0001104659-19-058489.txt : 20191031 0001104659-19-058489.hdr.sgml : 20191031 20191031172917 ACCESSION NUMBER: 0001104659-19-058489 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 33 CONFORMED PERIOD OF REPORT: 20191031 FILED AS OF DATE: 20191031 DATE AS OF CHANGE: 20191031 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Suzano S.A. CENTRAL INDEX KEY: 0000909327 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-38755 FILM NUMBER: 191184609 BUSINESS ADDRESS: STREET 1: AV. PROFESSOR MAGALHAES NETO, 1,752 STREET 2: 10TH FLOOR, ROOMS 1010 AND 1011 CITY: SALVADOR - BA STATE: D5 ZIP: 41 810-012 BUSINESS PHONE: 551121384588 MAIL ADDRESS: STREET 1: AV. BRIGADEIRO FARIA LIMA, 1,355 STREET 2: 7TH FLOOR CITY: PINHEIROS, SAO PAULO - SP STATE: D5 ZIP: 01 452-919 FORMER COMPANY: FORMER CONFORMED NAME: Suzano Papel e Celulose S.A. DATE OF NAME CHANGE: 20180322 FORMER COMPANY: FORMER CONFORMED NAME: COMPANHIA SUZANO DE PAPEL E CELULOSE /FI DATE OF NAME CHANGE: 19930719 6-K 1 a19-20763_36k.htm 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

FORM 6-K

 


 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of October, 2019.

 

Commission File Number 001-38755

 


 

Suzano S.A.

(Exact name of registrant as specified in its charter)

 


 

SUZANO INC.

(Translation of Registrant’s Name into English)

 

Av. Professor Magalhaes Neto, 1,752

10th Floor, Rooms 1010 and 1011

Salvador, Brazil 41 810-012

(Address of principal executive office)

 


 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x     Form 40-F o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

 

 

 


 

Enclosures:

 

Exhibit 99.1 — Earnings Release for Third Quarter 2019.

 

2


 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October 31, 2019

 

 

 

SUZANO S.A.

 

 

 

 

By:

/s/ Marcelo Feriozzi Bacci

 

Name:

Marcelo Feriozzi Bacci

 

Title:

Chief Financial Officer and Investor Relations Director

 

3


EX-99.1 2 a19-20763_3ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Stronger sales, inventory drawdown and cash flow generation

 

São Paulo, October 31, 2019. Suzano S.A. (B3:SUZB5 | NYSE: SUZ), one of the world’s largest integrated pulp and paper producers, announces today its consolidated results for the third quarter of 2019 (3Q19). Data for the comparison periods of 2018 (3Q18, 9M18 and LTM(6)) are based on the simple sum or weighted average, when applicable, of Suzano + Fibria.

 

HIGHLIGHTS

 

·                 Pulp inventory drawdown of approximately 450 thousand tons.

 

·                 Pulp sales of 2,549 thousand tons, up 15% vs. 2Q19.

 

·                 Paper sales of 313 thousand tons, up 4% vs. 2Q19.

 

·                 Adjusted EBITDA¹ and Operating Cash Generation² of R$2.4 billion and R$1.5 billion, respectively.

 

·                 Adjusted EBITDA¹/ton(4) of pulp of R$857/ton (-34% vs. 2Q19).

 

·                 Adjusted EBITDA/ton(5) of paper of R$1,229/ton (+3% vs. 2Q19).

 

·                 Average net pulp price — exports price: US$526/t (-17% vs. 2Q19).

 

·                 Average net paper price(5) of R$4,024/ton (stable in relation to 2Q19).

 

·                 Pulp cash cost of R$717/t, or R$654/t ex-downtimes.

 

·                 Capture of synergies in line with target for 2019 (40% as of Dec. 2019).

 

Consolidated Financial Data (R$ million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Net Revenue

 

6,600

 

9,842

 

-33

%

6,665

 

-1

%

26,206

 

Adjusted EBITDA(1)

 

2,396

 

5,387

 

-56

%

3,101

 

-22

%

11,809

 

Adjusted EBITDA Margin(1)

 

36

%

55

%

-18 p.p.

 

47

%

-10 p.p.

 

45

%

Adjusted EBITDA Margin ex-Klabin(4)

 

39

%

59

%

-20 p.p.

 

48

%

-10 p.p.

 

47

%

Net Financial Result

 

(6,493

)

(2,791

)

 

79

 

 

(6,671

)

Net Income

 

(3,460

)

1,022

 

 

700

 

 

(1,002

)

Operating Cash Generation(2)

 

1,515

 

4,448

 

-66

%

2,226

 

-31

%

7,988

 

Net Debt/Adjusted EBITDA(1) (x) (R$)

 

4.7 x

 

1.5 x

 

3.2 x

 

3.5 x

 

1.2 x

 

4.7 x

 

Net Debt/Adjusted EBITDA(1) (x) (US$)

 

4.3 x

 

1.3 x

 

3.0 x

 

3.6 x

 

0.7 x

 

4.3 x

 

 

Operational Data (‘000 tons)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Sales

 

2,862

 

3,227

 

-11

%

2,514

 

14

%

9,815

 

Pulp

 

2,549

 

2,891

 

-12

%

2,214

 

15

%

8,577

 

Paper(5)

 

313

 

336

 

-7

%

301

 

4

%

1,238

 

Production

 

2,406

 

3,084

 

-22

%

2,539

 

-5

%

10,329

 

Pulp

 

2,095

 

2,750

 

-24

%

2,221

 

-6

%

9,071

 

Paper(5)

 

311

 

334

 

-7

%

318

 

-2

%

1,258

 

 


(1) Excluding non-recurring items. (2) Corresponds to Adjusted EBITDA less sustaining CAPEX (cash basis).  | (3) Corresponds to Adjusted EBITDA less maintenance capex (accrual basis), less working capital, less net interest, less Income Taxes | (4) Excludes Klabin volumes | (5) Includes results of the Consumer Goods Unit. | (6) Last 12 months.

 

 


 

The consolidated quarterly information has been prepared in accordance with the Securities and Exchange Commission (CVM) and Accounting Standards Committee (CPC) standards and is in compliance with International Accounting Standard (IFRS) issued by the International Accounting Standard Board (IASB). The data contained in this document was obtained from the financial information as made available to the CVM. The operating and financial information is presented based on consolidated numbers in Reais (R$). Summaries may diverge due to rounding. Non-financial data, such as volume, quantity, average price, average price, in Reais and Dollars, were not reviewed by independent auditors.

 

CONTENTS

 

 

 

PULP BUSINESS PERFORMANCE

3

PULP SALES VOLUME AND REVENUE

3

PULP CASH COST

4

PULP SEGMENT EBITDA

5

PULP OPERATING CASH GENERATION

6

PAPER BUSINESS PERFORMANCE

6

PAPER SALES VOLUME AND REVENUE

7

PAPER OPERATING CASH FLOW

8

ECONOMIC AND FINANCIAL PERFORMANCE

9

NET REVENUE

9

PRODUCTION

10

COST OF GOODS SOLD

10

OPERATING EXPENSES

12

ADJUSTED EBITDA

14

FINANCIAL INCOME AND EXPENSES, NET

14

DERIVATIVE TRANSACTIONS

15

NET INCOME (LOSS)

17

INDEBTEDNESS

17

CAPITAL EXPENDITURE

19

OPERATING CASH GENERATION

20

IFRS 16

20

SYNERGIES

21

EVENTS AFTER THE REPORTING PERIOD

21

CAPITAL MARKETS

21

FIXED INCOME

22

RISK RATING

22

UPCOMING EVENTS

23

IR CONTACTS

23

APPENDICES

24

APPENDIX 1(2) — Operating Data

24

APPENDIX 2(2) — Consolidated Statement of Income and Goodwill Amortization

26

APPENDIX 3(1) — Consolidated Balance Sheet

27

APPENDIX 4(1) — Consolidated Statement of Cash Flow

28

APPENDIX 5(2) — EBITDA

30

APPENDIX 6(2) — Segmented Statement of Income

31

Forward-looking Statements

33

 

2


 

PULP BUSINESS PERFORMANCE

 

PULP SALES VOLUME AND REVENUE

 

The imbalance in market fundamentals already observed in previous quarters was boosted by seasonality in the northern hemisphere, which led to a sharp and greater correction softwood and hardwood prices compared to previous periods.

 

On the demand side, the growth in production of the various types of paper in China was not sufficient to offset the performance of other regions impacted mainly by macroeconomic and geopolitical issues. The tissue segment continued to show resilience and is estimated to have grown globally by 2.9% until July.

 

On the supply side, scheduled maintenance and unscheduled production cuts did not impact the increasing availability of both fibers. The pulp destocking movement initiated by paper producers during previous quarters, with the consequent migration to pulp producers, was still observed in the third quarter, mostly in China. At the end of this quarter, there was a typical resumption of demand in the northern hemisphere to the point that several price increase announcements were made by softwood pulp producers for the Chinese and North American markets.

 

 

In this context, Suzano recorded a quarter with sales growth and sold 2,549 thousand tons of market pulp, 15% higher than 2Q19 and 12% lower than 3Q18.

 

The average net pulp price in USD sold by Suzano was US$527/ton in 3Q19, a decrease of US$101/t (-16%) and US$215/ton (-29%) compared to 2Q19 and 3Q18, respectively. The average net foreign market price in 3Q19 was US$526/ton (compared to US$630/ton in 2Q19 and US$752/ton in 3Q18).

 

The average net price in BRL was R$2,095/ton in 3Q19, down 15% and 29% from 2Q19 and 3Q18, respectively, due to lower prices in USD.

 

Net revenue from pulp sales amounted to R$5,340 million in 3Q19, down 37% from 3Q18, mainly due to the lower net average price in USD (-29%) and the lower sales volume (-12%).

 

Compared to 2Q19, the main factor in the 2% decline in net revenue was the 16% lower net average pulp price in USD, which was partially offset by the higher pulp sales volume (+15%) and the 1% average appreciation in the USD against the BRL.

 

3


 

 

PULP CASH COST

 

The consolidated cash cost of market pulp production in 3Q19, excluding the impacts from downtimes (maintenance and administrative) in the period, was R$654/ton. The cash cost including downtimes was R$717/t.

 

 

Cash cost ex-downtime in 3Q19 increased R$58/ton vs. 3Q18 (+10%), mainly due to: i) the higher wood cost, reflecting the supply mix (higher share of third-party wood and longer average supply radius); ii) the lower dilution of fixed costs given the lower production volume; and iii) the weaker result from energy sales (lower power generation and lower sales price). The positive impact on input is due to a lower consumption and lower chemical prices, partially as a result of synergy gains (mainly caustic soda prices).

 

 

Pulp cash cost ex-downtimes in 3Q19 decreased R$43/ton vs. 2Q19 (-6%), mainly due to: i) lower fixed cost, mainly explained by lower maintenance costs and by the pulp mill mix (higher relevance of Três Lagoas in the

 

4


 

total production); ii) the lower consumption of inputs and iii) the higher result from energy sales given the better price.

 

 


(1) Excludes maintenance and administrative downtimes impact.

 

 


(1) Considers cash cost without downtimes and energy sales.

 

PULP SEGMENT EBITDA

 

Pulp segment

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Adjusted EBITDA (R$ million)

 

2,012

 

4,980

 

-60

%

2,734

 

-26

%

10,337

 

Sales Volume (k ton) — ex-Klabin

 

2,347

 

2,662

 

-12

%

2,095

 

12

%

8,066

 

Pulp Adjusted EBITDA Ex-Klabin (R$/ton)

 

857

 

1,870

 

-54

%

1,305

 

-34

%

1,282

 

 

The variation in Adjusted EBITDA from pulp sales in 3Q19 compared to 3Q18 mainly reflects: i) the lower net pulp price in USD (-29%); ii) the 12% reduction in pulp sales volume; and iii) the higher cash COGS ex-Klabin due to the increase in cash production cost (impact from wood and lower production volumes). The lower per-ton adjusted EBITDA is explained by the lower net average pulp price and higher cash COGS ex-Klabin, by the factors mentioned above.

 

Compared to 2Q19, the 26% lower pulp adjusted EBITDA mainly reflects the 16% decrease in the net average price in USD, which was partially offset by the 15% higher sales volume. The decrease in per-ton pulp Adjusted EBITDA is explained by the pulp price in USD reduction.

 

5


 

 

PULP OPERATING CASH GENERATION

 

Pulp segment (R$ million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Adjusted EBITDA

 

2,012

 

4,980

 

-60

%

2,734

 

-26

%

10,337

 

Maintenance Capex*

 

(811

)

(874

)

-7

%

(797

)

2

%

(3,530

)

Operating Cash Flow

 

1,201

 

4,106

 

-71

%

1,938

 

-38

%

6,807

 

 


*Cash basis.

 

 


(1) Excludes sales volume related to the agreement with Klabin.

 

Per-ton operating cash generation in the pulp segment decreased 63% and 38% from 3Q18 and 2Q19, respectively, impacted by the lower per-ton Adjusted EBITDA, as already explained, partially offset by higher dilution of maintenance capex due to higher sales volume.

 

PAPER BUSINESS PERFORMANCE

 

Note that the paper business is incorporating the results from the consumer goods business, which is still in the ramp-up phase.

 

6


 

PAPER SALES VOLUME AND REVENUE

 

According to the Forestry Industry Association (Ibá), domestic sales of printing & writing paper and paperboard in Brazil increased 9% vs. 2Q19 and a decrease of 10% vs. the same period of last year. The imports were stable vs 2Q19 and showed a 4% reduction vs 3Q18.

 

As for the first nine months of 2019, sales of printing & writing paper and paperboard in the domestic industry decreased by 6% compared to the same period of the previous year and imports also decreased by 6%. Domestic sales in printing & writing market decreased by 8% while paperboard sales decreased by 2%.

 

In Brazil, Suzano’s paper sales came to 211 thousand tons in 3Q19, up 13% from 2Q19, explained by the seasonality of the Brazilian market, and a drop of 14% compared to 3Q18, justified by the lower consumption in the period.

 

Paper sales in both domestic and foreign markets at the 3Q19 totaled 313 thousand tons, up to 4% from 2Q19, but a retraction of 6% compared to 3Q18, given the lower production in the period, due to the  printing & writing paper machine conversion to Eucafluff, and the maintenance downtime at Mucuri.

 

 

The average net price in the domestic market in 3Q19 was R$4,138/ton, down R$40/ton (-1%) compared to 2Q19 and up R$253/ton (+7%) compared to 3Q18.

 

The average net price of paper exports in 3Q19 was US$953/ton, down US$13/ton (-1% vs. 2Q19) and US$60/ton (-6% vs. 3Q18). Due to our profitability strategy and the flexibility to operate in several markets, the deterioration of international prices in these periods was partially offset. In BRL, the export price in 3Q19 was R$3,788/ton, stable in relation to 2Q19, as a result of the BRL depreciation during the period, and down R$223/ton lower (-6%) in relation to 3Q18 driven by lower prices levels in USD.

 

The total average net price was R$4,024/t in 3Q19, stable in relation to 2Q19 and up 3% when compared to 3Q18.

 

 

7


 

Net revenue from paper sales amounted to R$1,260 million in 3Q19, up 4% from 2Q19, mainly due to the higher sales volume, which was partially offset by the lower net average price.

 

Comparing to the same period last year, there was a 4% reduction, mainly due to lower sales volume, and partially offset by higher net average price.

 

PAPER EBITDA

 

Paper segment

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Adjusted EBITDA (R$ million)

 

385

 

407

 

-6

%

366

 

5

%

1,471

 

Sales volume (k ton)

 

313

 

336

 

-7

%

301

 

4

%

1,238

 

Paper adjusted EBITDA (R$/ton)

 

1,229

 

1,212

 

1

%

1,219

 

1

%

1,189

 

 

The performance of Adjusted EBITDA from paper in 3Q19 compared to 3Q18 is mainly explained by the lower sales volume and higher cash COGS, due to the downtime schedule, which were partially offset by the higher net average price and lower selling and administrative expenses.

 

Compared to 2Q19, the increase is due to higher sales volume (+4%) and lower cash COGS in the period, partially offset by the lower average net price.

 

 

PAPER OPERATING CASH FLOW

 

Operating cash flow - Paper (R$ million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Adjusted EBITDA

 

385

 

407

 

-6

%

366

 

5

%

1,471

 

Maintenance Capex

 

(70

)

(65

)

8

%

(78

)

-10

%

(291

)

Operating Cash Flow

 

314

 

342

 

-8

%

288

 

9

%

1,181

 

 

8


 

 

Operating cash generation per ton came to R$1,004/t in 3Q19. Compared to 3Q18, operating cash generation per ton was virtually stable (-1%). Compared to the previous quarter (+5%), in addition to the higher Adjusted EBITDA (+5%), sustaining capex decreased by 10%.

 

ECONOMIC AND FINANCIAL PERFORMANCE

 

NET REVENUE

 

Suzano’s net revenue in 3Q19 was R$6,600 million, 80% of which came from export sales (vs. 83% in 3Q18 and 81% in 2Q19). Pulp and paper sales in the quarter amounted to 2,862 thousand tons, up 14% from 2Q19 and down 11% from 3Q18, mainly due to the pulp sales performance in those periods.

 

 


(1) Excludes service revenue from Portocel.

 

Consolidated net revenue in 3Q19 decreased compared to 2Q19, explained by the 16% lower net average pulp price in USD, which was largely offset by the 14% higher sales volume (with pulp volume rising 15%) and by the 1% appreciation in the USD against the BRL.

 

Compared to 3Q18, the reduction in net revenue was mainly due to the lower net average price of pulp in USD (-29%) and the 12% lower sales volume.

 

9


 

PRODUCTION

 

Production (k ton)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Market Pulp

 

2,095

 

2,750

 

-24

%

2,221

 

-6

%

9,071

 

Paper

 

311

 

334

 

-7

%

318

 

-2

%

1,258

 

Total

 

2,406

 

3,084

 

-22

%

2,539

 

-5

%

10,329

 

 

In the third quarter of 2019, scheduled maintenance downtime was carried out at the Jacareí Unit and on Line 1 of the Mucuri Unit and partially on Line 2 of the Três Lagoas Unit (the latter begun in June). In addition to these effects, production volume also was affected by the Company’s decision to continue to produce below its capacity to optimize its inventories, which currently are above historical levels. The Company decided to discontinue the guidance of market pulp production volume in 2019, as per Material Fact disclosed to the market on 10/31/2019. The decision derives from the pulp market conditions, being in line with Suzano’s commercial strategy and aiming for the best interests of the Company and its shareholders.

 

The following calendar details Suzano’s scheduled maintenance downtimes:

 

 


(1) Veracel is a joint venture between Suzano (50%) and Stora Enso (50%) with total annual capacity of 1,120 thousand tons.

(2) Includes integrated capacities.

 

COST OF GOODS SOLD

 

COGS — Income Statement (R$ million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Pulp

 

4,166

 

4,085

 

2

%

4,435

 

-6

%

15,601

 

Paper

 

820

 

808

 

2

%

787

 

4

%

3,177

 

Consolidated

 

4,986

 

4,892

 

2

%

5,222

 

-5

%

18,778

 

 

COGS — Income Statement (R$/ton)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Pulp

 

1,634

 

1,413

 

16

%

2,003

 

-18

%

1,819

 

Paper

 

2,620

 

2,403

 

9

%

2,620

 

0

%

2,566

 

Consolidated

 

1,742

 

1,516

 

15

%

2,077

 

-16

%

1,913

 

 

As a result of the business combination with Fibria, Suzano assessed the fair value of the assets acquired and liabilities assumed from Fibria and made the corresponding allocations to the balance sheet (Purchase Price Allocation - PPA). For the purposes of the operating analysis for 3Q19, the following information excludes the effects from the realization of the surplus value allocated to COGS in the period (whose impact was an

 

10


 

additional expense of R$179 million) and on Selling Expenses (negative impact of R$207 million). For more details, please refer to page 27.

 

COGS — ex-PPA (R$ million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Pulp

 

3,987

 

4,085

 

-2

%

3,271

 

22

%

12,899

 

Paper

 

820

 

808

 

2

%

787

 

4

%

3,177

 

Consolidated

 

4,808

 

4,892

 

-2

%

4,058

 

18

%

16,076

 

 

COGS — ex-PPA (R$/ton)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Pulp

 

1,564

 

1,413

 

11

%

1,477

 

6

%

1,504

 

Paper

 

2,620

 

2,403

 

9

%

2,620

 

0

%

2,566

 

Consolidated

 

1,680

 

1,516

 

11

%

1,614

 

4

%

1,638

 

 

Excluding the effect above from PPA, COGS in 3Q19 came to R$4,808 million, or R$1,680/ton. Compared to 3Q18, including the accounting allocation effect (R$106 million), COGS decreased 4%, reflecting the lower pulp sales volume, which was partially offset by the higher cash production cost, as explained above, and freight due to the higher per-ton freight cost — plant mix with higher share from Três Lagoas and regional mix with higher share of exports to Asia. The effect on COGS related to the alignment of criteria for accounting allocation mentioned is due to the asset combination with Fibria, which is mainly explained by logistics expenses, which in 2018 were allocated to “selling expenses” at Fibria and as of 1Q19 were reallocated to “logistics costs” under COGS. Analyzing COGS per ton excluding PPA, there was a 11% increase in view of the higher ex-Klabin cash COGS as a result of the higher cash production cost.

 

 

Compared to 2Q19 and also excluding the impact from PPA, the 18% increase was due to the higher pulp and paper sales volumes and the higher cash COGS ex-Klabin, which in turn was impacted by the higher cost with downtimes and the inventory turnover effect, given the higher impact from cash cost in prior quarters as a result of the higher sales volumes. In a per-ton basis, the same factors with the exception of the volume justify the 4% increase.

 

11


 

 

OPERATING EXPENSES

 

Operating Expenses — Income Statement (R$
million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Selling Expenses

 

469

 

392

 

19

%

457

 

3

%

1,707

 

General and Administrative Expenses

 

279

 

299

 

-7

%

278

 

0

%

1,288

 

Total Expenses

 

748

 

691

 

8

%

735

 

2

%

2,995

 

Total Expenses/Sales Volume (R$/ton)

 

261

 

214

 

22

%

292

 

-11

%

305

 

 

Operating Expenses — ex-PPA
(R$ million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Selling Expenses

 

262

 

392

 

-33

%

255

 

3

%

1,093

 

General and Administrative Expenses

 

280

 

299

 

-6

%

283

 

-2

%

1,288

 

Total Expenses

 

542

 

691

 

-22

%

538

 

0

%

2,382

 

Total Expenses/Sales Volume (R$/ton)

 

189

 

214

 

-12

%

214

 

-12

%

243

 

 

Excluding the effect from PPA of R$207 million on the result for 3Q19, Selling Expenses decreased 33% from 3Q18, which is basically explained by the impact of R$95 million from the alignment of criteria for accounting allocation due to the merger of Fibria shares (especially on selling expenses, which as of 1Q19 are recorded as COGS), and by the lower sales volume (-11%). Excluding the accounting allocation effect, selling expenses per ton remained stable.

 

 

Compared to 2Q19, the 3% increase is explained by the higher sales volume and the 1% appreciation in the average price of the USD against the BRL. Per-ton selling expenses, however, decreased 10% due to the

 

12


 

higher dilution of fixed costs and to the sales mix (increased share of sales to Asia, where the Company has lower inland logistics costs).

 

 

Excluding the minor effect from positive PPA on administrative expenses (R$1 million), due to the closing of processes, compared to 3Q18, the 6% decrease in this item is explained by lower expenses arising from the transaction with Fibria and by the capture of synergies, which were partially offset by the effect from the accounting allocation of R$30 million (related to a portion of variable compensation and contingencies that Fibria previously recorded as “other operating income and expenses”).

 

 

Compared to 2Q19, the item remained basically stable (-1%). In the analysis of administrative expenses per ton, there was a decrease of 11% due to the increase in sales volume.

 

 

Excluding the effect from PPA, “other operating income (expenses)”, net amounted to a revenue of R$116 million in 3Q19, compared to an expense of R$14 million in 3Q18 and income of R$196 million in 2Q19. The

 

13


 

variation compared to 3Q18 is mainly explained: i) by the R$128 million tax credit from the exclusion of the ICMS from the PIS and COFINS calculation base (favorable decision on tax lawsuit — for further details, please refer to Note 9 in Financial Statements); and ii) by the accounting reallocation of profit sharing paid to employees of the former Fibria from this item to administrative expenses. These factors were partially offset by the agreement with Valmet in 3Q18 (non-recurring gain in that period). Compared to 2Q19, the variation is explained in that quarter by the result from the fair value of biological assets update and the sale of judicial receivables, both in the previous quarter, partially offset by the revenue from the tax credits received, as mentioned above.

 

ADJUSTED EBITDA

 

Consolidated

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Adjusted EBITDA (R$ million)

 

2,396

 

5,387

 

-56

%

3,101

 

-23

%

11,808

 

Adjusted EBITDA Margin - ex-Klabin

 

39

%

59

%

-20 p.p.

 

48

%

-10 p.p.

 

47

%

Sales Volume ex-Klabin (mil ton)

 

2,661

 

2,998

 

-11

%

2,396

 

11

%

9,304

 

Adjusted EBITDA ex-Klabin / Ton (R$/ton)

 

901

 

1,797

 

-50

%

1,294

 

-30

%

1,269

 

 

Adjusted EBITDA in 3Q19 was R$2,396 million, decreasing compared to 3Q18, mainly due to: (i) the lower average net pulp price in U.S. dollar (-29%); (ii) the lower pulp sales volume (-12%); and (iii) the higher cash production cost, with these factors partially offset in large part by the lower SG&A expenses (as explained above). The 50% decrease in per-ton EBITDA also is explained by the price factor and higher cash COGS.

 

Compared to 2Q19, the 23% decline in Adjusted EBITDA is mostly due to the lower net pulp price in USD (-16%) and the higher cash COGS ex-Klabin (impact from downtimes and inventory turnover effect), with these factors partially offset by the higher sales volume (+14%) and the appreciation in the average price of the USD against the BRL (+1%). The 30% lower per-ton EBITDA is basically due to the lower average net price in USD and higher cash COGS ex-Klabin.

 

FINANCIAL INCOME AND EXPENSES, NET

 

Financial Result (R$ million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Financial Expenses

 

(1,045

)

(863

)

21

%

(1,086

)

-4

%

(3,984

)

Interest on loans and financing (local currency)

 

(355

)

(316

)

13

%

(345

)

3

%

(1,494

)

Interest on loans and financing (foreign currency)

 

(597

)

(292

)

105

%

(538

)

11

%

(1,962

)

Capitalized interest(1)

 

0

 

2

 

-86

%

1

 

-71

%

2

 

Other financial expenses

 

(93

)

(257

)

-64

%

(205

)

-55

%

(530

)

Financial Income

 

94

 

232

 

-59

%

150

 

-37

%

752

 

Interest on financial investments

 

91

 

214

 

-57

%

74

 

23

%

646

 

Other financial income

 

3

 

17

 

-83

%

76

 

-96

%

107

 

Monetary and Exchange Variations

 

(3,685

)

(698

)

428

%

758

 

 

(2,748

)

Foreign exchange variations (Debt)

 

(3,627

)

(727

)

399

%

647

 

 

(2,436

)

Other foreign exchange variations

 

(58

)

29

 

 

112

 

 

(312

)

Derivative income (loss), net(2)

 

(1,857

)

(1,462

)

27

%

257

 

 

(692

)

Cash flow hedge

 

(654

)

(898

)

-27

%

408

 

 

969

 

Debt hedge

 

(1,246

)

(555

)

124

%

(177

)

604

%

(1,670

)

Others(3)

 

43

 

(9

)

 

26

 

65

%

10

 

Net Financial Result

 

(6,493

)

(2,792

)

133

%

79

 

 

(6,671

)

 


(1) Capitalized interest due to construction in progress.

(2) Variation in mark-to-market adjustment plus adjustments paid and received (3Q19: R$(1.806) million | 2Q19: R$257 million).

(3) Includes commodity hedge and embedded derivatives.

 

14


 

Financial expenses totaled R$1,045 million in 3Q19, 4% lower than 2Q19, due to the effect of the BRL depreciation on interest expenses attached to the debt in foreign currency, partially offset by the interest rates decrease in domestic and international markets (CDI and Libor) and by the reduction on “other financial expenses” as explained below. Year-on-year, the 21% increase is due to the higher level of debt as a result of the asset combination with Fibria.

 

Financial revenues in 3Q19 vs. 2Q19 reduced 37% mainly due to “other financial income”, explained by lower amortization of the goodwill related to the asset combination with Fibria (for further details please refer to note 24 in the Financial Statements). The 23% upturn in “interest on financial investments” is basically due to Company’s cash position increase in the period. In relation to 3Q18, the 59% reduction is explained by the decrease of the interest on financial investments, as a result of the cash position drop, considering that in that quarter there was a strong cash concentration in order to conclude the Fibria deal (R$21.8 billion).

 

The line “other financial expenses” showed a 55% reduction vs. 2Q19, mainly due to the anticipated settlement of the ECA Finnvera line last quarter, which caused the total write-off of its hiring costs. The settlement of this contract in 2Q19 removed the financial covenant of Company’s debt contracts. In relation to 3Q18, the 64% decrease is due to the commitment fees recorded in that quarter, related to lines of US$4.5 billion available to the asset combination with Fibria.

 

Inflation adjustment and exchange variation had a negative impact of R$3,685 million on the Company’s financial result in the quarter, due to the 9% appreciation in the end-of-period price of the USD against the BRL on the foreign-denominated portion of debt (73% of the total debt). The negative accounting impact from exchange variation on the foreign-denominated debt has a cash impact only on the respective maturities.

 

The derivatives operations results were negative in the amount of R$1,857 million in 3Q19, mainly as result of the debt hedging. The mark to market variation on derivatives can be largely explained by: (i) end-of-period USD appreciation vs. the BRL on the current contracts (negative change); and (ii) due to the Pre, Cupom and Libor negative variations. The mark-to-market of the financial derivative instruments on September 30, 2019 was negative in the amount of R$3,060 million, vs. negative mark-to-market of R$1,254 million on June 30, 2019, resulting in a negative variation of R$1,806 million.

 

The result from operations with derivatives was negative at R$1,857 million, impacted by the high volatility of the financial markets in the quarter, which caused a substantial variation in the mark-to-market (MtM) adjustment of derivative operations. The MtM variation is mainly explained by: 1) the variation in the Fixed-rate, Coupon and Libor curves on operations (negative variation); and 2) the effect from the appreciation in the end-of-period price of the USD against the BRL on existing agreements (negative variation). The mark-to-market adjustment of derivative instruments on September 30, 2019 was an expense of R$3,060 million, compared to the R$1,254 million expense at June 30, 2019, representing a negative variation of R$1,806 million.

 

Due to the aforementioned factors, the net financial expense was R$6,493 million in 3Q19, compared to net financial income of R$79 million in 2Q19 and the net financial loss of R$2,791 million in 3Q18.

 

DERIVATIVE TRANSACTIONS

 

Suzano carries out derivatives transactions exclusively for hedging purposes. The following table reflects the position of derivative hedging instruments at September 30, 2019:

 

Hedge

 

Notional
(USD million)

 

Fair Value
(R$ million)

 

Debt

 

6,543

 

(2,881

)

Cash flow

 

3,765

 

(492

)

Others(1)

 

693

 

313

 

Total

 

11,001

 

(3,060

)

 


(1)         Refer to note 4.3 of the Financial Statements for further details and fair value sensitivity analysis.

(2)         Includes commodity hedge and embedded derivatives.

 

The Company’s currency exposure policy seeks to minimize the volatility of its cash generation and to impart greater flexibility to its cash flow management. Currently, the policy stipulates that surplus dollars may be

 

15


 

partially hedged (up to 75% of exchange variation exposure over the next 18 months) using plain vanilla instruments, such as Zero Cost Collars (ZCC) and Non-deliverable Forwards (NDF).

 

ZCC transactions establish minimum and maximum limits for the exchange rate that minimize adverse effects in the event of significant appreciation in the BRL. If the exchange rate is within such limits, the Company neither pays nor receives any financial adjustments. Therefore, the Company is protected in scenarios of significant BRL appreciation. However, these transactions also limit potential gains in scenarios of extreme BRL depreciation. The characteristics allows for capturing greater benefits from export revenue in a potential scenario of USD appreciation within the range contracted. The current scenario of volatility in the BRL/USD exchange rate made this strategy more adequate for protecting the cash flow of the Company, which is constantly monitoring the market and analyzing the attractiveness at any given moment of any full or partial reversal in the transaction.

 

At September 30, 2019, the outstanding notional value of operations involving forward USD sales through ZCCs was US$3,765 million, whose maturities are distributed from October 2019 to February 2021, with an average forward rate ranging from R$ 3.85 to R$4.33. In 3Q19, results from ZCC transactions posted a loss of R$654 million. The mark-to-market adjustment (fair value) of ZCC transactions was negative R$492 million at the end of the quarter.

 

Cash Flow Hedge

 

Maturity

 

Strike Range

 

Notional
(US$ million)

 

Zero-Cost Collars

 

4Q19

 

3.72 – 4.13

 

1,085

 

Zero-Cost Collars

 

1Q20

 

3.87 – 4.28

 

940

 

Zero-Cost Collars

 

2Q20

 

3.86 – 4.19

 

695

 

Zero-Cost Collars

 

3Q20

 

3.93 – 4.49

 

705

 

Zero-Cost Collars

 

4Q20

 

4.02 – 4.42

 

200

 

Zero-Cost Collars

 

1Q21

 

3.92 – 6.07

 

140

 

Total

 

 

 

3.85 – 4.33

 

3,765

 

 

The Company also uses currency and interest rate swaps to mitigate the effects from exchange and interest rate variations on the balance of its debt and on its cash flow. Contracts swapping different interest rates and inflation indexes may be entered into as a way to mitigate the mismatch between financial assets and liabilities.

 

On September 30, 2019, the Company had outstanding (notional value) US$6,543 million distributed as shown in the table below. In 3Q19, debt hedge transactions posted a loss of R$1,246 million. The mark-to-market adjustment (fair value) of such operations was negative R$2,881 million at the end of the quarter.

 

Debt Hedge

 

Maturity

 

Currency

 

Notional
(US$ million)

 

Swap (PRÉ x USD)

 

2024

 

USD

 

350

 

Swap (CDI x USD)

 

2026

 

USD

 

3,116

 

Swap (IPCA x CDI)(1)

 

2023

 

BRL

 

203

 

Swap (IPCA x USD)

 

2023

 

USD

 

121

 

Swap (LIBOR x USD)

 

2024

 

USD

 

2,754

 

Total

 

 

 

 

 

6,543

 

 


(1)   Translated at the closing exchange rate on 9/30/2019 of 4.1644

 

Forestry partnership agreements and standing-timber supply agreements entered into on December 30, 2013 by former Fibria Celulose S.A. are denominated in USD per cubic meter of standing timber, adjusted by U.S. inflation measured by the Consumer Price Index (CPI), which is not related to inflation in the economic environments where the forests are located, which therefore constitutes an embedded derivative. Such instrument, which is presented in the table below, consists of a swap contract with the short leg consisting of the variations in the U.S. CPI during the period of the aforementioned agreements. At September 30, 2019, the outstanding (notional) value of the operation was US$691 million. The result from the swap was a gain of R$44 million in 3Q19. The mark-to-market adjustment (fair value) of such operations was as gain of R$312 million at the end of the quarter.

 

16


 

Embedded Derivative

 

Maturity

 

Index

 

Notional
(US$ million)

 

Embedded Derivative

 

2035

 

Fixed USD – USD US-CPI

 

691

 

Total

 

 

 

 

 

691

 

 

The cash effect due to the settlement of derivatives in 3Q19 was R$51 million, R$24 million related to cash flow hedge (ZCC) and R$29 of debt hedge.

 

 

NET INCOME (LOSS)

 

In 3Q19, the Company posted a net loss of R$3,460 million, compared to net income of R$1,022 million in 3Q18 and of R$700 million in 2Q19. The variation in relation to 3Q18 is mainly explained by the greater impact of exchange variation in financial results, from the translation of gross debt from USD (94% pegged to the USD) to BRL and the effect of exchange rate hedging instruments. The second important factor corresponds to the lower operating result, mainly explained by the decrease in net revenues (impacts of pulp price and volume sold, as explained above).

 

Compared to 2Q19, the variation is more concentrated in the negative financial result, largely explained by the exchange variation on debt and hedge instruments, against a positive financial result in the previous quarter.

 

INDEBTEDNESS

 

Debt (R$ million)

 

09/30/2019

 

09/30/2018

 

Δ Y-o-Y

 

06/30//2019

 

Δ Q-o-Q

 

Local Currency

 

17,278

 

17,945

 

-4

%

17,221

 

0

%

Short Term

 

2,620

 

1,836

 

43

%

2,227

 

18

%

Long Term

 

14,658

 

16,109

 

-9

%

14,994

 

-2

%

Foreign Currency

 

46,743

 

27,225

 

72

%

43,259

 

8

%

Short Term

 

2,472

 

2,220

 

11

%

2,466

 

0

%

Long Term

 

44,271

 

25,005

 

77

%

40,793

 

9

%

Gross Debt

 

64,021

 

45,169

 

42

%

60,480

 

6

%

(-) Cash and financial statements

 

8,790

 

21,778

 

-60

%

7,972

 

10

%

Net Debt

 

55,231

 

23,391

 

136

%

52,508

 

5

%

Net Debt/Adjusted EBITDA(1) (x) — R$

 

4.7x

 

1.5x

 

3.2x 

 

3.5x

 

1.2x 

 

Net Debt/EBITDA Ajustado¹ (x) — US$

 

4.3x

 

1.3x

 

 3.0x

 

3.6x

 

 0.7x

 

 


(1) Excluding non-recurring items.

 

On September 30, 2019, gross debt stood at R$64 billion (US$15 billion) and was composed of 92% long-term maturities and 8% short-term maturities, with 73% denominated in foreign currency and 27% in local currency. The percentage of gross debt denominated in foreign currency, considering the effect from debt

 

17


 

hedge, was 94%. Gross debt increased by 6% compared to 2Q19 (R$3.5 billion), reflecting the effect from exchange variation on debt, in turn due to the depreciation of the BRL against the USD (3Q19: 4.16 vs. 2Q19: 3.83). Compared to 3Q18, the increase in gross debt reflects mainly the funds raised for the asset combination with Fibria.

 

Suzano contracts debt in foreign currency as a natural hedge, since net operating cash generation is denominated in foreign currency. This structural exposure allows it to contract loans and financing instruments in USD to match financing payments with receivable flows from sales.

 

 


* Corresponding mainly to transaction costs (emission, fund raising, etc.) and impacts from surplus value resulting from the operation with Fibria.

 

At September 30, 2019, the total average cost of debt in USD was 4.8% p.a., considering the debt in BRL adjusted by the market swap curve (stable vs. 2Q19). The average term of total debt at the end of the period was 85 months (vs. 87 months in June 2019).

 

 


(1) Considers the portion of the debt with swap in foreign currency. The original debt was composed 73% of USD and 27% of BRL.

 

Cash and cash equivalents at September 30, 2019 was R$8,790 million, 10% higher than the previous quarter, 71% of which was invested in local currency, in government bonds and fixed income, and the remainder in short-term investments abroad.

 

The company maintains two stand-by credit facilities in the aggregate amount of R$3,082 million available through 2024, with one facility denominated in local currency in the amount of R$1 billion at a cost of CDI plus 2.5% p.a. when tapped (while not in use the cost in Brazilian real is 0.40% p.a.) and one facility in foreign currency in the amount of US$500 million at the cost of 3M Libor plus 1.0% p.a., potentially reaching 2.50% depending on the Company’s credit rating, when tapped (while not in use, the cost in USD is 0.30% p.a.). These funds, although untapped, help to improve the company’s liquidity conditions. As a result, the current cash position of R$8,790 million plus this line of R$3,082 million amounts to a readily available cash position of R$11,872 million (US$2,851 million). Accordingly, the ratio of cash (including these stand-by credit facilities) to short-term debt stood at 4.7 at September 30, 2019.

 

18


 

 

Net debt stood at R$55.2 billion (US$13.3 billion) on September 30, 2019, compared to R$52.5 billion (US$13.7 billion) on June 30, 2019. The increase in net debt in BRL is mainly due to the appreciation in the USD against the BRL.

 

 

The breakdown of the gross debt between trade and non trade finance on September 30, 2019 is shown below:

 

 

 

2019

 

2020

 

2021

 

2022

 

2023

 

2024

 

2025 em
diante

 

Total

 

Trade Finance

 

86

%

8

%

54

%

62

%

80

%

54

%

7

%

33

%

Non Trade Finance

 

14

%

92

%

46

%

38

%

20

%

46

%

93

%

67

%

 

The ratio of net debt to Adjusted EBITDA in BRL stood at 4.7 on September 30, 2019, compared to 3.5 at the end of 2Q19. In USD, the ratio of net debt to Adjusted EBITDA stood at 4.3 on September 30, 2019, compared to 3.6 at the end of 2Q19.

 

CAPITAL EXPENDITURE

 

In 3Q19, capital investments (cash basis) amounted to R$1,593 million, down 2% from 3Q18, mainly due to lower expenses with modernization, which was partially offset by the higher expenditures with the acquisition of forest assets from Duratex and with the investments in port operations. Compared to 2Q19, the increase was mainly due to higher expenses with land and forests (compliance with Duratex contract). The investments in Land and Forests, which amounted to R$541 million, seek to capture gains in the current operations and to create optionality for business growth.

 

19


 

Investiments (R$ million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

9M19

 

Guidance 2019

 

Sustaining

 

881

 

939

 

-6

%

875

 

1

%

2,736

 

3,813

 

Industrial Maintenance

 

211

 

185

 

14

%

156

 

35

%

534

 

767

 

Forestry Maintenance

 

630

 

749

 

-16

%

695

 

-9

%

2.112

 

2,953

 

Other

 

40

 

5

 

705

%

24

 

70

%

90

 

93

 

Expansion and Modernization

 

69

 

289

 

-76

%

46

 

50

%

194

 

387

 

Land and Forestry

 

541

 

363

 

49

%

387

 

40

%

1,205

 

1,349

 

Port Terminals

 

102

 

33

 

208

%

70

 

47

%

263

 

389

 

Total

 

1,593

 

1,624

 

-2

%

1,377

 

16

%

4,398

 

5,938

 

 

OPERATING CASH GENERATION

 

(R$ million)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

LTM 3Q19

 

Adjusted EBITDA

 

2,396

 

5,387

 

-56

%

3,101

 

-23

%

11,808

 

Maintenance Capex(1)

 

(881

)

(939

)

-6

%

(875

)

1

%

(3,821

)

Operating Cash Flow

 

1,515

 

4,448

 

-66

%

2,226

 

-32

%

7,987

 

Operating Cash Flow (R$/ton)

 

569

 

1,483

 

-62

%

929

 

-39

%

858

 

 


(1) Cash basis.

 

Operating cash generation, measured by Adjusted EBITDA less sustaining Capex (cash basis), amounted to R$1,515 million in 3Q19. The decrease compared to 3Q18 reflected mainly the lower net price of pulp in USD (-16%) and the lower pulp sales volume. Compared to 2Q19, the decline reflects the lower adjusted EBITDA, which in turn is explained by the lower net pulp price, partially offset by higher sales volumes. The per ton operating cash flow performance is also explained by the same factors.

 

 

IFRS 16

 

The Company first adopted CPC 06 (R2) / IFRS 16 as of January 1, 2019. As a result, it recognized on January 1, 2019 the amounts corresponding to the right-of-use of current contracts, in amounts equivalent to the present value of obligations assumed with its counterparties. These balances will be amortized over the terms of the leases. Upon adoption of the standard, the Company recognized lease liabilities for contracts that meet the definition of lease, in the amount of R$4,019 million. The updated balance of liabilities on September 30, 2019 was R$4,534 million, while the updated balance on the same date of “Rights of use over lease contracts” under assets was R$4,360 million. For more details, see Note 18 to the 3Q19 Quarterly Financial Statements (ITR).

 

20


 

SYNERGIES

 

On March 26, 2019, the Company announced its projected synergy gains from the business combination with Fibria Celulose S.A. Suzano expects to gradually capture from 2019 to 2021 operating synergies estimated at R$800 to R$900 million per year (before taxes), and on a recurring basis as from 2021, with a reduction in costs, expenses and capital expenditures from the areas of procurement, forest, industrial, logistics, sales, administrative and personnel, and expects to capture tax synergies that result in tax deductions of around R$2.0 billion per year, from the merger of Fibria into Suzano.

 

The estimated amount of operating synergies mentioned above does not include the costs for implementing the initiatives linked to these synergies, which are estimated by the Company at approximately R$200 million by 2021, 50% of which is planned for 2019. The synergies continue to be captured in line with the planning.

 

EVENTS AFTER THE REPORTING PERIOD

 

On October 17, 2019, the Company announced to the market the settlement of the issuance of debentures not convertible into shares, unsecured, in the total amount of R$750 million, with issuance date of September 15, 2019, term of 9 years and remuneration of 100% CDI + spread of 1.20 a.a.

 

CAPITAL MARKETS

 

On September 30, 2019, Suzano’s stock was quoted at R$33.65/share (SUZB3) and US$8.07 (SUZ). The Company’s stock is listed on the Novo Mercado, the trading segment of the São Paulo Exchange (B3 — Brasil, Bolsa e Balcão) with the highest corporate governance standards, and also is traded on the New York Stock Exchange (NYSE) - Level II.

 

 

Source: Bloomberg.

 

 

21


 

On September 30, 2019, the Company’s share capital was represented by 1,361,263,584 common shares, of which 12,042,004 were held in Treasury. Suzano’s market capitalization stood at R$45.8 billion on September 30, 2019. In 3Q19, the free-float corresponded to 53.3% of the total capital.

 

 

FIXED INCOME

 

 

 

Unit

 

Sep/18

 

Jun/19

 

Sep/19

 

Δ Y-o-Y

 

Δ Q-o-Q

 

Suzano 2021 — Price

 

USD/k

 

103.6

 

104.5

 

103.8

 

0,2

%

-0,8

%

Suzano 2021 — Yield

 

%

 

4.2

 

2.9

 

2.9

 

-1,3

 

0,1

 

Fibria 2024 — Price

 

USD/k

 

100.6

 

106.4

 

106.9

 

6,2

%

0,5

%

Fibria 2024 — Yield

 

%

 

5.1

 

3.8

 

3.6

 

-1,5

 

-0,2

 

Fibria 2025 — Price

 

USD/k

 

92.7

 

100.8

 

102.1

 

10,1

%

1,3

%

Fibria 2025 — Yield

 

%

 

5.4

 

3.8

 

3.6

 

-1,8

 

-0,3

 

Suzano 2026 — Price

 

USD/k

 

100.5

 

109.1

 

110.6

 

10,1

%

1,4

%

Suzano 2026 — Yield

 

%

 

5.7

 

4.2

 

3.9

 

-1,7

 

-0,3

 

Fibria 2027 — Price

 

USD/k

 

99.2

 

107.4

 

107.7

 

8,5

%

0,2

%

Fibria 2027 — Yield

 

%

 

5.6

 

4.3

 

4.3

 

-1,3

 

-0,1

 

Suzano 2029 — Price

 

USD/k

 

100.0

 

109.1

 

108.8

 

8,8

%

-0,2

%

Suzano 2029 — Yield

 

%

 

6.0

 

4.8

 

4.8

 

-1,2

 

0,0

 

Suzano 2030 — Price

 

USD/k

 

0.0

 

101.1

 

102.5

 

 

1,4

%

Suzano 2030 — Yield

 

%

 

0.0

 

4.9

 

4.7

 

4,7

 

-0,2

 

Suzano 2047 — Price

 

USD/k

 

103.9

 

113.6

 

114.7

 

10,3

%

0,9

%

Suzano 2047 — Yield

 

%

 

6.7

 

6.0

 

5.9

 

-0,8

 

-0,1

 

Treasury 10 years

 

%

 

3.1

 

2.0

 

1.7

 

-1,4

 

-0,3

 

 

Note: Senior Notes issued with face value of 100 USD/k

 

RISK RATING

 

Agency

 

National Scale

 

Global Scale

 

Outlook

 

Fitch Ratings

 

AAA

 

BBB-

 

Negative

 

Standard & Poor’s

 

brAAA

 

BBB-

 

Stable

 

Moody’s

 

Aaa.br

 

Ba1

 

Stable

 

 

22


 

UPCOMING EVENTS

 

Earnings Conference Call (3Q19)

 

Date: November 1, 2019 (Friday)

 

Portuguese (simultaneous translation)

English

10:00 a.m. (Brasília time)

10 a.m. (Brasília time)

9:00 a.m. (New York time)

9 a.m. (New York time)

2 p.m. (London time)

2 p.m. (London time)

Tel: +55 (11) 4003-4860

Tel: +1 866 890 2584 (access code: Suzano)

 

Please connect 10 minutes before the conference call is scheduled to begin.

 

The conference call will be held in English, feature a slide presentation and be transmitted simultaneously via webcast. The access links will be available on the Company’s Investor Relations website (www.suzano.com.br/ir).

 

If you are unable to participate, the webcast link will be available for future consultation on the Investor Relations website of Suzano S.A.

 

IR CONTACTS

 

Marcelo Bacci

Camila Nogueira

Roberto Costa

Luiz Otavio Souza Fonseca

 

Tel: +55 (11) 3503-9330

ri@suzano.com.br

www.suzano.com.br/ir

 

23


 

APPENDICES

 

APPENDIX 1(2) — Operating Data

 

Revenue
breakdown
(R$ ‘000)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

9M19

 

9M18

 

Δ Y-o-Y

 

Exports

 

5,277,946

 

8,178,625

 

-35

%

5,402,279

 

-2

%

15,066,030

 

20,315,087

 

-26

%

Pulp

 

4,892,173

 

7,817,554

 

-37

%

4,975,200

 

-2

%

13,963,834

 

19,350,626

 

-28

%

Paper

 

385,774

 

361,071

 

7

%

427,079

 

-10

%

1,102,196

 

964,461

 

14

%

Domestic Market

 

1,321,963

 

1,637,131

 

-19

%

1,262,800

 

5

%

3,897,960

 

4,070,350

 

-4

%

Pulp

 

448,042

 

681,549

 

-34

%

478,569

 

-6

%

1,432,137

 

1,747,011

 

-18

%

Paper

 

873,921

 

955,582

 

-9

%

784,231

 

11

%

2,465,823

 

2,323,339

 

6

%

Total Net Revenue

 

6,599,909

 

9,815,756

 

-33

%

6,665,082

 

-1

%

18,963,990

 

24,385,437

 

-22

%

Pulp

 

5,340,215

 

8,499,103

 

-37

%

5,453,769

 

-2

%

15,395,971

 

21,097,637

 

-27

%

Paper

 

1,259,695

 

1,316,653

 

-4

%

1,211,310

 

4

%

3,568,019

 

3,287,800

 

9

%

 

Sales Volume
(tons)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

9M19

 

9M18

 

Δ Y-o-Y

 

Exports

 

2,442,076

 

2,715,039

 

-10

%

2,126,088

 

15

%

6,172,893

 

7,439,425

 

-17

%

Pulp

 

2,340,238

 

2,625,025

 

-11

%

2,013,287

 

16

%

5,881,145

 

7,166,843

 

-18

%

Paper

 

101,838

 

90,014

 

13

%

112,801

 

-10

%

291,749

 

272,583

 

7

%

Paperboard

 

17,673

 

13,594

 

30

%

15,691

 

13

%

44,304

 

40,205

 

10

%

Printing & Writing

 

84,166

 

76,420

 

10

%

97,110

 

-13

%

247,445

 

232,377

 

6

%

Domestic Market

 

420,143

 

510,314

 

-18

%

388,334

 

8

%

1,207,051

 

1,388,714

 

-13

%

Pulp

 

208,929

 

266,079

 

-21

%

200,598

 

4

%

610,989

 

760,724

 

-20

%

Paper

 

211,214

 

244,235

 

-14

%

187,736

 

13

%

596,062

 

627,990

 

-5

%

Paperboard

 

32,173

 

36,555

 

-12

%

32,866

 

-2

%

95,214

 

96,715

 

-2

%

Printing & Writing

 

150,248

 

177,645

 

-15

%

133,459

 

13

%

429,028

 

469,467

 

-9

%

Other paper(1)

 

28,793

 

30,034

 

-4

%

21,410

 

34

%

71,820

 

61,809

 

16

%

Total Sales Volume

 

2,862,219

 

3,227,128

 

-11

%

2,514,422

 

14

%

7,379,945

 

8,831,241

 

-16

%

Pulp

 

2,549,167

 

2,891,104

 

-12

%

2,213,885

 

15

%

6,492,134

 

7,927,566

 

-18

%

Paper

 

313,052

 

336,024

 

-7

%

300,537

 

4

%

887,811

 

903,674

 

-2

%

Paperboard

 

49,846

 

50,149

 

-1

%

48,557

 

3

%

139,518

 

136,920

 

2

%

Printing & Writing

 

234,413

 

254,066

 

-8

%

229,814

 

2

%

676,473

 

701,844

 

-4

%

Other paper(1)

 

28,793

 

31,809

 

-9

%

22,166

 

30

%

71,820

 

64,910

 

11

%

 

Average net price
(R$/ton)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

9M19

 

9M18

 

Δ Y-o-Y

 

Exports

 

2,161

 

3,012

 

-28

%

2,541

 

-15

%

2,441

 

2,731

 

-11

%

Pulp

 

2,090

 

2,978

 

-30

%

2,471

 

-15

%

2,374

 

2,700

 

-12

%

Paper

 

3,788

 

4,011

 

-6

%

3,786

 

0

%

3,778

 

3,538

 

7

%

Domestic Market

 

3,146

 

3,208

 

-2

%

3,252

 

-3

%

3,229

 

2,931

 

10

%

Pulp

 

2,144

 

2,561

 

-16

%

2,386

 

-10

%

2,344

 

2,297

 

2

%

Paper

 

4,138

 

3,913

 

6

%

4,177

 

-1

%

4,137

 

3,700

 

12

%

Total

 

2,306

 

3,042

 

-24

%

2,651

 

-13

%

2,570

 

2,761

 

-7

%

Pulp

 

2,095

 

2,940

 

-29

%

2,463

 

-15

%

2,371

 

2,661

 

-11

%

Paper

 

4,024

 

3,918

 

3

%

4,030

 

0

%

4,019

 

3,638

 

10

%

 

24


 

Average net price (US$/ton)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

9M19

 

9M18

 

Δ Y-o-Y

 

Exports

 

544

 

761

 

-29

%

648

 

-16

%

628

 

758

 

-17

%

Pulp

 

526

 

752

 

-30

%

631

 

-17

%

611

 

749

 

-19

%

Paper

 

953

 

1,013

 

-6

%

966

 

-1

%

972

 

982

 

-1

%

Domestic Market

 

792

 

810

 

-2

%

830

 

-5

%

831

 

814

 

2

%

Pulp

 

540

 

647

 

-17

%

609

 

-11

%

603

 

637

 

-5

%

Paper

 

1,041

 

988

 

5

%

1,066

 

-2

%

1,064

 

1,027

 

4

%

Total

 

580

 

768

 

-24

%

676

 

-14

%

661

 

766

 

-14

%

Pulp

 

527

 

743

 

-29

%

629

 

-16

%

610

 

739

 

-17

%

Paper

 

1,013

 

990

 

2

%

1,028

 

-2

%

1,034

 

1,010

 

2

%

 


(1) Paper from other manufacturers sold by the distributor and tissue paper,

(2) Data for the comparison periods of 2018 (3Q18, 9M18 and LTM) are based on the simple sum or weighted average of Suzano + Fibria,

 

FX Rate R$/US$

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

Closing

 

4.16

 

4.00

 

4

%

3.83

 

9

%

Average

 

3.97

 

3.96

 

0

%

3.92

 

1

%

 

25


 

APPENDIX 2(2) — Consolidated Statement of Income and Goodwill Amortization

 

Income Statement
(R$ ‘000)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

9M19

 

9M18

 

Δ Y-o-Y

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenue

 

6,599,909

 

9,841,611

 

-33

%

6,665,082

 

-1

%

18,963,990

 

24,459,920

 

-22

%

Cost of Goods Sold

 

(4,986,414

)

(4,892,335

)

2

%

(5,222,119

)

-5

%

(14,933,426

)

(12,977,782

)

15

%

Gross Profit

 

1,613,495

 

4,949,276

 

-67

%

1,442,963

 

12

%

4,030,564

 

11,482,138

 

-65

%

Gross Margin

 

24.4

%

50.3

%

-26 p.p.

 

21.6

%

3 p.p.

 

21.3

%

46.9

%

-26 p.p.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expense/Income

 

(616,180

)

(700,767

)

-12

%

(559,902

)

10

%

(1,965,376

)

(1,946,967

)

1

%

Selling Expenses

 

(469,014

)

(392,486

)

19

%

(456,981

)

3

%

(1,367,298

)

(1,071,438

)

28

%

General and Administrative Expenses

 

(278,976

)

(298,543

)

-7

%

(278,031

)

0

%

(887,772

)

(817,388

)

9

%

Other Operating Income (Expenses)

 

116,132

 

(13,876

)

-937

%

171,199

 

-32

%

268,447

 

(62,692

)

-528

%

Equity Equivalence

 

15,678

 

4,138

 

279

%

3,911

 

301

%

21,247

 

4,551

 

367

%

EBIT

 

997,315

 

4,248,509

 

-77

%

883,061

 

13

%

2,065,188

 

9,535,187

 

-78

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, Amortization & Depletion

 

1,514,089

 

1,163,264

 

30

%

2,327,703

 

-35

%

6,313,082

 

3,254,448

 

94

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

2,511,404

 

5,411,773

 

-54

%

3,210,764

 

-22

%

8,378,270

 

12,789,635

 

-34

%

EBITDA Margin (%)

 

38.1

%

55.0

%

-17 p.p.

 

48.2

%

-10 p.p.

 

44.2

%

52.3

%

-8 p.p.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

2,396,426

 

5,387,027

 

-56

%

3,100,521

 

-23

%

8,258,189

 

12,811,064

 

-36

%

Adjusted EBITDA Margin(1)

 

36.3

%

54.7

%

-18 p.p.

 

46.5

%

-10 p.p.

 

43.5

%

52.4

%

-9 p.p.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Financial Result

 

(6,493,278

)

(2,791,151

)

133

%

79,065

 

-8313

%

(8,350,355

)

(9,427,613

)

-11

%

Financial Expenses

 

108,143

 

231,722

 

-53

%

149,607

 

-28

%

393,374

 

465,797

 

-16

%

Financial Revenues

 

(1,058,484

)

(862,378

)

23

%

(1,086,192

)

-3

%

(3,123,771

)

(2,080,375

)

50

%

Exchange Rate Variation

 

(3,685,540

)

(698,257

)

428

%

758,223

 

-586

%

(3,383,054

)

(3,445,887

)

-2

%

Net Proceeds Generated by Derivatives

 

(1,857,397

)

(1,462,075

)

27

%

257,427

 

-822

%

(2,236,904

)

(4,366,985

)

-49

%

Earnings Before Taxes

 

(5,495,963

)

1,457,373

 

-486

%

962,126

 

-685

%

(6,285,167

)

107,573

 

-6062

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income and Social Contribution Taxes

 

2,035,728

 

(435,433

)

-568

%

(262,278

)

-876

%

2,295,649

 

283,579

 

710

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

(3,460,235

)

1,021,925

 

-439

%

699,848

 

-594

%

(3,989,518

)

391,153

 

-1120

%

Net Margin

 

-52.4

%

10.4

%

-63 p.p.

 

10.5

%

-63 p.p.

 

-21.0

%

1.6

%

-23 p.p.

 

 


(1) Excluding non-recurring items,

(2) Data for the comparison periods of 2018 (3Q18, 9M18 and LTM) are based on the simple sum or weighted average of Suzano + Fibria,

 

Goodwill amortization - PPA (R$ thousand)

 

3Q19

 

3Q18

 

Δ Y-o-Y

 

2Q19

 

Δ Q-o-Q

 

COGS

 

(180,036

)

 

 

(1,165,069

)

-85

%

Selling Expenses

 

(206,700

)

 

 

(202,085

)

2

%

General and administrative expenses

 

794

 

 

 

5,404

 

-85

%

Other operational revenues (expenses)

 

(6,820

)

 

 

(1,596

)

327

%