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Indebtedness and Financial Investiments

Indebtedness and Financial Investments

Gross debt at year-end 2020 was R$ 26.339 billion, a reduction of R$ 2.554 billion  relative to 3Q20, principally explained by the FX translation effect on currency denominated debt and the marking to market of interest rate swap instruments, both with no material cash effect. Another factor contributing to this reduction was the voluntary prepayment of a residual amount of a syndicated loan worth US$ 150 million, maturing in 2023. Out of total company debt, including financing operations with Real to US Dollar interest rate swaps, R$ 20.556 billion, or 79% (US$ 3.953 billion), are dollar denominated.

In the period, there was stability in the total average maturity of loans and financing, which at the end of 3Q20 was 117 months and closed 4Q20 with an average term of 116 months, 65 months for loans and financing in Reais and 128 months currency denominated operations. The average cost of Klabin’s financing in foreign currency, its principal source of credit, remained stable in the quarter at 4.7% p.a. plus exchange variation. In terms of  local currency debt, there was a slight increase in financial cost of 4.1% p.a. in 3Q20 to 4.3% p.a. in the current quarter, largely a reflection of an increase in the IPCA.

The Company’s cash and cash equivalents position at the ended of the quarter was R$ 6.557 billion, a reduction of R$ 1.283 billion in relation to the end of 3Q20. This decrease reflects principally the prepayment of debt during the quarter and disbursements made to the Puma II Project, the decline partially offset by strong cash generation in the period. This cash is enough to support the amortization of 59 months of debt. In addition, Klabin has a Revolving Credit Facility of US$ 500 million (equivalent to R$ 2.600 billion), with maturity in December 2023 and a financial cost of 0.4% p.a.. Should drawings be made against this facility, the cost of this financing would be Libor + 1.35% p.a..

Klabin also has financing earmarked to the execution of the Puma II Project, contracted, and partially drawn in the following amounts: (i) IBD Invest, IFC and JICA, US$ 700 million; (ii) Finnvera, US$ 178 million; and (iii) BNDES with R$ 2 billion. Financing is to be drawn down according to the construction schedule of the Puma II Project and/or as and when the Company requires cash injections.

Consolidated net debt as of December 31, 2020 amounted to R$ 19.782 billion, a reduction of R$ 1.271 billion compared to quarter-end 3Q20, largely the impact of the exchange translation effect on debt in US Dollars. The Company’s financial leverage, measured by the Net Debt/Adjusted Ebitda ratio, in US Dollars, which best reflects Klabin’s financial leverage profile, remained stable on 4.0 times. Due to the Company’s strong cash generation, and despite the disbursements for investments in the Puma II Project, financial leverage has remained at the same levels for the last few month and within the parameters set out in the Company’s Financial Debt Policy.

Rating

AGENCY RATING OUTLOOK LATEST UPDATE
Standard & Poor’s BB+ Stable Dec-19
Fitch Ratings BB+ Stable Apr-21
Last updated on April 30, 2021.
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