Suzano Q3 2026 Earnings Call Transcript

Suzano (NYSE:SUZ) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.

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View the webcast at https://mzgroup.zoom.us/webinar/register/WN_0hXZ69xGTqC9x_K1JCdjhg#/registration

Summary

Suzano S.A. reported solid Q3 2026 results with the successful integration of Arbex, significantly enhancing its business portfolio.

The company maintained stable pro forma leverage at 3.4 times, with strategies focused on reducing net debt and leveraging Arbex efficiency gains.

Q3 saw robust sales volumes and pricing, despite geopolitical challenges, with Suzano Packaging reporting synchronized results across operations.

The pulp market experienced strong demand, particularly in China, with rising cash costs attributed to wood price inflation and geopolitical factors.

Management emphasized continued focus on operational efficiency, cost competitiveness, and deleveraging, with expectations for a strong Q4 performance.

Future guidance includes a revised cash cost outlook due to higher commodity prices, with no significant asset sales planned.

Full Transcript

OPERATOR

Good morning, ladies and gentlemen. Thank you for holding and welcome to Suzano’s conference call to discuss the results for the third quarter of 2026. We would like to inform that all participants will be in a listen-only mode during the presentation that will be addressed by the CEO, Mr. Beto Abreu, and other Executive Officers. This call will be presented in English with simultaneous translation to Portuguese. To change the audio, you can press the globe icon on the lower right side of the Zoom screen and then choose to enter the Portuguese room.

After that you can select Mute Original Audio before proceeding. Please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano’s management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Suzano and could cause results to differ materially from those expressed in such forward-looking statements.

Now I will turn the conference over to Mr. Beto Abreu. Please, you may begin your presentation.

Joao Alberto Fernandez de Abreu (Chief Executive Officer)

Good morning, everyone, and thank you for joining our third quarter earnings call. This is a special call for Suzano as it’s the first one in which we are reporting Arbex’s results in our financial statements. The Arbex acquisition is perfectly aligned with the company strategy. We see a significant value-creation opportunity and it gave Suzano a more resilient business portfolio. I’m happy to share that Arbex’s first quarter with us came fully in line with our plan, once again showing Suzano’s ability to deliver as promised since the transaction was announced more than a year ago.

Q3 was marked by solid volumes, sales, and pricing, a declining cash cost despite a challenging geopolitical environment, and stable pro forma leverage of 3.4 times in US dollars, including Arbex’s last 12 months EBITDA. Management’s priorities are now fully focused on continuing to improve our structure, competitiveness, advancing our fiber-to-fiber initiatives, reducing net debt and leverage starting already in Q4, our strongest quarter for 2026, and capturing the highly visible efficiency gains at Arbex.

Nothing else is on our agenda at the moment. With that said, I turn the floor over to Fabio, who will continue the presentation.

Fabio Almeida de Oliveira (VP Paper and Packaging)

Thanks, Beto, and good morning, everyone. Please, let’s turn to the next page of the presentation. Before we start, I would like to highlight that Suzano Packaging results in this quarter cover the June–September period. Since its inception, Suzano Packaging has been reported with a one-month lag for our Brazilian operations. It started this quarter reporting fully synchronized across both businesses. Looking at our markets in Brazil, print and write demand grew 5% versus Q2 and 2% year over year, benefiting from seasonality and election-related coated paper demand. Paperboard demand remained under pressure, down 9% sequentially and 5% year over year amid a softer domestic consumption environment in Brazil. Imports continue to rise, with print and write paper and paperboard imports up 76% and 18% year to date through August, respectively, reflecting global oversupply and a stronger FX.

Turning to international print and write markets, PPPC reported a 2% decline in uncoated woodfree demand in North America and LATAM in the first eight months of the year, while Europe fell 4%. Now looking at paperboard in the US, market fundamentals slightly improved during the quarter. Based on data from AF&PA, SBS shipments were 2% quarter over quarter, recording 4% year to date up, while the production disruption at Nippon Dynawave tightened regional supply, especially liquid packaging board, the main market for Suzano Packaging. SBS operating rate is now at 85%, better quarter over quarter but still below on a year-over-year and historical levels.

During the quarter, our Brazilian operations performed well with a 3% growth in production quarter over quarter, even considering the annual plant shutdown at our Mucuri mill in August. Against last year, volumes from the Brazilian operations were stable. In our Suzano Packaging operations, the growth in production volumes was up quarter over quarter and year over year, reflecting the additional month reported, as explained before. Our sales volumes grew 10% quarter over quarter and remained stable year over year.

While domestic volumes in Brazil were broadly stable, exports from Brazilian operations decreased 9% versus Q2 and 27% year over year, reflecting non-recurrent impacts related to the implementation of our new SAP system in July. Export operations have since improved and we are now working to have our backlog cleared in Q4. Suzano Packaging sales grew on a quarter-over-quarter and year-over-year basis but were limited by operational constraints at our Pine Bluff mill in Q3 and lower inventory levels.

Despite higher import volumes in the Brazilian markets, our Brazilian operations delivered a price increase of over 2% quarter over quarter. Suzano Packaging prices increased 6% in dollar terms over the same period. Now looking at our EBITDA, our combined operations performance decreased 14% quarter over quarter. Our Brazilian operations delivered stable volumes and higher prices, but higher SG&A in the period due to corporate expense allocations and higher logistics costs, and COGS impacted by the annual plant maintenance shutdown at the Mucuri mill, which affected our performance in the quarter. At Suzano Packaging, Q3 EBITDA was significantly impacted by operational challenges at the Pine Bluff mill, mainly related to asset reliability and production efficiency, resulting in lower operating rates, higher production costs, and reduced inventory availability.

In addition, raw materials and logistics costs increased in the quarter amid a more challenging geopolitical environment. Price increases helped mitigate part of these inflationary pressures; they were not sufficient to offset the operational headwinds. The operational issues faced in Q3 were substantially addressed by the end of September, and the mill has been operating more consistently since then. We continue to prioritize reliability, efficiency, safety, and cost competitiveness as we advance the turnaround of Suzano Packaging, supporting gradual improvement in EBITDA performance and our path to positive cash flow by 2028, in line with the original business plan.

Looking ahead in Brazil, we expect sales volumes to improve, following historical seasonality, particularly in uncoated paper and coated paper. Demand, on the other hand, should soften as the additional demand associated with the election cycle fades. For paperboard, we expect stable demand with stronger year-end consumption offsetting part of the softer economic backdrop. Now I hand over to Leo, who will present the pulp business unit results.

Leonardo Barreto de Araujo Grimaldi (VP Pulp Commercial and Log.)

Thanks, Fabio, and good morning, everyone. Let’s now turn to our Pulp business unit, where I’d like to share with you the highlights for our third quarter of 2026 as well as my view for the upcoming months. This past quarter was marked by solid invoicing by Suzano. In line with last year in China, paper and board production posted a slight growth when compared to Q3 25 and, as usual, our customers planned their pulp purchases in order to support their higher production pace from September through December, the strongest seasonal period of the year.

Despite healthy demand, market pulp dynamics reflected two distinct business environments as the quarter unfolded. In the first half of Q3, customers continued destocking in anticipation of new pulp supply coming from OKI 2, at the time expected to start up in Q4 26. By mid-quarter, and with the announcement that the project had been delayed into Q1 27, customers rapidly increased pulp purchases to meet their late Q3 and their Q4 production plans, creating a significantly more favorable environment for market pulp producers.

This supportive scenario was also fostered by pulp inventories at Chinese ports, which continued to decline during Q3. At the same time, low pulp price levels in China in July and August, below the cash costs of some local producers, led certain integrated players to reduce their own pulp production rates and shift to market pulp purchases. Despite hardwood–softwood price spreads remaining below historic levels, especially in Asia, fiber-to-fiber substitution continues at a healthy pace as customers seek every possible saving and recognizing that the current weak softwood market is unsustainable long term.

As an example, in Europe, according to Europulp data, hardwood pulp consumption was stable in Q3 when compared to Q3 25, while softwood consumption fell 9%. The quarter was also marked by growing reports of permanent pulp mill closures as well as an increase in unexpected downtimes. According to market consultancies, more than 900,000 tons of bleached chemical pulp was removed from the market as Q3 unfolded, again improving supply and demand dynamics. On such contexts, we have sold 3.19 million tonnes in Q3 with an average export price of $591 per ton, a slight decline when compared to Q2 26 and 13% higher than Q3 25.

Looking at the right side of my slide, the 4.8 billion rise in EBITDA, up 12% quarter over quarter with a 50% EBITDA margin, was mostly driven by higher volumes, lower costs, and a more favorable FX when compared to Q2 26. Now, looking forward, I would like to highlight the following points. In October, we were able to implement our announced price increases globally while maintaining our planned sales volumes in China. At these new prices, our customers confirmed their order intake with volumes at historic levels. At the same time, pulp production costs in China continue to rise on top of the $30 per BDMT over 2025 lows, which translates roughly into a $60 per ton increase on pulp production costs.

As I have mentioned during our previous call, our sources on the ground report an additional $10 per BDMT increase from this July to September, or $20 per ton of additional cash cost, bringing our estimated cash cost in China to a range between the low $500 to $560. And the cost pressure in our sector is not exclusive to China. Pulp producers worldwide continue to face a broad cost inflation in their value chain amid ongoing geopolitical tensions and weather-related events.

Now, talking about the supply side of the equation, we are closely monitoring the impacts of El Niño globally and, more specifically, in Indonesia. Wildfires in this country, following a pattern similar to 2015, are reportedly affecting the forest base supporting the country’s pulp production, although the impact remains unclear. Depending on the severity of the wildfires and their impact with haze or on wood availability, the ongoing pulp project in Indonesia may face further startup delays or have lower ramp-up curves for the coming months.

We also see the confirmation of our thesis that looking only at gross new capacity as a result of new projects in the pipeline is not enough to forecast price levels. Permanent closures already reached over 1 million tons of bleached chemical pulp since the beginning of this year and expected downtimes are rising and reaching 2.3 million tons so far. Several pulp projects, both market pulp and verticalization, have been delayed during 2026, and we are enthusiastic to share that the first cases of de-verticalization in Western markets are starting to materialize.

Unfortunately, due to confidentiality agreements, we cannot yet publicly disclose them. For Suzano, the fourth quarter is seasonally marked by higher sales volumes to support our customers’ increasing demand, and we are prepared to deliver another strong Q4. Today we are running with invoicing backlogs, in some cases reaching more than two months, and we seek to reestablish normalized levels until the end of the year. With that said, I would now like to invite Carlos — welcome back, Carlos — to address our cash cost performance during the past quarter.

Carlos Anibal Fernandes de Almeida Junior (VP Pulp)

Thanks, Leo, and good morning, everyone. I will cover pulp cash cost, page 6 of our presentation. Our cash cost excluding downtime was 825 reais per ton in the quarter, down 2% versus Q2 26. The improvement was mainly driven by operational efficiency captured after the maintenance downtimes in the previous quarter, with lower specific input consumption, better fixed cost dilution, and lower wood cost supported by lower specific wood consumption. These gains were partially offset by higher chemical and energy costs, reflecting both direct and indirect impacts of the conflict in the Middle East as well as the stronger US dollar.

It is worth noting that approximately 14 reais per ton of our cash cost in the quarter was related to commodity cost pressures associated with this conflict in the Middle East. Adjusting for this exogenous factor, cash cost would have declined 4% quarter over quarter, highlighting the underlying operational improvements captured during the period. Looking now to the year-over-year performance, our cash costs, excluding downtime, increased 3%, mainly reflecting higher chemical and energy costs once again associated with direct and indirect impacts of the conflict in the Middle East on the global commodity and energy markets. We also saw higher wood costs, mainly driven by labor and maintenance inflation in our harvesting operations. These headwinds were partially offset by operational efficiency gains with better fixed cost dilution from higher production volumes and stronger energy sales.

The weaker US dollar against the Brazilian real benefited the cash cost performance. Overall, we continue to demonstrate solid cost discipline despite a more challenging geopolitical and commodity cost environment. As we look to the year end, our operational execution remains broadly in line with the assumptions underlying our original cash cost outlook. However, commodity and energy cost pressures have proven more persistent than initially anticipated, as the conflict in the Middle East continues to affect global supply chains and commodity markets.

Combined with a strong US dollar, these exogenous factors have increased our cost base beyond our original assumptions. As a result, we are updating our full-year 2026 cash production cost, excluding downtime, guidance from 800 reais per ton to approximately 825 reais per ton. Important to say that, absent these external pressures, we would be on track to deliver our original 800 reais per ton cash cost target. Now I turn the floor over to Marcos, who will continue the presentation.

Marcos Moreno Chagas Assumpcao (VP Finance and IR)

Good morning, everyone. Moving to slide 7, this is our first quarter after closing the Arbex acquisition and the first time we report Consumer Goods as a separate segment. To make the quarter easier to compare, we also show pro forma Arbex figures for prior periods. The Consumer Goods division posted an EBITDA of 803 million reais with a 16% margin. Arbex contributed 694 million reais. Our Brazilian operations added 109 million reais, up 31% year on year, driven by strong volumes and lower costs.

Arbex is performing in line with what we underwrote over the last 12 months. Arbex generated EBITDA slightly above $530 million, confirming that the business kept running smoothly between signing and closing. Despite the negative impacts of the Middle East conflict, we remain highly confident that we will extract value from this division and we expect to see increasing efficiency gains in our results in the coming quarters. Moving to slide number 8, let me walk you through our net debt excluding Arbex. Net debt for Suzano continued to decline from $12.8 billion in June to $12.5 billion in September. Reported net debt, including Arbex, reached $14.7 billion at the end of the quarter, impacted by the value we paid for Kimberly-Clark for our 51% stake and the full consolidation of Arbex net debt. Important to mention that deleveraging remains our top priority, and we provided guidance that our net debt should be under $14 billion by the end of 2026.

Our pro forma leverage, which includes Arbex’s last 12-month EBITDA, remained at 3.4 times, stable compared with June. Important to mention that we continue to have a very comfortable debt amortization schedule, with 73 months on average, and also a competitive cost of debt. Moving to slide 9, we would like to highlight our strong FX hedging portfolio. In third quarter 2026, we generated 294 million reais in positive cash adjustments, and in the nine months year to date, we generated 825 million reais. At the end of the quarter, our zero-cost collar portfolio had a notional of $4.8 billion, with an average put strike at 6 reais and 4 cents per dollar and an average call of 6 reais and 95 cents per dollar. These hedges cover 65% of our FX exposure.

As a sensitivity, if the FX rate stays at September’s close of 5 reais and 18 cents, we expect more than 4.1 billion reais in cash adjustments throughout the next 24 months. Now moving to slide 10, we will comment on our commodity hedges. Oil prices remained high during the quarter, with Brent prices averaging $91 per barrel, which compares with $68 per barrel a year ago, and we closed September at $98 per barrel. This is the main source of pressure on our costs, given oil-linked inputs, chemicals, and logistics. Our hedging program for natural gas and bunker helped to offset it. In third quarter 2026, our hedges generated 91 million reais in positive cash adjustments, and year to date these positive cash adjustments total nearly 300 million reais.

For 2027, we have coverage for nearly 65% of our hedgeable exposure, and if Brent stays at $98, which was the level that it closed the quarter, we would expect around 477 million reais in total cash adjustments from this portfolio. With that, I will hand it back to Berto for his final remarks.

Joao Alberto Fernandez de Abreu (Chief Executive Officer)

Thank you, Marcos. Looking forward, and as a summary of the team just presented, we see a positive trend, and we are really expecting to be, as I said before, our strongest quarter of the year. This will allow us to keep focusing on deleveraging our net debt and keep focusing on strengthening our competitiveness. Important to say that we haven’t started yet gaining the efficiencies that were in the plan for Arbex, so in the fourth quarter we will also be able to start gaining those efficiencies that were planted in the business plan.

So that’s the main element for the next quarter. Having said that, I would hand over for the Q&A session. Thank you very much.

OPERATOR

We will now begin the Q and A session for investors and analysts. If you wish to ask a question, please click on Raise Hand. If your question has already been answered, you can leave the queue by clicking on Put Hand Down. Our first question comes from Daniel Sason from Itaú BBA. You can open your microphone, sir.

Daniel Sason (Analyst at Itaú BBA)

Hi everyone. Thanks for taking my questions. My first question is on prices and order intakes. You mentioned that the October price increases were implemented globally without impacting the planned sales volumes. With intakes in China at historical levels at the new prices, you’re also running invoicing backlogs of more than two months in some cases. Does this give you confidence that the market can absorb another price increase in December? Or are you seeing meaningful difference between China and Europe in terms of the ability to implement further increases?

And still on OKI 2, you mentioned the initial delay from 4Q26 to the first part of 2027 that triggered a meaningful restocking cycle in China. As you mentioned, you are now flagging the wildfires in Indonesia could result in delays or further delays or slower ramp up. Has the recent events there changed your base case for the startup time, your ramp up curve of OKI 2, and if the project is pushed further out, could that materially change your pulp price outlook for next year?

And my second question on cash costs, you reiterated your DTO guidance which points to a pulp cash cost of 787 per ton next year which includes maintenance stoppages. Maybe if you could walk us through what would be the case if we use the same FX and commodity assumptions, Brent price assumptions, for instance, in your updated 2026 guidance. What would the 787 per ton guidance look like? And how do you bridge the reduction from 2026 to 2027 between lower downtime or wood cost or fixed cost dilution?

That would give us some comfort to, you know, factoring your guidance for next year despite a more challenging than anticipated 2026. Right? Thank you so much, guys.

Leonardo Barreto de Araujo Grimaldi (VP Pulp Commercial and Log.)

Hi Daniel, this is Leo here. Thanks for your question. Just to tackle the first part of it and rephrasing what I have mentioned in my speech, we confirm that during October our price increase announcements were fully implemented with no concessions and that our volumes are right in line with plan, and that the order intake volumes with our Chinese customers and other Asian countries’ customers are also fully aligned with historic volumes with no decrease at all.

Looking forward, obviously sharing our price outlook is very sensitive information and we won’t do that. But there are several moving factors as we stand and which we are analyzing to decide directionally or to what intensity we will be moving on the last few days and weeks. Two main events happened, both in Indonesia. First, obviously the intensification of the wildfires affecting the wood base which is needed for, in our view, to start up or to an efficient ramp up curve of the OKI mill.

And a lot of issues with haze. And sources that we have on the ground have also mentioned that that had, in a sense, also jeopardized for some days or weeks the construction of the site. And more recently during this week, you all know about the news on the fire at OKI 1 mill. That’s still unclear in terms of how much of the mill has been affected. Up to now what we know is that the fires affected the cooling tower of OKI 1, which was unplanned downtime, with expected return on November 8, November 9.

So the sources that we have on the ground, and also connecting with our customers in the region and with traders in the region, the information we have is that this company is going to try to interconnect the cooling system that was being built, or built, for OKI 2 with OKI 1. And that’s a distance, as we understand, of approximately two, two and a half kilometers. So they’re going to try to do this interconnection to then restart OKI 1. So to that sense, the restart should take longer than expected. So there’s a market pulp loss just for that purpose. And then obviously after a fire of this extent happens, there’s always a worry on safety and what other parts of the mill were affected. So it is our estimation that the ramp up of OKI 1 post maintenance downtime will be slower or more careful than originally expected, therefore also affecting availability of market pulp in the market.

And our sources also show and present that the inventory levels at APP system, including the pulp needed for their paper mills in China and in the region, are below normalized levels. Most reports present lower than 15 days. So obviously there’s this huge crunch that probably will happen in China and in Asian markets, to be unfolded and to be known during the next, I would say, five to 10 days. So there’s a lot of moving parts, a lot of unclarity.

And this is all key for us to position our short-term price strategy. And I would say that a bit more midterm critical for us is clarity on OKI 2, if it really starts in Q3. In mid Q3, the situation is as planned for Suzano. But any delay would also favor a better supply and demand dynamics looking forward.

Marcos Moreno Chagas Assumpcao (VP Finance and IR)

Hi, Daniel. Marcos here, taking your second question. You mentioned about our guidance for the TOD for 2027, which is 1,983 reais, and embedded in that there is an assumption of the cash cost of 787, right? Remember that that assumption carries an oil price of $70 per barrel. Okay, we will soon update you with our TOD guidance for 2027, as we always do by the end of the year. But just to give you a hint here, the revision that we did on our cash cost from 800 to 825 had two major impacts, right?

The first one was the FX that we had before at 5.07 and we moved it to 5.20. And the other one was the change in the assumption of oil prices from $84 per barrel to $94 per barrel. The biggest contributor to the guidance change was definitely the higher oil prices and its consequences and impacts on the other chemicals and logistics as well. Okay?

Daniel Sason (Analyst at Itaú BBA)

Thank you so much, Leo and Marcos.

OPERATOR

Our next question comes from Marcio Farigi from Goldman Sachs. You can open your microphone, sir.

Marcio Farigi (Analyst at Goldman Sachs)

Thank you. Morning everyone. Leo, sorry, I want to follow up on Sason’s questions. I think you painted a very good picture in your early remarks. You talked about significantly better market in the second quarter, fiber-to-fiber continuing, you know, cash costs rising, slower ramp up curve for local producers in China, closures happening, unexpected downtime, de-verticalization happening, two months backlog. I mean, can you get better than that? And I wonder why you announced a price hike for Europe and not for China in that scenario.

Obviously you had, like you said, two new events with OKI fire being an issue last week and obviously with the general fires in Indonesia as well. So obviously two new news in the last week not under your control. But you’re painting a very good picture. Prices are struggling, or it wasn’t easy as I understand to get to $600 in China, or not as easy as you would expect with this scenario. So just wondering what else you need to see to, you know, to push harder and to see further price momentum?

And then maybe a question to Fabio. Fabio, what’s the plan with the US operations? I understand you’ve done a lot of work and I think things have, you know, the operations are a lot better than when you initially started. But obviously it’s still a little bit behind where we would expect in terms of profitability as well. So if you can talk a little bit about the plans for the US and when you expect those operations to be free cash breakeven, that would be great.

Thank you.

Leonardo Barreto de Araujo Grimaldi (VP Pulp Commercial and Log.)

Hi Marcio, this is Leo here. Yeah, so first of all, we had announced the second pulp price increase for Europe and not in China. And that, again, as you have mentioned, is important to say that’s all pre having a clear view on the effect of the wildfires in Indonesia and also pre fire at OKI 1 event. That was before understanding the effects of these two important variables to the S&D dynamics in our sector. We have actually announced two price increases for each region.

So they are kind of walking simultaneously with a delay in Europe as usual. And what makes us watchful in China, or made us prior to these two events, are two main points. First is timing for increasing margins of our customers. We all know that prices in uncoated woodfree, coated woodfree and ivory board are not doing well, are falling in China. But these three paper grades or paper and packaging grades are mostly integrated as we speak. And what really drives the demand of pulp and the dynamics of pulp in the market are tissue and specialty papers, which represent roughly 80% of the hardwood pulp demand in that country.

We know tissue prices are increasing in China. They have been on this positive trend for the last two months. So our intention was to give time for margin recoveries. And we see today margins at historic levels in tissue, a bit compensated also with fiber-to-fiber in that country. Second variable that we are watchful of are prices of softwood pulp. We know the situation there is much more critical than it is for hardwood supply and demand dynamics. At China prices, there was just a recent update from one of the main consultants in the business: at China prices, 51% of all global softwood production would be losing money. And this is unsustainable. Right? So we were also waiting and seeing what will happen to softwood and if that will give us a better leeway in terms of our price strategy looking forward.

As it is today, price differentials in China are much lower than historic averages, roughly $50 plus minus $10 depending on the grade, which we think is not sustainable. It’s also important to say, as in my opening speech I mentioned, that closures have again got traction during the year and we are monitoring that closely. Again, with the adjustment of a mill who decided to get back in business, total closures of softwood from January to October—the announcements total roughly 1.1 million tons. And when we factor that in, actually their curves as of the moment they were stopping, of the 1.1 million tons of closures in softwood, the factored market up to now is 380,000 tons.

So most of it is coming as of Q4 and into Q1, into 2027 as well. So we have to see how all these factors unfold: again, margins of our customers, how much or how quick softwood prices could move up in China, then factor in these two new variables in Indonesia to decide what to do.

Fabio Almeida de Oliveira (VP Paper and Packaging)

Marcos, thanks. Thank you, Marcel, thank you for your question. I’m gonna address our U.S. operations. You’re right, it was a very challenging quarter for us. When we bought this facility here in the United States, the main bottleneck that we had in terms of operations was the paper part of the mill. That was the major bottleneck that led to lower operating rates, higher cost, low quality. And since then we have put a lot of efforts and we have improved a lot the paper side of the mill.

Last year we had no major issues at the paper side. This year we had no major issue at the paper side. The issues that we have had this year were on the pulp side of the mill and the power utilities, which is now the main focus of our efforts here to bring stability to the mill. As I said in my speech in September, the mill has already stabilized. In October, we had a good month in terms of production, at a normal level both on the pulp side and the paper side of the mill. And we are focusing on two fronts. First front is to continue to stabilize the mill, increase operating rate levels at the mill, efficiency, quality of our products, and reducing cost. And also we have a series of small projects that we are working on, with small projects, higher returns that can help us to increase the EBITDA that we generated.

So these are the two fronts that we are working on and we are still pursuing our business plan that we had prior to the acquisition, which is to bring this mill to cash positive in 2028.

OPERATOR

Thanks, Leo. Thanks, Fabio. I’ll turn it over. Our next question comes from Lucas Lagi from XP Investimentos. You can open a microphone.

Lucas Lagi (Analyst at XP Investimentos)

Hi everyone. Good morning. I have two questions. First of all, thinking of RBEX now with the differences on the accounting format that you are providing market, I think it becomes easier to understand kind of the level of integration of the pulp that you’re selling into your company. So just thinking of what’s the optimal level that you expect RBEX integration to become over time? I think a part of it is already integrated by your own pulp production.

But just trying to understand what’s the optimal integration level that you pursue for this asset over time and how should we think of this ramp up between the integration of the pulp that you produce internally and I mean thinking of the guidance of net debt below $14 billion. I think it implies very, as you indicated, very strong free cash flow standpoint for 4Q. Just understanding if there’s any, let’s say, cash enhancement initiative included in this guidance or if it’s only related to the operating free cash flow related to your robust expected sales and operating standpoint in fourth Q. And if there’s any, I mean just if you could comment on any asset sale expected for the short term, I mean any other potential cash enhancement initiative that should drive this leverage downwards over the upcoming quarters. Just those two topics. Thank you very much.

Marcos Moreno Chagas Assumpcao (VP Finance and IR)

Hi Lucas, Marcos here. If I understood well your first question, I don’t know if you had that information, but we were already basically the sole supplier of Kimberly-Clark in most of their operations. So that integration does not provide us with meaningful additional volumes. I remember that we mentioned when we acquired during the signing that fiber-to-fiber could be one of the drivers of value creation. So that’s something that we will be pursuing in the future.

But that wouldn’t be the biggest synergies that we expect for that transaction. On your second question regarding the net debt reduction to $14 billion, there is nothing material regarding asset sale in the SEC in the fourth quarter of the year. We are expecting a strong free cash flow generation in the quarter given the positive environment for pulp volumes, for pulp prices and also considering, as you mentioned, an assumption of 5.40 as an average BRL for U.S. dollar. That’s pretty much it.

Lucas Lagi (Analyst at XP Investimentos)

Okay, thank you, Marcos.

OPERATOR

Our next question comes from Marcelo Arazi from BTG Pactual. You can open a microphone.

Marcelo Arazi (Analyst at BTG Pactual)

Good morning, guys. Can you hear me? Thanks for the space. Two questions on my side as well. The first one for Leo, a follow-up on the pulp topic. You mentioned that the cash cost in China has been rising. I would like to understand a little bit more on that point if this inflation is more related to the war impacts that you have been mentioning or this is more related to the wood inflation that we have been seeing in the region as well. And how could these fires in Indonesia impact even further this wood availability in the region?

So this is the first one. And on the second one, perhaps for Beto, we are finally seeing the first quarter with RBEX integrating in the company and we should expect Suzano to move towards a more deleveraged balance sheet over the next coming quarters and years. How can we expect capital allocation when Suzano is back on more normalized leverage levels? Could we expect further intentions to increase in the tissue business, especially since this environment on pulp? And wanted to hear Beto’s thoughts about this environment.

Thank you, guys.

Leonardo Barreto de Araujo Grimaldi (VP Pulp Commercial and Log.)

Marcelo, thank you for your question. Yes, the rising cash costs in China are mostly related to inflation on wood prices. If we consider, first of all, the lows that we saw in, let’s say, the biggest part of the first half of last year, we come up with this increased cost depending if they’re buying more or less imported wood in their ratio, anywhere from $30 to $40 per BDMT, which is kind of a double effect when it comes to their pulp cash cost.

We still have not factored in the effects of the fire or the wildfires in Indonesia. We have heard from more than one source in the market that Indonesians are even more active looking at wood from Vietnam to their country. But we still do not see reflection on price indexes for this, I would say, recent event. And looking forward, with the verticalization projects in China alone that are expected for 2027, if they were buying and sourcing only from China—as to the China prices are a bit lower than imported—if they were sourcing China wood only, that would mean a 20% increase over their current wood purchases in China.

So this is massive. And as this demand grows, obviously there’s going to be more pressure on prices because it’s, as we all know, a stable wood base in that country.

Marcelo Arazi (Analyst at BTG Pactual)

That’s very clear. Thanks, Leo.

Joao Alberto Fernandez de Abreu (Chief Executive Officer)

Marcelo, can you hear me? Regarding RBEX and your question, it’s related to capital allocation. RBEX still has a lot to do in the next two years, so we’re just starting. As I said, we are happy with the first quarter under our control, but there’s a lot to explore and to gain in terms of efficiency. We have this value creation stream that we already put in place. So I would say that the focus on RBEX and on the consumer goods business in the next two years is to deliver the business plan and capture all the efficiency that we were able to design during the business plan.

And so, in the end of the day, it’s improving the business and for Suzano as a whole, deleveraging. This is the main focus mainly in the next two years. So that’s what we have to focus at this time and not distract the organization putting further elements in the agenda. So that’s how we see our plans in the, let’s say, short and midterm.

Marcelo Arazi (Analyst at BTG Pactual)

Thanks, Beto. That’s very clear.

OPERATOR

The next question comes from Kyle Graner from UBS. You can open a microphone, sir.

Kyle Graner (Analyst at UBS)

Hello. Good morning, everyone. Thank you. So two follow-ups from me. The first one is still on OKI, Leo. I wanted to hear specifically about the initial reaction from your clients after the news on the OKI fire. Did you perceive already on day one or day two an increase in your order intake after this incident? Because if the market gets as tight as you mentioned, probably there’s gonna be room for higher prices still in November. There’s news today of APP snapping up all the volume available in China.

So would you still be willing to raise prices for China in November despite weak paper prices, or is this more a December or January negotiation going forward? So two points: on your order intake and higher prices for November. The second question, also a follow-up on costs. So also looking into 2027, and I know that you guys are only going to provide the official guidance at the Suzano Day or later in the year, but based on the $825 per ton guidance for the year that you provided, the implied value for the fourth quarter is around $830. So at current market conditions, is this number a good proxy for 2027, or should your efficiency initiatives or other initiatives that you have still translate into a lower number versus $830, again at current market conditions?

Thank you very much.

Leonardo Barreto de Araujo Grimaldi (VP Pulp Commercial and Log.)

Hi Caio, this is Leo here. So regarding October, our sales to China were closed before the OKI event, and we, due to our backlogs, do not have space to reopen or to increase orders, which, as I mentioned, were coming and, even with the price increase, came at historic levels. So to that point we did not increase our order books. Obviously there were customers calling, but we did not leave space to reopen or increase previous orders with Suzano. We do, however, see and hear a lot of news on APP these last 48 hours, very active on the resales markets in China, trying to buy pulp from traders or buying pulp from traders, reflecting on increasing resale prices in these last one to two days, and that can pose an effect to market sentiment in general, not only for customers buying from traders.

Regarding if we’re going to increase prices still in November, which we could, or December or January, this is obviously a very sensitive information. It’s part of our commercial strategy, and unfortunately I cannot open and share that with you at this moment.

Marcos Moreno Chagas Assumpcao (VP Finance and IR)

Hi Caio, regarding your second question. We’re actually in the middle of our budgeting process at this point in time, and as I mentioned, I think that the cash cost assumption will depend a lot on the macro variables that we commented, with oil prices being very relevant because of its impact on our business through chemicals and also logistics. What I can say to you is that we remain highly committed to improve the efficiency of our own operations.

We’re studying and analyzing how we can create value and extract value from our own operations—from the nursery to the forestry business to the industrial business, on the commercial and the logistics. So throughout the whole value chain, how can we extract value? And that should be included whenever we provide the guidance for 2027 by the end of the year.

Kyle Graner (Analyst at UBS)

Thank you both.

OPERATOR

The next question comes from Paula Athanasex for Citi. The floor is yours.

Paula Athanasex (Analyst at Citi)

Hi, guys, thanks for taking my questions and congrats on the results and the incorporation of RBEX. So just a follow-up here in the pulp cash cost, actually in the total operational disbursement. The last presentation of you guys, you had the bridge between 2025 and 2027 with $121 per ton of cost initiatives. I just want to ask if there’s any update on that, how these initiatives are going so far, and if I could ask about two more questions very quickly.

Regarding RBEX, we saw an increase in EBITDA sequentially. What were the main drivers for this? Is there any surprise so far? Any update on the timing for synergies? And lastly, if I could ask about the cash tax rate, is there any update on your view on what we could expect of the tax rate for 2027 and 2028? So these are my questions.

Marcos Moreno Chagas Assumpcao (VP Finance and IR)

If I understood you well on your first question regarding cost, the evolution from 2025 to 2027. Basically, we are incorporating inflation, right? The change in the macro variable of FX, and we are also incorporating the efficiency gains that we expect for the business. And that’s how we arrive at a total reduction from the 2,060 level that was realized at TOD for 2025 to 1,980 in 2027. As Carlos mentioned in his initial speech, if it was not for the change in the macro variables, we would be 100% aligned with our guidance on the cash cost side.

So I think that remains the case. The main or the big difference that could arrive in the numbers for 2027 will depend on the macro variables that we will use. Okay. Second question regarding Arbix. Beto also mentioned that we expect the value-creation program to kick in in the upcoming quarters. As we mentioned before, we see room for SG&A improvement. We now have contracts that we have to still—like Kimberly-Clark is offering some services to Arbix, and as we get out of those services, we will probably be able to reduce the cost of the structure of Arbix. On the procurement side, there is a lot of upside, in our opinion.

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