Suzano S.A. Q3 FY2025 earnings call

• Highlights: Pine Bluff team achieved first positive EBITDA for the quarter; focus on reducing cash costs and deleveraging the company even in low price cycles.
• Paper and Packaging: Strong sales volumes, first positive EBITDA for Suzano Packaging, stable operations in mills with lower cash costs, higher volumes but lower prices in export markets.
• Pulp: Early tariff uncertainties in US market, high order intake in China, planned price increases, cash cost reductions driven by wood cost and input efficiencies.
• Cash Cost: Q3 cash cost ex downtime BRL 801 per ton, down 4% QoQ, with wood cost reduction as key driver.
• Leverage and Hedge: Leverage in dollar terms 3.3x, net debt stable, positive free cash flow, healthy hedge portfolio with put and call options.
• CapEx: 2025 CapEx guidance BRL 13.3 billion, BRL 2.9 billion in Q4.

Paper and Packaging Business

• Third quarter results featured strong sales volumes across all markets and the first quarterly positive EBITDA for Suzano Packaging. Mills in Brazil and the US had stable operations with lower cash costs than the previous quarter. Volume was the highest in the history of the Paper and Packaging business unit despite challenging paper market conditions. Print and write demand in Brazil declined, but domestic producers outperformed imports. In international markets, uncoated paper grades (main export product) performed better, though European demand was sensitive to economic headwinds. Paperboard demand in Brazil decreased, while US SBS shipments grew. Pricing in Brazil reduced 2% QoQ but was 2% higher YoY; external markets saw 6% QoQ and 10% YoY reductions. EBITDA reached BRL 542 million, up 11% QoQ but down 10% YoY.

Pulp Business

• Early July potential 50% tariffs on Brazilian pulp exports to the US caused market turbulence, but restored tariff-free access stabilized operations. Order intake in China was high, with Chinese customers including integrated paper producers securing significant pulp volumes. EBITDA for the pulp business unit was BRL 4.5 billion, equivalent to a 49% EBITDA margin. Pulp prices are expected to continue rising, with planned price increases. Cash costs ex downtime in Q3 were BRL 801 per ton, down 4% QoQ, driven by lower wood cost and input efficiencies.

• Pulp: Expect pulp prices to continue rising, implement remaining price increases, allocate volumes across regions, supply side adjustments likely.
• Paper and Packaging: Planned maintenance outages in Q4, stable costs and increased volumes in Q4, EBITDA for Suzano Packaging to improve in Q4 and beyond.
• CapEx: 2025 CapEx guidance BRL 13.3 billion, BRL 2.9 billion in Q4; 2026 CapEx to be updated by end of month, expected declining trend.

• Market Turbulence: Potential tariffs on Brazilian pulp exports to US caused short-term market uncertainty.
• Unsustainable Pricing: Hardwood and softwood pulp producers facing unprofitable operations, with over 15% of global hardwood market pulp production operating underwater.
• Geopolitical and Trade Uncertainties: Impact on logistics streams and market visibility for pulp and paper participants.

Q: View on wood chips and softwood in Chinese market?

A: Leo Grimaldi mentioned uptick in wood chip prices, impact on cash costs, and fiber substitution from softwood to hardwood.

Q: Cash costs and medium-term expectations?

A: Aires Galhardo discussed deal with Eldorado and plans to keep cash costs below BRL 800 per ton.

Q: Expectations for London Pulp Week?

A: Leo Grimaldi highlighted unsustainable market scenario and expected discussion on closures and price increases.

Q: Suzano Packaging EBITDA contribution and Lenzing investment?

A: João Abreu discussed positive EBITDA for Suzano Packaging and ongoing analysis of Lenzing investment.

Q: Pulp fundamentals and Kimberly-Clark JV?

A: Leo Grimaldi discussed structural fundamentals and Luis Bueno provided update on K-C JV progress.

Q: Flood impact on wood prices and dissolving pulp shifts?

A: Leo Grimaldi mentioned flood impact on wood prices and potential shifts in dissolving pulp production.

Q: CapEx update and market conditions?

A: Marcos Assumpcao discussed declining CapEx trend and market conditions affecting new projects.

Q: Pulp price cycles and future ranges?

A: Leo Grimaldi discussed variables affecting pulp price cycles, including closures and project timings.

Q: Growth opportunities in US paper market and profitability?

A: Fabio Oliveira discussed growth in US foodservice and focus on cost improvement.