Suzano Q2 2026 Earnings Report

Suzano EPS Results

• Actual EPS: $0.28
• Consensus EPS: $0.25
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

Suzano Revenue Results

• Actual Revenue: $2.24 billion
• Expected Revenue: $2.26 billion
• Beat/Miss: Missed by -$20.46 million
• YoY Revenue Growth: N/A

Suzano Announcement Details

• Quarter: Q2 2026
• Date: 8/12/2026
• Time: After Market Closes
• Conference Call Date: Thursday, August 13, 2026
• Conference Call Time: 9:00AM ET

Suzano (NYSE:SUZ) S.A. is a Brazil-based pulp and paper company recognized as one of the world’s leading producers of eucalyptus pulp. The company develops and supplies a wide range of fiber-based products that serve global demand in printing and writing papers, tissue paper, packaging, and specialty paper markets. With an extensive network of industrial units and logistics operations, Suzano manages every stage of production from forest plantations to final delivery, emphasizing integrated operations and quality control.

At the core of Suzano’s business is its sustainable forestry model, which covers more than one million hectares of managed eucalyptus plantations across Brazil. The company employs advanced silvicultural practices and certifications such as FSC® (Forest Stewardship Council) to ensure environmental stewardship and responsible land use. In addition to pulp production, Suzano generates energy from biomass, converting industrial waste into renewable electricity that supports both its operations and local communities.

Following the 2019 merger with Fibria Celulose, Suzano significantly expanded its production capacity and international footprint. The combined entity enhanced its position as the world’s largest eucalyptus pulp producer, supplying customers in North America, Europe, Asia and the Middle East. Suzano’s diversified revenue streams include domestic sales in Brazil as well as exports, with distribution channels spanning major ports and logistical corridors to ensure reliable delivery to pulp and paper manufacturers worldwide.

Founded in 1924 by Leon Feffer and headquartered in São Paulo, Suzano has grown from a regional forest products company into a global industry leader. The company is governed by a board of directors and an executive team based in Brazil, with a commitment to innovation in bio-based materials and ongoing investments in research and development. Through a blend of strategic expansion, sustainability initiatives and integrated operations, Suzano aims to drive long-term value for stakeholders and contribute to the transition toward a circular bioeconomy.

Suzano Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong free cash flow reduced net debt from $13.0 billion to $12.8 billion despite volatile market conditions, while oil and FX hedges provided BRL 150 million and BRL 480 million of positive cash adjustments, respectively.
• Positive Sentiment: Suzano completed the Arbex acquisition on July 1 with governance and management teams in place, and expects to begin capturing efficiency gains in the second half of 2026 and more substantially in 2027–2028.
• Negative Sentiment: Net leverage increased to 3.4x from 3.3x as trailing EBITDA contracted, and management reiterated that deleveraging remains the priority; shareholder returns and buybacks are unlikely to become more aggressive until leverage reaches about 2.5x.
• Positive Sentiment: Management maintained its 2026 cash-cost guidance of approximately BRL 800 per ton, citing fewer planned maintenance stoppages, lower wood consumption from the Pangea agreement, fixed-cost dilution, and potentially stronger energy sales in the second half.
• Positive Sentiment: Suzano sees a more constructive pulp outlook for the second half, with improving August order intake in China, balanced hardwood inventories, seasonal demand, and a large share of global capacity operating below cash cost; however, excess Chinese capacity and weak purchasing earlier in the quarter remain risks.

Presentation

[Operator]

Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management, and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to the future events, and therefore depend on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Suzano and could cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Beto Abreu. Please, you may begin your presentation.

[Beto Abreu, CEO at Suzano]

Hi, everyone. Thank you for attending our the second quarter result call. I want to start with the highlights of the following three points. The first one, we reported solid operation results with a strong free cash flow, once again showing resilience of the business, even with more volatile geopolitical conditions. The second point that I also would like to highlight is that on July 1st, we had the Arbex closing, fully aligned with what we had previously expected in terms of timeline. The governance and the management team is already 100% in place, and now we will focus on the integration and on capturing efficiency gains of this new organization. The third point, I also would like to say that Suzano will keep the focus on reducing the TOD, the Total Operational Disbursement, and, of course, on de-leveraging the business.

[Beto Abreu, CEO at Suzano]

I also want to take the opportunity to say that today is the last call for Aires Galhardo, our Vice President for the industry operation and also engineering. Aires is leaving a legacy of major achievements of Suzano, and we all want to wish him every success in his next journey. So thank you very much, Aires. On the next call, we will already have Carlos Aníbal as the company's Industrial and Engineering Executive Vice President. Carlos has been with us for 23 years already, has previously held the roles of Paper Business Vice President, Commercial Vice President, and also a Forestry Vice President. So huge experience in many areas of the company, and he has been both a supplier and a customer to the industrial area. So we wish him great success in this new cycle. Very welcome, Carlos.

[Beto Abreu, CEO at Suzano]

Having said that, I will turn over to Fabio to talk about the paper business.

[Fabio Almeida de Oliveira, EVP of Paper and Packaging at Suzano]

Thanks, Beto. Good morning, everyone. Please, let's turn to the next slide. Our the second quarter performance reflect higher sales volumes and prices, as well as lower SG&A on a quarter-over-quarter basis. These positive factors were offset by inflationary pressures on wood and oil-related products and logistics, as well as longer than expected ramp-up following our annual maintenance downtime in Pine Bluff mill. Looking at our addressable markets in Brazil, print and write demand, according to Ibá, remained stable in the the second quarter compared to the same period of last year. On a quarter-over-quarter basis, the 4% growth was driven by seasonality and higher demand for coated papers, benefiting from increased promotional and communication-related activity ahead of this year's elections. In such context, Suzano domestic print and write volumes grew 4% on a year-over-year basis and 10% on a quarter-over-quarter basis.

[Fabio Almeida de Oliveira, EVP of Paper and Packaging at Suzano]

In the export markets, print and write demand declined 4% year-over-year in the U.S. and Europe, according to PPPC. Latin America showed stability, led by an increase in participation of Asian players in the region. Now looking at paperboard. Demand in Brazil grew 8% in the the second quarter when compared to the same period of last year, and grew 11% against the the first quarter. We noticed some customer inventory build-up in the first half of the year ahead of the implementation of paperboard price increases. Against this backdrop, Suzano domestic paperboard volumes grew 11% on a year-over-year basis and 28% on a quarter-over-quarter basis. In the U.S., according to AF&PA's data, SBS shipments grew by 11% year-over-year, albeit at an operating rate around 82%, which is softer year-over-year and stable quarter-over-quarter .

[Fabio Almeida de Oliveira, EVP of Paper and Packaging at Suzano]

Adjusted for recent capacity closure of its Smurfit Westrock La Tuque mill, Clearwater's Cypress Bend capacity reduction, and the interruption of operations at the Nippon Dynawave facility, operating rates increases to 90% and should support better market dynamics in the second half of the year. Our Suzano Packaging sales volumes were quite stable on quarter-over-quarter and year-over-year basis. Turning to the EBITDA performance, our Brazilian operations improved 28% on a quarter-over-quarter basis, with higher volumes and better prices domestically and from our exports, despite unfavorable FX. Compared to the second quarter 2025, the EBITDA from our Brazilian operations declined 20% due to lower prices, export volumes, and FX.

[Fabio Almeida de Oliveira, EVP of Paper and Packaging at Suzano]

Suzano Packaging EBITDA was impacted by the scheduled maintenance outage in May and operational instability returning from the outage, as well as increased costs due to the ongoing Middle East conflict, especially in oil-related imports, mainly resins and logistics. Looking ahead to Suzano's paper packaging business performance, sales volumes from our Brazilian operations tend to improve across both domestic and export markets, given historical. In the U.S., we start Q3 with a strong order book with improvements in supply and demand dynamics. We remain focused on managing inflationary pressures related to the Middle East conflict, mainly in resin and logistics. Through initiatives already implemented or currently underway, we expect to mitigate most of these impacts going forward. Now I will hand over to Leo, who will be presenting our pulp business results.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

Thanks, Fabio, and good morning, everyone. Let me highlight the main developments in our pulp business unit during Q2 2026 and share our outlook ahead. Q2 was marked by different dynamics in pulp markets. In Europe and North America, pulp demand recurrently outperformed expectations, supported by stronger paper production due to war-related effects and inventory replenishments across the value chain as customers aim to get ahead of expected cost increases. These factors led to consistent month-over-month increases in pulp prices during the quarter. In China, the narrowing softwood-hardwood price spread and the high availability of softwood pulp at Chinese ports weighed on purchasing activity from paper producers. Despite solid paper production, higher wood costs impacted integrated local producers and a greater clarity around the delayed startup of Oki 2 mill.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

This unfavorable backdrop, driven primarily by softer dynamics, affected the broader pulp market and led to hardwood pulp price concessions towards quarter end. Even at lower prices, customer purchasing activity remained subdued in June. At Suzano, our Q2 was marked by constrained production output due to a concentration of planned maintenance downtimes added to our ongoing reduced operating rate, as well as an inventory rebuilding toward minimum operation levels required to support our operations, as previously discussed. As a result, our sales reached 2.9 million tons during Q2, lower compared to Q2 2025 and slightly above Q1 2026. Higher prices across all markets, combined with the recovery of delayed invoicing to China and Asia, drove our average export price to $601 per ton in the quarter.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

Turning to the right side of the slide, the BRL 4.2 billion in EBITDA with a 48% margin reflected higher prices in USD, partially offset by higher cash costs and FX headwinds. Looking forward, I would like to share our view on the key factors influencing pulp market fundamentals. Market dynamics in July were quite similar to those observed at the end of the the second quarter. Healthy demand in Europe and North America, but mounting pressure in Asia for the same reasons pointed out before. As hardwood pulp prices in China approach the mid $500 range, paper producers stepped up buying activity and our July order intake returned to healthy levels. In addition, our market intelligence team indicates that hardwood pulp inventory levels remain well-balanced, both at Chinese ports and on the hand of paper producers in China.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

As we move into August, we see a more constructive environment developing in Asia. Seasonal demand is expecting to strengthen. Hardwood pulp prices have moved below the cash cost of a number of Chinese producers and a wider softwood-hardwood price spread, enhance the competitiveness of hardwood grades. Together, these factors should support higher order intake volumes in China and Asia, reinforcing our confidence in a stronger second half of the year. Furthermore, the prospect of paper price increase announcements in Asia should provide additional tailwind for pulp demand in the coming months. While demand indicators are becoming more constructive, the supply side also presents potential upside risks to market fundamentals. At current CIF China price levels, a meaningful share of global pulp capacity remains under economic pressure.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

According to a well-known industry consultancy, their just updated numbers, approximately 17 million tons of softwood and 5 million tons of hardwood capacity are currently operating below cash cost levels at these China prices, representing close to 30% of global market pulp production. Production curtailments announcements have reached the headlines during these past months, mostly in softwood pulp, but still insufficient to rebalance the market fundamentals. At the same time, industry profitability continues to be pressured by rising input costs, several of which are linked to ongoing geopolitical tensions.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

Still on the pulp supply side of the equation, a stronger El Niño season this year may increase the likelihood of weather-related disruptions in key producing regions, with possible implications for wood availability and production costs. Together with the recent forest license revocations in Indonesia, these factors could contribute to a tighter than expected S&D scenario in the short term. To conclude, I would like to reiterate that Suzano's unmatched business platform, supported by our best-in-class assets and unique end-to-end logistics capability, provide us the agility to respond quickly to any market conditions and capture commercial opportunities. With our inventory levels already aligned with our operational needs, we remain well-positioned to navigate the ongoing volatile global environment. With that said, I would now like to invite Aires to share our cash cost performance for the quarter.

[Aires Galhardo, EVP of Pulp Industrial Operations, Engineering and Energy at Suzano]

Thank you, Leo. Good morning, everyone. Cash cost excluding downtime reached BRL 843 per ton in the the second quarter of 2026, broadly in line with our guidance. The 5% sequential increase mainly reflect higher input costs, particularly natural gas, caustic soda, and chlorine dioxide, amid continued pressure from global commodity and energy markets from the conflict in the Middle East. Wood costs also increased quarter-over-quarter, mostly driven by longer cartages and mill production mix. These effects were partially offset by stronger utilities results, supported by higher export volumes, favorable FX, and fixed cost dilution from higher production volumes. The conflict in the Middle East remain a factor affecting our year-over-year cost performance, contributing to higher chemical and energy price. Wood costs were pressured by higher logistics and harvesting activities driven by transportation mix, labor, and maintenance.

[Aires Galhardo, EVP of Pulp Industrial Operations, Engineering and Energy at Suzano]

These headwinds were partially offset by the same positive factors discussed in the quarter-over-quarter analysis, namely favorable FX effects and a stronger energy sales performance. In addition to the higher energy export volumes, energy price benefited from the excess energy auction related to Ribas mills, which became effective in January 2026. Beyond the information presented on the slide, I would like to provide some additional color on maintenance downtime costs. The BRL 129 per ton required in the the second quarter of 2026 mainly reflect a heavier maintenance schedule during the quarter, extending downtime at the Três Lagoas mill and the remaining impact of Ribas mill downtime that began in the the first quarter of 2026.

[Aires Galhardo, EVP of Pulp Industrial Operations, Engineering and Energy at Suzano]

Looking ahead, the company remains on track to deliver an average 2026 cash cost, excluding downtime, of approximately 800 reais per ton, in line with its guidance and disclosure assumptions, supported by the gradual cash cost decline and coming contracts. I pass the word to Marcos to continue the presentation.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

Thank you, Aires, and good morning, everyone. I will start on slide seven, explaining the impact of higher oil prices in our operations and the effectiveness of our hedging strategy. the the second quarter 2026, our costs increased by BRL 275 million due to higher oil-related prices, and we had a positive cash impact of nearly BRL 150 million from our hedging portfolios, compensating nearly 60% of the negative impact. Looking ahead, we have 85% of coverage over our hedgeable exposure in the second half of 2026 and 35% in 2027. As a sensitivity, if Brent prices remain at today's level of $87 per barrel, Suzano will receive a positive cash adjustment of BRL 250 million over the upcoming 18 months. Moving to slide eight, I will show that our currency portfolio continues to protect our free cash flow.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

the the the second quarter 2026, we had a positive cash adjustment of BRL 480 million from our FX hedges. Our portfolio of zero cost dollars remains solid at $4.6 billion, with an average put option of BRL 6.11 per dollar, covering 57% of our U.S. dollar exposure. As a sensitivity, if the BRL remains at today's level of 5.19, Suzano will receive more than BRL 4 billion on positive cash adjustments in the upcoming 24 months. Moving to slide nine. Our positive free cash flow in the quarter contributed to reduce our net debt from $13 billion the the first quarter 2026 to $12.8 billion the the the second quarter. our leverage ticked up from 3.3x the the first quarter 2026 to 3.4x the the second quarter, namely explained by the contraction in our last 12-month EBITDA.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

Following the acquisition of Arbex in the third quarter, we will consolidate 100% of Arbex net debt and only one quarter of EBITDA. But we believe that the correct way of looking at this metric will be to consider the last 12-month EBITDA of Arbex. We remain highly focused on executing our strategy to reduce Suzano's leverage following the conclusion of this transaction. Lastly, we maintain a very healthy cost of debt at 5.1% in U.S. dollars with a comfortable amortization schedule of 76 months, with limited amortizations in the short term. Important to mention that we continued our liability management effort the the second quarter 2026, and we issued BRL 2.5 billion, or $500 million in local instruments with an average tenure of nearly 11 years and a final cost 60 basis points below the Brazilian benchmark rate for the same period.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

Now I'd like to turn the call to Beto for his final remarks.

[Beto Abreu, CEO at Suzano]

Thank you, Marcos. I want to highlight three main points looking forward. The first one is that we still expecting higher demand on the second semester and then stronger sales. That's the first point. The second one is that we're still confident that we will deliver the guidance regarding the cash costs that we share with all of you. The third one is that we are already expecting efficiency gains from the Arbex operation in the second semester, since the team is already in place. Having said that, I will open for que-

[Operator]

We will now begin the Q&A session for investors and analysts. If you wish to ask a question, please click on Raise Hand. If your question has already been answered, you can leave the queue by clicking on Put Hand Down. Our first question comes from Caio Ribeiro with Bank of America.

[Caio Ribeiro, Analyst at Bank of America]

Good morning. Thank you for the opportunity. My first question is on your cash cost guidance for the year, which you kept at BRL 800 per tonne, which points to a drop to levels below BRL 800 per tonne in the second half of the year to achieve that. I know that you guys are confident on achieving that, but I just wanted to see if you can share some more color on the main components of that cash cost and the variables that should help you deliver that guidance. If you can give us also some color on the general trends that you're seeing for next year, how sticky some of those cost impacts from the conflict are, that would also be great. Secondly, a question on leverage.

[Caio Ribeiro, Analyst at Bank of America]

With the company targeting to reach that level below 2.5x that debt to EBITDA in 2027-2028, you still have to consolidate the net debt from Arbex. I just wanted to see if you can share some color on the pathway towards achieving that level. If you believe at this point that it can be reached solely with free cash flow generation in the period, or to what extent you are incorporating divestments as part of that assumption to reach that level, that would also be very helpful. Thank you.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

I will start. Hi, Caio. Thank you. I will start with the leverage question. The bulk of the free cash flow generation will continue to come from our operations. We expect to generate that from our business. As Beto mentioned, we also expect Arbex to contribute on our deleveraging process as they will be able to generate efficiency gains over the upcoming quarters, namely in 2027 and in 2028. On top of that, as we started mentioning in our last Suzano Day in December last year, we are also focused on a couple of divestments on non-core assets. We mentioned to you that we will have a strategy of selling land plots in Brazil that could be sold to a higher best use than only being used by planting forestry.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

We started that in the last months and last quarters, and we expect that to also help on the deleveraging process going forward.

[Aires Galhardo, EVP of Pulp Industrial Operations, Engineering and Energy at Suzano]

Hi, Caio. Aires speaking here. For second semester, there are three main reasons to us expecting a decrease in our cash cost. First of all, we do not have significant downtimes at our facilities that will increase our production, delivering the deletion of the fixed costs. The second one, these downtimes normally impact other costs in the analysis because normally we bring to the general shutdown some other maintenance that we have scheduled to the year. The third most important factor, we expect a reduction of the consumption in the woods, especially because we have been totally in place our deal with Pangea that we presented in the end of last year. It will take place in a good amount, and we reduce probably our ratios and our wood consumption in the coming years. There is another important fact, that is energy.

[Aires Galhardo, EVP of Pulp Industrial Operations, Engineering and Energy at Suzano]

Probably in a specific quarter, we have an increase of surplus and it will deliver a better result. For next year, I prefer Carlos be in place to say what you are waiting for coming year.

[Caio Ribeiro, Analyst at Bank of America]

Okay. That is very clear. Thank you, gentlemen.

[Operator]

Our next question comes from Marcio Farid with Goldman Sachs. You can open your microphone.

[Marcio Farid, Analyst at Goldman Sachs]

Thank you. Morning, everyone. Well, first of all, Aires, I have been following your work since your Fibria times, and very well done. Congrats on the great journey on Fibria and then on Suzano. It has been truly remarkable, the operational deliveries you guys have delivered. So congrats and good luck on the next steps. I have a couple of questions. The first one on Arbex. I have seen many LinkedIn updates. Clearly, you have been moving fast in terms of putting the team together, and I am sure by now you probably have an even better idea on what the company and the assets and the markets look like versus when you did the due diligence for the acquisition. So it would be great to hear your updates, early impressions, next steps, and your ongoing conviction on the deliveries that can be expected.

[Marcio Farid, Analyst at Goldman Sachs]

Secondly, maybe on the paper side, I think Fabio mentioned China imports have been hitting the market. We have been hearing about Chinese and Indonesian imports being more harmful to the Brazilian market as well. Trying to understand if you can see actions being taken by the government in terms of tariffs and how you are positioned for that, and also if you can comment on the U.S. profitability side, that would be great as well. Thank you both.

[Beto Abreu, CEO at Suzano]

Hi, Marcio. This is Beto. Let me go over the Arbex and then the team here will cover the other questions. I think three things that we should highlight on the Arbex deal. The first one it is that the team, I will say the clean team from Suzano and from Kimberly-Clark, have been working together during all this period of time, and they have delivered tremendous job in terms of carve-out and also in terms of writing down all the value gain streams that we had in place. All the premises that we share once we announce the deal, we want to confirm that they all are still in place. We are now focused to deliver the premise that we also share with you. The second thing is that the governance also it is working already.

[Beto Abreu, CEO at Suzano]

We have a board already in place with three members from Suzano, two from Kimberly-Clark. They already had a first meeting. They already are working to implement the plan that we have approved. Secondly, we are very glad about the management team that we were able to put together with people from both companies and also hiring people from outside. We are confident that we have a very strong team to extract all the efficiencies that we share with you once we announce the deal. The team very confident about what we are able to build with this initiative. Thank you. Let us take the— I will hand over to Leo.

[Fabio Almeida de Oliveira, EVP of Paper and Packaging at Suzano]

No, it is Fabio here.

[Beto Abreu, CEO at Suzano]

To Fabio.

[Fabio Almeida de Oliveira, EVP of Paper and Packaging at Suzano]

Marcio, thank you for your question. Let me take the first part about the Chinese imports. Yes, we have seen a big inflow of Chinese ports in the first half of the year. This is mainly given the stronger BRL for most of the first part of the year, and also lower freights that we have seen, especially in the beginning of the year. Things have changed a little bit. We have seen some price increases announced by Indonesian, Chinese paper producers. We have also seen rising freight costs, mainly with the Middle East conflict. The Brazilian real has also weakened a little bit. Let's see what happens in the second half of the year with these adjustments.

[Fabio Almeida de Oliveira, EVP of Paper and Packaging at Suzano]

Through Ibá, the main players are discussing ways of protecting the domestic industry, looking at our import duties and see if we have the right level of import duties in order to protect what we are doing. We are discussing with the Brazilian government ways of protecting the national industry here. Your second question regarding U.S. profitability, we have had a difficult the second quarter. Part of that was expected. We had a cold maintenance outage, which is first time that we have done that in Pine Bluff. It's the one that we turn off all the utilities at the mill. We have some difficulties bringing the mill back to operations, and that affected our results in the the second quarter. We also have a delay in pricing protection.

[Fabio Almeida de Oliveira, EVP of Paper and Packaging at Suzano]

We have 80% of our volume under contract, and our contracts, they offer some inflation protection prices, but there's a lag of three months in between when the cost hit us and when we can increase price to customers. That the second quarter was the lag period that we had higher costs and prices that will start rising now in the third quarter. We are optimistic about the second half of the year, as I mentioned. There's some things happening in the market. Our main competitor had a major accident at the mill. It's still down, not operating. That's Nippon Dynawave. We have received a very strong orders book for the second half of the year. We now need to produce well so that we can collect all these volumes that we have already in place here with us in terms of orders.

[Fabio Almeida de Oliveira, EVP of Paper and Packaging at Suzano]

We are very positive about the second half of the year. We have no major event in terms of maintenance planned for that period. We see the mill running much better now in August already. We are optimistic.

[Marcio Farid, Analyst at Goldman Sachs]

Great. Thanks a lot, Beto and Fabio. I will turn it over.

[Operator]

Our next question comes from Rafael Barcellos with Bradesco BBI. Your microphone is open, sir.

[Rafael Barcellos, Analyst at Bradesco BBI]

Good morning. Thanks for taking my questions. Aires, thanks for the interactions over the past few years. Wishing you good luck and congrats on Aníbal for the new position. First question on pulp market. Leo, your speech seemed a bit more constructive versus what we have been hearing over the past one or two months. I just wanted to hear your thoughts on how strong you believe demand will be in the end of August as we approach a stronger demand seasonality. If you are comfortable to call where we are in hardwood pulp as the bottom. Any other comments that you can provide on the cycle could be interesting as well. The second question, Beto, on capital allocation. The company still have some potential investments going forward. You have the right to increase your share in Lenzing, in Arbex.

[Rafael Barcellos, Analyst at Bradesco BBI]

You also have a buyback program opened. You have this priority now to deleverage. I just wanted to hear your thoughts and your framework here on which areas you should prioritize. If you can consider any sort of asset sales to accelerate deleveraging, and your overall thoughts on how you're going to balance the buybacks, the potential investments, and this deleveraging process. Thank you.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

Hi, Rafael, and good morning. Thank you for your question. Yes, indeed, we are a bit more constructive when it comes to volume allocations. As we know, second half of the year is certainly higher than the first half of the year. During this first weeks of August, all interactions that we are having with our Asian customers, and Chinese customers, obviously, are extremely positive. We expect that August order intake will exceed significantly our average order intake pattern. We are quite confident of that. We are also seeing now the first signs of integrated Chinese producers, mainly the higher cost ones, already coming to the table to start discussing a negotiation. That's always a big indication of higher volumes going forward. Regarding your question, if we see hardwood pulp reaching the bottom, obviously, we cannot give forward-looking statements.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

But we are confident, as negotiations have started, that at current levels or very close to them, we will see the industry moving in China and in Asia, and consecutively in Europe and North America as well. We are very confident of a strong second half of the year.

[Beto Abreu, CEO at Suzano]

Hi, Rafael. Thank you for your question. To be very straightforward in terms of capital allocation, our priority, it's really deleveraging. This is where we're going to focus despite rights that we might have on those deals that you mentioned before. This is also related to buyback. Again, the focus and the main priority of the company is deleveraging, and this is what we're going to focus on. Regarding asset sales, you know that we own nearly 1 million hectares in terms of land, and we have a very small part of that we call higher and best usage of the land that we might divest. Actually, we have started already

[Beto Abreu, CEO at Suzano]

Besides that, there's no other important divestment process that we are taking into consideration at this time.

[Rafael Barcellos, Analyst at Bradesco BBI]

Perfect. Thank you, Beto and Leo.

[Operator]

Our next question comes from Daniel Sasson with Itaú BBA. Your microphone is open, sir.

[Daniel Sasson, Analyst at Itaú BBA]

Hi, everyone. Thanks for the opportunity. Before we start, I'd also like to thank Aires for all the changes we've had over the years, your constant availability to engage with us. It's really been a privilege to follow your journey across Aracruz, Fibria, and Suzano. So best of luck in your next steps. My first question, Marcos, you mentioned that you expect the internal free cash flow generation to be the main driver of your deleveraging path over the next few years, followed by some opportunities to divest from non-core assets and so on and so forth. At what time or at what point do you believe the company can rethink about its formal policy, so as to maybe send a clearer message to the market with regards to shareholders' returns? For instance, by changing its dividend policy.

[Daniel Sasson, Analyst at Itaú BBA]

Because I think that the main point of discussion we've had with investors since last night was the super strong free cash flow operating that you posted this quarter, right? Once this continues to materialize after the incorporation of Arbex, maybe you are going to start to be asked about capital allocation and so on and so forth. I would like to understand how your official policies enter into this discussion. Then maybe my second question to Leo, if you could expand a little bit more. Leo, of course, you cannot say whether you are close or not to the bottom of prices for this cycle, but if you could give us more information or more details about what you just said, that there are some high-cost integrated Chinese producers maybe considering buying market pulp, right? What are your estimates in regards to the Chinese pulp production cost?

[Daniel Sasson, Analyst at Itaú BBA]

Depending on if they use domestic wood or if they import wood chips from Vietnam, for instance, because we are seeing wood chip prices increasing across Southeast Asia in general. That would be really helpful. Thank you, everyone.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

Hi, Daniel. Thank you for your question. First, I would say that we continue to be very focused on our strategy. The first point is we will continue to be never satisfied in terms of how competitive we can be in our operations. We are always looking for opportunities to improve our efficiency in all the value chain that we have. Starting from the nursery, to the forestry, to the logistics on the commercial area, in the industrial area, so on and so forth. This will be a top priority for us. We believe that this will help and contribute to generate cash to reduce our leverage. Second point, as we mentioned, we will continue to extract value from our recent growth investment that we made, and the most relevant one is Arbex for sure.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

We are confident that we will be able to deliver the efficiency gains that we are expecting for that business. Last point, we should look for optionalities that we can have and that we can bring to the table as we have a replicable asset base in our hands. We start that with the land plots, as we mentioned. But we could extrapolate that into other business that we have. Of course, whenever trying to extract value from our asset base, this could take some time. We mentioned to you before that we have very strong and competitive logistic assets that we have in Brazil, replicable as well, that we could extract value from that in the future, but could take more time. For the short term, we are definitely focused on bringing the leverage to the level that we believe it is healthy for the company, 2.5x.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

As we reach that, we will be able to decide on a more aggressive or not return to shareholders. I would say that the main assumption behind considering a new return to shareholder will be focused on deleveraging the company to 2.5x.

[Daniel Sasson, Analyst at Itaú BBA]

Super clear, Marcos. Thank you.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

Hi, Daniel. This is Leo here. Thanks for your question. I am going to try to give color in other variables other than just wood to fundament why we see a constructive the second quarter or second half of the year with several potential upsides in the model. First, with all our market intelligence team in China and all the work we do, our current estimate of average cash costs for pulp production in China ranges from USD 535-USD 550. That is the average Chinese cash cost. Obviously, older mills operate at a higher cash cost and newer mills

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

at a lower cash cost. Prices, as you know, are very close to these levels and already breaching the cash cost of higher cost Chinese producers. I am not even talking about marginal cash cost because that is, in our view, around USD 630. We really think that something has to go on this global pulp scenario, as I mentioned before. I continue to say it is completely unsustainable to see an industry operating with 30% of the total production underwater. This cannot be sustained for a longer time. A bigger evidence of that is the amount of unplanned downtimes and closures announcements that we have seen so far. I have always been saying that this is one of the drivers of change. That is not in our forecasting models, but that happened and could happen in cycles like this.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

Just to exemplify, the unplanned downtimes and closures last year totaled roughly 1.7 million tons adding softwood and hardwood. What we know up to today, with yesterday's announcement of Metsä Kemi, we are now reaching 2.5 million tons already. Again, that's just until yesterday. It's a 45% increase in unplanned downtimes and closures, up into August. That's almost 1 million tons of product that's now less available to markets, but in my view, still insufficient. We still need to see more closures for market to recover balance. Last but not least, it's important also to look at the inventory levels at Chinese ports. They are high indeed, but they are reducing. We see a reduction from peak of roughly 300,000 tons. In our view, that's all softwood inventories being reduced.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

A few months ago, inventories of softwood represented 65% of what was available at ports based on our market info and teams on the ground. Today, we see maybe a 50/50 build up in terms of what is the Chinese stocks. Meaning that if you make the calculations, hardwood is completely on balance. There's still an overstock in softer grades, which we believe with this number of announcements of closures and expected future announcements to come under this economic scenario which I mentioned, should again reshape and rebalance Chinese inventories, and consequently, the market as well.

[Daniel Sasson, Analyst at Itaú BBA]

Thank you, Leo.

[Operator]

Our next question comes from Rodolfo Angeli with JPMorgan. You can open your microphone.

[Rodolfo Angeli, Analyst at JPMorgan]

Good morning. I have a couple of questions. One is just to Marcos on working capital outlook. Just wanted to hear if you have any visibility on potentially freeing up some working capital, to help that process of deleveraging in the second half of the year. The main question I have is for Beto on strategy. When we discuss the investment case for Suzano, one pushback that we constantly receive is, again, because of the past, and the fears of potential opportunistic M&A shifting the focus away from deleveraging and shareholder returns into more investments. I just wanted to make the question very vocally to you, so that we can for sure clarify even better how management sees M&A as in your toolkit of potential things to do and just how you look at it as a whole. That's it from me. Thank you very much.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

Hi, Rodolfo. Thank you for your question. On working capital, definitely we have a very strong focus on improving that line. This is an internal target for the company and it resounds on the never satisfied approach that we have. How can we be more effective and more efficient on our inventories? How can we be more efficient on our CapEx? So on and so forth. We will continue to look at this line with the very close eyes and looking to capture opportunities. However, I would say that there are fluctuations in that line that are very frequent, right, in most of the accounts that are relevant. Accounts receivables, accounts payable, CapEx, postponements, so on and so forth. It's very difficult to predict or to forecast anything on that line.

[Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations at Suzano]

You can bear in mind that this is a strong focus of the management at this point in time.

[Beto Abreu, CEO at Suzano]

Hi, Rodolfo. Thank you for your question. I have been saying that our strategy, it's very concentrated currently on, I'll call reshaping the level of competitiveness of our company. We still have a lot to do on that area in the next couple of years. The commercial team have been doing a great job in what we can call creating new demand through the fiber-to-fiber strategy.

[Beto Abreu, CEO at Suzano]

The potential of those initiatives is still in place and is still growing. As I said, on the very short term, the nexttwo, three years, deleveraging the business. There is no M&A in the pipeline at all. This is what we are going to keep focused, and this is what we want to do. Thank you, Rodolfo, for your question.

[Rodolfo Angeli, Analyst at JPMorgan]

Very clear. Thank you.

[Operator]

Our next question comes from Alfonso Salazar with Scotiabank. You can open a microphone, sir.

[Alfonso Salazar, Analyst at Scotiabank]

Yes. Thank you. The question that I have tries to put together some of the comments that you have made during the presentation. The fact that China is exporting more, what you mentioned about the situation in China. We know that consumption in China has been very weak recently, overall consumption, not only paper. This is something that more people are starting to think this is structural, not something cyclical, and at the same time, they are producing more. I am wondering if, at some point, are you considering what could happen if you start having over capacity and more supply in China, more exports, the need for more exports, as we have seen in many other industries. What grades and what markets you think could be more exposed? What would be the strategy?

[Alfonso Salazar, Analyst at Scotiabank]

This is important, especially as you are getting more exposure to new markets through Arbex. If you can comment on how this situation could unfold, or what are your thoughts about what we are seeing today.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

This is Leo here. I'm going to answer your question, but before that, I missed. I'm going to get back to Daniel's question when he asked about the wood impact in China. Just to clarify, because I skipped that one. We are seeing today the Chinese industry using roughly 58%-60% of their needs from local wood in China, and roughly 40%-42% imported. The imported part of it, there is a price increase. As we all know, that ranges from $30-$50 from end of last year. I think in two calls ago, I mentioned that this could be a probable impact related to the revocation of the Indonesian licenses and now Indonesia importing wood from Vietnam, which is what's happening. In China, there's also an uplift in prices compared to early last year's prices of roughly $30 BDMT.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

We see a lot of volatility in the short term, very related to the typhoon season. There's a big correlation of wood prices in China and these weather-related events. Every time a typhoon occurs, and obviously the recurrence of those in a strong El Niño year is higher. We see peaks every once in a while. All in all, if we consider the lowest part of this range of $30 BDMT increase, we're talking about $60 increase in the cash cost of the Chinese producers. If we consider the upper range of $50, that's a $100 per ton cash cost increase for Chinese integrated or pulp producers. That's our view on wood. Now going to Alfonso's question. This is a big dilemma, right, Alfonso? First of all, I would start by saying what I don't agree to.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

We don't agree that the consumption in China in paper grades is weak. We see, in most grades, packaging and tissue, double-digit growth, demand growth in China. It is not our view that we're seeing a contraction of demand in that grades. Obviously, printing and writing grades still grow domestically. The demand for those still grow, but at a lower pace and not double digits. We're not seeing at all, in any of these grades, a trend in paper grades that point out to a negative consumption trend. It is a positive consumption trend in China, obviously excluding exports and adding imports to that. Yes, there is an overcapacity in the industry. This is not new. This is not 2026 information. This has been going on for many years or decades.

[Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics at Suzano]

But it's important to say that there are grades that are easier to be exported, which are more efficient in logistics. I would say printing and writing and packaging grades. As you correlated to Arbex, your question and tissue. Tissue, obviously, is a product that's much harder to be exported because logistics and the cost of logistics is a key component. So it's a product that usually you would reach efficiency closer to your production basis. So risk levels differ among different grades in terms of paper production.

[Alfonso Salazar, Analyst at Scotiabank]

That's very helpful. Thank you.

[Operator]

The Q&A section is over. We would like to hand the floor back to Mr. Beto Abreu for his closing remarks.

[Beto Abreu, CEO at Suzano]

Thank you very much again, all, for our the second quarter 2026 results. I want to thank you, and if there is any further question, please get in contact with our IR team. We will be keen to answer any further doubts. So thank you very much, and have a good day.

[Operator]

The Suzano S.A. the second quarter of 2026 conference call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good day.

Participants

Executives

• Beto Abreu, CEO
• Fabio Almeida de Oliveira, EVP of Paper and Packaging
• Leo Grimaldi, EVP of Global Pulp Sales, Marketing, and Logistics
• Aires Galhardo, EVP of Pulp Industrial Operations, Engineering and Energy
• Marcos Moreno Chagas Assumpção, EVP of Finance and Investor Relations

Analysts

• Caio Ribeiro, Analyst at Bank of America
• Marcio Farid, Analyst at Goldman Sachs
• Rafael Barcellos, Analyst at Bradesco BBI
• Daniel Sasson, Analyst at Itaú BBA
• Rodolfo Angeli, Analyst at JPMorgan
• Alfonso Salazar, Analyst at Scotiabank