Suzano S.A.(US:SUZ)2024-10-25 17:53Financial Data and Key Metrics Changes - The company reported an EBITDA of BRL 6.5 billion for Q3 2024, despite higher cash costs, indicating strong sales and favorable foreign exchange rates [3][4] - Leverage decreased to 3.1, continuing a declining trend as planned [4][23] - Net debt increased to BRL 12.88 billion from BRL 12 billion, but the net debt to EBITDA ratio improved from 3.2 to 3.1 [22][23] Business Line Data and Key Metrics Changes - The Paper and Packaging segment achieved the highest EBITDA since Q3 2023, with an 8% year-over-year increase in sales volume [6][9] - Demand for paperboard grew by 18% year-over-year, supported by better economic activity [6][7] - The Pulp segment saw a 3% increase in EBITDA margin to BRL 5.7 billion, driven by higher volumes and favorable FX, despite lower prices [14][19] Market Data and Key Metrics Changes - Domestic print and writing demand increased by 8%, while paperboard demand remained strong across all market segments [6][7] - Internationally, demand in North America and Latin America was sustained, but European demand for paper declined due to seasonality [7][10] - The company faced challenges in export logistics due to container supply chain issues, impacting international sales [8][10] Company Strategy and Development Direction - The focus for the upcoming quarters will be on generating value from recently acquired assets and continuing the deleveraging process [5][25] - The company does not foresee any transformational changes in its capital allocation strategy, emphasizing smaller bolt-on acquisitions instead [25][62] - The company aims to extract value from the Cerrado project and the recent acquisitions, positioning itself for resilience in varying pricing scenarios [25][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing operational challenges but expressed confidence in the company's ability to navigate the current market dynamics [3][10] - The outlook for Q4 anticipates strong seasonal demand for uncoated papers and paperboard, while coated grades may see a decline as election cycle impacts fade [9][10] - The company expects cash costs to improve in Q4 following the ramp-up of the Ribas mill, with a forecasted single-digit reduction in consolidated cash production costs [19][36] Other Important Information - The company completed the acquisition of forestry assets and the Suzano Packaging U.S. business, enhancing its operational portfolio [5][22] - The Ribas mill began operations, contributing to increased pulp inventories and sales [11][12] Q&A Session All Questions and Answers Question: Changes to Debt Policy Post-Cerrado Project - Management confirmed that with the end of the Cerrado project and the startup of the Ribas mill, the focus will be on accelerating deleveraging and reducing CapEx in 2025 [28][29] Question: Future Capital Allocation and Dividend Policy - Management indicated that there are no plans for significant transformational initiatives and that capital allocation will focus on reducing leverage while considering share buybacks [29][62] Question: Pulp Production Capacity and Market Dynamics - Management stated that the decision to reduce pulp production capacity is based on current market conditions, with flexibility to adapt as needed [57] Question: Wood Chip Market Dynamics in Asia - Management noted increased availability of wood chips in China due to the housing market downturn but does not see this as a structural change [39][40] Question: Softwood and Hardwood Market Outlook - Management believes softwood has reached an inflection point, which may lead to price increases and additional demand for hardwood [42][43]