Suzano reported adjusted EBITDA in the third quarter of 2021 to R$6.3 billion and operating cash generation to R$5.2 billion — the highest since the creation of Suzano S.A.
Oct. 28, 2021 - Suzano S.A. today announced its consolidated results for the third quarter of 2021.
4 Last 12 months.
EXECUTIVE SUMMARY
The third quarter of 2021 was marked by strong sales volume and resilient pulp prices, mainly driven by solid pulp demand performance in Europe and North America, despite the seasonality effects during this period of the year and falling demand in China. In the paper business, demand remained buoyant, with high sales volumes and further price increases in both the domestic and international markets and once again registering the highest quarterly EBITDA in the company's history, considering paper and consumer goods. These factors, combined with the average weaker BRL, drove adjusted EBITDA in the quarter to R$6.3 billion and operating cash generation to R$5.2 billion — the highest since the creation of Suzano S.A.
PULP SALES VOLUME AND REVENUE
The third quarter of 2021 was marked by strong demand for pulp in Europe and North America, on the back of solid performance by the paper segments. Tissue paper consumption remained strong, sustained by the continued strong consumption of household products combined with the spurt in demand for corporate use products, mainly printing and writing paper, as the transoceanic logistical crisis reduced the availability and, consequently, the competition of imported products and due to the faster pace of vaccination against COVID19, which made economic recovery possible as a result of less restrictive measures on social interaction in both continents.
In China, however, the seasonal resumption of demand expected for the period between the end of August and the beginning of September did not materialize in the expected intensity given a scenario of high maritime freight and a reduction in paper exports, restrictions on school tutoring and a slowdown in the country's economic growth.
On the supply side, the worsening logistics problems in late 2020 caused by lower availability of containers, congestion at ports and strict operational protocols at Chinese port companies against the delta variant exerted different pressures on the balance between supply and demand with a more favorable scenario in Europe and a challenging one in China. In this scenario, the benchmark PIX/FOEX indexes for hardwood pulp recorded an increase of 13% in the European market and a 15% drop in China when compared to the previous quarter.
Moreover, the wide gap between softwood and hardwood pulp prices continued, which encouraged the substitution of fibers. According to PIX/FOEX, the difference between softwood and hardwood pulp prices at the end of the quarter was US$200/t in Europe and US$208/t in China.
In this context, Suzano's pulp sales totaled 2,673 thousand tons, up 5% and 6%, respectively, from 2Q21 and 3Q20.
Average net price in USD of the pulp sold by Suzano was US$651/ton, an increase of 4% and 43%, respectively, from 2Q21 and 3Q20, driven by the hike in international pulp prices. Average net price in the export market was US$654/ton (compared to US$636/ton in 2Q21 and US$458/ton in 3Q20).
Average net price in BRL was R$3,405/ton in 3Q21, increasing 2% and 39%, respectively, from 2Q21 and 3Q20, accompanying the rising trend in the international market prices.
Pulp net revenue increased 8% compared to 1Q21, mainly due to higher sales volume (+5%) and higher net price in USD (+4%), partially offset by the depreciation of the average USD against the BRL of 1%. Compared to 3Q20, revenue was 48% higher due to the better price in USD (+43%) and a 6% growth in sales volume, despite the appreciation of the average USD against the BRL (3%).
PAPER SALES VOLUME AND REVENUE (includes consumer goods unit)
According to data published by Brazil's Forestry Industry Association (IBÁ), demand for printing and writing in Brazil grew 21% in July and August 2021 compared to the same period in 2020. Comparing the eight months of 2021 with the same period in 2020, demand for printing and writing increased 29% across Brazil. These figures show that demand in Brazil continues to recover with the progress of vaccination and the resumption of onsite classes and activities.
Despite the relaxation of distancing measures and the progress of vaccination, the pandemic brought changes in consumption habits, such as the spike in e-commerce. This trend, combined with the prolonged restrictions on the supply of wood shavings to produce cardboard boxes, continues to drive the use of printing and writing paper as an alternative in this industry. In July and August 2021, about 15% of total demand in the segment was estimated to have been used for this purpose.
Without this application, domestic sales in the printing and writing segment in Brazil should have grown 17% in the eight months in 2021 compared to the same period in 2020. Growth in July and August 2021 compared to the same period in 2020 is estimated at 4%. We expect better seasonal effects in the domestic market during the final quarter as a result of paper sales to Brazil's national textbook program (PNLD) and a brighter scenario in the notebooks market and promotional campaigns.
Demand for paperboard in Brazil grew 21% in the first eight months of 2021 compared to the same period in 2020. In July and August 2021, nationwide demand grew 3% compared to the same period in 2020, already reflecting the heavy demand for the product.
Consolidating both market segments (Suzano's accessible paper market), demand grew 26% in the first eight months of 2021, and by 15% in July and August 2021, compared to the same periods in 2020.
Suzano's paper sales (printing and writing, paperboard and tissue) in the domestic market totaled 239 thousand tons in 2Q21, an increase of 15% from 2Q21 and 9% from 3Q20.
Paper sales in the international markets totaled 97 thousand tons, an increase of 10% from 2Q21 but down 2% from 3Q20, representing 29% of total sales in 3Q21.
Driven by the gradual economic recovery and seasonality effects during the period, total paper sales in 3Q21 grew 14% in relation to 2Q21 and 5% in relation to 3Q20.
Average net price rose 4% vs. the previous quarter, driven by price increases across all product lines in the domestic market during 2Q21, mainly due to the recovery in international market prices across all operating regions and high demand in the paperboard market. Year-on-year, the increase was 21% from 3Q20, due to price increases in the domestic and international markets in all segments.
Net revenue from paper was R$1,662 million in 3Q21, an increase of 19% from 2Q21, resulting from the price increase caused by the above factors and higher sales volumes. In relation to 3Q20, net revenue from paper grew 28% due to the normalization of sales volume to pre-pandemic levels and higher prices.
Suzano's complete third quarter 2021 financial report (pdf document) with charts and graphs can be opened on the following link: 3Q 2021 Earnings Release.
Based in São Paulo, Brazil, Suzano (B3: SUZB3 | NYSE: SUZ) is one of the world's largest integrated pulp and paper producers. With ten mills and the joint operation Veracel, the company has an annual installed capacity of 10.9 million tons of market pulp and 1.4 million tons of paper. Its product portfolio includes coated and uncoated printing and writing paper, paperboard, tissue, market pulp and fluff pulp. To learn more, visit: www.suzano.com.br.
SOURCE: Suzano S.A.
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