Suzano announces first quarter results and Cerrado Project nears completion

Rhea-AI Summary

Suzano, the world's largest pulp producer, announces its financial results for the first quarter of 2024, highlighting the near completion of the Cerrado Project, the largest capital investment project by the company. The new pulp mill, with a planned investment of R$22.2 billion, will have an annual production capacity of 2.55 million tons of pulp. Despite lower pulp prices, Suzano's leverage remains within limits. The results also show a recovery in international pulp prices, stable production costs, and positive operating cash generation.

Positive

• The progress of the Cerrado Project, the largest ever capital investment project by the company, nearing completion with a planned investment of R$22.2 billion and an annual production capacity of 2.55 million tons of pulp.

• Recovery trend of international pulp prices and stable production costs in relation to the previous quarter, reflecting positive market conditions for the company.

• Suzano's adjusted EBITDA totaled R$4.6 billion, indicating a strong financial performance in the first quarter of 2024.

Negative

• The impact of lower pulp prices in recent quarters led to Suzano's US dollar leverage ending the quarter at 3.5 times, despite remaining within the company's policy limits.

• Net revenue in the quarter was R$9.5 billion, reflecting the challenges posed by lower pulp prices and the ongoing investment in the new pulp mill.

• Net debt at the end of the quarter stood at US$11.9 billion, including share buyback program and interest payments on equity.

Insights

Financial Analyst

Suzano's recent financial results indicate the significance of the Cerrado Project as a pivotal investment, with implications for the company's future revenue streams. Notably, the company's US dollar leverage of 3.5 times, although within the established policy limits, warrants attention as it may affect the company's financial flexibility. Despite the leverage, Suzano reported an adjusted EBITDA of R$4.6 billion, demonstrating strong operating performance. The operational cash generation of R$2.5 billion further underscores the company's ability to generate cash flow despite the substantial capital outlay for the project. Investors should note the recovery trend in international pulp prices and stable production costs, which may augur well for margins. The net income of R$220 million, though modest relative to revenue, signals profitability amidst significant capital expenditures. However, the net debt of US$11.9 billion, especially in the context of the share buyback program and interest payments, should be closely monitored for its potential impact on future financial health.

Industry Analyst

The imminent completion of the Cerrado Project, which positions Suzano to host the world's largest single-line pulp mill, is likely to bolster the company's production capacity significantly, with an addition of 2.55 million tons per annum. This expansion in production capabilities underscores the company’s commitment to growth and may translate into increased market share in the pulp industry. For investors, Suzano's centenary celebration is marked by strategic positioning that could lead to greater value creation. However, the capital-intensive nature of the pulp industry and the cyclical price fluctuations require a cautious approach. Investors should consider the long-term benefits of increased production capacity against the backdrop of current and future pulp market dynamics. Furthermore, the reported sales volumes of 2.4 million tons for pulp and 313,000 tons for paper provide a baseline to assess the capacity utilization and market demand for Suzano's expanded operations.

World’s largest single pulp production line is set to commence operations in the coming weeks

SÃO PAULO--(BUSINESS WIRE)-- Suzano, the world’s largest pulp producer, which celebrates its centenary this year, announces its financial results for the first quarter of 2024 (1Q24). The highlight of the period is the progress of the Cerrado Project, the largest ever capital investment project by the company. The new pulp mill, under construction in the municipality of Ribas do Rio Pardo, Mato Grosso do Sul state, is now 94% complete and will be operational in a few weeks. It will be the largest single-line pulp mill in the world.

With a total planned investment of R$22.2 billion, of which R$19.1 billion has been deployed as of the end of April, the new mill will have annual production capacity of 2.55 million tons of pulp, used in the production of sanitary papers and sanitary pads, printing & writing papers and packaging paper, among other items.

Given the combined impact of the investment in the construction of the mill and lower pulp prices in recent quarters, Suzano’s US dollar leverage ended the quarter at 3.5 times, within the limits established in the company’s policy.

“This is a transformational project in Suzano’s history and marks a new and important cycle of value creation for the company. With the new unit, Suzano celebrates its centenary even more prepared to grow and benefit its stakeholders,” said Walter Schalka, CEO of Suzano.

The results also reflect the recovery trend of international pulp prices and stable production costs in relation to the previous quarter, as well as seasonal effects on sales in the sector. Suzano’s adjusted EBITDA totaled R$4.6 billion, while operating cash generation came to R$2.5 billion. Net revenue in the quarter was R$9.5 billion. Suzano registered net income of R$220 million. Net debt ended the quarter at US$11.9 billion, including Suzano’s share buyback program and interest payments on equity during the quarter.

Cash cost of pulp production, excluding downtimes, ended the quarter at R$812 per ton. Pulp sales totaled 2.4 million tons, while paper sales totaled 313,000 tons.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240509572283/en/

suzano@hawthornadvisors.com

Source: Suzano

FAQ

When is the new pulp mill of Suzano expected to be operational?

The new pulp mill, part of the Cerrado Project, is expected to be operational in the coming weeks.

What is the total planned investment for the Cerrado Project?

The total planned investment for the Cerrado Project is R$22.2 billion.

What is the annual production capacity of the new pulp mill?

The new pulp mill will have an annual production capacity of 2.55 million tons of pulp.

How did Suzano's adjusted EBITDA perform in the first quarter of 2024?

Suzano's adjusted EBITDA totaled R$4.6 billion in the first quarter of 2024.

What was the net revenue of Suzano in the first quarter of 2024?

Suzano's net revenue in the first quarter of 2024 was R$9.5 billion.

What is the current status of Suzano's net debt?

Suzano's net debt at the end of the quarter was US$11.9 billion, including share buyback program and interest payments on equity.