Suzano SA Joint Venture with Kimberly-Clark Transcript

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

Question: Rodolfo Angele - JPMorgan Chase & Co - Analyst : Let me just make my questions here. So my number one question is you mentioned that there is a three-year period and then you'll be able to acquire the 49% that will remain in the hands of KC in the short term. So is there anything around how this will happen? Are there targets? Is there discussion on pricing? Is it the same price? How will that happen in three years' time? And my second question is, of course, in an acquisition as important like this and given how much we've discussed things such as fiber to fiber, I wanted to hear a little bit more in detail the strategies to kind of a lower cost, what can be applied in the acquired asset to replicate the successful story that we also saw in the acquisition of the assets in Mogi. Those are my two questions.

Question: Leonardo Correa - Banco BTG Pactual SA - Analyst : A couple of questions here. The first one, Beto, just taking your last -- I think the last part of what you were saying, which I think is very important, right? You're basically saying that -- and please correct me if I misunderstood, okay? You had a target of M&A -- total M&A through 2026 of $3 billion, right? I think there was a series of jitters and noise, some speculation over the past weeks on a deal. Some people were speculating higher numbers. Even last night, Wall Street Journal was talking about a higher deal of $3.5 billion. You guys announced this JV, right, with an initial purchase of $1.7 billion. And from your tone, you're basically stating that given the complexities of everything REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Daniel Sasson - Banco Itau BBA SA - Analyst : My first question is related to the assets that you acquired in 14 countries or more specifically, if there are any chances that you could sales-specific operations even sooner than the three years from which you're going to have -- you could exercise your call option, right? I mean, if the current portfolio that you acquired is still subject to revisions, maybe one or two specific countries or specific operations could be sold to a third party even before your call option kicks in? And then maybe I'm not sure I think that was asked before, but I'm not sure if I've missed the answer. Can you quantify a little bit from the 1 million tons of tissue products that Kimberly currently produces? How much of -- 100% of that is soft. So I mean, you see a potential 1 million-ton fiber-to-fiber substitution happening here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Jonathan Brandt - HSBC Securities (USA) Inc - Analyst : I wanted to sort of get an understanding of how you're seeing tissue demand in the countries that you just bought the tissue assets in? So I guess that's predominantly Europe. It appears to be a slower-growth region than others. If we look at sort of KC's consensus, I was expecting sales to drop the assets that you just bought, and I think they dropped in 2024 as well. So I'm just trying to understand the other assets that you bought in Brazil was much higher growth. So does this sort of represent a new challenge for you? And are you depending on growth to reach that 15.5% IRR? Or do you think you'll get there mostly from synergies? And I guess my second question, just as it relates to the option. Is this option good into perpetuity? Or is there an expiration date?

Question: Rafael Barcellos - Bradesco BBI - Analyst : My first question is about synergies. I mean, you mentioned $175 million in potential synergies. Could you please provide the breakdown of these synergies? I mean, how much would be fiber to fiber, how much is commercial? I don't know. I mean, any further details here in terms of the breakdown of the estimation here could be helpful. And my second question is about the structure and the governance of the JV. So I mean, what will be the timing and how will be the process of choosing the CEO and CFO of the JV, other than that, I mean, I wanted to check if you have already decided which Suzano executive will be part of the Board of Directors of the JV? And lastly, I understand that Suzano can appoint the majority of the Board members, can appoint the CEO and CFO, but I wanted to understand which type of special rights Kimberly-Clark has, if any, and of course, whether you have decided any kind of change in terms of pulp commercial relationship between Suzano and the JV? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Alfonso Salazar - Scotiabank GBM - Analyst : I have two questions. The first one is regarding the liabilities involved. I just want to confirm, is a part of the assets that you mentioned, are there any liabilities in this transaction that we need to consider? And the second question is regarding the product, Leo asked a moment ago about the USA being an attractive market. But I want to know -- dig a little bit deeper into the product preference for Suzano. Clearly, now you're going for tissue assets. But what about packaging and to what extent this decision considered the trade war and the uncertainty of future implications of packaging rates and because of the trade war? And how do you see that unfolding for your strategy in the long term? Tissue and packaging as part of your portfolio.

Question: Caio Ribeiro - Bofa Merrill Lynch Asset Holdings Inc - Analyst : So two questions here from my side. First off, going back to the call option. I just wanted to see if you can clarify what the conditions are to execute that call option before the third-year anniversary of the transaction? And then secondly, back on the synergies front. I just wanted to see if you can give some more color on the pace at which you expect to capture those synergies over the coming years until you reach that $175 million level? And if there is any CapEx associated that's needed to achieve those synergies?

Question: Caio Ribeiro - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Yes. It was just on the call option to see if you can clarify what the conditions are to execute that call option before the third-year anniversary of the transaction?

Question: Caio Ribeiro - Bofa Merrill Lynch Asset Holdings Inc - Analyst : That's clear. And just as a quick follow-up here, what is the normal level of CapEx or CapEx per ton that you estimate for the asset going forward?

Question: Eugenia Cavalheiro - Morgan Stanley - Analyst : Two questions on my end. I think both were a bit addressed by you, but I think I wanted to get a bit more detailed view on each of them. The first would be on sourcing of the fiber from the current Kimberly-Clark division. So could you give us a bit more detail of the breakdown between softwood and hardwood? And how much of that you think you can do the fiber-to-fiber substitution, just for us to try to understand a bit more the synergies coming from that end? And maybe how much of cost reduction we could see from a better sourcing of fiber on the JV? The second one, if we go a year back today, you were involved in talks to potentially acquire International Paper which was a completely different business. If we think about the market, which was packaging US, so very different from the transaction that you're doing now. I just wanted to try to see what changed ever since and what is the new view of the company for such a shift on strategy and how you're seeing potential investments in the US packaging market, for example?

Question: Yuri Pereira - Santander Osbkinc - Analyst : Do you have any estimate about what was the free cash flow generation from those assets last year?

Question: Cole Hathorn - Jefferies LLC - Analyst : I'd just like to understand how the acquisition of this downstream tissue business might change how you manage your pulp inventories? What are the benefits of being able to manage your pulp inventories going forward with more kind of downstream integration? And does this have any changes on how you are going to run your inventories near term before this deal completes?

Question: Rodolfo Angele - JPMorgan Chase & Co - Analyst : I just wanted to hear from Marcos a little bit more detail. Not sure if I got it correctly. So the $3.4 billion is equity and enterprise value. So the idea is to lever it up and eventually end up the disbursement being diminished. Can you comment a little bit more, Marcos? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.