Suzano S.A.(SUZ)2022-10-28 23:30Financial Data and Key Metrics Changes - The company reported an EBITDA of BRL 859 million for Q3 2022, representing a 58% increase year-over-year, achieving new all-time highs for the Paper and Packaging business unit [7] - The average net price during the quarter was 13% higher than Q2 and 43% higher than the same quarter last year, with margins expanding by 6 percentage points to an all-time high of 43% [6] - The cash production cost, excluding downtimes, stood at BRL 18 per ton, a slight increase of 3% from the previous quarter [21] Business Line Data and Key Metrics Changes - The Paper and Packaging business unit achieved its best quarter ever, with strong demand for print and writing papers and cartonboard, leading to a new best quarter EBITDA [2] - Sales volumes for the Pulp business reached 2.8 million tons in Q3 2022, exceeding previous quarters despite historically lower seasonality [11] - Domestic sales accounted for 71% of total sales in the quarter, totaling 211,000 tons, a 1% increase year-over-year [6] Market Data and Key Metrics Changes - Demand for print and writing papers in Brazil increased by 8.5% in the first two months of Q3 compared to the same period in 2021, driven by government programs and elections [4] - Paperboard demand showed a strong 11.7% increase in the same period, indicating robust market conditions [5] - In China, production in segments related to BHKP, such as tissue and printing, increased by 7% year-to-date compared to 2021 [17][18] Company Strategy and Development Direction - The company is focused on integrating the recently acquired Kimberly-Clark tissue business and plans to build a new tissue plant in Aracruz, pending board approval [30][31] - The company aims to reduce price volatility through various pricing schemes, including cap and floor agreements, to stabilize order chains [49][50] - The Cerrado project is on time and on budget, with 31% physical progress and 24% financial progress, indicating a commitment to future growth [28] Management's Comments on Operating Environment and Future Outlook - Management noted improvements in international logistics, which are expected to ease supply imbalances seen in the previous year [9] - The company anticipates strong paper demand in Brazil during Q4 and supportive demand in main export markets [9] - There is recognition of macroeconomic uncertainties, particularly related to the Russia-Ukraine war, but demand for pulp remains strong in Europe and North America [16] Other Important Information - The company maintained a net debt of 700 million to shareholders through dividends and share buybacks [25] - The company has increased its cash flow hedges to take advantage of rising interest rates in Brazil [26] Q&A Session All Questions and Answers Question: Outlook for Europe vs. China in 2023 - Management acknowledged uncertainty in supply and demand fundamentals for 2023, with expectations of global hardwood pulp demand growth despite potential slowdowns in Europe [35][38] Question: Pulp Prices and Long-term Strategy - Management believes that supply curtailments are supporting high pulp prices and that they are exploring various avenues for future growth, including organic growth and niche products [42][44] Question: Production and Volume Outlook - Management does not expect to increase inventories in Q4 2022 due to full order books and plans to manage maintenance downtimes strategically [47][48] Question: Kimberly-Clark Acquisition Details - Management refrained from disclosing specific financial details about the acquisition but emphasized the expected synergies and smooth integration due to existing experience in the tissue business [54][55] Question: Price Realizations and Supply/Demand in China - Management confirmed that price realization dynamics are expected to remain favorable, with tight supply conditions in China despite recent price fluctuations [60][62] Question: Domestic and Export Demand for Paper - Management reported solid demand in both domestic and Latin American markets, with expectations for a strong fourth quarter driven by seasonal factors [66]