What Suzano (SUZ) Said on Its Q3 Earnings Call

Key Points

• Suzano expects to reduce net debt below $14 billion by year-end 2026, relying on strong fourth-quarter free cash flow rather than material asset sales. Reported net debt was $14.7 billion at September’s end, including Arbex’s debt.
• Pulp demand and prices strengthened, supporting a 12% sequential rise in pulp EBITDA to BRL 4.8 billion. However, Suzano raised its 2026 pulp cash-cost forecast to about BRL 825 per ton from BRL 800, citing higher oil prices and a stronger U.S. dollar.
• Packaging operations weighed on results, with combined paper and packaging EBITDA down 14% sequentially amid higher costs and maintenance. Problems at the Pine Bluff mill were largely addressed by September, and October production returned to normal.

Suzano NYSE: SUZ reported its first quarterly results including the Arbex consumer goods business and raised its 2026 pulp cash cost forecast, while executives said stronger pulp sales and prices should help the company reduce debt in the fourth quarter.

CEO Beto Abreu said Arbex performed in line with the company’s plan in the third quarter of 2026. He described debt reduction, operational competitiveness and efficiency gains at Arbex as management’s priorities, and said Suzano expects the fourth quarter to be its strongest of the year.

Pro forma leverage, including Arbex’s last 12 months of EBITDA, was unchanged from June at 3.4 times in U.S. dollars. Reported net debt reached $14.7 billion at the end of September, including the acquisition and consolidation of Arbex’s debt.

Arbex contribution and debt plans

Suzano’s consumer goods division posted EBITDA of BRL 803 million with a 16% margin. Arbex contributed BRL 694 million, while the Brazilian consumer goods operations added BRL 109 million, up 31% from a year earlier on stronger volumes and lower costs.

Finance chief Marcos Moreno Chagas Assumpção said Arbex generated slightly more than $530 million in EBITDA over the last 12 months. Suzano paid Kimberly-Clark for a 51% stake in the business, and the company is now reporting consumer goods as a separate segment.

Assumpção reiterated Suzano’s guidance for net debt below $14 billion by the end of 2026. Excluding Arbex, net debt declined to $12.5 billion in September from $12.8 billion in June. He said the fourth-quarter debt target did not include any material asset sale and instead relied on strong free cash flow, supported by pulp volumes and prices.

Management expects Arbex efficiency gains to begin appearing in the fourth quarter. Assumpção said opportunities include reducing administrative costs, renegotiating procurement contracts and improving industrial productivity. He reaffirmed the company’s target of reaching $175 million in synergies over three years.

Pulp sales improve, but cost forecast rises

Suzano sold 3.19 million tons of pulp in the third quarter at an average export price of $591 per ton. That price was slightly below the second quarter but 13% higher than a year earlier. Pulp EBITDA rose 12% sequentially to BRL 4.8 billion, with a 50% margin, helped by higher volumes, lower costs and a more favorable exchange rate.

Leo Barretto de Araújo Grimaldi, executive vice president of pulp commercial and logistics, said demand strengthened midway through the quarter after the expected startup of the OKI 2 pulp project was delayed from the fourth quarter of 2026 to the first quarter of 2027. Customers had previously reduced inventories in anticipation of new supply, he said.

Grimaldi said Suzano implemented announced price increases globally in October without concessions or a reduction in planned sales volumes. Chinese and other Asian customers placed orders at levels consistent with historical volumes, he added. The company was running invoicing backlogs exceeding two months in some cases and aimed to return to normalized levels by year-end.

Executives declined to disclose future pricing plans. Grimaldi said Suzano was monitoring Indonesian wildfires and a fire at the OKI 1 mill, while cautioning that the extent of the effects remained unclear. He said wildfire-related haze and damage to wood supplies could affect project construction, harvesting or pulp production.

Pulp cash production cost excluding downtime fell 2% from the second quarter to BRL 825 per ton, as operational efficiencies and lower wood costs partly offset higher chemical and energy costs. Carlos Aníbal Fernandes de Almeida Júnior, executive vice president of pulp operations, said approximately BRL 14 per ton of quarterly cash cost was associated with commodity pressures linked to the Middle East conflict.

Suzano raised its full-year 2026 cash production cost guidance, excluding downtime, to approximately BRL 825 per ton from BRL 800. Assumpção said the revised assumptions included a stronger U.S. dollar and oil at $94 per barrel rather than $84, with higher oil prices the larger contributor to the change. The company expects to update its 2027 total operational disbursement guidance by year-end.

Packaging operations face setbacks

Combined paper and packaging EBITDA fell 14% from the second quarter. Fabio Almeida de Oliveira, executive vice president of paper and packaging, cited higher logistics and administrative costs and a planned maintenance shutdown at the Mucuri mill in Brazil.

At Suzano Packaging, operational problems at the Pine Bluff mill reduced operating rates and inventory availability while raising production costs. Oliveira said the issues were substantially addressed by the end of September and that October production was at a normal level. Suzano continues to target positive cash flow from the mill in 2028.

Exports from Brazilian paper operations fell 9% sequentially and 27% year over year, reflecting nonrecurring disruptions from a new SAP system implemented in July. Oliveira said export operations had improved and the company was working to clear the backlog in the fourth quarter.

About Suzano (NYSE:SUZ)

Suzano SA is a Brazilian forest products company and one of the world's major producers of eucalyptus pulp. The company cultivates and manages planted forests, primarily in Brazil, and processes wood into market pulp used by manufacturers of tissue, paper, packaging and other fiber-based products.

Suzano also produces and sells a range of paper products, including printing and writing paper, packaging paper and paperboard, as well as tissue products and consumer paper goods in selected markets.

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