Suzano Reports Record Pulp Sales In 1Q20

Suzano (NYSE: SUZ) is reporting today its results for the first quarter of 2020 (1Q20). The period was marked by strong pulp demand, a trend that supported record high sales volume for first quarters and a drawdown of 500,000 tons in the company's inventories, which consequently returned to normal levels.

In the period, 2.9 million tons of pulp were sold, which is in line with the volume registered in the fourth quarter of 2019 (4Q19) - seasonally the industry's strongest quarter in the year. Compared to the same quarter last year (1Q19), pulp sales volume grew by 65%.

In the paper segment, sales volume amounted to 268,000 tons, down slightly from 1Q19. As result, on a consolidated basis, Suzano sold 3.1 million tons of pulp and paper for net revenue of R$7 billion in the period.

Suzano's strong growth in pulp sales, reduction in production costs and status as an exporter, which benefit from the depreciation in the Brazilian real against the U.S. dollar, all helped Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) to reach R$3 billion, while operational cash generation came to R$2.3 billion. Both results are higher in comparison with 4Q19 and 1Q19.

"The numbers attest to the company's resilience during crises and are a result of Suzano's strong competitiveness, broad global footprint, solid financial condition and the systemic management adopted to confront the COVID-19 pandemic," said Walter Schalka, CEO of Suzano.

Pulp production cash cost, excluding the effects from the scheduled downtimes, once again registered a positive performance, benefiting increasingly from synergy gains and operating efficiency gains. The indicator stood at R$596 per ton, down 6% and 11% compared to 4Q19 and 1Q19, respectively.

On the other hand, the same factor of currency variation, which leverages growth in revenue and cash generation, also generates a negative accounting impact by increasing the balance of USD-denominated debt when converted into Brazilian real. This effect, however, is purely of accounting nature, with no effect on cash, since it is associated with debt coming due only in the long term. Due to this non-cash foreign exchange effect, the company registered a net loss of R$13.4 billion in 1Q20.

Coronavirus

Due to the scenario triggered by the spread of the coronavirus around the world, Suzano announced a reduction in its capital expenditures from R$4.4 billion to R$4.2 billion in 2020. However, this decision will not affect the company's competitiveness, the efforts to ensure the health and safety of employees and partners or the quality of the products and services offered to clients.

Since the crisis first began to deteriorate, Suzano has adopted a series of operational and administrative measures to support employees, partners and society, while ensuring the continuity of its business, which is essential during these times of physical distancing. These actions include the company allocating R$50 million to help combat the spread of COVID-19 and to safeguard the lives of people in treatment.