Summary of Suzano's Investor Day Conference Call Company Overview - **Company**: Suzano - **Industry**: Pulp and Paper Key Points and Arguments Strategic Focus - Suzano is transitioning from a five-pronged strategy to a focus on two main avenues: competitiveness and value extraction from existing projects [2][4] - The company is finalizing a cycle of capital allocation, with significant investments in projects such as Cerrado, Limeira, and Aracruz [3][4] Market Outlook - Forecasts a solid growth of hardwood pulp demand, estimating an increase of 4.5 million tons until 2029, driven by tissue grades, paperboard, and specialty papers [6][7] - The share of hardwood pulp is expected to grow, with an additional demand of 700,000 tons in 2025 alone [8] Competitive Landscape - Verticalization in China is a concern, with 6 million tons of hardwood pulp projects confirmed, potentially reducing the addressable market for Suzano [10][11] - The company is monitoring the dynamics of operating rates and wood chip availability, which could impact costs [12][13] Demand and Supply Dynamics - Demand growth is projected at 3.1 million tons until 2029, while supply capacity is expected to increase by 4 million tons, leading to a demand-to-capacity ratio below optimum levels [16][17] - The current market scenario is unsustainable, with 15 million tons of pulp production losing money [21] Innovations and Initiatives - Suzano is actively engaging over 70 customers in its fiber-to-fiber agenda, achieving a 12 percentage point increase in hardwood usage among a control group of tissue players [26] - The company is investing in enhanced eucalyptus fibers to improve product quality and performance [28] Consumer Goods Strategy - In Brazil, Suzano has achieved an 18% price premium compared to competitors, with plans to increase market share through brand innovation and product launches [33][34] - The joint venture with Kimberly-Clark is expected to close by mid-2026, aiming for operational gains of $175 million [36][38] Competitiveness in Paper and Packaging - Suzano is focusing on reducing cash costs and improving competitiveness in its paper and packaging business, with a target of 21% cash cost reduction over the coming years [46][48] - The company is expanding its operations in the U.S. and leveraging long-term contracts to enhance market position [42][44] Sustainability and Forest Management - Suzano's forestry strategy emphasizes resilience against climate change, with investments in silviculture and genetics to increase productivity [53][54] - The company is committed to sustainability, with 40% of its debt linked to sustainability targets [62] Financial Projections - Projected total operational disbursement of BRL 1,983 per ton in 2027, reflecting a disciplined approach to cost management [59] Additional Important Content - The company is utilizing digital tools to enhance operational efficiency, including the use of digital twins in production processes [50][51] - Suzano's sustainability strategy is integrated across all business units, focusing on water, climate, biodiversity, and social impact [61][62]

Strategy and Focus - The company aims to enhance competitiveness and drive value creation by focusing on strategic levers such as pulp capacity expansions in Latin America and Asia, and the acceleration of new integrated capacity in China[5, 7, 10] - A key strategic goal is deleveraging towards a net debt/adjusted EBITDA ratio of less than 2.5x[10] - The company is focusing on extracting value from previous capital allocation decisions and accelerating the fiber-to-fiber (F2F) strategy[10] - The company is implementing cost reduction initiatives, aiming for R$80 million to R$115 million in total cost reduction by 2026[101] Pulp & Paper Market Dynamics - The market for BHKP (Bleached Hardwood Kraft Pulp) is experiencing organic growth, with a CAGR of +2.1% expected from 2024 to 2029, increasing from 41.4 Mt to 45.9 Mt[14, 17] - BHKP is gaining market share in BCP (Bleached Chemical Pulp), with an estimated 700 kt of F2F demand in 2025[20] - New confirmed BHKP integrated capacity is projected to reach 6.0 Mt between 2025 and 2029[29] Financial Management - The company is adopting a more conservative approach towards its net debt target, aiming for a net debt/adjusted EBITDA ratio of less than 2.5x[149] - The company has successfully issued debt in 2025 below its bond curve, with the 2036 bond achieving the company's lowest G-Spread ever[150] - The company is protecting cash flow exposure against FX risk through a consistent hedging policy[156]

Core Insights - Suzano has launched its Nature Strategy, emphasizing the importance of biodiversity in its business operations and decision-making processes [1][5] - The strategy is developed in collaboration with IUCN and follows a science-led approach based on the mitigation hierarchy: avoid, reduce, restore, and transform [2][4] - The company has identified 125 endangered species within its operational territories, with 24 prioritized for conservation actions [3] Group 1: Nature Strategy Development - The Nature Strategy incorporates the STAR metric to map sensitive areas and identify endangered species, guiding priority actions for their conservation [3] - The internal analysis for the strategy covers 2.9 million hectares of land owned by the company, expanding to about 10 million hectares when including analyzed watersheds [4] - The strategy aligns with global biodiversity goals, including the Kunming-Montreal Global Biodiversity Framework [6] Group 2: Stakeholder Engagement - The development of the Nature Strategy involved over 25 stakeholders, including experts, government representatives, academia, NGOs, and local communities, ensuring diverse perspectives [7] - The strategy aims to connect 500,000 hectares of forest fragments and enhance water availability in critical watersheds [6] Group 3: Industry Context - The global biodiversity situation is concerning, with 75% of terrestrial ecosystems altered by human activity and approximately 25% of assessed species endangered [5] - Suzano's commitment to biodiversity is seen as essential for the resilience of its business and the communities it serves [5]

Proposed Joint Venture - Sappi and UPM have signed a non-binding letter of intent to form a joint venture in the European graphic paper sector, with both companies owning a 50% share[6] - The proposed JV aims to create a more efficient, adaptable, and sustainable graphic paper business in Europe[5] - The JV is expected to achieve cost synergies greater than €100 million per annum[6] Strategic Rationale - The European graphic paper industry faces structural challenges including digital substitution, excess capacity, and tightening sustainability standards[11] - Since 2007, graphic paper demand in Europe has decreased by over 60%, newsprint by close to 80%, and magazines and catalogues by some 70%[12] - The proposed JV is a necessary step towards securing the long-term viability, competitiveness, and resilience of the European graphic paper industry[13] Financial Implications for Sappi - Sappi's share of the equity accounted income from the JV is anticipated to exceed the EBITDA of the standalone European graphic paper business[10, 16] - Post transaction, Sappi group graphic paper sales volumes will be less than 20%[10, 16] - Sappi will receive cash consideration of €139 million from the transaction, which will be used to reduce debt[16, 22] Transaction Details - Sappi's assets in scope have an enterprise value of €320 million[18, 21] - Pension and other liabilities transferred amount to €53 million[18] - The transaction is classified as category 1 by the JSE and requires approval of shareholders[21]

Group 1: Suzano S.A. (SUZ) - Suzano S.A. is a pulp and paper company with a Zacks Rank 1 [1] - The Zacks Consensus Estimate for its current year earnings has increased by 7.7% over the last 60 days [1] - The company has a price-to-earnings ratio (P/E) of 4.07, significantly lower than the industry average of 14.00 [1] - Suzano S.A. possesses a Value Score of A [1] Group 2: Farmers & Merchants Bancorp, Inc. (FMAO) - Farmers & Merchants Bancorp is a bank holding company with a Zacks Rank 1 [2] - The Zacks Consensus Estimate for its next year earnings has increased by 5.3% over the last 60 days [2] - The company has a price-to-earnings ratio (P/E) of 10.33, compared to the industry average of 30.40 [2] - Farmers & Merchants Bancorp possesses a Value Score of B [2] Group 3: Universal Corporation (UVV) - Universal Corporation is a business-to-business agriproducts company with a Zacks Rank 1 [3] - The Zacks Consensus Estimate for its current year earnings has increased by 6.5% over the last 60 days [3] - The company has a price-to-earnings ratio (P/E) of 11.23, which is slightly lower than the industry average of 11.70 [3] - Universal Corporation possesses a Value Score of B [3]

Financial Data and Key Metrics Changes - The company reported an EBITDA of negative $28 million for Q3 2025, a decrease from negative EBITDA of $21 million in Q2 2025, primarily due to lower pulp pricing and demand [3][9] - The consolidated net loss for Q3 was $81 million, or $1.21 per share, compared to a net loss of $86 million, or $1.29 per share, in Q2 [9] - Cash consumption increased to $48 million in Q3 from $35 million in Q2, driven by lower EBITDA [10] Business Segment Data and Key Metrics Changes - The pulp segment had a negative EBITDA of $13 million, while the solid wood segment reported a negative EBITDA of $9 million [3][23] - Pulp sales volumes increased by 26,000 tons to 453,000 tons, while pulp production remained flat at 459,000 tons [5][20] - Lumber production decreased by about 4% to 150 million board feet, and lumber sales volumes decreased by about 9% to 110 million board feet [6][23] Market Data and Key Metrics Changes - Average published prices for MBSK and MBHK pulp decreased across all markets compared to Q2, with the MBSK net price in China at $690 per ton, down $44, and the European average at $1,497 per ton, down $56 [4][5] - Lumber pricing in the U.S. remained stable, with the benchmark price for Western SPF No. 2 Stud averaging $477 per 1,000 board feet, a modest increase from $472 [6] - Electricity sales totaled 204 gigawatt hours, a 6% decrease from Q2, while pricing increased to about $106 per megawatt hour [7][8] Company Strategy and Development Direction - The company is focused on its "One Goal 100" program, targeting $100 million in cost savings and operational efficiencies by the end of 2026, with an expected $30 million in savings by the end of 2025 [9][12] - The company aims to transform its pulp mills into biorefineries, enhancing resilience during commodity downturns [30][31] - The mass timber business is expected to grow, with a backlog of projects valued at about $80 million and increasing interest in sustainable construction [27][50] Management's Comments on Operating Environment and Future Outlook - Management highlighted significant industry headwinds due to trade uncertainty, impacting demand for both paper and lumber [11][29] - The company expects modest NBSK price improvements late in Q4 2025 and into Q1 2026, driven by curtailments and market dynamics [20][29] - Management remains optimistic about the long-term value of its products and the potential for market recovery as economic conditions improve [29][30] Other Important Information - The company plans to reduce capital expenditures in 2026, focusing on maintenance and essential projects [28][45] - The company is actively engaging in discussions with banks regarding liquidity and financing options [41][56] Q&A Session Summary Question: Potential asset sales to expedite deleveraging - Management is considering asset sales but acknowledges that current market conditions are not ideal for divestitures [32] Question: Industry supply-demand balance and capacity adjustments - Management indicated that closures of pulp mills may be necessary to right-size the industry, especially in Canada and Finland [33] Question: Substitution issues in the pulp market - Substitution has been ongoing, with a recent increase attributed to a significant price differential between hardwood and softwood pulp [35][38] Question: Liquidity-enhancing actions - Management is exploring various liquidity-enhancing actions, including discussions with banks and potential asset divestitures [41][43] Question: Industry supply pressures from sawmill closures - Management noted that the situation regarding chip access is already tight, and closures of sawmills could further impact pulp mills [54]

Financial Performance - Mercer's Q3 2025 operating EBITDA decreased to $(28) million, a decrease of $(7) million compared to Q2 2025[6] - The net loss for Q3 2025 was $(81) million, compared to a net loss of $(86) million in Q2 2025[26] - Cash flow used in operating activities increased to $(30) million in Q3 2025 from $(5) million in Q2 2025[26] - Capital expenditures increased to $(30) million in Q3 2025 from $(24) million in Q2 2025[26] - Liquidity position decreased to $376 million in Q3 2025 from $438 million in Q2 2025[26] Market Conditions and Pricing - Lower sales realizations led to a non-cash inventory impairment of $20 million in Q3 2025[8] - Lower sales realizations for NBSK and NBHK pulp negatively impacted EBITDA by approximately $15 million[8] - Lumber production decreased by 4% compared to Q2 2025 due to planned maintenance at Friesau[43] Strategic Initiatives - Mercer aims to improve profitability by $100 million by the end of 2026, using 2024 as a baseline[29, 36] - The company anticipates $30 million in cost savings for 2025 and is on track to meet this goal[29, 36] - Mass Timber backlog of projects currently sits at ~$80 million[60]

Financial Data and Key Metrics Changes - The company's leverage in dollar terms increased to 3.3 times, with stable net debt but a decline in EBITDA over the last 12 months due to lower pulp prices [6][7] - Cash cost production decreased by 7% compared to the third quarter of 2024, with cash costs running below BRL 800 per ton [4][5] Business Line Data and Key Metrics Changes - Significant reductions in wood costs were noted, driven by operational efficiencies and improved wood quality, contributing to lower specific consumption [3][4] - The cash cost of production ex-downtime is expected to be the most competitive in the fourth quarter of 2024-2025 [5] Market Data and Key Metrics Changes - Prices of domestic wood chips in China have increased, impacting the cash cost of production for Chinese producers [15][16] - The market for softwood is weaker compared to hardwood, with prices dropping due to an abundance of softwood in the Chinese market [17][18] Company Strategy and Development Direction - The company is focusing on reducing cash production costs and extracting value from recent investments, particularly in packaging and joint ventures [10][11] - Future CAPEX guidance for 2025 is set at BRL 13.3 billion, with expectations of a declining trend in CAPEX for subsequent years [9][65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining cash costs below BRL 800 per ton and highlighted the importance of operational efficiencies [10][26] - The outlook for pulp prices remains cautious, with expectations of gradual price increases but limited optimism due to oversupply conditions [32][49] Other Important Information - The company has a healthy hedge portfolio with a total value of $6 billion, which could provide a positive cash impact of nearly BRL 2.5 billion over the next two years [8] - The company is committed to its guidance for 2027 and is confident in delivering on its targets [33] Q&A Session Summary Question: Dynamics of wood chips and softwood in the Chinese market - Management noted an uptick in prices for both domestic and imported wood chips in China, which is expected to increase cash costs for Chinese producers [15][16] Question: Cash cost trajectory and improvements - Management indicated that they aim to maintain cash costs below BRL 800 per ton and highlighted a 4% reduction in wood consumption per ton due to a new wood supply deal [25][26] Question: Expectations for London Pulp Week - Management expressed optimism about discussions on unsustainable market conditions and the potential for unexpected closures impacting supply dynamics [28][30] Question: Performance of the US packaging business - Management reported positive EBITDA contributions from the US packaging business and emphasized ongoing efforts to improve logistics and operational efficiency [38][39] Question: Updates on Lenzing investment - Management is currently analyzing trends and investment opportunities in Lenzing but has no immediate plans to increase their stake [37] Question: Long-term fundamentals for pulp - Management maintains a cautious view on the structural fundamentals for pulp, noting that while imports are increasing, local production remains stagnant [49] Question: Impact of floods in Southeast Asia on wood prices - Management acknowledged that recent floods have influenced wood chip prices in the short term, particularly in southern China and Vietnam [57][58] Question: Expansion CAPEX and future projects - Management indicated a declining trend in CAPEX for the next year, with fewer projects in the pipeline as major projects are completed [65]

Financial Data and Key Metrics Changes - The company's cash cost decreased by 7% compared to Q3 2024, driven by operational efficiencies and input cost reductions [2][4] - Net debt remained stable quarter-on-quarter, but leverage in dollar terms increased to 3.3 times due to a decline in EBITDA over the last 12 months primarily from lower pulp prices [3][4] - The cash cost of production ex-downtime is now below BRL 800 per ton, indicating strong operational performance [3][4] Business Line Data and Key Metrics Changes - The Ribas units contributed significantly to improvements across all cash cost components, particularly in wood costs, which saw a notable reduction [2][4] - The company is focusing on cash production costs and aims to maintain a competitive cash cost in the upcoming quarters [6][7] Market Data and Key Metrics Changes - Prices of domestic wood chips in China have increased, impacting the cash cost of production for Chinese producers [11][12] - The dynamics for softwood in China have weakened, with prices dropping due to an abundance of supply, while hardwood prices are recovering [10][12][14] Company Strategy and Development Direction - The company is committed to reducing cash costs and extracting value from recent investments, particularly in packaging and joint ventures [7][8][9] - Future CAPEX guidance for 2025 is set at BRL 13.3 billion, with a focus on maintaining operational efficiency and managing costs [6][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering competitive cash costs in Q4 2024-2025, despite potential downtimes affecting specific quarters [3][6] - The management highlighted the unsustainable pricing scenario in the pulp market, indicating a cautious outlook while monitoring market dynamics closely [20][34] Other Important Information - The company has a healthy hedge portfolio with a total value of $6 billion, which could provide a positive cash impact of nearly BRL 2.5 billion over the next two years [5] - The company is not planning to exercise the option to acquire an additional stake in Lenzing in the short term, focusing instead on analyzing market trends [27] Q&A Session All Questions and Answers Question: Dynamics of wood chips and softwood in the Chinese market - Management noted an uptick in prices for both domestic and imported wood chips in China, which is expected to increase cash costs for Chinese producers [11][12] Question: Cash cost improvements and future expectations - Management confirmed that they are running below BRL 800 per ton and are focused on maintaining this level while exploring further cost-cutting opportunities [15][18] Question: Expectations for London Pulp Week - Management indicated that the current market scenario is unsustainable, with expectations of increased closures and a potential shift in pricing dynamics [20][21] Question: Growth opportunities in the US paper market - Management highlighted that there are still significant growth opportunities in the US market, particularly in food service, and emphasized the focus on improving efficiency [47][48]

Operational Performance - Sales volume reached 3.2 million tons for pulp, compared to 3.3 million tons in 2Q25 and 2.6 million tons in 3Q24[6] - Paper and packaging sales volume was 372 thousand tons, up from 348 thousand tons in 2Q25 and 295 thousand tons in 3Q24[6] - Adjusted EBITDA was R$5.2 billion, down from R$6.1 billion in 2Q25 and R$6.5 billion in 3Q24[6] - Operating cash generation was R$3.4 billion, compared to R$4.1 billion in 2Q25 and R$4.4 billion in 3Q24[6] - Cash cost ex-downtimes decreased to R$801/ton, from R$832/ton in 2Q25 and R$863/ton in 3Q24[6] Financial Management - Liquidity stood at US$6.5 billion, up from US$5.9 billion in 2Q25 and US$5.7 billion in 3Q24[7] - Net debt remained at US$13.0 billion, consistent with 2Q25 and slightly up from US$12.9 billion in 3Q24[7] - Leverage increased to 3.3x in US$, compared to 3.1x in both 2Q25 and 3Q24[7] Paper and Packaging Business - US operations recorded positive performance since acquisition[8] - Paper sales in Brazilian operations (domestic) reached 200 thousand tons in 3Q24, 173 thousand tons in 2Q25 and 186 thousand tons in 3Q25[9] Pulp Business - Production volumes were fully sold in the quarter[11] - Average net price in the export market was $670/ton in 3Q24, $555/ton in 2Q25 and $524/ton in 3Q25[12] Financial Strategy - Liability management extended the average term of debt without increasing the average cost, maintaining it at 5.0% p.a. in US$[16,18] - Cash flow hedging strategy covers 64% of the FX gap with a notional value of US$6.0 billion[21]