptus), soft wood pulp (pine). Production involves various types of paper, packaging and pulp made in 23 plants in Brazil and one in Argentina, supplying both the domestic and international markets. In 2020, Klabin and its subsidiaries had a workforce of approximately 16 thousand, generating about 25 thousand direct and indirect jobs.
Operations are organized as four business units which are the operational segments corresponding to the principal production processes and products. A brief description is provided next:
• Forestry Unit – carries out silviculture activities and harvests of pine (long fiber) and eucalyptus (short fiber). The largest share of production is for the supply of the Company’s own operations; a smaller share is sold to third parties;
• Pulp unit - manufactures bleached short fiber, long fiber and fluff markets. Short- and long- fiber cellulose supply the paper tissue, writing paper and packaging paper markets. Fluff pulp, by its turn, is an important input used in the production of sanitary products (such as infant and adult diapers, and sanitary pads);
• Paper unit – manufactures coated boards, including liquid packaging board, kraftliner (virgin fiber paper), testliner (recycled paper) and sacks for packaging. The papers produced by the Company are used in the production of paperboard packaging for consumer products in a wide range of sectors including food (in natura and processed), electronic and electrical products, household utensils, cleaning products, footwear, personal hygiene and beauty products, canned and bottled beverages, equipment and apparel, among others.
• Conversion unit, manufacturing and selling corrugated cardboard packaging and industrial bags. A wide range of customers use corrugated cardboard packaging for storage and transportation of in natura and processed food products, chemicals and related products, flowers, beverages, tobacco products, metallurgy, perfumes and cosmetics. Certain domestic buyers also use corrugated packaging for storage and international transportation of meat, poultry, fruit and tobacco, among others. The production of industrial bags is mainly intended for the civil construction industry (as packaging for raw materials such as cement, lime and clay), as well as for packaging seeds, chemicals, food products, livestock feed, and minerals.
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7.1.a. Information on a mixed economy corporation
Not applicable to the Company.
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7.2. Operational segments which have been disclosed in the last three financial statements for the close of the fiscal year or when the case, in the consolidated financial statements:
a) Products and services sold
In 2003, the Company underwent a financial restructuring process and focused on its current core businesses of manufacturing packaging papers and paperboard and paper packaging. Today, the Company’s products are: kraftliner papers (virgin fiber paper), testliner (recycled paper) and coated paperboard, corrugated cardboard packaging and industrial bags, together with long fiber pulp, fluff and short fiber pulp. The Company also operates in the forestry sector with the sale of wood logs.
The Company is a pioneer and leader in the production of kraftliner paper in Latin America in addition to being the largest producer and exporter of packaging papers, accounting for more than half of Brazilian exports of these products in 2019. Kraftliner paper manufactured by the Company exported to more than 60 countries and, together with recycled paper, provides integrated supplies to Klabin’s corrugated board packaging plants.
The Company’s paperboard is produced from a mix of short (eucalyptus) and long (pine) fibers, lending packaging excellent resistance and printing quality. All the Company’s plants have Chain of Custody certification from the FSC (Forest Stewardship Council).
The Company is also a leader in the corrugated board sector in Brazil and has the largest installed capacity in the domestic market. The Company’s packaging products serve various segments of the economy, providing total protection to transported products.
The Company is also a leader in the manufacture of industrial bags of recognized quality, offering customized service to clients in several market segments, notably civil construction, food, chemical products and agribusiness.
In addition to paper segments, the Company’s Forestry Unit sells logs harvested from the planted forests to the laminates industry and saw mills. These processes ensure the reliability and low cost of products, always in line with the Company’s sustainability policy. The Company’s forests are certified by the FSC (Forest Stewardship Council), and Klabin was the first company in the pulp and paper sector in the Southern Hemisphere to receive FSC certification for its forests in the state of Paraná in 1998.
In 2016, the Company began operations at its new pulp plant (Puma Unit), located in Ortigueira, state of Paraná. The Puma Unit has a production capacity of 1.5 million tons of pulp, of which 1.1 million tons are bleached short fiber pulp (eucalyptus) and 400 thousand tons are bleached long fiber pulp (pine), part of which is converted into fluff pulp. The industrial unit is the only one in the world designed to produce all three fiber types. Output at Klabin contributes to the substitution of fluff pulp imports, an important raw material used in diapers and sanitary pads, representing hard currency savings for the country.
b) Revenue from the segment and its participation in the Company’s net revenue
The table below shows the amounts arising from each of the Company’s activities, as well as the respective percentage of such amounts on net operating revenue in the years ended
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December 31, 2020, 2019 and 2018:
Fiscal Year Ending 12/31/2020 12/31/2019 12/31/2018 BRL BRL BRL million % million % million % Net Operating Revenue 11,949 100% 10,271 100% 10,016 100%
Paper 5,884 57% 5,104 50% 4,596 46%
Conversion 3,812 37% 3,033 30% 2,874 29%
Forestries 1,782 17% 1,772 17% 1,736 17%
Pulp 4,021 39% 3,601 35% 3,763 38% Other / exclusions (3,551) -35% (3,239) -32% (2,952) -29%
Gross revenue (including wood) in 2020 was BRL 13.7 billion. Net revenue was BRL 11.9 billion, up 16% from 2019. Export revenues were 41% of total net revenues.
Gross revenue (including wood) in 2019 was BRL 11.9 billion. Net revenue was BRL 10.3 billion, up 3% from 2018. Export revenues were 40% of total net revenues.
Gross revenue (including wood) in 2018 was BRL 11.5 billion. Net revenue was BRL 10.0 billion, up 20% from 2017. Export revenues were 45% of total net revenues.
c) Profit and loss resulting from the segment and its participation in the Company’s net income
The Company does not calculate the profit or loss for each one of the segments separately since the functions of its operational structure are shared across all segments. It is therefore not possible to allocate the expenses associated with these activities for each business. Additionally, the Company’s cash is concentrated at its corporate unit and not segregated among the business units.
However, Klabin does disclose operating results before the financial result by operational segment as shown below.
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1/1 t o 12/31/2020 Corporat e/ T ot al Forest ry Paper Conv ersion Pu lp elim inat ions Consolidat ed Net revenue: .Domestic market 2 4 6 ,3 6 2 2 ,1 5 6 ,4 7 4 3 ,2 5 9 ,5 6 3 1 ,3 7 7 ,3 6 0 (4 4 ,6 88) 6,995,071 .Foreign market - 2 ,04 7 ,3 9 9 3 7 6 ,6 7 0 2 ,5 3 6 ,2 08 (6 ,5 5 4 ) 4,953,723 Revenue from sales to third parties 246,362 4,203,873 3,636,233 3,913,568 (51,242) 11,948,794 Revenue between segments 1 ,5 3 5 ,7 4 7 1 ,6 80,3 4 4 1 7 5 ,9 2 2 1 07 ,4 08 (3,499,421) - T ot al net sales 1,782,109 5,884,217 3,812,155 4,020,976 (3,550,663) 11,948,794 Changes in the fair v alue of biological assets 6 5 8,3 89 - - - - 658,389 Cost of products sold (2,659,864) (3,636,268) (3,256,062) (1,977,725) 3 ,6 4 4 ,6 2 0 (7,885,299) Gross profit (219,366) 2,247,949 556,093 2,043,251 93,957 4,721,884 Operating income (expenses) (87 ,7 3 8) (5 89 ,1 5 5 ) (4 2 2 ,87 3 ) (5 7 6 ,4 05 ) 1 6 9 ,05 3 (1,507,118) Operating result before finance result (307,104) 1,658,794 133,220 1,466,846 263,010 3,214,766
Sales of produ ct s (in m et ric t ons) .Domestic market - 6 1 9 ,86 7 82 3 ,4 2 0 5 1 6 ,9 5 8 - 1,960,245 .Foreign market - 5 3 3 ,3 5 0 5 1 ,5 9 5 1 ,01 2 ,7 84 - 1,597,729 .Inter-segmental - 83 2 ,3 82 7 4 ,2 5 2 3 4 ,84 8 (9 4 1 ,4 82 ) - - 1,985,599 949,267 1,564,590 (941,482) 3,557,974 Sales of timber (in metric tons) .Domestic market 1 ,5 2 0,9 1 1 - - - - 1,520,911 .Inter-segmental 1 3 ,2 4 3 ,5 1 9 - - - (13,243,519) - 14,764,430 - - - (13,243,519) 1,520,911
Investments during the period 3 9 7 ,5 3 1 2 9 4 ,07 8 3 4 0,3 81 4 ,1 2 2 ,2 9 5 1 9 ,3 81 5,173,666 Depreciat ion, deplet ion and am ort izat ion (1,312,571) (3 9 3 ,7 88) (9 6 ,4 7 5 ) (5 5 7 ,7 2 8) (2 2 ,3 4 9 ) (2,382,911) Total assets - 12/31/2020 9 ,02 9 ,2 9 4 4 ,3 6 0,4 3 6 2 ,05 6 ,01 0 1 2 ,086 ,5 9 4 7 ,7 3 7 ,9 2 7 35,270,261 Total liabilities - 12/31/2020 2 ,6 88,5 1 5 7 6 9 ,4 2 1 6 5 1 ,3 9 4 1 ,1 3 0,81 2 2 5 ,6 4 5 ,3 5 8 30,885,500 Equity - 12/31/2020 5 ,7 6 6 ,3 2 3 3 ,5 9 1 ,01 5 1 ,4 04 ,6 1 6 1 0,9 5 5 ,7 82 (17,907,431) 3,810,305 Non-cont rolling sh areh olders 5 7 4 ,4 5 6 - - - - 574,456
1/1 t o 12/31/2019 Corporat e/ T ot al Forest ry Paper Conv ersion Pu lp elim inat ions Consolidat ed Net revenue: .Domestic market 2 4 9 ,5 07 1 ,9 3 6 ,5 5 4 2 ,6 84 ,2 9 1 1 ,2 5 3 ,4 05 (9 ,82 4 ) 6,113,933 .Foreign market - 1 ,5 7 3 ,7 6 3 3 2 4 ,2 9 0 2 ,2 5 9 ,85 3 - 4,157,906 Revenue from sales to third parties 249,507 3,510,317 3,008,581 3,513,258 (9,824) 10,271,839 Revenue between segments 1 ,5 2 2 ,87 8 1 ,5 9 3 ,2 6 2 2 4 ,6 5 3 88,04 9 (3,228,842) - T ot al net sales 1,772,385 5,103,579 3,033,234 3,601,307 (3,238,666) 10,271,839 Changes in the fair v alue of biological assets 3 9 0,05 3 - - - - 390,053 Cost of products sold (2,557,315) (3,532,268) (2,567,015) (1,879,935) 3 ,2 9 5 ,2 9 9 (7,241,234) Gross profit (394,877) 1,571,311 466,219 1,721,372 56,633 3,420,658 Operating income (expenses) (1 3 3 ,4 6 5 ) (5 2 1 ,7 3 6 ) (3 87 ,1 1 0) (4 3 2 ,81 8) 5 80,84 5 (894,284) Operating result before finance result (528,342) 1,049,575 79,109 1,288,554 637,478 2,526,374
Sales of produ ct s (in m et ric t ons) .Domestic market - 5 81 ,1 6 7 7 07 ,84 8 4 7 9 ,5 3 1 - 1,768,546 .Foreign market - 4 9 4 ,86 4 5 8,2 5 6 1 ,004 ,84 1 - 1,557,961 .Inter-segmental - 83 1 ,09 9 3 ,4 6 3 3 2 ,5 83 (86 7 ,1 4 5 ) - - 1,907,130 769,567 1,516,955 (867,145) 3,326,507 Sales of timber (in metric tons) .Domestic market 1 ,7 06 ,01 7 - - - - 1,706,017 .Inter-segmental 1 3 ,3 9 2 ,5 2 5 - - - (13,392,525) - 15,098,542 - - - (13,392,525) 1,706,017
Investments during the year 4 3 6 ,83 1 3 9 2 ,4 6 2 7 8,82 0 1 ,5 9 2 ,5 3 6 7 3 ,4 2 6 2,574,075 Depreciat ion, deplet ion and am ort izat ion (1,181,805) (3 4 9 ,2 5 4 ) (9 0,3 2 2 ) (5 4 4 ,83 3 ) (2 7 ,2 00) (2,193,414) Total assets - 12/31/2019 8,85 5 ,2 7 0 4 ,7 6 9 ,6 4 0 1 ,9 2 1 ,3 2 9 9 ,05 2 ,7 4 3 1 0,1 04 ,1 00 34,703,082 Total liabilities - 12/31/2019 2 ,3 3 3 ,9 1 1 6 2 7 ,86 5 3 9 4 ,1 4 8 7 5 0,86 9 2 4 ,09 5 ,01 6 28,201,809 Equity - 12/31/2019 6 ,06 6 ,9 6 8 4 ,1 4 1 ,7 7 5 1 ,5 2 7 ,1 81 8,3 01 ,87 4 (13,990,916) 6,046,882 Non-cont rolling sh areh olders 4 5 4 ,3 9 1 - - - - 454,391
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From 1/1 t o 12/31/2018 Corporat e/ T ot al Forest ry Paper Conv ersion Pu lp elim inat ions Consolidat ed Net revenue: .Domestic market 3 1 5 ,5 9 4 1 ,809 ,3 9 5 2 ,5 6 5 ,7 2 4 85 1 ,1 00 (8,2 3 5 ) 5,533,578 .Foreign market - 1 ,3 6 7 ,3 09 2 86 ,6 6 6 2 ,82 8,9 08 - 4,482,883 Revenue from sales to third parties 315,594 3,176,704 2,852,390 3,680,008 (8,235) 10,016,461 Revenue between segments 1 ,4 2 0,3 2 9 1 ,4 1 9 ,5 4 3 2 1 ,2 5 7 82 ,85 5 (2,943,984) - T ot al net sales 1,735,923 4,596,247 2,873,647 3,762,863 (2,952,219) 10,016,461 Changes in the fair v alue of biological assets 6 2 8,3 6 7 - - - - 628,367 Cost of products sold (2,015,212) (3,065,783) (2,440,449) (1,778,128) 2 ,9 5 7 ,1 6 6 (6,342,406) Gross profit 349,078 1,530,464 433,198 1,984,735 4,947 4,302,422 Operating income (expenses) (89 ,004 ) (4 3 8,1 9 1 ) (3 6 1 ,2 81 ) (3 6 5 ,7 6 0) (6 4 ,5 81 ) (1,318,817) Operating result before finance result 260,074 1,092,273 71,917 1,618,975 (59,634) 2,983,605
Sales of produ ct s (in m et ric t ons) .Domestic market - 5 7 9 ,2 05 7 1 4 ,9 7 5 2 9 4 ,3 6 7 - 1,588,547 .Foreign market - 4 4 1 ,4 05 5 2 ,2 5 6 1 ,1 06 ,87 7 - 1,600,538 .Inter-segmental - 7 89 ,5 4 5 3 ,1 03 2 9 ,5 4 9 (82 2 ,1 9 7 ) - - 1,810,155 770,334 1,430,793 (822,197) 3,189,085 Sales of timber (in metric tons) .Domestic market 2 ,1 09 ,04 0 - - - - 2,109,040 .Inter-segmental 1 3 ,5 4 6 ,6 2 5 - - - (13,546,625) - 15,655,665 - - - (13,546,625) 2,109,040
Investments during the period 5 2 7 ,7 2 8 2 5 5 ,6 1 9 1 3 4 ,87 1 1 4 0,7 7 5 3 7 ,3 5 0 1,096,343 Depreciat ion, deplet ion and am ort izat ion (7 1 3 ,6 2 3 ) (3 1 8,4 4 8) (7 0,3 3 9 ) (5 5 4 ,7 80) (1 6 ,1 5 7 ) (1,673,347) Total assets - 12/31/2018 8,1 9 9 ,5 82 5 ,2 7 8,2 5 4 1 ,84 6 ,7 3 2 7 ,6 6 5 ,4 84 6 ,6 4 3 ,6 9 1 29,633,743 Total liabilities - 12/31/2018 1 ,9 9 1 ,5 80 4 4 1 ,1 2 1 3 6 4 ,86 1 2 4 9 ,9 09 2 0,05 3 ,04 2 23,100,513 Equity - 12/31/2018 5 ,9 6 7 ,007 4 ,83 7 ,1 3 3 1 ,4 81 ,87 1 7 ,4 1 5 ,5 7 5 (13,409,351) 6,292,235
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7.3. Products and services corresponding to the operational segments disclosed in item
a) Characteristics of the production process
The Company is a vertically integrated producer. Its requirements for wood are satisfied principally from its own planted forests which are planted and managed by the Company and certified by the FSC (Forest Stewardship Council). It produces pulp and subsequently integrates it in paper machines. Some of the paper is converted in own conversion units into corrugated board packaging and industrial bags, the remainder being sold to the domestic and export markets. In addition, the Company produces bleached short and long fiber pulp, which is partly converted into fluff pulp and partly sold on the domestic and export markets.
The processes employed are those customarily used by the sector and fine-tuned to the conditions of each plant in relation to the type of wood and the end use of the fiber. Technology employed is largely from the Northern Hemisphere, notably countries such as Germany, Sweden, Finland and the USA. Since Brazil is an important pulp and paper producer, all the leading world producers of equipment for the sector have manufacturing plants in the country.
FORESTRY
Klabin produces wood from eucalyptus and pine planted forests. The production process begins with seedlings raised from vegetative propagation (cloning) or seeding, which takes place in own or outsourced forestry nurseries. The production of seedlings normally takes between 3 and 5 months.
Seedlings are planted following the preparation of the soil and the first fertilizing. During the initial phase of planted forest installation, the areas must be fertilized and undergo weed and pest control. The initial plantation phase takes about one year for eucalyptus and three years for pine. Following this period, the forest is consolidated and surveillance is necessary as a precaution against events which may prejudice productivity.
At felling age (between six and seven years for eucalyptus and 14-15 years for pine), the forest is harvested using a mechanized process that relies on machinery for cutting, dragging and processing of the wood. The logs produced are loaded onto and transported on trucks to the wood yards located at the manufacturing plants.
The forestry area also produces wood in logs that are sold to regional industries (sawmills and laminators). In this case, the forest is harvested after about fifteen years (eucalyptus) and twenty years (pine).
Throughout this process, rigorous environmental and social criteria are adopted so that production in the forest plantations takes place sustainably. These operations involve care with the soil, water and biodiversity, as well as the communities with which the managed relate. Forestry management at Klabin is FSC (Forest Stewardship Council) certified.
Principal equipment
In forest formation, the principal equipment used involves soil preparation machinery (tractors and towed implements). In the harvesting process, by its turn, the equipment is grouped into modules comprising a directional feller, a skidder, a shovel and two processors.
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PULP
In the market pulp and fluff pulp production process, the fibers from the bleaching process are transferred to the drying machine, where low-consistency fiber suspension is placed on a screen to drain excess water and form sheets. The sheets are roll-pressed to remove excess water prior to entering the drier. Having passed through the drier, the sheet already has water content in line with market standards. Eucalyptus pulp sheet is cut into smaller sizes and sheet bales are packed prior to shipment. Pine pulp sheets may be baled (the same process as eucalyptus) or transformed into fluff pulp reels.
Principal equipment
In the production process, the most important pieces of equipment are the digestors (pulp production), the recovery boiler (chemicals recovery and steam generation), the turbine generators (electric energy production) and the drying machines.
PAPER
The Company uses eucalyptus and pine fibers to produce packaging papers. Pulp production consists in the separation of the fibers from other components of the wood, more especially lignin, a substance which binds the cells together and lends wood its rigid structure. Wood chips are treated with lye and other chemicals in pressure vessels known as digestors. This is the chemical, or kraft, process and the one most used in the pulp industry.
Following the digestor stage, the cellulose fibers are separated from the dissolved wood components. Still with a brown color, the fiber is delivered to the following stage, directly to the paper mill or for bleaching. The dissolved components form the so-called black liquor which is sent for the recovery of chemicals and burning off of organic content (lignin and other wood components), generating steam and energy.
Bleaching is a process used to continue the de-lignification that began with cooking and lend cellulose its white color. It relies in oxidizing agents such as oxygen, ozone and peroxides to remove the residual lignin from the fibers and whiten the cellulose paste. The Company uses a process of elementary chlorine-free bleaching (ECF) at its Monte Alegre Plant. This process ensures that highly polluting dioxins are formed and are released as plant effluents.
The transformation of the pulp into a flat, thin and cohesive structure – paper – takes place using equipment and operations collectively referred to as paper mills. The process begins with the treatment of the fibers, a phase called paste preparation where fibers are run through equipment that develops the physical properties of the fibers, separating out impurities and blending in other types of fibers and additives used in paper manufacture such as mineral fillers, starches, glues, dyes. Each paper type has a distinct formula in accordance with its end-use requirements. This phase takes place in an aqueous medium and, after this treatment, the fiber suspension is sent to the paper mill for final characteristics, such as grammage (fiber mass per unit of area), drying and surface finishing.
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Recycled papers
Used in the production of corrugated board packaging and also sold to other packaging companies. About 15% of the raw material is supplied from the corrugated board packaging conversion units and the remainder is acquired from OCC suppliers. Products:
EkoFlute – Fluting paper is made with 100% recycled fibers and receives during the manufacturing process, chemical additives which increase water resistance. Recommended for manufacture of fluting for corrugated board packaging. Not recommended for direct contact with foodstuffs.
Ekoliner – Made from corrugated board shavings as well as fibers from trims and scraps from the manufacture of the Company’s virgin fiber papers. Recommended for internal use in corrugated board packaging as fluting support.
Principal equipment
The most important pieces of equipment in the production process are the digestors (pulp production), the recovery boiler (recovery of chemicals and steam generation), the turbo- generators (power production) and the paper production machines.
The production units undergo annual 7-10-day stoppages for major maintenance and inspections of equipment, especially those working under conditions of pressure and temperature such as digestors and boilers. During these stoppages, worn down equipment is replaced and technological upgrades are introduced to improve performance, ensure operational safety and increase productivity. Preventive and corrective maintenance is also carried out on a monthly basis on specific equipment and on the paper mills.
The main pieces of equipment at the Company’s paper and pulp production units are as follows.
Monte Alegre (PR) Unit Principal equipment Year of operational start-up Recent technological updates Manufacturer Installed capacity Continuous digester I 1978 1984/ 1986/2012 Voith 850 t/d Continuous digestor II 1988 2007 Kvaerner 2100 t/d Recovery boiler I 1977 1977/ 2000/ 2003 Gotaverken/ Anthony Ross 1968 t/d Recovery boiler II 2007 - CBC 1700 t/d Turbo-generator 7 1978 2010 ABB 27.0 MWh/h Turbo-generator 8 2008 - Siemens 71.5 MW/h/h Paper machine 7 1979 1989/1997/1998/2000/2002 Voith/Valmet 900 t/d Paper machine 9 2007 2014 Voith 1240 t/d Otacílio Costa (SC) Unit Principal equipment Year of startup of operation Recent technological updates Manufacturer Installed capacity 07 Batch digesters 1975 1986/1998 Hércules/Jaragua 980 t/d Recovery boiler 1998 - CBC 1100 t/d Turbo-generators TG3-1993 1993 - Ahlstrom /ABB 32MWh/h TG4-1998 1998 - Paper machine 13 1975 1997 Voith 680 t/d Paper machine 12 1967 1998 Voith 250 t/d Paper machine 11 1953 1998 Voith 120t/d
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Correia Pinto (SC) Unit Principal equipment Year of operational start-up Recent technological updates Manufacturer Installed capacity 08 Digesters 1969 1992 Jaraguá/CBC 500 t/d Recovery boiler 1992 - CBC 850 t/d Turbo-generator 3 1993 - Siemens 12 MW h/h Paper Machine 1 1969 1990/1993/2002/2005 Beloit/Voith 376 t/d Paper Machine 23 2013 2013 Voith 320 7/d
Recycled Papers Principal equipment Unit Recent technological updates Installed capacity Paper machine 21 Piracicaba (SP) 2015 105 th. t/y Paper machine 17 Goiana (PE) - 51 th. t/y Paper machine 24 Goiana (PE) 2015 110 th. t/y
CONVERSION
(i) Corrugated Paperboard Boxes and Sheets
The manufacture of corrugated paperboard packaging involves a chemical, thermo-mechanical process. The paperboard is processed through various stages before producing the end packaging product. During this process, the paperboard is pressed in layers, mechanically fluted, cut, creased, printed with water-based ink and folded.
The process begins with the combining of various layers of paperboard to form a rigid sheet. In this phase, one or two layers are joined alternately to the rest only after they have undergone a process of fluting. For this purpose, the paperboard receives an application of starch-based glue and then heat treatment. This fluting provides rigidity to the paperboard sheet. The flutes can be of various sizes giving the corrugated paperboard different thicknesses (approximate measures, depending on the thickness of the paperboard):
Flute "E": 1.3 mm thick Flute "B": 2.8 mm thick Flute "C": 3.8 mm thick Flute "A": 4.5 mm thick Paperboard can also be dual-fluted, which provides additional rigidity. Normally, "C" and "B" (most frequent) and "A" and "C" fluting combine. The corrugated paperboard sheets are then processed into packaging. During the process, the sheets are printed with flexographic (water- based) ink. The paper types used to manufacture corrugated paperboard are specially made for conversion into packaging and may be virgin-fiber (kraft) type, or recycled-fiber. Different grammages are used from 100 to 420 g/m², according to the resistance requirements of the product to be packaged.
Principal equipment
Flute laminating machine: transforms paper reels into corrugated paperboard sheets and normally producing paperboard sheets with B, C, E, AC and CB flutes.
Printers: transform corrugated paperboard sheets into packaging. The Company has a modern
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printing press park comprising printing presses of the "rotary cutting-creasing" type (using forms for cutting and creasing the paperboard, supplying as a finished product, unfolded packages) and "folder-gluer machines" (machines, which can be repositioned, producing cuts and creases), dispensing the need for forms, supplying as the end product, folded packaging with glued ears). The Company is able to print in up to five reticulated polychromatic colors.
Other equipment
Stapling machines, gluer, machines for accessories and palletization; Utilities (boilers, starch glue kitchens, baling presses, scrap shredders, etc.) Effluent treatment plants
(ii) Industrial Bags
Industrial bags are processed through a range of different equipment to produce the finished packaging. The paper is printed flexographically with water-based ink, cut, glued with vegetable starch or PVA glue, layered, folded, closed for filling-valve insertion, counted and bundled for shipment to the end customers.
Printing or pre-printing process
Reels of sack paper are placed on reel unwinders, run through rollers and the printing apparatus, where application of ink takes place. This may be up to eight colors, depending on the design and layout provided by the client. The paper is then run through a drying and re-spooling system. The spools are tagged and returned to inventory, where they await processing at the tuber, in line with the production schedule.
Printing or pre-printing process
Reels of paper for bags are placed on a reel unwinding machine, passed through rollers and then on to printing which may be in as many as eight colors in accordance with customized design and layout. Subsequently, the paper is introduced into a drying and rewinding system. The reels are then identified and returned to stock to await processing in the tuber in line with the production program.
Tuber process
The tuber process begins by placing the reels on the reel unwinding machine. The first sheet may pre-printed or printed directly during this process. Then the paper is processed through rollers for correcting reel positioning for application of glue between the sheets, cut (perforated) and the edge glue applied for forming the tubes. The next step in the manufacturing process is the tube forming table and subsequently the perforating knife to separate the individual tubes. The tubes then proceed along a moving conveyer belt exit table where they are counted and bundled. The tube bundles are then dispatched along automated conveyor belts to the gluer feeder table.
Gluer process
The individual tubes are fed automatically through the creasing and opener stations and tube bottomer unit. The upper and lower bottoms are glued and a filling valve applied in the upper
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bottom layer. The bottoms are then sealed and the product then proceeds for drying and pressing. The bags are counted and stacked in bundles and then go for palletization, which may be manual or automated.
Process of lashing the pallets
In this process, the pallets released for shipment are baled with plastic or according to customer requirements, lashed and send for shipment in accordance with established dates.
b) Characteristics of the distribution process
The Company’s products are exported to more than 50 countries through local representatives, trading companies specialized in paper products and also through direct sales coordinated by an in-house sales team established at the head office in São Paulo. Sales to the domestic market are nationwide. Exports go to Europe, South America, North America, the Middle East, Africa and the Far East. Supply logistics largely involve road transportation to the domestic market and Latin America and by sea to other regions.
FORESTRY
The logistics for delivery of wood to the yards of the Company’s own pulp and paper plants as well as the sale of logs is entirely via road haulage.
PULP
Klabin’s short and long fiber pulp is sold on the domestic and export markets to clients in several segments such as: tissue (toilet paper, paper handkerchiefs, napkins), printing and writing paper (books, newsprint, catalogs), among others. The Company’s fluff pulp is sold both on the domestic as well as the export markets to clients making infant and geriatric diapers, sanitary pads and nonwovens.
The Company currently exports to more than 40 countries, mainly through its São Paulo-based sales team, as well as representative firms and agents, and directly to some clients under global distribution agreements. The logistics of supply is largely via road to the domestic market and Latin America and by sea for other world markets.
PAPER
in the domestic market, Klabin sells to clients in several segments such as: corrugated paperboard, manufacturers of tubettes, makers of abrasives (3M, Saint Gobain) and manufacturers of non-extensive bags. Sales are made through a domestic sales team at the Company’s head office in São Paulo. The Company offers a complete line of papers for corrugated paperboard boxes whether made from virgin fiber such as kraftliner paper and white top liner or papers from recycled fibers used as inner layers or recycled face paper, known as testliner.
Sales to the European market are made on a delivered duty unpaid basis and have the logistical support of an office in Vienna. Shipments are coordinated on a just-in-time basis for all European clients out of this office with the exception of the markets of Greece and Portugal,
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where sales are made CIF port of destination. Sales to the international market are made through local agents, exclusively dedicated to the Company’s products in the leading markets. Some markets are directly served by the commercial team headquartered in Brazil. International clients are basically corrugated paperboard manufacturers.
Coated board sales (reels and sheets) are centered at head office in São Paulo (SP). Global sales are made through the intermediary of proprietary salespersons, sales representatives and trading companies and cover several segments of the coated board packaging industry for consumer products. The competition, also worldwide, involves local producers (from the respective regions covered) as well as international producers (inter-regional). Sales in the domestic market are covered out of the Monte Alegre (in Telêmaco Borba, PR), Angatuba (in Angatuba, SP) plants or to form buffer stocks which can be at different locations according to strategic interest. In the event of need for additional manufacturing (some special finishing), the material in question will be dispatched by the final manufacturer to the end client or to inventory and thereafter to the end client.
Transportation may be via road or rail (for closer destinations and South America) or multi- modal. In 2009, Klabin opened a commercial office in the United States with a view to improving service to clients in that region and to support sales growth.
CONVERSION
(i) Corrugated paperboard boxes and sheets
The sale of the Company’s products both to the domestic and export markets are the responsibility of a proprietary team of salespersons. Commercial offices are located in São Paulo (SP) and in Lages (SC).
The sales of paper packaging (boxes, sheets, corrugated paperboard accessories) take place at the head office in the city of São Paulo (SP). The latter enjoys the support of regional sales offices with nationwide coverage, its own salespersons and commercial representatives. This structure allows Klabin to operate in this highly competitive segment.
Sales almost in their entirety go to the domestic market throughout Brazil and distributed from eight packaging plants in seven states: São Leopoldo (RS), Itajaí (SC), Piracicaba, Jundiaí - Distrito Industrial e Jundiaí - Tijuco Preto (SP), Rio de Janeiro (RJ), Betim (MG), Feira de Santana (BA) and Goiana (PE).
Logistics for supplying the domestic market is largely in the form of overland transportation (road).
(ii) Industrial bags
The distribution of industrial bags is conducted out of the two industrial plants located in Brazil in the cities of Lages (SC) and Goiana (PE), via road throughout Brazil and to some neighboring countries. The Company uses sea transportation to export to other countries in Latin America, Central America, Caribbean and the United States out of the ports of Itajaí and São Francisco,
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both located in the state of Santa Catarina.
The Company serves the Argentine market out of its industrial unit in Pilar, close to Buenos Aires.
c) Characteristics of the chosen market: i) participation in each one of the markets; ii) competitive conditions in the markets
FORESTRY
Klabin sells logs to be made into products for several segments, such as: frames, furniture, packaging, panels and plywood, among others. Products are largely sold to the American, European and Brazilian markets.
Sales are the responsibility of a proprietary sales team based in the states of Paraná and Santa Catarina.
PULP
As the sole producer of long fiber and fluff pulp in Brazil, the Company’s principal aim is the sale of these products to the domestic market, the focus being on infant and geriatric diapers, sanitary pads and producers of nonwovens. The long fiber and fluff market in Brazil is estimated at approximately 400,000 tons. However, long fiber and fluff pulps are also exported to more than 20 countries, in this way leveraging global growth in the market for infant and geriatric diapers.
The world market for short fiber pulp is about 33 million tons and the product is notably sustainable for sanitary requirements (toilet paper, paper towels, napkins), newsprint and writing papers (books, commercial printing, catalogs) and special papers.
PAPER
Kraftliner and white top liner customers both in the domestic and export markets are largely manufacturers of corrugated paperboard boxes. The Company’s clients are suppliers of boxes to several segments, most notably: food products, chemicals and derivatives, fruit and flower growing, poultry farming, beverages, tobacco, metallurgy, fragrances and cosmetics among others.
A large share of Latin-American overseas clients concentrates in the fruit market, notably in Argentina, Chile and Ecuador, the latter being one of the largest banana exporters in the world. The Company’s strategy to focus on these markets reflects that food products, notably fruit, are packaged in papers with no heavy metals, permitting direct contact with food stuffs – a great competitive advantage Klabin enjoys.
The Company has been increasing its exposure to the domestic market using as its main competitive advantage, the offer of products certified for direct contact with food as well as FSC
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certified products.
The Company’s coated board output provides the raw material for carton board packaging for consumer goods of the most varied segments such as food (in natura or processed: dried, fatty, frozen and chilled); electronic and electrical products; utensils in general; personal care and cleansing products; footwear; canned and bottled beverages, parts and equipment; articles of apparel etc.
According to the Brazilian Tree Industry (IBÁ- formerly BRACELPA), the Brazilian coated board market, excluding liquid packaging board, was 586 thousand tons 2020, 542 thousand tons in 2019 and 545 thousand tons in 2018.
CONVERSION
(i) Corrugated Paperboard Boxes and Sheets
Customers for corrugated paperboard operate in all kinds of industrial segments, some of which include: food products, chemicals and derivatives, fruits, flowers, poultry, beverages, tobacco, metallurgy, fragrances and cosmetics, and other. Domestic sales of corrugated paperboard are also driven by meat, poultry, fruit, tobacco and other exporters.
According to information released by the Brazilian Paper Packaging Association (Empapel), formerly the Brazilian Corrugated Paperboard Association (ABPO), shipments of corrugated paperboard boxes and sheets in 2020 were 3.815 million tons, up 5.5% from 2019’s 3.616 million tons. In 2018, shipments of boxes and accessories were 3.546 million tons, up 1.1% from 2017’s 3.507 million tons.
(ii) Industrial bags
The Company operates in several segments, out of which civil construction (cement, lye and caulk) represents approximately 70% of sales by volume. Other segments served include seeds, chemicals, food products, animal feed and minerals.
d) Seasonal effects
FORESTRY
Sales in the forestry segment are subject to no significant seasonality.
PULP
Demand for the pulp output usually trends up as the summer vacations end in the Northern Hemisphere, as well as during the Holidays season.
PAPER
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greatest during the fruit harvest period, beginning around August and lasting through March of the following year. There are basically no seasonal fluctuations for banana exporters. In both markets the third quarter is most active, with a decrease in December and January, with the exception of clients in the fruit growing business. In Europe, the market drops sharply in the summer, beginning in June and proceeding through until August.
Coated board sales are associated with consumer goods of various types, tending to mitigate demand variations over the course of the year, but remain subject to a degree of seasonality. A typical year (ex- economic events and disasters) sees brisker demand in the second half, when consumption is driven by the Holidays seasons
CONVERSION
(i) Corrugated paperboard boxes and sheets
Corrugated paperboard sales are related to consumer goods production, the segment reporting stronger movement in the second half of the year in the run-up to the year-end holiday period. The packaging market is also influenced indirectly by exports of tobacco, fruits, meats and poultry, etc.
(ii) Industrial bags
Cement consumption decreases in the rainy season. In Brazil, the Company’s sales of industrial bags are weakest in January and February. On the other hand, the seed segment shows strongest demand in the months of March and April when seed harvest is at its peak.
e) Principal inputs and raw materials
i) description of the relations with suppliers, including whether they are subject to governmental control or regulations, indicating authorities bodies and the respective applicable law;
Klabin’s relationship with its suppliers is based on a policy of respect and trust. In order to make the process more transparent, the commercial relations are undertaken by the procurement areas focused on: developing new sources of national and international supplies; coordinating the process for electronic purchasing with qualified suppliers; encouraging small and middle market companies to take a greater participation in the mix of suppliers; and to capture synergies with the production sales and logistics areas, among others.
In 2011, the Company set up a Supply Chain Division in the light of its territorial coverage and large number of agreements with suppliers in different locations, the structure responsible for the management and negotiation of the acquisition of products and services necessary for the operations at each unit.
All contracts executed with suppliers are established through a process of ratification in which aspects such as occupational safety, health, legal, commercial, technical, environmental responsibility and financial are assessed. The agreements also carry specific work protection clauses. Among these are aspects such as the prohibition of child and forced labor, child prostitution on the highways and protection of the environment.
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Suppliers are required to substantiate their technical expertise in meeting the Company’s demands in terms of deadlines and volume; supplying when so requested a sample/lot of their products for evaluation; adopting socially responsible practices- such as guaranteeing basic benefits to their employees, providing a safe productive and participative work environment and not using child labor – and demonstrating standards of environmental responsibility. Suppliers should also collaborate in the strengthening of the supply chain, incentivizing free competition and technical visits and permitting technical visits for evaluating the installations, equipment, production processes, etc.
There is no policy to give special preference to purchases from local suppliers. However, the Company endeavors to stimulate greater participation on the part of small and middle market companies. The area also focuses on aspects such as: adopting a process of electronic purchases with qualified suppliers; negotiating corporate agreements and contracts for the supply of raw materials and services, and coordinating and executing the import processes, among others.
The relationship between the Company and its suppliers is generally of a medium and long-term nature. The majority of inputs acquired by the Company carry variable pricing, reflecting the equilibrium between supply and demand in the sectors. Significant increases in demand or sudden restrictions on supply can drive up international prices or vice versa.
Service providers are subject to inspection and audit procedures for substantiating their strict compliance with labor laws and payment of social contributions and labor charges. The inspections include viewing labor documentation and inspecting operations to ensure that working conditions are decent and that there is no evidence of child labor. These procedures guarantee the conditions established for parties contracted by the Company, with employees physically present in the units of the company or any other site which Klabin may determine.
Monitoring of all documentation with respect to the labor relations area may take place at the supplier’s premises with a view to more detailed analysis. Should eventual irregularities be found, the contracting area and the supplies sector are responsible for adopting measures, which include communicating in writing to the supplier on the suspension of payments until the aspects deemed as faults are remedied; and acknowledgment that any reoccurrence shall result in the disqualification as a supplier to the Company. The disqualified company may only be re- contracted with the elapse of two years from the date of contractual rescission. In the event of further irregularities during the period of a new agreement, the supplier will be definitively disqualified.
The relationship with the electric energy concession holders and distributors, and suppliers of gas and fuel oil is subject to the regulations of government authorities (ANEEL, ANP) which set prices and contracted requirements.
ii) any dependence on a few suppliers
Electric energy distribution and transmission through the Brazilian Electricity System is restricted to the companies with a Federal concession in the states where they operate – an example being COPEL (Companhia Paranaense de Energia) in the state of Paraná – and must be used by all consumers nationwide. However, since all Klabin’s productive units are part of the Free Energy Market, they are free to negotiate and purchase all of their electric energy requirements directly with and from generators or traders. This is managed on a matrix basis at the Company. Some dependence on a few suppliers or a concentrated number of suppliers may Page 107 of 348
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also be found in the case of fuel oil or the manufacturers of some products.
iii) any price volatility
Services provided to the Company are covered by medium term agreements and are subject to limited oscillation in values. Price readjustments are made through the medium of periodic negotiations based on agreement and inflation. However, the prices of inputs are subject to greater volatility and determined by the equilibrium between supply and demand in the markets. As a rule, price formation for these products are influenced by GDP, inflation, level of economic activity in Brazil and the world, variation in interest rates, tax burden and the floating of the Real relative to other currencies, as well as natural phenomena which may impact the supply side. The costs of electric power are readjusted periodically following a tariff revision by the concessionaires and eventual charges approved by the government.
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7.4 Important clients (responsible for more than 10% of the Company’s total net revenue): a) Total amount of revenue from the client; and b) Operational segments affected by revenues from the client
On December 31, 2020 one client in the paper segment was responsible for approximately 12% of net revenues, equivalent to BRL 1.4 billion.
On December 31, 2019, one client in the paper segment was responsible for approximately 13% of the net revenue, corresponding to BRL 1.3 billion.
On December 31, 2018, two clients were responsible for approximately 33% of the net revenue, corresponding to BRL 3.3 billion, being 11% (BRL I .08 billion) in the paper segment and 22% (BRL 2.18 billion) in the pulp segment.
The remainder of the Company’s customer base is dispersed such that none of the remaining clients, individually, have a significant share (more than 10%) of the net income from the Company’s sales.
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7.5 Significant effects of state regulation on the Company’s activities:
a) requirement of governmental authorizations to exercise activities and a track record of relationship with government for obtaining these authorizations
The Company requires the following government authorizations for exercising industrial activities:
- Operational License;
- Grant for the use of water when there is withdrawal from rivers and the water table;
-Federal Technical Registration from IBAMA;
-Army Registration Certificate for the units that use products controlled by this entity;
-Federal Police Certificate for the units that use products controlled by this entity; and
-Authorization for transportation and disposal of solid waste.
The Company attempts to adapt its business to the authorities' requirements without harming performance according to the business plan. The Company’s historic relationship with the authorities issuing these documents is transparent and proactive.
b) Company’s environmental policy and costs incurred for compliance with the environmental regulation and, if the case, other environmental practices including adherence to international standards of environmental protection
Sustainability Policy
The Company is a corporation which produces wood, papers and coated boards for packaging, corrugated paperboard packaging and bags. It operates in the domestic and export markets and its operations are conducted on the basis of the following principles of sustainability for all activities with respect to its products and services:
1. Strive for competitive quality to support sustained improvement in its results, researching, developing and continuously refining, processes, products and services, whether existing or new, to meet the expectations of clients, employees, shareholders, the community and suppliers and other stakeholders.
2. Encourage collaboration with clients, suppliers, academia and other stakeholders in the pursuit of innovation in products and processes as well as improvements in the value chain.
3. Ensure the value of the forest base by transforming it into sustainable and competitive products.
4. Ensure the sustainable supply of wood planted for its industrial units without adversely affecting the associated natural ecosystems in both proprietary operations and those of producers under incentive programs.
5. Practice and encourage the recycling of pulp fibers in the production chain.
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waste and atmospheric emissions, always considering these elements when maintaining and improving product processes and when developing and refining products in its forestry and logistics operations and when monitoring critical suppliers with regard to economic, social and environmental aspects.
7. Employ the most efficient and modern engineering technologies and solutions when implementing new projects while ensuring the protection of human health, natural resources and the environment.
8. Encourage the personal and professional growth of its employees and the pursuit of continuous improvement in work, health and safety.
9. Promote a culture based on disseminating ethical values and developing best practices in corporate governance.
10. Observe the United Nations’ Sustainable Development Goals (SDGs) and orient its actions and investments in the strengthening of this agenda, acting proactively to promote social and environmental development in the regions where it operates.
11. Practice social responsibility with a focus on communities where it operates in accordance with the private social investment platform based on the following lines of action: local development and education.
12. Comply with all legislation and regulations applicable to products, the environment, health and safety.
13. Ensure that the Company’s operations seek to constantly reduce greenhouse gas emissions (GHG).
Certification
Klabin was the first Brazilian company to be recognized by the Rainforest Alliance as "Creator of Sustainable Development Tendencies", in the light of the way it manages its forests. The Company’s sustainable management was also instrumental in it becoming the first in the Americas in the pulp and paper sector to receive FSC (Forest Stewardship Council) certification in 1998 for its forests in the state of Paraná. In 2004, the forest plantations in Santa Catarina were also awarded the green seal.
The FSC seal recognizes that the entire packaging production chain from forestry management to paper manufacture and conversion take place in an environmentally correct, social fair and economically viable manner. Certification also guarantees traceability of the raw material along the entire production chain.
Focusing on the multiple and rational use of its forests, Klabin also encourages activities for the sustainable use of their rich natural resources. In 1999, Klabin was the first company in the world to have non-wood forest products certified in the light of its management of medicinal plants and chain of custody phytotherapeutic and phytocosmetic products produced as part of its Phytotherapy Program.
At all units, environmental performance indicators show advances year after year with the implementation of standardized procedures, as in the case of selective trash collection,
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separation of waste, company organization, among others. All employees involved are trained to act preventively and in the control and attendance of environmental emergencies.
The company also has certifications for ISO 22.000, ISO 9001, OHSAS 18.000 norms and from the Isega Institute of Germany.
Biodiversity
The conservation of the biodiversity is one of Klabin’s environmentally responsible practices enshrined in its Sustainability Policy. The results achieved in this field reflect the adoption of the forestry management system in a mosaic formation, interspersing indigenous vegetation with pine and eucalyptus plantations to form ecological corridors. This allows suitable habitats to be maintained for fauna and flora and ensure the maintenance of water-quality and the equilibrium of the ecosystem.
It is thanks to these practices that Klabin was selected for inclusion in the book Exemplary Case Studies in Sustainable Forest Management in Latin America and the Caribbean, published by the United Nations Organization for the Food and Agriculture Organization (FAO). The document contains 35 case studies in 14 different countries from these regions. Klabin is the only Brazilian company highlighted due to the multiuse of wood and non-wood forestry resources. Correct environmental practices together with suitable procedures in the management of the landscape ensures the exploitation of the productive potential of the Company’s forests with the protection of their natural resources.
Monitoring
Since the beginning of its activities, Klabin has been working to identify and monitor the biodiversity of its forests, based on the identification of species either rare or threatened with extinction on lists such as those of the International Union for the Conservation of Nature (IUCN) and the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA). The work of mapping and preserving the ecosystems is based on the regulations of environmental bodies and is executed in partnership with research institutes. It covers different species of animals (mammals, birds, reptiles, amphibians, insects, among others) and studied for understanding the dynamic and relations with their habitats. The results of these analyses permit the use of sustainable management models.
In parallel with these monitoring activities, different procedures and programs are adopted to protect these areas, such as:
Non-performance of activities in adjacent production areas that would impact the preserved areas (e.g.: avoiding erosion and silting of preserved areas, not using river banks and not felling planted trees). Controlled use of chemicals preventing risks to protected areas.
In December 2020, the Company had 564 thousand hectares of land, of which 266 thousand hectares were planted forests of pine and eucalyptus, 243 thousand hectares of preserved native forests, 17 thousand hectares of unplanted areas, and 37 thousand hectares divided into roads, dividers, structures among others.
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All planted wood is subject to a process of mechanized harvesting, thus ensuring better productivity, reliability and safety, with lower losses and reduced cost.
With the operational startup at the Puma Unit in 2016, Klabin handled 14 million tons that year, between wood logs which are sold to saw mills, pine and eucalyptus chips for the manufacture of pulp and paper, as well as waste for the production of energy at Klabin’s factories.
The Company is aware of the importance of maintaining the biodiversity for preservation of natural life, and adopts strategic policies to monitor and preserve the various species of plants and animals in its indigenous forests. In this context, a Natural Heritage Private Reserve (RPPN) is installed at Fazenda Monte Alegre in Telêmaco Borba (PR) with an area of 3,852 hectares and in the state of Santa Catarina, the Serra da Farofa Complex with an area of 4,920 hectares.
Through continual monitoring, diagnoses are undertaken for verifying the quantity and quality of populations, threatened species and habitats as well as tracking of emissions and corrective actions in the event of any divergence. An annual management plan is prepared for the forestry units to include biodiversity data based on the surveys and aimed at reducing the negative impacts and expanding the positive ones, as well as the restoration of areas for improving environmental conditions of the indigenous forest reserves, enhancing resources for the fauna and flora. Among the procedures adopted for example is the avoidance of any activity of impact in productive areas adjacent to preserved areas.
c) Dependence on patents, trademarks, licenses, concessions, franchises, significant royalty agreements for the development of its activities.
The Company is not dependent on its trademarks, patents, licenses, concessions, franchises and royalty agreements.
For additional information on the Company’s trademarks and patents, see item 9.l(b).
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7.6 Information on countries in which the issuer generates substantial revenue:
a) Revenue arising from clients in the country in which the Issuer is headquartered and their share in the issuer’s total net revenue
The Company's revenue from clients in the Brazilian market was BRL 6.9 billion in the fiscal year 2020, whose share in the Company's total net revenue was 59%. In 2019, the Company's revenue from clients in the Brazilian market was BRL 6.1 billion, whose share in total net revenue of the Company was 60%. In 2018, the Company's revenue from customers in the Brazilian market was BRL 5.5 billion, whose share of the Company's total net revenue was 55%.
b) Revenue arising from clients in each country and their share in the Company’s total net revenue:
The Company’s revenues from export customers were BRL 4.9 billion in fiscal de 2020, for a 41% share of total net revenues. In 2019, the Company’s revenues from export customers were BRL 4.2 billion, for a 40% share of total net revenues. In 2018, the Company’s revenues from export customers were BRL 4.5 billion, for a 45% share of total net revenues.
c) Total revenue arising from countries and their share of the Company’s total net revenue
The table next shows the breakdown of net revenues from customers in fiscal years 2020, 2019 and 2018 by export country.
Consolida t ed 1/1 t o 31/12/2020 T ot a l rev enu e % of t ot a l net Cou nt ry (R$ /m illion) rev enu e Ch in a 1 ,3 7 4 1 1 .5 % A r gen tin a 6 3 4 5 .3 % Ita ly 3 5 2 2 .9 % Sin ga por e 2 3 8 2 .0% United Arab Emirates 1 8 1 1 .5 % South Africa 1 2 2 1 .0% Ger m a n y 1 07 0.9 % Tu r key 1 03 0.9 % Fr a n ce 1 01 0.8 % Oth er s 1 ,7 4 2 1 4 .6 % 4,954 41%
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Consolida t ed 1/1 t o 12/31/2019
% of t ot a l net T ot a l rev enu e rev enu e Cou nt ry (R$ /m illion) Austria 9 2 8 9 .0% United States 697 6 .8 % Ch in a 558 5 .4 % A r gen tin a 447 4 .4 % Ita ly 2 1 1 2 .1 % Sin ga por e 1 3 1 1 .3 % Mex ico 84 0.8 % Saudi Arabia 83 0.8 % Ecu a dor 77 0.7 % Oth er 942 9 .2 % 4,158 40%
Consolida t ed 1/1 t o 12/31/2018 T ot a l rev enu e % of t ot a l net Cou nt ry (R$ /m illion) rev enu e Austria 2 ,5 7 0 5 7 .3 % A r gen tin a 5 2 5 1 1 .7 % Ch in a 2 4 9 5 .6 % Ecu a dor 91 2 .0% Ita ly 85 1 .9 % Mex ico 80 1 .8 % Sin ga por e 73 1 .6 % Colom bia 71 1 .6 % Pa kista n 61 1 .4 % Oth er 6 7 8 1 5 .1 % 4,483 45%
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7.7 Regulation of the countries in which Company generates significant revenues and influence on the businesses of the Company:
The Company exports to more than 80 countries and is subject to regulations in these jurisdictions. The authorities responsible for the countries to which the Company exports its products may revise the prevailing rules and regulations and alter the terms and conditions of the licenses awarded to the Company and/or its subsidiaries to which the Company must adhere. The adherence to these regulations may require that the Company incur operational expenses and additional capital which may be significant. To ensure compliance with the existing laws, rules and regulations, the Company should periodically replace, repair or update the installations, existing equipment or material, which may mean the Company incurring additional capital.
In addition, Brazilian exporters are being increasingly affected by measures on the part of importing countries to protect local producers. The competitive nature of Brazilian companies has meant some countries introducing commercial barriers to limit market access of Brazilian companies to their markets or even to subsidize local producers. Some countries impose import quotas on products from Brazil and delays in allocating such quotas or changes in the legislation or policies related to these quotas may adversely affect the Company’s exports.
Klabin’s industrial bags factory in Argentina is registered and regulated by organs covering the environment, labor laws, tax regime and labor unions and has been complying with all legal requirements, there being no barriers preventing normal operations.
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7.8. Social and environmental policies
1. Public sustainability report or similar document?
The Company publishes its Sustainability Report annually. The publication includes information and data on the Company’s operations and results as well as a description of the management practices adopted to achieve them and the outlook. The sustainability report incorporates the SDGs (Sustainable Development Goals).
a. Methodoly
The Sustainability Report has been prepared on the basis of the GRI - Global Reporting Initiative guidelines since 2010.
b. Audited by third parties
The Sustainability Report is verified by an independent entity and the numbers are in line with the Company’s financial statements, published annually in the Management Report.
c. External disclosure link
http://ri.klabin.com.br/en/
2. Does the Company have a Social and Environmental Policy?
Klabin has a Sustainability Policy which provides a framework for its practices in relation to social and environmental responsibility.
a. External disclosure link
https://rs.klabin.com.br/?lang=en
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7.9. Other relevant information:
Management of sustainability
Klabin maintains a structure dedicated to sustainability management led by a Corporate Unit made up of four areas: Sustainability Governance, Environmental Responsibility, Ecological Park and Social Responsibility.
In addition, there is a Sustainability Management Committee made up of five managers of strategic areas covering ESG themes. Its mission is the pre-analysis of sustainability-related themes for subsequent submission and validation by the Permanent Sustainability Commission. The latter is made up of officers from five areas and a responsible technician all with the role of establishing guidelines and assessing the need for investments and prioritizing initiatives, submitting topics for analysis and final approval by the Executive Board.
Recognition in Sustainability
In 2020, Klabin’s sustainability practices were once again recognized domestically and internationally. A highlight has been the Company’s Dow Jones Sustainability Index’s Global and Emerging Market listings. Klabin is the only Brazilian company on the global portfolio. The index evaluates and recognizes world-leaders in ESG (environmental, social and governance) performance.
In addition, our sustainability-oriented practices are recognized by the Company’s long-standing presence in indices and rankings such as B3’s Corporate Sustainability Index – ISE (since 2014), which lists the shares of companies that stand out for their high level of commitment to business and national sustainability, and its 90.3% environmental performance score according to the 2019 Environmental Paper Company Index (EPCI) – held biannually by the WWF, for the fourth consecutive year.
Klabin is a component of the CDP’s A-List for water and forest management programs, with leading performance in the climate change program. This achievement places Klabin among the companies that the institution highlights as leaders of the transition to the new sustainable economy. The initiative analyzes and recognizes efforts of companies around the world to manage the environmental impacts of their activities. In 2020, the evaluation methodology involved 515 with more than US$ 106 trillion in total assets.
The Company also placed high for the third consecutive time in the Spott Timber & Pulp rankings, which evaluate the soundness and transparency of sustainability management on the part of 50 wood and pulp producers worldwide. The Company placed first in the global ranking of paper and pulp companies.
Also in 2020, Klabin maintained its status as a Best Emerging Markets Performer according to Vigeo Eiris, a global provider of environmental, social and governance research and services, which evaluates the performance of emerging market companies on several criteria broken down into six areas: environment, human rights, human resources, community outreach, business behavior, and corporate governance.
Learn more about these and other awards and recognitions earned in 2020 at Klabin’s Website: https://klabin.com.br/nossa-essencia/reconhecimentos/
Social Programs
In the social area, Klabin implements and supports programs aligned with its social investment
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platform, which focuses on local development, education and culture, and aims to create a positive socio-environmental impact and leverage the economy of the communities in which it operates.
In 2020, the Company invested more than BRL 24.9 million i socio-environmental and cultural programs such as:
• community projects and actions in the areas of education management, public management, regional planning, and sustainable development agenda preparation;
• skills-building and income generation actions on behalf of small farmers and communities;
• environmental monitoring, conservation and education projects;
• cultural support and popularization initiatives.
KLABIN EDUCAÇÃO
Klabin’s actions on the education front include initiatives to foster education, sports and citizenship. The projects focus on training for teachers and students at all levels (children’s, basic, middle, trade, and off-shift) and improving school infrastructure. Some illustrative projects include Semeando Educação and the actions of Terra Viva Associação de Voluntários da Klabin, which stimulate volunteering among Klabin’s employees.
Klabin Semeando Educação Project
The program provides consulting services for principals, educators and teachers in 31 public state schools, sharing methods, best practices and tools to improve school management indicators, including leadership training and increased participation of the school community. It takes place in the municipalities of Telêmaco Borba, Ortigueira and Imbaú, in the state of Paraná, and has the support of consultancy firm Falconi and Klabin employees acting as facilitators. The program was created in 2017 and has since provided training to more than 140 school managers, benefitting over 11 thousand students.
After producing good results in the state public education network, the program was extended to municipal schools as well. In its new phase, the initiative is expected to serve 11 thousand students aged zero to 10 years old, and a thousand teachers from 65 schools in the urban and rural areas of the three municipalities.
Terra Viva
Terra Viva Associação de Voluntários da Klabin is a non-profit organization formed in 2003 that has since organized and promoted citizenship and solidary actions supported by employees and their family members. Projects may be one-off, such as rallies for winter clothing, food, milk, blood donations, associated with celebratory dates, or educational, as illustrated by guidance on first-job seeking, technical and creativity lessons such as guitar, languages, information technology and more. The publics served go from socially vulnerable or special- needs children and youths to the elderly.
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KLABIN FOR LOCAL DEVELOPMENT
Klabin believes in the economic, social and cultural empowerment of communities as a means towards the development of the locations where it operates. Its social investment initiatives strengthen each region’s skills, knowledge and potential. Highlights include the Community Development Forums and the Legal Forests and Planning Sustainable Properties (Social Forests) as well as Meliponiculture and Bee Keeping.
Community Forums
The Community Development Forum project began in 2015 in the cities of Correia Pinto and Otacílio Costa, state of Santa Catarina. Since then, the Forum Program has been expanded to new areas where Klabin has operations.
In 2019, we set up the Local Development Forum of Angatuba (SP), continued our activities in Goiana (PE) as well as holding meetings in Otacílio Costa and Correia Pinto (SC). The proposal is to involve a range of different actors from organized civil society, among them Klabin, so that all can work together for designing a new land management model by discussing solutions for local issues. The initiative has been fined tuned using the Social Progress Index (SPI), a methodology for measuring quality of life in a given region, independently of economic development. See more on the indicators in the website www.progressosocial.org.br.
Legal Forests
This initiative is a partnership with the Association for Preservation of the Environment and Life (Apremavi) and involves planning of rural property, conservation, environmental education and forest development in the states of Paraná and Santa Catarina. Small and midsized property owners receive guidance on the most efficient, profitable and environmentally-friendly ways to operate. Producers take courses, conduct community support actions, make visits to exchange knowledge and receive free native seedlings. The program also encourages silviculture with forest plantations, both pine and eucalyptus as well as indigenous species; the enriching of secondary forests; the restoration of riparian forests, supporting the conservation of water resources; organic farming and ecotourism.
Social Forests - Planning Sustainable Properties
The Social Forests project helps small rural producers in 10 municipalities in the state of Paraná to obtain Rural Environmental Registration and in the sustainable planning of the use of their properties. The initiative also encourages family farming, prevents rural depopulation, the development of the regional production and consumption chain and fosters entrepreneurship. The project is run in partnership with the Micro and Small Company Support Service (Sebrae), the international The Nature Conservancy (TNC) organization and Aprernavi. The Social Forest project has already helped more than 500 rural property owners over its five-year existence.
Bee Keeping and Meliponiculture
Through this program, which began in 2005, Klabin grants use of its forests to the families of small and medium sized farmers for beekeeping. In addition to increasing household income,
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the program benefits biodiversity and ecosystem conservation as the bees pollinate the plants, improving the productivity of other cultures. Since the outset of the Program, a total of 178.7 tons of honey has been produced and sold.
Regional Development Guidelines
Supported on the economic, social, environmental and educational pillars, the Regional Development Guidelines (DDR) are designed as guidance of the 12 municipalities affected by the Puma Unit’s operations in Paraná for the improvement of indicators and to instruct the best use of resources.
Strategic government plans and other initiatives supporting municipal government management, particularly in education –still at a development stage – are some of the products aimed at sustainable regional development being proposed by Klabin. The initiative began in 2017.
Guidelines include appreciation of family farming and regional tourism, water and sanitation provision actions, health, construction of housing and road improvements as well as education. Management of the DDRs is conducted on a collegiate basis through the combined efforts of the municipalities, optimizing demands on the basis of an overview of the entire territory.
KLABIN AMBIENTAL
On the Environmental Education front, Klabin runs projects for teachers and students in local communities for raising ecological awareness, promoting respect for the environment and for the conservation of the biodiversity. Notable are the Caiubi, Environmental Protectors, Growing Up, Ecological Park projects and the Conservation of the Private Natural Heritage Reserves Program (RPPN).
Caiubi Program
The program trains municipal education teachers in the states of Paraná and Santa Catarina, with the support of municipal governments, institutions and professional partners, to raise ecological awareness and contribute to the formation of citizens aware of their responsibilities to the environment. A total of 442 schools and more than 1,200 teachers and nearly 160 thousand students have all benefited from this program since 2007.
Environmental Protectors
Theoretical and practical training provided to elementary school students on nature preservation, environmental law, aspects of the local wildlife and plant life, first aid, civics, morals and ethics as a means to train environmental education multipliers. Held by the Santa Catarina State Environmental Policy, the program has had Klabin’s support since 2005. It has since benefitted more than 600 teenagers 11-14 years old in several municipalities where the company operates in Santa Catarina.
Força Verde Mirim
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The project began in 2014 in Telêrnaco Borba (PR) and fosters environmental education and initiatives for raising the awareness on the environment and on the importance of conserving the natural riches. Since its inception, the program has been used to train 346 fourth and fifth elementary grade students in municipal schools.
Growing Up Project
We provide continued education for direct and indirect employees on matters related to the environment, health, household management, quality of life and professional growth, among others. The Project is being run in Santa Catarina and Paraná, and serves 4 thousand and 6,304 people respectively, including own and third-party employees in various positions.
Ecological Park
Established in the 1980s in Fazenda Monte Alegre (PR), the Klabin Ecological Park has an area of 11 thousand hectares, 71% of which are natural forests. Activities include biodiversity conservation, wildlife rehabilitation, protection of threatened species, scientific research and support to environmental education projects.
CULTURAL KLABIN
Klabin’s initiatives to foster cultural development through artistic expression include those of the Vera Lafer Cultural Center, such as the Singing Girls, the Right Step, Our Digital Language and the Decolar Project, together with the projects under the auspices of the Ema and Eva Klabin foundations.
Klabin’s Singing Girls
Created in 2004 at the Monte Alegre Unit and extended to the Puma Unit in 2017, both in the state of Paraná, Klabin’s Singing Girls is a group made up of the daughters of employees and young girls from the Telêmaco Borba and Ortigueira community aged 7 and upwards. The project offers choral singing and teaches the basic principles of musical theory, rhythm and vocal techniques.
Right Step
Formed in August 2008 at the Monte Alegre Unit in partnership with Studio 3 Cia. de Dança and later extended to the Puma Unit in 2017, the program offers a program of contemporary dance and capoeira for six-year old’s and upwards - children and adolescents of the Company’s employees as well as siblings of residents in the Telêmaco Borba and Ortigueira communities.
Our Digital Language
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the Telêmaco Borba (PR) community. It employs new information and communication technology and uses technology for introducing themes such as identity, sexuality, the environment, citizenship, narcotics, among others.
Initiatives in combat of COVID- 19
Since the beginning of the pandemic, the Company has actively worked on prevention measures to control the spread of Coronavirus (COVID-19) among its employees and the community. Besides the reinforcement of the hygiene protocol and the propagation of pertinent information in its official communication channels, Klabin remains aligned with the guidelines of the World Health Organization (WHO), adopting several measures, including the cancellation of travels, implementation of medical and monitoring committees in all of its units, flexibilization of the routine and management of remote work, adoption of alternate shift system and individualized food service.
Additionally, and aiming to extend these prevention measures, on March 23 the Company announced the temporary demobilization process of professionals involved in the civil construction and assembly works of Project Puma II which had, by the time, approximately 4,500 professionals on site. In mid-April, the Company began the gradual reintegration of some of these professionals, most of them residents of the state of Paraná. By reinforcing sanitary protocols and implementing several measures to tighten up hygiene conditions, the full reestablishment of the works and their professionals is still subject to evaluation in the coming weeks of COVID-19's epidemiological scenario, especially in the regions near the site.
All these initiatives, which aim to ensure the safety of its employees and prioritize the health and well-being of all, ensure also the maintenance of the operational activities of Klabin, the largest producer and exporter of packaging paper in the country, to ensure the production of containers that fill, protect, store and transport items of prime necessity, important for the population, especially in the segments of industrialized and fresh food (milk, protein, wheat flour, fruit, frozen and other kinds); of personal and medical hygiene (baby and geriatric diapers, sanitary pads for hospital beds, paper towels and toilet paper); and cleansing products (detergents, sanitizers, alcohol, among others). It is worth noting that Klabin has approximately 80% of its total production directed to the food, hygiene and cleansing segments, considered of prime necessity. It is also the only producer of fluff pulp in Brazil, a primary material for the production of disposable diapers.
From March to December 2020, we donated over BRL 15 million to mitigate the impacts of Covid-19. The funds were allocated to relief for more than 30 municipalities in 10 states where Klabin is present, showing, as goes the campaign’s motto, that “every attitude counts”. Actions took place on three fronts: health, social work, and income generation for workers in vulnerable industries.
Some noteworthy initiatives include:
an innovation developed at our technology center, where we produced hand sanitizing gel with micro fibrillated cellulose (MFC), a wood derivative that replaces carbo-mer, a fossil input that is not produced in Brazil. Four tons of hand sanitizer were produced and packaged in exclusive containers made from Klabin kraft paper for delivery to healthcare institutions; In partnership with the Government of the State of Paraná and the City Hall of Telêmaco Borba, Klabin began the civil construction retrofitting for the installation of ICU beds and infirmary beds for a Campaign Hospital in Paraná, which will provide exclusive are to Coronavirus patients from seven municipalities in the region; Participation of the Saving Lives Campaign, together with the Brazilian Development Bank Page 123 of 348
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(BNDES), for delivery of supplies and equipment such as masks, gloves and lung ventilators to philanthropic hospitals and charitable hospitals. Klabin is part of the Federal Government consortium together with other companies to manufacture 6.5 thousand Magnamed ventilators, which will significantly increase domestic availability of the device; Donation of approximately 100,000 hospital and hygiene items and more than 400,000 corrugated packages for shipment of food and hygiene products to hospitals, entities, institutions and communities throughout Brazil. Donations to the 'Pimp My Carroça' organization, which will generate minimum income for recyclables scavengers nationwide; Donation of 4 tons of paper to produce disposable cups for major hospitals.
Through measures to prevent and fight the effects of the COVID-19 pandemic, Klabin reinforces its commitment to the well-being of its teams, their families and society at large. Finally, the Company emphasizes the commitment of its employees, especially those who are in forestry and manufacturing operations, spearheading production of key items for the country’s basic supply chain
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8.1. Extraordinary businesses:
There was no significant acquisition or sale in the periods that do not classify as a normal operation in the businesses of the Company.
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8.2. Significant changes in the conduct of the Issuer’s Businesses
There were no significant changes in the conduct of the Company’s businesses.
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8.3. Significant agreements executed by the issuer and its Subsidiaries not Directly Related to its Operational Activities
No significant agreements were reached by the Company and its Subsidiaries not directly related to its operational activities.
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8.4. Other relevant information- extraordinary businesses
There is no other relevant information on this item "8".
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9.1. Non-current assets of relevance to the Company’s activities:
Non-current assets of relevance to the Company’s activities are chiefly made up of its fixed assets and biological assets.
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9.1 - Relevant Non-Current Assets /9.1.a - Fixed Assets
Property Fixed asset description Country State Municipality type Otacílio Industrial Complex- Paper Mill Brazil SC Own Costa Industrial Complex- Pulp Mill Brazil PR Ortigueira Own Industrial Complex- Conversion Plant Brazil PR Rio Negro Own Industrial Complex- Conversion Plant Brazil AM Manaus Own Parcels of land totaling 11.541 hectares, with 7.141 Brazil SC Own hectares of planted forests Feira de Industrial Complex- Conversion Plant Brazil BA Own Santana Industrial Complex- Conversion Plant Brazil SP Jundiaí Own Industrial Complex- Paper Mill Brazil SP Angatuba Own Industrial Complex- Paper Mill Brazil SC Correia Pinto Own Industrial Complex- Conversion and Recycled Brazil PE Goiana Own Products Plant Industrial Complex- Conversion Plant Brazil SC ltajaí Own Industrial Complex- Conversion Plant Brazil RS São Leopoldo Own Argentin Industrial Complex- Conversion Plant Own a Parcels of land totaling 4,547 hectares, with 1,815 Brazil SP Own hectares of planted forests Parcels of land totaling 4,245 hectares, with 2,891 Brazil SP Leased hectares of planted forests Parcels of land totaling 99,290 hectares, with 40,641 Brazil SC Own hectares of planted forests Parcels of land totaling 25,574 hectares, with 8,677 Brazil SC Leased hectares of planted forests Parcels of land totaling 297,100 hectares, with 152,389 Brazil PR Own hectares of planted forests Parcels of land totaling 58,943 hectares, with 18,166 Brazil PR Leased hectares of planted forests Telêmaco Industrial Complex- Paper Mill Brazil PR Own Borba Industrial Complex- Conversion Plant Brazil SP Jundiaí Own Industrial Complex- Conversion and Recycled Brazil SP Piracicaba Own Products Plant Industrial Complex- Conversion Plant Brazil MG Betim Own Industrial Complex- Conversion Plant Brazil SP Paulínia Own Franco da Industrial Complex- Conversion Plant Brazil SP Own Rocha Industrial Complex- Conversion Plant Brazil SP Suzano Own Industrial Complex- Conversion Plant Brazil AM Manaus Own Industrial Complex- Conversion Plant Brazil GO Rio Verde Own
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9.1 - Relevat Non-Current Assets /9.1.b –Intangible Assets
Asset Asset Duration Events that may cause rights loss Consequence of rights loss type description "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 01 consequently have great difficulty preventing third parties Brands 03/11/2028 owed to the INPI is required to prevent registration 822647753 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 01 consequently have great difficulty preventing third parties Brands 01/22/2028 owed to the INPI is required to prevent registration 822848295 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 04 consequently have great difficulty preventing third parties Brands 03/11/2028 owed to the INPI is required to prevent registration 822647745 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 04 consequently have great difficulty preventing third parties Brands 07/08/2028 owed to the INPI is required to prevent registration 822906139 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 06 consequently have great difficulty preventing third parties Brands 03/11/2028 owed to the INPI is required to prevent registration 822647737 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 06 consequently have great difficulty preventing third parties Brands 02/13/2027 owed to the INPI is required to prevent registration 822928442 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services.
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Asset Asset type Duration Events that may cause rights loss Consequence of rights loss description "K" Figurativa End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees NCL(7) 07 would consequently have great difficulty preventing Brands 07/22/2028 owed to the INPI is required to prevent registration 822703653 third parties from using identical or similar brands to expiration and, thereby, loss of the holder’s rights. (BRAZIL) identify even competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees NCL(7) 07 would consequently have great difficulty preventing Brands 07/01/2028 owed to the INPI is required to prevent registration 822928450 third parties from using identical or similar brands to expiration and, thereby, loss of the holder’s rights. (BRAZIL) identify even competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees NCL(7) 16 would consequently have great difficulty preventing Brands 07/22/2028 owed to the INPI is required to prevent registration 822703688 third parties from using identical or similar brands to expiration and, thereby, loss of the holder’s rights. (BRAZIL) identify even competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees NCL(7) 16 would consequently have great difficulty preventing Brands 01/22/2028 owed to the INPI is required to prevent registration 822848287 third parties from using identical or similar brands to expiration and, thereby, loss of the holder’s rights. (BRAZIL) identify even competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees NCL(7) 17 would consequently have great difficulty preventing Brands 07/22/2028 owed to the INPI is required to prevent registration 822703661 third parties from using identical or similar brands to expiration and, thereby, loss of the holder’s rights. (BRAZIL) identify even competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees NCL(7) 17 would consequently have great difficulty preventing Brands 01/22/2028 owed to the INPI is required to prevent registration 822881667 third parties from using identical or similar brands to expiration and, thereby, loss of the holder’s rights. (BRAZIL) identify even competing products and/or services.
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Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset Duration Events that may cause rights loss Consequence of rights loss type description "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 19 consequently have great difficulty preventing third parties Brands 06/24/2028 owed to the INPI is required to prevent registration 822647761 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 19 consequently have great difficulty preventing third parties Brands 03/11/2028 owed to the INPI is required to prevent registration 822946009 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 31 consequently have great difficulty preventing third parties Brands 07/22/2028 owed to the INPI is required to prevent registration 822700042 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 31 consequently have great difficulty preventing third parties Brands 03/11/2028 owed to the INPI is required to prevent registration 822945991 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 36 consequently have great difficulty preventing third parties Brands 06/24/2028 owed to the INPI is required to prevent registration 822647770 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services. "K" Figurativa End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees NCL(7) 36 consequently have great difficulty preventing third parties Brands 03/11/2028 owed to the INPI is required to prevent registration 822887169 from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. (BRAZIL) competing products and/or services.
Page 133 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees "K" Figurativa NCL(7) 37 would consequently have great difficulty preventing Brands 03/11/2028 owed to the INPI is required to prevent registration 822947129 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees "K" Figurativa NCL(7) 39 would consequently have great difficulty preventing Brands 11/11/2028 owed to the INPI is required to prevent registration 822948648 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees "K" Figurativa NCL(7) 42 would consequently have great difficulty preventing Brands 09/30/2028 owed to the INPI is required to prevent registration 822700026 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees "K" Figurativa NCL(7) 42 would consequently have great difficulty preventing Brands 03/11/2028 owed to the INPI is required to prevent registration 822647788 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees "K" Figurativa NCL(7) 42 would consequently have great difficulty preventing Brands 03/11/2028 owed to the INPI is required to prevent registration 822948630 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees "K" Figurativa NCL(7) 39 would consequently have great difficulty preventing Brands 07/22/2028 owed to the INPI is required to prevent registration 822700034 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 134 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type CARTÃO KRAFTLINER End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees MASTER Nominativa would consequently have great difficulty preventing Brands 09/19/2025 owed to the INPI is required to prevent registration 16/10 817382925 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. End of exclusive rights to the brand. The Company EUKALINER Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands 16/10 811508560 08/13/2025 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees EUKALINER 1276679 would consequently have great difficulty preventing Brands 19/06/2024 owed to the INPI is required to prevent registration (FRANCE) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees EUKALINER 1574546 would consequently have great difficulty preventing Brands 01/08/2024 owed to the INPI is required to prevent registration (ITALY) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees EUKALINER 1220791 would consequently have great difficulty preventing Brands 14/06/2025 owed to the INPI is required to prevent registration (UNITED KINGDOM) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 01/15/2028 owed to the INPI is required to prevent registration NCL(7) 01 824135849 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services.
Page 135 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type K KLABIN - Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would HORIZONTAL Mista protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 01/15/2028 NCL(7) 01 824134834 to prevent registration expiration and, from using identical or similar brands to identify even (BRAZIL) thereby, loss of the holder’s rights. competing products and/or services. K KLABIN - Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would HORIZONTAL Mista protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 03/11/2028 NCL(7) 04 824134850 to prevent registration expiration and, from using identical or similar brands to identify even (BRAZIL) thereby, loss of the holder’s rights. competing products and/or services. K KLABIN - Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would HORIZONTAL Mista protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 03/11/2028 NCL(7) 04 824135857 to prevent registration expiration and, from using identical or similar brands to identify even (BRAZIL) thereby, loss of the holder’s rights. competing products and/or services. K KLABIN - Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would HORIZONTAL Mista protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands NCL(7) 06 824134842 to prevent registration expiration and, from using identical or similar brands to identify even (BRAZIL) 02/10/2029 thereby, loss of the holder’s rights. competing products and/or services. K KLABIN - Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would HORIZONTAL Mista protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands NCL(7) 06 824135865 to prevent registration expiration and, from using identical or similar brands to identify even (BRAZIL) 07/22/2028 thereby, loss of the holder’s rights. competing products and/or services. K KLABIN - Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would HORIZONTAL Mista protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 03/11/2028 NCL(7) 07 824134877 to prevent registration expiration and, from using identical or similar brands to identify even (BRAZIL) thereby, loss of the holder’s rights. competing products and/or services.
Page 136 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 03/11/2028 owed to the INPI is required to prevent registration NCL(7) 07 824135873 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 07/21/2025 owed to the INPI is required to prevent registration NCL(7) 16 824135881 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 09/26/2027 owed to the INPI is required to prevent registration NCL(7) 17 824135890 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 03/11/2028 owed to the INPI is required to prevent registration NCL(7) 19 824134893 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 03/11/2028 owed to the INPI is required to prevent registration NCL(7) 19 824135962 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 03/11/2028 owed to the INPI is required to prevent registration NCL(7) 31 824134907 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services.
Page 137 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 03/11/2028 owed to the INPI is required to prevent registration NCL(7) 31 824135954 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 04/12/2021 owed to the INPI is required to prevent registration NCL(7) 37 824135938 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 04/12/2021 owed to the INPI is required to prevent registration NCL(7) 36 824135946 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 04/12/2021 owed to the INPI is required to prevent registration NCL(7) 36 824134915 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLAMULTI Norminativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands 16 TMA808525 07/10/2026 owed to the INPI is required to prevent registration third parties from using identical or similar brands (CANADA) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 06/10/2028 owed to the INPI is required to prevent registration NCL(7) 39 824134931 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services.
Page 138 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 07/22/2028 owed to the INPI is required to prevent registration NCL(7) 39 824135920 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 06/10/2028 owed to the INPI is required to prevent registration NCL(7) 42 824135911 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. K KLABIN - End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees HORIZONTAL Mista would consequently have great difficulty preventing Brands 03/11/2028 owed to the INPI is required to prevent registration NCL(7) 42 824134940 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. (BRAZIL) to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 01 01/15/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133315 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Norminativa 16 would consequently have great difficulty preventing Brands 15/05/2028 owed to the INPI is required to prevent registration 1044198 (MÉXICO) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 04 03/11/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824132203 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 139 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 04 03/11/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133307 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 06 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133293 (BRAZIL) expiration and, thereby, loss of the holder’s rights. 02/10/2029 to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 06 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824132220 (BRAZIL) expiration and, thereby, loss of the holder’s rights. 02/10/2029 to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 07 03/11/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824132211 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 07 03/11/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133277 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 16 02/24/2025 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824132238 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 140 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 16 02/24/2025 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133285 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 19 03/11/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824132254 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 19 03/11/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133250 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 31 03/11/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824132262 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 31 03/11/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133242 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 36 04/05/2021 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824132289 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 141 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 36 04/05/2021 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133234 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Norminativa 16 would consequently have great difficulty preventing Brands 06/27/2028 owed to the INPI is required to prevent registration 36 246629 (NORWAY) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 39 10/06/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824132270 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 39 10/06/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133218 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 42 11/03/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824132300 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company K KLABIN - VERTICAL Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista NCL(7) 42 11/03/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 824133200 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 142 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would KAPAKRAFT NEVADO protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands Nominativa 20/35 6761372 09/25/2028 to prevent registration expiration and, from using identical or similar brands to identify even (BRAZIL) thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would KAPAKRAFT NEVADO protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands Nominativa NCL(8) 16 09/10/2027 to prevent registration expiration and, from using identical or similar brands to identify even 825738539 (BRAZIL) thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would KAPATEST Nominativa protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 09/04/2023 16/10 817107223 (BRAZIL) to prevent registration expiration and, from using identical or similar brands to identify even thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would KLA SET Nominativa protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 03/14/2029 16/10 812296214 (BRAZIL) to prevent registration expiration and, from using identical or similar brands to identify even thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would KLABIN Nominativa 16/10 protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 10/04/2026 6275346 (BRAZIL) to prevent registration expiration and, from using identical or similar brands to identify even thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would KLABIN Nominativa protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 04/20/2025 2746286 (ARGENTINA) to prevent registration expiration and, from using identical or similar brands to identify even thereby, loss of the holder’s rights. competing products and/or services.
Page 143 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company KLABIN DO PARANÁ Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Nominativa NCL(8) 31 10/27/2021 owed to the INPI is required to prevent registration third parties from using identical or similar brands 730082750 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLABIN EXPORT Mista Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(7) 01 824137485 01/15/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLACE Nominativa 1/60 would consequently have great difficulty preventing Brands 10/11/2022 owed to the INPI is required to prevent registration 815544065 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLACE Nominativa 16/10 would consequently have great difficulty preventing Brands 12/26/2025 owed to the INPI is required to prevent registration 815544081 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLACELL Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands 16/10 815545037 09/29/2022 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLACELL Nominativa would consequently have great difficulty preventing Brands 09/02/2023 owed to the INPI is required to prevent registration 1/60 815545029 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 144 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company KLAFOLD Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(9) 16 829523553 02/23/2030 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLAFOLD Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands 6778328 (EUROPEAN 03/25/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands COMMUNITY) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLAFOLD BF Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(9) 16 829473483 02/23/2030 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLAFOLD FZ Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(9) 16 829473440 02/23/2030 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLAMULTI Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(9) 16 829523480 02/23/2030 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLAMULTI Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands 3621734 (UNITED 05/19/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands STATES) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 145 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands 05/16/2028 owed to the INPI is required to prevent registration 1045082 (MÉXICO) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands 06/12/2028 owed to the INPI is required to prevent registration 246361 (NORWAY) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands 03/25/2028 owed to the INPI is required to prevent registration 572982 (SWITZERLAND) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLAMULTI Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands 6778451 (EUROPEAN 03/25/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands COMMUNITY) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLASACK Mista NCL(10) would consequently have great difficulty preventing Brands 01/12/2025 owed to the INPI is required to prevent registration 16 905723376 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLASACK Mista NCL(10) would consequently have great difficulty preventing Brands 01/12/2025 owed to the INPI is required to prevent registration 16 905723392 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 146 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company KLASACK Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(10) 16 905723422 01/12/2025 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company LYPTUSCEL Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(10) 01 910390355 01/30/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company LYPTUSCEL Mista Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(10) 01 910390363 01/30/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company LYPTUSCEL Mista Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(10) 01 910390380 01/30/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company LYPTUSFLUFF Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Nominativa NCL(10) 01 01/30/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands 910390398 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company LYPTUSFLUFF Mista Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(10) 01 910390410 01/30/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 147 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company would LYPTUSFLUFF Mista Periodic payment of ten-year brand protection fees consequently have great difficulty preventing third parties Brands NCL(10) 01 910390452 01/30/2028 owed to the INPI is required to prevent registration from using identical or similar brands to identify even (BRAZIL) expiration and, thereby, loss of the holder’s rights. competing products and/or services. End of exclusive rights to the brand. The Company would NORCELL Nominativa Periodic payment of ten-year brand protection fees consequently have great difficulty preventing third parties Brands NCL(8) 04 814657079 12/26/2030 owed to the INPI is required to prevent registration from using identical or similar brands to identify even (BRAZIL) expiration and, thereby, loss of the holder’s rights. competing products and/or services. End of exclusive rights to the brand. The Company would PINECEL Nominativa Periodic payment of ten-year brand protection fees consequently have great difficulty preventing third parties Brands NCL(10) 01 910390479 02/20/2028 owed to the INPI is required to prevent registration from using identical or similar brands to identify even (BRAZIL) expiration and, thereby, loss of the holder’s rights. competing products and/or services. End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees PINECEL Mista NCL(10) consequently have great difficulty preventing third parties Brands 02/20/2028 owed to the INPI is required to prevent registration 01 910390487 (BRAZIL) from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. competing products and/or services. End of exclusive rights to the brand. The Company would Periodic payment of ten-year brand protection fees PINECEL Mista NCL(10) consequently have great difficulty preventing third parties Brands 02/20/2028 owed to the INPI is required to prevent registration 01 910390495 (BRAZIL) from using identical or similar brands to identify even expiration and, thereby, loss of the holder’s rights. competing products and/or services. End of exclusive rights to the brand. The Company would PINEFLUFF Nominativa Periodic payment of ten-year brand protection fees consequently have great difficulty preventing third parties Brands NCL(10) 01 910390509 01/30/2028 owed to the INPI is required to prevent registration from using identical or similar brands to identify even (BRAZIL) expiration and, thereby, loss of the holder’s rights. competing products and/or services.
Page 148 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company PINEFLUFF Mista Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(10) 01 910390533 01/30/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company PINEFLUFF Mista Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(10) 01 910390541 01/30/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees PUMA Figurativa NCL(10) would consequently have great difficulty preventing Brands 02/20/2028 owed to the INPI is required to prevent registration 01 910390606 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees PUMA Figurativa NCL(10) would consequently have great difficulty preventing Brands 02/20/2028 owed to the INPI is required to prevent registration 01 910390614 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company SAFEKRAFT Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands 16/10.20 815555920 02/06/2022 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Nominativa would consequently have great difficulty preventing Brands 03/25/2028 owed to the INPI is required to prevent registration 572981 (SWITZERLAND) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 149 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees SAKOLA Mista NCL(10) would consequently have great difficulty preventing Brands 01/12/2025 owed to the INPI is required to prevent registration 16 905723481 (BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company SAKOLA Mista Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands NCL(10) 16 905723449 01/12/2025 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company STRETCH KRAFT Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Nominativa 16/10.20 02/06/2022 owed to the INPI is required to prevent registration third parties from using identical or similar brands 815555890 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company SUPERKRAFT Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Nominativa 16/10 7029020 11/25/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees PineFluff Mista 3116330 would consequently have great difficulty preventing Brands 10/09/2030 owed to the INPI is required to prevent registration (ARGENTINA) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees PineFluff Mista 3116331 would consequently have great difficulty preventing Brands 10/09/2030 owed to the INPI is required to prevent registration (ARGENTINA) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 150 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would PineFluff Nominativa protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 10/09/2030 3116329 (ARGENTINA) to prevent registration expiration and, from using identical or similar brands to identify even thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would KLAFOLD Nominativa protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 03/14/2027 TMA819826 (CANADA) to prevent registration expiration and, from using identical or similar brands to identify even thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would EUKALINER Nominativa protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 18193548 (EUROPEAN 02/10/2030 to prevent registration expiration and, from using identical or similar brands to identify even COMMUNITY) thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would EUKALINER Mista protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 18193550 (EUROPEAN 02/10/2030 to prevent registration expiration and, from using identical or similar brands to identify even COMMUNITY) thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would KLAFOLD Nominativa protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 3677372 (UNITED 01/09/2029 to prevent registration expiration and, from using identical or similar brands to identify even STATES) thereby, loss of the holder’s rights. competing products and/or services. Periodic payment of ten-year brand End of exclusive rights to the brand. The Company would PineFluff Nominativa protection fees owed to the INPI is required consequently have great difficulty preventing third parties Brands 5887318 (UNITED 10/15/2029 to prevent registration expiration and, from using identical or similar brands to identify even STATES) thereby, loss of the holder’s rights. competing products and/or services.
Page 151 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees PineFluff Mista 5887319 would consequently have great difficulty preventing Brands 10/15/2029 owed to the INPI is required to prevent registration (UNITED STATES) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees PineFluff Mista 5887320 would consequently have great difficulty preventing Brands 10/15/2029 owed to the INPI is required to prevent registration (UNITED STATES) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees EUKALINER Norminativa would consequently have great difficulty preventing Brands 01/31/2030 owed to the INPI is required to prevent registration 2123994 (MÉXICO) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees PineFluff Nominativa would consequently have great difficulty preventing Brands 03/11/2029 owed to the INPI is required to prevent registration 1292854 (CHILE) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees PineFluff Mista 1292855 would consequently have great difficulty preventing Brands 03/11/2029 owed to the INPI is required to prevent registration (CHILE) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees PineFluff Mista 1292856 would consequently have great difficulty preventing Brands 03/11/2029 owed to the INPI is required to prevent registration (CHILE) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 152 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing EUKALINER Nominativa Brands 10/05/2030 owed to the INPI is required to prevent registration third parties from using identical or similar brands 161330403(CHILE) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLAFOLD Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands 16UK00906778328(UNITED 03/25/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands KINGDOM) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLAMULTI Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands 16UK00906778451(UNITED 03/25/2028 owed to the INPI is required to prevent registration third parties from using identical or similar brands KINGDOM) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company LIVE SUSTAINABILITY Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing LIVE SUSTAINABILITY Brands 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands Mista Ncl(11) 01 915979128 expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or (BRAZIL) services. End of exclusive rights to the brand. The Company LIVE SUSTAINABILITY Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing LIVE SUSTAINABILITY Brands 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands Mista Ncl(11) 01 915979152 expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or (BRAZIL) services. End of exclusive rights to the brand. The Company LIVE SUSTAINABILITY. Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista Ncl(11) 01 915978938 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 153 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company LIVE SUSTAINABILITY. Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Mista Ncl(11) 01 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands 915978997 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. SUSTENTABILIDADE End of exclusive rights to the brand. The Company VIVA Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands SUSTENTABILIDADE 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands VIVA Mista Ncl(11) 01 expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. 915979039 (BRAZIL) SUSTENTABILIDADE End of exclusive rights to the brand. The Company VIVA Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands SUSTENTABILIDADE 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands VIVA Mista Ncl(11) 01 expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. 915979098 (BRAZIL) End of exclusive rights to the brand. The Company SUSTENTABILIDADE Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands VIVA. Mista Ncl(11) 01 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands 915978849 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company SUSTENTABILIDADE Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands VIVA. Mista Ncl(11) 01 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands 915978890 (BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Nominativa would consequently have great difficulty preventing Brands 01/28/2031 owed to the INPI is required to prevent registration 2422107(ARGENTINA) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 154 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Nominativa would consequently have great difficulty preventing Brands 08/31/2030 owed to the INPI is required to prevent registration 394644(URUGUAY) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands 08/05/2029 owed to the INPI is required to prevent registration 3822980(ARGENTINA) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Nominativa would consequently have great difficulty preventing Brands 29/07/2029 owed to the INPI is required to prevent registration 119851-C(BOLIVIA) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands 09/29/2029 owed to the INPI is required to prevent registration 119852-C(BOLIVIA) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Nominativa would consequently have great difficulty preventing Brands 25/02/2029 owed to the INPI is required to prevent registration 1877-09(ECUADOR) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands 25/02/2029 owed to the INPI is required to prevent registration 1878-09(ECUADOR) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 155 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Nominativa would consequently have great difficulty preventing Brands 05/14/2030 owed to the INPI is required to prevent registration 332279(PARAGUAI) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Nominativa would consequently have great difficulty preventing Brands 02/11/2029 owed to the INPI is required to prevent registration 373727(COLOMBIA) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands 02/11/2029 owed to the INPI is required to prevent registration 373728(COLOMBIA) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Nominativa would consequently have great difficulty preventing Brands 11/28/2028 owed to the INPI is required to prevent registration 775842(PERU) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands 12/09/2028 owed to the INPI is required to prevent registration 776049(PERU) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands '17/04/2029 owed to the INPI is required to prevent registration 847043(CHILE) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
Page 156 of 348
Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAFOLD Nominativa would consequently have great difficulty preventing Brands '17/04/2029 owed to the INPI is required to prevent registration 847044(CHILE) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLAMULTI Nominativa would consequently have great difficulty preventing Brands 08/31/2030 owed to the INPI is required to prevent registration 514971(URUGUAY) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLABIN BOARDS Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Nominativa Ncl(7) 16 04/09/2021 owed to the INPI is required to prevent registration third parties from using identical or similar brands 821069152(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. KLABIN CARRIER End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees BOARD Nominativa would consequently have great difficulty preventing Brands 04/09/2021 owed to the INPI is required to prevent registration Ncl(7) 16 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. 821069187(BRAZIL) to identify even competing products and/or services. KLABIN FREEZE End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees BOARD Nominativa would consequently have great difficulty preventing Brands 04/09/2021 owed to the INPI is required to prevent registration Ncl(7) 16 third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. 821069195(BRAZIL) to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLABIN LIQUID BOARD Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Nominativa Ncl(7) 16 04/09/2021 owed to the INPI is required to prevent registration third parties from using identical or similar brands 821069160(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
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Reference Form- 2021- KLABIN S. A. Version: 7
Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company KLABIN RIGID BOARD Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Nominativa Ncl(7) 16 04/09/2021 owed to the INPI is required to prevent registration third parties from using identical or similar brands 821069659(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLABIN X RIGID Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands BOARD Nominativa Ncl(7) 04/09/2021 owed to the INPI is required to prevent registration third parties from using identical or similar brands 16 821069179(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLACUP Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Ncl(11) 16 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands 916184668(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company KLALIGHT Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Ncl(11) 16 08/20/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands 915952637(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLABIN Nominativa 16/10 would consequently have great difficulty preventing Brands 10/04/2026 owed to the INPI is required to prevent registration 6273017(BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees KLABIN Figurativa 16/10 would consequently have great difficulty preventing Brands 10/04/2026 owed to the INPI is required to prevent registration 6273025(BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
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Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company Klabin Raízes Nominativa Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Ncl(10) 02/14/2027 owed to the INPI is required to prevent registration third parties from using identical or similar brands 03908020066(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Klabin Raízes Mista Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Ncl(10) 02/14/2027 owed to the INPI is required to prevent registration third parties from using identical or similar brands 03908041756(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees Miskai Nominativa Ncl(10) would consequently have great difficulty preventing Brands 02/14/2027 owed to the INPI is required to prevent registration 03908020015(BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees Miskai Mista Ncl(10) would consequently have great difficulty preventing Brands 02/14/2027 owed to the INPI is required to prevent registration 03908020058(BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company PHITOSPHERA Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Nominativa Ncl(8) 09/02/2023 owed to the INPI is required to prevent registration third parties from using identical or similar brands 03821705580(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company PHITOSPHERA Mista Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands Ncl(8) 07/13/2024 owed to the INPI is required to prevent registration third parties from using identical or similar brands 03822007282(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
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Asset Asset description Duration Events that may cause rights loss Consequence of rights loss type End of exclusive rights to the brand. The Company PHITOSPHERA BELEZA Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands & SAÚDE K Mista Ncl(8) 04/07/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands 03824740920(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company PHITOSPHERA BELEZA Periodic payment of ten-year brand protection fees would consequently have great difficulty preventing Brands & SAÚDE K Mista Ncl(8) 04/07/2029 owed to the INPI is required to prevent registration third parties from using identical or similar brands 03824876083(BRAZIL) expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. PHITOSPHERA End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees TERAPÊUTICA K Mista would consequently have great difficulty preventing Brands 04/07/2029 owed to the INPI is required to prevent registration Ncl(8) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. 03824740912(BRAZIL) to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees "K" Figurativa Ncl(7) would consequently have great difficulty preventing Brands 02/13/2027 owed to the INPI is required to prevent registration 03822967561(BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services. End of exclusive rights to the brand. The Company Periodic payment of ten-year brand protection fees "K" Figurativa Ncl(7) would consequently have great difficulty preventing Brands 02/13/2027 owed to the INPI is required to prevent registration 03822980231(BRAZIL) third parties from using identical or similar brands expiration and, thereby, loss of the holder’s rights. to identify even competing products and/or services.
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Asset type Asset description Duration Events that may cause rights loss Consequence of rights loss The periodic payment of fees corresponding End of the right to exclusive use of the mark. to the ten-year protection of the trademark, As a result, the Company would find it very CONFIGURATION APPLIED TO / IN due to the INPI is essential to avoid the Patents 08/08/2044 difficult to prevent third parties from using SUPPORT FOR EXHIBITION extinction of the registrations and the identical or similar brands to its own to consequent termination of the rights of the indicate competing services and / or products owner The periodic payment of fees corresponding End of the right to exclusive use of the mark. to the ten-year protection of the trademark, As a result, the Company would find it very CONFIGURATION APPLIED TO / IN due to the INPI is essential to avoid the Patents 09/11/2044 difficult to prevent third parties from using BOX extinction of the registrations and the identical or similar brands to its own to consequent termination of the rights of the indicate competing services and / or products owner The periodic payment of fees corresponding End of the right to exclusive use of the mark. to the ten-year protection of the trademark, As a result, the Company would find it very CONFIGURATION APPLIED IN due to the INPI is essential to avoid the Patents 02/05/2027 difficult to prevent third parties from using DOOR CONTAINER - CUPS extinction of the registrations and the identical or similar brands to its own to consequent termination of the rights of the indicate competing services and / or products owner The periodic payment of fees corresponding End of the right to exclusive use of the mark. to the ten-year protection of the trademark, As a result, the Company would find it very CONFIGURATION APPLIED TO / IN due to the INPI is essential to avoid the Patents 09/26/2042 difficult to prevent third parties from using FURNITURE extinction of the registrations and the identical or similar brands to its own to consequent termination of the rights of the indicate competing services and / or products owner The periodic payment of fees corresponding End of the right to exclusive use of the mark. to the ten-year protection of the trademark, As a result, the Company would find it very CONFIGURATION APPLIED TO / IN due to the INPI is essential to avoid the Patents 09/26/2042 difficult to prevent third parties from using FURNITURE extinction of the registrations and the identical or similar brands to its own to consequent termination of the rights of the indicate competing services and / or products owner
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9.1 - Relevant Non-Current Assets /9.1.c- Equity Holdings
Dividendos Dividendos Dividendos Issuer's CVM Market value on Variation Variation Corporate Name Country State City CNPJ Activity Entity type Acquisition reason Variation 2020-2019 2020 2019 2018 share (%) Code 12/31/2020 2019-2018 2017-2018 Florestal Vale do Corisco SA Brazil SP São Paulo 10,186,000 11,919,000 11,985,000 04.788.536/0001-74 Reforestation and timber trade. 51 Affiliate No Development of forestry activities. 147,777,000 -8.1958% -2.8265% -3.5072% Ikapê Empreendimentos Ltda. Brazil PR Telêmaco Borba - - - 81.399.230/0001-77 Hospitality 100 Subsidiary No Expectation of future income. 1,744,000 -47.1034% 13.6897% 10.9193% Klabin Argentina S.A. Argentina - - - Industrial Bags 100 Subsidiary No Expectation of future income - 25,933,000 -332.1266% -21.4899% -56.8959% Marketing of own products on the foreign Marketing of own products on the foreign Klabin Austria Austria - - 100 Subsidiary No - market market 311,745,000 65.9728% 450.3340% 212.7996% Klabin do Paraná Produtos Florestais Ltda. Brazil PR Telêmaco Borba - - - 76.171.479/0001-90 Manufacture of herbal products 100 Subsidiary No Expectation of future income 611,000 -46.3121% 245.9146% -47.7778% Klabin Finance Luxembourg - - - Raising financial resources abroad. 100 Subsidiary No Raising financial resources abroad. 126,827,000 46.6700% -19.3931% 52.7438% Production and commercialization of Production and commercialization of Klabin Fitoprodutos Ltda. Brazil PR Telêmaco Borba - - 19.013.389/0001-38 100 Subsidiary No - phytoproducts. phytoproducts. 1,133,000 -1.3925% 8.4986% 160.1966% Klabin Florestal Ltda. Brazil PR Telêmaco Borba - - - 76.171.453/0001-42 Planting forests 100 Subsidiary No Expectation of future income 1,454,000 -1.2899% -1.6032% -1.1885% Marketing of own products on the foreign Klabin Forest Products Company United States - - 100 Subsidiary No Expectation of future income - market 7,914,000 78.2031% 27.7618% 27.7472% Klabin Limited Cayman Islands - - Participation in other companies 100 Subsidiary No Expectation of future income - - -100.0000% -1.0387% 17.7802% Marketing of own products on the foreign Klabin Trade South Africa - - 0 Subsidiary No Expectation of future income - market - 0.0000% 0.0000% 0.0000% Monterla Holdings S.A. Brazil SP São Paulo - - - 05.867.677/0001-45 Reforestation 100 Subsidiary No Reforestation 7,953,000 0.3153% 14.4955% -0.3883% Sociedades em Conta de Participação - GC Brazil PR 125,000 145,000 Reforestation 0 Subsidiary No Funding for reforestation. Forest 162,000 22.758.102/0001-03 - -100.0000% -5.2564% -4.1993% Sociedades em Conta de Participação - Monte Brazil PR 292,000 325,000 Reforestation 75 Subsidiary No Funding for reforestation Alegre 270,000 22.673.431/0001-51 227,728,000 -0.0493% 11.2741% 3.8093% Sociedades em Conta de Participação - Brazil PR - - Reforestation 72 Subsidiary No Funding for reforestation Harmonia 1,719,000 26.811.464/0001-71 172,843,000 -14.3444% -8.0125% 13.9985% Sociedades em Conta de Participação - Serrana Brazil SC - - 28.362.229/0001-95 Reforestation 64 Subsidiary No Funding for reforestation - 136,854,000 -27.8992% 85.1581% 14.2862% Sociedades em Conta de Participação - Brazil PR - - Reforestation 56 Subsidiary No Funding for reforestation Araucária - 29.386.065/0001-07 96,825,000 6.6001% -50.5859% 11.4496% Celucat Brazil SP São Paulo - - - 05.563.019/0001-60 Participation in other companies 0 Subsidiary No Expectation of future income - -100.0000% 0.0000% 0.0000% Klabin Overseas Brazil - - - Participation in other companies 0 Subsidiary No Expectation of future income - -100.0000% 0.0000% 0.0000% Riohold Holdings Brazil - - - 05.678.196/0001-91 Participation in other companies 100 Subsidiary No Expectation of future income 1,000 -98.0388% 0.0000% 0.0000% Santa Catarina Florestal Brazil SP - - - 05.905.802/0001-64 Packaging customization services 100 Subsidiary No Expectation of future income - 330,000 16.6078% -28685.8586% 0.0000% Guaricana Reflorestadora S.A. Brazil SP São Paulo 12,352,000 4,914,000 - 31.231.718/0001-12 Reforestation 34.74 Subsidiary No Funding for reforestation 115,877,000 4.6239% -13.6669% 100.0000% Sapopema Reflorestadora S.A. Brazil SP São Paulo - - 31.371.665./0001-35 Reforestation 26.15 Subsidiary No Funding for reforestation 126,334,000 79.5974% 0.0000% 0.0000% Klabin Paranaguá S.A. Brazil PR Paranaguá - - 35.703.702/0001-16 Port services 100 Subsidiary No Provision of port services 20,060,000 0.3000% 0.0000% 0.0000% Pinus Taeda Florestal S.A. Brazil PR - - 22.840.050/0001-10 Reforestation 25.5 Subsidiary No Funding for reforestation 98,109,000 0.0000% 0.0000% 0.0000% Aroeira Reflorestadora S.A. Brazil PR 35.012.664/0001-55 Reforestation 100 Subsidiary No Funding for reforestation 20,000,000 0.0000% 0.0000% 0.0000% Cerejeira Reflorestadora S.A. Brazil PR 30.367.996/0001-39 Reforestation 100 Subsidiary No Funding for reforestation - 0.0000% 0.0000% 0.0000% Embacorp Soluções em Embalagens de Papel Ltda Brazil SP 32.779.402/0001-22 Industrial expansion 100 Subsidiary No Production and commercialization of products. 606,165,000 0.0000% 0.0000% 0.0000% Embacorp da Amazônia - Soluções em Embalagens de BrazilPapel Ltda AM 04.398.525/0001-88 Industrial expansion 100 Subsidiary No Production and commercialization of products. 40,000,000 0.0000% 0.0000% 0.0000% Kla Holdings S.A. Brazil SP 39.871.596/0001-30 Participation in other companies 100 Subsidiary No Funding for reforestation 1,000 0.0000% 0.0000% 0.0000%
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9.2. Additional information that the Company may deem relevant: Permanent Preservation Areas The Company maintains and works to improve the quality of the environment in its permanent preservation areas. Private areas with their boundaries provided by force of law help maintain biodiversity, and the quality of the air, water and soil in a global manner. Preserved forests contribute to environmental balance and the sustainability of the forest business. As of December 31, 2020 the Company had 243 thousand hectares of permanent preservation areas.
Insurance To protect its operational risks, assets and responsibilities, the Company maintains insurance coverage for a variety of events capable of affecting its equity and operations.
According to best market practices, the Company maintains insurance policies for operational risk, including lost profits and other forms of coverage for property damage, involving all manufacturing, administrative and storage facilities.
The Company has other insurance policies in place, with coverage including general liability, D&O liability, environmental liability, domestic and international freight, and forests, as well as engineering risks, liability and construction works insurance to support expansions and//or new sites built to join the Company’s operations. The sum of all maximum insurance indemnities was BRL 6.1 billion as of December 31, 2020.
Management therefore understands that its insurance framework provides appropriate coverage for the Company’s operational continuity.
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10.1. Overall financial and equity conditions a) Overall financial and equity conditions Management understands that the Company has the financial and equity conditions to maintain and develop its operations. Revenues come from domestic and foreign market sales of packaging paper and board, short- fiber cellulose, long-fiber cellulose, fluff pulp, cardboard boxes, paper bags, and timber for sawmills. The Executive Board’s financial strategy maintains a high cash position and a lengthy debt profile.
Ratios 12/31/2020 12/31/2019 12/31/2018 Current liquidity 2.98 4.40 2.93
General liquidity 0.41 0.57 0.54
Net debt-to-adjusted EBITDA 4.21 3.30 3.10
Adjusted EBITDA-to-Total assets 13.33% 12.46% 13.58%
Net Earnings-to-Shareholders’ Equity -62.71% 11.82% 2.97%
In the three fiscal years shown above, current assets exceeded current liabilities by BRL 7.2 billion, BRL 10.6 billion and BRL 7.2 billion in 2020, 2019 and 2018 respectively, corresponding to current liquidity ratios of 2.98 as at yearend 2020, 4.40 as at yearend 2019 and 2.93 as at yearend 2018. General liquidity, too, was positive in the three fiscal years at hand, at 0.41, 0.57 and 0.54, respectively. In fiscal year 2019, the Company began a new expansion project (Puma II) for the construction of two new paper mills. Expected investment is BRL 9.1 billion, with effective outlays of BRL 1.3 billion in 2019 and BRL 4.0 billion in 2020, which affected the Company’s net debt. In addition, indebtedness in fiscal year 2020 was sharply affected by the 29% depreciation of the Brazilian real versus the US Dollar, as the Company had foreign currency-denominated debt of approximately USD 4.0 billion as at yearend 2020. Adjusted EBITDA-to-Total assets trends up in the fiscal years shown, due to the stabilization of operations at the pulp mill (Puma I) commissioned in 2016, to increased demand for staple products, and to currency depreciation effects due to the pandemic. On the other hand, the ratio was down in 2019 due to the beginning of work on Puma II, with the outlay of BRL 1.3 to purchase assets without offsetting cash generation. In 2020 the outlay was BRL 4.0 billion, for a total outlay of BRL 5.3 billion as at yearend 2020. The two paper mills are slated for commissioning in July 2021 and July 2023, respectively. The Company chooses Adjusted EBITDA over Net Earnings because the latter excludes exchange-rate effects on financial liabilities and the change in the fair value of biological assets, as well as of depreciation and amortization, all of which have a relevant presence in the income statement, with impact on net income. b) Capital structure The Company’s third-party capital includes financing secured with the financial and capital markets, largely to maintain fixed assets, make new investments, and lengthen its debt profile. Own capital is made up of the Company’s shares, representing shareholders’ equity.
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Based on the consolidated financial statements of December 31, 2020, the Company has 12% own capital over total assets and 88% third-party capital over total assets. There are no cases of redemption of the Company’s shares except as provided in the Corporations Law.
Debt (BRL thousands) 12/31/2020 12/31/2019 12/31/2018
Short term 721,021 1,274,542 1,975,465
Long term 25,617,969 22,810,730 17,470,207
Gross debt 26,338,990 24,085,272 19,445,672
Cash and cash equivalents (6,556,727) (9,730,915) (7,047,204)
Net debt 19,782,263 14,354,357 12,398,496
Shareholders’ Equity 4,384,761 6,501,273 6,533,230
c) Payment capacity vis-à-vis financial obligations Given the Company’s debt profile, cash flow and liquidity position it has sufficient liquidity and capital to cover its investments, expenses, debt and other amounts payable over the coming years, with a cash position sufficient to amortize 59 months of its debt. In 2020, the Company undertook liability management, reducing its short-term debt from 5% as at yearend 2019 to 3% as at yearend 2020, in addition to increasing the average debt maturity from 96 months as at yearend 2019 to 116 months as at yearend 2020. If a need arises to secure financing for investment in new projects and acquisitions, the Company believes that it has the capacity to do so. The Company’s cash as of December 31, 2020 was sufficient to amortize approximately 81 months of its upcoming financial debt. As indicated in the announcement to the market of March 19, 2020, although Klabin faces highly volatile financial markets, it has a robust cash position, a lengthy debt profile, and 100%¨financing for the Puma II Project. d) Sources of financing used for working capital and investment in non-current assets In addition to cash from its own operations and those of its subsidiaries, the Company raises funds in a variety of ways in the domestic and international markets, including bilateral, syndicated operations, with financing agencies and the capital markets to finance its working capital and investment in non-current assets. For major projects, the Company relies on financing facilities with BNDES and multinational import agencies, or the issue of shares and convertible or non-convertible securities.
e) Sources of financing for working capital and investment in non-current assets that the Company intends to use to cover liquidity shortfalls The Company has not faced a situation of liquidity deficiency. In addition to the current cash position, Klabin's liquidity position comprises a revolving credit facility of US $ 500 million, with a five-year term of availability and a financial cost of 0.4% per year. If the line is withdrawn, the cost of this financing would be Libor + 1.35% per year.
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In addition, the Company also has financing lines linked to the execution of the Puma II Project and not yet withdrawn: (i) BID Invest, IFC and JICA, totaling US $ 700 million; (ii) Finnvera, totaling US $ 178 million and (iii) BNDES, totaling BRL 2 billion. With the worsening of the Covid-19 pandemic and the unfolding of this crisis, the Company points out that there may be liquidity difficulties in international markets, disadvantaging new funding at this time. f) Debt levels and debt characteristics
(R$ thousand) Annual interest rate - % 12/31/2020 12/31/2019 12/31/2018 In local currency . BNDES - Project Puma I - - 1,678,295 . BNDES - Project Puma II TLP + 3,58 500,592 500,592 - . BNDES - Others TJLP 100,183 100,183 84,463 . BNDES - FINAME 19,729 19,729 110,384 . Export credit notes (in BRL) 102 a 105,50 do CDI 983,531 983,531 2,925,262 95 a 102 do CDI ou IPCA + 3,50% a CRA IPCA + 4,51% 3,795,817 3,795,817 1,815,251 . Other 0,76 a 8,5 ou TJLP 20,898 20,898 37,359 (-) Cost with funding (270,594) (270,594) (65,429) 5,150,156 5,150,156 6,585,585 In foreign currency (*) . BNDES - Project Puma - - 1,094,332 . BNDES – Others - 12,648 43,530 . Export prepayments USD + 5,40 651,926 3,231,493 4,559,069 . Export credit notes 4,70 a 5,67 3,009,461 1,883,279 586,100 .BID Libor + 1,59 522,103 - 841,479 USD + Libor + 0,60 a 0,95 ou USD + .Finnvera 1,405,318 988,983 1,115,071 3,38 . ECA EUR + 0,45% 40,490 33,991 38,428 . Gain / loss on derivative instruments (swap) 4,70 a 5,67 1,748,282 400,073 114,125 . Bonds (Notes) 4,88% a 7,00% 11,737,196 8,277,741 3,947,634 . Export prepayments (Notes) - 2,447,136 - (-) Cost with funding (298,731) (184,325) (142,357) 18,816,045 17,091,019 12,197,411 Total Borrowings 23,966,201 22,241,175 18,782,996 . Debêntures 6ª emission USD + 8,0 - - - . Debêntures 7ª emission IPCA + 2,5 a 7,5 92,796 620,308 662,676 . Debêntures 12ª emission 114,65% do CDI 1,740,008 1,223,789 - Total Debt 25,799,005 24,085,272 19,445,672
Short-term debt 721,021 1,274,542 1,975,465 Long-term debt 25,617,969 22,810,730 17,470,207 26,338,990 24,085,272 19,445,672 (*) In U.S. dollars i. Material loan and financing agreements BNDES
The Company has executed agreements with BNDES to fund industrial and forestry development projects, social projects, and the paper production expansion project called Puma II, with settlement scheduled for 2039. Amortization is monthly, with payment of the respective interest bills.
Prepaid exports and export credit notes
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Prepayment operations and export credit notes (in Brazilian Reais and US Dollars) have been contracted to manage working capital and develop the Company’s operations. Settlement is scheduled for completion by April 2029.
The Company voluntarily carried out the early settlement of export prepayment operations and export credit notes in the amount of six point two (6.2) billion Brazilian Reais in the fiscal year ending December 31, 2020, in line with its debt reprofiling strategy.
Bonds (Notes)
The Company, through its wholly owned subsidiaries Klabin Finance S.A. and Klabin Áustria GmbH, issued Notes on the international market, listing them on the Luxembourg Exchange (Euro MTF) and the Singapore Exchange (SGX), as Senior Unsecured Notes 144A/Reg S.
(i) USD 500 million were raised in July 2014, maturing in 10 years, with twice annual 5.25% coupon. The purpose is to fund the regular business of the Company and its subsidiaries, in line with the respective purposes. In April 2019, the Company repurchased USD 238 million, in line with its debt reprofiling strategy.
(ii) In September 2017, the Company issued Green Bonds in the amount of USD 500 million, maturing in 10 years, in 2027, with twice annual 4.88% coupon. The funds are intended for reforestation, native woods restoration, investments in renewable energy, logistics efficiency, using railway transportation, solid waste recycling, and the development of environmentally efficient products, among other sustainability-related practices. In 2020, the Company bought back USD 9.5 million, in line with its debt management strategy.
(iii) In March 2019, the Company raised USD 500 million, maturing in 10 years, in 2029, paying twice annual 5.75% coupon, and USD 500 million in Green Bonds maturing in 30 years, in 2049, paying annual 7% coupon. The purpose of the funds is to enable early repayment of debts of the Company and its subsidiaries, in addition to reinforcing the cash position. In 2020, the Company bought back USD 18.5 million, in line with its debt management strategy.
(iv) In July 2019, the Bonds maturing in 2029 reopened for an additional nominal USD 250 million in funds raised, with 5.75% coupon and 4.90% annual yield. The purpose of the funds is to enable early repayment or refinancing of debts of the Company and its subsidiaries, as well as cash reinforcements.
(v) In January 2020, Green Bonds maturing in 2049 reopened for an additional nominal USD 200 million in funds raised, with 7.00% coupon and 6.10% annual yield. The purpose is to fully or partly finance and/or refinance costs of and/or investments in eligible Green Projects.
Finnvera (Finnish credit export agency)
As part of the funding required to execute the Puma I Project, the Company executed a fundraising agreement with Finnvera. The amount of the obligation is up to USD 460 million, maturing in 2026 and divided into two tranches, the former of up to USD 414 million paying interest at 3.4% p.a., and the latter of up to USD 46 million paying interest at Libor 6M + 1%
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p.a. Two disbursements took place in 2015 for a total USD 325.7 million and a final USD 38.6 million disbursement was released in the final quarter of 2016, for a total USD 364.3 million. The amount raised in USD was lower than initially predicted because the imports were denominated in Euros and the US Dollar appreciated versus the Euro in that period. For the Puma II Project, the Company raised USD 67 million paying interest at Libor 6M + 0.55% p.a. and maturing in 2031.
The Company voluntarily carried out the early liquidation of BRL 22 million in Finnvera agreements in the fiscal year ending December 31, 2020, in line with its debt reprofiling strategy.
Term loan (BID Invest and IFC)
As part of the funding needed to execute the Puma II Project, the Company raised USD 100 million divided into two tranches, the former of USD 48 million paying interest at Libor 6M + 1.45% p.a., maturing in 2026, and the latter of USD 52 million, paying interest at Libor 6M + 1.75% maturing in 2029.
CRA – Agribusiness Receivables Certificates
The Company issued debentures to provide the underlying assets for the issue of Agribusiness Receivables Certificates (“CRA”), as follows:
(i) CRA I – issued by Eco Securitizadora de Direitos Creditórios do Agronegócio S.A in March 2017 in the amount of BRL 845.9 million, maturing in five years and paying twice-annual interest at 95% of CDI.
(ii) CRA II – issued by Eco Securitizadora de Direitos Creditórios do Agronegócio S.A in December 2017 in the amount of BRL 600 million, maturing in 6 years and paying twice-annual interest at 97.5% of CDI.
(iii) CRA III – issued by Ápice Securitizadora S.A in September 2018 in the amount of BRL 350 million, maturing in 6 years and paying twice-annual interest at 102% of CDI.
(iv) CRA IV – issued by VERT Companhia Securitizadora in April 2019 in the amount of BRL 1 billion, split into two series. The first series is in the total amount of BRL 200 million, maturing in 7 years and paying twice-annual interest at 98% of CDI. The second series is in the amount of BRL 800 million, maturing in 10 years and paying twice-annual interest equal to the internal rate of return of Tesouro IPCA.
(v) CRA V – issued by VERT Companhia Securitizadora in July 2019 in the amount of BRL 966 million maturing in 10 years and paying annual interest at IPCA + 3.5%.
Derivatives (swaps) – gain/loss
In December 2018, the Company raised funds with Banco Bradesco as a new export credit note in
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the amount of BRL 1,879 million maturing in 2026 paying interest at 114% of CDI, unsecured and covenant-free, coupled with two like-value FX/interest swaps in the same amount, but denominated in USD and paying interest at 5.6%, with the same maturity profile as the credit note, none of which instruments may be liquidated in separate.
In March 2019, the Company executed with Banco Itaú a swap with an asset position at 114.65% of CDI and a liability at an annual 5.40% in USD. The operation is coupled with the 12th debentures issue, in the amount of BRL 1 billion, had in April 2018 as discussed in note 17 b).
In May 2019, the Company executed a swap with Bradesco with an asset position at 114.03% of CDI and a liability position at an annual 4.70% in USD. The operation is coupled with the BRL 1,125 million export credit note executed in May 2019 with the same bank, maturing in May 2026.
Derivatives gains and losses are marked to market, corresponding to their fair value and recognized as financial income/loss.
The table next depicts the maturity schedule of the Company’s long-term financings as at December 31, 2020:
2028 Year 2022 2023 2024 2025 2026 2027 Total onwards Amount (BRL) thousands) 1,302,000 1,085,000 1,846,000 2,036,000 4,441,000 3,682,000 11,225,969 25,617,969 Average financing maturity was 116 months at yearend 2020; it was 65 months for operations denominated in domestic currency and 128 for those denominated in foreign currencies. ii. Other long-term ties with financial institutions The Company has no other long-term ties with financial institutions, except for those recognized and disclosed in its financial statements, and no debt subordination exists. iii. Debt subordination BNDES financings are secured by land, buildings. Improvements, machinery, equipment, and facilities of the Ortigueira- PR plants that are the purpose of the respective financings. Finnvera financings are secured by the manufacturing plants of Angatuba- SP, Piracicaba• SP, Betim - MG, Goiana - PE, Otacílio Costa - SC, SC, Jundiaí/Distrito Industrial - SP and Jundiaí/Tijuco Preto - SP and Lages - SC The BID Invest and IFC financing is secured by the Correa Pinto – SC and Telêmaco Borba – PR manufacturing plants. Export credit loans, export prepayments, Bonds, Agribusiness Receivables Certificates and working capital loans are uncollateralized. iv. any covenants by which the issuer must abide, in ´particular as concerns debt levels and securing new debt, dividends distribution, assets divestment, issue of new securities, and divestment of a controlling stake, as well as whether or not the issuer has been abiding by these covenants. The Company and its Controlled Entities were under no financing agreements on the as-of date of the financial statements at hand that include covenants establishing an obligation to maintain
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certain ratios in association with income, liquidity or leverage compared to the contracted operations, or that make repayment of the debt immediately due. As the COVID-19 pandemic deepens, the Company underscores that liquidity issues may arise in the international credit markets, hampering access to new debt and financing. However, despite the financial markets’ increased volatility, Klabin’s cash position is robust, its debt profile is extended and funding for the Puma II Project is 100% contracted. Therefore, we see no evidence of liquidity risk for the Company at this point. g) Limits of financing agreements and percentages withdrawn As disclosed in announcements to the market of October 31 and November 6, 2019, the Company has the following financing agreements in place on which it has not yet drawn, associated with execution of the Puma II Project.
Contract financing - Puma II Project (BRL Thousand) Bank Amount Currency Rate Term Other information BNDES 3 Billion BRL IPCA + 3,58 p.y. 20 years 2.5-year principal grace period BID lnvest & IFC {A-Loans and Co-Loans) 378 Million USD LIBOR + 1,75 p.y. 10 years 3-year principal grace period BID lnvest & IFC {B-Loans) 350 Million USD LIBOR + 1,45 p.y. 7 years 3-year principal grace period JICA 72 Million USD LIBOR + 1,45 p.y. 10 years 3-year principal grace period ECA {Export CreditAgency)- Finnvera 245 Million USD LIBOR + 0,55 p.y. 12 years 2.5-year principal grace period
Disbursements Bank Amount Currency Fundraising 2019 Fundraising 2020 % used BNDES 3,000,000 BRL 500,000 500,000 33% BID Invest & IFC (A-Loans e Co-Loans) 378,000 USD - 51,923 14% BID Invest & IFC (B-Loans) 350,000 USD - 48,077 14% JICA 72,000 USD - - 0% ECA (Export Credit Agency) - Finnvera 245,000 USD - 66,953 27% h) Material changes to each item of the financial statements The following consolidated financial statements reflect the correct presentation of the equity and financial position and the result of the Company’s operations for the aforementioned years.
Preparation of Financial Statements
The consolidated financial statements were prepared in accordance with the international financial reporting standards (IFRS - International Financial Reporting Standards), issued by the IASB - International Accounting Standards Board, and accounting practices adopted in Brazil, based on the technical pronouncements issued by the CPC - Committee Accounting Pronouncements, fully converging to IFRS, and standards established by CVM - Brazilian Securities and Exchange Commission. Summary of consolidated financial statements The tables below present the Company’s balance sheets and income statements for the years ended December 31, 2020, 2019 and 2018.
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BALANCE SHEET (BRL Thousands)
12/31/2020 12/31/2019 12/31/2018 CHANGE - AH (2) A SSET S 12/31/2020 e 12/31/2019 e
A V (1) A V (1) A V (1) 1 2 /3 1 /2 01 9 1 2 /3 1 /2 01 8 Cu rrent Cash and cash equivalents 5 ,2 08,83 0 1 5 % 8,3 4 0,3 86 2 4 % 5 ,7 3 3 ,85 4 1 9 % -3 8% 4 5 % Marketable securities 1 ,3 4 7 ,89 7 4% 1 ,3 9 0,5 2 9 4% 1 ,3 1 3 ,3 5 0 4% -3 % 6% Accounts receivable: 1 ,806 ,9 1 8 5% 1 ,85 9 ,5 05 5% 2 ,04 0,9 3 1 7% -3 % -9 % In v en tor y 1 ,3 7 9 ,1 3 1 4% 1 ,3 3 2 ,2 4 4 4% 1 ,2 06 ,3 5 3 4% 4% 1 0% Taxes recoverable 82 4 ,7 7 1 2% 5 05 ,4 1 1 1% 2 6 9 ,7 2 8 1% 6 3 % 87 % Other assets 2 1 8,3 2 4 1% 2 4 5 ,86 9 1% 2 9 7 ,7 1 8 1% -1 1 % -1 7 % T ot al cu rrent asset s 1 0,7 85 ,87 1 3 1 % 1 3 ,6 7 3 ,9 4 4 3 9 % 1 0,86 1 ,9 3 4 3 7 % -2 1 % 2 6 %
A sset s h eld for sale 1 7 5 ,06 4 0% 1 00% 0%
Non-cu rrent
Deferred income tax and social contribution 7 6 5 ,09 9 2% - 0% - 0% 1 00% 0% Related parties 1 1 8,84 3 0% 1 1 7 ,1 7 9 0% 86 ,6 5 8 0% 1% 3 5 % Taxes recoverable 7 6 9 ,09 2 2% 1 ,9 4 4 ,6 5 6 6% 1 ,2 80,81 1 4% -6 0% 5 2 % Other assets 1 7 5 ,5 02 0% 2 7 0,81 7 1% 3 00,7 5 7 1% -3 5 % -1 0% 0% Investimentos 0% . Participações em controladas 0% Investments: 0% . Interests in subsidiaries and joint v enture 2 5 6 ,07 2 1% 1 6 0,9 7 0 0% 1 6 5 ,6 5 2 1% 5 9 % -3 % . Oth er 1 2 ,3 7 2 0% 9 ,6 87 0% 7 ,6 07 0% 2 8% 2 7 % Property, plant and equipment 1 6 ,6 7 0,7 7 3 4 7 % 1 3 ,2 4 1 ,1 81 3 8% 1 2 ,2 6 2 ,4 7 2 4 1 % 2 6 % 8% Biological assets 4 ,6 5 7 ,82 1 1 3 % 4 ,7 1 2 ,3 81 1 4 % 4 ,5 82 ,6 3 1 1 5 % -1 % 3% Right of use asset 808,4 2 0 2% 4 9 4 ,3 9 9 1% - 0% 64% 0% Intangible assets 7 5 ,3 3 2 0% 7 7 ,86 8 0% 85 ,2 2 1 0% -3 % -9 % T ot al non-cu rrent asset s 2 4 ,3 09 ,3 2 6 69% 2 1 ,02 9 ,1 3 8 6 1 % 1 8,7 7 1 ,809 6 3 % 1 6 % 1 2 %
T ot al asset s 35,270,261 1 00% 34,703,082 1 00% 29,633,743 1 00% 2% 1 7 %
AV(1) Vertical Analysis AH(2) Horizont al A naly sis
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BALANCE SHEET (BRL Thousands)
12/31/2020 12/31/2019 12/31/2018 CHANGE - AH (2) LIABILITIES AND EQUITY 12/31/2020 e 12/31/2019 e
A V (1) A V (1) A V (1) 1 2 /3 1 /2 01 9 1 2 /3 1 /2 01 8 Cu rrent Bor r ow in gs 6 5 2 ,9 8 3 2% 7 01 ,7 8 3 2% 1 ,9 1 3 ,7 7 9 6% -7 % -6 3 % Deben tu r es 6 8 ,03 8 0% 5 7 2 ,7 5 9 2% 6 1 ,6 8 6 0% -8 8 % 8 2 9 % Trade payables 2 ,003 ,02 9 6% 1 ,02 4 ,2 5 6 3% 9 03 ,7 5 2 3% 96% 1 3 % Tax payables 1 6 5 ,3 4 8 0% 6 7 ,07 9 0% 5 0,8 3 2 0% 1 4 6 % 3 2 % Social security and labor obligations 3 7 7 ,8 1 6 1% 3 01 ,2 8 8 1% 3 00,3 7 9 1% 2 5 % 0% Div idends and interest on shareholders' equity payable - 0% 2 00,000 1% 2 5 0,000 1% -1 00% 1 00% REFIS membership - 0% - 0% 7 3 ,8 6 2 0% 0% -1 00% Lease liability 1 4 3 ,7 2 1 0% 1 00,5 09 0% - 0% 1 00% 0% Other pay ables and provisions 2 02 ,5 3 7 1% 1 3 6 ,8 4 9 0% 1 5 4 ,02 6 1% 4 8 % -1 1 % Total current liabilities 3 ,6 1 3 ,4 7 2 1 0% 3 ,1 04 ,5 2 3 9% 3 ,7 08 ,3 1 6 1 3 % 1 6 % -1 6 %
Property liabilities held for sale 3 6 ,2 9 5 0% 1 00% 0%
Non-cu rrent Bor r ow in gs 2 3 ,8 5 3 ,2 04 6 8 % 2 1 ,5 3 9 ,3 9 2 6 2 % 1 6 ,8 6 9 ,2 1 7 5 7 % 11% 2 8 % Deben tu r es 1 ,7 6 4 ,7 6 5 5% 1 ,2 7 1 ,3 3 8 4% 6 00,9 9 0 2% 3 9 % 1 1 2 % Income tax and social contribution Deferred income tax and social contribution - 0% 1 ,1 4 5 ,06 9 3% 9 5 9 ,9 06 3% -1 00% 1 9 % Prov ision for tax, social security , labor and 0% 0% civil contingencies 5 1 ,9 5 1 0% 6 0,5 1 9 0% 6 4 ,1 1 8 0% -1 4 % -6 % Pay ables - Inv estors in Special Partnership Companies (SPCs) 3 01 ,6 7 1 1% 3 3 3 ,1 8 3 1% 3 01 ,5 8 3 1% -9 % 1 0% Adesão - REFIS - 0% - 0% 2 6 5 ,5 8 7 1% 0% -1 00% Lease liability 6 7 9 ,5 9 1 2% 3 9 6 ,7 2 0 1% - 0% 1 00% 0% Other pay ables and provisions 5 8 4 ,5 5 1 2% 3 5 1 ,06 5 1% 3 3 0,7 9 6 1% 6 7 % 6% T ot a l non-cu rrent lia bilit ies 2 7 ,2 3 5 ,7 3 3 77% 2 5 ,09 7 ,2 8 6 7 2 % 1 9 ,3 9 2 ,1 9 7 6 5 % 9% 2 9 %
Equ it y Share capital 4 ,4 7 5 ,6 2 5 1 3 % 4 ,07 6 ,03 5 1 2 % 4 ,07 6 ,03 5 1 4 % 1 0% 0% Capital reserves (3 6 5 ,7 9 1 ) -1 % (3 5 0,6 2 2 ) -1 % (3 6 1 ,2 3 1 ) -1 % 4% -3 % Revaluation reserve 4 8 ,7 05 0% 4 8 ,7 05 0% 4 8 ,7 05 0% 0% 0% Profit reserv es - 0% 1 ,5 1 7 ,04 4 4% 1 ,7 4 8 ,2 1 9 6% -1 00% -1 3 % Other compreenseve income 8 2 3 ,4 7 6 2% 9 4 2 ,9 9 4 3% 9 7 7 ,1 2 2 3% -1 3 % -3 % Accumulated loss for the y ear (9 9 3 ,8 2 6 ) -3 % - 0% - 0% 0% 0% Treasury shares (1 7 7 ,8 8 4 ) -1 % (1 8 7 ,2 7 4 ) -1 % (1 9 6 ,6 1 5 ) -1 % -5 % -5 % Sh a reh olders' equ it y of Kla bin 3 ,8 1 0,3 05 11% 6 ,04 6 ,8 8 2 1 7 % 6 ,2 9 2 ,2 3 5 2 1 % -3 7 % -4 % Non-cont rolling int erest 5 7 4 ,4 5 6 2% 4 5 4 ,3 9 1 1% 2 4 0,9 9 5 1% 2 6 % 1 00% Consolida t ed sh a reh olders' equ it y 4 ,3 8 4 ,7 6 1 1 2 % 6 ,5 01 ,2 7 3 1 9 % 6 ,5 3 3 ,2 3 0 22% -3 3 % 1 00%
Total liabilities and equity 35,270,261 1 00% 34,703,082 1 00% 29,633,743 1 00% 2% 1 7 %
AV(1) Vertical Analysis AH(2) Horizont a l A na ly sis
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INCOME STATEMENTS FOR THE YEARS ENDED IN (BRL Thousands)
12/31/2020 12/31/2019 12/31/2018 CHANGE - AH (2) 12/31/2020 e 12/31/2019 e
A V (1) A V (1) A V (1) 1 2 /3 1 /2 01 9 1 2 /3 1 /2 01 8
Net sales revenue 1 1 ,9 4 8,7 9 4 1 00% 1 0,2 7 1 ,83 9 1 00% 1 0,01 6 ,4 6 1 1 00% 1 6 % 3% Variation in the fair v alue of biological assets 6 5 8,3 89 6% 3 9 0,05 3 4% 6 2 8,3 6 7 6% 69% -3 8% Cost of products sold (7,885,299) -6 6 % (7,241,234) -7 0% (6,342,406) -6 3 % 9% 1 4 % Gross profit 4 ,7 2 1 ,884 4 0% 3 ,4 2 0,6 5 8 33% 4 ,3 02 ,4 2 2 4 3 % 3 8% -2 0%
Operating expenses Sales (1,139,138) -1 0% (9 1 0,3 88) -9 % (7 6 4 ,3 4 8) -8% 2 5 % 1 9 % General and administrative (7 1 7 ,7 9 9 ) -6 % (6 00,9 5 9 ) -6 % (5 5 8,2 05 ) -6 % 1 9 % 8% Oth er n et 3 1 6 ,6 9 6 3% 6 09 ,82 6 6% (2 ,2 2 8) 0% -4 8% -2 7 4 7 1 % (1,540,241) -1 3 % (9 01 ,5 2 1 ) -9 % (1,324,781) -1 3 % 7 1 % -3 2 %
Equity in the results of joint v enture 3 3 ,1 2 3 0% 7 ,2 3 7 0% 5 ,9 6 4 0% 3 5 8% 2 1 %
Profit before finance result and taxes 3 ,2 1 4 ,7 6 6 2 7 % 2 ,5 2 6 ,3 7 4 2 5 % 2 ,9 83 ,6 05 3 0% 2 7 % -1 5 %
Finance result Finance income 3 82 ,6 03 3% 1 ,02 2 ,6 6 1 1 0% 4 9 5 ,4 03 5% -6 3 % 1 06 % Finance costs (3,791,000) -3 2 % (2,274,238) -2 2 % (1,548,790) -1 5 % 6 7 % 4 7 % Exchange variation (3,620,734) -3 0% (4 1 0,2 7 1 ) -4 % (1,998,799) -2 0% 7 83 % -7 9 % (7,029,131) -5 9 % (1,661,848) -1 6 % (3,052,186) -3 0% 3 2 3 % -4 6 %
(Loss) Profit before t axes on incom e (3,814,365) -3 2 % 86 4 ,5 2 6 8% (6 8,5 81 ) -1 % -5 4 1 % -1 3 6 1 %
Incom e t ax and social cont ribu t ion . Cu r r en t (4 4 6 ,6 2 6 ) -4 % 5 8,1 2 3 1% (3 2 2 ,2 3 6 ) -3 % -86 8% -1 1 8% . Defer r ed 1 ,87 1 ,5 01 1 6 % (2 08,03 1 ) -2 % 5 7 7 ,6 3 5 6% -1 000% -1 3 6 % 1 ,4 2 4 ,87 5 1 2 % (1 4 9 ,9 08) -1 % 2 5 5 ,3 9 9 3% -1 05 0% -1 5 9 %
(Loss) Profit for t h e y ear (2,389,490) -2 0% 714,618 7% 186,818 2% -4 3 4 % 2 83 %
A t t ribu t ed t o Klabin's sh areh olders (2,487,870) -2 1 % 675,825 137,455 1% -4 6 8% 1 00% A t t ribu t ed t o non-cont rolling sh areh olders 98,380 1% 38,793 49,363 0% 1 5 4 % 1 00%
AV(1) Vertical Analysis AH(2) Horizont al A naly sis COMPARISON OF OPERATIONAL RESULTS IN THE FISCAL YEARS ENDING DECEMBER 31, 2020, AND 2019
Net Revenue from Sales
Net operating revenue from sales in FY 2020 was BRL 11.9 billion, up 16% from 2019. Sales volume (ex- wood) was 3,554 thousand tons, up 7% YoY.
The main impacts on net sales revenues in 2020 compared with 2019 were:
(i) 15% increase in sales revenues in the Paper segment, from BRL 3.5 billion in 2019 to BRL 4.2 billion in 2020, and 21% increase in sales revenues in the Conversion segment, from BRL 3 billion in 2019 to BRL 3.6 billion in 2020, influenced by the strong presence in essential goods markets and e-commerce, which experienced strong demand during the pandemic, and the excellent operational performance of its units.
(ii) 11% increase in sales revenues in the Pulp Segment, from BRL 3.5 billion in 2019 to BRL 3.9 billion in 2020, with significant influence from the recovering demand in late 2020 in certain regions, and the US Dollar’s depreciation comparted to other global currencies, adding to product prices.
(iii) In October 2020, the Company completed acquisition of the assets of International Paper, which were responsible for generating BRL 271 million in additional Revenues in FY 2020.
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(iv) Approximately 45% of the Company’s sales volume is allocated to the international market, where the exchange rate affects prices. In 2020, the average exchange rate was BRL 5.15 to the US Dollar, up 28% from 2019, boosting revenues from sales of export goods.
Variation in the fair value of biological assets
The 2020 variation in the fair value of biological assets is equivalent to a BRL 648 million gain arising from increased productivity and extension of the forestry, in addition lower discount rates in terms of discounted cash flow.
The effects of the change in the fair value of biological assets in 2019 correspond to a BRL 390 million gain, arising from forest expansions and the revised discount rate used in calculations. In addition, the balance experienced a negative impact from the lower market prices of wood, from an average BRL 67/m3 at yearend 2018 to BRL 66/m3 at yearend 2019.
Cost of goods sold
The cost of goods sold in 2020 was BRL 7.9 billion, exceeding the 2019 amount due mainly to the 7% increase in sales volume (ex- wood). I addition, the amount was largely affected by the costs of the scheduled stop of the pulp unit, and lower generation and sale of electric energy. Another contributing factor to the increase is a product mix with a larger share of paper and packaging materials, with higher cost value-added.
The best indicator for cost determination when volumes are not comparable is the analysis of the unit cash cost in BRL/t, which covers sales of all of the Company’s products and includes sales, general and administrative expenses. This indicator was BRL 2.037/t in 2020, up 3% from 2019, ex- the one-time tax credit gain arising from the res judicata court ruling in favor of the Company’s claim to remove the ICMS tax bill from the PIS and Cofins taxable base, which added BRL 620 million in FY 2019, and the gain from the advantageous purchase of International Paper’s assets in Brazil, in the amount of BRL 206 million in 2020.
The minor 3% increase in the unit cash cost BRL /t was feasible due to the dilution of costs arising from the increased sales volume, as well as to increased efficiency at the Tall Oil plant, reducing the fuel and energy consumption over the year. On the other hand in addition to inflation impacts in 2020, the Company experienced an increase in the cost of wood due to the greater average felling radius and increased volume of wood purchased from third parties.
Operating expenses/revenues
(i) Sales
Sales expenses in 2020 were BRL 1.139 billion, up 25% from 2019 and representing 10% of the net sales revenues (versus 9% in 2019). At yearend 2018, Klabin put an early end to the supply arrangement it had with Fibria/Suzano for sales of short-fiber cellulose outside of South America, which Klabin took over in full from August 2019. The agreement was a free on board – Port of Paranaguá operation and the costs, which were previously deducted from the applicable price, have since then been booked in Klabin’s sales expenses line.
(ii) General and administrative
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General and administrative expenses were BRL 718 million in 2020, up 19% from 2019. The increase is due mainly to greater investment in information technology and engineering and design advisory services, in addition to COVID-19-related expenses including donations and services to reinforce the Company’s healthcare protocols.
(iii) Other, net
Other net operating revenues/expenses amounted to BRL 317 million in revenues in 2020, influenced mainly by the BRL 206 million gains in goodwill from the acquisition of International Paper’s assets, and BRL 63 million in connection with an insurance event payment.
Concerning FY 2019, particular notice is due on the effects of the non-recurring gain from the res judicata ruling regarding exclusion of the ICMS tax bill from the PIS and Cofins taxable base, in the amount of BRL 621 million.
Financial results
Financial income in FY 2020 was BRL 383 million, down 63% form 2019’s BRL 1 billion. The decrease was mainly due to the monetary restatement of tax credits associated with the res judicata ruling in favor of the Company’s plea to exclude the ICMS tax bill from the PIS and Cofins taxable base, adding BRL 384 million in 2019. Another effect was the lower income from financial investments because of the reduced cash position and lower market interest rates.
Financial expense 2020 was BRL 3.8 billion, up 67% from 2019’s BRL 2.3 billion. The increase is due to the greater gross debt in the wake of the Company’s liability management process, with costs incurred from the early liquidation of loans and financings, in addition to increased indebtedness and costs from financial instruments (Swaps).
Net foreign exchange variation increased to BRL 3.6 billion in expenses from BRL 410 million in 2019. The increase is due to the 28% depreciation of the US Dollar relative to the Brazilian Real in 2020. The change affects the balance sheet’s foreign currency entries, in particular loans and financings of approximately USD 4 billion, and has no net impact on cash as US Dollar- denominated export transactions exceed US Dollar-denominated obligations.
Because of the foregoing, the financial result was BRL 7 billion in expenses in 2020, compared to BRL 1.7 billion in 2019.
Current and deferred income tax and social contribution
In 2020, the Company recognized BRL 1.4 billion in income tax and social contribution, with a positive impact on Net Income arising largely from the BRL 1.8 billion in deferred taxes due to the adoption of the cash regime for foreign exchange rate variations.
In 2019, the Company’s income tax and social contribution bill was BRL 149 million, due to higher taxable income arising from improved operational results.
Net income/loss
The Company’s posted a net loss in FY 2020 of BRL 2.389 billion, due mainly to high financial expenses, influenced by foreign exchange variations given the Brazilian Real’s depreciation Page 175 of 348
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versus the US Dollar.
In addition, concerning net income/loss, the Company underscores BRL 7 million recognized in separate because they concern the Nova Campina (SP) unit, which was listed in the discontinued operations line because of its divestment, planned to take place in the first quarter of 2021.
Adjusted EBITDA
Consolidated 12/31/2020 12/31/2019 (=) Net earnings (2,389,490) 714,618 (+) Income tax and social contribution (1,424,875) 149,908 (+/-) Net financial income 7,029,131 1,661,848 (+) Amortization, depreciation and depletion on earnings 2,382,911 2,193,414 EBITDA 5,597,677 4,719,788
Adj. pursuant to CVM Inst 527/12 (+/-)Variation in the fair value of biological assets (658,389) (390,053) (+/-) Equity income (33,123) (7,237) (+/-) EBITDA from jointly held subsidiary - - Adjusted EBITDA 4,906,165 4,322,498
(+/-) Ganho de ICMS na base de PIS/COFINS (iii) - (620,833) (+/-) Ganho de compra vantajosa (iv) (206,061) - LAJIDA (EBITDA) - ajustado (excluindo efeitos não recorrentes) 4,700,104 3,701,665
The Company’s operational cash generation (Adjusted EBITDA ex- non-recurring effects) in 2020 was BRL 4.7 billion, from BRL 3.7 billion in 2019, up 27% YoY.
COMPARISON OF OPERATIONAL RESULTS IN THE FISCAL YEARS ENDING DECEMBER 31, 2019, and 2018
Net revenue from sales
Net operating revenue from sales in FY 2019 was BRL 10.3 billion, up 3% from 2018. Sales volume (ex- wood) was 3,327 thousand tons, up 4% YOY.
The main impacts on net sales revenues in 2019 compared with 2018 were:
(i) 11% increase in sales revenues in the Paper segment, up from BRL 3.2 billion in 2018 to BRL 3.5 billion in 2019, boosted by a 15% increase in revenues from paper exports, up from BRL 1.4 billion to BRL 1.6 billion in 2019, a 12% increase in board exports, taking advantage of its privileged sales position and distinctive product technology, enabling new markets to develop. In addition, with the drop in international kraftliner markets, the Company used its flexibility to allocate sale to the domestic market, increasing net revenues from the domestic market by 7%.
(ii) 5% increase in sales revenues in the Conversion segment, from BRL 2.9 billion in 2018 to BRL 3 billion in 2019, allocating a greater volume of paper to packaging
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production in pursuit of improved returns, taking advantage of the Brazilian economy’s growing demand.
(iii) 5% decrease in sales revenues in the Pulp segment, from BRL 3.7 billion in 2018 to BRL 3.5 billion in 2019, with significant impact from an approximately 26% price retraction over the course of 2019. Operationally, despite the drop in prices, the company increased its production volume in 2019 beyond nominal production capacity, as reflected in the 6% increase in pulp sales by volume compared with FY 2018.
(iv) An approximate 50% of the Company’s sales by volume are allocated to the international market, where the foreign exchange rate affects prices. In 2019 the average BRL-to-USD exchange rate was 3.95, up 8% from 2018, boosting sales revenues in the international market.
Variation in the fair value of biological assets
The 2019 change in the fair value of biological assets corresponds to a BRL 390 million gain from forest growth and the revised discount rate used in calculations. In addition, the balance had negative impact from the lower prices used for valuation purposes, from an average BRL 67/m3 at yearend 2018 to BRL 66/m3 at yearend 2019.
The effect of the change in the fair value of biological assets in 2018 corresponds to a BRL 628 million gain, with positive impact from the higher prices used for valuation, from an average BRL 63/m3 at yearend 2017 to BRL 67/m3 at yearend 2018, in addition to normal forest growth.
Cost of goods sold
The cost of goods sold in 2019 was BRL 7.2 billion, up from 2018 due mainly to the 4% increase in sales volume (ex- wood).
The best indicator for cost determination when volumes are not comparable is the analysis of the unit cash cost in BRL/t, which covers sales of all of the Company’s products and includes sales, general and administrative expenses. This indicator was BRL 1,975/t in 2019, up 5% from 2018, ex- the one-time tax credit gain associated with a court decision that became res judicata in favor of the Company’s claim to exclude ICMS from the PIS and COFINS taxable base, amounting to BRL 620 million. The 5% increase is largely due to inflation on the Company’s costs.
Operating expenses/revenues:
(i) Sales
Sales expenses in 2019 were BRL 910 million, up 19% from 2018, and answering for 9% of the period’s net sales revenue, up 1% from 2018. In addition to the 4% increase in sales volume in 2019, the gain concerns costs incorporated after the expiration of the supply agreement with Fibria/Suzano. Sales were previously made under the free-on-board regime, where the customer is responsible for costs.
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(ii) General and administrative
General and administrative expenses were BRL 601 million in 2019, up 8% from 2018. In addition to the period’s inflation, the increase is explained by topical spending on consultancy and on administrative restructuring, which helped optimize the Company’s corporate structure.
(iii) Other operating, net
In 2019 the company had a non-recurring tax credit gain from a sentence that became res judicata, supporting the Company’s claim to exclude ICMS from the PIS and COFINS taxable base. The BRL 1 billion was recognized as follows BRL 384 million to financial income, and BRL 631 million to Other operating expenses, net.
Financial income
Financial revenue in 2019 was BRL 1 billion, up from 2018’s BRL 495 million. The increase is mainly due to the restatement of tax credits in the light of the sentence that became res judicata, recognizing the Company’s claim to exclude ICMS from the PIS and COFINS taxable base, retroactive to April 2002, resulting in an effect of BRL 384 million.
Financial expenses were BRL 2.3 billion in 2019, up 47% from 2018’s BRL 1.5 billion. The increase is due to the increase in net debt after the Company’s liability management process, with costs involving early settlement of loans and financings, i addition to increased debt and costs arising from financial instruments (swaps).
Net foreign exchange variation was down to an expense of BRL 410 million, vis-à-vis BRL 2 billion in 2018. This was due to the 8% appreciation of the US dollar versus the Brazilian real, whereas in 2018 the US currency appreciated 15% against the domestic one in 2017. This change affects the balance sheet’s foreign-currency balances, mainly loans and financings, and has no net impact on cash, as US Dollar-denominated export transactions exceed US Dollar- denominated obligation payments.
Because of the foregoing, financial income decreased to expenses of BRL 1.7 billion in 2019 versus BRL 3 billion in expenses in 2018.
Current and deferred income tax and social contribution
In 2019 the Company recognized a BRL 149 million Income tax and social contribution expense due to increased taxable income arising from improved operational results.
In 2018, the balance of income tax and social contribution was up BRL 255 million, under sharp impact the deferred foreign exchange variation expense because of the endorsement of the cash regime for FX effects for tax purposes. The decision was reversed in 2019, when the company returned to accrual basis.
Net income
The Company had BRL 715 million in net income in 2019, due to its strong cash operational cash generation.
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Adjusted EBITDA
Consolidated 12/31/2019 12/31/2018 (=) Net earnings 714,618 186,818 (+) Income tax and social contribution 149,908 (255,399) (+/-) Net financial income 1,661,848 3,052,186 (+) Amortization, depreciation and depletion on earnings 2,193,414 1,673,347 EBITDA 4,719,788 4,656,952
Adj. pursuant to CVM Inst 527/12 (+/-)Variation in the fair value of biological assets (390,053) (628,367) (+/-) Equity income (7,237) (5,964) (+/-) EBITDA from jointly held subsidiary - 1,798 Adjusted EBITDA 4,322,498 4,024,419
(+/-) Ganho de ICMS na base de PIS/COFINS (iii) (620,833) - (+/-) Ganho de compra vantajosa (iv) - - LAJIDA (EBITDA) - ajustado (excluindo efeitos não recorrentes) 3,701,665 4,024,419 (*Amounts in BRL million)
The Company’s operational cash generation (adjusted EBITDA ex- non-recurring effects) in 2019 was BRL 3.7 billion versus BRL 4 billion in 2018, down 8% YoY.
COMPARISON OF THE MAIN BALANCE SHEET ACCOUNTS ON DECEMBER 31, 2020, AND 2019
CURRENT ASSETS
Cash and cash equivalents and securities
The Company had a balance of BRL 6.6 billion in cash and cash equivalents and securities at yearend 2020, answering for 19% of total assets. The BRL 3.1 billion decrease from yearend 2019 (BRL 9.7 billion) is mainly due to disbursements for the Puma II Project, of approximately BRL 4 billion over the course of 2020, and the early liquidations of Finnvera prepaid exports and export credit notes, in the respective amounts of BRL 6.2 billion and BRL 22 million.
Customer accounts receivable
The balance of customer accounts receivable was BRL 1.8 billion on December 31, 2020, down 3% from December 31, 2019’s BRL 1.9 billion. The decrease is due to the reduced average days’ payment and the effects of drawee risk operations.
Non-recourse receivables discount operations were conducted with specific customers in 2020 in the amount of BRL 2.7 billion, versus BRL 2.4 billion in 2019.
Average days’ payment was 82 days for domestic market sales in 2020, and approximately 112 days for foreign market sales.
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Inventories
On December 31, 2020, the Company had BRL 1.4 billion in inventories, up 6% from yearend 2019, due to the purchase of inputs to meet the high demand for the Company’s products.
ASSETS (LIABILITIES) FROM ASSETS RETAINED FOR DIVESTMENT
Due to the divestment process of the Nova Campina (SP) unit, acquired together with the International Paper assets, assets in the amount of BRL 175 million and liabilities in the amount of BRL 36 million from that unit are recognized separately in the balance sheet, pursuant to the specifically applicable accounting standards.
NON-CURRENT ASSETS
Taxes recoverable
The balance of taxes recoverable in current and non-current assets at yearend 2020 was BRL 1.5 billion, down from the BRL 1.9 billion booked on December 31, 2019. The decrease is mainly due to the use of approximately BRL 500 million in tax credits recognized in 2019 in connection with the res judicata court ruling in favor of the Company’s plea to exclude the ICMS tax bill from the PIS and Cofins taxable base, in the amount of BRL 1 billion.
Deferred income tax and social contribution
The balance of deferred taxes emerges from temporary differences in the netting of assets and liabilities. In 2020, the balance of deferred of income tax and social security shifted from a BRL 1.1 billion liability into a BRL 770 million asset.
Of particular relevance in the variation are the effects of foreign exchange fluctuations arising from the adoption of the cash regime for income tax purposes. Temporary losses from foreign exchange variations of book income were excluded from the taxable base for income tax purposes, resulting in a deferred asset of BRL 888 million in addition to BRL 637 million in losses from financial instruments (swaps), which FY 2020’s foreign exchange variation also affected.
Fixed Assets
The balance of fixed assets on December 31, 2020, was BRL 16,7 billion, equivalent to 47% of total assets, from BRL 13.2 billion on December 31, 2019, equal to 38% of total assets. As concerns the variation in the line, particular emphasis is due on the disbursement of BRL 4 billion in 2020 associated with the Puma II Project and the acquisition of International Paper do Brasil Ltda assets in the amount of BRL 410 million, considering the historic cost of the acquisition and the goodwill gains made in the operation.
Right-of-use assets
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2019 because of new land lease operations executed in FY 2020. Right-of-use assets concern the rental/lease of land, machinery, equipment and buildings for which the company has asset- side agreements.
Biological assets
The Company’s biological assets valued at fair value were BRL 4.7 billion on December 31, 2020, equivalent to 13% of total assets, in line with 2019 amounts.
CURRENT LIABILITIES
Suppliers
On December 31, 2020 the balance of supplier accounts payable was BRL 2 billion, up 98% from 2019’s BRL 1 billion. The increase is significantly due to procurement for the Puma II Project, which amounted to BRL 4 billion in 2020, to the increase in average days’ payment from 51 days in 2019 to 67 days in 2020, and to drawee risk operations that the Company offers to suppliers, from BRL 137 million at yearend 2019 to BRL 249 million at yearend 2020.
NON-CURRENT LIABILITIES
Loans and financings
The balance of loans and financings was BRL 653 million in current liabilities and BRL 28.9 billion in non-current liabilities on December 31, 2020, from BRL 702 million in current liabilities and BRL 21.5 billion in non-current liabilities on December 31, 2019, for a 4% YoY increase in the total balance. The balance of loans and financings, considering both current and non-current liabilities, corresponds to 70% of total liabilities and shareholders’ equity on December 31, 2020, versus 64% on December 31, 2019.
Of particular relevance is the 28% appreciation of the US Dollar against the Brazilian Real in 2020, raising the outstanding balance in Brazilian Reais of the foreign currency=-denominated debt to 78% of the balance of Loans and Financings at yearend 2020.
Debentures
The balance of debentures as current and non-current liabilities was BRL 1.8 billion, equivalent to 5% of total liabilities, on December 31, 2020, steady from FY 2019. In FY 2020 the Company amortized the 7th issue (1st series), capitalizing the converted debentures as equity stock in the amount of BRL 399 million, partly offset by the restatement of financial instruments (swaps) in the amount of BRL 526 million due to the effects of foreign exchange variations.
COMPARISON OF THE MAIN BALANCE SHEET ACCOUNTS AS OF DECEMBER 31, 2019, AND 2018
CURRENT ASSETS Page 181 of 348
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Cash and cash equivalents and securities
The Company had a balance of BRL 9.7 billion in Cash and cash equivalents and securities at yearend 2019, representing 28% of total assets, up BRL 2.7 billion from yearend 2018 (BRL 7 billion). This is mainly due to new funds raised and operational cash generation in the period.
Customer accounts receivable
The balance of customer accounts receivable was BRL 1.9 billion in December 31, 2019, down 9% from December 31, 2018’s BRL 2 billion. The decrease is due to lower selling prices, particularly in the pulp segment.
Average days’ payment was approximately 86 days for domestic sales and 117 days for foreign sales.
Inventories
On December 31, 2019, the Company had BRL 1.3 billion in inventories, up 10% from yearend 2018. The increase is due to increased pulp production volume.
NON-CURRENT ASSETS
Taxes recoverable
The balance of taxes recoverable in non-current assets as of December 31, 2019, was BRL 1.9 billion, up from the BRL 1.3 billion recognized on December 31, 2018. The increase is mainly due to the tax credits gain arising from the court sentence that passed into res judicata, recognizing the Company’s claim to remove ICMS from the PIS and COFINS taxable base, retroactive to April 2002, in the amount of BRL 1 billion.
Fixed assets
The balance of fixed assets on December 31, 2019, was BRL 13.2 billion, equivalent to 38% of total assets, versus BRL 12.3 billion on December 31, 2018. Concerning the change, we underscore disbursements for the Puma II Project for the construction of two paper mills with integrated pulp production, in the amount of BRL 1.3 billion.
Right-of-use assets
On January 1st, 2019, the Company adopted the new technical accounting standard CPC 06 (R2)/IFRS 16 – Lease Operations, which requires balance-sheet recognition of asset leases, rent, and land leases.
Because of IFRS 16, on December 31, 2019, the Company recognized BRL 494 million in connection with rights to use land, machinery, equipment and buildings for which it maintains rent/lease agreements.
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The Company’s biological assets valued at fair value were BRL 4.7 billion on December 31, 2019, equivalent to 14% of total assets, and BRL 4.6 billion on December 31, 2018, for 13% of total assets. The main element in the increase balance corresponds to standing trees purchase agreements entered into over the course of 2019.
CURRENT LIABILITIES
Suppliers
As of December 31, 2019, the balance of suppliers was BRL 1 billion, up 13% from 2018’s BRL 904 million. The increase is due to the greater average days’ payment, from 50 in 2018 to 51 in 2019, due to drawee risk operations that the company offers to suppliers, in addition to investment in fixed assets acquisitions associated with Puma II.
NON-CURRENT LIABILITIES
Loans and financings
The balance of loans and financings was BRL 702 million in current liabilities and BRL 21.5 billion in non-current liabilities on December 31, 2019, from BRL 1.9 billion in current liabilities and BRL 16.9 billion in non-current liabilities on December 31, 2018, up 18% YoY. The balance of loans and financings, considering current and non-current liabilities, was 64% of total liabilities and shareholders’ equity as of December 31, 2019, from 55% on December 31, 2018.
The increase in gross debt arises from funds raised in connection with the Company’s liability management process, lengthening average maturity from 48 to 96 months at yearend 2019, and the investments associated with the Puma II Project. Over the course of 2019 the Company secured new financing, such as the issue of Agribusiness Receivables Certificates (CRA) in the amount of BRL 2 billion, and the issue of bonds for a total USD 750 million.
Also noteworthy is the 4% gain of the US Dollar versus the Brazilian Real in 2019, increasing the outstanding foreign currency-denominated debt, which corresponded to 76% of the balance as of December 31, 2019.
Debentures
The balance of debentures, considering both current and no-current obligations, was BRL 1.8 billion, or 6% of total liabilities, on December 31, 2019, versus BRL 663 million at yearend 2018. The increase is due to the 12th issue, in the amount of BRL I billion, which the Company carried out in 2019.
Deferred income tax and social contribution
As of December 31, 2019, the balance of deferred Income tax and social contribution constituted on temporary differences and recognized in the balance sheets as assets and
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liabilities correspond to BRL 1.1 billion in liabilities, from BRL 960 million on December 31, 2018. The change seen in 2019 corresponds to the amount won in the legal proceedings to exclude ICMS from the PIS and COFINS taxable base.
The Company’s main temporary differences concern the fair-value valuation of biological assets, the cost assigned to fixed assets (land), which will have no cash effect when realized, and the deferred foreign exchange rate variation and credits on losses and accumulated negative bases.
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10.2. Operational and financial income a) Operational income i. description of all relevant components of revenues The Company positions itself the domestic market with emphasis on the packaging paper and packaging paper for food, liquids (refrigerated and dairies), beverages (sodas and beers), hygiene and cleaning, personal care, and pharmaceuticals, in addition to paper bags (cement, mortar, flour, seed and other) and fluff pulp. As for the international market, growth is based on the markets for pulp, liquid packaging board as global supplier to Tetra Pak, folding boxboard (frozen products, hygiene and cleaning – Europe, USA and Mercosur) and kraftliner. The Company sold 53% of its sales volume in the domestic market in 2020. The domestic/international sales mix is an important element in net revenues formation. The table next shows the volume of sales and net revenues from sales for the past three fiscal years.
2020 2019 2018 Sales volume 1000 t % 1000 t % 1000 t % Domestic market 1,960 55% 1.769 53% 1.589 50% Exports 1,598 45% 1.558 47% 1.6 50% Total 3,558 100% 3.327 100% 3.189 100% Wood 1,706 1.706 2.109
2020 2019 2018 Net revenues BRL BRL BRL % % % million million million Domestic market 6,995 59% 6,114 60% 5,533 55% Exports 4,954 41% 4,158 40% 4,483 45% Total 11,949 100% 10,272 100% 10,016 100%
Breakdown of net 2020 2019 2018 revenues by product
Coated board 25% 24% 21% Corrugated boxes 23% 21% 20% Pulp 33% 34% 36% Kraftliner 10% 10% 9% Industrial bags 8% 8% 8% Wood 2% 2% 3% Other 0% 1% 3%
The sales mix across regions is also a very important element in the Company’s sales breakdown, as prices, freight and delivery terms vary between locations.
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In 2020, the Company acquired the Brazilian packaging papers and corrugated cardboard business of International Paper do Brasil. Under the operation, the fiscal year’s results recognized goodwill in the amount of BRL 206 million in the process of measuring the fair value of the assets and liabilities acquired. In 2019, Klabin recognized a one-time tax credit in connection with a res judicata court ruling in favor of the Company’s claim to exclude the ICMS tax bill from the PIS and Cofins taxable base, with a positive effect on the Company’s EBITDA in the amount of BRL 620 million. b) Change in revenues associated with changes in prices, foreign exchange rates, inflation, volume, and the introduction of new products and services The prices of the Company’s products vary depending on the balance of supply and demand in the domestic and international markets. Products are priced differently in the various segments in which the Company operates, and are under heavy influence of GDP. Inflation, economic activity level in Brazil and around the world, interest rate changes, tax burden, variation of the Brazilian Real against foreign currencies, the market price of pulp, paper shavings price, and natural phenomena affecting wood supply. Prices are usually cyclic and subject to factors beyond Klabin’s control. The international prices of paper and pulp are, in most cases, denominated in US Dollars. The Company exported 45% of its sales volume in 2020. Therefore, the foreign exchange rate is an important element for the company’s net revenues. In the past three years, the exchange rate (selling rate) varied as follows:
2020 2019 2018 2020/2019 2019/2018 Foreign exchange BRL/US$ BRL/US$ BRL/US$ % % Average US Dollar 5.16 4,03 3,87 28% 4% Closing US Dollar 5.20 3,95 3,66 32% 8%
Net sales revenue in the foreign market was BRL 4.9 billion in 2020, up 19% from the previous year, when export revenues were BRL 4.2 billion. In 2018, net export revenues were BRL 4.5 billion. The Company’s revenues and costs are affected by inflation. The domestic market prices of paper products, as well as the cost of production inputs and labor, tend to vary with Brazilian inflation indices. c) The impact of inflation, of price changes for the main inputs and outputs, of foreign exchange rates, and of the interest rate on the issuer’s operational and financial results For materials, in addition to the IPCA, the variation of certain commodities – such as fuels – applies to determine freight price adjustments. The Company’s operational results are influenced by inflation and foreign exchange rate variations, as, in 2020, 41% of net revenues came from foreign sales. Financial results are affected by changes in the Funds Rate and other rates affecting financial investments; in the TJLP, which applies to domestic currency-denominated debt, and the foreign exchange rate, which applies to foreign currency-denominated financing.
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10.3. Effective or expected events with effects on financial statements a) Introduction or divestment of an operating segment No operating segments were introduced or divested in 2020, 2019 and 2018. b) Creation, acquisition or divestment of an equity stake In the fiscal year ending December 31, 2020, the Company created, acquired or divested following equity stakes: i. On January 21, 2020, the Company formed Pinus Taeda Florestal S.A., A Special Purpose Entity (SPE), together with a Timber Investment Management Organization (TIMO), whose main purpose shall be exploration of forestry activities in the Central- South Region of Paraná State, enabling access to new land to increment the Company’s forest base.
ii. On October 14, 2020, the Company acquired the assets of International Paper do Brasil Ltda. These assets have production capacity for 305 thousand annual tons of corrugated cardboard. The acquisition also includes packaging paper units (virgin and recycled fiber) with total capacity for 310 thousand annual tons. The transaction aligns with the Company’s strategy for growth in the paper and paper packaging businesses, expanding operational flexibility and adding stability to the bottom line. On June 24, 2020, during the acquisition process, the assets located in the city of Nova Campina (SP) were negotiated with the Klingele Paper & Packaging Group, and the sale was completed in January 2021.
iii. On September 09, 2020, the Company formed Aroeira Reflorestadora S.A., a Special Purpose Entity (SPE), whose main purpose is to explore forestry activities in the state of Santa Catarina. Upon execution of the company, an advance was provided for future capital increase (“adiantamento para futuro aumento de capital” – AFAC) in the amount of BRL 20 million for the purposes of acquiring and leasing land for planting forests.
iv. On November 26, 2020, the Company took over SOGEMAR – Sociedade Geral de Marcas, the owner of brands involved in the royalties agreement. As a result of the operation, Klabin became the owner of Sogemar brands, with the consequent termination, on that date, of the respective license agreement and ceasing payment of royalties for said brands.
v. On November 12, 2020, the Company formed Kla Holdings S.A. (“Kla Holdings”) for the purposes of holding stakes in other companies, in line with the Company’s corporate strategy.
vi. On November 09, 2020, the Company took over Sociedade em Conta de Participação CG Forest (“SCP CG Forest”), at the decision of its partners upon the winding down of the entity’s operations.
vii. At yearend 2020 the Company wound down its overseas subsidiaries Klabin Limited, Klabin Trade and Klabin Overseas, in addition to domestic subsidiary Celucat. The respective operations ceased because the companies were inactive and without prospects of operational utility.
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In the fiscal year ending December 31, 2019, the Company created, acquired or divested following equity stakes: i. On March 28, 2019, the Company formed Cerejeira Reflorestadora S.A., a Special Purpose Entity (SPE), whose main purpose is to explore forestry activities in the state of Paraná. The entity is undergoing structuring and has no active operations.
ii. On July 26, 2019, the Company formed Sapopema Reflorestadora S.A, a Special Purpose Entity (SPE), together with a Timber Investment Management Organization (TIMO), whose purpose is to explore forestry activities in the state of Paraná.
iii. On October 21, 2019, the Company formed the wholly-owned subsidiary "Klabin Paranaguá SPE S.A". The Company’s sole and exclusive purpose is to explore the lease of areas, port facilities and public infrastructure within the Port of Paranaguá, to carry out unloading (offloading, internal handling, storage and shipment) and loading (receipt, storage, internal handling and loading) of general cargo, in particular paper and pulp.
In the fiscal year ending December 31, 2018, the Company created, acquired or divested the following equity stakes:
i. Formation of the Special Purpose Entity "Guaricana Reflorestadora S.A." together with a Timber Investment Management Organization in December 2018, with the injection of BRL 142 million in forest assets (BRL 101 million, discounting deferred taxes on the fair value of biological assets) and BRL 869 thousand in cash for working capital from Klabin S.A and BRL 192 million in cash from the Timber Investment Management Organization, of which BRL 190 million were used to acquire forest assets from third, comprising 11,541 hectares of rural land in Santa Catarina, of which 7,644 hectares are tillable area, of which 7,141 are currently planted, at a cost of BRL 123 million in forests and BRL 67 million in land.
c) Unusual events or operations There were no unusual events or operations in fiscal years 2020, 2019 and 2018 that have not been specified elsewhere.
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10.4. Significant changes in account practices – auditors’’ reservations and emphasis a) Significant changes in accounting practices
No material accounting practice changes worth emphasizing took place between fiscal years 2020 and 2018. In FY 2019, the IASB and CPC approved and issued new standards, which went into force and were effectively adopted from January 1, 2019.
(i) IFRS 16- Lease Operations (CPC 06 (R2) - Operações de Arrendamento Mercantil) The new standard replaces IAS 17 - "Lease Operations” and constructions thereof, providing that lessees must now recognize the liability from future payments of “lease liabilities” and the right to use the leased asset “right-of-use assets” in connection with virtually all lease agreements.
(ii) IFRIC 23 – Uncertainty Surrounding the treatment of Taxes on Earnings (CPC 22 - Incerteza sobre Tratamento de Tributos sobre o Lucro)
The new interpretation provides requirements for recognition and measurement in situations where the Company has defined, during the process of ascertaining taxes on earnings (Income tax and social contribution), the use of uncertain tax treatments that may come into question before tax authorities. The Company’s Management now considers aspects of IFRIC 23 (ICPC 22) and has revised judgments made while ascertaining Income tax and social contribution, concluding that no uncertain treatments have been used in its financial statements, as all procedures associated with payment of taxes on earnings are backed by the applicable law and legal precedent.
b) material effects of accounting practice changes The table below shows the balance-sheet effects in BRL thousands of the adoption of the new CPC 06 (R2)/ IFRS 16 standard on July 1st and December 31, 2019:
Effect of IFRS 16 on t h e Balance Sh eet of Consolidat ed in
A sset s Liabilities and Equity 01/01/2019 12/31/2019 01/01/2019 12/31/2019
Cu rrent - Cu rrent 90,477 100,510 Lease Liability 9 0,4 7 7 1 00,5 1 0
Non-cu rrent 372,893 481,287 Non-cu rrent 282,416 396,719 Right of use asset 3 7 2 ,89 3 4 9 4 ,3 9 9 Lease Liability 2 82 ,4 1 6 3 9 6 ,7 1 9 Biological assets - (1 3 ,1 1 2 ) Equ it y - (15,942) Retained earnings - (1 5 ,9 4 2 )
T ot al 372,893 481,287 T ot al 372,893 481,287 No material changes in accounting practices took place in fiscal years 2020 and 2018. c) Auditors’ reservations and emphasis External audit reports for the financial statements for the fiscal years ending December 31, 2020, 2019 and 2018 included no reservations or emphasis.
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10.5. Critical accounting policies The Company’s consolidated financial statements are prepared according to the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), in line with accounting practices embraced in Brazil, under the standards published by the Comitê de Pronunciamentos Contábeis - CPC. The Company understands that the items next are critical, requiring estimates and subjective judgment on an uncertain future, and are needed to determine the amounts provided in its financial statements, as they depend on the definition of assumptions like discount rates, customer analyses, the definition of the useful life of assets, forecasting results based on the budget, estimated losses, productivity, forecast of future events, market prices, and more. The assumptions made are based on the Management’s knowledge and experience, on the best benchmarks available from the market, on predicted future events, and on expert support as needed. Provision for bad credits
The Company provisions for bad credits based on individual analyses of amounts receivable and estimated probably losses realizing receivables. The credit risk of the Company’s operational activities is managed by means of specific rules governing customer acceptance, credit analysis and establishment of exposure limits by customers, all of which are periodically revised, in addition to constant monitoring of customers’ financial health as a means to make sure that amounts owed the Company are in fact collected.
The Company’s policy is to provision for bad credits based on an individual analysis of amounts receivable, considering: (i) the concepts of effective losses and expected losses, taking account of the probability of default events occurring in the following 12 months, (ii) financial instruments experiencing significant credit risk increase, but no objective evidence of impairment; and (iii) financial assets showing objective evidence of impairment.
The procedure requires a certain degree of discretion from Management because of the uncertain assumptions involved in the process, such as the financial standings of customers and the market’s economic trends.
Provision for losses realizing inventories
The Company provisions for probable losses from (i) inventories of products that have been discontinued or we intend to discontinue; (ii) surplus inventories of raw materials relative to projected sales of the products for which they are used in the coming twenty-four months; (iii) inventories of finished products that will expire before they can be sold; and (iv) unused maintenance inventories. These provisions are updated as of each balance-sheet closing date.
The activity’s critical process lies in evaluating the obsolescence of inventories, considering individual analysis of the items according to the judgment of the professionals involved, leaving to Management the definition of standards and internal procedures for periodical evaluation of inventories.
Although this is a critical process because of the necessary judgment, the Company’s main products (paper, packaging, bags and wood) are not perishable, and, even if not used for sales, Page 190 of 348
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they may be re-processed and used in new production processes.
Deferred income tax and social contribution
The Company recognizes deferred tax assets and liabilities based on the difference between book values and the taxable base of assets and liabilities. The Company regularly reviews the realization of deferred tax assets.
The critical nexus for deferred taxes relates with Management’s judgment of the realization of the net deferred tax asset, keeping it on the books as long as probable, as supported by results forecasts, but the amount thereof is subject to uncertainty as it depends on the materialization of forecast taxable income in future periods.
The Company chose early adoption in 2014 of Law 12.973/14, which enable neutralizing the current tax effect on income accounts, which receive different treatments under the tax law and the new Corporations Law.
Fixed and intangible assets
The Company uses the linear depreciation method set based on the assessment of each asset’s useful life, based on the expected generation of future economic benefits, with the exception of land, which does not depreciate. Assessment of assets’ useful life is reviewed annually and adjusted as needed, and may vary based on each unit’s technological currentness.
Financial charges are capitalized on fixed assets when they are incurred on ongoing fixed assets formed, where applicable.
Expenses on new products and techniques research are recognized in each fiscal year as expenses, as they are incurred.
Useful-life determination is a critical process and demands subjective judgment. It is inherently uncertain due to technological change or other factors that may cause early obsolescence of fixed assets. If a need arises to make relevant changes to the original assumptions, depreciation expenses, obsolescence write-offs and the book value of fixed assets may diverge materially from the originally adopted assumptions.
Asset impairment
The balance of fixed and other assets is revised annually to identify evidence of non-recoverable losses or events and chances indicating that the book value may not be recoverable.
In the estimates used to define an asset’s recovery value, estimated cash flows are discounted to their present value using a discount rate that reflects the current market valuation of the time- value of money and asset-specific risks. This discount rate is set individually for each asset, unless an asset generates no cash inflows. When a loss is identified, it is recognized in a period’s results at the amount by which an asset’s book value exceeds its recovery value.
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Impairment valuation is critical because it can be influenced by different internal and external factors, such as economic and industrial trends, interest rates, strategic business changes, and changes in the types of products offered to the market.
Biological assets
Fair-value valuation of biological assets, which the Company does quarterly, takes account of certain estimates such as: price of wood, discount rate, forest harvest plans, and productivity volume, all of which are subject to uncertainty and whose variations may affect future results. A fair-value increase or decrease is determined as the difference between the fair value of biological assets at the beginning and end of the relevant period.
Tax, social security, labor and civil provisions
These provisions arise from administrative and/or court proceedings inherent to the Company’s regular activities. Tax, social security, labor and civil provisions are reviewed by in-house counsel, and lawyers and experts retained by the Company, and are quantified based on criteria that enable proper measurement. They are restated to the as-of date of each balance sheet.
Provisions are made for court proceedings deemed to be probable losses. For those where a loss is deemed possible, the Company merely discloses the cases and amounts involved, with no provisioning; and for those where a loss is deemed remote, the Company neither discloses risks nor forms provisions, as required by the accounting practices in force in Brazil.
In court cases where the Company is the plaintiff, no amounts are recognized in financial statements, according to the accounting principle of prudence. The practice in place is to only recognize such assets after the sentences thereunder pass into res judicata.
Combined businesses
A business acquisition takes place when the set of activities and assets acquired includes at least one input and one substantive process that, taken together, contribute significantly to the ability to generate output. Combined businesses are recognized by means of the application of the acquisition method. The cost of an acquisition is measured as the sum total of the assets transferred, valued at fair value on the date of acquisition, in the light of the Purchase Price Allocation (PPA) to the acquired assets and liabilities. A combined business produces a premium when the acquisition price exceeds the value of the net assets acquired (net identifiable assets acquired and liabilities accepted). If the acquisition price is lower than the fair value of the net assets acquired, the difference will be recognized as a beneficial acquisition in the fiscal year’s bottom line. PPA effects are allocated to intangible assets when they emerge from a premium for future returns, or allocated to assets and liabilities when valuation indicates a market premium.
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10.6. Material off-balance sheet items a) assets and liabilities that the Company holds directly or indirectly and not shown in the balance sheet (off-balance sheet items), such as: i) operational leases as lessor or lessee; ii) written off receivables portfolios in connection with which the entity maintains risks and obligations, indicating the respective liabilities; iii) agreements governing the future purchase and sale of products or services; iv) unfinished construction agreements; and v) agreements governing future financing receipts. The Company has no operations, agreements, obligations or other engagements in societies whose financial statements are not consolidated with its own, nor other operations capable of creating present or future relevant effects on results or the Company’s equity or financial situation, its revenues or expenses, liquidity, investments, cash or any other not recognized in its financial statements. b) Other off-balance sheet items There are no other material items not recognized in the Company’s consolidated financial statements that are recognized in its financial statements.
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10.7 Comments on off-balance sheet items
There are no other material items not recognized in the Company’s consolidated financial statements
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10.8 Business plan a) Investment (i) Quantitative and qualitative description of ongoing investments and forecast investments: Total investment in 2020 was BRL 5.2 billion, of which BRL 340 million were allocated to forestry operations, BRL 451 million were allocated to operational continuity of the plants, BRL 339 million were allocated to special projects and expansions, in particular high-return projects pursuing improved performance of the company in all of its operational segments, and BRL 4 billion sere allocated to the Puma II Project.
BRL million 2020 2019 2018 Maintenance and operational continuity 791 1,065 734 Special projects and expansion 339 237 222 Puma II Project 4,045 1,271 - Total 5,174 2,573 956
Klabin invested BRL 2.6 billion in 2019, of which BRL 334 million were allocated to forest operations, BRL 731 million were allocated to operational continuity of the plants, BRL 237 million were allocated to special projects and expansions, in particular high-return projects that seek to improve the Company’s performance in every segment in which it operates, and BRL 1.3 billion was allocated to the Puma II Project. (ii) Investment Funding Sources Investments are funded with cash balances, expected cash generation from the operation itself, and market funding through loans, financing with development agencies, and access to the capital markets. In addition, as announced to the market on October 31, 2019, and November 6, 2019, the Company has secured credit facilities with the ISDB BID Invest & IFC – for a total USD 800 million, ECA (Export Credit Agency) – Finnvera, and a facility tied in with execution of the Puma II Project with ao BNDES, for a total of up to BRL 3 billion. All of these are part of the process for securing financing for the Puma II Project. (iii) Material divestments underway and forecast divestments Sale of the Nova Campina (SP) unit
As discussed in an Announcement to the Market of June 24, 2020, the Company has executed the required documents to sell the unit located in Nova Campina (SP) to the Klingele Paper & Packaging Group for an amount of BRL 196 million, of which BRL 132 million to be paid upon operation close, which took place on January 29, 2021, and the remainder in two annual installments of a like amount. The Nova Campina (SP) unit, with production capacity of 162 thousand tons of kraftliner, is one of the assets acquired from International Paper.
b) disclosed acquisition of plants, equipment, patents, or other assets capable of materially affecting the Company’s productive capacity Expansion project – “Puma II”
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As disclosed to the market in the Material Fact of April 16, 2019, the Company approved commencement of a project for capacity expansion in the packaging papers segment. It has been called the "Puma II Project" and covers construction of two paper mills with integrated pulp production in the Klabin manufacturing unit in Ortigueira (PR) (Puma Unit). Installation of the Puma II Project will take place in two phases:
(i) Phase one consists in the construction of a fiber line for non-bleached pulp production, integrated with a kraftliner and white kraftliner paper mill whose output will be marketed under the Eukaliner brand, with capacity for 450 thousand annual tons. This phase also includes construction and/or adjustment of supporting facilities for the new fiber lines and recovery and utility areas. (ii) Phase two covers construction of a supplementary line integrated with a kraftliner paper mill with capacity for 470 thousand annual tons, and expansion of certain supporting structures.
According to schedule, each phase will take 24 months, and construction of the second phase will begin as soon as phase one is completed. Therefore, commissioning of the first machine is scheduled for the second quarter of 2021, and commissioning of the second machine is scheduled for the second quarter of 2023.
Gross investment on budget for construction of the Puma II Project is BRL 9.1 billion, subject to foreign exchange rate variations and inflation restatements. As of December 2020, BRL 5.3 billion had been disbursed, and the remainder will be until 2023. Out of this total, approximately BRL 900 million concern recoverable taxes. As the majority of the equipment will be installed in phase I, an approximate two-thirds of the disbursements should take place by the end of 2021.
Assets acquired from International Paper do Brasil
As disclosed in the announcement to the market of March 29, 2020, the Company has executed the documents required to acquire the packaging paper and corrugated cardboard business of international Paper do Brazil (IP) located in Brazil.
IP’s operations, which were the focus of the acquisition, include productive capacity for 305 thousand annual tons of corrugated cardboard, with sales equivalent to a 6.6% market share of the domestic market, according to 2018 data from the Brazilian Corrugated Cardboard Association (ABPO). The acquisition also include the packaging papers units (virgin fiber and recycled) with 310 annual tons in total capacity.
On October 14, 2020, the conditions precedent for acquisition of the packaging papers and corrugated cardboard businesses of International Paper do Brasil (“IP”) located in Brazil were fulfilled and all agreements and legal approvals were executed, with the disbursement of an initial payment in the amount of BRL 280 million on the same date, with BRL 50 million left to pay one year thereafter, subject to certain terms and conditions under the agreement, for a total acquisition price of BRL 330 million, in addition to reimbursing IP of excess working capital received on that date, in an amount to be determined and close to BRL 58 million in the first half of 2021. Payment was made out of the Company’s own funds.
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Acquisition of brands involved in royalties and takeover of Sogemar
On November 26, 2020 an Extraordinary General Meeting approved the takeover of SOGEMAR – Sociedade Geral de Marcas (Sogemar), the owner of the brands involved in the royalties agreement.
With the takeover, Klabin becomes the owner of Sogemar’s brands, and Sogemar ceases to exist on the date, thereby extinguishing the respective license agreement and payment of royalties in connection with such brands.
The takeover involved substitution of the shares of Sogemar through the issue of sixty-nine million, three hundred and ninety-four thousand, six hundred and ninety six (69,394,696) new common shares of the Company, all nominative and without par value, for Sogemar’s partners, with a BRL 144 increase in the Company’s shareholders’ equity.
c) new products and services (including description of disclosed research underway, total amount spent in research for new products or services development, disclosed projects underway, and total amount spend by the Company on new products or service development) Klabin’s competitive evolution, from the performance of its forests and production processes to management of its products’ impacts, is intrinsically connected with constant investment in Research, Development and Innovation. As the paper and packaging markets become more and more challenging, and with entry into the world pulp market with the operational startup of the Ortigueira (PR) plant and the motto of Sustainability and renewable materials, the Company has been increasing its R&D&I investments.
In 2020, Klabin was devoted to standing as a global benchmark for responsible solutions in response to constant societal changes, offering renewable, recyclable and biodegradable multipurpose forestry products. To contribute to a sustainable economy and inspire consumer choices, the Company prioritizes the planet’s prosperity, which principles are aligned with the KODS (Klabin Sustainable Development Goals), creating value for its investors, employees, business partners and communities.
With a more comprehensive view and a more strategic action, the R&D&I area acts on several links along the production chain:
Perfecting processes for improving species, planting and handling of pine and eucalyptus to achieve increasing productivity; Developing new products and improving existing processes to adapt them to customers’ needs or to better economic and environmental performance; Solutions for the issues of the physical and mechanical properties of papers and packaging, such as barriers (water, steam, fat, oxygen), porosity, permeability and roughness, and of conversion (cutting, folding, pasting, closing and printing); Review of product performance in terms of the environment, quality, productivity, health and safety.
Klabin’s Forest Research, Development and Innovation is devoted to projects included in different research tracks:
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Cloning; Forest Biotechnology; Plant Health; Nutrition and Forestry; Ecophysiology.
2020 Highlights:
Forming genetic improvement populations of pine and eucalyptus in PR and SC, in pursuit of medium- and long-term genetic gains for the purposes of recommending new hybrids with greater fiber production potential; Expansion of the Eucalyptus and Corymbia genetic base by means of the introduction of new genetic material in an attempt to secure new alleles for adverse conditions, such as climate change and expansion into new production sites; Development of genetic improvement strategies for the Corymbia genus from the selection of hybrid clones with high productive potential, for the purposes of producing new clones appropriate for hydric stress conditions, as well as to increase basic wood density; Protecting 6 cultivars of high-productivity hybrid eucalyptus clones to ensure Klabin’s genetic assets; Increasing the production capacity for genetically improved seeds by means of orchards of Pinus taeda, Pinus maximinoi and Pinus tecunumanii; Enabling operational-scale production of saplings of the elite Pinus taeda family through vegetative propagation; Development of 250 new clones of Pinus taeda via somatic embryogenesis to expand the clonal selection program’s experimental network; Continuation of the internal technical committee called FIP (Forest, Industry and Research), with a focus on understanding the quality characteristics of wood and the solution of deviations that may impact the quality of the end product; Installation of 32 weather forecasting and climate monitoring stations in Klabin’s area of activities in PR; Major advance in the Forest Biotechnology area, with the development and implementation of biotechnology techniques such as somatic embryogenesis and molecular markets applied to the selection of superior clones; Development of a computerized research management and information security system (Labware/Lims) for the forestry research base.
Klabin’s Industrial Research, Development and Innovation area addresses five research tracks:
Development of forest raw materials for pulp, paper and new materials; Paper optimization and new applications, with a focus on functional barriers; Bio-refinery (multiple uses of the first base, in particular lignin); Optimization of environmental processes, re-use of process byproducts, reduced water, energy and steam consumption; Nanotechnology – cellulose fractions at the micro- or nanoscale and application to new products.
Industrial Research achieved several accomplishments in 2020, which was a promising year despite the great challenges faced. Progress continued in quality assessments of wood from new genetic materials planted at Klabin, with the following highlights:
Pinus maximinoi, as a source of long fibers, with increased forest production potential and distinctive end-product quality. The fruits of these studies were recognized by international awards such as best Technical Paper presented in 2019, in the Tappi Peers
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event in the USA, in addition to one more doctorate earned in 2020.
Evaluation of the wood quality of more than 1,123 Eucalyptus spp. trees by application of the Near Infrared technology for quick prediction of the wood’s chemical, physical and pulping properties. For added efficiency, the R&D&I area maintains partnerships with providers of equipment and inputs, in addition to relying on support from research institutes and universities in Brazil and abroad.
It is also worth mentioning actions intended to add properties to paper as a means to improve its effectiveness as a sustainable packaging material in functional barrier form, meeting the increasing needs of the market and society, as well as continued progress in terms of intrinsic properties, such as mechanical resistance and surface quality. Gains were made in the development of barriers against various substances (water, steam, fat, oxygen), achieving more effective results in line with stakeholders’ expectations.
In addition to the BRL 70 million invested in 2015-2017, Klabin will inject approximately BRL 180 million in Industrial and Forest Research in 2019-2021, including a new Pilot Plants park whose operations began in November 2019 for the purposes of new products development. In line with the investment in the Pilot Plant, the company’s first lignin extraction plant developed a product that is unique in Brazil: kraft lignin from pine. More than 4 tons of the material have been produced, materializing over 20 partnerships for R&D projects and future clients. The microfibrillated cellulose plant enabled holding five industrial tests focusing on the development of new papers and cardboards with distinctive features compared with the competition. At the same time, several generations of cellulose-base products were developed for application in other markets, culminating in the success case “Hand Sanitizing Gel Production with Cellulose-Based Thickener”. The application enabled developing a new, fully renewable and sustainable, ingredient for cosmetics from MFC (microfibrillated cellulose).
Given the replacement of non-renewable materials with biodegradable ones based on cellulose fibers, nanotechnology projects using cellulose fractions on the micro- (microfibrillated cellulose – MFC) and nano- (nanocrystalline cellulose) scales progressed to pilot applications to paper and packaging materials.
Another focal point in the application of lignocellulosic materials (MFC, cellulose and wood fines) pursued production of plastic-substitute composites. This are may provide a new market for more sustainable materials. In a partnership with Senai, the Company developed a faceshield with 10% cellulose as a replacement for polyethylene that was distributed at all Klabin healthcare units to support the combat against Covid-19.
Sustainability is an ever-present beacon for the Company’s research and, in pursuit of zero waste-to-landfill, an initiative at the Rio Negro (PR) unit enables using sludge from the Effluents Treatment Station for local brick manufacture.
Advances in research on the use of wood extracts and forestry waste, leading green fuels – Crude Tall Oil and BioOleo – to make use of 100% of the forest potential, playing a key role in the world’s main groups and intellectual institutions as concerns inputs.
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thousand annual tons of Eukaliner®, the world’s first kraftliner 100% made from eucalyptus. The Technology Center carried out work involving studies of the pulp and paper production process, from wood quality to simulated paper properties. The goal was to track the development of the installation of the new cellulose plant and paper mills, evaluating the quality assurance of the process and product to be introduced into the market.
Highlights:
- The partnership with Israeli startup Melodea is already producing early prototypes of packaging with a higher ratio of renewable materials;
- Partnerships with more than 20 startups in pursuit of various research projects;
- Filing for patents for application of MFC in several countries in four continents;
- Filing for extended patent over the Eukaliner® brand in the European Community, England, United States, Argentina, Chile, South Africa, Australia, China and Indonesia;
- Collaborative projects with universities, involving scientific initiation, master’s and doctoral grant recipients. New partnerships formed with institutes and companies for joint project development;
- After three years’ research into the bag barrier project, a new product – the Ecolayer line of bags intended for the mortar market that features a steam barrier.
- Development of fluting paper with wood and cellulose chemistry projects leading to investments in the Angatuba unit, making it one of the world’s major producers of high- quality fluting paper;
Recognitions:
- ABTCP award in the Innovation *R&D and Technology) category with the case Nanocellulose as replacement for the carbo-mer present in hand sanitizing gel formulae;
- Recognition by a customer in the “Sustainability Project” category for the development of two high-impact initiatives: Ecolayer and KlaSack Dispersível.
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10.9. Other materially influential factors No other factors materially influenced operational performance that have not been discussed elsewhere in this section.
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11.1 Forecasts Disclosure The Company disclosed no forecasts in fiscal year fiscal year 2020.
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11.2 Tracking of an amendment to disclosed forecasts. The Company disclosed no forecasts in fiscal year fiscal year 2020.
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12.1. Description of the management structure a) Duties of the board of directors and permanent bodies and committees reporting thereto indicating: i. whether or not they have specific statures, informing, where affirmative, the body responsible for approval, the date of approval and, where the issuer discloses such documents, the Web locations where they may be viewed ii. Whether or not the issuer has a statutory audit committee, informing, where positive, its main duties, mode of operation, and whether or not it meets the requirements of the CVM regulations on the matter iii. How the board of directors evaluates the independent auditors’ work, indicating whether or not the issuer has a policy for the retainer of non-audit services from the independent auditors and informing the body responsible for approval of the policy, its date of approval, and, where the issuer discloses such policies, the Web locations where they may be viewed Management of the Society is the purview of the Executive Board and the Board of Directors, which shall be advised by the Audit and Related Parties Committee, the Sustainability Committee and the Compensation Committee.
Board of Directors
The Society’s Board of Directors comprises at least 13 (thirteen) and at most 18 (eighteen) members, to be elected and subject to removal by the General Meeting, pursuant to the applicable law, with a unified term of office of 1 (one) year, reelection being permitted. For each one of the directors elected, 1 (one) specific alternate shall also be elected.
The majority of the members of the Board of Directors are elected by the shareholders Klabin Irmãos SA and Niblak Participações SA, who hold the majority of Klabin's voting capital and their votes, as well as those of their elected representatives on the Company's Board of Directors, are linked to the decisions previously taken at the General Meeting or meeting of the Board of Directors of Klabin Irmãos SA, under the terms of the shareholders' agreement of Klabin Irmãos SA.
At least 20% (twenty percent) of the members elected to the Board of Directors shall be Independent Directors as established by Level 2 Regulations.
The chairperson of the Board of Directors shall be appointed by the Board of Directors itself from amongst the Directors elected by the controlling shareholder, and selection of the chairperson shall abide by the principle of rotation, provided reelection shall be permitted with a unanimous vote in favor of all Directors elected as proposed by the controlling shareholder.
Board of Directors has a Charter approved in April 2018 that governs the body’s working and purview.
Pursuant to Article 20 of the Company’s Bylaws, it shall be incumbent upon the Board of Directors to:
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I guiding the Executive Board in formulating the medium- and long term plans;
II approving the plans for development and expansion and the investments necessary for their implementation;
III approving the annual budgets for operations and investments;
b) Electing and removing the officers of the Company, establishing their duties, observing the provisions of the Corporate Bylaws;
c) Electing and removing the Advisory Directors of the Company;
d) Permanently monitoring the development and performance of the Company;
e) Inspecting the management of the officers, examining, at any time, the Company’s books, and documentation, requesting information on executed agreements or agreements in the process of execution, in addition to any other acts;
f) Convening the General Meeting in the cases involving legal issues or when deemed appropriate;
g) Opining on the Management reports, the financial statements, and the accounts of the Executive Board;
h) Establishing the policy for the Company’s debt;
i) Authorizing acts that surpass ordinary administration acts such as:
I. taking an equity stake, including an increase in stake in other corporations and the sale of these interests;
II. constitution, merger, incorporation, spin-off, transformation, and extinguishment of subsidiary corporations;
III. acquisition, sale, and encumbrance of real estate property;
IV. sale of property, plant, and equipment for an amount in excess of that set by the Board of Directors;
V. constitution of encumbrances and the granting of guarantees or sureties except when in guarantee of the acquisition of the asset itself;
VI. investments in expansion and improvement projects involving an amount higher than established by the Board of Directors;
VII. engagement of services for an amount in excess of that established by the Board of Directors;
VIII. commercial lease for an amount more than that established by the Board of Directors;
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IX. engagement of long-term debt;
X. acquisition of shares issued by the Company for the purposes of cancellation or for holding as treasury stock and subsequent sale;
XI. sale, encumbrance, or assignment for use of patents and trademarks;
XII. establishment of pension plans for the Company’s employees;
XIII. issue of securities intended for public distribution in accordance with the legislation in effect; and
XIV. waiving rights or settlement in lawsuits for amounts higher than those established by the Board of Directors.
j) Deciding on any proposals of the Executive Board for submission to the General Meeting;
k) Selecting and removing independent auditors;
l) Deciding, ad referendum of the General Meeting that approves the accounts for the fiscal year, on the payment of dividends, on the basis of intermediate or annual balance sheets, and on the payment of equity interest pursuant to the applicable legislation;
m) Deciding on the division of the aggregate remuneration of the managers of the Company, set by the General Meeting, as well as on the participation of the members of management in the Company’s profits;
n) Decide on the proposal of the Executive Board regarding acts of subsidiaries in cases where a decision of the Controlling Company is necessary;
o) Decide on the issue of shares within the limit of the Authorized Capital;
p) Decide on the issue of subscription warrants or debentures convertible into common shares, preferred shares or common and preferred shares intended for the formation of share deposit certificates, in any case within the limits of the Authorized Capital;
q) Opine favorably or otherwise with regard to any public offering for the purchase of shares which has as its objective the issue of shares of the Company on the basis of a prior substantiated opinion disclosed in up to 15 (fifteen) days from the publication of the notice of a public offering for the purchase of shares to include at least: (i) the convenience and opportunity of the public offering for the acquisition of shares with respect to the interests of the full spectrum of shareholders and with respect to the liquidity of their securities; (ii) the consequences of the public offering for the purchase of shares for the Company’s interests; (iii) the strategic plans announced by the offeror with respect to the Company; and (iv) other aspects which the Board of Directors deem pertinent as well as the information required under the rules of the CVM;
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r) Draw up a list of three companies specialized in economic appraisals of companies for the preparation of an appraisal report of the shares of the Company, in the cases of a Public Offering for Acquisition of Shares (POA) for cancellation of company registration or delisting from Level 2 Corporate Governance;
s) Establish the rules for the Company’s Units plan, including rules on the issue and cancellation of Units and approve the engagement of an institution providing shares’ and Units’ bookkeeping services;
t) Authorize the issue, conversion, early redemption, and other conditions involving debentures not convertible into shares, commercial papers, bonds, and other securities intended for primary or secondary distribution in the capital markets;
u) Decide on the appraisal of properties to be used for paying in as capital stock of its subsidiaries and controlled companies except in the case of wholly- owned subsidiaries, where the responsibility for such shall be the General Meeting of the Company;
v) Take a decision prior to the presentation by the Company of a request for bankruptcy or judicial or extrajudicial reorganization;
x) Grant and establish the rules and conditions for the option to purchase or subscribe shares on behalf of the members of management or other employees of the Company or natural persons that provide services to the Company or to corporations under its control without preemptive rights to the shareholders within the limit of the Authorized Capital and pursuant to a plan previously approved by the General Meeting;
y) Establish permanent and temporary committees and commissions as well as elect their members to provide support for the Board of Directors of the Company;
z) Decide on any associations by the Company, as well as its participation in shareholder agreements;
aa) In addition to the cases pursuant to ¶ 2 of Article 26, authorize when deemed necessary, the Company’s representation by a single member of the Executive Board or by a proxy;
bb) Establish the policies for the trading of the Company’s securities, disclosure of a material act or fact and transactions with related parties;
cc) Establish policies and limits based on amounts, duration, or type of operation for financial derivative instruments of any kind, involving or not futures and options markets as well as procedures for the management and control of the Company’s exposure to the respective risks in such operations;
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ee) At any time, request the examination of any matter regarding the businesses of the Company and its controlled companies, if not already covered in the foregoing items, and in this respect proffer a decision for mandatory execution by the Executive Board;
ff) Decide on any matter which is submitted by the Executive Board and/or by the committees as well as convene members of the Executive Board and the committees for joint meetings, whenever deemed advisable; and
gg) Establish the functions and responsibilities of the Company’s Advisory Board.
Executive Board
The Company’s Statutory Executive Board shall be comprised of up to ten (10) members elected by the Board of Directors, among which one shall be the Chief executive Officer, with the remaining officers to perform as designated by the Board of Directors, all of whom shall serve one- (1-) year terms. Reelection shall be permitted.
The Executive Board, when called to convene by the Chief Executive Officer, shall meet regularly at least once per month and extraordinarily whenever so required. A minimum quorum of one-half of the complement plus one member shall be required, and the Chief executive Officer shall have the tie-breaker vote in addition to their own vote.
Pursuant to Articles 24 and 25 of the Society’s Bylaws, the executive Board shall have the managing duties and powers as provided under the law and the Bylaws, in such a manner as to ensure the faithful and efficient performance of its duties, as follows:
a) it shall be incumbent on the officers to provide the Board of Directors and the Fiscal Council, including, at the request of any of the members of the same, information which is requested of them and any other information deemed relevant.; b) as concerns performance of any acts beyond simple and regular management, the executive Board shall resolve collectively, in particular as concerns actions that, pursuant to the Bylaws, must be submitted to the Board of Directors; c) it shall be the Chief Executive Officer’s duty to supervise all of the Society’s activities, coordinate the actions of the other officers, implement the corporate policy as established by the Board of Directors for the Society and its subsidiaries, and supervise internal audit; d) the remaining officers shall perform the duties assigned to them by the Board of Directors.
Furthermore, according to the Bylaws, (i) any two acting officers, (ii) one acting officer together with one duly constituted proxy, or (iii) two duly constituted proxies acting together, shall have the powers to:
a) represent the Society as plaintiff or defendant;
b) execute agreements and accept obligations, manage bank accounts, to which end they may write and endorse checks; concede and execute agreements; cash or endorse as deposit or for banking, or accept invoices and any securities;
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c) provide guarantee or surety for operations as authorized by the Board of Directors, provided that (i) one officer, individually, may serve as witness before a court; (ii) one director, individually, or one specifically constituted proxy, may (1) issue invoices and endorse them for bank collection, as deposit and/or for banking, endorse checks for deposit to the Society’s bank accounts, execute foreign exchange contracts, issue purchase orders within the limits set by the Board of Directors and (2) represent the society before any federal, state or municipal department, autarchy or mixed economy corporation, provided that not to accept obligations on behalf of the Society or relieve third parties of obligations before it.
Advisory Committees to the Board of Directors:
Klabin has 3 (three) non-statutory advisory committees to the Board of Directors, created in October 2020, which are linked to it and of a permanent nature: Audit and Related Parties Committee, Remuneration Committee and Sustainability Committee . Such committees are formed, individually, by 3 (three) members, elected by the Company's Board of Directors for a term of 1 (one) year, coinciding with the term of the members of the Company's Board of Directors, with reelection permitted. The attributions and rules of operation of Klabin's Committees are provided for in their respective Internal Regulations, approved by the Company's Board of Directors, which are available for consultation on the Company's IPE, on the CVM website and on the Company's IR website. (https://ri.klabin.com.br/governanca-corporativa/estatuto-codigos-e-politicas/) In addition to meeting the requirements set forth in their respective bylaws, in all of the aforementioned committees, most members must not participate in the Company's control group, directly or indirectly. Audit and Related Parties Committee Comprised of 3 (three) members, elected by the Company's Board of Directors, at least one of the members of the Audit and Related Parties Committee must have recognized experience in corporate accounting matters.
Among the powers of the Audit Committee and Related Parties, described in its Internal Regulations, are:
. give an opinion on the hiring and dismissal of the independent auditor, as well as supervising its activities; . supervise the area of internal controls, internal audit and the area of preparation of the Company's financial statements . monitor the quality and integrity of the Company's internal control mechanisms, quarterly information, interim statements and financial statements; . evaluate the control mechanisms of the company's risk exposures, which may require information on policies and procedures related to the theme; and . evaluate and monitor, together with Management and the internal audit area, the adequacy and commutativity of transactions with related parties carried out by the Company and their respective disclosures.
The Board of Directors will define the remuneration of the members of the Audit Committee and Related Parties, as well as the budget destined to cover the expenses of its operation.
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Compensation Committee
Composed of 3 (three) members, elected by the Company's Board of Directors, the Compensation Committee is competent to analyze the following matters, among other attributions that may be established by the Board of Directors: . evaluate the talent management and compensation policies and guidelines proposed by the Company's management; . examine and discuss the compensation guidelines for the members of the Executive Board to be submitted to the Board of Directors, including the compensation criteria (fixed and variable), benefits and other recognition or award programs, taking into account the best market practices; . evaluate the Executive Board's proposal on the amount of the global compensation of the administrators to be submitted to the Board of Directors; . evaluate and approve the compensation model for the Company's officers; . to ensure that the compensation guidelines for the Company's officers are permanently compatible with the risk management policy, with the goals and the current and projected financial situation of the Company.
Sustainability Committee
Composed of 3 (three) members, elected by the Company's Board of Directors, the Sustainability Committee is competent to analyze the following matters, among other attributions that may be established by the Board of Directors:
. recommend and monitor the adoption of the best sustainable development standards and the process of implementing and maintaining such standards in the Company, proposing changes, updates and improvements in policies, strategies and actions to the Board of Directors, in order to promote sustainable development and disseminate these practices in all the Company's strategic activities and relationships; . evaluate proposals for creation and adherence by the Company to institutional campaigns related to environmental or social issues; . evaluate and provide necessary support for the preparation of reports related to the theme of sustainability developed by the Company itself; . approve training programs and tools to disseminate knowledge and stimulate awareness of topics and practices focused on sustainability; . examine market opportunities or new business formats to strengthen the Company's sustainable growth strategy; . advise the Company's Board of Directors in all aspects related to sustainability, including with regard to the suggestion of actions that can be taken by the Company to develop and strengthen support for sustainable development; . encourage the adoption of waste management programs, encouraging small producers and others for sustainable development.
b) Concerning the members of the Statutory Executive Board, their individual duties and powers, indicating whether or not the Executive Board has its own statutes and informing, where affirmative, the corporate body responsible for approval, the date of approval and, where the issuer discloses the statutes, the Web locations where it may be viewed
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The Statutory Executive Board does not have a Charter in place; however, the body’s operations are driven by the contents of the Bylaws, as well as by the Company’s other corporate governance practices. The Chief Executive Officer’s duties are partly stipulated by the Bylaws, whereas the remaining officers’ duties are assigned by the Board of Directors. c) Date of installation of the fiscal council, if not permanent, informing whether or not it has own statues, and indicating, where affirmative, the date of approval by the fiscal council and, where the issuer discloses the statutes, the Web locations where they may be viewed The Company’s Fiscal Council’s duties are as per the applicable law. The Council was installed on December 13, 1985. It operates under a Charter officially approved in August 2019.
d) Whether or not there are performance evaluation mechanisms in place for the Board of Directors and for each body or committee reporting thereto, informing, where positive: i. the evaluation interval and scope, indicating whether the evaluation is conducted in connection with the corporate body alone, or also includes evaluation of individual members ii. Evaluation methodology and main criteria iii. How the issuer uses the evaluation results to improve the body’s functioning; and iv. Whether or not external consultancy or advice services have been retained A Administração the Company’s permanentemente avalia e discute o desempenho de seus órgãos societários, inclusive da Diretoria. A Secretaria de Governança Corporativa, criada recentemente, tem entre suas atribuições estabelecer procedimentos para avaliação do funcionamento dos órgãos societários the Company’s, porém, não há atualmente avaliação formal com periodicidade pré-determinada. No ano de 2018, a Secretaria de Governança Corporativa the Company’s implementou uma avaliação a ser respondida pelos conselheiros a cada reunião, a fim de avaliar a qualidade e desempenho das reuniões do Board of Directors, mas não se trata de uma autoavaliação do órgão colegiado. A Diretoria the Company’s é avaliada periodicamente pelo seu desempenho por meio de reunião entre Diretoria e Board of Directors com a finalidade de avaliar e alinhar os resultados the Company’s. Os membros da Diretoria são avaliados anualmente, com base em metas e indicadores de desempenho estabelecidos a partir do direcionamento estratégico e o resultado dessa avaliação tem reflexos diretos na remuneração variável dos diretores. As metas englobam indicadores corporativos como, por exemplo, desempenho do EBITDA e receita líquida e metas individuais acordadas no início de cada ano, como, por exemplo, custo fixo, volume de produção, volume de vendas, qualidade e índice ambiental, dentre outros.
Os Comitês de Auditoria e Partes Relacionadas, de Sustentabilidade e de Remuneração, que são órgãos de assessoramento do Board of Directors, devem proceder, anualmente, à auto avaliação de suas atividades e identificar possibilidades de melhorias na forma de sua atuação. e) Concerning the members of the Executive Board, and their individual duties and powers The Statutory Executive Board of the Company is composed of up to 10 (ten) members, shareholders or not, resident in the country, elected by the Board of Directors, being a general director and the other directors will have attributions and designations established by the Board of Directors; among which, one will act as Investor Relations Officer, under the terms of Bylaws. The officers' term of office is 1 (one) year, reelection permitted.The directors shall Page 211 of 348
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remain in their positions until the election and investiture of their successors. All members of the Executive Board have a business address in the City of São Paulo, State of São Paulo, at Avenida Brigadeiro Faria Lima, No. 3,600, 5th floor. The following table shows the names, positions and terms of office of the current members of the Statutory Executive Board, elected at the Extraordinary Meeting of the Board of Directors dated 08/25/2020:
Term of Officers Position Election date office Cristiano Cardoso Teixeira Chief Executive Officer 08/25/2020 1 Year Marcos Paulo Conde Ivo Financial and Investor Relations Officer 08/25/2020 1 Year Francisco Cesar Razzolini Executive Officer 08/25/2020 1 Year Flávio Deganutti Executive Officer 04/27/2021 1 Year
Note: the functions of the Executive Officers are set by the Board of Directors.
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12.2. Rules, policies and practices governing the General Meeting: a) Convening period According to the Corporations Law, General Meetings must be called to convene by means of announcements published three times in the São Paulo State Official Print and one more wide- circulation newspaper. The first call must run at least 15 days prior to the General Meeting, and the second call must run at least 8 days in advance. Pursuant to Article 8 of CVM Instruction 559, Klabin calls its General Meeting to convene 30 days prior to the convening date, due to ADRs (American Depositary Receipts) issued abroad
b) Purview It shall be the General Meeting’s exclusive attribute to: (a) amend the Bylaws; (b) elect or remove, at any time, the Company’s managers and overseers, provided the contents of Article 142, item II, of Law No. 6.404/76; (c) to annually review the Management’s accounts and resolve on the financial statements submitted thereby; (d) authorize debentures issues pursuant to the contents of Paragraph 1, article 59, of Law No. 6.404/76; (e) suspend the exercise of shareholder rights; (f) deliberate on the appraisal of assets shareholders may offer to form the equity capital; (g) authorize participation certificate issues; authorize management to declare bankruptcy and file for creditor relief; (i) deliberate on capital decreases or increases, spin-offs, mergers, transformation or takeover of the Company and its subsidiaries, as well as dissolution and termination thereof, or any form of corporate reorganization under the law; (j) deliberate on the dissolution and termination of the Company, elect and remove receivers, and review their accounts; (k) deliberate on the exchange of shares or other securities issued by the Company or its subsidiaries; and (l) deliberate on the convening of the Fiscal Council as provided in the Bylaws. c) brick-and-mortar address of Web location where the documents associated with the General Meeting will be made available to the shareholders for analysis Web locations: http://ri.klabin.com.br and www.cvm.gov.br d) Identification and handling of conflicts of interest Where a shareholder has a conflict of interest with a topic on the agenda of the day, pursuant to Brazilian law, such a shareholder shall be prevented from voting e) Management solicitation of powers of attorney to exercise voting rights The Company’s Bylaws do not provide a means for management to solicit powers of attorney to exercise voting rights, nor does it forbid the practice. The Company and its management do not solicit or operate under a policy to solicit proxies for the exercise of voting rights. f) formalities applicable for the acceptance of powers of attorney granted by shareholders, indicating whether the Company will accept powers of attorney electronically grated by shareholders Given the coronavirus (COVID-19) pandemic and the protective measures taken to contain its spread, in order to facilitate shareholder attendance at the AGM, the Company shall waive, for this Meeting exceptionally, certified signatures and the submission of notarized copies of ID cards, proof of powers, and power-of-attorney documents. However, documents not written in Portuguese must be accompanied of the respective translation.
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Individual shareholders may be represented, pursuant to paragraph 1, Article 126, ,of law 6.404/76, by a proxy with power granted less than one year before and that is (i) a shareholder, (ii) a lawyer, (iii) a financial institution or (iv) a manager of the Company. Corporate or investment fund shareholders, by their turn, may be represented by a proxy with powers granted pursuant to the respective bylaws, statutes or articles of incorporation, as the case may be, even if such a proxy is not (i) a shareholder, (ii) a lawyer, (iii) a financial institution, or (iv) a manager of the Company, in line with the CVM view of the matter. Powers-of-attorney must be granted by means of a physical instrument. g) Necessary formalities for acceptance of the distance voting ballot, where sent directly to the Company, indicating whether or not the issuer requires or waives notarized signatures, notarization and consular certification Shareholders electing to exercise their right to distance voting and choose to vote instead by means of the submission of distance voting ballots directly to the Company must provide the documents below to the Company’s registered offices, care of the Investor Relations area: (i) The original physical Ballot, duly completed, initialed and signed; and (ii) Copies of the following documents: a. For natural persons: Photo ID of the shareholder. b. For legal entities: (i) the latest consolidated statutes or bylaws, as well as any subsequent changes thereto; (ii) corporate documents proving the shareholder’s regular representation; and (iii) official photo ID of the shareholder’s legal representative. c. For investment funds: (The investment fund’s latest consolidated regulations, as well as any subsequent changes thereto; (ii) the fund manager’s latest consolidated statutes or bylaws (provided the investment fund’s voting policy), and any subsequent changes thereto; (iii) corporate documents proving the shareholder’s manager’s regular representation with photo ID. The Ballot, together with the required documentation, shall only be deemed valid if received fully in order by the Company at least seven days prior to the date of the AGM. h) Whether or not the Company provides an electronic means of receipt of distance voting ballots or remote attendance Shareholders may attend at the AGM by means of the submission of distance voting ballots in the following ways: (i) Provision of instructions to complete the to their custody agents, in the case of the holders of shares deposited with a central depository; or (ii) provision of instructions to complete the voting ballot to the Company’s booking agent, Itaú Corretora de Valores S.A, in the case of holders of shares deposited with the booking agent; or (iii) Submission of the duly completed distance voting ballot directly to the Company. The distance voting ballot for attendance at the AGM shall be provided in a timely manner at the electronic addresses of B3 S.A - Brasil, Bolsa, Balcão (b3.com.br), the Brazilian Securities Exchange Commission - CVM (cvm.gov.br), and the Company (ri.klabin.com.br).
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i) Instructions for shareholders, or groups of shareholders, to include proposals for resolution, slates, or candidates to membership in the Board of Directors and Fiscal Council by means of the distance voting ballot Pursuant to Article 21 of CVM Instruction 561, the Company’s shareholders may include candidates to positions in the Company’s board of directors and fiscal council, as well as proposals for resolution in the distance voting ballot, provided the requires percentages of each share type, from the first business day of the fiscal year in which the General Meeting shall convene up until forty-five (45) days prior to convening, in the case of Annual General Meetings.
j) Whether or not the company provides forums and Webpages intended to accept and share shareholders’ commends on the Meetings’ agendas of the day The Company does not currently have a specific forum or Webpage intended to share shareholders’ comments on the Meetings’ agendas of the day. However, shareholders may send any doubts, questions and comments to the investor relations area at the following address: http://ri.klabin.com.br k) Other information needed for remote attendance and exercise of distance voting rights Due to the developments arising from the novel coronavirus pandemic, the Brazilian Securities Exchange Commission issued on April 17, 2020, CVM Instruction No. 622, which partly amends CVM Instruction No 481 and provides means for publicly traded corporations to hold digital general meetings. Given this, the Company has chosen to hold a General Meeting, that is, a partly digital Meeting where shareholders may attend and vote both in person and remotely, in each case without prejudice of the use of distance voting ballots as a means to exercise voting rights.
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12.3 Rules, policies and practices governing the board: The Board of Directors is made up of fourteen (13) members, all of whom are shareholders, with or without a place of residence in Brazil, elected by the General Meeting for a unified one- (1-) year term, reelection being permitted. Regardless of the date of the election of the Members of the Company’s Board of Directors, the respective terms shall end on the date of the General Meeting examining the accounts for the latest fiscal year their terms may include. The current members of the Company’s Board of Directors are:
Candidates for Full Candidates for Substitute Date of the last Observation Term of office Members Members election Board Until AGO (empty) Wolff Klabin 03/24/2021 Chairman 2022 Camilo Marcantonio Independent Until AGO Ruan Alves Pires 03/24/2021 Junior advisor 2022 Independent Until AGO Celso Lafer Reinoldo Poernbacher 03/24/2021 advisor 2022 Until AGO Daniel Miguel Klabin Amanda Klabin Tkacz 03/24/2021 2022 Until AGO Francisco Lafer Pati Vera Lafer Lorch Cury 03/24/2021 2022 Until AGO Horacio Lafer Piva Francisco Amaury Olsen 03/24/2021 2022 Until AGO Israel Klabin Alberto Klabin 03/24/2021 2022 Mauro Gentile Rodrigues Independent Until AGO Tiago Curi Isaac 03/24/2021 da Cunha advisor 2022 Paulo Sergio Coutinho Until AGO Maria Eugênia Lafer Galvão 03/24/2021 Galvão Filho 2022 Roberto Klabin Martins Until AGO Lilia Klabin Levine 03/24/2021 Xavier 2022 Independent Marcelo Bertini de Until AGO Roberto Luiz Leme Klabin 03/24/2021 advisor Rezende Barbosa 2022
Sergio Francisco Monteiro Independent Joaquim Pedro Monteiro de Until AGO 03/24/2021 de Carvalho Guimarães advisor Carvalho Collor de Mello 2022 Until AGO Vera Lafer Antonio Sergio Alfano 03/24/2021 2022
The term of office as provided in the Company’s Bylaws is one (1) year, ending and with new elections at the ordinary General Meeting approving the financial statements for fiscal year 2021. a) Number of meetings convened in the last fiscal year, indicating the number of regular and extraordinary meetings Pursuant to the Company’s Bylaws, the Company’s Board of Directors shall meet regularly every two months and extraordinarily as needed. It may be called to convene by its Chairperson or by two Members, eight (8) days in advance, by letter, fac-simile, e-mail, or telegram. If a meeting fails to convene, a new call to convene shall be issued at least five (5) days in advance.
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In 2020, the Company’s Board of Directors convened for a total of 22 meetings, of which 06 were regular and 16 were extraordinary. In 2019, the Company’s Board of Directors convened for a total 16 meetings, of which 05 were regular and 11 were extraordinary. In 2018, the Company’s Board of Directors convened for a total 19 meetings, of which 06 were regular and 13 were extraordinary. b) Dispositions under the shareholders’ agreement, if any, providing restrictions against or limitations on the voting rights of members of the board of directors The corporate statutes of the Company’s controlling entities provide that members of the board elected thereby for controlled entities such as the Company shall not note in a manner other than that resolved within the society.
c) conflicts of interest identification and management rules The Corporations Law forbids election to the Board of Directors, except in the presence of waiver from the General Meeting, of any persons (i) holding a position in societies regarded as competitors; or (ii) with a conflict of interests with the Company. Any conflicts between shareholders taking place within the Board of Directors and that cannot be resolved between the parties shall be submitted thereby to arbitration, pursuant to the Company’s Bylaws.
d) Whether or not the issuer has a formally approved policy in place for the appointment and filling of seats in the Board of Directors, informing, where affirmative: i. the corporate body responsible for approval of the said policy, the date of approval thereof, and, where the issuer disclosed the said policy, the Web locations where the document can be viewed ii. the policy’s main characteristics, including rules governing the appointment process for members of the board of directors, the body’s composition, and the selection of its members There is no policy in place governing the filling of seats on the Board of Directors.
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12.4. Description of the Commitment Clause for Arbitration-Based Dispute Resolution Article 40 of the Bylaws provides that the Company, its shareholders, Managers and members of the Fiscal Council shall endeavor to resolve through arbitration before the Market Arbitration Panel, any and all disputes or controversies that may arise between them, particularly where related to or arising from the application, validity, effectiveness, construction, breach of and consequences thereof, of the contents of the Corporations Law, of the Company’s Bylaws, of standards issued by the National Monetary Council, by the Central Bank of Brazil and by the Brazilian Securities Exchange Commission, as well as of other standards applicable to the functioning of the capital markets at large, in addition to those provided in the Level 2 Regulations, the Arbitration regulations, the Sanctions regulations, and the Level 2 Corporate Governance Membership Contract.
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12.5/6 – Membership and Professional Background of the Management and Fiscal Council
Expected Election Expected Date for Date, if the Possession, if the Administration Body Name Date of birth Profession CPF / Passport Position to be filled Management Proposal Management Proposal is is approved approved Mandate Term, Number of consecutive if the Other positions or Indicated by the terms, if the Percentage of participation in Management functions in the Independent member Controllers Management Proposal meetings Proposal is Company is approved approved 19- Other Officers / Executive Board member only Flávio Deganutti 01/30/1975 Chemical engineer 608.490.291-04 Executive Officer 04/27/2021 04/27/2021
1 Year None Yes No 0 0,00% 1O- Chief Executive Bachelor in Foreign Executive Board member only Cristiano Cardoso Teixeira 06/21/1973 128.996.528-50 Officer /Superintendent 04/27/2021 04/27/2021 Trade
1 Year None Yes No 4 0,00% 19- Other Officers / Executive Board member only Francisco Cesar Razzolini 10/20/1962 Chemical engineer 581.536.089-91 Executive Officer 04/27/2021 04/27/2021
1 Year None Yes No 6 0,00% 12- Investor Relations Executive Board member only Marcos Paulo Conde Ivo 06/12/1981 Economist 220.481.088-65 Officer / Chief Financial 04/27/2021 04/27/2021 Officer 1 Year Chief Financial Officer Yes No 2 0,00%
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Expected Election Expected Date for Position to be Date, if the Possession, if the Administration Body Name Date of birth Profession CPF / Passport filled Management Proposal Management Proposal is is approved approved Number of consecutive Mandate Term, if the Other positions or Indicated by the Independent terms, if the Percentage of Management functions in the Company Controllers member Management Proposal participation in meetings Proposal is approved is approved 22 - Board of Board of Directors member only Daniel M iguel Klabin 05/11/1929 Engineer 008.143.777-34 Directors (Effective) 03/24/2021 03/24/2021
1 Year Board of Directors member only Yes No 19 72,70%
23- Board of Board of Directors member only Antonio Sergio Alfano 09/08/1952 Administrator 875.349.248-04 03/24/2021 03/24/2021 Directors (Alternate)
1 Year Board of Directors member only Yes Yes 0 0,00%
23- Board of Board of Directors member only M aria Eugênia Lafer Galvão 08/07/1962 Journalist 076.308.458-12 03/24/2021 03/24/2021 Directors (Alternate)
1 Year Board of Directors member only Yes Yes 0 0,00% 22 - Board of Board of Directors member only Horacio Lafer Piva 05/30/1957 Economist 008.143.777-34 Directors (Effective) 03/24/2021 03/24/2021
M ember of the 1 Year Board of Directors member only Yes No 5 81,80% compensation committee. 22 - Board of Board of Directors member only Israel Klabin 09/20/1926 Engineer 008.143.777-34 Directors (Effective) 03/24/2021 03/24/2021
M ember of the sustainability 1 Year Board of Directors member only Yes No 20 0,00% committee. 22 - Board of Paulo Sergio Coutinho Board of Directors member only 07/17/1960 Administrator 040.443.368-57 Directors (Effective) 03/24/2021 03/24/2021 Galvão Filho
1 Year Board of Directors member only Yes No 18 81,80%
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Expected Election Expected Date for Position to be Date, if the Possession, if the Administration Body Name Date of birth Profession CPF / Passport filled Management Proposal Management Proposal is is approved approved Number of consecutive Mandate Term, if the Other positions or Indicated by the Independent terms, if the Percentage of Management functions in the Controllers member Management Proposal participation in meetings Proposal is approved Company is approved
20 - Chairman of the Roberto Klabin M artins Board of Directors member only 10/04/1968 Administrator 153.181.088-81 Admnistrative Board 03/24/2021 03/24/2021 Xavier
1 Year Board of Directors member only Yes No 20 100.00% 27- Independent Board of Directors member only Roberto Luiz Leme Klabin 07/15/1955 Lawyer 988.753.708-00 Director (Effective) 03/24/2021 03/24/2021
M ember of the sustainability 1 Year Board of Directors member only Yes Yes 20 100.00% committee. 27- Independent Board of Directors member only Camilo M arcantonio Junior 06/11/1981 Engineer 978.145.710-49 Director (Effective) 03/24/2021 03/24/2021
1 Year Board of Directors member only No Yes 3 100.00% 27- Independent Sergio Francisco M onteiro Board of Directors member only 11/16/1962 Economist 725.095.897-68 Director (Effective) 03/24/2021 03/24/2021 de Carvalho Guimarães
1 Year Board of Directors member only No Yes 4 100.00% 22 - Board of Board of Directors member only Vera Lafer 10/03/1936 Industrial 380.289.138-49 Directors (Effective) 03/24/2021 03/24/2021
1 Year Board of Directors member only Yes No 20 100.00% 27- Independent M auro Gentile Rodrigues da Board of Directors member only 11/06/1971 Consultant 004.275.077-66 Director (Effective) 03/24/2021 03/24/2021 Cunha
1 Year Board of Directors member only No Yes 3 100.00%
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Expected Election Expected Date for Date, if the Possession, if the Administration Body Name Date of birth Profession CPF / Passport Position to be filled Management Management Proposal is Proposal is approved approved Number of Mandate Term, if the consecutive terms, Percentage of Other positions or functions in Indicated by the Management Proposal Independent member if the Management participation in the Company Controllers is approved Proposal is meetings approved
Board of Directors member only Amanda Klabin Tkacz 08/15/1978 Administrator 047.868.957-84 23- Board of Directors (Alternate) 03/24/2021 03/24/2021 M ember of the audit committee and 1 Year Yes No 17 100.00% related parties. Board of Directors member only
Board of Directors member only Wolff Klabin 05/01/1973 Businessman 018.376.457-95 23- Board of Directors (Alternate) 03/24/2021 03/24/2021
1 Year Board of Directors member only Yes No 3 54.50%
Board of Directors member only Alberto Klabin 06/10/1951 M echanical Engineer 261.062.567-72 23- Board of Directors (Alternate) 03/24/2021 03/24/2021
1 Year Board of Directors member only Yes No 18 100.00%
Board of Directors member only Francisco Lafer Pati 10/05/1953 Lawyer 038.613.618-17 22 - Board of Directors (Effective) 03/24/2021 03/24/2021
1 Year Board of Directors member only Yes No 3 9.09%
Board of Directors member only Francisco Amaury Olsen 11/22/1949 Administrator 019.167.269-68 23- Board of Directors (Alternate) 03/24/2021 03/24/2021 M ember of the compensation 1 Year Yes Yes 3 100.00% committee. Board of Directors member only
Celso Lafer 08/07/1941 Lawyer and University Professor 001.913.298-00 27- Independent Director (Effective) 03/24/2021 03/24/2021 Board of Directors member only
1 Year Board of Directors member only Yes Yes 20 100.00% 46- F.C.(Alternate)Elected by Vivian do Valle Souza Leão M ikui 04/03/1962 Lawyer 088.036.718-03 03/24/2021 03/24/2021 Board of Directors member only Controlling Shareholder
1 Year Board of Directors member only Yes Yes 0 100.00%
Board of Directors member only Lilia Klabin Levine 08/24/1939 Businesswoman 300.825.448-91 23- Board of Directors (Alternate) 03/24/2021 03/24/2021
1 Year Board of Directors member only Yes No 5 36.30%
M arcelo Bertini de Rezende 28 - Independent Board of Directors 09/26/1963 Economist 813.071.527-91 03/24/2021 03/24/2021 Barbosa (alternate) Board of Directors member only
1 Year Board of Directors member only Yes Yes 3 36.00%
28 - Independent Board of Directors Ruan Alves Pires 10/21/1993 Engineer 143.957.877-03 03/24/2021 03/24/2021 (alternate) Board of Directors member only
1 Year Board of Directors member only No Yes 1 9.09% Joaquim Pedro M onteiro de 28 - Independent Board of Directors 01/08/1978 Businessman 085.081.467-79 03/24/2021 03/24/2021 Board of Directors member only Carvalho Collor de M ello (alternate) 1 Year No Yes 3 100.00% Board of Directors member only
Board of Directors member only Vera Lafer Lorch Cury 07/27/1964 Businesswoman 060.657.498-00 23- Board of Directors (Alternate) 03/24/2021 03/24/2021
1 Year Board of Directors member only Yes No 4 9.09%
28 - Independent Board of Directors Tiago Curi Isaac 06/16/1982 Administrator 303.612.048-33 03/24/2021 03/24/2021 (alternate) Board of Directors member only 1 Year No Yes 3 0.00% Board of Directors member only Page 222 of 348 28 - Independent Board of Directors Reinoldo Poernbacher 04/02/1943 Chemical engineer 003.976.440-00 03/24/2021 03/24/2021 (alternate) Board of Directors member only M ember of the sustainability 1 Year No Yes 0 0.00% committee. Board of Directors member only Reference Form- 2021- KLABIN S. A. Version: 7
Expected Election Expected Date for Date, if the Possession, if the Administration Body Name Date of birth Profession CPF / Passport Position to be filled Management Management Proposal Proposal is approved is approved Mandate Term, if Number of Other positions or Percentage of the Management Indicated by the consecutive terms, if functions in the Independent member participation in Proposal is Controllers the Management Company meetings approved Proposal is approved 43- F.C.(Effective)Elected by Fiscal Council João Adamo Junior 12/29/1969 Lawyer 132.904.408-85 03/24/2021 03/24/2021 Controlling Shareholder It belongs only to the Fiscal 1 Year Yes No 5 100.00% Council 43- F.C.(Effective)Elected by Fiscal Council João Alfredo Dias Lins 06/25/1940 Accountant 027.023.637-68 03/24/2021 03/24/2021 Controlling Shareholder It belongs only to the Fiscal 1 Year Yes No 18 100.00% Council 43- F.C.(Effective)Elected by Fiscal Council Raul Ricardo Paciello 04/05/1966 Economist 773.617.257-91 03/24/2021 03/24/2021 Controlling Shareholder It belongs only to the Fiscal 1 Year Yes No 3 100.00% Council 45- F.C.(Effective)Elected by M inority Fiscal Council M aurício Aquino Halewicz 03/27/1973 Accountant 694.701.200-78 03/24/2021 03/24/2021 Common It belongs only to the Fiscal 1 Year No Yes 3 100.00% Council 44- F.C.(Effective)Elected by Fiscal Council Louise Barsi 09/07/1994 Economista e Contadora 343.307.008-32 03/24/2021 03/24/2021 Preferred shareholders It belongs only to the Fiscal 1 Year No Yes 2 100.00% Council 48 - F.C. (Alternate) Elected Fiscal Council M ichele da Silva Gonsales Torres 11/25/1983 Administrator and Accountant 324.731.878-00 03/24/2021 03/24/2021 for M inor.Ordinarians It belongs only to the Fiscal 1 Year Yes No 0 0.00% Council 46- F.C.(Alternate)Elected by Fiscal Council Antonio M arcos Vieira Santos 03/17/1964 Economist 053.610.478-64 03/24/2021 03/24/2021 Controlling Shareholder It belongs only to the Fiscal 1 Year Yes No 20 0.00% Council 46- F.C.(Alternate)Elected by Fiscal Council Felipe Hatem 09/19/1990 Engineer 139.836.057-02 03/24/2021 03/24/2021 Controlling Shareholder It belongs only to the Fiscal 1 Year Yes No 2 0.00% Council 47 - F.C. (Alternate) Elected Fiscal Council Tiago Brasil Rocha 10/26/1975 Administrator 251.877.268-54 03/24/2021 03/24/2021 for preferentialists It belongs only to the Fiscal 1 Year No Yes 2 0.00% Council
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Professional background/Criteria for Independence Cristiano Cardoso Teixeira - 128.996.528-50 He has more than 30 years’ professional experience in different sectors, such as pulp and paper, forestry, metallurgy, ceramics, and oil and gas. He has worked at Sumitomo Corporation, Ripasa, Sony, Duratex, and San Antonio. His career has taken in commercial, logistics, operational planning, and project areas. He began his career at Klabin in 2011 as Supply Chain Director. He has also been Executive Director of the Corrugated Cardboard, Industrial Bags, Sackraft and Containerboard Paper Divisions, and Executive Director of Conversions and Commercial Papers. He has been the CEO of the company since April 2017. He holds a degree in Foreign Trade from Paulista University, an MBA in International Trade from FIA, and a Master's degree in Logistics from the Ecole Supérieure des Affaires (France). He is the Climate Ambassador of the United Nations Global Compact Network Brazil, and a member of the Business Leaders group at COP26 – the United Nations Conference of the Parties on Climate Change. He was appointed “International CEO of the Year” in 2021 by Fastmarkets RISI and has been listed by Época Negócios' as a person committed to the future of the planet.
Mr. Cristiano Teixeira, pursuant to the contents of Article 147 of Law 6404/76, CVM Instruction 367/2002 and CVM Official Statement 02/2016, DECLARES under the penalties of the Law:
1 No impediment by force of specific law, or sentencing for bankruptcy, malfeasance, graft, extortion by a public official, embezzlement, crimes against the popular economy, the national financial system, anti-trust standards, consumer relations, public faith, or property;
2. No conviction by the CVM to temporary suspension or removal of privileges making me ineligible for management positions in a publicly traded corporation pursuant to paragraph 2 of Article 147 of Law 6.404/76;
3. Compliance with the spotless reputation requirement pursuant to article 147 of Law 6.404/76;
4. No criminal or administrative conviction before the CVM or any other authority, or before court, even if not passed into res judicata.
5. Not to hold public office or be politically exposed.
6. Not to hold office in a society that may be deemed a competitor of the company, and not to have or represent interests at conflict with the Company’s, pursuant to items I and II of paragraph 3 of Article 147 of Law 6.404/76. Francisco Cesar Razzolini - 581.536.089-91 Mr. Razzolini built his career inside Klabin, which he joined in 1985. He has since gained experience in the areas of paper and packaging production, and in project planning and development. In 2006, he ran an important in-house project, the MA 1100, which doubled the paperboard production capacity of the Monte Alegre Unit, in Telêmaco Borba (PR). Two years later, he became Projects, Industrial technology and Supplies Officer. In 2014-16 he once again led one of the Company’s main projects: construction of the Puma Unit, one of the world’s most modern pulp mills, designed to meet the best sustainability standards of the industry. He currently answers for Research and Development, Innovation, Sustainability, Projects, Automation Technology and Pulp. Mr. Razzolini has a Master’s degree in Paper Engineering from Universidade Politécnica da Catalunha (Spain) and a bachelor’s degree in Chemical Engineering from Universidade Federal do Paraná.
Mr. Francisco Razzolini, pursuant to the contents of Article 147 of Law 6404/76, CVM Instruction 367/2002 and CVM Official Statement 02/2016, DECLARES under the penalties of the Law:
1 No impediment by force of specific law, or sentencing for bankruptcy, malfeasance, graft, extortion by a public official, embezzlement, crimes against the popular economy, the national financial system, anti-trust standards, consumer relations, public faith, or property;
2. No conviction by the CVM to temporary suspension or removal of privileges making me ineligible for management positions in a publicly traded corporation pursuant to paragraph 2 of Article 147 of Law 6.404/76;
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3. Compliance with the spotless reputation requirement pursuant to article 147 of Law 6.404/76;
4. No criminal or administrative conviction before the CVM or any other authority, or before court, even if not passed into res judicata.
5. Not to hold public office or be politically exposed.
6. Not to hold office in a society that may be deemed a competitor of the company, and not to have or represent interests at conflict with the Company’s, pursuant to items I and II of paragraph 3 of Article 147 of
Law 6.404/76. Marcos Paulo Conde Ivo - 220.481.088-65 Bachelor of Economics with a post-graduate degree in Business Administration (CEAG) from Fundação Getúlio Vargas, master’s degree in Business Comptrollership from Mackenzie, and Executive Education course at INSEAD. Has been with Klabin for over 10 years, having accumulated management and finance experience in the Comptrollership, Economic Projects and Studies, Financial Planning, and M&A areas.
Mr. Marcos Paulo Conde Ivo, pursuant to the contents of Article 147 of Law 6404/76, CVM Instruction 367/2002 and CVM Official Statement 02/2016, DECLARES under the penalties of the Law:
1 No impediment by force of specific law, or sentencing for bankruptcy, malfeasance, graft, extortion by a public official, embezzlement, crimes against the popular economy, the national financial system, anti-trust standards, consumer relations, public faith, or property;
2. No conviction by the CVM to temporary suspension or removal of privileges making me ineligible for management positions in a publicly traded corporation pursuant to paragraph 2 of Article 147 of Law 6.404/76;
3. Compliance with the spotless reputation requirement pursuant to article 147 of Law 6.404/76;
4. No criminal or administrative conviction before the CVM or any other authority, or before court, even if not passed into res judicata.
5. Not to hold public office or be politically exposed.
6. Not to hold office in a society that may be deemed a competitor of the company, and not to have or represent interests at conflict with the Company’s, pursuant to items I and II of paragraph 3 of Article 147 of Law 6.404/76.
Flávio Deganutti - 608.490.291-04 Responsible for Klabin’s paper (kraftliner, coated paperboard, LPB, sack kraft and recycled) domestic and international sales and procurement. Former general manager of the Monte Alegre Unit, Klabin’s paper mill in Telêmaco Borba, state of Paraná. His 20 years of professional experience enable him to play several other leadership roles at the Company, in the Planning, Logistics, Engineering, Production and Maintenance areas. He also previously represented Klabin in the LPB, coated paperboard and kraft markets in Asia, Europe and the Americas, carrying out quality management and providing technical support. He has bachelor’s degree in Chemical Engineering and a Master’s degree in Engineering with emphasis on Paper Manufacture from Universidade Estadual de Maringá (PR), as well as a post-graduate degree in Business Administration from Fundação Getulio Vargas.
1 No impediment by force of specific law, or sentencing for bankruptcy, malfeasance, graft, extortion by a public official, embezzlement, crimes against the popular economy, the national financial system, anti-trust standards, consumer relations, public faith, or property;
2. No conviction by the CVM to temporary suspension or removal of privileges making me ineligible for management positions in a publicly traded corporation pursuant to paragraph 2 of Article 147 of Law 6.404/76;
3. Compliance with the spotless reputation requirement pursuant to article 147 of Law 6.404/76;
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4. No criminal or administrative conviction before the CVM or any other authority, or before court, even if not passed into res judicata.
5. Not to hold public office or be politically exposed.
6. Not to hold office in a society that may be deemed a competitor of the company, and not to have or represent interests at conflict with the Company’s, pursuant to items I and II of paragraph 3 of Article 147 of Law 6.404/76.
Daniel Miguel Klabin - 008.143.777-34 President of Daro Participações S.A, managing partner of Klabin Irmãos S.A., the Klabin Group’s holding company. Member of the Permanent Business Committee of the Ministry of Foreign relations. Has a degree in civil engineering from the Polytechnic School of the Federal University of Rio de Janeiro (UFRJ), with ample experience in leadership positions. Founder and first president (1998) of the Centro Brasileiro de Relações Internacionais (CEBRI), currently serving as its vice-president and member of the Board of Curators. Experienced Klabin’s main growth cycles as member of the Board of Directors. Chaired the Board in seven other periods (terms of 1981, 1987, 1993, 1999, 2005, 2011 and 2017). Currently holds the following leading positions with companies and institutions: managing partner of Damaro Comercial Agropecuária Ltda; CEO of Daram Participações Ltda; member of the Strategic Committee of the Brazil Chapter of the Latin American Businessmen Council (CEAL), member of the Higher Council of Associação Comercial do Rio de Janeiro (ACRJ) since 2008 and President of the Jewish History and Culture Center. Doctor honoris causa of the Brazilian Academy of Philosophy, an institution that stands up for freedom of opinion and expression, debate, democracy, and the rule of law.
Antonio Sergio Alfano - 875.349.248-04 Joined the Klabin conglomerate in 1974, having served in the Economic Research, Sales and Marketing areas. Former CEO of Klabin Export, Chief Financial Officer of Norske Skog Klabin, both of which Klabin S.A. has taken over; and Chief Financial Officer of Klabin Bacell. Former Planning Officer and Chief Financial and Investor Relations Officer of Klabin S.A.
Maria Eugênia Lafer Galvão - 076.308.458-12 Director of GL Holdings S.A., managing partner of Klabin Irmãos S.A., the Klabin Group's holding company. Officer at GL Investimentos e Participações Ltda., at GL Agropecuária Ltda and at Gepel Rural Ltda. Has a Journalism degree from Pontifícia Universidade Católica de São Paulo and a post-graduate degree in Journalism from Columbia University, NY, USA. Coordinator of Instituto Jaborandi, a nonprofit that carries out bespoke projects for institutions, developing educational projects using education IT for institutions, public education networks and companies. Horácio Lafer Piva- 038.613.618-17 Shareholder of Klabin Irmãos SA, holding of the Klabin Group. Economist and postgraduate in Business Administration from Fundação Getúlio Vargas. He was president of FIESP / CIESP, SESI / SENAI, SEBRAE-SP and the Thematic Council of Economy of the CNI-Confederação Nacional da Indústria. He was a member of the Solidarity Community Program of the Fernando Henrique Cardoso government and of the CDES-Council for Economic and Social Development of the Lula government. He served as president of BRACELPA-Brazilian Pulp Page 226 of 348
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and Paper Association, of the Board of the AACD-Association for Assistance to Disabled Children, of Instituto DNA Brasil. He also sat on the Board of Directors of Redecard S/A, Martins S/A, BHG S/A, Tarpon S/A, TCP S/A, FAPESP - Foundation for Research Support of the State of São Paulo, AC Camargo Câncer Center, from the Biennial Foundation. He chairs the Board of Brain4Care S/A and IBÁ-Indústria Brasileira de Árvores. He is a member of the Council of Cataratas S/A, of the Baumgart Group, of the OSESP Foundation - São Paulo State Symphonic Orchestra, of EMBRAPII - Brazilian Company for Industrial Research and Innovation, of IEDI - Institute of Industrial Studies, of FEK - Ema Foundation Klabin, from FFHC - Fundação Fernando Henrique Cardoso, from the Advisory Councils of Brasilpar – Serviços Financeiros and Brainvest – Serviços de Investimentos, and from the leadership of MEI - Business Mobilization for Innovation. Israel Klabin - 008.143.857-53 CEO of Glimdas Participações S.A, the society that gave rise to Klabin, managing partner of Klabin Irmãos S.A., the Klabin Group’s holding company. In addition to his relevant experience as a manager of the Company, having become its CEO at only 30 years old, he is recognized for his environmental work. President of Fundação Brasileira para o Desenvolvimento Sustentável (FBDS), which he helped create; member of the Independent Sustainability Council of the Inter- American Development Bank (IADB) and author of the book "A urgência do presente: biografia da crise ambiental" (2011). An organizer of the ECO 92 UN Conference on the Environment and Development. In 1997, he chaired the Brazilian Host Committee of Rio+5 and was co-chair of the Rio+5 International Committee. Has degrees in civil engineering and mathematics from the Federal University of Rio de Janeiro (UFRJ) and a post-graduate degree from the Institute of Political Science of Paris. Also a former member of the founding group of the Instituto Superior de Estudos Brasileiros (ISEB). Mayor of Rio de Janeiro in 1979. Lecturer at the lnstitut d'études Politiques de Paris, author of articles for domestic and international periodicals, and advisor to universities, research institutions and collaborative networks like UFRJ, Fundação Getúlio Vargas, Harvard University, Tel Aviv University and the Sustainable Development Solutions Network (SDSN), the UN network of solutions for sustainable development.
Paulo Sergio Coutinho Galvão Filho - 040.443.368-57 Partner of Klabin Irmãos S.A., the Klabin Group’s holding company. Member of the Boards of Directors of Klabin S/A, of Raia Drogasil S/A. Sócio fundador da GL Holdings, an investment and equity company (equity investments, private equity and venture capital) and of GL Asset Management, a capital markets funds manager. Former member of the Board of Directors of Bovespa (currently B3), among other public listed corporations, close corporations, and family- business boards. Member of the Board of Hospital Albert Einstein, of Fundação Bienal de São Paulo and of Masp – Museu de Arte de São Paulo. Has a bachelor’s degree in business administration from Pontifícia Universidade Católica de São Paulo and a specialization in business administration from the Harvard Business School. Roberto Klabin Martins Xavier - 153.181.088-81 Shareholder and Officer at LKL Participações S.A and Esli Participações S/A, managing partner of Klabin Irmãos S.A., the Klabin Group’s holding company. Officer and shareholder da Levine Participações S/A. Business Administration degree from Pontifícia Universidade Católica de São Paulo, Master of Administration degree from Business School São Paulo and family businesses management course at Universidade Adolfo lbáliez in Chile, in addition to finance at New York University. Supports and fosters social initiatives aimed at education, sports and Page 227 of 348
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citizenship.
Roberto Luiz Leme Klabin - 988.753.708-00
Attorney, a Law graduate from the Law School of the Largo de São Francisco, University of São Paulo. Specialization in Business Administration from Universidade Mackenzie. Managing partner at the following firms: KL & KL Participações Ltda; R K Hotéis e Turismo Ltda and Caiman Agropecuária Ltda. Notable environmentalist action, currently serving as vice-president of Fundação SOS Mata Atlântica and of Instituto SOS Pantanal. Member of the Governing Board of Fundação Amazônia Sustentável; Member of the Advisory Board of FUNBIO, Fundo Brasileiro para a Biodiversidade; Member of the São Paulo State Advisory Board for the Environment; Member of the Governing Board of Projeto Onçafari; Member of the Governing Board of LIDE (Grupo de Líderes Empresariais). Member of the Deliberative Board of Hospital Einstein; Member of the Deliberative Board of Museu Judaico; President of the Brazilian Sculpture and Ecology Museum (MUBE) and vice-president of the Brazilian Luxury Travel Association (BLTA). Camilo Marcantonio Junior - 978.145.710-49 Investment Manager and Director of Charles River Capital, a funds management firm where he is a founding partner. Member of the Board of Directors of BrasilAgro - Companhia Brasileira de Propriedades Agrícolas. Former manager of Bain & Company, having served for eight years as a strategy consultant, and for three years an executive partner of Astor Group, a firm active in mergers and acquisitions. Has an Electronic Engineering degree from Instituto Militar de Engenharia, having earned the Correia Lima medal as first of his class, has an MBA with honors from the Harvard Business School (USA), having earned the John L. Loeb award for his remarkable performance in Finance.
Sergio Francisco Monteiro de Carvalho Guimarães - 725.095.897-68 Officer and Full Member of the Board of Directors of Monteiro Aranha, Officer of Monteiro Aranha Participações Imobiliárias. Former Officer and Director of Charles River Capital, an asset management company. Full Member of the Board of Directors of Klabin. Has an Economics degree from Pontifícia Universidade Católica do Rio de Janeiro. Has an MBA degree from Fordham University (USA) and is a graduate of the Harvard Business School’s Owner/President Management program.
Vera Lafer - 380.289.138-49 Shareholder and Officer of VFV Participações S.A, managing partner of Klabin Irmãos S.A., the Klabin Group’s holding company. Also an officer and shareholder of the following: VL Participações Ltda, Novo Horizonte Agropecuária Ltda, VEMI Participações Ltda, Kla Gama Agropecuária Ltda. and Lavesube Comércio e Representações Ltda. A ballerina of renown, she stands out for her work in support of culture, the arts and education. A co-founder of Studio3 Espaço de Dança, a ballet dancers training and development school. At Espaço Cultural Vera Lafer, in Telêmaco Borba, Paraná, the Passo Certo program, held in partnership with Studio3, provides contemporary dance and capoeira classes to children and teenagers in the community
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and the children of Klabin employees ages 6-17. Her endeavors in this area have already earner her several public recognitions, including honors from the São Paulo City Council.
Mauro Gentile Rodrigues da Cunha - 004.275.077-66 Has an Economics degree from Pontifícia Universidade Católica do Rio de Janeiro and an MBA from the University of Chicago. Serves as Chairman of the Board of Directors of Caixa Econômica Federal. Has over 27 years’ experience in the capital markets and in corporate governance. President of AMEC- Associação dos Investidores no Mercado de Capitais from 2012 to August 2019. Before that, served in several wealth management and financial institutions, including Mauá Investimentos, Franklin Templeton (Brasil), Bradesco Templeton, Investidor Profissional, and more. Also a former chairman of the Board of Directors of IBGC- Instituto Brasileiro de Governança Corporativa. Has since 1999 been a member of the Boards of Brazilian public listed companies, having served as Chairman of the Board of Caixa Econômica Federal in 2019-20. Currently a member of the Board of Directors and Coordinator of the Audit Committee of BRMalls Participações S.A., member of the Board of Directors, People and Compensation Committee and Audit Committee of Totvs, member of the Board of Directors, coordinator of the Audit Committee and of the People and Governance Committee of Vale and member of the Board of Directors of Klabin.
Amanda Klabin Tkacz - 047.868.957-84 A co-owner of and in charge of strategic positioning at Galt Capital, a consultancy firm specializing in asset management. Founding partner of Bait INC, a developer that focuses on the Rio de Janeiro housing market. Has a Business Administration degree from IBMEC, a diploma from Harvard’s Owners/Presidents Management Program, from the Wharton School of Business’s Private Wealth Management program, and from the Executive Education Program of the Singularity University in California. Her experience and training have given her recognized skills in strategic business planning, mergers and acquisitions, and risk management. Wolff Klabin - 018.376.457-95 Began his professional career in the mergers and acquisitions area of Banco JP Morgan. Former partner of Gestora de Recursos Jardim Botânico Investimentos. Since 2014 a founding partner of the 4K Investimentos asset management firm and founder in 2019 of Alexia Ventures, a Venture Capital fund. Co-founder of several social organizations: Prep Estudar Fora da Fundação Estudar, RenovaBr and Movimento União Rio. Also a member of the Council of Escola ORT Brasil, of the David Rockefeller Center for Latin American Studies of Harvard University and of Instituto Igarapé. Also serves as an alternate member of the Board of Directors de Klabin S.A. since 2019, having previously served as an alternate in 2001-2012. Wolff has a bachelor’s degree from Harvard University and graduated from the Harvard Business School’s OPM 43. Alberto Klabin - 261.062.567-72 Mechanical production engineering degree from Pontifícia Universidade Católica do Rio de Janeiro, a graduate from the Escola Superior de Guerra’s Higher Policy and Strategy Studies Program, and has a Psychology degree from Universidade Estácio de Sá. Managed the planning and implementation of Cortex Cia. Brasileira de Esteróides, former Relationship Manager at Chemical Bank and Banco NorChem. Monitored project concept, as well as implementation and
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start-up of Atina Ativos Naturais’s factory as entrepreneurial partner. Former Alternate Member of the Board of Directors of Klabin S.A. for several terms of office.
Francisco Lafer Pati - 256.483.558-90 Shareholder and Officer of VFV Participações S.A, managing partner of Klabin Irmãos S.A., the Klabin Group’s holding company. Has degrees in Law and Philosophy from the Pontifícia Universidade Católica de São Paulo and a post-graduate degree in Corporations Law from Fundação Getúlio Vargas. Has experience in civil, corporate and contracts litigation. Has since 2011 been an Officer at a communications group producing journalistic content. Francisco Amaury Olsen - 019.167.269-68 Born in São Bento do Sul/SC on 11/22/1949. Has a Business Administration Degree from Universidade de Joinville (FURJ), with an extension degree in Business Administration (Advanced Management) from the University of Southern California – USC. Served as CEO of Tigre Tubos e Conexões for 15 years. Since 2007 has been a member of the Boards of Directors of local and foreign companies, such as Tigre, Cerâmica Portobello, Papaiz, Marisol, Unipar Carbocloro and Estacio. Currently serves as independent director of Grupo Rotoplas in Mexico, S&B in Texas, USA, Tigre S/A, Tenda Atacado, Grupo Baumgart, Heads-Agencia de Publicidade, Galvani/Fosnor Fertilizantes, Copersucar, and is Chairman of the Board of Zilor Usinas de Açúcar e Etanol. Alternate Director at Klabin S/A. Chairman or member of several Board advisory committees, particularly in the areas of Audit and Risk, Sustainability, People and Governance, Related Parties. Principal partner at Olsen Consultoria, providing services to large companies in segments such as paper and pulp, ports, mining, wholesale, shopping malls, e-commerce, civil construction and agriculture. Founder of Associação Brasileira da Indústria de Material de Construção (Abramat), in São Paulo, and of Instituto Trata Brasil. Celso Lafer- 001.913.298-00 Professor Emeritus of the International Relations Institute of the University of São Paulo (USP), where he taught until 2011 as chair of the Philosophy and General Theory of the Law Department of the Law School of the University of São Paulo. PhD of Political Sciences from Cornell University (USA). A jurist and scholar of human rights, specializing in international relations and foreign trade. In 1992, was Minister of Foreign Relations and ex-officio Vice- President of the Rio-92 UN Conference on the Environment and Development. In his second term as Minister of Foreign Relations (2001-2002), he led the Brazilian delegation to the World Trade Organization’s (WTO) Ministries Conference in Doha. Minister of Development, Industry and Trade (1999) and Ambassador and Head of the Permanent Brazilian Mission to the United Nations and World Trade Organization in Geneva (1995-1998). In 1996, was president of the WTO’s Controversy Solutions Body and, in 1997, of the entity’s General Council. Member of the Brazilian Academy of Letters and the Brazilian Academy of Sciences. Former Chairman of the Board of Directors of Metal Leve S/A. Indústria e Comércio (1993-1995), member of the Board of Directors of Fundação Orquestra Sinfônica do Estado de São Paulo- Fundação Osesp (2005-2011) and president of the Fundação de Amparo à Pesquisa do Estado de São Paulo (Fapesp). Currently president of Fundação Ema Klabin, of the Deliberative Board of Museu Lasar Segall and of the Editorial Board of the Política Externa review. Member of the Advisory Board of Associação Pinacoteca Arte e Cultura in São Paulo. Author of several books, including: A reconstrução dos direitos humanos, um diálogo com o pensamento de Hannah Arendt (1988); Comércio, desarmamento, direitos humanos- reflexões sobre uma experiência diplomática (1999); A internacionalização dos direitos humanos: Constituição, racismo e
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relações internacionais (2005), with Alberto Filippi as co-author. Has received the following honors, among others: Doctor honoris causa of the Tres de Febrero University - UNTREF, Argentina (2011) and of Université Jean Moulin Lyon 3, France (2012); Honorary Fellow of the Jerusalem Hebrew University (2006); Moinho Santista award from Fundação Bunge in the International Relations area (2001). In 2006, held the "Southern Countries and Cultures chair of the John W. Kluge Center of the US Library of Congress. Vivian do Valle Souza Leão Mikui - 088.036.718-03 Bachelor of Laws degree from Faculdades Metropolitanas Unidas - FMU (1988) and bachelor of business administration degree from Instituto Presbiteriano Mackenzie (1998). Partner at the law firm Leão and Tohmé Advogados Associados Ltda, for 15 years. Member of the Fiscal Council of Klabin S.A. since March/2005.
Lilia Klabin Levine - 300.825.448-91 Businesswoman, CEO of LKL Participações S.A. and Esli Participações S/A, managing partner of Klabin Irmãos S.A., the Klabin Group’s holding company. Officer at Jack Levine Participações Ltda. and shareholder of Levine Participações S/A. Has a Law degree from Universidade Mackenzie. Also attended the Escola de Sociologia e Política de São Paulo and the extensive Business Administration program of Fundação Getulio Vargas, in São Paulo. Interviewer and host of a TV show. Has supported and fostered Brazilian Popular Music for 20 years.
Marcelo Bertini de Rezende Barbosa - 813.071.527-91 Has a bachelor’s degree in Economics and a post-graduate degree in Finance from Pontifícia Universidade Católica do Rio de Janeiro, with specialization from the Harvard Business School. Currently a partner in nine companies in the State of São Paulo. Has experience in companies of renown such as IBM Brasil and McKinsey, with experience in the Accounting, Finance and Audit areas. President of Cinemark Brazil and formerly Chief Financial Officer and ice- President of the network. Also president of ABRAPLEX- Associação Brasileira das Empresas Exibidoras Cinematográficas Operadoras de Multiplex and member of the strategy committee of the Associação Brasileira de Lojistas de Shopping (Aolshop).
Ruan Alves Pires - 143.957.877-03 Partner and analyst at Charles River Capital. Joined Charles River Capital in 2013, where he served as Compliance and Risk Officer and currently serves in the stock analysis area. Has a degree in Mechanical and Automotive Engineering from Instituto Militar de Engenharia (IME). Joaquim Pedro Monteiro de Carvalho Collor de Mello- 085.081.467-79 Investor Relations Officer and alternate member of the Board of Directors of Monteiro Aranha. Full member of the Board of Directors of Ultrapar Participações S.A. and alternate member of the Board of Directors de Klabin S.A. Former Officer and Director of Charles River Capital, an asset management firm, officer of Organização Arnon de Mello, a media conglomerate. Has a degree in International Relations with a specialization in International Economics from Georgetown University (USA) – magna cum laude. Has an MBA degree from Harvard Business School (USA). Page 231 of 348
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Vera Lafer Lorch Cury - 060.657.498-00 Shareholder of VFV Participações S.A, managing partner of Klabin Irmãos S.A., the Klabin Group’s holding company. Has ample experience in leadership positions, gained as manager of companies where she holds stock. These include Fazenda e Haras Boa Vista Ltda, which specializes in farming support activities. Tiago Curi Isaac - 303.612.048-33 Currently a member of the Board of Directors of Banco do Estado do Sergipe – BANESE, of DGH Foods and of BBM Logística, where he also serves as a member of the Audit Committee. Also a member of the Fiscal Council of Ômega Energia. Previously a Director of Mercaprev, ABRASCA and ABVCAP. Has a Business Administration degree from Faculdade Trevisan, having taken the Advanced Management Program at the ESADE Business School and a specialization course in Competitive Marketing Strategy at the Wharton School of the University of Pennsylvania. Former Capital Markets Officer at B3 and currently a professor at IBGC’s Directors Training Course.
Reinoldo Poernbacher - 003.976.440-00 Chemical Engineer, joined Petrobrás in 1967. Worked in the chemical and petrochemical industries. Held management roles at Cia Química Meacril, at Copener – Copene Energética S.A. and at Norcell S.A. From 1994 to 1999, held management roles in the former Klabin Bacell and has since then been the Managing Officer of the Klabin Florestal Business Unit and the Supply Chain Officer of Klabin S.A. CEO of Klabin S.A. from March 2008 to February 2011.
João Adamo Junior - 132.904.408-85 Officer Founder and Member with 26 years’ experience in the financial market. CVM manager and member of the Executive and Investment Committee of Cadence Gestora de Recursos. Held several managing positions with institutions of renown. Such as: structured products VP of Banco Fenícia, 1993-1997; Head of structure products at Deutsche Bank, 1997-2000; founder of the joint venture Maxblue DTVM, between Deutsche Bank and Banco do Brazil, where he served as ECO, deputy head of the wealth management products platform of UBS São Paulo in 2003-2007. In 2006, also served as senior executive for the integration of Banco Pactuai with the UBS world platform and, in 2007, as executive officer of Vision Brazillnvestments; former officer and member of the executive committee of Mainstay Asset Management and member of the fiscal council of Net in 2012-2013. Founding partner of More lnvest Gestora de Recursos. Has bachelor of laws degree from the Law School of the Largo São Francisco, and a Business Administration degree from FGV-EAESP.
João Alfredo Dias Lins - 027.023.637-68 Holds an Accounting degree from Faculdade de Ciências Contábeis e Administrativas Moraes Junior, Rio de Janeiro, RJ, graduating on July 30, 1970. Began his professional career in 1962 at external audit firm Price Waterhouse & Peat, currently PriceWaterhouseCoopers, which he left in 1971 as audit manager. Joined Klabin Irmãos S.A.. in May that year, and resigned in 1980 when he became a business consultant. In 1998, took the Advanced Management Programme if
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the lnstitut Européen d'Administration des Affaires- INSEAD, Fontainebleau, France. Member of the Fiscal Council of Klabin S.A. since January 13, 1981. Vice-President of the Board of Curators of Fundação Getúlio Vargas. Chairman of the Fiscal Council of Fundação Brasileira para o Desenvolvimento Sustentável- FBDS.
Raul Ricardo Paciello - 773.617.257-91 Risk, Compliance and PLD Officer at Gestora de Recursos Charles River and Financial, IT and Compliance manager at Monteiro Aranha. Alternate member of the Fiscal Council of Klabin. Formerly Chief Financial Officer of EMI Music, an English music industry company, and holder of several management, planning and control positions in several multinationals in various industries, such as: Packaging, Oil and Gas, Technology, Personal Care, and Tobacco. Has an economics degree from UGF, Master of Administration and Corporate Finance MBA degrees from IBMEC, and a post-graduate degree in Economic Engineering and Industrial Administration from Escola Nacional de Engenharia da UFRJ. Maurício Aquino Halewicz - 694.701.200-78 Has an Accounting degree from Universidade Federal do Rio Grande do Sul, an MBA in Corporate Finance from Fundação Getúlio Vargas- FGV, a post-graduate degree in Economic Engineering from Universidade Presbiteriana Mackenzie and a specialization in administration from the University of Virginia (Darden School of Business Administration). Currently Chief Financial Officer for Latin America at Contour Global (global energy player), former Chairman of Fiscal Council of Fibria Celulose S.A. in 2013-2019, alternate member of the Fiscal Council of Eneva S/A active in the electric energy generation industry), and from November 2012 to July 2018, Chief Financial Officer of SPIC Brazil (active in the clean energy industry). Also served at Fibria Celulose S.A, in 2009-2013, as alternate member of the Board of Directors and of the Audit and Risk Committee. Served as Investor Relations Officer, Comptroller and Corporate Superintendent Comptroller of Rede Energia S.A. (a publicly traded corporation active in the energy industry). Louise Barsi - 343.307.008-32 Has an Economics degree from Universidade Presbiteriana Mackenzie and an Accounting degree from Fundação Escola de Comércio Álvares Penteado. Attending the post graduate program of Capital Markets and MsC program in Accounting, with financial specialization, at Fundação Escola de Comércio Álvares Penteado. Currently an alternate member of the Board of Directors of Unipar Carbocloro S.A, alternate member of the Fiscal Council of Enel S.A, and member of the Board of Directors of Eternit S.A. Also serves as an investment analyst at Elite Investments. Michele da Silva Gonsales Torres - 324.731.878-00 Has a Law degree and a specialization degree in Business Law from Universidade Mackenzie. Currently a partner at ALFM Advogados, with experience including: Corporate Governance; Compliance; Legal Departments Management; Valuation and Risk Management; Analysis, Drafting and Management of various agreements; Corporations Law; strategic legal planning for business structuring; Structuring operations involving equity Investment Funds; Structuring operations involving Real-Estate developments; Drafting legal expert opinions – Compliance, Corporations Law, Capital Markets. Member of the Compliance Commission of the Instituto dos Advogados de SP – IASP; of the Compliance Commission of the Brazilian Bar – OAB/SP, of the Fiscal Council of Cemig (2018-2019) and if the Fiscal Council of Light since 2019.
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Antonio Marcos Vieira Santos - 053.610.478-64 Has a degree in Economics from Universidade São Judas Tadeu -São Paulo-SP, graduating in 1987. Active in accounting since 1985 and in the financial area for more than 20 years, having held mid- and top-level positions with companies such as Siemens and McCann Erickson Publicidade. Member of the Fiscal Council of Klabin S.A. since April 1998. Felipe Hatem - 139.836.057-02 Partner and Director of Risk, Compliance and PLD at Charles River Capital, a company he joined in 2016. At Charles River Capital, he previously worked in the stock analysis area. He was an analyst at asset managers Vinci Partners and BBM Investimentos. He holds a degree in Production Engineering from the Federal University of Rio de Janeiro (UFRJ) and is CFA (Chartered Financial Analyst) certified. Tiago Brasil Rocha - 251.877.268-54 Graduated in Business Administration from Universidade Mackenzie. Postgraduate degree in Business Economics from the University of São Paulo - USP. Master in Business Administration from Fundação Getúlio Vargas - FGV and Executive MBA from Oxford University, England, UK. Founder and General Director of Build from Scratch and represents the Green Innovation Group A / S for Latin America. Partner of SC Connection and member of the Advisory Board of GotChosen (Orlando, FL, USA). He worked at Klabin S.A., São Paulo, SP, from November / 2011 to March 2018. Between April / 2004 and November / 2011, he worked at Kimberly Clark Corporation (Dallas, TX, USA and São Paulo, SP). He also worked at Suzano Pulp and Paper Group from April / 2000 to April / 2004.
Pursuant to the contents of Article 147 of Law 6404/76, CVM Instruction 367/2002 and CVM Official Statement 02/2016, DECLARES under the penalties of the Law:
1 No impediment by force of specific law, or sentencing for bankruptcy, malfeasance, graft, extortion by a public official, embezzlement, crimes against the popular economy, the national financial system, anti-trust standards, consumer relations, public faith, or property;
2. No conviction by the CVM to temporary suspension or removal of privileges making me ineligible for management positions in a publicly traded corporation pursuant to paragraph 2 of Article 147 of Law 6.404/76;
3. Compliance with the spotless reputation requirement pursuant to article 147 of Law 6.404/76;
4. No criminal or administrative conviction before the CVM or any other authority, or before court, even if not passed into res judicata.
5. Not to hold public office or be politically exposed. (Except Mr. Joaquim Pedro Monteiro de Carvalho Collor de Mello.)
6. Not to hold office in a society that may be deemed a competitor of the company, and not to have or represent interests at conflict with the Company’s, pursuant to items I and II of paragraph 3 of Article 147 of Law 6.404/76. (Except Mr. Joaquim Pedro Monteiro de Carvalho Collor de Mello.) Conviction Conviction Type Description Arthur Canhisares 021.861.148-01 N/A Cristiano Cardoso Teixeira 128.996.528-50 N/A Francisco Cesar Razzolini 581.536.089-91 N/A Marcos Paulo Conde Ivo 220.481.088-65 N/A None. Daniel Miguel Klabin 008.143.777-34 N/A Antonio Sergio Alfano 875.349.248-04 N/A Page 234 of 348
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Maria Eugênia Lafer Galvão 076.308.458-12 N/A Horacio Lafer Piva 008.143.777-34 N/A Israel Klabin 008.143.777-34 N/A Paulo Sergio Coutinho Galvão Filho 040.443.368-57 N/A Roberto Klabin Martins Xavier 153.181.088-81 N/A Roberto Luiz Leme Klabin 988.753.708-00 N/A Camilo Marcantonio Junior 978.145.710-49 N/A Sergio Francisco Monteiro de Carvalho Guimarães 725.095.897-68 N/A Vera Lafer 380.289.138-49 N/A Mauro Gentile Rodrigues da Cunha 004.275.077-66 N/A Amanda Klabin Tkacz 047.868.957-84 N/A Wolff Klabin 018.376.457-95 N/A Alberto Klabin 261.062.567-72 N/A Francisco Lafer Pati 038.613.618-17 N/A Francisco Amaury Olsen 019.167.269-68 N/A Vivian do Valle Souza Leão Mikui 088.036.718-03 N/A Lilia Klabin Levine 300.825.448-91 N/A Marcelo Bertini de Rezende Barbosa 813.071.527-91 N/A Ruan Alves Pires 143.957.877-03 N/A Joaquim Pedro Monteiro de Carvalho Collor de Mello 085.081.467-79 N/A Vera Lafer Lorch Cury 060.657.498-00 N/A Tiago Curi Isaac 303.612.048-33 N/A Reinoldo Poernbacher 003.976.440-00 N/A João Adamo Junior 132.904.408-85 N/A João Alfredo Dias Lins 027.023.637-68 N/A Raul Ricardo Paciello 773.617.257-91 N/A Maurício Aquino Halewicz 694.701.200-78 N/A Louise Barsi 343.307.008-32 N/A Michele da Silva Gonsales Torres 324.731.878-00 N/A Antonio Marcos Vieira Santos 053.610.478-64 N/A Felipe Hatem 139.836.057-02 N/A Tiago Brasil Rocha 251.877.268-54 N/A Celso Lafer 001.913.298-00 N/A
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12.7/8 – Committees Membership
Description other CPF Committee type Audit Type Profession Position held Description other positions held committees Name Number of Consecutive Percentage of participation in Other positions / functions performed Date of birth Election date Possession date Term of office Mandates meetings at the issuer Amanda Klabin Tkacz 047.868.957-84 Audit Committee - Non-statutory Audit Committee Business Administrator Committee Member (Effective) - 08/15/1978 04/27/2021 04/27/2021 1 year 1 100% Member of the Board of Directors Pedro Guilherme Zan 010.972.568-98 Audit Committee - Non-statutory Audit Committee Accountant Committee Member (Effective) - 06/29/1960 04/27/2021 04/27/2021 1 year 0 100% Luis Eduardo Pereira de Carvalho 384.060.808-25 Audit Committee - Non-statutory Audit Committee Mechanical Engineer Committee Member (Effective) - 06/10/1948 04/27/2021 04/27/2021 1 year 1 100% Horácio Lafer Piva 038.613.618-17 Compensation Committee - - Economist Committee Member (Effective) - 05/30/1957 04/27/2021 04/27/2021 1 year 1 100% Member of the Board of Directors Francisco Amaury Olsen 019.167.269-68 Compensation Committee - - Business Administrator Committee Member (Effective) - 11/22/1949 04/27/2021 04/27/2021 1 year 1 100% Member of the Board of Directors Luis Fernando Giorgi 064.116.138-77 Compensation Committee - - Business Administrator Committee Member (Effective) - 09/03/1964 04/27/2021 04/27/2021 1 year 1 100% Israel Kabin 008.143.857-53 Other Committees Sustainability Committee Non-statutory Audit Committee Engineer Committee Member (Effective) - 09/20/1926 04/27/2021 04/27/2021 1 year 1 100% Member of the Board of Directors Roberto Luiz Leme Klabin 988.753.708-00 Other Committees Sustainability Committee Non-statutory Audit Committee Business Administrator Committee Member (Effective) - 07/15/1955 04/27/2021 04/27/2021 1 year 1 100% Member of the Board of Directors Reinoldo Poernbacher 003.976.440-00 Other Committees Sustainability Committee Non-statutory Audit Committee Chemical engineer Committee Member (Effective) - 04/02/1943 04/27/2021 04/27/2021 1 year 1 100%
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Professional experience / Independence criteria Amanda Klabin Tkacz - 047.868.957-84 Graduated in Business Administration from IBMEC, graduated from the Owners / Presidents Management Program at Harvard and from the Wharton School of Business on the Private Wealth Management course. She has experience in strategic business planning, mergers and acquisitions and risk management. She is part of the corporate structure and is responsible for Galt Capital's strategic positioning.
Pedro Guilherme Zan - 010.972.568-98 Has an Accounting degree from Faculdade de Ciências Econômicas Alvares Penteado, a post- graduate degree in Systems from the same institution and an Executive MBA degree from Insper. His experience includes controllership, managerial information, M&As, opening offshore branches, and strategic planning with effective implementation and management. Served as a member of the Finance Committee of OSESP.
Luis Eduardo Pereira de Carvalho - 384.060.808-25 Graduated in Production Engineering from Escola Politécnica da USP, with an MBA from London Business School. He has experience in planning and valuing companies, businesses and projects, and in economic analysis for tax purposes. He is a managing partner at Setape Assessoria Econômica.
Horácio Lafer Piva - 038.613.618-17 Shareholder of Klabin Irmãos SA, holding of the Klabin Group. Economist and postgraduate in Business Administration from Fundação Getúlio Vargas. He was president of FIESP / CIESP, SESI / SENAI, SEBRAE-SP and the Thematic Council of Economy of the CNI-Confederação Nacional da Indústria. He was a member of the Solidarity Community Program of the Fernando Henrique Cardoso government and of the CDES-Council for Economic and Social Development of the Lula government. He served as president of BRACELPA-Brazilian Pulp and Paper Association, of the Board of the AACD-Association for Assistance to Disabled Children, of Instituto DNA Brasil. He also sat on the Board of Directors of Redecard S/A, Martins S/A, BHG S/A, Tarpon S/A, TCP S/A, FAPESP - Foundation for Research Support of the State of São Paulo, AC Camargo Câncer Center, from the Biennial Foundation. He chairs the Board of Brain4Care S / A and IBÁ-Indústria Brasileira de Árvores. He is a member of the Council of Cataratas S/A, of the Baumgart Group, of the OSESP Foundation - São Paulo State Symphonic Orchestra, of EMBRAPII - Brazilian Company for Industrial Research and Innovation, of IEDI - Institute of Industrial Studies, of FEK - Ema Foundation Klabin, from FFHC - Fundação Fernando Henrique Cardoso, from the Advisory Councils of Brasilpar – Serviços Financeiros and Brainvest – Serviços de Investimentos, and from the leadership of MEI - Business Mobilization for Innovation. Francisco Amaury Olsen - 019.167.269-68 Business administrator, with an extension course in Business Administration from the University of Southern, California (Advanced Management). He is an independent member of the Board of Directors of Duratex, where he also integrates the People, Governance and
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Nomination Committee, the Sustainability Committee and the Committee for the Evaluation of Transactions with Related Parties. He is also vice-chairman of the Board of Directors, chairman of the Audit, Risks and Finance Committee and member of the Integration Committee of Martins Comércio e Serviço de Distribuição. He serves on the Board of Directors of Grupo Rotoplas, in addition to being part of the Audit, Risks and Finance Committee.
Luis Fernando Giorgi - 064.116.138-77 Graduated in Business Administration from FAAP, he is the founder and director of LFG Assessoria - Liderança e Gestão. He is also a member of the Boards of Directors of Arezzo & Co and the Teadit Group and the People and Governance Committees of Santander and Martins Atacadista; Human Capital of SulAmerica Seguros; and People of the Rodobens Group.
Israel Kabin - 008.143.857-53 Graduated in civil engineering and mathematics from the Federal University of Rio de Janeiro (UFRJ) and post-graduated from the Institute of Political Sciences of Paris. He has experience as a manager of the company and a career recognized as an environmentalist. He is president of the Brazilian Foundation for Sustainable Development (FBDS) and a member of the Independent Sustainability Council of the Inter-American Development Bank Development (IDB).
Roberto Luiz Leme Klabin - 988.753.708-00 Lawyer, specializing in Business Administration from Mackenzie University. He has an important role as an environmentalist. He is president of Fundação SOS Pantanal and vice president of Fundação SOS Mata Atlântica. Member of the Advisory Board of the Brazilian Fund for Biodiversity (Funbio). He is also a member of the Deliberative Council of Hospital Israelita Albert Einstein.
Reinoldo Poernbacher - 003.976.440-00 Graduated in Chemical Engineering from the Federal University of Paraná (UFPR). He has executive experience in companies such as Companhia Química Metacril and Copener-Copene Energética. He was Forestry Director, Supply Chain Director, CEO and member of Klabin's (alternate) Board of Directors.
Sentencing Conviction Name CPF Type Description Amanda Klabin 047.868.957-84 N/A Pedro Guilherme Zan 010.972.568-98 N/A Luis Eduardo Pereira de Carvalho 384.060.808-25 N/A Horácio Lafer Piva 038.613.618-17 N/A Francisco Amaury Olsen 019.167.269-68 N/A
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Luis Fernando Giorgi 064.116.138-77 N/A Israel Kabin 008.143.857-53 N/A Roberto Luiz Leme Klabin 988.753.708-00 N/A Reinoldo Poernbacher 003.976.440-00 N/A
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12. 9- Marriage, Common-Law Marriage, or Kinship up to 2nd Degree with Managers of the Issuer, Subsidiaries and Controlling Shareholders
GL Holdings S/A CNPJ 53.728.895/0001-41 Name and Position CPF Related Person CPF Type of relationship Paulo Sergio Coutinho Galvão Filho Graziela Lafer Galvão 040.443.368-57 Father or Mother (1st degree by consanguinity) Vice-President CEO 012.072.688-28
Dawojobe Participações S/A CNPJ: 30.280.465/0001-04 Name and Position CPF Related Person CPF Type of relationship Armando Klabin Israel Klabin 008.144.407-97 Brother or Sister (1st degree by consanguinity) CEO Director 008.143.857-53 Armando Klabin Daniel Miguel Kabin 008.144.407-97 Brother or Sister (1st degree by consanguinity) CEO Director 008.143.777-34 Armando Klabin Wolff Klabin 008.144.407-97 son (1st degree by consanguinity) CEO Shareholder 018.376.457-95
Daro Participações S/A CNPJ: 008.143.777-34 Name and Position CPF Related Person CPF Type of relationship Daniel Miguel Klabin Armando Klabin 008.143.777-34 008.144.407-97 Brother or Sister (1st degree by consanguinity) CEO CEO Daniel Miguel Klabin Israel Klabin 008.143.777-34 008.143.857-53 Brother or Sister (1st degree by consanguinity) CEO Director Daniel Miguel Klabin Amanda Klabin Tkacz 008.143.777-34 047.868.957-84 Son or Daughter (1st degree by consanguinity) CEO Shareholder
Glimdas Participações S/A CNPJ: 30.526. 602/0001-48 Name and Position CPF Related Person CPF Type of relationship Israel Klabin Armando Klabin 008.144.407-97 Brother or Sister (1st degree by consanguinity) CEO 008.143.857-53 Director Israel Klabin Daniel Miguel Klabin 008.143.777-34 Brother or Sister (1st degree by consanguinity) CEO 008.143.857-53 Director Israel Klabin Alberto Klabin 261.062.567-72 Son or Daughter (1st degree by consanguinity) CEO 008.143.857-53 Shareholder
VFV Participações S/A CNPJ:72.872.146/0001-38 Name and Position CPF Related Person CPF Type of relationship Vera Lafer Francisco Lafer Pati 380.289.138-49 256.483.558-90 Son or Daughter (1st degree by consanguinity) CEO Director Vera Lafer Vera Lafer Lorch Cury 380.289.138-49 060.657.498-000 Son or Daughter (1st degree by consanguinity) CEO Director
LKL Participações S/A CNPJ: 00. 288.075/0001-1O Name and Position CPF Related Person CPF Type of relationship Lilia Klabin Levine Roberto Klabin Martins CEO 300.825.448-91 Xavier 153.181.088-81 Son or Daughter (1st degree by consanguinity) Director
Presh S/A CNPJ: 53.728.903/0001-50 Name and Position CPF Related Person CPF Type of relationship Horácio Lafer Piva - Eduardo Lafer Piva - 038.613.618-17 029.198.238-76 Irmão ou Irmã (1° grau por consangüinidade) Director/Shareholder Director/Shareholder
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12.10 – Subordination, Retainer or Control Ties between Managers, Subsidiaries, Controlling Entities and Others
Klabin Irmãos S.A. 60.485.034/0001-45 Direct Controller
Name Position/Title CPF Type of ties between Manager and Fiscal Year related party 2020 João Alfredo Dias Lins Fiscal Council 027.023.637-68 Retainer
2019 João Alfredo Dias Lins Fiscal Council 027.023.637-68 Retainer
2018 João Alfredo Dias Lins Fiscal Council 027.023.637-68 Retainer
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12.11 Agreements, including Insurance Policies, to Pay or Reimburse Expenses Borne by the Managers The Company maintains liability insurance policies (D&O) for members of the Executive Board, Fiscal Council and Board of Directors. The purpose of these policies is to indemnify managers of the Company and its controlled entities of any losses incurred thereby as a result of innocent actions or omissions in the course of their duties, pursuant to the contents of the relevant policy. The maximum indemnity limit under the policy in force is BRL 120 million.
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12.12 Other relevant information
a) Involvement of members of the Board of Directors with other public listed corporations The table below shows members of the Board of Directors of Klabin S/A who hold positions in the Boards of Directors, Fiscal Councils, Committees and Executive Bodies of other publicly trade corporations.
Member Company Title Joaquim Pedro Monteiro de Carvalho Monteiro Aranha S.A. Member of the Board of Directors Collor de Mello Sérgio Francisco Monteiro de Carvalho Monteiro Aranha S.A. Member of the Board of Directors Guimarães BrasilAgro – Companhia Camilo Marcantonio Junior Brasileira de Propriedades Member of the Board of Directors
Agrícolas Paulo Sergio Coutinho Galvão Filho Raia Drogasil S.A. Member of the Board of Directors
1. Member of the Board of 1. BBM Logística S.A. Directors/ 2. Ômega Geração S.A. Audit Committee Member Tiago Curi Isaac 3. Banco do Estado de Sergipe 2. Substitute Fiscal Council S.A. 3. Member of the Board of Directors
1. Member of the Board of 1. brMalls Participações S.A. Directors/ Audit Committee Coordinator 2. Member of the Board of Directors/ Personnel and 2. Totvs S.A. Mauro Rodrigues da Cunha Compensation Committee / Member of the Audit Committee 3. Member of the Board of Directors Administration / Coordinator of 3. Vale S.A Audit Committee and Committee of People and Governance. Member of the Board of Directors/ Francisco Amaury Olsen Rotoplas S.A. Member of the Risk, Audit and Finance Committee. Substitute member of the Raia Drogasil S.A. Marcelo Bertini de Rezende Barbosa Administrative Council BrasilAgro – Companhia Substitute member of the Fiscal Ruan Alves Pires Brasileira de Propriedades Council Agrícolas
b) Average percentage attendance of full members at meetings of the Board of Directors
The average attendance of full members at meetings is 80.41%.
c) Average time served by full members of the Board of Directors
Full members of the Board of Directors serve an average 13 years.
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13.1. Description of the compensation policy or practice, including as concerns the non- Statutory Executive Board. a) Purposes of the compensation policy or practice, informing whether or not a compensation policy has been formally approved, the corporate body responsible for approval, and, where the issuer discloses such policies, the Web locations where they may be viewed. The purposes of our compensation practices are as follows:
- to align the interests of employees with the Company’s and the shareholders’ strategy;
- to enable employee compensation to be competitive and attractive compared to the market at large;
- to recognize the efforts of Klabin’s high-performing employees, fostering a culture of meritocracy and attracting and maintaining talent;
- to make sure that executive compensation does reflect our short- and long-term results, in addition to individual performance.
Our compensation plan and the overall compensation of Management are approved by the Board of Directors and the General Meeting. Approval-related information may be viewed in full at https://ri.klabin.com.br/governanca-corporativa/assembleias-e-reunioes/.
b) Compensation breakdown, indicating: (i) Description of the components of compensation and the purposes of each Board of Directors and Fiscal Council
Our Board of Directors and Fiscal Council earn fixed monthly fees, as well as life insurance and healthcare as benefits.
Additional compensation is offered for committee membership.
Statutory Executive Board (CEO and other Statutory Officers)
Compensation of the Statutory Executive Board breaks down into monthly fees, short- and long-term incentives, benefits (life insurance, healthcare plan, grocery vouchers, meal vouchers, private pension plan, and medical checkup) and FGTS (Time-in-Employment Fund).
As concerns fixed compensation, that is, monthly fees, we aim to align with the relevant market’s median, as well as with the practices applicable to the benefits package.
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and healthy and sustainable growth for Klabin, establishing indicators pegged to the business strategy and cycle, which enable closer alignment with the shareholders.
Furthermore, a large portion of long-term incentives arises from a matching program, where beneficiaries invest a portion of their short-term incentives to join. This enables aligning short- and long-term incentives, instilling a deeper sense of ownership in participants. The other portion of the long-term incentive is pegged to share-performance indicators, further reinforcing this alignment.
Non-Statutory Officers
Compensation of our Non-Statutory Officers is made up of monthly fees, short- and long-term incentives, and benefits (life insurance, healthcare plan, medication expenses support, meal vouchers, private pension, and medical checkup). It also includes labor rights as per the Law (paid vacation, 13th salary, and FGTS).
Our strategy for fixed compensation and short- and long-term incentives is the same as for the Statutory Executive Board.
(ii) Breakdown of total compensation
Fiscal year ending December 31, BOARD OF DIRECTORS 2020 2019 2018 1. Fixed compensation (a) Fees 92.70% 93.10% 93.30% 3. Benefits 7.30% 6.90% 6.70% 2. Variable compensation (a) Short-term 0.0% 0.0% 0.0% (b) Long-term 0.0% 0.0% 0.0% TOTAL 100.00% 100.00% 100.00%
Fiscal year ending December 31, STATUTORY EXECUTIVE BOARD 2020 2019 2018 1. Fixed compensation (a) Fees 24.6% 33.0% 31.5% 3. Benefits 4.5% 5.6% 4.7% 2. Variable compensation (a) Short-term 48.8% 42.1% 50.9% (b) Long-term 22.1% 19.3% 12.9% TOTAL 100.00% 100.00% 100.00%
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Fiscal year ending December 31, FISCAL COUNCIL 2020 2019 2018 1. Fixed compensation (a) Fees 95,7% 94,3% 94,5% 3. Benefits 4,3% 5,7% 5,5% 2. Variable compensation (a) Short-term 0,0% 0,0% 0,0% (b) Long-term 0,0% 0,0% 0,0% TOTAL 100,00% 100,00% 100,00%
The share of each component of the Statutory Executive Board’s compensation as reported in the table above represents the accountging positoni of item 13.2. Given the targets for each component of the Statutory and Non-Statutory Executive Board, the following shares emerge:
Fiscal year ending
December 31, STATUTORY EXECUTIVE BOARD 2020 2019 2018 1. Fixed compensation (a) Fees 33.5% 31.0% 32.7% 3. Benefits 6.2% 4.9% 5.1% 2. Variable compensation (a) Short-term 36.6% 39.4% 37.7% (b) Long-term 23.7% 24.7% 24.5% TOTAL 100.00% 100.00% 100.00%
Fiscal year ending
December 31, NON-STATUTORY EXECUTIVE 2020 2019 2018 BOARD 1. Fixed compensation (a) Fees 39.1% 40.1% 40.9% 3. Benefits 6.9% 6.5% 7.0% 2. Variable compensation (a) Short-term 33.9% 32.8% 31.7% (b) Long-term 20.1% 20.6% 20.4% TOTAL 100.00% 100.00% 100.00%
(iii) Calculation and adjustment method for each component of compensation
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The annual amount to be used for the overall compensation of management (Directors and Statutory Officers) is set at the Company’s Annual General Meeting.
Our annual compensation survey is supported by consultants Korn Ferry do Brasil. The survey covers companies whose characteristics are similar to Klabin’s and recognized by the market.
We use the information obtained to analyze our compensation practices for competitiveness, as well as to determine the need for any adjustments to our executive compensation.
Compared with the relevant market, we keep a market-median position for fixed compensation and in the 3rd quartile for variable compensation, strengthening be connection between compensation and the Company’s healthy and sustainable growth.
(iv) Reasons justifying the compensation breakdown
Fees/fixed compensation: it is our policy to position our reference compensation at the market median (P50) to maintain competitiveness. We thus strengthen the connection between compensation and Klabin’s healthy and sustainable growth.
Short-term variable compensation: helps make the compensation package more competitive compared with the market at large and provides the basis for participation in the LTI Marching plan. Because it also depends on the Company’s performance, it has even greater impact on aligning interests with shareholders. Our strategy for this component is to maintain a position in the market’s 3rd quartile (P75).
Long-term variable compensation: the long-term variable component is most relevant for aligning the interests of shareholders with the employees’ and as concerns talent retention and attraction, as it depends on the participants’ remaining with the Company for periods from three to five years, as well as on good performance on the part of Klabin’s shares. It has the potential to significantly increase participants’ compensation, and our strategy for this component is to maintain a position in the 3rd market quartile (P75).
Benefits: We believe that benefits are important to leverage the competitiveness of Klabin’s compensation package, as well as to ensure better living standards for our employees and their dependents. Our strategy for this component is to maintain a position in line with best market practices.
v) presence of members without compensation from the issuer and the reason for this
There are no members without compensation
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c) main performance indicators considered to determine each compensation component
For our short-term incentives program, parameters include financial indicators and individual goals measuring the performance of each employee. Corporate goals make up 75-80% of the total weight, and individual ones make up the remaining 20-25%. Indicators are financial operational, market-related, and ESG-related.
Individual goals are agreed at the beginning of each year and attainment is determined at the end of the year.
Since the 2020 hiring cycle, individual goals have been pegged to the KODS (Klabin Sustainable Development Goals), that is, they relate with each of the four theme axes proposed (renewable future, sustainable economy, prosperity for people, and technology & innovation). This reinforces the importance of managing the ESG culture and our commitment to long-term goals set for 2030, adopting the required short-term measures and rallying employees around this purpose.
¹KODS = Klabin Sustainable Development Goals. We organize in the light of the UN’s 17 sustainable development goals and prioritize 14 of them, which our sustainability programs and initiatives affect directly. They have been devised with short- (2021), medium- (2025) and long- term (2030) goals in mind, embracing our company’s values and needs, while maintaining a dialogue with the four theme axes that we prize: building a renewable future, contributing to a sustainable economy, prosperity for the people, and technology & innovation.
Concerning long-term incentives, we established two share-based programs to stimulate attainment of results and alignment of the interests of participants with those of the Company’s shareholders:
- LTI Matching: under this program, performance indicators apply indirectly, as the number of shares awarded to a participant depends on the amount invested thereby upon joining the program, such an amount to be a portion (up to 35%) of their short-term incentive. After the awarding, participants must await a three-year vesting period to receive the matching. See item 13.4 for additional information on the program.
Since 2016, Managers have become eligible for the program, and eligibility for Coordinators and Specialists came in 2018.
- LTI Performance: The purpose of the Program is to strengthen alignment with the Company’s strategy and the interests of Shareholders, conditioning receipt to the attainment of a performance goal, that is, TSR (Total Shareholder Returns) X Cost of Shareholders’ Equity
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(Ke).
The target value is 25% of each executive’s short-term variable compensation target, based on the fees/salaries in force in January of the year when the program begins. This target value is converted into “virtual units”, considering the average share price in the final 30 trading days of the year preceding the plan in force. The plan has a duration of 5 years, and is contingent upon attainment of performance targets after this five-year period (vesting period), in addition to permanence with Klabin.
Once a performance target has been reached, in addition to the “virtual units”, executives shall be entitled, as additional LTI Performance yield, to an amount equivalent to the dividends and/or interest on shareholders’ equity paid by KLABIN S/A to shareholders during the vesting period. These amounts are converted into “virtual units” over the course of the five-year vesting period, and accumulated in a graphic account.
After the 5-year vesting period, in addition to determination of performance indicator attainment, the Board of Directors conducts a discretionary review that may modulate the final result by 10% more or less to mitigate exogenous impacts.
For the purposes of payment of the LTI Performance, as long as the performance target has been met, the total number of “virtual units” in each Plan shall be converted into monetary amounts at the unit’s price (KLBN11), considering the average of the last 30 trading days prior to plan close. Payment to the executive shall be made in cash.
Only Statutory and Non-Statutory Officers shall be eligible for LTI Performance.
¹TSR = [(Final share price – Initial share price) + Dividends]/Initial share price
²Ke = Risk-free interest rate + Business risk factor * (Market index yield – Risk-free interest rate)
d) how the Company structures compensation to reflect the evolution of performance indicators
The short-term incentive paid may vary between 0% and 150%, depending on the annual targets attained. We thereby also guarantee that the LTI Matching plan will reflect this evolution, as the number of assets awarded to participants depends on the percentage of the STI invested in the plan.
The LTI Performance plan, by its turn, is directly aligned with the indicators, as the amount participants will receive depends on TSR and Ke performance of the Company’s shares as
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described before.
e) how the compensation policy aligns with the Company’s short-, medium- and long-term interests
In the short term, the Company pursues alignment by means of competitive salaries and a benefits package compatible with the market, enabling the attraction of skilled and high- performance workers. In addition, our short-term incentives are pegged to financial performance indicators (such as EBITDA, Net revenues, Working Capital) and individual targets that measure each employee’s performance.
For the long term, we achieve alignment by means of the LTI Matching plan, which is based on units and requires participants to make an initial investment. Also in the long term, we have the LTI Performance plan, which aligns Officer compensation with the units’ market performance by means of the TSR and Ke indicators, as discussed before.
f) presence of compensation supported by subsidiaries, controlled entities or directly or indirectly controlling shareholders
No form of compensation exists that meets these criteria.
g) presence of any compensation or benefits pegged to the passing of certain corporate events, such as divestment of the Company’s controlling stake
No compensation or benefits are pegged to the passing of corporate events. However, in the event of a control change, the vesting period of the LTI plants will be anticipated, releasing participants from giving Klabin preemptive rights over the shares acquired and anticipating the conveyance of title over the shares.
h. Board of Directors practices and procedures in place to define individual compensation of the Board of Directors and the Executive Board, indicating
i. The issuer’s bodies and committees involved in the decision-making process, identifying the manner of their involvement
Our compensation plan and the overall compensation of the Management require the approval of the Board of Directors and General Meeting. Information on approval thereof can be viewed
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in full at https://ri.klabin.com.br/governanca-corporativa/assembleias-e-reunioes/.
In addition, the Board of Directors counts on the advice of the Compensation Committee, which is responsible for examining and discussing the compensation guidelines for the members of the Executive Board, including the compensation criteria (fixed and variable) and benefits, ensuring that these guidelines are compatible with the risk management policy, with the goals and the financial situation of the Company. In addition, the Compensation Committee advises the Board of Directors regarding the overall compensation of the managers.
ii. Criteria and methods used to set individual compensation amounts, indicating whether or not surveys are used to determine market practices and, if so, the studies’ comparison criteria and scope
Our annual compensation surveys have the support of consultants Korn Ferry do Brasil. The survey covers companies with similar characteristics to Klabin’s and recognized by the market.
The information is used to analyze our compensation practices’ competitiveness, as well as to establish the need for any compensation adjustments as concerns our employees.
Compared with the relevant market, we maintain a median position for fixed compensation and a position in the 23rd quartile for variable compensation, strengthening the link between compensation and the Company’s healthy and sustainable growth.
iii. how often and in what manner does the Board of Directors review the adequacy of the issuer’s compensation policy
Annually.
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13.2- Total Compensation of the Board of Directors, Statutory Executive Board and Fiscal Council
Total compensation for the current fiscal year - 12/31/2021 – Annual Amounts Statutory Executive Board of Directors Fiscal Council Total Board Total members 13.00 4.00 5.00 22.00 Total compensated members 13.00 4.00 5.00 22.00 Fixed annual compensation Salary or fee BRL 12,202,765.38 BRL 8,430,293.36 BRL 1,660,945.00 BRL 22,294,003.74 Direct and indirect benefits BRL 1,128,962.71 BRL 1,684,715.73 BRL 83,581.99 BRL 2,897,260.44 Attendance at Committees BRL 1,080,000.00 BRL 1,080,000.00 Other Description of other fixed compensation elements Variable compensation Bonus BRL 16,187,706.76 BRL 16,187,706.76 Profit sharing Attendance at meetings Commissions Other Description of other variable compensation elements Post-employment - Position termination - Share-based (including options) BRL 7,488,386.25 BRL 7,488,386.25 Notes Total compensation BRL 14,411,728.09 BRL 33,791,102.11 BRL 1,744,526.99 BRL 49,947,357.19
Total compensation in the fiscal year ending 12/31/2020 Annual Amounts Statutory Executive Board of Directors Fiscal Council Total Board Total members 13.58 4.00 5.00 22.58 Total compensated members 13.58 4.00 5.00 22.58 Fixed annual compensation Salary or fee BRL 12,708,205.35 BRL 7,321,177.12 BRL 1,660,945.00 BRL 21,690,327.47 Direct and indirect benefits BRL 1,001,769.90 BRL 1,316,909.90 BRL 74,124.09 BRL 2,392,803.89 Attendance at Committees Other Description of other fixed compensation elements Variable compensation Bonus BRL 14,520,840.81 BRL 14,520,840.81 Profit sharing Attendance at meetings Commissions Other Description of other variable compensation elements Post-employment - - - - Position termination - - - - Share-based (including options) BRL 6,569,818.62 BRL 6,569,818.62 Notes Total compensation BRL 13,709,975.25 BRL 29,728,746.44 BRL 1,735,069.09 BRL 45,173,790.78
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Total compensation in the fiscal year ending 12/31/2019 Annual Amounts Statutory Executive Board of Directors Fiscal Council Total Board Total members 13.67 3.42 5.00 22.09 Total compensated members 13.67 3.42 5.00 22.09 Fixed annual compensation Salary or fee BRL 12,995,923.72 BRL 6,456,229.20 BRL 1,660,949.00 BRL 21,113,101.92 Direct and indirect benefits BRL 969,876.59 BRL 1,086,620.36 BRL 99,896.30 BRL 2,156,393.25 Attendance at Committees Other Description of other fixed compensation elements Variable compensation Bonus BRL 8,244,559.78 BRL 8,244,559.78 Profit sharing Attendance at meetings Commissions Other Description of other variable compensation elements Post-employment - - - - Position termination - - - - Share-based (including options) BRL 3,774,601.56 BRL 3,774,601.56 Notes Total compensation BRL 13,965,800.31 BRL 19,562,010.90 BRL 1,760,845.30 BRL 35,288,656.51
Total compensation in fiscal year ending 12/31/2018 - Annual Amounts Statutory Executive Board of Directors Fiscal Council Total Board Total members 13.00 4.00 5.00 22.00 Total compensated members 13.00 4.00 5.00 22.00 Fixed annual compensation Salary or fee BRL 12,628,513.00 BRL 6,890,400.00 BRL 1,660,958.00 BRL 21,179,871.00 Direct and indirect benefits BRL 905,925.66 BRL 1,027,914.61 BRL 96,666.81 BRL 2,030,507.08 Attendance at Committees Other Description of other fixed compensation elements Variable compensation Bonus BRL 11,122,232.40 BRL 11,122,232.40 Profit sharing Attendance at meetings Commissions Other Description of other variable compensation elements Post-employment - - - - Position termination - - - - Share-based (including options) BRL 2,819,201.80 BRL 2,819,201.80 Notes Total compensation BRL 13,534,438.66 BRL 21,859,748.80 BRL 1,757,624.81 BRL 37,151,812.27
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13.3 – Variable Compensation of the Board of Directors, Statutory Executive Board and Fiscal Council
Forecast 2021 (in BRL): Board of Directors Executive Board Fiscal Council Total Number of Members 13.00 4.00 5.00 22.00 Total compensated members 13.00 4.00 5.00 22.00 Bonus Minimum amount under the compensation plan BRL 3,792,240.10 BRL 3,792,240.10 Maximum amount under the compensation plan BRL 16,187,706.76 BRL 16,187,706.76 Amount under the compensation plan - goals met BRL 10,791,804.51 BRL 10,791,804.51 Effectively recognized amount Profit sharing Minimum amount under the compensation plan Maximum amount under the compensation plan Amount under the compensation plan - goals met Effectively recognized amount
Effective 2020 (in BRL): Board of Directors Executive Board Fiscal Council Total Number of Members 13.58 4.00 5.00 22.58 Total compensated members 13.58 4.00 5.00 22.58 Bonus Minimum amount under the compensation plan BRL 3,306,933.01 BRL 3,306,933.01 Maximum amount under the compensation plan BRL 14,116,105.60 BRL 14,116,105.60 Amount under the compensation plan - goals met BRL 9,410,737.07 BRL 9,410,737.07 Effectively recognized amount BRL 14,520,840.81 Profit sharing Minimum amount under the compensation plan Maximum amount under the compensation plan Amount under the compensation plan - goals met Effectively recognized amount
Effective 2019 (in BRL): Board of Directors Executive Board Fiscal Council Total Number of Members 13.67 3.42 5.00 22.08 Total compensated members 13.67 3.42 5.00 22.08 Bonus Minimum amount under the compensation plan BRL 2,928,020.04 BRL 2,928,020.04 Maximum amount under the compensation plan BRL 11,652,919.20 BRL 11,652,919.20 Amount under the compensation plan - goals met BRL 8,963,784.00 BRL 8,963,784.00 Effectively recognized amount BRL 8,244,559.78 BRL 8,244,559.78 Profit sharing Minimum amount under the compensation plan Maximum amount under the compensation plan Amount under the compensation plan - goals met Effectively recognized amount
Effective 2018 (in BRL): Board of Directors Executive Board Fiscal Council Total Number of Members 13.00 4.00 5.00 22.00 Total compensated members 13.00 4.00 5.00 22.00 Bonus Minimum amount under the compensation plan BRL 2,794,817.40 BRL 2,794,817.40 Maximum amount under the compensation plan BRL 12,834,000.00 BRL 12,834,000.00 Amount under the compensation plan - goals met BRL 8,556,000.00 BRL 8,556,000.00 Effectively recognized amount BRL 11,122,232.40 BRL 11,122,232.40 Profit sharing Minimum amount under the compensation plan Maximum amount under the compensation plan Amount under the compensation plan - goals met Effectively recognized amount
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13.4. Share-based compensation plan for the Board of Directors and Statutory Executive Board
LTI MATCHING LTI PERFORMANCE
Our plan does not include members of the Our plan does not include members of the Board of Directors, just the Statutory Board of Directors, just the Statutory Executive Board (CEO and other Statutory Executive Board (CEO and other Officers) as well as for the others eligible, Statutory Officers) as well as for the according to item 13.1. others eligible, according to item 13.1.
Our long-term variable compensation plan The first LTI Performance plan and its was approved at the Extraordinary General rules were approved by the Board of Meeting held July 10, 2012, and has been Directors of Klabin SA in 2018. This duly authorized by the CVM pursuant to approval is validated annually to maintain OFICIO/CVM/SEP/GEA-2/No 221/2012, the plan. covering beneficiaries’ right to convert a portion of their bonuses into the acquisition This is a long-term incentive plan, pegged of units (KLBN11) of the Company held in to attainment of performance indicators, treasury. that is, TSR (Total Shareholder Return) X a) General Cost of shareholders’ equity (KE). clauses and Pursuant to the plan, Klabin stipulated that conditions the Statutory Executive Board may use up Participation is annual, counting form to 25% of its short-term variable January 1st each year, and considers for compensation to acquire units held in calculation purposes 25% of the short- treasury. Klabin will match the units thus term variable compensation target, acquired at a rate of de 100%, by means of multiplied by the salary for the month of “Private Usufruct and other Matters January of the relevant year. The amount Agreement”, on the number of units is converted into virtual units, considering acquired by the executive upon the average price of the 30 trading days presentation of the “Treasury Units prior to the plan in force. Purchase and Other Matters Agreement”.
Participants shall be entitled to dividends and interest on shareholders’ equity associated with the units under usufruct, as long as duly declared and approved by the Company’s corporate bodies, as per the law, the Bylaws and the Charter.
The purposes of our LTI Matching plan is The purpose of our LTI Performance to: plan is to:
b) main purposes - Secure alignment with the Company’s - Secure alignment with the Company’s of the plan and its shareholders’ strategy, in addition and the shareholders’ strategy by making to fostering a sense of ownership in the amount to be received contingent on participants by making participation the performance of market indicators, contingent on investment of part of the such as TSR, which is directly Page 255 of 348
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short-term incentives in shares of Klabin; connected with return to shareholders; - properly reward our executives by means - properly reward our executives by of competitive compensation compared means of competitive compensation with the relevant market; compared with the relevant market; - attract maintain and recognize high- - attract maintain and recognize high- performing workers, fostering a culture of performing workers, fostering a culture meritocracy, of meritocracy, - reflect the Company’s short- and long- - reflect the company’s long-term results, term results in executive compensation as well as individual executive through the investment of short-term performance. incentives in the plan.
By fostering a sense of ownership and The market indicators used under the making participation contingent on program guarantee that this share of c) how the plan investing a portion of the short-term compensation will be pegged to the contributes to incentives in shares of the Company. return that the shares provide to these objectives Being share-based, it also binds shareholders. compensation to Klabin’s performance
d) how the plan It is one component of the total compensation package, pursuing a position in the 3rd matches the market quartile, in addition to helping align the interests of our executives and issuer’s shareholders, which is possible by involving share-appreciation indicators (TSR) and compensation permanence with the Company (5-year vesting period) as conditions to receive the policy LTI.
The use of matching as a condition for Performance conditions pegged to the e) how the plan participation creates a sense of ownership, market performance of the Company’s aligns the and the vesting period helps retain talent. shares, as well as the vesting period, interests of the which helps retain talent. It is worth managers and emphasizing the TSR, which answers for the issuer in the a significant portion of the performance short, medium condition and is directly connected with and long run return to shareholders
f) maximum number of shares Not applicable None, as the plan is settled in cash. covered
g) maximum number of None, as the plan is settled in cash. options to be The Company’s plan does not provide for awarded options.
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Attaining the performance conditions h) conditions for Initial investment to join the program and specified at the beginning of the plan share acquisition completion of a vesting period (additional details in item 13.1 letters c and d) and completion of a vesting period
i) Acquisition or Not applicable as this is not an options Not applicable as the executives acquire strike price plan. no assets under the plan. criteria However, it is worth mentioning that, given the presence of matching, executives must acquire a previously determined number of assets to join the program. The unit acquisition price shall be equivalent to the average closing prices of the sixty (60) trading days preceding the date of the award, or the unit price on the day preceding the award, whichever is lower.
Not applicable as this is not an options Not applicable as this is not an options j) exercise plan. The shares are automatically plan. The shares are automatically period criteria awarded upon the end of the vesting awarded upon the end of the vesting period. period, assuming attainment of the performance conditions. The vesting period is three years.
The vesting period is five years.
k) Settlement Shares (equity shares) Cash
None. However, shares acquired by None participants as a condition for joining may l) restrictions on not be transferred during the vesting share transfer period (3 years)
m) criteria and If the Company undergoes a control If the Company undergoes a control events whose change before the end of the vesting change before the end of the vesting occurrence shall period, the vesting period will be period, the vesting period will be
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lead to the anticipated. anticipated. The greater will apply suspension, between the target performed restated at amendment or the IPCA or the results thus far. extinction of the plan
n) effects of the In the event of a participant’s death, death: the estate shall receive early manager leaving retirement or force majeure, full title over payment of the target amount restated at the issuer’s the units awarded shall convey to the the IPCA. bodies on their estate or the participant themselves, before Termination without cause: immediate rights under the the end of the three-year vesting period. release of the amount. The payment will share-based consider the results (TSR and Ke) on the compensation If an executive is terminated without cause date of termination, based on the average plan at the Company’s initiative during the price of the last 30 trading days. vesting period, the right to the programs in force shall stand as long as the executive Voluntary resignation or termination maintains the part acquired upon joining with cause: loss of rights. the plan until the end of the vesting period.
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13.5. Share-based compensation of the Board of Directors and Statutory Executive Board: a) corporate body; b) number of members; c) number of compensated members; d) concerning each stock option granted; (i) date granted; (ii) number of options granted; (iii) vesting period; (iv) maximum exercise period; (v) restriction transfer period; (vi) weighted average strike price of each of the following option groups: (I) outstanding at the beginning of the fiscal year; (lI) lost during the fiscal year; (Ill) exercised during the fiscal year; (IV) expired during the fiscal year; d) Fair value of the options on the date granted; e) fair value of the options on the date granted; and f) potential dilution in the event of exercise of all options granted.
AWARDS ACTIVE IN 2021 (FORECAST) Reference period: 01/01/2021 12/31/2021 Statutory Statutory Statutory Statutory Statutory Statutory Statutory Statutory a) Body Officers Officers Officers Officers Officers Officers Officers Officers b) Total members 4 4 4 4 4 4 4 4 c) Compensated members 4 4 4 4 4 4 4 4 ILP ILP ILP ILP ILP ILP ILP ILP Award: Matching Matching Matching Matching Performan Performan Performan Performan 2020 2019 2018 2017 ce 2018 ce 2019 ce 2020 ce 2021 d) Relative to each stock otions award: i. Date of the Award 02/26/2021 02/28/2020 02/28/2019 02/28/2018 01/02/2018 01/02/2019 01/02/2020 01/04/2021 ii. Number of options 113,253 0 0 0 0 0 0 0 awarded iii. Vesting period 02/26/2024 02/28/2023 02/28/2022 03/01/2021 01/02/2023 01/02/2024 01/02/2025 01/02/2026 iv. Exercise deadline None None None None None None None None v. Share transfer None None None None None None None None restriction period vi. Weighted average proce of each of the following groups of shares: · outstanding at fiscal R$ 29.47 R$ 19.25 R$ 18.04 R$ 17.90 R$ 25.94 R$ 25.94 R$ 25.94 R$ 25.94 year start · lost in the fiscal R$ R$ R$ R$ R$ R$ R$ R$ year ------· exercised in the R$ R$ R$ R$ R$ R$ R$ R$ 17.90 fiscal year ------· expired in the fiscal None None None None None None None None year e) fair value on the date of R$ 29.47 R$ 19.25 R$ 18.04 R$ 17.90 R$ 18.20 R$ 16.31 R$ 18.76 R$ 25.94 each award f) potential dillution if all options awarded are 0% 0% 0% 0% 0% 0% 0% 0% exercised
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AWARDS ACTIVE IN 2020 Reference period: 01/01/2020 12/31/2020 Statutory Statutory Statutory Statutory Statutory Statutory Statutory a) Body Officers Officers Officers Officers Officers Officers Officers b) Total members 4 4 4 4 4 4 4 c) Compensated members 4 4 4 4 4 4 4 ILP ILP ILP ILP ILP ILP ILP Award: Matching Matching Matching Matching Performan Performan Performan 2019 2018 2017 2016 ce 2018 ce 2019 ce 2020 d) Relative to each stock otions award: i. Date of the Award 02/28/2020 02/28/2019 02/28/2018 02/24/2017 01/02/2018 01/02/2019 01/02/2020 ii. Number of options 122,478 0 0 0 0 0 206,962 awarded iii. Vesting period 02/28/2023 02/28/2022 03/01/2021 02/25/2020 01/02/2023 01/02/2024 01/02/2025 iv. Exercise deadline None None None None None None None v. Share transfer None None None None None None None restriction period vi. Weighted average proce of each of the following groups of shares: · outstanding at fiscal R$ 19.25 R$ 18.04 R$ 17.90 R$ 15.50 R$ 18.76 R$ 18.76 R$ 18.76 year start · lost in the fiscal R$ R$ R$ R$ R$ R$ R$ year ------· exercised in the R$ R$ R$ R$ R$ R$ R$ 15.50 fiscal year ------· expired in the fiscal None None None None None None None year e) fair value on the date of R$ 19.25 R$ 18.04 R$ 17.90 R$ 15.50 R$ 18.20 R$ 16.31 R$ 18.76 each award f) potential dillution if all options awarded are 0% 0% 0% 0% 0% 0% 0% exercised
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AWARDS ACTIVE IN 2019 Reference period: 01/01/2019 31/12/2019 Statutory Statutory Statutory Statutory Statutory Statutory a) Body Officers Officers Officers Officers Officers Officers b) Total members 3.17 3.17 3.17 3.17 3.17 3.17 c) Compensated members 3.17 3.17 3.17 3.17 3.17 3.17 ILP ILP ILP ILP ILP ILP Award: Matching Matching Matching Matching Performan Performan 2018 2017 2016 2015 ce 2018 ce 2019 d) Relative to each stock otions award: i. Date of the Award 02/28/2019 02/28/2018 02/24/2017 02/29/2016 01/02/2018 01/02/2019 ii. Number of options 125,564 0 0 0 0 0 awarded iii. Vesting period 02/28/2022 03/01/2021 02/25/2020 03/01/2019 01/02/2023 01/02/2024 iv. Exercise deadline None None None None None None v. Share transfer None None None None None None restriction period vi. Weighted average proce of each of the following groups of shares: · outstanding at fiscal R$ 18.04 R$ 17.90 R$ 15.50 R$ 21.50 R$ 16.31 R$ 16.31 year start · lost in the fiscal R$ R$ R$ R$ R$ R$ 17.66 year - - - - - · exercised in the R$ R$ R$ R$ R$ R$ 21.50 fiscal year - - - - - · expired in the fiscal None None None None None None year e) fair value on the date of R$ 18.04 R$ 17.90 R$ 15.50 R$ 21.50 R$ 18.20 R$ 16.31 each award f) potential dillution if all options awarded are 0% 0% 0% 0% 0% 0% exercised
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AWARDS ACTIVE IN 2018 Reference period: 01/01/2018 31/12/2018 Statutory Statutory Statutory Statutory Statutory a) Body Officers Officers Officers Officers Officers b) Total members 3 3 3 3 3 c) Compensated members 3 3 3 3 3 ILP ILP ILP ILP ILP Award: Matching Matching Matching Matching Performan 2017 2016 2015 2014 ce 2018 d) Relative to each stock otions award: i. Date of the Award 02/28/2018 02/24/2017 02/29/2016 02/27/2015 01/02/2018 ii. Number of options 169,982 0 0 0 0 awarded iii. Vesting period 03/01/2021 02/25/2020 03/01/2019 02/27/2018 01/02/2023 iv. Exercise deadline None None None None None v. Share transfer None None None None None restriction period vi. Weighted average proce of each of the following groups of shares: · outstanding at fiscal R$ 17.90 R$ 15.50 R$ 21.50 R$ 17.94 R$ 18.20 year start · lost in the fiscal R$ R$ R$ R$ 15.50 R$ 21.50 year - - - · exercised in the R$ R$ R$ R$ R$ 17.94 fiscal year - - - - · expired in the fiscal None None None None None year e) fair value on the date of R$ 17.90 R$ 15.50 R$ 21.50 R$ 17.94 R$ 18.20 each award f) potential dillution if all options awarded are 0% 0% 0% 0% 0% exercised
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13.6. Information on outstanding options held by the Board of Directors and the Statutory Executive Board: a) Corporate body; b) Number of members; c) Number of compensated members; d) Concerning options that cannot be exercised; (i) Quantity; (ii) Date when exercise will become possible; (iii) Maximum exercise period; (iv) Vesting period for transfer; (v) Weighted average strike price; (vi) Fair value of the options at the end of the fiscal year; and e) Concerning options that can be exercised; (i) Quantity; (li) maximum exercise period; (Ill) vesting period for transfer; (IV) Weighted average strike price; (V) Fair value of the options at the end of the fiscal year; (VI) Fair value of all options at the end of the fiscal year:
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AWARDS ACTIVE IN 2020 Reference period: 01/01/2020 31/12/2020 ILP Matching ILP Performance ILP Performance ILP Performance Award: ILP Matching 2019 ILP Matching 2018 ILP Matching 2017 2016 2018 2019 2020 Statutory a) Body Statutory Officers Statutory Officers Statutory Officers Statutory Officers Statutory Officers Statutory Officers Officers 13.6 Totals b) Total members 4 4 4 4 4 4 4 4 c) Compensated 4 4 4 4 4 4 4 4 members d) Relative to options not yet eligible for exercise: i. Quantity 122,478 125,564 175,411 - 80,672 93,367 106,575 704,067 ii. Date of eligibility for 02/28/2023 02/28/2022 03/01/2021 02/25/2020 01/02/2023 01/02/2024 01/02/2025 exercise vi. Fair value of the shares in the last BRL 2,357,701.50 BRL 2,265,174.56 BRL 3,139,856.90 BRL - BRL 1,468,230.40 BRL 1,522,815.77 BRL 1,999,347.00 BRL 12,753,126.13 fiscal year
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AWARDS ACTIVE IN 2019 Reference period: 01/01/2019 12/31/2019 ILP Matching ILP Performance ILP Performance Award: ILP Matching 2018 ILP Matching 2017 ILP Matching 2016 2015 2018 2019 Statutory a) Body Statutory Officers Statutory Officers Statutory Officers Statutory Officers Statutory Officers Officers 13.6 Totals b) Total members 3.17 3.17 3.17 3.17 3.17 3.17 3.17 c) Compensated 3.17 3.17 3.17 3.17 3.17 3.17 3.17 members d) Relative to options not yet eligible for exercise: i. Quantity 125,564 175,411 102,031 - 80,672 93,367 577,045 ii. Date of eligibility for 02/28/2022 02/28/2021 02/25/2020 03/01/2019 01/02/2023 01/02/2024 exercise vi. Fair value of the shares in the last BRL 2,265,174.56 BRL 3,139,856.90 BRL 1,581,480.50 BRL - BRL 1,468,230.40 BRL 1,522,815.77 BRL 9,977,558.13 fiscal year
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AWARDS ACTIVE IN 2018 Reference period: 01/01/2018 12/31/2018 ILP Matching ILP Performance Award: ILP Matching 2017 ILP Matching 2016 ILP Matching 2015 2014 2018 Statutory a) Body Statutory Officers Statutory Officers Statutory Officers Statutory Officers Officers 13.6 Totals b) Total members 3 3 3 3 3 3 c) Compensated 3 3 3 3 3 3 members d) Relative to options not yet eligible for exercise: i. Quantity 169,982 98,914 55,700 - 80,672 405,268 ii. Date of eligibility for 02/28/2021 02/25/2020 03/01/2019 02/27/2018 01/02/2023 exercise vi. Fair value of the shares in the last BRL 3,042,677.80 BRL 1,533,167.00 BRL 1,197,550.00 BRL - BRL 1,468,230.40 BRL 7,241,625.20 fiscal year
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13.7. Options exercised and shares delivered in connection with the share-based compensation of the Board of Directors and Statutory Executive Board: a) Corporate body; b) Number of members; c) Number of compensated members; d) Concerning exercised options, inform: (I) number of shares; (ii) Weighted average strike price; e (iii) Total difference between the strike price and the market value of the shares as concerns options exercised; and e) Concerning shares delivered, inform: (I) number of shares; (II) Weighted average acquisition price; and (Ill) total difference between the acquisition price and the market value of the shares acquired:
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AWARDS ACTIVE IN 2020 Reference period: 01/01/2020 12/31/2020 Award: ILP Matching 2019 ILP Matching 2018 ILP Matching 2017 ILP Matching 2016 ILP Performance 2018 ILP Performance 2019 ILP Performance 2020 a) Body Statutory Officers Statutory Officers Statutory Officers Statutory Officers Statutory Officers Statutory Officers Statutory Officers 13.7 e) Concerning shares awarded, inform: i. Quantity - - - 102,031 - - - 102,031 ii. Weighted average acquisition ------price iii. Total difference between acquisition price and the market BRL BRL - BRL - BRL - 1,581,480.50 BRL BRL - BRL - BRL - 1,581,480.50 value of the shares acquired
AWARDS ACTIVE IN 2019 Reference period: 01/01/2019 12/31/2019 Award: ILP Matching 2018 ILP Matching 2017 ILP Matching 2016 ILP Matching 2015 ILP Performance 2018 ILP Performance 2019 a) Body Statutory Officers Statutory Officers Statutory Officers Statutory Officers Statutory Officers Statutory Officers 13.7 e) Concerning shares awarded, inform: i. Quantity - - - 55,700 - - 55,700 ii. Weighted average acquisition ------price iii. Total difference between acquisition price and the market BRL BRL - BRL - BRL - 1,197,550.00 BRL BRL - BRL - 1,197,550.00 value of the shares acquired
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AWARDS ACTIVE IN 2018 Reference period: 01/01/2018 12/31/2018 Award: ILP Matching 2017 ILP Matching 2016 ILP Matching 2015 ILP Matching 2014 ILP Performance 2018 a) Body Statutory Officers Statutory Officers Statutory Officers Statutory Officers Statutory Officers 13.7 e) Concerning shares awarded, inform: i. Quantity - - - 63,400 - 63,400 ii. Weighted average acquisition ------price iii. Total difference between acquisition price and the market BRL BRL - BRL - BRL - 1,137,396.00 BRL BRL - 1,137,396.00 value of the shares acquired
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13.8. Information required for understanding the data disclosed in items 13.5 to 13.7 – shares and options pricing method: a) Pricing model; b) data and assumptions used in the pricing model, including weighted average price of shares, strike price, expected volatility, option maturity, expected dividends and risk-free interest rate; c) Method and assumptions used to incorporate the expected effects of the forecast period; and d) Expected volatility determination method; e) Whether or not any other option features were incorporated into fair-value measurement: The acquisition price of each of the Treasury units by beneficiaries of the plan offered by the Company is the average closing quote of Klabin unit (KLBNII) Depository Certificates over the sixty (60) trading days preceding the eve of the acquisition at B3 SA - Brasil, Bolsa, Balcão, or the market price on the eve of the acquisition, whichever is lower. See items 13.4 and 13.16 for additional information.
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13.9 – Equity Holdings by Corporate Body Shares and other convertible securities issued by the Company, its directly or indirectly controlling entities, subsidiaries or jointly controlled entities directly or indirectly held by members of the Board of Directors, of the Statutory Executive Board or of the Fiscal Council, broken down by corporate body, on the final day of the last fiscal year: The table below shows the total securities issued by the Company as described in CVM Form 358, consolidated as of December 31, 2020:
Quantity Name PN ADR’s ON (thousand) (thousand) (thousand)
Controllers 29.363 1,242,344 361,472
Board of Directors - 45,226 176,882
Executive Officers - 1,279 5,117
Fiscal Council - 295 1,180
None of the Company’s managers have stakes in subsidiaries or jointly controlled entities of the Company. Their stakes therein are purely indirect, through the shares of the Company they may hold. The Company, by its turn, holds equity in these entities.
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13.10. Information on Retirement Plans Granted to Members of the Board of Directors and Statutory Officers
Statutory Executive Board (Amounts in thousands of BRL) a) corporate body 4,00 b) number of members 4,00 PACK -Plano de c) plan name Aposentadoria Complementar Klabin d) number of managers eligible for retirement 2 e) conditions for early retirement Reaching the age of 55 f) current value of restated contributions to the retirement plan until the end of the last fiscal year, net of the portion associated with contributions BRL 8,512,201.30 made directly by the managers
g) total accumulated value of contributions made during the last fiscal year, net of the portion associated with contributions made directly by the BRL 952,780.96 managers h) whether or not early redemption is possible and the conditions for this No
The PACK is not granted to members of the Board of Directors.
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13.11 Minimum, Maximum and Average Compensation of the Board of Directors, Statutory Executive Board and Fiscal Council
Annual amounts Statutory Executive Board Board of Directors Fiscal Council 12/31/2020 12/31/2019 12/31/2018 12/31/2020 12/31/2019 12/31/2018 12/31/2020 12/31/2019 12/31/2018 No. of members 4.00 3.42 4.00 13.58 13.67 13.00 5.00 5.00 5.00 No. of compensated members 4.00 3.42 4.00 13.58 13.67 13.00 5.00 5.00 5.00 Highest compensation (BRL) 13,559,297.11 9,207,532.53 8,261,775.98 1,094,178.62 1,119,574.80 1,147,586.19 406,313.09 400,080.15 369,984.60 Lowest compensation (BRL) 3,231,781.72 4,248,387.49 66,394.87 979,021.04 913,152.74 568,325.88 332,189.00 332,189.00 332,189.00 Average Compensation (BRL) 7,432,186.61 5,725,466.61 5,464,937.20 1,009,323.33 1,021,887.83 1,041,110.67 347,013.82 352,169.06 351,524.96
Note
Statutory Executive Board 12/31/2020 The highest compensated member performed with the Company for 12 months. 12/31/2019 The highest compensated member performed with the Company for 12 months. 12/31/2018 The highest compensated member performed with the Company for 12 months.
Board of Directors 12/31/2020 The highest compensated member performed with the Company for 12 months. 12/31/2019 The highest compensated member performed with the Company for 12 months. 12/31/2018 The highest compensated member performed with the Company for 12 months.
Fiscal Council 12/31/2020 The highest compensated member performed with the Company for 12 months. 12/31/2019 The highest compensated member performed with the Company for 12 months. 12/31/2018 The highest compensated member performed with the Company for 12 months.
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13.12 – Manager Compensation or Indemnity Mechanisms in the Event of Removal or Retirement The Company maintains liability insurance policies (D&O) for members of the Executive Board, Fiscal Council and Board of Directors. The purpose of these policies is to indemnify managers of the Company and its controlled entities of any losses incurred thereby as a result of innocent actions or omissions in the course of their duties, pursuant to the contents of the relevant policy.
The maximum indemnity limit under the policy in force is BRL 120 million. Only the Chief Executive Officer is covered by a clause that provides indemnity in the event of termination not for clause before the end of the term.
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13.13. Percentage of Total Compensation Accruing to Managers and Members of the Fiscal Council who Are related parties Vis-à-Vis the Controlling Shareholders
% associated with controlling shareholders Corporate Body 2020 2019 2018 Statutory Executive Board - - - Board of Directors 50.60% 52.08% 65.22% Fiscal Council - - -
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13.14. Compensation Earned by Managers and Members of the Fiscal Council, Broken down by Corporate Body for any Reason other than the Position Held The Company’s financials in the last three fiscal years recognize no amounts paid to members of the Board of Directors, Statutory Executive Board or Fiscal Council for reasons other than the position held.
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13.15 Compensation Earned by Managers and Members of the Fiscal Council recognized in the Financials of Directly or Indirectly Controlling Shareholders, Jointly Controlled Entities, or Subsidiaries of the Issuer No amounts have been recognized by the Company’s directly or indirectly controlling shareholders, jointly controlled entities, or subsidiaries in the last three fiscal years as compensation earned by Members of the Company’s Board of Directors, Statutory Executive Board, or Fiscal Council.
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13.16 Other relevant information The amounts shown in items 13.2 and 13.3 are book amounts, that is, they concern Klabin’s expenses provisioned for the variable compensation plans and, since the last fiscal year, awards under the LTI Performance plan are no longer treated as bonuses, but rather as share-based compensation.
INSS at the Company’s expenses
According to CVM Proceeding No. 19957.007457/2018-10 and the meeting of 12/08/2020, the amount corresponding to INSS at the Company’s expenses is no longer treated as a “benefit of any type”, and is therefore not declared in item 13.2. For the sake of transparency, however, Klabin lists the respective amounts for fiscal years 2018, 2019 and 2020, and the forecast 2021 amount:
INSS at the Company’s expense, 2021: BRL 8,292,894.57
INSS at the Company’s expense, 2020: BRL 7,521,958.87
INSS at the Company’s expense, 2019: BRL 5,795,107.82
INSS at the Company’s expense, 2018: BRL 6,287,353.05
The calculations in items 13.3, 13.11 and 13.13 were also entirely reprocessed, disregarding the INSS at the Company’s expenses.
Share-based compensation plan
Given the nature of the compensation plants based in share of the Company, none of which include options, all items concerning options are not applicable.
Management and Fiscal Council Compensation
The compensation earned by Management and the Fiscal Council in fiscal year 2021, as provided in items 13.2 and 13.3 hereof, represents the proposal to be submitted to the shareholders at the Annual General Meeting to be held on March 24, 2021.
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14.1 Human Resources: The information provided in this item corresponds to numbers for Klabin S.A and its Subsidiaries. a) Number of employees (total and grouped by activity and geography)
2020 2019 2018 No of No of No of Geograph Geograph Geography Geography Activity Employee Employee Employees y Total y Total Total s s Administrative 196 239 282 Technician Level 582 663 629 Southeast (includes supervisors) 2,700 2,615 2,666 Operational 1,673 1,587 1,647 Officers, Managers and Coordinators 168 160 155 Administrative 523 623 659 Technician Level 1,227 1,521 1,351 South (includes supervisors) 10,347 10,227 10,318 Operational 8,061 8,020 8,235 Officers, Managers and Coordinators 242 233 197 Administrative 15 13 14 Technician Level 20 25 23 North(i) (includes supervisors) 244 232 245 Operational 201 193 207 Officers, Managers and Coordinators 3 3 4 Administrative 75 63 74 Technician Level 129 147 131 Northeast (includes supervisors) 1,407 1,364 1,372 Operational 1,155 1,142 1,143 Officers, Managers and Coordinators 30 28 26 Administrative 6 7 4 Technician Level 33 29 29 Argentina (includes supervisors) 121 125 137 Operational 84 87 97 Officers, Managers and Coordinators 2 2 3 United States Officers, Managers and Coordinators 1 1 1 1 2 2 Technician Level 10 8 5 Austria 11 9 6 Officers, Managers and Coordinators 1 1 1 14,831 14,831 14,573 14,573 14,746 14,746 b) Number of outsourced workers (total and grouped by activity and geography)
2020 2019 2018
Southeast 864 773 301 South 6,593 5,796 4,519 Northeast 480 359 273 North 106 23 Argentina 8 - 3 8,051 6,951 5,096
a) Turnover
2020 2019 2018
Turnover (%) 15.38 16.16 15.87 Hires 2,464 2,318 2,373 Terminations 2,126 2,405 2,324
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d) Exposure to labor liabilities and contingencies Labor claims are analyzed annually by the Company’s counsel and the respective are rated risks as probable, possible, and remote, with appropriate provisioning.
As of December 31, 2020, 2019, and 2018, the Company was a party in several labor claims in the total amount of BRL 396, BRL 451, and BRL 502 million, breaking down as follows:
BRL/thou Expected Loss Year Probable Possible Remote Total
2020 32,926 233,671 129,141 395,738
2019 42,103 252,122 156,773 451,998
2018 43,250 243,557 214,733 501,541
The Company is party to no labor claims deemed to be probable losses by outside counsel that have not been provisioned for.
See item 4.3 for additional information on existing labor claims.
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14.2. Relevant changes in the numbers disclosed in foregoing item 14.1: Concerning the behavior of the headcount in 2020, no significant differences emerge from 2019. As for the number of outsourced workers, the increase is due to activities associated with the Puma II Project, outsourcing of silviculture teams, wood transportation from Klabin operations, particularly in the South, and increased demand for packaging in the last quarter, which required increasing the number of temporary workers, a seasonal effect. Impact on all Brazilian regions at corrugated paperboard units.
Concerning the behavior of the headcount in 2019, no significant differences emerge from 2018. As for the number of outsourced workers, the increase is due to higher production, outsourcing of forestry teams, and wood transportation from Klabin operations, particularly in the South. Concerning the behavior of the headcount in 2018, no significant differences emerge from 2017. The largest difference occurred in the Southeast due to a redistribution of production in Brazil. As for the number of outsourced workers, the main difference occurred in the Northeast because of increased workforce to meet the operation’s demand. In the other regions, the changes seen arise from ordinary needs stemming from the activity’s maintenance and production processes.
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14.3 Employee compensation policies, informing: a) Wages and variable compensation policy
The purposes of our compensation practices are as follows:
- to align the interests of employees with the Company’s and the shareholders’ strategy;
- to enable employee compensation to be competitive and attractive compared to the market at large;
- to recognize the efforts of Klabin’s high-performing employees, fostering a culture of meritocracy and attracting and maintaining talent;
- to make sure that executive compensation does reflect our short- and long-term results, in addition to individual performance.
Our annual compensation survey is supported by consultants Korn Ferry do Brasil. The survey covers companies whose characteristics are similar to Klabin’s and recognized by the market.
We use the information obtained to analyze our compensation practices for competitiveness, as well as to determine the need for any adjustments to our executive compensation.
Compared with the relevant market, we keep a market-median position for fixed compensation and in the 3rd quartile for variable compensation of the Manager level and up. At the Coordination level and below, we adopt the market median for all compensation components, strengthening be connection between compensation and the Company’s healthy and sustainable growth.
b) Benefits policy
The Company offers a competitive benefits package, in line with market practices.
The benefits package includes health care, supplementary retirement, dental care, life insurance for employees and their dependents including handicap coverage, grocery vouchers, meal vouchers, transport vouchers, discount agreement with drugstores, paycheck loans, support (day-care and special needs), support program for employees and dependents facing financial problems, legal, psychological and social advice, and supplementary sick pay.
Temporary workers hired through labor agencies receive life insurance and meal and transport vouchers.
In 2019 the Company joined the Citizen Company Program, extending 6-month maternity leave and 20-day paternity leave to all employees.
c) features of share-based compensation plans for non-management employees, indicating: (i) the beneficiary group; (ii) exercise terms; (iii) strike price; (iv) exercise period; and (v) Page 282 of 348
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number of shares committed to the plan
The Company has in place an incentive plan based on shares (converted into Units) for its executives that has been duly approved by the CVM, and is discussed in detail in item 13 hereof.
LTI Matching was initially exclusive for Statutory and Non-Statutory Officers. Since 2016, Managers became eligible, and Coordinators and Specialists gained eligibility in 2018.
LTI Performance remains exclusive for Officers, whether Statutory or not.
Because the share-based compensation plans include no options, no exercise conditions, exercise periods, or strike prices apply.
Under LTI Matching, participants must invest a portion of their short-term incentives to join the program and await a three-year vesting period. Under LTI Performance, participants must meet the performance conditions, as described in items 13.1 and 13.4, and await a five-year vesting period.
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14.4. Union Relations The Company makes available appropriate time and places for unions to seek members among the employees. There have been no reports in manufacturing units or sectors of attitudes capable of inhibiting employees’ exercise of this right. Industrial plants include unionized employees and union officials. Similarly, to enable proper management and maintain a cooperative atmosphere, employees and their unions are informed of any significant operational changes. The Company values collective bargaining with union representatives, as it does freedom of association. All employees are covered by collective bargaining agreements.
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14.5 Other relevant information: No other relevant information exists on the topic of the present item 14.
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15.1 / 15.2 – Share Ownership
SHARES Party to shareholders’ Controlling Latest CNPJ Name of the Legal Representative or Proxy Entity type Nationality-State STOCKHOLDER COMMON % PREFERRED % TOTAL % agreement Shareholder change Klabin Irmãos S.A. 945,359,142 45.41 - - 945,359,142 16.83 60.485.034/0001-45 - - Brazilian-RJ Yes Yes 03/31/2021 Niblak Participações S.A. 142,023,010 6.82 - - 142,023,010 2.53 04.047.019/0001-44 - - Brazilian-SP Yes Yes 03/31/2021 Monteiro Aranha S.A. 76,709,905 3.68 265,235,406 7.50 341,945,311 6.09 33.102.476/0001-92 - - Brazilian-RJ Yes No 03/31/2021 BNY (*) 60,954,026 2.93 243,816,104 6.89 304,770,130 5.42 05.523.773/0001-76 THE BANK OF NEW YORK ADR DEPARTMENT Legal North American No No 03/31/2021 BLACKROCK 48,109,602 2.31 192,438,408 5.44 240,548,010 4.28 05.838.687/0001-52 BLACKROCK LATIN AMERICA FUND INC Legal North-American No No 03/31/2021 Ações em Tesouraria 25,831,006 1.24 103,324,024 2.92 129,155,030 2.30 ------03/31/2021 Outros (**) 782,741,904 37.60 2,731,350,219 77.25 3,514,092,123 62.54 ------03/31/2021 TOTAL 2,081,728,595 100.00 3,536,164,161 100.00 5,617,892,756 100.00 (*) Shareholder with residence abroad (**) Shareholders with less than 5% of the shares.
CONTROLLER/INVESTOR: Klabin Irmãos S.A. SHARES Party to shareholders’ CNPJ Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Jacob Klabin Lafer Adm. Partic. S.A. 12,517,639 12.518 51.559.573/0001-90 Brazilian Yes Yes 12/31/2020 Miguel Lafer Participações S.A. 6,262,268 6.262 72.872.120/0001-90 Brazilian Yes Yes 12/31/2020 VFV Participações S.A. 6,262,268 6.262 72.872.146/0001-38 Brazilian Yes Yes 12/31/2020 PRESH S.A. 12,521,045 12.521 53.728.903/0001-50 Brazilian Yes Yes 12/31/2020 GL Holdings S.A 12,521,045 12.521 53.728.895/0001-41 Brazilian Yes Yes 12/31/2020 GLIMDAS Participações S.A. 11,073,679 11.074 30.526.602/0001-48 Brazilian Yes Yes 12/31/2020 DARO Participações S.A. 11,073,679 11.074 30.304.992/0001-01 Brazilian Yes Yes 12/31/2020 DAWOJOBE Participações S.A. 11,073,679 11.074 30.280.465/0001-04 Brazilian Yes Yes 12/31/2020 ESLI Participações S.A. 8,354,375 8.354 53.601.423/0001-23 Brazilian Yes Yes 12/31/2020 LKL Participações S.A. 8,340,323 8.340 00.288.075/0001-10 Brazilian Yes Yes 12/31/2020 TOTAL 100,000,000 100.000
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CONTROLLER/INVESTOR: NIBLAK PART. S/A 04.047.019/0001-44 SHARES Party to shareholders’ CNPJ / CPF Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Miguel Lafer Part. S/A 3,038,036 12.521 72.872.120/0001-90 Brazilian Yes Yes 12/31/2020 VFV Participações S/A 3,038,035 12.521 72.872.146/0001-38 Brazilian Yes Yes 12/31/2020 GL Holdings S/A 3,038,061 12.521 53.728.895/0001-41 Brazilian Yes Yes 12/31/2020 Glimdas Participações S/A. 2,686,869 11.074 30.526.602/0001-48 Brazilian Yes Yes 12/31/2020 Verde Vivo Investimentos Florestais Ltda. 2,686,869 11.074 07.060.894/0001-54 No Yes 12/31/2020 Dawojobe Partic. S.A. 2,562,686 10.562 30.280.465/0001-04 Brazilian Yes Yes 12/31/2020 Armando Klabin's estate 124,183 0.512 008.144.407-97 Brazilian Yes Yes 12/31/2020 Esli Participações S/A 4,050,722 16.695 53.601.423/0001-23 Brazilian Yes Yes 12/31/2020 Eduardo Lafer Piva 1,012,687 4.174 029.198.238-76 Brazilian No Yes 12/31/2020 Horácio Lafer Piva 1,012,687 4.174 038.613.618-17 Brazilian No Yes 12/31/2020 Regina Piva Coelho de Magalhães 1,012,687 4.174 040.443.408-89 Brazilian No Yes 12/31/2020 TOTAL 24,263,522 100.0000
CONTROLLER/INVESTOR: DARO Participações S.A. 30.304.992/0001-01 SHARES Party to shareholders’ CNPJ / CPF Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Daniel Miguel Klabin 69,003 6.91 008.143.777-34 Yes Yes 12/31/2020 Rose Klabin (*) 310,000 31.03 047.868.967-56 Yes Yes 12/31/2020 Amanda Klabin (*) 310,000 31.03 047.868.957-84 Yes Yes 12/31/2020 David Klabin (*) 310,000 31.03 047.868.947-02 Yes Yes 12/31/2020 TOTAL 999,003 100.00 (*) Shares exercised for usufruct, with Daniel Miguel Klabin the right to vote.
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CONTROLLER/INVESTOR: DAWOJOBE Participações S.A. 30.280.465/0001-04 SHARES Party to Controlling CNPJ / CPF Nationality-State shareholders’ Latest change Shareholder STOCKHOLDER COMMON % PREFERRED % TOTAL % agreement Armando Klabin's estate 4 0.193 4 0.116 008.144.407-97 Brazilian Yes Yes 12/31/2020 Wolff Klabin (*) 516 24.952 516 14.970 018.376.457-95 Brazilian Yes Yes 12/31/2020 Daniela Klabin (*) 516 24.952 516 14.970 018.376.287-85 Brazilian Yes Yes 12/31/2020 Bernardo Klabin (*) 516 24.952 516 14.970 051.864.937-75 Brazilian Yes Yes 12/31/2020 José Klabin (*) 516 24.952 516 14.970 028.464.277-04 Brazilian Yes Yes 12/31/2020 Klaro Participações Ltda. - 1,379 100.0000 1,379 40.006 31.483.727/0001-09 Yes Yes 12/31/2020 TOTAL 2,068 100.00 1,379 100.00 3,447 100.00 (*) Shares subject to usufruct, the usufructuary Armando Klabin's estate being entitled to vote.
CONTROLLER/INVESTOR: ESLI Participações S.A. (*) 53.601.423/0001-23 SHARES Party to shareholders’ CNPJ / CPF Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Cristina Levine Martins Xavier 7,602,070 33.333 104.891.158-61 Brazilian Yes Yes 12/31/2020 Regina Klabin Xavier 7,602,070 33.333 738.174.659-04 Brazilian Yes Yes 12/31/2020 Roberto Klabin Martins Xavier 7,602,070 33.333 153.181.088-81 Brazilian Yes Yes 12/31/2020 TOTAL 22,806,210 100.000 (*) Private Instrument Share Donation Contract with Usufruct Reserve to Lilia K. Levine, on December 22, 2010.
CONTROLLER/INVESTOR: GLIMDAS Participações S.A. 30.526.602/0001-48 SHARES Party to Controlling CNPJ / CPF Nationality-State Latest change STOCKHOLDER COMMON % PREFERRED % TOTAL % shareholde Shareholder Léa Manela Klabin (*) 421,360 29.468 421,360 12.500 442.281.477-04 Yes Yes Alberto Klabin (*) 323,502 16.666 238,311 16.667 561,813 16.667 261.062.567-72 Brazilian - SP Yes Yes 12/31/2020 Leonardo Klabin (*) 323,502 16.666 238,311 16.667 561,813 16.667 375.332.587-20 Brazilian Yes Yes 12/31/2020 Stela Klabin (*) 323,502 16.666 238,311 16.667 561,813 16.667 375.332.407-82 Brazilian Yes Yes 12/31/2020 Maria Klabin (*) 323,502 16.666 97,858 6.844 421,360 12.500 051.366.027-59 Brazilian Yes Yes 12/31/2020 Dan Klabin (*) 323,502 16.666 97,858 6.844 421,360 12.500 052.116.597-08 Brazilian Yes Yes 12/31/2020 Gabriel Klabin (*) 323,502 16.666 97,858 6.844 421,360 12.500 101.169.347-00 Brazilian Yes Yes 12/31/2020 Espólio Maurício Klabin (*) 32 0.002 32 0.001 261.062.647-91 Brazilian Yes Yes 12/31/2020 TOTAL 1,941,044 100.000 1,429,867 100.000 3,370,911 100.000 (*)Shares subject to usufruct, the Israel Klabin usufructuary being entitled to vote.
CONTROLLER/INVESTOR: GL Holdings S/A 53.728.895/0001-41 SHARES Party to Controlling CNPJ / CPF Nationality-State Latest change STOCKHOLDER COMMON % PREFERRED % TOTAL % shareholders’ Shareholder Paulo Sergio Coutinho Galvão Filho 2,154,077 50.00 8 50.00 2,154,085 50.00 040.443.368-57 No No 12/31/2020 Maria Eugênia Lafer Galvão 2,154,077 50.00 8 50.00 2,154,085 50.00 076.308.458-12 No No 12/31/2020 TOTAL 4,308,154 100.00 16 100.00 4,308,170 100.00
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CONTROLLER/INVESTOR: Jacob Klabin Lafer Adm. Partic. S.A. 51.559.573/0001-90 SHARES Party to Controlling CNPJ /CPF Nationality-State Latest change STOCKHOLDER COMMON % PREFERRED % TOTAL % shareholders’ Shareholder Vera Lafer 28,647,311 98.00 7,307,988 100.00000 35,955,299 98.40 380.289.138-49 Brazilian Yes Yes 12/31/2020 Novo Horizonte Agropecuária Ltda. 584,639 2.00 584,639 1.60 56.145.592/0001-94 Yes Yes 12/31/2020 TOTAL 29,231,950 100.00 7,307,988 100.00 36,539,938 100.00
CONTROLLER/INVESTOR: LKL Participações S.A. (*) 00.288.075/0001-10 SHARES Party to shareholders’ CNPJ / CPF Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Cristina Levine Martins Xavier 1,525,700 33.333 104.891.158-61 Brazilian Yes Yes 12/31/2020 Regina Klabin Xavier 1,525,700 33.333 738.174.659-04 Brazilian Yes Yes 12/31/2020 Roberto Klabin Martins Xavier 1,525,700 33.333 153.181.088-81 Brazilian Yes Yes 12/31/2020 TOTAL 4,577,100 100.000 (*) Private Instrument Share Donation Contract with Usufruct Reserve to Lilia K. Levine, on December 22, 2010.
CONTROLLER/INVESTOR: Miguel Lafer Participações S.A. 72.872.120/0001-90 SHARES Party to shareholders’ CNPJ Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Jacob Klabin Lafer Adm. Partic. S.A. 4,121,291 100.0000 51.559.573/0001-90 Yes Yes 12/31/2020 Novo Horizonte Agropecuária Ltda 1 0.0000 12/31/2020 TOTAL 4,121,292 100.0000
CONTROLLER/INVESTOR: PRESH S.A. 53.728.903/0001-50 SHARES Party to shareholders’ CNPJ /CPF Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Horácio Lafer Piva 8,829,453 33.3333 038.613.618-17 Brazilian Yes Yes 12/31/2020 Eduardo Lafer Piva 8,829,453 33.3333 029.198.238-76 Brazilian Yes Yes 12/31/2020 Regina Piva Coelho Magalhães 8,829,454 33.3334 040.443.408-89 12/31/2020 TOTAL 26,488,360 100.0000
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CONTROLLER/INVESTOR: Verde Vivo Investimentos Florestais Ltda. 07.060.894/0001-54 SHARES Party to shareholders’ CNPJ / CPF Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Rose Klabin 1,426,277 33.33 047.868.967-56 No No 12/31/2020 Amanda Klabin 1,426,277 33.33 047.868.957-84 No No 12/31/2020 David Klabin 1,426,277 33.33 047.868.947-02 No No 12/31/2020 TOTAL 4,278,831 100.00
CONTROLLER/INVESTOR: VFV Participações S.A. 72.872.146/0001-38 SHARES Party to shareholders’ CNPJ /CPF Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Jacob Klabin Lafer Adm. Partic. S.A. 11,640,664 99.999932 51.559.573/0001-90 No No 12/31/2020 Vera Lafer Lorch Cury 4 0.000034 060.657.498-00 No No 12/31/2020 Francisco Lafer Pati 4 0.000034 256.483.558-90 No No 12/31/2020 TOTAL 11,640,672 100.00000
CONTROLLER/INVESTOR: Novo Horizonte Agropecuária Ltda. 54.055.983/0002-73 SHARES Party to shareholders’ CNPJ / CPF Nationality-State Controlling Shareholder Latest change STOCKHOLDER COMMON % agreement Vera Lafer 6,713,000 100.000 380.289.138-49 No No 12/31/2020 TOTAL 6,713,000 100.0000 Company with capital of BRL 6,713,000.00, divided into 6,713,000 shares of BRL 1.00 each.
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CONTROLLER/INV ESTOR: Klaro Participações Ltda. QUOTA S Party to shareholders’ CNPJ /CPF Nationality-State Controlling Shareholder Latest change SHA REHOLDERS A m ou nt % of Capital agreement Armando Klabin's estate 3 ,004 0.6 01 008.144.407-97 No No 12/31/2020 Rosa Maria Lisboa Klabin 4 ,9 9 6 0.9 9 9 023.474.747-15 No No 12/31/2020 Daniela Klabin Basílio 1 2 3 ,000 2 4 .6 00 018.376.287-85 No No 12/31/2020 Wolff Klabin 1 2 3 ,000 2 4 .6 00 018.376.457-95 No No 12/31/2020 José Klabin 1 2 3 ,000 2 4 .6 00 028.464.277-04 No No 12/31/2020 Bernardo Klabin 1 2 3 ,000 2 4 .6 00 051.864.937-75 No No 12/31/2020 TOTA L 500,000 100.000 Company with share capital of BRL 500,000.00, div ided into 500,000 shares of BRL 1.00 each.
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Version: 7 Reference Form- 2021- KLABIN S. A.
15.3 – Capital Distribution
Date of the latest Meeting I Date of 03/24/2021 latest change Number of natural-entity shareholders 173,547 (unit holders) Number of legal-entity shareholders 1,751 (unit holders) Number of institutional investors 56 (units)
Outstanding shares Outstanding shares correspond to all shares of the issuer, except for those held by the issuer itself, persons bound thereto, managers of the issuer, and treasury shares.
Common shares (Units) 44.300% 922,294,338
Preferred shares (units) 91.960% 3,251,977,589 "A" Class Preferred - 0.000% Total 4,174,271,927 74.300%
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15.4 – Shareholders and Conglomerate Organization Chart
25,50% Pinus Taeda Florestal S.A.
43,39% Aroeira Reflores. S.A.
19,89% Sapopema Reflores. S.A.
34,74% Guaricana Reflores. S.A.
Jacob Klabin Lafer Adm. 18,78% Partic. S.A.
12,52% 100,00% PRESH S.A. Cerejeira Reflores. S.A.
8,35% LKL Participações S.A.
100,00% 11,07% Daro Participações S.A. Klabin Áustria GmbH
16,695% 8,36% ESLI Participações S.A.
12,521% 100,00% KPPF - Klabin PR Prods. GL Holdings S.A 12,52% Florest 11,074% GLIMDAS Participações 11,07% S.A. 12,521% Miguel Lafer Participações 6,26% 99,00% 1,00% S.A. Monterla Holdings
10,562% DAWOJOBE Participações 11,07% S.A. Klabin Irmãos 16,83% 97,98% 2,02% Klabin Argentina S.A.
99,80% Niblak 2,53% 0,20% Klabin Florestal Ltda Participações S.A. 0,510% Armando Klabin's Estate
4,174% The Bank Of New York 5,42% 99,99% 0,01% Regina Piva ADR Department IKAPÊ Empreendimentos
4,174% Horácio Lafer Piva Klabin S.A.
4,174% Monteiro Aranha 6,09% 99,00% 1,00% Eduardo Lafer Piva Klabin Fitoprodutos Ltda S.A. Verde Vivo 11,074% Investimentos Florestais Ltda 1,00% 12,521% 4,28% 99,00% VFV Participações S/A Blackrock Santa Catarina Florestal
Ações em 2,30% 100,00% Klabin Forest Products Tesouraria Company
100,00% Outros 62,55% Klabin Finance
51,00% Vale do Corisco
67,00% SCP's PR/SC
100,00% Klabin Paranaguá SPE S.A.
100,00% Kla Holding S.A.
100,00% Embacorp da Amaz. - Sol. em Embal. de Pap. Ltda
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15.5. Shareholders agreement filed at the issuer’s registered offices to which the controlling shareholder is a party Monteiro Aranha S.A. Agreement a) Party and b) date of execution On November 28, 2013, subject to the effectiveness of resolutions taken at the Meeting of November 28, 2013, and after conversion of the shares held by shareholder Monteiro Aranha S.A ("MASA") into units, certified on February 7, 2014, Klabin Irmãos S.A, the Company’s Controlling Shareholder, entered into a shareholders agreement with Monteiro Aranha S.A, a minority shareholder. The sole purpose of the agreement is exercise voting rights at the Company’s General Meetings to guarantee to MASA the appointment of two members of the Board of Directors, one member of the Fiscal Council and one member of the Executive Board. c) Term The Shareholders Agreement by and between Klabin Irmãos e Cia. and Monteiro Aranha S.A. or their natural-entity shareholders shall remain in force for as long as they directly or indirectly hold a minimum of 6,345,861 common shares of the Company after conversion of their shares into units. d) Description of clauses governing voting rights and control powers There are no clauses governing voting rights and control powers. e) Description of clauses governing appointment of managers or members of statutory committees, or of individuals holding managerial positions According to the agreement, Monteiro Aranha S.A shall have the right to appoint two members of the Company’s Board of Directors and one member of the Executive Board. f) Description of clauses governing share transfers and preemptive acquisition rights None. g) Description of clauses restricting or binding the voting rights of members of the Board of Directors or other oversight and control bodies There are no clauses restricting or binding the voting rights of members of the Board of Directors or other oversight and control bodies.
Roberto Luiz Leme Klabin et alii Agreement a) Party and b) date of execution On June 10, 2013, subject to the effectiveness of the resolutions made at the General Meeting of November 28, 2013, and after conversion of the shares held by shareholders Roberto Luiz Leme Klabin and George Mark Klabin ("RLLK Group"), Edgar Gleich, Celso Lafer and Marina Lafer into units, certified on February 7, 2014, Klabin Irmãos S.A., the Company’s Controlling Shareholder, entered into a shareholders agreement with Roberto Luiz Leme Klabin et alii, the minority shareholders identified above. The sole purpose of the agreement is to exercise voting rights at the Company’s General Meetings to guarantee the appointment of one member of the Board of Directors.
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c) Term The Shareholder Agreement shall remain in force for as long as the RLLK Group holds a minimum of 3,023,000 common shares of the Company after conversion of their shares into units. d) Description of clauses governing voting rights and control powers There are no clauses governing voting rights and control powers. e) Description of clauses governing appointment of managers or members of statutory committees, or of individuals holding managerial positions According to the Agreement, the RLLK Group shall appoint one member of the Company’s Board of Directors. f) Description of clauses governing share transfers and preemptive acquisition rights None. g) Description of clauses restricting or binding the voting rights of members of the Board of Directors There are no clauses restricting or binding the voting rights of members of the Board of Directors.
Voting Agreement
a) Parties and date of execution
On September 15, 2020, Klabin Irmãos S.A., Jacob Klabin Lafer Administração e Participações S.A., Presh S.A., GL Holdings S.A., Glimdas Participações S.A., Daro Participações S.A., Dawojobe Participações S.A., Esli Participações S.A. and LKL Participações S.A. executed a Voting and Other Matters Agreement (Voting Agreement) that was amended on October 26, 2020 and entered into force on November 26, 2020, when Klabin S.A. (Klabin) effectively acquired Sogemar – Sociedade Geral de Marcas Ltda. (Sogemar).
b) Term
The Voting Agreement’s period shall be five (5) years from the takeover of Sogemar by Klabin, and may be automatically terminated with no additional formalities prior to the period first mentioned if any of the following occurs: (i) disposal or any other change to the controlling stake in Klabin; (ii) public offer for the acquisition of Klabin’s shares; (iii) Klabin’s shares ceasing to be admitted to Corporate Governance Level 2 listing at B3 S.A. – Bolsa, Brasil, Balcão (B3), except in the case of listing migration to the special B3 shares segment called “Novo Mercado”.
c) Description of clauses concerning the exercise of voting rights and of controlling shareholder powers
Each party to the Voting Agreement shall thereby, and as provided therein, exercise the respective voting rights associated with the shares they received due to the takeover of Sogemar by Klabin, which number 47,293,666 (forty-seven million, two hundred and ninety-three thousand, sic hundred and sixty-six) common shares of Klabin (Bound Shares), at any and all Page 295 of 348
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General Meeting of the Company, in line with the voting guidelines defined thereby under Klabin Irmãos S.A., according to the governance mechanisms provided in the respective corporate documents or any para-corporate agreements that may be executed.
d) Description of clauses concerning the appointment of managers or members of statutory committees or individuals to fill management positions
None
e) Description of clauses concerning the transfer of shares and preemptive acquisition rights
None.
f) Description of clauses restricting or binding the voting rights of members of the Board of Directors or other oversight and control bodies
None.
Lock-Up Agreement
a) Parties and date of execution
On September 15, 2020, KlC, Jacob Klabin Lafer Administração e Participações S.A., Presh S.A., GL Holdings S.A., Glimdas Participações S.A., Daro Participações S.A., Dawojobe Participações S.A., Esli Participações S.A. e LKL Participações S.A., Monteiro Aranha S.A. (Masa), AJL Participações e Comércio Ltda. (AJL), Roberto Luiz Leme Klabin (RK”) and Edgar Gleich (EG) executed a Lock-up and Other Matters Agreement (Lock-Up Agreement) that was amended on October 26, 2020 and entered into force on November 26, 2020 as Klabin effectively took over Sogemar.
b) Term
The Lock-Up Agreement’s period shall be five (5) years from the effective takeover of Sogemar by Klabin, and may be automatically terminated with no additional formalities prior to the period first mentioned if any of the following occurs: (i) disposal or any other change to the controlling stake in Klabin; (ii) public offer for the acquisition of Klabin’s shares; (iii) Klabin’s shares ceasing to be admitted to Corporate Governance Level 2 listing at B3 S.A. – Bolsa, Brasil, Balcão (B3), except in the case of listing migration to the special B3 shares segment called “Novo Mercado”.
c) Description of clauses concerning the exercise of voting rights and of controlling shareholder powers
None.
d) Description of clauses concerning the appointment of managers or members of statutory committees or individuals to fill management positions
None
e) Description of clauses concerning the transfer of shares and preemptive acquisition rights
The Lock-up Agreements provides for the commitment of Klabin Irmãos S.A., Jacob Klabin Page 296 of 348
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Lafer Administração e Participações S.A., Presh S.A., GL Holdings S.A., Glimdas Participações S.A., Daro Participações S.A., Dawojobe Participações S.A., Esli Participações S.A. and LKL Participações S.A., Masa, AJL, RK and EG to, for the period indicated in foregoing letter “b”, (i) not convert the shares received from Klabin’s takeover of Sogemar, which number 69.394.696 (sixty-nine million, three hundred and ninety-four thousand, six hundred and ninety- six) common shares of Klabin, nor to use them to form units, and (ii) not dispose of, assign, encumber or place in lien any of the new shares.
Assignment, disposal or any form of transfer of new shares by Jacob Klabin Lafer Administração e Participações S.A., Presh S.A., GL Holdings S.A., Glimdas Participações S.A., Daro Participações S.A., Dawojobe Participações S.A., Esli Participações S.A. e LKL Participações S.A., Masa, AJL, RK and EG to any of the respective affiliates shall not be a breach of the Lock-up Agreement. If Jacob Klabin Lafer Administração e Participações S.A., Presh S.A., GL Holdings S.A., Glimdas Participações S.A., Daro Participações S.A., Dawojobe Participações S.A., Esli Participações S.A. and LKL Participações S.A., Masa, AJL, RK or EG assign, dispose of or in any other way transfer the new shares to an affiliate, the recipient affiliate shall, concomitantly, with such an assignment, disposal or transfer, adhere to the Lock- up Agreement, with the original party remaining jointly and severally liable before the remaining parties for the duties and obligations accepted by the assignee. An affiliate shall meal (i) in connection with legal entities, any society, trust, investment fund, nonprofit or other person or entity with or without legal personality and fully owned and/or maintained by the party in question,. Whether directly or indirectly; and (ii) in connection with individuals, their spouse, direct forebears or descendants up to the second degree.
f) Description of clauses restricting or binding the voting rights of members of the Board of Directors or other oversight and control bodies
None.
Agreement Klabin Irmãos S.A. and Niblak Participações S.A.
a) Parties and b) Date of execution
On December 30, 2020, Jacob Klabin Lafer Administração e Participações SA (“JKL”), Miguel Lafer Participações SA (“MLP”), VFV Participações SA (“VFV”), Presh SA (“PRESH”), GL Holdings SA (“GL”), Glimdas Participações SA (“GLIMDAS”), Daro Participações SA (“DARO”), Dawojobe Participações SA (“DAWOJOBE”), ESLI Participações SA (“ESLI”), LKL Participações SA (“LKL”, and, together with JKL, MLP, VFV, PRESH, GL, GLIMDAS, DARO, DAWOJOBE and ESLI, “Parties”), shareholders holding 100% of the voting capital of Klabin Irmãos SA (“KIC”) and Niblak Participações SA (“Niblak” and, together with KIC, the “Companies”), controlling shareholders of Klabin SA (“Klabin”), entered into a shareholders' agreement, which was amended and consolidated on June 30, 2021, to regulate the exercise of power of control over the Companies, and indirectly over Klabin, and assume obligations in relation to the exercise of voting rights by Klabin's board of directors elected by KIC (“A cord”). KIC and Niblak sign the agreement as consenting parties.
The Agreement binds the shares and, if and when any, the subscription rights and securities convertible into shares issued by the Company and share deposit certificates of the Companies that are or will be owned by the Parties, or whose voting rights are or becomes owned by any Party. Additionally, the Parties, by themselves and by their respective shareholders who hold direct or indirect interest in Niblak, undertake to exercise their voting rights in Niblak in order to ensure that (i) Niblak always follows the votes that may come to be delivered by KIC in Klabin, pursuant to the Agreement, and (ii) Niblak has a term equivalent to that of KIC, voting Page 297 of 348
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for the dissolution of Niblak if KIC is dissolved, according to the same rules applicable to the dissolution of KIC, pursuant to the Agreement .
c) Term
The Agreement will be in force until March 31, 2028, and may be extended by an addendum signed by all Parties up to that date. Even if the term of KIC and Niblak expires, the Agreement will remain in force, as applicable, for the period of settlement.
d) Description of clauses concerning the exercise of voting rights and of controlling shareholder powers
The Parties undertake to exercise the voting rights they hold as shareholders of the Companies, at the Companies' general meetings, and to ensure that their representatives on KIC's board of directors and KIC's representatives on the Board of Directors of Klabin exercise their voting rights in those bodies pursuant to the Agreement. All resolutions to be submitted to the General Meetings of the Companies are previously subject to resolution within the scope of the Board of Directors of KIC, so that the resolutions taken by the Board of Directors of KIC bind the vote of the Parties at the General Meetings of the Companies, functioning as prior meetings of the shareholders, by their representatives.
The Parties undertake to ensure that KIC, as a shareholder of Klabin, and the representatives elected by KIC on Klabin's Board of Directors, vote as resolved at the KIC General Meeting or KIC Board of Directors meeting. Likewise, the Parties, by themselves and by their respective shareholders who hold direct or indirect interest in Niblak, undertake to exercise their voting rights in Niblak in order to ensure that Niblak always follows the votes that may be cast. by KIC in Klabin.
The meetings of the KIC board of directors are installed, on first call, with the presence of members who hold at least seventeen votes and, on second call, with the presence of members who hold at least twelve votes. Regardless of the installation, the approval of the matters on the agenda will depend on the number of favorable votes, or specific favorable vote, as the case may be, required in the Agreement or in KIC's Bylaws. The decision on the sale or encumbrance of shares issued by Klabin held by KIC depends on the affirmative vote of the directors appointed by ESLI and LKL, JKL and MLP, GL and PRESH.
e) Description of clauses concerning the appointment of managers or members of statutory committees or individuals to fill management positions
In the resolution of the KIC Board of Directors dealing with the election of the members of Klabin's Board of Directors, the Parties undertake to vote so that they are elected: by joint appointment of JKL and MLP, 1 (one) of the directors and their respective alternate; by joint appointment of ESLI and LKL, 1 (one) of the directors and their respective alternate; by appointment of VFV, 1 (one) of the directors and their respective alternate; by appointment of PRESH, 1 (one) of the directors and their respective alternate; by appointment of GL, 1 (one) of the directors and their respective alternate; by appointment of GLIMDAS, 1 (one) of the directors and their respective alternate; by appointment of DARO, 1 (one) of the directors and their respective alternate; by appointment of DAWOJOBE, 1 (one) of the directors and their respective alternate. The 9th (ninth) member of Klabin's Board of Directors that the Companies may elect will be the Superintendent Director of KIC, by resolution of members of the Board of Directors representing 17 (seventeen) votes, or another candidate nominated by consensus and approved by a favorable vote of all the Parties. The Chairman of Klabin's Board of Directors, in turn, will be chosen from among the members appointed in the manner described above, following the rotation system established in the Agreement.
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In the resolutions of the Board of Directors of KIC for the election of the Directors of the Companies or prior to a meeting of the Board of Directors of Klabin for the election of Klabin's officers, approval will depend on at least 17 (seventeen) favorable votes, being considered rejected if such a quorum is not reached.
f) Description of clauses concerning the transfer of shares and preemptive acquisition rights
In addition to the restrictions provided for in Clauses 22 to 25 of KIC's Bylaws, if any of the Parties wishes to dispose of its interest ("Seller"), the other Parties that are part of the Assignor's Group, constituted in accordance with Clause 3.4 of the Agreement, will have priority among themselves to exercise the preemptive right (“Priority Preemptive Right”), to fully acquire the shares offered, in proportion to the interests of such Parties within the respective group, or in a proportion freely adjusted between the Parties of the same Group.
In the event of non-exercise of the Priority Preference Right to acquire all offered shares or exercise of the preemptive right to acquire only a part of the offered shares, Parties that do not participate in the same Group as the Seller may express their intention to acquire the shares offered that have not been subject to the exercise of the Priority Preference Right.
In the case of transfer of Bound Shares by either Party by virtue of succession, as in the cases of incorporation, incorporation of shares, merger or spin-off of any of the parties, provided that the Party directly or indirectly maintains its current partners or shareholders, or their respective spouses, heirs or direct successors, the acquirer must adhere to the Agreement as a condition of the transfer and will retain the election rights of members of KIC's board of directors provided for in clause 3.2 of the Agreement and the voting power of the successful Party, even if the seller keep a portion of the Linked Shares or that the succession result from multiple holders of the transferred Linked Shares, in which case the right must be exercised jointly by the holders, upon prior agreement between them.
g) Description of clauses restricting or binding the voting rights of members of the Board of Directors or other oversight and control bodies
The decisions of KIC's board of directors bind the vote of the directors elected by the Companies to Klabin's board of directors at the meetings of Klabin's board of directors.
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15.6. Relevant changes to the equity stakes of members of the controlling group and managers of the Company As discussed in an announcement to the market released on February 23. 2021, BNDES PARTICIPAÇÕES S.A. – BNDESPAR, divested 41,554,255 units between 02/05/2021 and 02/222021, after which it held 42,166,933 units (42,166,933 common shares and 168,667,732 preferred shares), representing 3.75% of the Company’s total shares. This was a minority investment that in no way changed the controlling stake or the Company’s management structure.
There were no relevant changes in 2019 and 202.
As discussed in an announcement to the market released on December 17, 2018, In December 2018, US fund Capital World Investors divested preferred shares of the Company and now manages 169,777,096 shares, representing 4.96% of preferred shares. In addition to this stake, CWI held 42,444,274 common shares on the date of the announcement, representing 2.14% of common shares. This is a minority investment that does not change the Company’s control breakdown or administrative structure.
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15.7. Main corporate operations: a) event; b) principal terms and conditions of the transaction; c) entities involved; d) effects of the operation on the ownership structure, in particular the stakes of the controlling shareholder, of shareholders holding more than 5% of the equity stock, and of the issuer’s managers; e) the ownership structure before and after the transaction; and f) mechanisms used to ensure equitable shareholder treatment The Company’s ownership structure is described in item 15.4 of the present Form.
Constitution of Pinus Taeda Florestal S.A. (Pinus Taeda)
On January 21, 2020, the Company formed Pinus Taeda Florestal S.A., a Special Purpose Entity (SPE), together with a Timber Investment Management Organization (TIMO), whose main purpose shall be exploring forestry activities in the center-south of the state of Paraná, enabling access to new land to increase the Company’s forest base.
Acquisition of assets from International Paper do Brasil Ltda (IP)
On October 14, 2020, the Company acquired the assets of International Paper do Brasil Ltda. The assets’ production capacity is 305 thousand annual tons of corrugated paperboard. The acquisition further includes the packaging paper (virgin fiber and recycled) units, with 310 thousand annual tons total capacity. The transaction aligns with the Company’s growth strategy in the paper and paper packaging businesses, increasing operational flexibility and adding stability to results. On June 24, 2020, still during the acquisition process, the assets located in the city of Nova Campina (SP), were sold to the Klingele Paper & Packaging Group. The units’ assets have the capacity for 162 thousand tons of kraftliner.
Constitution of Aroeira Reflorestadora S.A. (Aroeira)
On September 09, 2020, the Company formed Aroeira Reflorestadora S.A., a Special Purpose Entity (SPE) with the main purpose of exploring forestry activities in the State of Santa Catarina. Upon constitution of the entity, the Company made an advance for a future capital increase (AFAC) in the amount of BRL 20 million for land acquisition and leases for planted forests in the State of Santa Catarina.
As discussed in an Announcement to the Market released on January 26, 2021, the Company executed the required agreements to associate with a Timber Investment Management Organization (TIMO). The Company’s contribution to the entity’s equity shall be the provision of approximately 9.7 thousand hectares of planted forests, while the TIMO shall contribute up to BRL 500 million in cash, part upon operation close and the remainder within three years.
The resources injected into the SPE shall be used to acquire and lease approximately 19.5 thousand hectares of actual plantation of pine, as well as the respective funding, on the relevant areas. Klabin shall have a right of first refusal on the wood produced by the SPE, in addition to other rights typically conferred upon the controlling shareholders of entities of this type. Operation close is subject to the usual conditions precedent, including approval by the relevant regulatory authorities.
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Takeover of Sociedade Geral de Marcas S.A. (Sogemar)
On November 26, 2020, the Company took over SOGEMAR – Sociedade Geral de Marcas, the owner of the brands involved in the royalties agreement. As a result of the takeover, Klabin became the owner of the brands held by Sogemar, with the resulting extinction, on the same date, of the respective licensing agreement and of the payment of royalties in connection with these brands.
Constitution of Kla Holding S.A. (Kla Holdings)
On November 12, 2020, the Company formed Kla Holdings S.A. to hold equity stakes in other companies, in line with the Company’s corporate strategy.
Dissolution of Special Partnership CG Forest (SCP CG Forest)
On December 09, 2020, the Company took over the Special Partnership CG Forest, as resolved by its partners after the cessation of the Partnership’s operations.
Winding down of inactive subsidiaries (Klabin Limited, Klabin Trade, Klabin Overseas and Celucat)
At yearend 2020, the Company wound down the activities of overseas subsidiaries: Klabin Limited, Klabin Trade and Klabin Overseas, in addition to those of domestic subsidiary Celucat. Their operations ceased as they were inactive and no operational use was envisioned for them.
Constitution of Cerejeira Reflorestadora S.A. (Cerejeira)
On March 28, 2019, the Company formed Cerejeira Reflorestadora S.A., a Special Purpose Entity (SPE), whose main purpose is to explore forestry activities in the state of Paraná. The entity is undergoing structuring and has no active operations.
Constitution of Sapopema Reflorestadora S.A. (Sapopema)
On July 26, 2019, the Company formed Sapopema Reflorestadora S.A, a Special Purpose Entity (SPE), together with a Timber Investment Management Organization (TIMO), whose purpose is to explore forestry activities in the state of Paraná.
Constitution of Klabin Paranaguá SPE S.A (Paranaguá)
On October 21, 2019, the Company formed Klabin Paranaguá SPE S.A, a Special Purpose Entity. The Company’s sole and exclusive purpose is to explore the lease of areas, port facilities and public infrastructure within the Port of Paranaguá, to carry out unloading (offloading, internal handling, storage and shipment) and loading (receipt, storage, internal handling and loading) of general cargo, in particular paper and cellulose. All pursuant to the contents of the Draft Lease Agreement produced by Auction 03/2019-ANTAQ, to be entered into with the Page 302 of 348
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Federative Union through the Ministry of Infrastructure.
Constitution of Guaricana Reflorestadora S.A. (Guaricana)
On December 13, 2018, the Company formed Guaricana Reflorestadora S.A, a Special Purpose Entity, together with a Timber Investment Management Organization whose purpose is to explore forest activities in the state of Santa Catarina - SC.
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15.8. Other relevant information. No additional relevant information exists concerning the present item 15.
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16.1 –Description of the Issuer’s Rules, Policies and Practices Governing Transactions with Related Parties Describe the issuer’s rules, policies and practices governing transactions with related parties as defined in the accounting standards applicable to this matter. Indicate, where the issuer has a formal policy in place, the body responsible for its approval and date of approval, and, where the issue discloses this policy, Web locations where the document can be viewed. Generally speaking, all terms and conditions of agreements with related parties are compliant with the terms and conditions customarily used in arm’s length contracting, reflecting the scenario that would prevail had the agreement been entered into with a third party with no ties to the Company, its shareholders or managers. In addition, the Article 13, paragraph 2, of the Company’s Bylaws provides mandatory approval by the General Meeting of agreements entered into by and between the Company and Controlling Shareholders and/or entities where they hold a stake. In this case, voting rights will be extended to preferred shareholders. In addition, the Audit and Related Parties Committee, created by the Company in October 2020, is responsible for evaluating and monitoring the adequacy and commutativity of transactions with related parties, in conjunction with the Company's internal audit and management.
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16.2 – Information on Transactions with related parties Klabin Irmãos S.A. / Sogemar - Sociedade Geral de Related Party Marcas e Licenças Transaction date 04/24/2002 Amount (BRL) 0.00 Balance 0.00 Amount (BRL) Indeterminate Termination Indeterminate Loan or other debt No Interest rate charged 0% Relationship with the Issuer Controlling shareholder Licensing brands held by Klabin Irmãos S.A. and Sogemar for use by Klabin, against payment of royalties equivalent to 1.3657% of Net Sales from the products involved. Until January 2019, Sogemar directly received 82.99% of the royalties and, by order of Klabin Irmãos S.A. and Sogemar, the remaining 17,01% were paid directly to Monteiro Aranha S.A. et alii. Since January 2019, has received royalty payments in full. The Purpose of the agreement outstanding balance as of 12/31/2018 was BRL 4,676,064.00 and BRL 5,346,671.00 on 12/31/2019. During fiscal year 2018 expenses in the amount of BRL 46,204,884.00 were recognized, and BRL 58,110,505.00 in fiscal year 2019. On November 26, 2020, the merger of the company SOGEMAR was approved at the Extraordinary General Meeting. Because incorporation, royalties will no longer be paid. Guarantee and insurance None Rescission or termination None
Nature and justification of the operation
Issuer position under the agreement Obligor
Specify
Related Party Klabin Irmãos S.A. Transaction date 06/15/2015 Amount (BRL) 0.00 Balance 0.00 Amount (BRL) Indeterminate Termination January 2025 Loan or other debt No Interest rate charged 0% Relationship with the Issuer Controlling shareholder
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Aval concedido para Klabin S.A. para os financiamentos relacionados ao Projeto Puma junto ao BNDES, com remuneração de 0,8% ao ano sobre o Purpose of the agreement saldo devedor junto ao BNDES no final de cada mês. Durante o fiscal year 2019 foi auferida despesa de BRL 22.797.332,94 e BRL 2.553.690,69 em 2020. Guarantee and insurance None Rescission or termination None
Nature and justification of the operation
Issuer position under the agreement Obligor Specify
Related Party BNDES Transaction date 12/22/2006 Amount (BRL) 0.00 BRL 633.152.000,00 em 12/31/2019 e BRL Balance 1.159.135.000,00 em 12/31/2020. Amount (BRL) Indeterminate Termination January 2025 Loan or other debt Yes Interest rate charged 7.500000% Relationship with the Issuer Shareholder Contratos de financiamento de projetos de desenvolvimento industrial, como Projeto Puma, com liquidação prevista até dezembro de 2025. A amortização do financiamento está Purpose of the agreement sendo realizada mensalmente com os respectivos juros. Durante o fiscal year 2019 houve juros de BRL 186.352.000,00 e BRL 96.838.000,00 em 2020. BNDES financings are secured by land, buildings, improvements, machinery, equipment and facilities of the Guarantee and insurance Correia Pinto- SC and Monte Alegre- PR plants, which are the object of the respective financing agreements, along with escrow funds and surety from the controlling shareholders. Rescission or termination None Nature and justification of the The interest rate corresponds to the average of all BNDES operation financing agreements. Issuer position under the agreement Obligor Specify
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16.3- Identification of Steps Taken to Address Conflicts of interest and Substantiation of the Strictly Mutual Nature of the Agreed Conditions or of Appropriate Compensation Payment a) Steps taken to address conflicts of interest
The Company adopts several corporate governance practices, including those recommended and//or required by Law, such as the B3 Level 2 Corporate Governance Listing Regulations.
In the presence of a conflict of interests between matters at hand and a member of the deliberative bodies, said member shall refrain from voting, and the resolution shall be taken by those members that have no ties with the matter at hand. The Company’s Directors shall in any case abide by any legal restrictions and impediments in such situations, as they have done over the years, acting diligently on behalf of the Company’s interests.
b) strictly mutual nature of agreed conditions or appropriate compensation payment
Any transactions with related parties of the Company must be submitted to the appreciation of the General Meeting, pursuant to the Company's Bylaws (§ 2, of Article 13 of the Bylaws). Such transactions must be within market parameters and aligned with the interests of the Company and are subject to analysis and monitoring by the Audit and Related Parties Committee, in order to guarantee their adequacy and commutativity.
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16.4- Other relevant information - Transactions with Related Parties No other relevant information exists on the topic of item 16.
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17.1 – Equity Capital Information
Date of authorization or Number of common Number of preferred Total shares Equity Capital (BRL) Pay-in Period approval Shares (units) Shares (units) (units) Capital type Issued Capital
11/26/2020 4,475,624,836 Fully Paid in 2,081,728,595 3,536,164,161 5,617,892,756 Capital type Subscribed Capital
11/26/2020 4,475,624,836 2,081,728,595 3,536,164,161 5,617,892,756 Capital type Paid-in Capital
11/26/2020 4,475,624,836 2,081,728,595 3,536,164,161 5,617,892,756 Capital type Authorized Capital
03/24/2021 0.00 - - 6,400,000,000
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17.2 - Capital Increase
Body resolving Issue Total issue Common Preferred(U Total shares Subscription I Issue Resolution date Increase type Quote factor on the increase date amount (BRL) (Units) nits) (Units) Previous capital price Council of Underwriting 01/12/2018 01/12/2018 506,625.00 40,530 162,120 202,650 0.00000000 2.5 BRL per Unit Administration particular Issue price-setting criteria Due to the exercise of conversion rights enforced by 6th Issue debenture holders. Payment mode Due to the exercise of conversion rights enforced by 6th Issue debenture holders.
Council of Underwriting 01/16/2018 01/16/2018 4,892,500.00 391,400 1,565,600 1,957,000 0.00000000 2.5 BRL per Unit Administration particular Issue price-setting criteria Due to the exercise of conversion rights enforced by 6th Issue debenture holders. Payment mode Due to the exercise of conversion rights enforced by 6th Issue debenture holders.
Council of Underwriting 01/23/2018 01/23/2018 75,809,250.00 6,064,740 24,258,960 30,323,700 0.00000000 2.5 BRL per Unit Administration particular Issue price-setting criteria Due to the exercise of conversion rights enforced by 6th Issue debenture holders. Payment mode Due to the exercise of conversion rights enforced by 6th Issue debenture holders.
Council of Underwriting 01/30/2018 01/30/2018 19,644,000.00 1,571,520 6,286,080 7,857,600 0.00000000 2.5 BRL per Unit Administration particular Issue price-setting criteria Due to the exercise of conversion rights enforced by 6th Issue debenture holders. Payment mode Due to the exercise of conversion rights enforced by 6th Issue debenture holders.
Council of Underwriting 01/31/2018 01/31/2018 1,458,430,000.00 116,674,400 466,697,600 583,372,000 0.00000000 2.5 BRL per Unit Administration particular Issue price-setting criteria Capital increase due to the final conversion of the 6th issue debentures. Payment mode Capital increase due to the final conversion of the 6th issue debentures.
Council of Underwriting 06/15/2020 06/15/2020 399,445,113.60 27,739,244 110,956,976 138,696,220 0.00000000 2.88 BRL per Unit Administration particular Issue price-setting criteria Due to the exercise of conversion rights enforced by 7th Issue debenture holders. Payment mode Due to the exercise of conversion rights enforced by 7th Issue debenture holders.
Extraordinary Underwriting 11/26/2020 11/26/2020 144,284.00 69,394,696 - 69,394,696 0.00000000 0 BRL per Unit General Meeting particular Issue price-setting criteria Payment mode Extraordinary General Meeting of 11/26/2020 - ACQUISITION AND MERGER OF SOGEMAR
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17.3 –Information on Stock Splits, Reverse Splits and Bonus Shares Justification for not completing the field: There were no stock splits, reverse splits, or bonus shares in the past 3 fiscal years and in the fiscal year under way.
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17.4 –Information on Equity Capital Reductions Justification for not completing the field: The Company has undergone no equity capital reduction in the past three fiscal years and in the fiscal year under way.
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17.5 -Other Relevant Information Units (KLBN11) correspond to the formation of share depositary receipts whose book breakdown is one (1) common share (ON – KLBN3) and four (4) preferred shares of the Company. Units shall only be formed at the request of shareholders that so wish, pursuant to the rules to be established by the Board of Directors in line with the Company’s Bylaws.
Klabin ADRs (American depositary receipt) are listed as Level 1 on the US OTC market, and each ADR corresponds to two of the Company’s units (KLBN11).
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18.1 - Share Rights
Share or COA type COMMOM Tag along 100.000000 As common shares shall confer rights to minimum required dividends in each fiscal year, at 25% of the respective period’s Right to dividends Net Earnings, adjusted pursuant to Art. 202 of the Corporations Law. Voting rights Full Convertibility Yes Shareholders may convert common into preferred shares and preferred into common shares, for the exclusive purpose of Convertibility terms and effects on equity forming share depository certificates (“Units”), at a ratio of one capital common to one preferred share and vice-versa, as long as paid-in, provided the limit under Article 5, Paragraph 1, of the Company’s Bylaws and chronological order of requests. Reimbursement rights Yes Any shareholder dissenting from certain resolutions taken by the Company’s general meeting may withdraw from the Company, being repaid for their shares at an amount computed in line with the equity value. Pursuant to the Corporations Law, the right of withdrawal may be exercised in the following circumstances, among others: (i) spin- off; (ii) reduction of the minimum required dividend; (iii) change Description of reimbursement in corporate purpose that modifies the Company’s current characteristics business segment; (iv) merger with or takeover into another society; (v) joining a group of societies; (vi) takeover of the Company, as per Article 252 of the Corporations Law, by another Brazilian society in such a manner as to make the former a wholly-owned subsidiary of the latter; and (vii) takeover of a controlling stake in another society for a price exceeding certain limits under the law. Restricted circulation Yes The Company shall keep a minimum ratio of outstanding shares Description of restrictions representing 25% of its equity stock, pursuant to Level 2 Listing Regulations. Redeemable No Redemption cases and redemption value
calculations formula According to the Corporations Law, neither the Bylaws nor General Meeting resolutions may deprive the shareholders of the following rights: (i) A right to share in the distribution of earnings; (ii) A right to share, proportionate to their share of equity, in the distribution of any remaining assets in the event of liquidation; Conditions for changing rights associated (iii) Preemptive subscription rights for shares, convertible with the securities debentures or subscription warrants, except under certain circumstances pursuant to the Corporations Law; (iv) The right to inspect management of corporate affairs as provided in the Corporations Law; (v) The right to vote in General Meetings; and (vi) The right to retire from the Company as provided in the Corporations Law. Other features No other relevant features exist. relevant
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Share or COA type PREFERRED Tag along 100.000000 Preferred shares shall confer rights to minimum required dividends in each fiscal year, Right to dividends at 25% of the respective period’s Net Earnings, adjusted pursuant to Art. 202 of the Corporations Law. Voting rights Restricted (a) transformation, takeover, merger or spin-off; (b) approval of agreements between the Company and the Controlling Shareholder, whether directly or through third parties, as well as other entities where the Controlling Shareholder has a stake, whenever they are subject to General Meeting resolution under the Law or Bylaws; (c) appraisal of assets for payment-in of capital increases; Restricted voting description (d) selection of a specialized institution of firm to determine the Company’s Economic Value, pursuant to Article 36 of the Bylaws; (e) amendment to or removal of statutory dispositions amending or modifying any of the requirements under item 4.1 of the Level 2 Regulations, provided that these voting rights shall prevail for as long as the Level 2 Corporate Governance Membership Agreement stands; and (f) amendment to or removal of the contents of Article 41 of the Bylaws. Convertibility Yes Shareholders may convert common into preferred shares and preferred into common shares, for the exclusive purpose of forming share depository certificates (“Units”), at a Convertibility terms and effects on equity ratio of one common to one preferred share and vice-versa, as long as paid-in, provided capital the limit under Article 5, Paragraph 1, of the Company’s Bylaws and chronological order of requests. Reimbursement rights Yes
Any shareholder dissenting from certain resolutions taken by trhe Copmany’s general meeting may withdraw from the Company, being repaid for theuir shares at an amount computed in line with the equity value. Pursuant to the Corporations Law, the right of withdrawal may be exercised in the following circumstances, among others: (i) spin-off; (ii) reduction of the minimum Description of reimbursement characteristics rquired dividend; (iii) change in coporate purpose that modifies the Company’s current business segment; (iv) merger with or takeover into another society; (v) joining a group iof societies; (vi) takeover of the Company, as per Article 252 of the Corporations Law, by another Brazilian society in such a manner as to make the former a wholly-owned subsidiary of the latter; and (vii) takeover of a contriolling stake in another soceity for a price exceeding certain limits under the law.
Restricted circulation Yes The Company shall keep a minimum ratio of outstanding shares representing 25% of Description of restrictions its equity stock, pursuant to Level 2 Listing Regulations. Redeemable No Redemption cases and redemption value calculations formula According to the Corporations Law, neither the Bylaws nor General Meeting resolutions may deprive the shareholders of the following rights: (i) A right to share in the distribution of earnings; (ii) A right to share, proportionate to their share of equity, in the distribution of any remaining assets in the event of liquidation; Conditions for changing rights associated with (iii) Preemptive subscription rights for shares, convertible debentures or subscription the securities warrants, except under certain circumstances pursuant to the Corporations Law; (iv) The right to inspect management of corporate affairs as provided in the Corporations Law; (v) The right to vote in General Meetings; and (vi) The right to retire from the Company as provided in the Corporations Law. Other features No other relevant features exist relevant
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18.2. Description of any statutory rules limiting the voting rights of significant shareholders of forcing them to hold public offerings There are no statutory rules limiting the voting rights of significant shareholders of forcing them to hold public offerings.
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18.3. Description of exception and suspension clauses for equity or political rights under the Bylaws The Company’s Bylaws include no exceptions or suspension clauses for equity or political rights.
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18.4 - Trading Volumes and Highest and Lowest Quotes of Securities Traded Fiscal Year - 12/31/2020
Average Financial volume Highest Lowest Quarter Security Type Class Market Managing Entity quote factor Quote traded (BRL) quote (BRL) quote(BRL) (BRL) BM&FBOVESPA S.A.- Bolsa de 03/31/2020 Shares Common Stock Exchange 1,443,264 3.49 3.27 per Unit 3.38 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 03/31/2020 Shares Preferred Stock Exchange 7,659,460 3.38 3.13 per Unit 3.26 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 03/31/2020 Stock Exchange 172,114,700 17.05 15.76 per Unit 16.41 Certificates Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 06/30/2020 Shares Common Stock Exchange 1,197,124 4.22 4.11 per Unit 4.17 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 06/30/2020 Shares Preferred Stock Exchange 7,469,785 4.12 4.01 per Unit 4.07 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 06/30/2020 Stock Exchange 225,977,900 20.70 20.11 per Unit 20.41 Certificates Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 09/30/2020 Shares Common Stock Exchange 2,286,285 5.14 4.96 per Unit 5.05 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 09/30/2020 Shares Preferred Stock Exchange 9,444,123 4.79 4.65 per Unit 4.72 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 09/30/2020 Stock Exchange 155,342,900 24.30 23.51 per Unit 23.91 Certificates Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 12/31/2020 Shares Common Stock Exchange 1,708,403 5.43 5.21 per Unit 5.32 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 12/31/2020 Shares Preferred Stock Exchange 7,990,089 5.28 5.07 per Unit 5.18 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 12/31/2020 Stock Exchange 292,727,100 26.57 25.53 per Unit 26.05 Certificates Valores, Mercadorias e Futuros
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Fiscal Year - 12/31/2019
Average Financial volume Highest Lowest Quarter Security Type Class Market Managing Entity quote factor Quote traded (BRL) quote (BRL) quote(BRL) (BRL) BM&FBOVESPA S.A.- Bolsa de 03/31/2019 Shares Common Stock Exchange 13,292,709 6.35 4.42 per Unit 5.50 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 03/31/2019 Shares Preferred Stock Exchange 37,552,177 3.43 2.86 per Unit 3.13 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 03/31/2019 Stock Exchange 4,262,657,350 20.11 15.83 per Unit 18.02 Certificates Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 06/30/2019 Shares Common Stock Exchange 27,792,792 5.20 3.66 per Unit 4.32 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 06/30/2019 Shares Preferred Stock Exchange 83,155,680 3.15 2.79 per Unit 2.97 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 06/30/2019 Stock Exchange 4,550,070,710 17.80 14.92 per Unit 16.16 Certificates Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 09/30/2019 Shares Common Stock Exchange 35,588,543 4.40 3.17 per Unit 3.82 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 09/30/2019 Shares Preferred Stock Exchange 118,571,482 3.19 2.74 per Unit 2.95 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 09/30/2019 Stock Exchange 3,721,110,350 17.17 14.13 per Unit 15.58 Certificates Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 12/31/2019 Shares Common Stock Exchange 49,225,580 4.40 3.25 per Unit 3.90 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 12/31/2019 Shares Preferred Stock Exchange 159,199,123 3.72 2.80 per Unit 3.29 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 12/31/2019 Stock Exchange 4,347,199,140 19.20 14.42 per Unit 17.00 Certificates Valores, Mercadorias e Futuros
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Fiscal Year - 12/31/2018
Average Financial volume Highest Lowest Quarter Security Type Class Market Managing Entity quote factor Quote traded (BRL) quote (BRL) quote(BRL) (BRL) BM&FBOVESPA S.A.- Bolsa de 03/31/2018 Shares Common Stock Exchange 6,201,703 7.45 4.70 per Unit 6.08 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 03/31/2018 Shares Preferred Stock Exchange 30,438,585 3.41 3.04 per Unit 3.23 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 03/31/2018 Stock Exchange 2,788,443,410 20.76 16.89 per Unit 18.83 Certificates Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 06/30/2018 Shares Common Stock Exchange 4,118,802 8.62 6.33 per Unit 7.48 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 06/30/2018 Shares Preferred Stock Exchange 22,068,367 3.68 3.05 per Unit 3.37 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 06/30/2018 Stock Exchange 4,691,682,980 22.48 19.10 per Unit 20.79 Certificates Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 09/30/2018 Shares Common Stock Exchange 2,547,356 9.10 6.62 per Unit 7.86 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 09/30/2018 Shares Preferred Stock Exchange 12,963,205 3.35 3.02 per Unit 3.19 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 09/30/2018 Stock Exchange 3,069,143,670 22.18 18.89 per Unit 20.54 Certificates Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 12/31/2018 Shares Common Stock Exchange 10,841,206 7.46 4.12 per Unit 5.79 Valores, Mercadorias e Futuros BM&FBOVESPA S.A.- Bolsa de 12/31/2018 Shares Preferred Stock Exchange 38,874,154 3.27 2.75 per Unit 3.01 Valores, Mercadorias e Futuros Security Depositary BM&FBOVESPA S.A.- Bolsa de 12/31/2018 Stock Exchange 5,235,073,570 20.29 15.11 per Unit 17.70 Certificates Valores, Mercadorias e Futuros
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18.5 - Other Securities Issued in Brazil
Security Agribusiness Receivables Certificate Security identification Not available Date issued 03/28/2017 Maturity date 03/28/2022 845,916 Quantity (Units) 845,916,000.00 Total amount (BRL) 849,826,447.00 Outstanding Balance Restricted circulation Yes Description of restrictions Qualified investors. Convertibility No Redemption terms No Debentures simples that provide the underlying assets for the issue of Agribusiness Receivables Certificates ("CRA") by Eco Securitizadora de Features of debt securities Direitos Creditórios do Agronegócio S.A The CRA were issued in a capital market operation, maturing in 5 years and paying twice annual interest at 95% of the CDI.
Conditions for amendment to None rights conferred by the security Other relevant features None
Security Debentures Security identification Not available Date issued 06/23/2014 Maturity date 06/15/2022 Quantity (Units) 27,777,500 399,996,000.00 Total amount (BRL) 92,795,085.00 Outstanding Balance Restricted circulation No Convertibility No Redemption terms No Series 2 Debentures mature on June 15, 2022, yield IPCA + 2,50% p.a., paid twice annually together with principal amortization, with two Features of debt securities years’ grace period, and are non-convertible. They are therefore not tied in with Subscription Warrants. Acquirers of Series 1 are required to acquire Series 2 Debentures.
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Conditions for amendment to None rights conferred by the security Other relevant features None
Security Agribusiness Receivables Certificate Security identification Not available Date issued 19/12/2017 Maturity date 19/12/2023 Quantity (Units) 600,000.00 600,000,000.00 Total amount (BRL) 600,305,932.00 Outstanding Balance Restricted circulation Yes Description of restrictions Qualified investors Convertibility No Redemption terms No
Simple debentures that provide the underlying assets for the issue of Agribusiness Receivables Features of debt securities Certificates ("CRA") pela Eco Securitizadora de Direitos Creditórios do Agronegócio S.A The CRA were issued in a capital markets operation, mature in 6 years, and pay interest twice annually at 97.5% of CDI. Conditions for amendment to rights conferred by the security None Other relevant features None
Security Agribusiness Receivables Certificate Security identification Not available Date issued 09/19/2018 Maturity date 01/20/2025 Quantity (Units) 350,000 350,000,000.00 Total amount (BRL) 353,098,473.00 Outstanding Balance Restricted circulation Yes Description of restrictions Qualified investors Convertibility No Redemption terms No
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Simple debentures that provide the underlying assets for the issue of Agribusiness Receivables Certificates ("CRA") by Ápice Securitizadora SA. Features of debt securities The CRA were issued in a capital markets operation, mature in 6.4 years and pay interest twice annually at 102% of em
Conditions for amendment to None. rights conferred by the security Other relevant features None.
Security Agribusiness Receivables Certificate Security identification Not available Date issued 03/15/2019 Maturity date 03/16/2026 Quantity (Units) 200,000 200,000,000.00 Total amount (BRL) 201,086,236.00 Outstanding Balance Restricted circulation Yes Description of restrictions Qualified investors Convertibility No Redemption terms No Simple Debentures that provide the underlying assets for the issue of Agribusiness Receivables Certificates ("CRA") by VERT Companhia Features of debt securities Securitizadora S.A. The CRA were issued in a capital markets operation, mature in 7 years, and pay interest twice annually at 98% of CDI.
Conditions for amendment to None rights conferred by the security Other relevant features None
Security Agribusiness Receivables Certificate Security identification Not available Date issued 15/03/2019 Maturity date 15/03/2029 Quantity (Units) 800 800,000,000.00 Total amount (BRL) 881,489,947.00 Outstanding Balance Restricted circulation Yes Description of restrictions Qualified investors.
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Convertibility No Redemption terms No
Simple Debentures that provide the underlying assets for the issue of Agribusiness Receivables Features of debt securities Certificates ("CRA") by VERT Companhia Securitizadora S.A. The CRA were issued in a capital markets operation, mature in 10 years and pay interest twice annually at the internal rate of return of Tesouro IPCA+ 4.5081%. Conditions for amendment to rights conferred by the security None Other relevant features None
Security Debentures Security identification Not available Date issued 01/04/2019 Maturity date 19/03/2029 Quantity (Units) 1,000,000 1,000,000,000.00 Total amount (BRL) 1,006,012,174.00 Outstanding Balance Restricted circulation No Convertibility No Redemption terms No
Series 12 Debentures mature on March 19, 2029, Features of debt securities pay interest twice annually at 114.65% of CDI and have annual amortizations at the end of the 8th, 9th and 10th years. Conditions for amendment to rights conferred by the security None Other relevant features None
Security Agribusiness Receivables Certificate Security identification Not available Date issued 07/27/2019 Maturity date 06/15/2029 Quantity (Units) 966,312 966,312,000.00 Total amount (BRL) 1,042,361,768.00 Outstanding Balance Restricted circulation Yes Description of restrictions Qualified investors
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Convertibility No Redemption terms No
Simple Debentures that provide the underlying assets for the issue of Agribusiness Receivables Features of debt securities Certificates ("CRA") by VERT Companhia Securitizadora S.A. The CRA were issued in a capital markets operation, mature in 10 years and pay interest twice annually at the internal rate of return of Tesouro IPCA+ 4.5081%. Conditions for amendment to rights conferred by the security None Other relevant features None
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18.5.a- Number of Security Holders
Security Natural Entities Legal Entities Institutional Investors Debentures 142 13 10 Agribusiness Receivables Certificate 23,406 99 6
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18.6 - Brazilian Markets where Securities are listed for Trading The Company’s securities are traded on B3 -Brasil, Bolsa, Balcão and its common and preferred shares and Units are traded under the tickers "KLBN3", "KLBN4" and "KLBN11", respectively.
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18.7 – Information on the Class and Type of Securities Listed and Traded in Markets Overseas
Security AMERICAN DEPOSITARY RECEIPTS (ADRs) Security Identification ADRs Country United States Securities Market AMERICAN DEPOSITARY RECEIPTS (ADRs) Managing Entity PINK OTC Market Date of admission 12/01/1994 Initial listing date 12/01/1994 Percentage 100.00% Yes: Klabin’s ADRs program is listed in Level 1 of the US Trading Segment Description OTC market Yes: Each Depositary Receipt corresponds to two (2) Units of Custodian Institution the Company. Depositary Bank Description Yes: The Depositary Bank of Klabin’s Depositary Receipts in the United States is the o Bank Of New Share of Depositary Receipts Yes: The Custodian Institution is ltaú Unibanco S.A. Abroad York
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18.8 - Securities Issued Overseas
Security Debentures Security identification Not available Date issued 03/27/2019 Maturity date 03/04/2049 Quantity (Units) 700,000,000 Total amount (BRL) 2,988,650,000.00 Outstanding Balance 3,699,227,589.00 Restricted circulation No Convertibility No Redemption terms No The Company, through its wholly owned subsidiary Klabin Austria GmbH, issued debt securities (Senior Unsecured Notes) in the international market, listing them on the Singapore Stock Exchange as Senior Notes 144A!Reg S. in Features of debt securities March 2019. The issue raised USD 500 million, maturing in 30 years and paying twice annual 7.00% coupon. A new round of funding was held in January 2020 for USD 200 million. Conditions for amendment to None rights conferred by the security Other relevant features None
Security Debentures Security identification Not available Date issued 07/16/2014 Maturity date 07/16/2024 Quantity (Units) 271,462,000 Total amount (BRL) 1,094,181,883.00 Outstanding Balance 1,444,445,974.00 Restricted circulation No Convertibility No Redemption terms No The Company, through its wholly-owned subsidiary Klabin Finance SA, issued debt securities (notes) on the international market, listing them on the Luxembourg Stock Exchange (Euro MTF) as Senior Notes 144A!Reg S in July 2014. The transaction raised USD 500 million, Features of debt securities maturing in 10 years, with twice annual 5.25% coupon. Its purpose is to fund the regular business of the Company and its subsidiaries, in line with the respective purposes. In April 2019, the Company repurchased USD 238 million, in line with its debt reprofiling strategy. Conditions for amendment to None rights conferred by the security Other relevant features None Page 330 of 348
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Security Debentures Security identification Not available Date issued 01/12/2021 Maturity date 01/12/2031 Quantity (Units) 500,000,000 Total amount (BRL) 2,737,950,000.00 Outstanding Balance 2,742,330,720.00 Restricted circulation No Convertibility No Redemption terms No
The Company, tyhrough its wholly-owned subsidiary Klabin Áustria GmbH, issued senior unsecured notes in January 2021. The transaction raised funds in the amount of USD 500 million, maturing in 10 years and paying a 3.20% semi-annual coupon. The issue is registered as sustainability-linked, as it is associated with the Features of debt securities performance on sustainability indicators (KPIs – key performance indicators) et for 2025 and aligned with the Company’s 2030 sustainable development goals. Therefore, the issue’s reopresentative securities are subject to coupon (interest) adjustments if the Company’ fails to meet its sustainability-related targets.
Conditions for amendment to None rights conferred by the security Other relevant features None
Security Debentures Security identification Not available Date issued 09/19/2017 Maturity date 09/19/2027 Quantity (Units) 500,000,000 Total amount (BRL) 2,015,350,000.00 Outstanding Balance 2,583,843,980.00 Restricted circulation No Convertibility No Redemption terms No
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In September 2017, The Company, through its wholly- owned subsidiary Klabin Finance S.A., iassued debt notes on the international market, with a listing on the Luxembourg Exchange (Euro MTF) as senior notes 144A/Reg S. The transaction raised funds in the amount of Features of debt securities USD 500 million, maturing in 10 years and paying a 4.88% semi-annual coupon. The funding shall be allocated to reforestation, restoration of indigenous forests, invetments in renewable energy, efficient railwy logistics, solid waste recycling, and the development of eco-efficient products, among other sustrinability-related practices. Conditions for amendment to None rights conferred by the security Other relevant features None
Security Debentures Security identification Not available Date issued 03/27/2019 Maturity date 04/03/2029 Quantity (Units) 750,000,000 Total amount (BRL) 3,023,025,000.00 Outstanding Balance 3,854,209,477.00 Restricted circulation No Convertibility No Redemption terms No The Company, through its wholly owned subsidiary Klabin Austria GmbH, issued debt securities (Senior Unsecured Notes) in the international market, listing them on the Singapore Stock Exchange as Senior Notes 144A!Reg S. in Features of debt securities March 2019. The Company raised USD 500 million, maturing in 10 years paying twice annual 5.75% coupon. A new round of funding took place in September 2019 for USD 250 million. Conditions for amendment to None rights conferred by the security Other relevant features None
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18.9. Public Distribution Offerings conducted by the issuer or third parties, including controlling shareholders and subsidiaries and affiliates, for the sale of the issuer’s securities The Company or third parties, including controlling shareholders, subsidiaries and affiliates, held no public distribution offerings for the sale of the Company’s securities in the past 3 fiscal years and in the current fiscal year.
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18.10 Allocation of funds raised in public offerings and any deviations The Company or third parties, including controlling shareholders, subsidiaries and affiliates, held no public distribution offerings for the sale of the Company’s securities in the past 3 fiscal years and in the current fiscal year.
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18.11 Description of public purchase offerings made by the issuer for third-party issues The Company made no such public offerings in the past three fiscal years and in the current fiscal year.
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18.12 Other relevant information There is no other relevant information on the present item "18".
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Version: 7 Reference Form- 2021- KLABIN S. A.
19.1 – Information on Issuer Share Repurchase Plans
Justification for not completing the table:
No share buyback programs for treasury shares were held in the last three fiscal years and the ongoing fiscal year.
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Version: 7 Reference Form- 2021- KLABIN S. A.
19.2 – Trades in Treasury Securities
Fiscal Year 12/31/2020
Share type Common Share class Preferred Description of the securities Quoting factor
Quantity Weighted average Trade (Units) acquisition/divestment price (BRL)
Initial Quantity 27,924,945 Quantity acquired 12,513 4.42
Quantity divested 1,408,540 4.42 Quantity cancelled
Yearend quantity 26,528,918 Ratio to outstanding securities 1.270000%
Share type Preferred Share class Preferred Description of the securities Quoting factor
Quantity Weighted average Trade (Units) acquisition/divestment price (BRL)
Initial Quantity 111,699,780 Quantity acquired 50,052 4.26
Quantity divested 5,634,160 4.26 Quantity cancelled
Yearend quantity 106,115,672 Ratio to outstanding securities 3.000000%
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Fiscal Year 12/31/2019
Share type Common Share class Preferred Description of the securities Quoting factor
Quantity Weighted average Trade (Units) acquisition/divestment price (BRL)
Initial Quantity 29,318,686 Quantity acquired 7,811 4.42
Quantity divested 1,401,552 4.42 Quantity cancelled -
Yearend quantity 27,924,945 Ratio to outstanding securities 1.410000%
Share type Preferred Share class Preferred Description of the securities Quoting factor
Quantity Weighted average Trade (Units) acquisition/divestment price (BRL)
Initial Quantity 117,274,744 Quantity acquired 31,244 4.26
Quantity divested 5,606,208 4.26 Quantity cancelled -
Yearend quantity 111,699,780 Ratio to outstanding securities 3.260000%
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Fiscal Year 12/31/2018
Share type Common Share class Preferred Description of the securities Quoting factor
Quantity Weighted average Trade (Units) acquisition/divestment price (BRL) Initial Quantity 30,736,688 Quantity acquired 44,306 5.79 Quantity divested 1,462,308 5.79 Quantity cancelled - Yearend quantity 29,318,686 Ratio to outstanding securities 1.480000%
Share type Preferred Share class Preferred Description of the securities Quoting factor
Quantity Weighted average Trade (Units) acquisition/divestment price (BRL) Initial Quantity 122,946,752 Quantity acquired 177,224 3.01 Quantity divested 5,849,232 3.01 Quantity cancelled - Yearend quantity 117,274,744 Ratio to outstanding securities 3.420000%
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19.3 Other relevant information The treasury share disposals shown in item 19.2 took place under the Company’s share-based executive compensation program, as described in item 13.16 hereof.
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20.1 –Information on the Securities Trading Policy
Date approved: 06/30/2002 Approving body: Board of Directors Title and/or position Entities subject to restriction are presumably holders of privileged information and may not trade securities (i) in breach of the present trading policy and/or (ii) in various specific periods, as discussed next. These entities may not trade in securities in the 15-calendar day period preceding the disclosure of the Company’s quarterly (ITR) and annual (DFP) information, irrespective of whether or not the Company will disclosed material facts or acts. The restrictions under the present trading policy include trades directly or indirectly conducted by entities subject to trading restrictions, defined as: controlling shareholders, managers and employees of the Company. Main features and viewing locations Persons subject to trading restrictions who wish to trade in securities shall abide by the following limitations: (a) refrain from trading in securities whenever so dictated by the investor relations officer, for the period established thereby, irrespective of justification; (b) not to trade in securities privately; (c) inform the Company in advance, through the investor relations officer, of the broker to be used in any trade involving securities issued by the Company and subsidiaries; (d) instruct and use best efforts so that (i) spouses or partners; (ii) descendants; and (iii) any other dependents according to the annual tax return will only trade in securities in the periods where the principal is authorized to do so; and (e) refrain from trading in securities whenever such a trade may interfere in the conditions of related business, harming shareholders of the Company, or the Company itself, or its subsidiaries, even if (i) after the disclosure of a material act or fact; or (ii) in accordance with the individual investment plan. The Company currently holds 16,907,900 preferred shares as treasury shares. Restriction periods and description of oversight procedures The Company’s Managers, as well as managers of subsidiaries and affiliates, may acquire securities issued by the Company more than 15 days prior to the disclosure of quarterly (ITR) and annual (DFP) information, provided that (i) the acquisition takes place in line with the individual investment plan as per Chapter II of the securities trading policy; and (ii) the Company has approved a schedule setting specific disclosure dates for the ITR and DFP forms.
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20.2. Other relevant information There is no other relevant information on the present item "20".
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21.1. Description of internal standards, guidelines or procedures governing disclosure The Company has in place the following standards on the handling of information for public disclosure: Disclosure, whether verbal or in writing, of information fully or partly associated with the Company’s and its subsidiaries’ policy, markets and results may only be conducted, within the respective purviews, by:
a) Chairpersons of the Company’s and its subsidiaries’ Boards of Directors;
b) the Company’s Chief Executive Officer;
c) the Company’s Investor Relations Officer;
d) the Company’s Corporate Affairs Officer
i) Under specific circumstances, the foregoing officers may delegate disclosure of information on certain sectors to other trusted Officers and/or managers.
ii) This guidance shall be conveyed through appropriate channels to the entire management team of the Company and its subsidiaries.
iii) Managers with positions in trade entities shall, as concerns the matters covered by the present guidelines, limit themselves to their purviews when speaking publicly on behalf of the respective entities, addressing only the disclosure of data on the entities they represent.
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21.2. Description of the material act or fact policy and of procedures governing secrecy over undisclosed material information According to the Securities Market Law, the Company must give notice to CVM and B3 - Brasil, Bolsa, Balcão of any and all material act or fact capable of influencing its business. The Company must also publish an announcement of such an act or fact. An act or fact shall be deemed material if it affects the price of the Company’s securities, investors’ decisions to trade in the Company’s securities, or investor decisions to exercise any rights as holders of the Company’s securities. Under particular circumstances, the Company may submit to the CVM an application for special confidential handling of a certain material act or fact. The Company also has in place, pursuant to CVM Instruction 358, of January 3, 2020, as subsequently amended ("CVM Instruction 358"), a “Material Act or Fact Disclosure Policy”, which consists in the disclosure of material information and maintenance of secrecy regarding such information that have not yet been disclosed to the public. It is the Investor Relations Officer’s duty to disclose and give notice to CVM and B3 - Brasil, Bolsa, Balcão of any material act more fact affecting or associated with the Company’s business that is deemed to be material information, as well as to provide for the widespread and immediate dissemination of material information to stock exchanges and the public at large. The Company has provided for certain cases excluding immediate disclosure of material information. Among these are cases where disclosure of said information may compromise the Company’s legitimate interests. All bound persons (controlling shareholders, Officers, members of the Board of Directors, members of the Fiscal Council, or members of any other bodies with technical or consultative duties created by force of statute, managers and employees with frequent access to material information, and others as deemed necessary or appropriate) shall execute a Statement of Compliance with the Market Disclosure Policy and shall maintain secrecy over undisclosed information. Failure to comply shall cause them to indemnify the Company and other bound persons of any ensuing damages. Any amendment to or revision of the present Policy shall be submitted to the Company’s Board of Directors. The trading policy may not be amended while a Material Act or Fact is pending disclosure. The contents of the present Policy shall not void legal or regulatory liability of third parties not directly associated with the Company and who gain awareness of a Material Act or Fact and then trade in the Company’s securities.
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21.3 Managers responsible for Implementing, Maintaining, Evaluating and Overseeing the Disclosure Policy The Investor Relations Officer shall implement and oversee the disclosure policies, the use of the information, and the trading in the Company’s securities.
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21.4. Other relevant information There is no other relevant information on the present item "21".
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