Release Date: February 13, 2025

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

Positive Points

• Suzano SA (NYSE:SUZ) achieved record sales for the fourth quarter and the entire year of 2024, demonstrating strong operational performance.
• The company reported a robust EBITDA of 23.8 billion reais for the year, contributing to a leverage ratio of 2.9 times in dollar terms.
• Suzano SA successfully integrated new assets and employees from Pactive Evergreen, enhancing its paper and packaging business in North America.
• The company secured better commercial contract terms and synergies in raw materials and logistics, expected to positively impact results in 2025.
• Suzano SA's pulp business unit achieved an all-time high sales volume for a quarter, supported by favorable FX rates and higher volumes.

Negative Points

• The company faces challenges in serving all markets with pulp volumes due to low inventories and scheduled maintenance downtimes.
• Lower pulp prices in Q4 2024, particularly in Europe and the Americas, impacted overall financial performance.
• Suzano SA's net debt increased to $12.8 billion by the end of 2024, despite generating $1.8 billion in cash flow.
• The company anticipates a temporary increase in cash costs in Q1 2025 due to maintenance stoppages, affecting overall cost efficiency.
• Demand in Europe has become challenging, with paper consumption returning to its declining historical rates.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with SUZ.

Q: Does the new government change anything in terms of your capital allocation decisions in the country? Also, can you update us on the current situation of the Chinese player that left the market, and how it affects your inventory levels? A: (Unidentified_6) The recent government changes do not alter our capital allocation strategy. We continue to view the US market as robust and protected against imports. Regarding the Chinese player, the situation is complex, and while a solution is expected, the timeline is uncertain. Our inventory levels are low, and we anticipate challenges in serving all markets in the short term.

Q: Can you clarify the cash cost guidance for 2025, and how does the FX rate impact this? A: (Unidentified_5) Initially, we expected a low double-digit decrease in cash costs for 2025, assuming an FX rate of 5.35. However, with the current FX rate at 5.8, the cash cost guidance is now expected to be flattish compared to Q4 2024, around 800 reais per ton. The FX rate impacts about 23% of our costs.

Q: With substantial free cash flow generation, why has Suzano stopped buying back shares despite trading at low multiples? A: (Unidentified_6) We compare buybacks with other capital allocation alternatives and consider our leverage policy. We have an open buyback program and will act when the timing is right, balancing capital allocation and deleveraging goals. The current market de-rating is likely influenced by global interest rate levels.

Q: What is Suzano's strategy regarding pulp expansion and maintaining market relevance? A: (Unidentified_2) We own a significant share of the hardwood pulp market, and maintaining this relevance is key to our strategy. We will consider pulp expansion in the medium to long term, ensuring it aligns with our strategic goals.

Q: How do you view future pulp demand, and what are the growth drivers outside China? A: (Unidentified_4) We are optimistic about pulp demand, driven by tissue demand in non-developing markets and growth in Southeast Asia. Specialty papers are gaining market share over traditional printing and writing papers. Additionally, there is a trend of fiber substitution from softwood to hardwood, further boosting demand.

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