Klabin faces dilemma over investing more or paying dividend
Klabin, the Brazilian pulp maker on the way to completing its largest investment ever, faces a good dilemma: embrace M&A opportunities in Brazil and worldwide, amid the current downturn cycle of the pulp and paper industry, or fulfill its policy of distribution of proceeds and financial debt and leave for further ahead a new round of growth.According to the minutes of Tuesday’s meeting of the board of directors, which ultimately decided to pay R$269 million in extraordinary dividends to shareholders, the approval of the amount was not unanimous.Of the 14 members of the board, three - all independents - did not vote in favor of the proposed payout of 20% of second-quarter adjusted EBITDA (of R$1.34 billion). While director Isabella Saboya asked to postpone the discussion, Mauro Cunha voted for a lower payout and Amaury Bier voted for a payout of 15% of EBITDA.The divergent votes come at a time when Klabin’s board and management are reviewing the debt and earnings policy approved in 2020. Today, the company must maintain the net debt-to-EBITDA ratio, in dollar terms, between 2.5 and 3.5 times, or up to 4.5 times during expansion investment cycles. With respect to dividends and return on equity, management team is expected to aim for a percentage of adjusted EBITDA between 15% and 25%, with possible exceptions."It’s natural to review these guidelines. We are in the process of updating studies and discussions in the management and with the board of directors, but that does not mean that we will change," Marcos Ivo, Klabin’s chief financial and investor relations officer, told Valor.The discussions also come at a time of growth opportunities for companies that are cash generators and have debt under control. There are industrial and forestry assets for sale, both domestically and abroad, some at attractive prices.Klabin has been studied by a large multinational in the sector with a view to a possible M&A that could lead to the internationalization of its operations, Valor found. According to a financial market source, some of the controlling shareholders are sympathetic to potential talks."Klabin is a very valuable and unique asset. It is natural that companies are interested in talking to the company. But there is nothing concrete in progress," Mr. Ivo replied when asked about it.In a conference call with analysts, Klabin’s managing...
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