PaperAge Magazine

Suzano Reports Second Quarter 2019 Results

Suzano - bleached eucalyptus kraft pulp Suzano sold 2,214 thousand tons of market pulp in the second quarter of 2019 — 28% more than in 1Q19 and 14% less than in 2Q18.

August 9, 2019 - Suzano S.A. (B3:SUZB3 | NYSE: SUZ), one of the world's largest pulp and integrated paper producers, on Aug. 8 announced its consolidated results for the second quarter of 2019 (2Q19). Comparison data with 2018 (2Q18, 6M18 and LTM4) represent the simple sum or weighted average of Suzano + Fibria.

Pulp Sales Volume and Revenue

The first half of the year was marked by a strong imbalance between supply and demand in the global pulp market. On the supply side, the lack of unexpected events, which on the other hand were frequent in 2017 and 2018, coupled with the fact that the pulp industry operated almost at full capacity, substantially increased the availability of pulp (both softwood and hardwood) in the market. On the demand side, the macroeconomic weakening of major countries in the world scenario, geopolitical uncertainties especially the China-US trade war, and destocking by pulp clients restricted growth in market sales volume.

This combination of factors led to a significant deterioration in the prices of both hardwood and softwood fibers in the first half of the year. In the second quarter, que reduction in pulp prices, along with the higher production volume of graphic papers in China and the continuous growth of Tissue in all markets favored the recovery in pulp demand, which grew 6.9% in the first two months during the quarter compared to the first two months in 1Q19. In this context, Suzano sold 2,214 thousand tons of market pulp in 2Q19, 28% more than in 1Q19 and 14% less than in 2Q18.

Average net price in U.S. dollar of the pulp sold by Suzano was US$628/ton in 2Q19, down US$77/ton (-11%) and US$111/ton (-15%) from 1Q19 and 2Q18, respectively. Average net price in the export market in 2Q19 was US$630/ton (vs. US$ 711/ton in 1Q19 and US$ 751 in 2Q18).

Average net price in Brazilian real was R$ 2,463/ton in 2Q19, down 7% from 1Q19 since, despite the 4% appreciation of the USD against the BRL during the period, prices in dollar came under pressure during the period. The same elements explain the performance of the average net price in BRL in comparison to 2Q18 (-8%), given the lower price in dollars, partially offset by the appreciation of the USD vs the BRL of 9%.

Pulp net revenues were R$ 5,454 million in 2Q19, a 20% reduction compared to 2Q18, mainly due to lower net average price in USD (-15%) and lower sales volumes (-14%), which were partially offset by the appreciation of the average USD vs BRL of 9%.

Quarter-on-quarter, the 19% increase was largely explained by the higher of sales volume (+28%) and the appreciation of the average USD vs BRL of 4%, partially offset by the net average price reduction of 11%.

Paper Sales Volume and Revenue

According to the Forestry Industry Association (Ibá), domestic sales of printing & writing paper and paperboard (in Brazil) declined 4% in the first half of 2019 compared to the same period last year, while imports decreased 7%.

Domestic sales of printing & writing paper fell 7%, while paperboard sales increased 2%.

Regarding results in the quarter, domestic sales in 2Q19 decreased 2% in relation to 1Q19 and 3% from the same period last year. Imports, on the other hand, increased 14% from 1Q19, but decreased 2% from 2Q18.

Suzano's paper sales in Brazil totaled 188 thousand tons in 2Q19, down 5% from 1Q19 and 4% from 2Q18, due to lower consumption in line with market data.

Paper sales in 2Q19 totaled 301 thousand tons, increasing 10% from 1Q19 and 6% from the same period last year, thanks to our strategy of allocating higher volumes to international markets due to our flexibility and presence in more than 60 countries.

Average net price of paper in the domestic market was R$ 4,177/ton in 2Q19, representing increases of R$ 79/ton (2%) and R$ 396/ton (10%) from 1Q19 and 2Q18, respectively, driven by the price implementation in the period.

Through our profitability management strategy and operations in multiple markets, we could mitigate most of the fluctuation in international prices. Average net price of paper exported in 2Q19 was US$ 966/ton, down US$ 29/ton (3%) from 1Q19 and US$ 23/ton (2%) from 2Q18. In BRL, the export price of paper in 2Q19 came to R$ 3,786/ton, up R$ 34/ton (1%) from 1Q19 and R$ 219/ton (6%) from 2Q18, mainly due to the exchange rate variation in the periods.

Net revenue from paper sales was R$ 1,211 million in 2Q19, increasing 16% from 2Q18, mainly due to higher average net price (+9%), higher export sales volume (+29%), and the 9% appreciation of the average USD in relation to BRL.

Compared to 1Q19, the main factors behind the 16% increase were higher export volume (+46%) and the 4% appreciation of average USD in relation to BRL.

Suzano's complete second quarter 2019 results with detailed tables are available on the following link: Suzano 2Q 2019 Results (1.0 mbs, PDF)

Suzano is one of the largest integrated eucalyptus pulp and paper producers in Latin America. With operations in nearly 60 countries, Suzano is the world's second largest producer of eucalyptus pulp, one of the ten largest producers of market pulp, and the regional market leader in paper for domestic and commercial use. To learn more, please visit:

SOURCE: Suzano