Nov 1, 2019   SOURCE: BusinessWire

Suzano Increases Pulp Sales Volume and Reduces Inventory Levels in Third Quarter

Suzano has announced its results for the third quarter of 2019, a period marked by growth in pulp sales and an important reduction in the inventory levels in its supply chain. The commercial strategy, backed by a slowdown in the pace of pulp production, enabled the company to close the quarter with net revenue of R$6.6 billion, adjusted EBITDA of R$2.4 billion and operating cash generation of R$1.5 billion.

“Our commercial strategy, combined with the quality of our assets and efficiency of our operations, enabled us to generate a significant amount of operating cash despite the current market scenario and a seasonally weaker period due to the summer season in the Northern Hemisphere,” said CEO Walter Schalka.

In the quarter, pulp sales remained brisk, totaling 2.549 million tons. This volume is 15% higher than the total volume sold between April and June and also higher than production in 3Q19 of 2.095 million tons. As a result, Suzano’s inventory levels decreased by approximately 450,000 tons, a significant change that marks the start of the company's inventory regularization process.

Suzano also recorded consolidated sales in paper lines of 313,000 tons, up 4% from the previous quarter, with prices remaining practically stable between the periods.

Another quarterly highlight was the 6% drop in pulp cash cost, without considering the effect of plant shutdowns, in comparison with the 2Q19. Pulp cash cost ended 3Q19 at R$654 per ton, leveraged by synergies captured, among other aspects.

The results were also influenced by the effect of exchange variation. Since Suzano is primarily an exporter, with 100% of its debt contracted or converted to U.S. dollar, any depreciation of the Brazilian real contributes, on the one hand, to higher cash generation and, on the other, to an immediate (and exclusively non-cash accounting effect) increase mainly in the balance of debt contracted in foreign currency. As a result of this effect, net financial result was an expense of R$6.5 billion. The net book result was an expense of R$3.5 billion.

Suzano’s net debt in U.S. dollar declined to US$13.3 billion. However, since the adjusted EBITDA in the 12-month period ended September was lower than in the same period in 2018, the financial leverage of the company measured in U.S. dollar stood at 4.3 times at the end of September.