Suzano S.A.(US:SUZ)2024-05-10 22:03Financial Data and Key Metrics Changes - The operational cash cost was R$812 per ton, showing strong performance close to the previous quarter's results [3] - EBITDA totaled R$3.9 billion, improving compared to the last quarter due to higher prices despite lower volumes [8] - Net debt increased from $10.9 billion to $11.9 billion, with a net debt to EBITDA ratio reaching 3.5 times, which is expected to be the peak for this investment cycle [144] Business Line Data and Key Metrics Changes - Demand for hardwood pulp exceeded expectations, particularly in China and Europe, with a 6% growth in paper production in China compared to Q1 2023 [7] - Demand for printing and writing papers in Brazil shrunk by 20% year-on-year in the first two months of 2024, primarily due to lower economic activity and inventory adjustments [75] - The average export price increased to $624 per ton, capturing only part of the price increases due to high backlog levels [8] Market Data and Key Metrics Changes - In Brazil, demand for paperboard decreased by 6% in early 2024 compared to the same period in 2023, influenced by consumer spending slowdowns [5] - International markets are expected to see price increases as major players have announced price hikes for the coming months [6] - The company is experiencing significant shipment and invoicing delays in regions served directly from Brazil, with backlog exceeding 70 days [101] Company Strategy and Development Direction - The company is focused on long-term value creation through both organic and inorganic growth strategies, including potential international expansion [15][136] - Financial discipline remains a priority, with a commitment to maintaining a clear capital allocation policy [16][120] - The company is not planning to build new plants in Brazil in the near term due to wood scarcity [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovering demand in the coated segment and improving paperboard demand for packaging [6] - The company anticipates a stable cash cost performance throughout 2024, supported by strong structural competitiveness [113] - Management highlighted the ongoing challenges in supply chain dynamics, which are expected to maintain positive price momentum [116] Other Important Information - The Cerrado project is nearing completion, with a CapEx guidance of R$4.6 billion for 2024, and over half of the budget already disbursed [104] - The company is committed to transforming any acquired assets to enhance competitiveness [32][60] Q&A Session Summary Question: What is driving the weakness in paper demand in Brazil? - The demand for printing and writing papers has been affected by lower economic activity and inventory adjustments, but there is optimism for recovery as the year progresses [28] Question: What is the strategic rationale behind internationalization? - The company is looking for value creation opportunities and is open to exploring international markets while maintaining a disciplined approach to capital allocation [30][136] Question: How does the company view the current share buyback program? - The company is considering the buyback program in light of recent share price corrections, but no decisions have been made yet [128] Question: What are the expectations for pulp pricing in the second half of the year? - The company expects price reactions to continue, with flexibility in ramping up production to meet demand [158] Question: How does the company plan to address inventory levels? - The company is focused on rebuilding inventory levels to meet customer agreements, which were unsustainably low at the end of the previous year [152]