Suzano Q2 Earnings Call Highlights

Suzano NYSE: SUZ reported second-quarter 2026 results marked by stronger free cash flow, higher pulp prices and improved paper sales volumes, while geopolitical volatility, inflation in oil-linked inputs and maintenance-related disruptions weighed on costs and operations.

Chief Executive Officer Beto Abreu said the company continued to demonstrate business resilience despite volatile geopolitical conditions. He also said the Arbex transaction closed on July 1, with governance and the management team fully established. Suzano is now focused on integrating the business, capturing efficiency gains and reducing total operational disbursement while deleveraging.

Abreu also announced that Aires Galhardo, executive vice president of pulp industrial operations, engineering and energy, was participating in his final earnings call. Carlos Aníbal will become the company’s Industrial and Engineering Executive Vice President.

Paper and Packaging Results

Fabio Almeida de Oliveira, Suzano’s executive vice president of paper and packaging, said the segment’s second-quarter performance benefited sequentially from higher volumes and prices and lower selling, general and administrative expenses. Those gains were partly offset by inflation in wood, oil-related products and logistics, as well as a longer-than-expected ramp-up after the annual maintenance outage at the Pine Bluff mill.

In Brazil, print-and-writing paper demand remained stable from a year earlier and rose 4% from the first quarter, according to industry group Ibá. Oliveira said the sequential increase reflected seasonality and demand for coated papers ahead of Brazil’s elections. Suzano’s domestic print-and-writing volumes rose 4% year over year and 10% sequentially.

Brazilian paperboard demand increased 8% from a year earlier and 11% from the first quarter. The company said some customers built inventories before anticipated paperboard price increases. Suzano’s domestic paperboard volumes rose 11% year over year and 28% sequentially.

In export markets, print-and-writing demand fell 4% year over year in the U.S. and Europe, while Latin American demand was stable amid increased participation by Asian suppliers. U.S. solid bleached sulfate shipments rose 11% year over year, though operating rates were around 82%. Oliveira said that after adjusting for recent capacity reductions and supply interruptions, the operating rate would rise to 90%, which could support better market conditions in the second half.

Suzano Packaging’s EBITDA was affected by a scheduled May maintenance outage, operational instability after the outage and higher resin and logistics costs tied to the Middle East conflict. Oliveira said the company began the third quarter with a strong U.S. order book and expects contractual pricing adjustments to begin offsetting prior cost increases. He also cited supply disruptions at a competitor’s mill as a factor supporting the outlook.

Pulp Market Outlook

Leo Grimaldi, executive vice president of global pulp sales, marketing and logistics, said pulp demand in Europe and North America exceeded expectations during the quarter, supported by stronger paper production, inventory replenishment and customers seeking to get ahead of expected cost increases. Pulp prices increased month over month in those regions.

China presented a more difficult backdrop. A narrow softwood-hardwood price spread and high softwood inventories at Chinese ports curtailed purchasing activity, leading to hardwood pulp price concessions near the end of the quarter. Suzano’s pulp sales totaled 2.9 million tons, below the year-earlier level but slightly above the first quarter, as production was constrained by planned maintenance, reduced operating rates and inventory rebuilding.

Higher prices across markets and the recovery of delayed invoicing to China and Asia lifted Suzano’s average export price to $601 per ton. Pulp EBITDA totaled BRL 4.2 billion, with a 48% margin, as higher U.S. dollar prices were partly offset by higher cash costs and unfavorable foreign-exchange effects.

Grimaldi said order intake in July returned to healthier levels as hardwood pulp prices in China approached the mid-$500-per-ton range. He said Suzano sees a more constructive Asian market in August, helped by seasonal demand, a widening softwood-hardwood spread and pulp prices below the cash cost of some Chinese producers.

According to the company’s estimates, average Chinese pulp cash costs range from $535 to $550 per ton, while the marginal cash cost is around $630 per ton. Grimaldi said industry data indicate that approximately 17 million tons of softwood capacity and 5 million tons of hardwood capacity are operating below cash costs at current China prices. He added that announced unplanned downtime and closures had reached about 2.5 million tons through August, compared with roughly 1.7 million tons for all of the prior year.

Costs, Hedges and Deleveraging

Galhardo said cash costs excluding downtime were BRL 843 per ton in the second quarter, broadly in line with guidance and 5% higher sequentially. Natural gas, caustic soda, chlorine dioxide, wood and logistics costs increased, while stronger utility results and higher production volumes provided partial offsets. Maintenance downtime costs were BRL 129 per ton, reflecting a heavier maintenance schedule and downtime at the Três Lagoas and Ribas mills.

The company maintained its forecast for average 2026 cash costs excluding downtime of about BRL 800 per ton. Management expects second-half costs to decline due to fewer significant downtimes, improved fixed-cost dilution, lower wood consumption associated with its Pangea arrangement and potentially stronger energy results.

• Higher oil-related prices added BRL 275 million in costs during the second quarter.
• Oil hedges produced a positive cash impact of nearly BRL 150 million, offsetting nearly 60% of that pressure.
• Foreign-exchange hedges generated a positive cash adjustment of BRL 480 million during the quarter.
• Net debt declined to $12.8 billion from $13 billion in the first quarter, while leverage increased to 3.4 times from 3.3 times due to lower trailing 12-month EBITDA.

Finance and Investor Relations Executive Vice President Marcos Moreno Chagas Assumpção said Suzano’s primary path to deleveraging will be internally generated free cash flow, supported by expected Arbex efficiency gains. The company is also pursuing sales of selected land plots with higher potential uses than forestry, though Abreu said there are no other significant divestment processes under consideration.

Abreu said deleveraging is Suzano’s capital-allocation priority for the next two to three years, with a target leverage level of 2.5 times. He said there is no merger-and-acquisition transaction in the pipeline and that the company’s focus remains on competitiveness, demand creation through its fiber-to-fiber strategy and extracting value from recent investments.

About Suzano (NYSE:SUZ)

Suzano SA 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.

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