Suzano S.A. (SUZ) Q3 2022 Earnings Call Transcript

For the period ending September 30, 2022

October 28, 2022 9:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Walter Schalka

[Foreign Language]

Fabio Almeida de Oliveira

Thanks, Walter. Good morning, everyone. Let's turn to Page number 4 on the presentation. Last quarter, we had informed you that the Paper and Packaging business unit has had its best quarter ever. Well, we have done it again. Our well-executed commercial strategy, aligned with a healthy demand for paper products delivered strong top and bottom line performance with a new best quarter EBITDA for the business unit. As discussed in previous quarter, demand for print and writing papers and cartonboard has continued to be solid in the domestic, international market served by Suzano. Latin America, our main export market has been the growth engine in demand during the Q3 with a sound growth for both print and write and paperboard papers.

Demand in North America and Europe continue to be resilient with imbalance on the supply side due to constraints in the supply chain. International Logistics have shown signs of improvement at the end of the quarter with better availability of container shipments and lower prices. Raw material and energy inflation continues to pressure the cash cost of paper producers, is still benefiting integrated producers moving forward.

Figures for the whole Q3 from EBA, related to print and write domestic demand, are yet not published. Considering the first 2 months of the third quarter when compared to the same period of 2021, the available data shows 8.5% demand increase, mainly due to increase on the demand for paper linked with the Brazilian National Government Program and the Brazilian general elections. Given the strong demand from the mainstream print and write obligations, volumes of uncoated paper sold into the containerboard market were not significant in the quarter.

EBA's public data on paperboard demand shows a strong 11.7% increase in the first 2 months of the third quarter, even when taking into account the same strong comparison period in 2021. Regarding Suzano sales volumes in the Q3 were 2.5% higher when compared to the previous quarter and 2% below when compared to Q3 last year. Albeit higher sales volumes in the domestic market in a quarter-over-quarter and year-over-year basis, our export volumes reduced due to supply chain restrictions and lower inventory levels.

Domestic sales reached 71% of our total sales in the quarter, totaling 211,000 tons, 1% increase on a year-over-year basis. Inflation has continued to heat paper cost during the quarter. Still, we were able to manage our prices effectively, being successful in offset inflation impacts during the period. Our margins have expanded 6 percentage points on a quarter-over-quarter basis to all-time high of 43%. Our average net price during the quarter was 13% higher than our average price in Q2 and 43% higher than same quarter last year.