Walter Schalka, Suzano’s current president, affirmed the company’s commitment to maintaining a long-term perspective on investments and consequent growth. Approaching the end of his term in about two months, Schalka refrained from commenting on the company’s potential acquisition of assets from International Paper, despite recent speculation.
Sources have hinted at Suzano’s informal offer to purchase International Paper, valued at US$15 billion, contingent upon canceling its acquisition of British company DS Smith, which could pose a challenge to the transaction. “The company, in an agnostic manner, will look at organic and inorganic opportunities in various geographies”, stated Schalka.
Continuing to grapple with the repercussions of last year’s pulp depreciation, Suzano reported a staggering 96% decline in net profit for the first quarter, amounting to R$220 million (almost USD 43 million at the current exchange rate). Net revenue also experienced a significant drop of 16%, totaling R$9.46 billion, with adjusted EBITDA standing at R$4.56 billion, marking a 26% decrease.
Schalka expressed optimism regarding this year’s market conditions, noting “quite strong” demand across Asia, Europe, and North America. As a result, pulp prices are steadily rebounding from the previous year. Moreover, unforeseen events such as strikes, logistical challenges, and unexpected factory shutdowns have contributed to an improved pricing environment, with “the average price realized in the first quarter has not yet captured all the increases”, Schalka added.
Furthermore, pulp revenue during January to March reflected a restocking trend, which had fallen below safety levels in December. Sustaining this trend could potentially jeopardize future customer service.
Suzano’s new factory in Ribas do Rio Pardo, Mato Grosso do Sul, Brazil, dubbed the Cerrado Project, remains on track for commencement of operations in June. With investments totaling R$22.2 billion, the facility aims to produce 2.55 million annual tons of pulp.
Following the startup, there’s an anticipation of a gradual reduction in financial leverage, which stood at 3.5 times in March, reaching the ceiling outlined in the debt policy for investment cycles. Schalka predicts a further decline in the cash cost of pulp production, which was R$812 per ton in the first quarter, marking a 13% decrease from the previous year, once Cerrado stabilizes.
Marcelo Bacci, Suzano’s director of finance, investor relations, and legal affairs, anticipates “quite significant” returns from Cerrado at current pulp price levels. He noted that new projects will entail higher investment per ton compared to ongoing ones due to increased costs of wood, land, and industrial capital expenditure, necessitating higher pulp prices for justification.
