1 MANAGEMENT REPORTMESSAGE FROM MANAGEMENT Given the less favorable global economic scenario, 2012 opened a new cycle of strategic revisions and it was absolutely essential for implementing in Klabin better and more mature management processes. In recompense for all our efforts, we recorded our best ever result, with an excellent performance across all our operating segments. The consolidation of a structured cost reduction program in all areas, combined with high- return investments and the adoption of an aligned commercial approach in all our market segments, led to record cash generation, resulting in EBITDA of R$1.4 billion. Throughout the year, we developed a series of industrial improvement processes, aiming to boost efficiency and productivity. We invested R$76 million in debottlenecking the Monte Alegre (PR) unit, which will add an additional 30 thousand tonnes of pulp bleaching capacity per year, eliminating the need to purchase the product on the market. On another front, we continued to invest in the operational start-up of two new corrugators at the Jundiaí (SP) and Goiana (PE) Units. The 400 meter Jundiaí machine is the largest of its kind in Brazil in terms ofwidth and speed. Through well-defined commercial strategies, we made inroads into several new segments in the industrial bag business, allowing us to increase sales volume. We approved investments in a new sack kraft paper machine, with a capacity of 80 thousand tonnes per year, which is scheduled to begin operation in 2013, making our product even more competitive, as well as creating new jobs. In the forestry area, new harvesting machines and soil preparation equipment began operations, along with significant advances in labor reversing of outsource. The forestry cost reduction program, which involved expense matrix management, began to produce results in the second half and played a vital role in maintaining our nominal cash cost in 2012. On the logistics front, we introduced key procedures and a more effective truck tracking system that optimized routes and reduced freig ht costs. 2012 was also marked by a new vision in relation to the human resources area, which is now called People & Management. In addition to permitting increased dynamism and efficiency in the construction of a culture of engagement, development and results among all employees, the new nomenclature emphasizes our mutual respect and the importance we give to human capital, the lynchpin of our business. Based on our process improvement management, we made considerable progress in the development of projects to optimize the use of natural resources, mitigate environmental impacts and develop an energy matrix that is increasingly clean and sustainable. Among other examples adopted in 2012 is the operational start-up of the new biomass boiler at Correia Pinto (SC), which reduced the unit’s fuel consumption.
