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SEGMENT INFORMATION | 12 Months Ended
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Dec. 31, 2019
SEGMENT INFORMATION |
SEGMENT INFORMATION | 29 SEGMENT INFORMATION 29.1 Criteria for identifying operating segments The Company evaluates the performance of its business segments through the operating result. The information disclosed under “Not Segmented” is related to income statement and balance sheet items not directly attributed to the pulp and paper segments, such as, net financial result and income and social contribution taxes expenses, in addition to the balance sheet classification items of assets and liabilities. The operating segments defined by Management are set forth below: i) Pulp: comprises production and sale of hardwood eucalyptus pulp and fluff pulp mainly to supply the foreign market, with any surplus sold in the domestic market. ii) Paper: comprises production and sale of paper to meet the demands of both domestic and foreign markets. Consumer goods (tissue) sales are classified under this segment due to its immateriality. 29.2 Information of operating segments
|  | December 31, 2019 |
|  |  |  |  |  | Not |  |  |
|  | Pulp |  | Paper |  | segmented |  | Total |
Net sales |  | 21,027,686 |  | 4,985,264 |  | — |  | 26,012,950 |
Domestic market (Brazil) |  | 1,833,936 |  | 3,480,279 |  | — |  | 5,314,215 |
Foreign market |  | 19,193,750 |  | 1,504,985 |  | — |  | 20,698,735 |
Asia |  | 9,605,799 |  | 136,882 |  | — |  | 9,742,681 |
Europe |  | 5,950,832 |  | 221,697 |  | — |  | 6,172,529 |
North America |  | 3,592,563 |  | 382,628 |  | — |  | 3,975,191 |
South and Central America |  | 44,556 |  | 710,086 |  | — |  | 754,642 |
Africa |  | — |  | 53,692 |  | — |  | 53,692 |
Cost of sales |  | (17,440,018) |  | (3,303,464) |  | — |  | (20,743,482) |
Gross profit |  | 3,587,668 |  | 1,681,800 |  | — |  | 5,269,468 |
Gross margin (%) |  | 17.1 | % | 33.7 | % | — |  | 20.3 | %
Operating income (expenses) |  | (2,089,286) |  | (679,719) |  | 128,115 |  | (2,640,890) |
Selling |  | (1,503,775) |  | (401,504) |  | — |  | (1,905,279) |
General and administrative |  | (806,774) |  | (366,584) |  | — |  | (1,173,358) |
Other operating, net |  | 209,577 |  | 68,062 |  | 128,115 |  | 405,754 |
Income from associates and joint ventures |  | 11,686 |  | 20,307 |  | — |  | 31,993 |
Operating profit before net financial income ("EBIT") (1) |  | 1,498,382 |  | 1,002,081 |  | 128,115 |  | 2,628,578 |
Operating margin (%) |  | 7.1 | % | 20.1 | % |  |  | 10.1 | %
Financial result, net |  | — |  | — |  | (6,725,781) |  | (6,725,781) |
Net income (loss) before taxes |  | 1,498,382 |  | 1,002,081 |  | (6,597,666) |  | (4,097,203) |
Income taxes |  | — |  | — |  | 1,282,461 |  | 1,282,461 |
Net income (loss) for the year |  | 1,498,382 |  | 1,002,081 |  | (5,315,205) |  | (2,814,742) |
Profit (loss) margin for the year (%) |  | 7.1 | % | 20.1 | % | — |  | (10.8) | %
Result of the year attributable to controlling Shareholders |  | 1,498,382 |  | 1,002,081 |  | (5,317,981) |  | (2,817,518) |
Result of the year attributed to non-controlling shareholders |  | — |  | — |  | 2,776 |  | 2,776 |
Depreciation, depletion and amortization |  | 7,575,630 |  | 516,301 |  | — |  | 8,091,931 |
| 1) |  | Earnings before interest and tax.
|  | December 31, 2018 |
|  |  |  |  |  | Not |  |  |
|  | Pulp |  | Paper |  | segmented |  | Total |
Net sales |  | 8,783,274 |  | 4,660,102 |  | — |  | 13,443,376 |
Domestic market (Brazil) |  | 744,566 |  | 3,307,074 |  | — |  | 4,051,640 |
Foreign market |  | 8,038,708 |  | 1,353,028 |  | — |  | 9,391,736 |
Asia |  | 3,837,998 |  | 101,695 |  | — |  | 3,939,693 |
Europe |  | 2,810,899 |  | 225,111 |  | — |  | 3,036,010 |
North America |  | 1,340,907 |  | 210,831 |  | — |  | 1,551,738 |
South and Central America |  | 48,904 |  | 774,730 |  | — |  | 823,634 |
Africa |  |  |  | 40,661 |  | — |  | 40,661 |
Cost of sales |  | (3,965,912) |  | (2,956,419) |  | — |  | (6,922,331) |
Gross profit |  | 4,817,362 |  | 1,703,683 |  | — |  | 6,521,045 |
Gross margin (%) |  | 54.8 | % | 36.6 | % | — |  | 48.5 | %
Operating income (expenses) |  | (626,887) |  | (886,347) |  | — |  | (1,513,234) |
Selling expenses |  | (212,869) |  | (385,857) |  | — |  | (598,726) |
General and administrative expenses |  | (275,859) |  | (549,350) |  | — |  | (825,209) |
Other operating income (expenses), net |  | (138,159) |  | 41,284 |  | — |  | (96,875) |
Income from associates and joint ventures |  | — |  | 7,576 |  | — |  | 7,576 |
Operating profit before net financial income (1) |  | 4,190,475 |  | 817,336 |  | — |  | 5,007,811 |
Operating margin (%) |  | 47.7 | % | 17.5 | % | — |  | 37.3 | %
Financial result, net |  | — |  | — |  | (4,842,513) |  | (4,842,513) |
Net income (loss) before taxes |  | 4,190,475 |  | 817,336 |  | (4,842,513) |  | 165,298 |
Income taxes |  | — |  | — |  | 154,516 |  | 154,516 |
Net income (loss) for the year |  | 4,190,475 |  | 817,336 |  | (4,687,997) |  | 319,814 |
Profit margin for the year (%) |  | 47.7 | % | 17.5 | % | — |  | 2.5 | %
Result of the year attributable to controlling shareholders |  | 4,190,475 |  | 817,336 |  | (4,688,118) |  | 319,693 |
Result of the year attributed to non-controlling shareholders |  | — |  | — |  | 121 |  | 121 |
Depreciation, depletion and amortization |  | 1,105,381 |  | 457,842 |  | — |  | 1,563,223 |
| 1) |  | Earnings before interest and tax.
|  | December 31,2017 |
|  |  |  |  |  | Not |  |  |
|  | Pulp |  | Paper | segmented |  | Total |
Net sales revenue |  | 6,920,494 |  | 3,660,179 |  | — |  | 10,580,673 |
Domestic market (Brazil) |  | 624,320 |  | 2,597,838 |  | — |  | 3,222,158 |
Foreign market |  | 6,296,174 |  | 1,062,341 |  | — |  | 7,358,515 |
Asia |  | 2,976,504 |  | 32,950 |  | — |  | 3,009,454 |
Europe |  | 2,262,162 |  | 139,572 |  | — |  | 2,401,734 |
North America |  | 966,789 |  | 254,971 |  | — |  | 1,221,760 |
South and Central America |  | 90,719 |  | 608,445 |  | — |  | 699,164 |
Africa |  | — |  | 26,403 |  | — |  | 26,403 |
Cost of sales |  | (3,937,036) |  | (2,559,268) |  | — |  | (6,496,304) |
Gross profit |  | 2,983,458 |  | 1,100,911 |  | — |  | 4,084,369 |
Gross margin (%) |  | 43.1 | % | 30.1 | % | — |  | 38.6 | %
Operating income (expenses) |  | (104,985) |  | (749,449) |  | 48,517 |  | (805,917) |
Selling |  | (163,879) |  | (259,446) |  | — |  | (423,325) |
General and administrative |  | (185,141) |  | (343,833) |  | — |  | (528,974) |
Other operating, net |  | 244,035 |  | (152,042) |  | 48,517 |  | 140,510 |
Income from associates and joint ventures |  | — |  | 5,872 |  | — |  | 5,872 |
Operating profit before net financial income ("EBIT") (1) |  | 2,878,473 |  | 351,462 |  | 48,517 |  | 3,278,452 |
Operating margin (%) |  | 41.6 | % | 9.6 | % | — |  | 31.0 | %
Financial result, net |  | — |  | — |  | (1,018,840) |  | (1,018,840) |
Net income (loss) before taxes |  | 2,878,473 |  | 351,462 |  | (970,323) |  | 2,259,612 |
Income taxes |  | — |  | — |  | (438,618) |  | (438,618) |
Net income (loss) for the year |  | 2,878,473 |  | 351,462 |  | (1,408,941) |  | 1,820,994 |
Profit (loss) margin for the year (%) |  | 41.6 | % | 9.6 | % | — |  | 17.2 | %
Result of the year attributable to controlling shareholders |  | 2,878,473 |  | 351,462 |  | (1,408,941) |  | 1,820,994 |
Depreciation, depletion and amortization |  | 1,007,280 |  | 395,498 |  | — |  | 1,402,778 |
| 1) |  | Earnings before interest and tax.
29.3 Net sales by product The following table set forth the breakdown of consolidated net sales by product:
|  | December 31, |  | December 31, |  | December 31,
Products |  | 2019 |  | 2018 |  | 2017
Market pulp(1) |  | 21,027,686 |  | 8,783,274 |  | 6,920,494
Printing and writing paper(2) |  | 4,100,502 |  | 3,834,380 |  | 2,265,093
Paperboard |  | 823,360 |  | 764,701 |  | 1,273,540
Other |  | 61,402 |  | 61,021 |  | 121,546
Net sales |  | 26,012,950 |  | 13,443,376 |  | 10,580,673
| 1) |  | Revenue from fluff pulp represents (around 1% of total net sales) and, therefore, was included in market pulp sales.
| 2) |  | Tissue is a recently launched product and its revenues represent less than 2% of total net sales. Therefore, it was included in the sales of printing and writing paper.
29.4 Goodwill based on expected future profitability The goodwill based on expected future profitability arising from the business combination were allocated to the disclosable segments, which correspond to the Company's cash-generating units (“CGU”), considering the economic benefits generated by such intangible assets. The allocation of intangibles is set forth below:
|  | December 31, |  | December 31,
|  | 2019 |  | 2018
Pulp |  | 7,942,486 |  | 45,752
Consumer goods |  | 119,332 |  | 112,582
|  | 8,061,818 |  | 158,334

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