Suzano Q1 2026 Earnings Call Summary

1Key Financial Results and Metrics:

EBITDA: BRL 4.1 billion, reflecting an 8% year-over-year decline primarily due to lower export prices and FX appreciation.

Pulp Sales Volume: 2.84 million tonnes, up nearly 200,000 tonnes compared to Q1 2025.

Cash Production Cost: BRL 802 per tonne, a 3% increase quarter-on-quarter, but down 7% year-over-year, driven by lower input prices and operational efficiencies.

Net Debt: Increased slightly to $13 billion, with a leverage ratio stable at 3.3x.

Free Cash Flow: Impacted by dividend payments and a one-off CapEx related to a wood swap with Eldorado.

2Strategic Updates and Business Highlights:

Operational Efficiency: Headcount reduced by 10% year-over-year; cash production costs aligned with operational plans.

Hedging Strategy: Effective hedging portfolio for oil and FX mitigated some cost pressures from rising Brent prices and currency fluctuations.

Joint Venture with Kimberly-Clark: Efficiency gains expected to enhance value creation.

Market Dynamics: Stronger demand in Brazil for paper and packaging, with Brazilian paper demand up 3% and paperboard demand up 6% in early Q1.

3Forward Guidance and Outlook:

Q2 Expectations: Anticipated sales volumes and prices in Brazilian and U.S. operations to improve, supported by seasonal demand and price increases.

Cash Cost Outlook: Expected to increase by low single digits in Q2 due to maintenance and geopolitical impacts, but average cash costs for 2026 are projected to remain below 2025 levels.

Pulp Market: Continued price increases in Western markets anticipated, while Eastern markets face challenges.

4Bad News, Challenges, or Points of Concern:

Declining EBITDA: Year-over-year decline attributed to lower export prices and FX impacts.

Geopolitical Risks: Ongoing conflicts, particularly in the Middle East, affecting logistics and costs.

Softwood Market Weakness: 40% of global softwood production is operating at a loss, creating competitive pressures.

Operational Downtimes: Planned maintenance in Q2 may further constrain production and inventory replenishment.

5Notable Q&A Insights:

Market Dynamics: Management noted differing conditions in Eastern and Western markets, with Western markets experiencing price increases while Eastern markets face challenges due to softwood pricing pressures.

Buyback Program: Management is considering share buybacks as a potential capital allocation strategy, contingent on leverage levels and share price valuation.

Long-term Strategy: Focus on fiber-to-fiber substitution and potential de-verticalization of integrated pulp producers as a response to market conditions.

Wood Chip Prices: Rising wood chip prices are expected to impact pulp fundamentals and pricing, with domestic and imported wood prices increasing. Overall, while Suzano's operational efficiencies and strategic hedging provide resilience, the company faces challenges from geopolitical risks, market dynamics, and declining EBITDA, necessitating careful navigation in the current environment.