Suzano Reports First Quarter 2024 Earnings
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Suzano reported results for the first quarter of 2024.
EXECUTIVE SUMMARY
The performance of the pulp market remained favorable during the first quarter of 2024, which reflected in another round of price increases, but which was not fully captured in the results of the period. Operational performance remained in line with the plan, with cash cost of production remaining stable without the effect of scheduled maintenance downtimes. This combination of factors resulted in an important increase in adjusted EBITDA per ton from pulp compared to the previous quarter.
At the paper business unit, sales volume decreased chiefly due to seasonality, while prices remained stable. As such, consolidated adjusted EBITDA in the quarter totaled R$4.6 billion, while operating cash flow reached R$2.5 billion.
As for financial management, net debt in USD increased to US$11.9 billion, mainly due to the largest investment cycle in the Company's history aimed at generating significant and sustainable value in the long term. Leverage in USD stood at 3.5 times, in line with the financial policy, an increase explained by the reduction in Adjusted EBITDA in the last 12 months and the increase in net debt. The hedging policy continued to play its part, bringing in a positive cash inflow of R$0.4 billion.
Continuing the advances made in its strategy, within the context of the "Maintain relevance in pulp" and "Be 'best-in-class' in the total pulp cost vision" avenues, the physical progress of Cerrado Project remains as expected, reaching 94%, while financial progress was 87% by the end of April.
Lastly, regarding the "Playing a leading role in sustainability" avenue, Suzano announced that it has adopted the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD), being one of the first Brazilian companies to commit to the initiative dedicated to creating an instrument for managing and disclosing risks and opportunities so that organizations can report and act on potential impacts related to nature.
PULP BUSINESS PERFORMANCE
Pulp Sales Volume and Revenue
The first quarter of the year was marked by paper production above expectations and low pulp inventories across the chain, which, combined with higher lead time due to logistical constraints, resulted in lower supply than demand, creating favorable market fundamentals for increases in pulp price in all regions.
In China, especially after the Chinese New Year, production by paper lines that mostly use hardwood pulp (sanitary papers, printing and writing papers and paperboard) registered a significant increase of 6% year on year. During the quarter, prices in all paper segments were below than in the same period last year, but increased gradually during 1Q24 and, in March, were higher than in January.
In the European market, demand for pulp surprised positively in the quarter, coming above expectations at the end of last year. Hardwood consumption grew 14% in the region in 1Q24 compared to the same period last year. The Red Sea crisis and strikes in Finland, which led to lower operational availability of local producers, contributed to lower supply than demand. In North America, demand for sanitary papers continues positive in response to increases in pulp prices.
Regarding the supply of chemical pulp (BCP) in the first quarter, the low inventory levels across the chain and restricted supply due to unscheduled events, especially strikes in Finland and logistics bottlenecks such as the Red Sea Crisis, had a negative effect on pulp availability.
Average PIX/FOEX prices of hardwood pulp in the quarter increased 6% in China and 23% in Europe compared to 4Q23. The difference between softwood and hardwood pulp prices in the quarter was US$82/t in China and US$208/t in Europe, in line with healthy levels.
Suzano's pulp sales decreased from the previous quarter due to seasonal effects in the period, as well as the need of partial restocking, totaling 2,401 thousand tons, down 13% from 4Q23 and 2% from 1Q23.
Average net price in USD of pulp sold by Suzano was US$619/t, increasing 9% from 4Q23 and decreasing 14% from 1Q23. In the export market, average net price charged by the Company was US$624/t, up 9% from 4Q23 and down 13% from 1Q23. Average net price in BRL was R$3,066/ton in 1Q24, up 9% from 4Q23, due to the better price scenario in China and Europe. Compared to 1Q23, the 18% reduction was mainly due to the lower average net price in USD during the period and the 5% decline in average USD versus average BRL.
