Suzano SA Q4 FY2024 earnings call

• Operational Execution: Beto Abreu highlighted flawless execution in Q4 2024 and 2024, with Ribas achieving 900,000 tons production and 700,000 tons sales in 2024, in line with guidance.
• Paper and Packaging Performance: Fabio Oliveira discussed Brazilian market demand trends (e.g., print/writing demand up 11.7% in first two months of Q4), integration of Suzano Packaging U.S., successful renegotiation of commercial contracts for better terms in 2025, and expectations for strong demand in Brazil for uncoated and paperboard in 2025.
• Pulp Business Insights: Leonardo Grimaldi talked about pulp prices, market dynamics in China (impact of a major integrated pulp and paper producer's operation cease), inventory challenges, and future demand trends (e.g., growth in tissue demand in non-developing markets).
• Debt and Capital Allocation: Marcelo Bacci discussed net debt evolution (started 2024 at $11.5 billion, ended at $12.8 billion), deleveraging process (aiming for 2.9x net debt to EBITDA), and shareholder remuneration (bought back R$2.8 billion in shares and paid R$1.5 billion in interest on equity in 2024).

Paper and Packaging

• In 2024, Suzano Packaging U.S. (acquired from Pactiv Evergreen) was incorporated. Fourth quarter 2024 total sales volume was 15% higher year-over-year and 24% higher quarter-over-quarter due to inclusion of Suzano Packaging sales. Brazilian operations saw sales increase, but export reduced due to unfavorable logistic conditions. EBITDA had a 7% quarter-over-quarter reduction and 3% year-over-year reduction. The integration of Suzano Packaging is on track, with commercial contracts renegotiated for better terms in 2025, expected to positively impact results.

• Pulp

• Fourth quarter 2024 had lower prices but higher volumes and favorable foreign exchange (FX) effects, resulting in EBITDA of R$5.7 billion. Full year 2024 EBITDA was up 37% to almost R$21 billion with a 56% EBITDA margin. Inventory was tight, and 2025 cash cost was expected to be flattish compared to the fourth quarter of 2024 despite a first quarter increase due to scheduled maintenance downtimes. Ribas mill performance improved, and the Cerrado project guidance remained unchanged.

• Paper and Packaging: Anticipate strong demand in the Brazil market for uncoated and paperboard lines during 2025. Outside Brazil, expect return to structural decline in demand in developed regions and strong paperboard demand in the U.S. in 2025. Pulp prices announcements early in 2025 could offer support to higher paper prices.
• Pulp: 2025 cash cost expected to be flattish compared to the fourth quarter of 2024 despite a first quarter increase due to scheduled maintenance downtimes. Ribas mill performance improved, and the Cerrado project guidance remained unchanged (final balance of R$150 million expected to be dispersed in 2025).
• Debt: Continue deleveraging in 2025, aiming for net debt to EBITDA of 2.9x.

• Market Dynamics: Uncertainty in the situation of a major Chinese integrated pulp and paper producer, impacting pulp demand and supply.
• Logistics and Geopolitics: Unfavorable logistic conditions and geopolitical turmoils affecting exports and input costs.
• Inventory: Tight inventories leading to challenges in serving markets, especially in the first quarter of 2025.

Q: Daniel Sasson asked about new government changes on capital allocation in Brazil and the current situation of the major Chinese integrated pulp and paper producer.

A: Marcos Assumpção stated new government changes didn't alter capital allocation strategy for the U.S. market. Leonardo Grimaldi discussed the complex situation of the Chinese mill, noting it's temporary but complex to resolve, and that every month it's down creates additional demand for Suzano's pulp.

Q: Leonardo Correa inquired about pulp cash cost guidance and free cash flow generation/buybacks.

A: Beto Abreu clarified cash cost guidance changes due to FX variations. Marcos Assumpção mentioned strong free cash flow generation and that buybacks depend on capital allocation and deleveraging process, with Suzano stock still derated but expecting reversion.

Q: Marcio Farid asked about balance sheet leverage strategy.

A: Beto Abreu stated no transformational M&A planned that would impact deleverage plan; Marcos Assumpção confirmed net debt to EBITDA target of around $11.5 billion to $12 billion.

Q: Rafael Barcellos asked about CapEx allocation preference.

A: Beto Abreu said capital allocation is agnostic to specific line of business, focusing on value generation; Aires Galhardo discussed Ribas mill performance and future pulp extension strategy.

Q: Alfonso Salazar asked about future pulp demand.

A: Leonardo Grimaldi discussed growing tissue demand in non-developing markets, specialty papers, and migration of consumption from softwood to hardwood grades as drivers of future pulp demand.

Q: Lucas Laghi asked about FX hedging strategy.

A: Marcos Assumpção explained FX hedging based on net dollar exposure; Fabio Oliveira talked about renegotiated commercial contracts for Suzano Packaging and upcoming maintenance impact.

Q: Ricardo Monegaglia asked about wood prices and consumer pulp inventories.

A: Leonardo Grimaldi discussed stable wood prices to China in short-term due to wood availability and government policies, and tight consumer pulp inventories in China with customers destocking in 2024.