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