Klabin: Stable leverage and positive FCF despite some headwinds

Research evidence excerpt

J P M O R G A N

Latin America Credit Research

07 August 2026

Klabin

Stable leverage and positive FCF despite some

headwinds

Klabin delivered a decent 2Q26, with positive FCF generation and stable

leverage. Operating trends were generally supportive, with better volumes

and stable production. However, pricing was mixed across products, and

near-term cost headwinds remain, including higher wood, fuel, and chemical

costs. Looking ahead, the end of the large investment cycle should support

FCF generation and deleveraging, although shareholder distributions will

likely moderate the pace. We remain comfortable with the credit, but current

valuations already reflect much of the improving FCF profile. As a result, we

maintain our Neutral recommendation across most of Klabin’s curve, except

for the ‘29s, where we remain UW as they screen tight to Suzano.

2Q26 results were decent with moderate FCF generation. Volumes were a

positive highlight, with consolidated sales volumes up 1% yoy, supported by

paper volumes (+4% yoy) and long fiber/fluff volumes (+5% yoy). From a

price perspective, performance was mixed across products: short fiber prices

increased 10% yoy in USD terms, while long fiber/fluff prices were down 5%

yoy in USD terms. In other products, paper prices were down 4% yoy, while

packaging prices increased 2% yoy. Overall, consolidated adjusted EBITDA

declined 4% yoy to US$387 million, with the margin down 1 p.p. yoy to 38%

(but up 4 p.p. qoq), pressured by cost headwinds and FX effects. FCF was

positive at US$64 million, with WK consumption of US$71 million driven by

inventory build ahead of the scheduled maintenance stoppage at Otacílio Costa

(3Q26) and safety wood inventories to mitigate potential El Nino impacts.

Additionally, capex reached US$130 million, up 1% yoy. After dividend

payments of US$55 million, Klabin generated US$9 million in cash. Liquidity

is solid at US$1.9 billion, covering 4.5x STD. Net debt was broadly stable at

US$4.9 billion, and we calculate net leverage was flat qoq at 3.4x.

Despite continued near-term cost headwinds, cash costs remained within

guidance, and management reaffirmed it for the full year. Total cash costs

…