Suzano SA Q3 FY2024 earnings call

• Sales volumes improved due to a well-defined commercial strategy, resulting in a strong EBITDA of BRL6.5 billion despite higher cash costs. Leverage continued to decline, reaching 3.1. - Closing of Lenzing, forestry assets from BTG, and Suzano Packaging U.S. were completed. Focus is on generating value from new assets, with the Cerrado project ramp-up showing higher efficiency than planned. - Paper and Packaging: Strong EBITDA driven by sales volumes and better prices, with domestic demand outlook and new packaging assets acquisition. - Pulp: Ribas mill startup, market challenges in China, price trends, and cash cost factors discussed, with expectations of improved performance in the future.

Paper and Packaging: Sales volumes improved, achieving the highest EBITDA since the third quarter of the previous year despite export supply chain bottlenecks. Domestic market demand for uncoated papers and paperboard is expected to be strong in Q4, while coated grades and international developed markets are forecasted to decline. Cash costs are anticipated to improve in Q4 following the lack of maintenance stoppage. Pulp: The new Ribas mill started operations, with first shipments in the latter part of Q3. The market was challenging, especially from China, with pulp prices declining but expected to improve with market seasonality. Cash costs increased due to factors like higher energy consumption at Aracruz Mill, Ribas mill startup, and FX, but are expected to reduce in Q4 and 2025.

• Leverage is expected to keep declining as part of the ongoing deleveraging trend. - CapEx is forecasted to reduce in 2025 compared to 2024. - Pulp prices are anticipated to improve due to market seasonality, with cash costs expected to decrease in Q4 and further in 2025 as Ribas mill ramps up.

• Logistics expenses are likely to remain high due to ongoing disruptions and geopolitical uncertainties, which could impact paper prices. - Supply chain issues and market fluctuations in China and other regions pose risks to pulp prices and production.

Q: Jon Brandt asked about debt capital allocation and potential capacity stoppage in pulp.

A: Marcelo Bacci stated deleveraging will continue, CapEx will reduce, aiming to bring leverage below 3 times net debt to EBITDA. On pulp, the production cut decision is based on market trends with potential to adapt.

Q: Unidentified Analyst inquired about transformational moves and pulp cash cost for 2025.

A: Beto Abreu said no big transformational moves in near future, focus on deleveraging and extracting value from existing assets. Aires Galhardo mentioned confident of double-digit cash cost reduction in 2025 as Ribas mill ramps up.

Q: Caio Ribeiro asked about wood chip market in Asia and softwood implications.

A: Leonardo Grimaldi said wood chip availability in China is due to short-term factors, not structural, and softwood may have reached an inflection point with potential fiber substitution to hardwood.

Q: Daniel Sasson asked about marketable projects in Asia and Chinese production cash costs.

A: Leonardo Grimaldi discussed delays in Oki project start-up and estimated Chinese production cash cost close to $500.

Q: Marcio Farid asked about acquired assets' profitability and production cuts lag.

A: Fabio Oliveira talked about positive outlook for acquired packaging assets and turnaround plans. Marcelo Bacci said production cut lag is due to supply chain nature but flexibility to adapt.

Q: Rafael Barcellos asked about capital allocation strategy and Lenzing synergies.

A: Beto Abreu said no major transformational moves, focus on deleveraging. Marcelo Bacci mentioned Lenzing is a well-positioned company with potential to extract value.

Q: Lucas Laghi asked about wood chip availability from low-cost suppliers to China.

A: Leonardo Grimaldi said Vietnam remains a source but structural changes in China will increase dependence on imported wood.