Good morning, ladies and gentlemen. Welcome to Dexco's conference call to discuss the results of the first quarter 2026.

This videoconference is being recorded, and the recording will be available on the company's website, ri.dexco.com. The presentation is also available for download.

We'd also like to inform you that you can listen to this conference call in English. You just need to click on the globe icon and then select the English language.

You can also mute the original audio. We'd like to inform you that all participants will be in a listen-only mode during the presentation, and afterwards, we'll begin the Q&A session when further instructions will be provided.

Before proceeding, we'd like to clarify that any forward-looking statements made during this conference have as a base all of the information available to the company right now, and they may involve risks and uncertainties, as they refer to future events and therefore depend on circumstances that may or may not occur. Investors, analysts, and journalists should understand that the general conditions, industry conditions, and other operational factors may affect the results presented here.

Joining us today, we have our Executive Board and our Investor Relations team. I'd now like to turn the conference over to Lucianna Raffaini, our CFO, who will start the presentation.

You may begin. Good morning, everyone.

Welcome to Dexco's earnings presentation. I am Lucianna Raffaini, the company CFO, and joining me today are Raul Guaragna, CEO, and Guilherme Setubal, IRO.

Let's begin. We're here to share the first quarter results.

We'll see that these results reflect consistent progress in the execution of our transformation plan, with important progress in cash generation, margin expansion, and deleveraging. It's a very special moment at Dexco.

We're celebrating our 75th anniversary—our 75th anniversary. Let's start with the highlights of the first quarter.

The first quarter marks an important inflection point in our operational journey, with disciplined execution and a focus on sustainable profitability. Adjusted and recurring EBITDA, excluding LD Celulose, reached a 478 million mark, a significant increase of 38.3% compared to the first quarter 2025.

The Ceramic Tiles Division continues to operate in a challenging demand environment, but with improvements supported by our productivity gains and strong expense management. Metals and Sanitaryware performed in line with our expectations, consistently delivering improved operational performance, better price execution, and productivity gains.

The Wood Division delivered another consistent quarter, benefiting from the capture of price increases implemented in the previous quarter. Our total recurring net revenue at Dexco grew 6.1%, going from 1.9 billion in the first quarter 2025 to 2 billion in this quarter.

The gross margin also improved. It went from 23.4% to 27.4%.

That shows our discipline in price implementation, our improved mix, and operational productivity gains. Dexco's adjusted and recurring EBITDA reached 478 million.

When coupled with LD Celulose's 180 million, amount to 658 million, a 23.7% gross margin compared to 18.2% in the same period last year. Recurring net income totaled 72 million in the quarter.

Dexco improved its by 78% year-on-year, although it still closed slightly negative at 9 million reais. LD Celulose posted a 35% decline, mainly impacted by lower dissolving pulp prices and to the FX effects, ending at a positive 81 million.

Although this represents a 14.2% decline year-on-year, it still demonstrates the gradual recovery of Dexco's operating profitability. Let's move on to our cash flow.

The first quarter 2026 marks a quarter of strong cash generation, supported by improved operating results and structural working capital improvements. Starting from our recurring EBITDA of 478 million, we had a working capital consumption of 44 million, 174 million in sustaining capex, and 20 million in project investments, representing an 87.5% reduction compared to the 160 million recorded in the first quarter 2025, in addition to taxes and other items.

As a result, our operating free cash flow totaled 226 million. On the financial cash flow side, we recorded a net inflow of 9 million, as there were no significant principal or interest disbursements during the quarter.

This contributed to a total free cash flow of 235 million in the quarter. The working-capital-to-net-revenue ratio declined to 17.3% in the first quarter 2026, climbing down from a peak of 18.5% in the third quarter 2025.

We can say that we have started on a journey of structural improvement without compromising our operations, and that remains a focus of our transformation plan. Our sustaining capex was 174 million.

Out of that, 127 million referred to forestry operations, 41 million to maintenance, and 20 million to projects. That is in line with the conclusion of the investment cycle and the company's cash preservation strategy.

Cash generation and deleveraging remain our top priorities. Moving on, let's talk about our debt levels.

Dexco's financial leverage declined to 2.99 times net debt over EBITDA. That represents a dip of 0.36 times in the quarter, going from 3.35 times in the fourth quarter 2025.

This is the lowest level in the last 10 quarters. That is driven by a combination of strong operating cash generation and the concluded in the last quarter 2025.

Our net debt closed the quarter at 5.3 billion. That is a 200 million reduction approximately quarter-on-quarter.

87% of the debt is long-term, with an average maturity of 5.3 years and an average cost of 104.6% of the CDI index. As you can see in the chart, the amortization schedule is comfortable, and we maintain an excellent liquidity position.

There are two important events we'd like to highlight. We concluded the CPR transaction in January, which added 296 million to cash, and the timber trading operations, which contributed positively to cash generation as well.

Let's now look into the divisions, starting with Ceramic Tiles. This is currently the division facing the most challenging environment, and we continue to execute with a lot of discipline.

Let's start with the industry environment. The ceramic tile industry continues to operate with excess capacity.

The installed capacity utilization declined to 63.1% in the first quarter 2026, going from 72.1% in the fourth quarter 2025 and from the peak of 74.6% in the third quarter 2025. This continues to sustain elevated inventories and competitive pressure on prices.

The wet process industry sales volume declined 10.3% in January-February compared to the same period in 2025. From a broader perspective, the market remains 22% below the peak turning in 2021, showing that the post-pandemic normalization has not yet occurred.

Demand continues to be below historical levels, and recovery continues to be gradual. The combination of excess supply, weak demand, and pricing pressure continues to weigh on the sector.

Inventory reductions are occurring gradually. In this context, our strategy is to focus on what is under our control, namely productivity, efficiency, and cost discipline.

Let's now look at the Ceramic Tiles results. Ceramic Tiles volume declined 9.9% year-on-year.

This performance reflects the weak demand environment that we have just described. Net revenue declined 13.9% to 172 million.

However, gross margin improved, increasing from 10.2% to 16%. That is a 5.8 percentage points quarter-on-quarter.

That is driven by higher industrial productivity and installed capacity optimization. Adjusted and recurring EBITDA was negative at 3.5 million, with an EBITDA margin of -2%, improving from the 6.2% in the first quarter 2025.

We know the environment will remain highly challenging, which is why we continue to maintain discipline and productivity initiatives, such as kiln gas optimization through heat retention projects and reduced raw material consumptions, as well as strict cost control and expense management. Let's now talk about Metals and Sanitaryware, a division that delivered a quarter of strong recovery and solid execution, even within a still challenging environment for the construction sector.

The Metals and Sanitaryware market posted a slight decline in demand in the first quarter across both segments. According to Asfamas, the industry gross revenue totaled 245 million for Metals and 268 million for Sanitaryware, posting modest declines compared to the fourth quarter 2025, but there are no signs of accelerated deterioration throughout 2026.

An important point of attention is cost pressure, especially copper, the main raw material for the Metals Division. In response, all industry players implemented price increases.

Moving on to this division's results. Metals and Sanitaryware delivered a quarter of strong earnings recovery, demonstrating that our commercial and operational execution efforts are generating tangible and consistent results.

The unit volume declined by 3.1% year-on-year. This slight decline is associated with the industry environment, as we mentioned, but was more than offset by improved pricing and product mix.

As a result, net revenue grew 9.3% to 455 million, and gross margin increased from 19.8% to 28.3%. That is an 8.5 percentage points increase.

That is due to the following points: the capture of price increases announced in the fourth quarter 2025 and the first quarter 2026, also improved productivity and operational management optimization as well. Our adjusted and recurring EBITDA climbed from 8 million to 40 million reais, and our EBITDA margin increased from 2% to 8.7%.

This underscores the effectiveness with which we are executing our transformation plan. Let's now talk about the Wood Division.

It also delivered another quarter of strong operational performance. This remains Dexco's most profitable division, with 89% capacity utilization.

Let's start with the results for the first quarter 2026. We had the domestic panels maintaining healthy fundamentals, and according to Ibá data, the total panel volume grew 4.1%, reaching 2.115, and MDF grew 10%, and MDP increased 3.2% in the domestic market.

We see that the factory utilization or capacity utilization has remained high. Exports continue to decline, falling 17% in the quarter.

This movement reflects the redirection of supply to the domestic market, which continues to absorb volumes at consistent levels and with better profitability. Moving on to the Wood Division results.

EBITDA margin increased 26.3%, highlighting this division's strong value capture capability. Panel volumes remained virtually stable, with a slight decline of 0.6% year-on-year.

This volume stability, combined with revenue and margin growth, clearly reflects improved pricing and product mix. Recurring net revenue increased 8.1%, now at 1 billion 392 million, and gross margin expanded from 26.7% to 28.6%, supported by improved price capture and sustained business profitability.

Adjusted and recurring EBITDA totaled 442 million, with an EBITDA margin of 31.8%. A point of attention for the coming quarters: the first quarter 2026 results do not yet fully reflect the impact of higher raw material and freight costs resulting from the conflict in the Middle East.

These effects are expected to materialize starting in the second quarter 2026, and we're working to mitigate them. It's important to emphasize that the Wood Division continues to show healthy fundamentals, with resilient demand, commercial discipline, and price capture, also with product mix optimization and strong operational efficiency.

Now, LD Celulose, our joint venture with Lenzing, where the results presented refer to 100% of the operation. LD Celulose shipped 168,000 tons in the first quarter 2026, a 13.9% increase year-on-year.

This performance reflects the plant's high productivity and operational efficiency. In spite of higher volumes, recurring net revenue declined 10.2%, now at 758 million.

It was mainly impacted by the lower dissolving pulp prices in the international market and the unfavorable FX effects. Adjusted and recurring EBITDA totaled 368 million, down by 32.1% year-on-year.

Dexco's share amounted to 180 million. LD Celulose net income totaled 165 million, down by 34.6% year-on-year.

These are the same factors—pricing and FX—that will explain why this decrease took place. Concluding the divisions' results, I now like to present the sustainability cycle.

The 2021 to 2025 sustainability strategy cycle concluded with 16 out of the 21 targets achieved. We're now defining the new metrics and targets for the next cycle, with publication expected by the end of 2026.

Some highlights from the completed cycle include: a 13% increase in the average score of suppliers participating in the GFD program; 100% of municipalities with industrial operations in Brazil received engagement initiatives; 36% of leadership positions held by women; 9.7% reduction in energy consumption; a 53.6% reduction in waste sent to landfills; 43,000 professionals engaged in training and engagement programs. We're very proud of these results.

We're also pleased to share that we published our 2025 integrated report, and it's available on [unclear]. For 2026, our focus is on preparing sustainability-related financial disclosures in accordance to the IFRS S1 and S2, aligning Dexco with the global ESG reporting best practices.

We'll now move on to the update on our priority projects. We remain fully focused on the continued execution of our five priority projects within our transformation plan.

First, financial deleveraging: we closed the first quarter 2026 at 2.99 times net debt over EBITDA, and we continue progressing toward our 2.7 times target. Second, go-to-market: our objective is to sell better, not only to sell more.

Our results reflect our channel repositioning and mix strategy aimed at converting brand strength into real margin gains. Third, Ceramic Tiles turnaround: we delivered EBITDA improvement even in an adverse environment by focusing on what we can control—higher productivity, cost management, and disciplined expense management.

Fourth, Wood innovation: we achieved 8.8% growth in unit revenue. The forestry business is our next value frontier.

Fifth, our Metals and Sanitaryware competitiveness: sustainable improvement compared to one year ago. Sanitaryware automation is the next catalyst for structural profitability.

The first quarter 2026 results confirm the consistency of execution of our transformation plan. Each division evolved according to its stage of maturity, and each strategic project generated measurable evidence of progress.

Moving on to our outlook for the second quarter 2026, starting with Ceramic Tiles: in the second quarter, we expect volatility and uncertainty. This is still a challenging market, with a downward trend in volumes.

There are no signs of meaningful demand recovery in the short term, and therefore, our response is to continue accelerating productivity gains and to further optimize production capacity. For Metals and Sanitaryware, the focus remains on commercial discipline, improving profitability through margin expansion and price capture.

A key point of attention is how demand behaves in response to the price increases. The Wood Division enters the second quarter 2026 with demand at stable levels and prospects for further price capture.

As I mentioned earlier, our main point of attention is rising commodity costs, including urea, methanol, and other inputs, as well as freight costs, which may pressure business margins in the coming months. LD Celulose continues to expect another year of high productivity and strong operational performance.

Additionally, we expect a possible improvement in DWP, the dissolving wood pulp, throughout the year. This concludes the presentation of the first quarter 2026.

Thank you all for joining us today, and we'll now open the floor for our Q&A session. Thank you.

We'll now start the Q&A session for investors and analysts. Should you wish to ask a question, please click the react button, and then click raise hand.

If your question has already been answered, you can click lower hand and leave the queue. Ricardo Monegaglia from Safra would like to ask a question.

Can you hear me well? Good morning.

Thank you for taking my questions. I'd like to start off talking about deleveraging.

I think this is a very important point. Correct me if I'm wrong: in 10 quarters, this is the first time it goes under 3 times your EBITDA, congratulations.

My question is, where do you see further opportunities to continue to deleverage? Is it increasing your EBITDA numbers?

Can you optimize working capital? With the '21 to '25 cycle being concluded, is there any chance to reduce capex further down compared to the 800 millions?

Are there any asset opportunities that you can share with us? There was a decrease in the average debt cost, and that supports you in interest rate payments, are there any other opportunities?

I have a second question, sorry, but oh, go ahead. I think Lucianna will answer the first question about deleveraging.

Thank you for your question. We have been consistent with deleveraging, as we said we would be in these past six months.

Starting off with operations, we, well, see a challenge to sustain these operational gains that we had. Continuing with our maintenance and discipline in pricing implementation, considering the very challenging macroeconomic scenario, and continue to be productive.

We've been very disciplined, and we have had substantial gains, we want to sustain that in the coming quarters. That is a challenge, of course, but we're quite confident we'll be able to make it.

As for working capital, we can see that this quarter has a substantial improvement year-on-year, but we still consumed 44 million in working capital. In the course of the year, there is an opportunity to improve our working capital leverage, especially in inventory levels.

As for capex, when you talk about sustaining capex, we won't be doing anything that will harm our business in any way. We'll sustain it at the levels we need it.

Projects, well, we're getting to the end of the cycle. These 20 million were published in this first quarter, but we have no expectation of this continuing in the coming quarters.

We need to continue with operations, working capital, capex is on our radar, and these are the structural and operating levers that we have a lot of discipline on. Now, when we talk about non-operational assets, we continue to analyze a number of opportunities in the projects we mentioned, whether they're related to operations or not, sustaining the consistency of what we mentioned.

That's why we have the 2.7 target up to the end of the year. I believe this is the most important question regarding our management here to really improve our cash generation potential.

2.99 is a multiple that made us happy. The sign of increase, we're below 3 for the first time, and you're right, in 10 quarters.

We're not only concerned about the multiple. The total amount of the debt is very important, how much we pay for this debt is also very important.

We aim to end the year between 2.5 and 2.7. Of course, top line, EBITDA are going to be contributing to that, but we are really focused on reducing debt levels.

You saw the 200 million decrease in net debt in this quarter, and this is something we're going to continue to pursue. To get to 2.5, we would need to have 1 billion or so reduction in debt.

This is the journey we're on. I wanted to say yes to every part of your question.

Yes, yes, yes. We need to enact all the levers that we have access to.

Working capital is always a big challenge. The capex at the end of the investment cycle is also a point.

The resilience of the Wood Division and the turnaround in Tiles and Metals and Sanitaryware also call for the management of the assets. We really intend to maintain our assets, of course always allocating capital responsibly.

We want to have our assets operating very efficiently. I do not see a lot of room to go further below than where we have already gone with our sustaining capex.

Any discretionary project is being removed, but the maintenance projects that also will pay quickly in terms of efficiency, they will be continued, because they are very important to a long-term industry like we are. We have to maintain our operations as well.

Ricardo, you had another question, yeah? I have a second question, yes.

There's a war out there, and this also impacts Dexco. One of the discussions we've been having with investors has to do with profitability expectations and also the demand concerning the price increases.

From what you've seen so far in May, are we on similar levels to the first quarter without too much impact on demand, or is there a concern to you at this point? I'll give the word to Raul.

Please. Thank you, Ricardo.

This is all very new to us. There are two sides to the situation.

When you think about our businesses' turnaround and discipline, our inflationary management is included. One of our strengths is that we are a sophisticated company.

We can cushion a substantial part of these increases. Also, we have a good partnership with our suppliers and with our customers.

We understand that we work in a consumption market, but it's a slow turnaround market, right? It's not fast-moving, and we have high inventory levels, we can be very careful in these price readjustments.

Some sectors have to change prices on a weekly basis or sometimes on a daily basis even. This is definitely not our case.

We are watching it up close. Everything we've been able to cushion, we did.

Everything we needed to transfer onto the end customers, we did. There were two price adjustments, one in December, one in the first quarter.

The same applies to the Wood Division, and we've been very cautious, sustaining our profitability, of course. This is the first part of your question, but I think it's the most important part of your question and what we're focusing more is how the demand is going to be reacting to this, and we're also watching this close.

There is a limit to the purchasing power of customers. We see that demand is still healthy when it comes to our main customers.

They've been quite stable in the course of time, but yes, it is a concern to us. The second quarter will be a key moment for us to understand how far this is going to go.

What we can say is we'll need to stand strong in the second quarter and also in the first part of the third quarter, watching closely what is happening to customers. I've been visiting customers and speaking to them, I've been spending a lot of time doing that, and all of them are quite concerned.

They also have been managing everything carefully. Credit levels have been managed carefully as well.

It's undeniable there will be some effect on the customer. Ceramic Tiles dropped 10% in the first quarter.

This is distributors already having lower inventory levels, and the same applies to Metals. Even though we had lower volumes, we increased our market share.

I think it has to do with our internal cohesion and coherence in our go-to-market projects, also working to be closer to our customers. This is a new point that we need to be watching closely in the coming quarter.

Just to complement that, we Brazilians are used to going through what we're going through, and we're focusing on what we can control internally. When you look at our results, there is a lot of discipline when it comes to expenses.

You see a decrease in sales expenses and in G&A as well. We don't know what's in store, and this is why we're really focusing on what we are able to control.

As Raul said, we have actions to mitigate any impacts. When you think about Wood, for example, when you think about oil and gas, urea, methanol, all of these inputs, of course there's an immediate impact on our costs, and the prices won't be changed to the end customer so immediately.

Profitability continues to be a very important focus for our levels to remain healthy. Thank you, Lucianna.

We hope to have answered your questions,

Ricardo. Thank you very much, and congratulations on your results.

Marcelo Arazi from BTG, you may unmute your microphone. Hi, everyone.

How are you? I've also got two questions.

The first focuses more on Deca. We saw a profitability level that was even better than the market expected it to be, and it's not the first time we've seen Deca climb back to close to 9%.

The other times, we saw that this profitability was put under pressure by other drivers. What were the main drivers for this increase, and can we rest assured that this is going to be sustained now?

That's my first question. Now, the second question: when you look at LD Celulose, we see that there has been some pressure on results because of external factors, also the pulp prices.

Are the dividends going to be paid earlier to try and support the deleveraging situation of the company? Raul will start talking about Deca, and then Lucianna will talk about LD.

These are two very important questions. On this turnaround journey, Deca had about 40 million, if I'm not mistaken, in the third quarter 2024, if I'm not mistaken.

We need to monitor this trend. For some time now, we've been saying that some things are structural.

For the very first time, our sanitaryware quality levels are close to world-class levels. That had a 100 million real impact on cost, and we see this trend improving month after month, week after week.

There's one last part of the improvement project that really helps us believe in this process: in Jundiaí, the sanitary sanitaryware automation. We concluded the capex this year.

Now we're going to be commissioning and ramping up these machines. When this starts operating full blast, we'll see other operating improvements in labor and in other other plans, and this will continue in the future.

As for Metals, there are many things going on. We established our outsourcing.

These are factories here in Brazil. When you look at supply chain, as as we've been looking, you see there's an increase in inventories and depending on the levels and what the demand is, and when you start importing, you start generating inefficiency in what you produce internally.

This has been monitored carefully as well, and we'll work to make this happen in the coming quarters. The third point: we haven't yet captured pricing changes fully.

When you think about copper, for example, as Lucianna mentioned, many of the increases hit us quite quickly, and there is some time for you to implement the price increases. We were very much impacted in the last quarter.

We mentioned this in the last call, last last quarter. We had one first price increase.

We're having another price increase now, and this will apply into the future. Now, we can't predict, we can't tell if, as Ricardo said in in his answer to the first answer, you may have an abrupt decrease in demand.

This could increase the caution of customers. The second element is the price increases that will take place in shipping and freight, and I mean copper is a bit more under control, but we'll start feeling the the full blast impact of these increases now.

What we can say is that we're but starting the journey to reestablish Deca to the the levels that we are capable of and that we really should be delivering. There may be other hiccups in the second quarter, second and third quarters, but you will see consistent margins in the next 7, 8, 9 quarters.

This is a plan to unleash all of this potential up to the end of 2027. Now, on LD, it continues to have spectacular operating levels, spectacular operations performance.

The speed of maintenance, the deliver of of delivery of volumes, all is exceptional. What we see is maybe the the bottom when it comes to to pricing, and in the second quarter, now the start of the second quarter, with some trend to dissolving pulp price recovery.

Effectively, we start seeing dissolving pulp prices climbing back to normal levels. That should support our business.

I'll ask Lucianna to talk about the the dividend. This is a point we continue to study.

It's one of these points that could help us deleverage, but it's a minor point in this major trend. Just to complement what Raul said, well, there is a limit to dividends, and our expectation for 2026 is to have $5 million to be broken down between Lenzing and Dexco.

This should remain for 2026, and we expect a similar flow for the following years. Nothing new there.

FX

is very favorable when it comes to costs as well. The dollar price is below 5 reais.

This helps us when it comes to copper and to urea. Of course, this won't mitigate all of the cost increases, but it mitigates them.

Guilherme,

this cost is favorable for Dexco, but in the case of LD, it's unfavorable. The FX has this impact on LD Celulose as well.

That's very clear. Thank you for your answer.

Gabriel Barra from Citi has a question. You may unmute your microphone now.

Hi, everyone. Good morning.

Thank you for taking my two questions. This is a follow-up on the deleveraging question that was asked.

As Raul said, it's one of the key points in the company's investment thesis. One of the discussions has to do with amortizing or selling assets.

We see that the total debt is going down now. You're likely to get to the 2.7 mark at the end of the year.

The asset sales is still a strategy that you're considering in terms of deleveraging, or could you even expect more deleveraging with this amortization? My second question has to do with Wood and also piggybacking on what Guilherme said about cost reduction: you mentioned cost reductions during the second quarter, and we see the Wood results in the first quarter above what was expected.

Can you detail out the impacts on cost that we can expect in the second quarter, and if these results, maybe due to some demand changes or increases in costs, how do you see the whole equation here for the second quarter, considering this more uncertain scenario and the cost pressure? These are my two questions.

Thank you. Thank you, Barra.

Raul will start answering the question. Thank you for giving us a chance to delve deeper into the deleveraging discussion.

This is one of our main projects. All of the alternatives that we have been looking into in the past six months, they are still valid, and they continue to be studied.

As I said, 2.7 looks feasible, and we're talking about 2.5 to 2.7. EBITDA improvements can contribute to that, certainly.

I really do want to reduce the total debt volume. Of course, the cash generation plays a key role.

Other assets continue to be on the table, considering the possibility of selling them. We have several factories, several plants that are idle, and all of this is being looked into.

You get to a few hundred million reais here when you add them all up. They are not generating any results, and they're generating costs for us to maintain them with a minimum level of maintenance you need to have.

Yes, it's still on the table. Operating assets, we'll continue to assess them.

Dexco and the whole group always focused on the long term as well. We want to be loyal to our purpose.

We want to have the best brands. We want to have products for every environment of the home.

This strategy is our backbone. We want to be self-sufficient in Wood.

We want to be very productive in our forests. This long-term results are still present.

If we can keep to our long-term strategy and sell assets, this is a possibility that we'll continue to assess carefully. Again, we want to be between the 2.5 to 2.7 range, but with a much smaller debt than we currently have.

I think this is the key point. The second question had to do with Wood costs, right?

I talked about our ability to be more efficient than the competition in Wood. We're one of the few companies that can produce our own resin.

We can amortize these price increases more comfortably. We can do hedging.

We can increase our raw material feedstocks. We can produce resin.

In this first quarter, we haven't yet felt the full impact of the price increases, but urea has climbed 50% in these past months. You see the average cost behavior as it is.

We don't expect this to be sustained for a long time in urea, for example, but we also announced the price increases about two months ago, one and a half months ago, but getting enforced in May. We see these new prices coming in, and in Wood, we still see healthy demand.

We don't see any hiccups here in April or May that should concern us. Of course, June, August are still ahead of us.

Seasonality isn't that strong, but September, October, November, then we have the strongest months for the wood market. The next two to three months, they're important, but we're confident.

We're confident that the cost control is being performed diligently, that the price increases have been transferred onto the customers timely. If we continue to have these cost pressure and we have to have more increases in price, then there could be more impact on demand.

Far, demand is looking healthy, especially in Wood. Thank you, Raul.

Matheus Moreira from Bradesco BBI. Hi, everyone.

Thank you for taking my questions. My first question has to do with Deca.

Results were slightly higher than what we expected, especially due to costs compensating or offsetting for the lower prices. The company's strategy was to improve the mix, but when you see that pricing went down by almost 10%, which was offset by by cost improvements, to that end, does that show any change in the division's strategy?

Is it focusing more on volume than price, and what can we expect in price and cost in the future? My second question has to do with Wood.

We see that Dexco's volume was lower than the market. It was 1% down year-by-year year-on-year, and the market grew 5% year-on-year.

This relative performance, is it due to capacity, you're operating close to your nominal capacity, or is it a strategy where you're prioritizing products with more value added?

I

think about Deca and you look at the fourth quarter and the first quarter, and other investors have raised this point, we improved the finishing mix. We improved the pricing as well.

We improved the pricing and mix of basic items as well, so that impacted the total recurring net. I think this is the point: we have a massive improvement potential.

It's high in category in Brazil, and we invested a lot in our Deca for different colors. We have nine different colors.

The market is really enjoying this, I think we'll continue to improve this mix improvement. There's a point that's more difficult to understand, really.

Deca is also a leader in basic items. Basic items are the one that go within the wall, and you have the finished products that are outside the wall.

That's the main point. We got more market share in basic items as well, and when you look at basic items and finished items and you combine them, you see apparently a reduction in mix, but when you look at them separately, we have increased pricing and mix in basic items, and we improved the mix in finished items.

This continues to be a very careful perspective on it. No change in strategy, no, and we'll certainly continue to pursue mix improvements.

This is a very important lever. From another perspective, the footprint, the capillarization, the reach is very important.

We need to deliver metals quickly, and in doing that, we get more confidence from the smaller retail. They hadn't been working with Deca a lot, and these are products with healthy margins.

When you look at the results going forward, the high-end mix improvements should continue, but the reach is something that we're striving for. Momentarily there could be a loss of mix, but with an increase in retail.

That's very healthy for our business. Do you want to talk about Deca, Lu?

I just wanted to add some color. We had a 9.4% increase in net income in Deca, of course, 13%.

I just wanted to give you some color in number, we did have an increase in unit as well. That was almost 13%.

As we don't want to sell more only, we want to sell better. I said that when I was presenting the results.

Mix, profitability, and our go-to-market, our repositioning of portfolio, repositioning our channels, has made an impact, and we need to sustain that for our sustainable profitability in coming months.

When it

comes to Wood, I want to repeat for you, it's almost a mantra that we have here, we call it optimal utilization, right? Our market share has to be the same as our capacity share in Wood.

We absolutely insist on that. Market share has to be equal to market share, and this has been one of the main drivers for success in Wood and this consistency in the market.

The competition, the market has understood that this is how we drive it. We're very diligent in doing it.

What we do here is we have the panel plants that had been reduced, and that will impact the volumes available momentarily, but when you look at the situation in the long run, you see that Wood is quite stable in this model. We don't want to lose any market share.

We want to have high utilization, at least close to 90%, and with opportunistic forestry deals, opportunities in trading and surplus wood, not buying wood or buying wood for panels. There are loads of elements that we continue to look at.

Nothing really changed. Nothing, especially nothing due to stopping any lines.

Thank you very much. My question in Deca had to do more with the price changes quarter-over-quarter.

We need to compare to the previous year as well. Thank you very much.

To be punctual, we'll just have the one last question now to wrap up. Marcio Farid from Goldman Sachs.

Saving the best for last. The conversations were really interesting here, the discussions were great.

We've talked a lot about Wood, and you talk about demand and cost. There is a supply risk as well, right?

The competition is in a much worse position than you are. Thinking about the last two years in competition, they may have been more net short and less net long in Wood, at least.

Just thinking about that in Wood and Tiles really as well. I know that the sector has changed structurally.

Smaller competitors have become more competitive, but is there any opportunity for this inflationary scenario, for this price pressure to lead to impact on supply that could improve the market for you? I was just trying to raise another point.

Thank you. These are two very good questions.

When it comes to Wood, I don't see any obvious exit when it comes to capacity. Brazil also exports a lot of MDF and some MDP.

The competition will certainly prioritize the domestic market, and if there's any challenging capacity, we'll reduce exporting, and that's still an opportunity for us, for us to be consistent in exports in some of the key markets. Now, in the long run, I mean what is positive in this story is panels won't take anyone's nonsense.

With the wood availability, the market is a lot more disciplined than that in the past. We have the full capacity operation, and people would look at the price later, but this doesn't happen anymore.

There's a lot of discipline in pricing, companies are a lot more cautious when it comes to pricing. Everyone had increases, some companies more or higher increases than the one that we announced, and this bears witness to what you've just said.

Other companies may well be in a more difficult position than we are. Now, operating panels without wood, well, that's not sustainable in the coming years.

I don't see anything obvious when it comes to capacity reduction, but in the medium term, if you're not self-sufficient in wood, you will have to reduce capacity or regulate capacity, reducing it to lower than your max capacity, or yeah yeah, reducing capacity. This is a very important point in this story.

For Tiles, this is a very important point to us. What you've stated is a fact.

The competitors that we deemed small are actually gigantic when you understand the market better. They have good operating capacities, good cost capacities, so that really has changed the dynamics of this market.

They have invested in capacity as well, and this contributed to this unbalance in supply and demand. So 2025 less in demand and 10% to 15% more in capacity.

This really changes the competitive dynamic and makes it more complicated. We also need to think about the fact that there are many markets within this market.

When you look at the dry dry process, it's less than 50% of the value. This is a this is a world we're not going to tap into.

Now, when we look at the wet process, this is a 10 billion real playground. This is the largest market where we're where we're in.

At the base of the market, 5 billion of it, Dexco doesn't have a right to win there. We don't have a value proposition, our operational levels or cost levels there, or from a compliance or cost or investment perspective to to act.

We have to operate on the other 5 billion. This is a very important addressable market.

Then our brands, our finishing is our formats, the sophistication of the plants, the the products, the presence in trade trade fairs, Casa Dexco, retail, I think all of that shows us that by controlling costs, getting to an excellent level of operations, managing demand, capacity, while you've been seeing subsequent reductions in capacity, we used to think we could be a 35 million meter [unclear] meter company, but well, we're smaller than that, but with a profitability level and a value share and market share that are much more relevant. This continues to be a very important element.

There are few companies that can claim they have a share have a share in the high-end market. We have to have matching costs, the right factory utilization, and with Botucatu, after this 1 and 1/2 years struggling to ramp up, we see that the plant is making more sense.

Thank you very much. Congratulations on the quarter, and good luck.

The second quarter is going to be quite important. It certainly is going to be very important.

This is the end of the Q&A session. We turn the conference over to Mr.

Raul Guaragna for his final remarks. Nothing much to add at this point.

Again, consistency, keeping to our long-term plan, 3 years to unleash value, repositioning our brand, our products, our plant capacity, looking at our teams, reorganizing the tiles and Deca and Wood showing all this resilience. So 2025 is in the past now.

2026 and 2027 are years for us to really unleash more value. Capital generation, building capability, commercial capability for us to claim our right to grow again in three years.

This is our commitment to the medium term: careful, transparent management. We've been speaking to you very truthfully in a very consistent, disciplined manner, and you are of course grasping our dynamics more and more, our medium-term plan.

You, like us, continue to have high expectations, right? When you read the report, you see the turnaround is what it is now, it is a reality.

We can think that there will be thunder and lightning on this journey. The second quarter is a key quarter, and we speak to the leaders, we speak to the company to explain what we're going through, really keeping our eye on the ball.

What we control, we can control. We focus on what we can have more efficiency, and so this is the tune we're playing.

We believe that Dexco's best years are still to come, indubitably. Thank you very much for your diligence.

Thank you for the quality of the reports you've been writing. We're very happy about that.

Should you have any questions and you need any clarity, explanations, we're here. We're available to share that with you.

This is the end of Dexco's conference call. Thank you for joining, and have a good day.