Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Suzano SA (NYSE:SUZ) reported a strong EBITDA of 6.5 billion, driven by improved sales volumes and favorable FX rates.
• The company successfully closed acquisitions of forest assets from BTG and Suzano Packaging US, enhancing its asset portfolio.
• Suzano SA (NYSE:SUZ) is on a clear path of deleveraging, with leverage declining to 3.1 and expected to continue decreasing.
• The Ribas Mill started operations, contributing to increased sales volumes and positioning Suzano SA (NYSE:SUZ) for future growth.
• The company anticipates a strong seasonal demand in Q4, particularly in the domestic market for uncoated papers and paperboard.

Negative Points

• Higher cash costs were reported, attributed to increased energy consumption and startup costs at the new Ribas Mill.
• Operational challenges were noted, including bottlenecks in export supply chains and higher logistics expenses.
• Prices in international markets were mostly flat, with a 3.8% year-over-year decrease reflecting market adjustments.
• The pulp market faced headwinds from China, with a sharp decrease in prices affecting Suzano SA (NYSE:SUZ)'s margins.
• The company anticipates ongoing disruptions and geopolitical uncertainties, which could maintain high logistics costs.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with SUZ.

Q: With the end of the SEDO project and the startup of the new mill, is there any change to Suzano's debt policy or capital allocation strategy? A: Marcelo, CFO, explained that with the completion of the SEDO project, Suzano will accelerate its deleveraging process. The company aims to bring leverage back to normal levels, below three times EBITDA, and expects CapEx to be lower next year. The focus will be on reducing debt and being selective with new investments. Share buybacks remain an option, depending on cash flow and market valuation.

Q: Can you clarify Suzano's stance on future acquisitions and capital allocation? A: Beto Breu, CEO, stated that Suzano is not planning any large-scale transformational acquisitions in the near future. The focus will be on extracting value from recent acquisitions like Lenzing and BTG, while maintaining a strategy of smaller, bolt-on acquisitions that do not significantly impact the company's leverage reduction plans.

Q: What are Suzano's expectations for cash cost reductions in 2025? A: Iris, COO, mentioned that Suzano anticipates a double-digit reduction in cash costs compared to Q3 2024, assuming stable FX and energy prices. The ramp-up of the new mill is expected to contribute significantly to these cost reductions.

Q: How does Suzano view the current woodchip market in Asia, particularly in China? A: Leo, Head of Pulp Business, noted that while there is currently more availability of woodchips in China due to the housing market downturn and policy changes, this is not seen as a structural change. Suzano expects China to become more dependent on imported wood again in the future, which could increase costs for Chinese producers.

Q: What is Suzano's perspective on the softwood market and its implications for hardwood prices? A: Leo, Head of Pulp Business, indicated that softwood prices might have reached an inflection point, with some producers already announcing price increases. This could lead to increased demand for hardwood as customers seek fiber substitution, potentially supporting hardwood prices.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.