Suzano Reports Results for the first quarter of 2020

Suzano S.A. (B3: SUZB5 | NYSE: SUZ), one of the largest integrated pulp and paper producers in the world, announces today its consolidated results for the first quarter of 2020 (1Q20).
• Reduction of approximately 500 thousand tons of pulp inventory.
• Pulp sales of 2,856 thousand tons, up 65% vs. 1Q19.
• Paper sales of 268 thousand tons, down 2% vs. 1Q19.
• Adjusted EBITDA1 and Operating cash generation² of R$3.0 billion and R$2.3 billion, respectively.
• Adjusted EBITDA1 /ton3 from pulp of R$961/ton (-35% vs. 1Q19).
• Adjusted EBITDA1 /ton4 of paper of R$1,186/ton (+12% vs. 1Q19).
• Average net pulp price – Export Market: US$469/t (-34% vs. 1Q19).
• Average net paper price5 of R$4,085/ton (+2% vs. 1Q19).
• Pulp cash cost ex-downtime of R$596/ton, down 6% vs. 4Q19.
• Capture of operating synergies in line with planning.
• Initiatives against Covid-19 focused on people, society and business continuity.

Pulp inventories in general decreased in Chinese and European ports after the recovery in demand started at the end of 2019. Suzano followed the same behavior of significant reduction in the volume of inventories in the period.

In this context, Suzano’s sales were record high for a first quarter, to 2,856 thousand tons of market pulp, slightly down (-2%) from the high volume shown in 4Q19 and up 65% from 1Q19. In comparison with 1Q19, it is worth highlighting the different commercial strategy of the Company in that quarter.

Suzano’s average net pulp price in USD was US$462/ton in 1Q20, representing decreases of US$7/t (-1%) and US$243/ton (-34%) compared to 4Q19 and 1Q19, respectively. The average net pulp price in the export market in 1Q20 was US$469/ton, compared to US$471/ton in 4Q19 and US$711/ton in 1Q19.

Net revenue from pulp was 28% higher compared to 1Q19, explained mainly by the higher sales volume (+65%) and the 18% appreciation in the average price of the USD against the BRL, with these factors partially offset by the lower average net price in USD (-34%).

In Brazil, Suzano’s paper sales came to 183,000 tons in 1Q20, down 29% from 4Q19 and 7% from 1Q19, in line with the market slowdown observed.

Paper sales in both the domestic and export markets in 1Q20 came to 268,000 tons, down 27% and 2% from 4Q19 and 1Q19, respectively. Taking advantage of weaker demand due to the typical seasonality of the period in the Brazilian market, the Company used its commercial flexibility to launch a plan to accelerate export sales and to rebuild inventories in the chain to ensure adequate service to the clients who participate in the Suzano Mais program in Brazil and to our international clients.

The average net price in the domestic market in 1Q20 stood at R$4,180/ton, representing increases of R$238/ton (+6%) compared to 4Q19 and R$83/ton (+2%) compared to 1Q19.

Net revenue from paper sales amounted to R$1,094 million in 1Q20, down 23% from 4Q19, reflecting the lower sales volume due to seasonality heightened by Covid-19’s impact on the business environment, partially offset by the higher average net price in BRL (+6%).

Suzano’s net revenue in 1Q20 was R$6,981 million, 83% of which came from exports (vs. 77% in 1Q19 and 80% in 4Q19). Paper and packaging sales in the quarter came to 3,124,000 tons, increasing 56% compared to 1Q19 and decreasing 5% compared to 4Q19. Compared to 1Q19, the net revenues increase is mainly explained by the better performance of pulp sales to all regions, especially Asia, and by the 18% appreciation in the average price of the USD against the BRL, with these effects partially offset by the 34% decline in the average net pulp price in USD.

In 1Q20, the Company posted net loss of R$13,419 million, compared to net loss of R$1,229 million in 1Q19 and net income of R$1,175 million in 4Q19. The variation in relation to 1Q19 and 4Q19 is mainly explained by the net financial loss, which in turn is due to the effects from exchange variation on debt and by the gain/loss from derivative transactions, partially offset by the deferred income taxes credit (notably on the unrealized exchange rate variation expense). This impact was partially offset by the higher operating income in both comparison periods.
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