Suzano SA Q1 2025 Earnings Call (English, Portuguese) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rodolfo De Angele - JPMorgan Chase & Co - Analyst : My two questions. My first one is on pulp prices. We are, of course, in a period of very high uncertainties. We are seeing resale prices coming down. So I just wanted to hear from Leo, if you can comment on how have been the talks with your clients? I know you mentioned the marginal costs already being bridged when you compare to prices. But just if you could give us a little bit more of color on exactly how the conversations are going. There's room for any moves at this point. That's my first one. And my second is for Beto. Beto, you added a bullet in your last slide, and I want to explore it a little bit. Of course, I'm talking about capital discipline. And here, I just wanted to hear a little bit more also in terms of how are you thinking about that when you think higher discount rates. Can you put also this in context with the other alternatives, which are taking care of your balance sheet and also dividends and buybacks. And that's it for me. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 09, 2025 / 12:30PM, SUZB3.SA - Q1 2025 Suzano SA Earnings Call (English, Portuguese)

Question: Rodolfo De Angele - JPMorgan Chase & Co - Analyst : And if you just wanted to complement with where do buybacks and shareholder return and also deleveraging kind of rank compared to potential new investments? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 09, 2025 / 12:30PM, SUZB3.SA - Q1 2025 Suzano SA Earnings Call (English, Portuguese)

Question: Rafael Barcellos - Bradesco BBI - Analyst : So my first question is about your pulp sales volumes. So well, I know that Suzano was running with pulp inventories below normal levels in recent quarters. But it could -- could you please give us a sense of the inventory buildup made during the first Q. Other than that, it would be very helpful if you could discuss a bit more about your volumes in May sorry, in April and May if possible? And ultimately, I mean, what we can expect in terms of sales volumes for 2025. Okay. And my second question is about the Hibas mill. So after the completion of the ramp-up and the first maintenance downtime, Beto, I would really appreciate your evaluation of the new operational performance. And other than that, I mean if you could discuss whether there's any debottlenecking opportunity here or even like a brownfield project being analyzed.

Question: Rafael Barcellos - Bradesco BBI - Analyst : Just as a quick follow-up on the sales volumes question, Leo. Could you please provide or discuss your sales volumes in April and maybe in May and ultimately, what we can expect for sales volumes in 2025 or in the coming quarters? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 09, 2025 / 12:30PM, SUZB3.SA - Q1 2025 Suzano SA Earnings Call (English, Portuguese)

Question: Daniel Sasson - Itau BBA - Analyst : First, Beto thank you for the details you've shared about the capital allocation alternatives that you have or at least about the $3 billion considering everything that you have that you are analyzing or that you have in your radar screen. My follow-up on that regard would be, do you think that for instance, with $3 billion in M&A transactions that would be good enough for you to reach a level of revenue diversification that you would be happy with? So that would be something that we could think about kind of a cap or a target for your M&A transactions? Or is that the sum of all the opportunities you have and then you might not even reach that over the next say, 12, 18 months. Just so we can understand how big potential capital allocation could be? Or if you think that these $3 billion would be already very interesting from a revenue diversification point of view? And my second question, maybe we explored a bit the somewhat challenging momentum for demand, especially from China. Can we try to change gears here and think about what -- where we could or the market could be wrong in regards to pulp prices or when we could see a change in momentum? Do you think, for instance, that maybe the more constrained logistics if demand resumes more quickly than expected because of the somewhat muted volumes in April and maybe May that could cause a glut in logistics, in maritime freight, for instance, and that could cause a panic buying sentiment? Or where do you think that we could be wrong in regards to this bad mood, let's put it this way, with pulp prices going into the second quarter and the third quarter of this year?

Question: Caio Greiner - UBS Investment Bank - Analyst : My first question, circling back to the internationalization theme. I wanted to ask you specifically about your capital allocation and potential acquisitions in the US. So how did the recent developments regarding US trade policy change Suzano's intention to acquire assets in the US markets. Shorter term, I mean, would that -- would the company be seeing this with the lenses of an elevated uncertainty and taking more of a wait-and-see approach to better understand what the trade policy is going to look like before making a move? Or has the strategy not changed at all? And it could be even seen as an opportunity to acquire assets at lower prices. My second question, maybe too Leo. I know that you mentioned that we're seeing industry cash cost inflation, but I mean, we're seeing a deflationary shock, especially considering oil prices down significantly. And I just wanted to understand a little bit more how do you see this impact to the industry cash cost level? I mean, what -- do think that was considered in the consultant framework to increase their marginal costs for high-cost producers? Or is that -- I mean, is that not really consider -- can you talk a little bit more about the moving parts of this recent revision?

Question: Caio Ribeiro - BofA Securities - Analyst : So first off, in past years, Suzano has announced production cuts during down cycles for pulp. So I wanted to ask you if, under the current environment, you see that decision once again making sense. And if yes, which variables you're paying close attention to in order to formalize that decision. And it would also be interesting to hear from you what, if anything, is fundamentally different in terms of inventories held by customers or producers profitability level of paper makers and your competitors, particularly on the softwood side or that cost support. I know you already alluded to it increasing, but if you could translate what's different between this down cycle and previous down cycles, that would be very, very helpful. And then secondly, as you assess the M&A opportunities, right? I know that you'll be focused on seeking opportunities that offer attractive returns. But on our numbers, your stock trades this year at around 5.5 times EBITDA and offers a 10% to 11% free cash flow yield. And any M&A, I believe, has to be analyzed on a comparative basis to purchasing your own stock, right? So do you see opportunities out there that exceed the returns that your own stock offers in terms of its discounted valuation.

Question: Marcio Farid - Goldman Sachs - Analyst : A couple of points on my side. Maybe, Leo, if you can follow up on the cash cost curve side because I think it's to our investors discussions are going to be if you see some price accommodation, my understand is that the $600 delivered to China and some of the producers in Japan, Europe, North America, they basically don't start to China, right? So they save another $50 at least in terms of freight because they sell mostly local. And historically, China has been the one that has be more sensitive to prices as well. And I understand is that China production cost today is in the low 400s, which is lower than the past cycle. So just trying to understand, I mean, the level of confidence in terms of production adjustments outside of China for this cycle and similar to what Caio ask them where -- when and how would Suzano react to a potential production slowdown. Because you have another at least 500,000 tons extra to sell this quarter versus last quarter in a more challenging scenario. So just trying to understand how you're going to be able to place these volumes in the market or there's going to be some production adjustments in the short term or it's longer dated. And secondly, on the paper side, Fabio, I think a good job on the sequential improvements in terms of profitability. Trying to understand next step where and what else is needed to get to breakeven? And what's the outlook for the US, especially paper packaging operations.

Question: Eugenia Cavalheiro - Morgan Stanley - Analyst : Two of them actually. And first, maybe asking on what Beto said in his initial remarks related to the higher return required for investments given the uncertainty. Would it be possible to give us more clarity on that and maybe a number of what you wish to see as a return to be able to proceed with an investment? And then the second one, if we think about the $3 billion opportunity that you mentioned and taking into consideration the company's strategy of deleveraging, but also taking into account the level of free cash flow generation expected for the next couple of years. I wanted to understand if management would feel comfortable with a dividend policy related to the free cash flow generation. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 09, 2025 / 12:30PM, SUZB3.SA - Q1 2025 Suzano SA Earnings Call (English, Portuguese)