Due to industry wide inflationary conditions on nearly all raw material purchases, Ritrama Inc. is announcing a price increase averaging 5-7% for all film and paper products effective with shipments on or after January 1, 2018. The price increases being instituted are a reflection of the raw material inflation. We have been working closely with our suppliers both locally and globally to minimize the impact while maintaining both quality and constant supply. In addition, we have taken every precaution to control other operating costs in an effort to remain competitive in times of escalating costs. We will continue to drive productivity and cost reduction programs in order to support our mutual market competitiveness.
Suzano Pulp and Paper (Bovespa: SUZB5), one of the largest integrated pulp and paper producers in Latin America, announces today its consolidated results for the fourth quarter of 2016 (4Q16) and for the fiscal year (2016).
* Strong operating cash flow1 of R$ 2.7 billion and ROIC of 12%.
* Strong operating results: record high pulp production and sales.
* Target cash cost for 2018 (R$ 570/ton2) met in 4Q16: lower wood costs and benefits from investments in retrofitting mills.
* Cost discipline: COGS/ton performance (+1.7%) lags inflation in the period (+6.3%).
* Expense discipline: reduction of 7.6% in SG&A/ton compared to 2015.
* Higher profitability of paper business in a scenario of contracting Brazilian demand through the consolidation of the Go to Market program (“Suzano Mais”), which aims to strengthen relations with end consumers.
* Financial discipline: lower net debt, net debt/adjusted EBITDA ratio of 2.6 times, lower debt cost and upgrade in credit rating.
* Liability management: issues in the domestic and international capital markets.
* Capital discipline: investments below initial budget and dividend distribution based on operating cash flow.
* Advances in the industrial project to debottleneck Imperatriz Unit, to be concluded in 2017, and acquisition of forestry assets to supply the expansion in pulp production and to reduce cost in Maranhão.
* Fluff: higher production during the year and launch of exports.
* Lignin and Tissue: startup of production slated for this year.
The year 2016 was challenging for the pulp industry, despite the resilient growth in global demand. The pulp list price was pressured by additional supply from new plants that launched operations in the year, which on average was US$100/ton lower than in 2015. In the last quarter of the year, market fundamentals improved, which supported an initial rebuilding in pulp prices. A recovery in demand from China, inventories at healthy levels and the expectation of weaker supply volume from the new capacities coming online supported announcements of price increases in 4Q16 and 1Q17.
In this adverse scenario for pulp, Suzano proved ready to overcome challenges, with its efforts focused on manageable factors, which led its pulp production cash cost to register, in 4Q16, its lowest level of the year, of R$ 570/ton. In the year, cash cost was R$ 623/ton, down 3% from R$ 642/ton in 2015. This downward trend will continue until reaching the target cash cost.
For the paper business, the Brazilian market continued to be affected by a caustic macroeconomic scenario, with demand for paper contracting. However, the Company’s margin in the business expanded, given its continued discipline in production costs and its successful implementation of price increases for all product lines at rates above inflation. The Company also continued to benefit from the impact of the Go to Market program (“Suzano Mais”), which works to strengthen relations with the end of the value chain.
The focus on cost discipline kept the variations in Suzano’s costs and expenses below inflation. Our financial discipline, meanwhile, resulted in lower expenses with debt service and deleveraging. The liability management operations worked to lengthen the average debt term and to reduce debt cost, with the highlight the capital markets issuances: Green Bond (US$ 500 million), Green CRA (R$ 1.0 billion) and other CRA placements (R$ 900 million).
Our capital discipline is demonstrated by the flexibility to reduce capex for the year by negotiating with suppliers and postponing certain projects without affecting the pace of our operations.
Note that the Company’s main management metric is return on invested capital (ROIC) based on operating cash flow1, which stood at 12% and R$ 2.7 billion, respectively, in 2016.
more detail at: http://ir.suzano.com.br/enu/6230/Earnings%20Release%204Q16.pdf