Suzano S.A.(SUZ) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an EBITDA of R $6.2 billion, which is over 20% higher than the same period last year, with a cash generation of R$ 4.7 billion after CapEx [22][21] - Net debt remained flat at $10.9 billion, with a leverage ratio of 1.9 times net debt over EBITDA [38][23] - The company has a strong liquidity position with$ 6.1 billion available in cash and credit lines [5][38] Business Line Data and Key Metrics Changes - Sales volumes for pulp were 3% higher year-over-year but 11% lower compared to the previous quarter, indicating a seasonal effect [15] - The paper and packaging business unit delivered solid EBITDA despite challenges in international markets, with domestic demand for paperboard increasing by 3% in the first two months of 2023 [25][9] - The average export price for pulp in Q1 was $719, which is 13% lower than Q4 but 13% higher than Q1 2022 [33] Market Data and Key Metrics Changes - In Brazil, prices for paper increased by 32% year-over-year, while international prices have been more volatile [12] - Demand for print and writing papers in Brazil decreased by 3.2% in early 2023, attributed to a strong comparison base from the previous year [26] - The company noted a decrease in shipments for print and writing papers and paperboard in international markets due to restocking movements [8] Company Strategy and Development Direction - The company aims to maintain its focus on reducing total cash costs and enhancing its relevance in the global pulp market, with the Cerrado project expected to reinforce this strategy [39] - Vertical integration is a key strategic avenue, with the acquisition of Kimberly Clark's assets being part of this vision [40] - The company is exploring new alternatives for its trees and advancing sustainability initiatives, including carbon certification [40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of consumer confidence and spending in China, which is expected to drive demand for pulp and paper products [59] - The company anticipates that unexpected downtimes will continue to pressure supply due to various factors, including weather-related events and strikes [35] - Management emphasized the importance of maintaining low inventory levels to navigate potential adverse market conditions [88] Other Important Information - The company has approved its acquisition of Kimberly Clark's tissue operations in Brazil, expected to be completed in Q2 2023 [7] - The Cerrado project is on track, with 57% physical progress and expected to transform the company's cost structure [63][69] - The company has a$ 7 billion portfolio of FX derivatives, providing significant protection against currency fluctuations [65] Q&A Session Summary Question: Concerns about leverage if pulp prices remain low - Management indicated that they do not foresee exceeding their net debt limit of $12 billion and will manage capital allocation carefully [72] Question: Performance of marginal ton and profitability outlook - Management noted that while some volumes generate positive cash flow, not all meet the required return on capital at current price levels [91] Question: Inventory levels and customer behavior - Management confirmed that customer inventory levels are normalized in North America and Europe, but there is no buildup in China [84] Question: CapEx increase for Cerrado project - Management clarified that the increase is due to inflation adjustments and not cost overruns, with ongoing land acquisitions to support future growth [80][81] Question: Long-term pricing outlook for pulp - Management expects long-term pulp prices to align with historical averages of around$ 600 to $620 CIF China rate, driven by growing demand [110]