Suzano to pursue internationalization of operations, says new CEO

Suzano will continue to pursue the internationalization of its operations, a strategy primarily driven by the need to advance along the value chain amid limited growth opportunities in the Brazilian market, given the company’s current scale, said Beto Abreu, the new CEO of the world’s largest pulp producer, in an interview with Valor. Abreu took over as CEO on July 1, succeeding Walter Schalka, who has moved to the board of directors.

After what Abreu described as a “very strong” second quarter in terms of results, the company is set to benefit from additional cash flow generated by the upcoming operation of its Cerrado unit in Mato Grosso do Sul. This will position Suzano to accelerate its growth strategy. “The company will have 20% more volume and fewer capital expenditures, enabling a new growth cycle.”

Even before the Cerrado unit, a 2.55 million tonne-per-year pulp mill, becomes operational, Suzano has already made acquisitions in the international market and started a process of financial deleveraging following the R$22.2 billion investment in the project. According to Abreu, the company has a “clear” strategy for growth avenues, and with Cerrado, it maintains a significant position in short-fiber pulp, which accounts for one-third of the global market.

The plan is to maintain this position in the long term while also advancing along the value chain. “Internationalization is an important way to achieve this since there aren’t as many opportunities in the Brazilian market anymore,” explained Abreu. “We want to continue with this robust strategy, focusing on value creation, adequate returns, and seeking assets where we can demonstrate competitive advantages that can be scaled.”

Abreu highlighted that Suzano’s recent acquisition of two factories from the American company Pactiv Evergreen for $110 million allows the company to test that market, with plans to continue exploring further opportunities. With the purchase of a 15% stake in Lenzing, added Marcelo Bacci, Suzano’s CFO, the company enters the textile sector, indicating a move towards higher-value-added products beyond just the initial stage of dissolving pulp.

The start of operations at Cerrado is expected to accelerate Suzano’s financial deleveraging strategy in the second half of the year, in addition to supporting its internationalization efforts. “It was a very strong quarter, driven by improved pulp prices, with robust demand in Europe and the United States, though there were some challenges in China,” said Abreu. During the quarter, the company sold 2.5 million tonnes of eucalyptus pulp, a 6% increase from the previous quarter and a 1% year-over-year growth.

“There was no change in inventories. Suzano basically sold everything it produced,” said Bacci. He also noted that the company does not intend to change its cash flow protection strategy (hedge), which it has maintained for several years, despite seeing short-term fluctuations in results that do not impact cash, as was the case in the second quarter. Despite the strong operational performance, Suzano reported a net loss of R$3.7 billion for the quarter due to the impact of exchange rates on debt and derivative mark-to-market.

On the other hand, the additional supply of pulp has already initiated a price correction process, with prices expected to be lower by the end of the year compared to the second quarter. “The price correction is already happening, but from a structural standpoint, when we look at the United States and Europe, demand is consistent,” said Abreu. In his view, “it’s too early to talk about a recession in the U.S.” In China, the world’s largest pulp consumer, the government is targeting 5% growth for the year. “We don’t see a structural decline in demand,” he concluded.

Source: Valor Econômico

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