EX-99.1 2 tm2032572d4_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1 

 

 

 

Strong operating performance despite the seasonal factors in the quarter, further reduction of net debt and deleverage

 

São Paulo, October 29, 2020. Suzano S.A. (B3: SUZB3 | NYSE: SUZ), one of the world’s largest integrated pulp and paper producers, announces today its consolidated results for the third quarter of 2020 (3Q20).

 

HIGHLIGHTS

 

·Pulp sales of 2,527 thousand tons (stable vs. 3Q19).

 

·Paper sales of 319 thousand tons (+2% vs. 3Q19).

 

·Adjusted EBITDA1 and Operating cash generation² of: R$3.8 billion and R$2.9 billion, respectively.

 

·Adjusted EBITDA1/ton3 from pulp of R$1,339/ton (+56% vs. 3Q19).

 

·Adjusted EBITDA1/ton4 of paper of R$1,236/ton (+1% vs. 3Q19).

 

·Average net pulp price – export market: US$458/t (-13% vs. 3Q19).

 

·Average net paper price5 of R$4,081/ton (+1% vs. 3Q19).

 

·Pulp cash cost ex-downtime of R$600/ton (-8% vs. 3Q19).

 

·Capture of operating synergies in line with planning.

 

·Recovery of ICMS credits in Espírito Santo in the gross amount of R$146 million.

 

Financial Data (R$ million)   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    LTM5 3Q20 
Net Revenue   7,471    6,600    13%   7,996    -7%   29,496 
Adjusted EBITDA1   3,779    2,396    58%   4,180    -10%   13,450 
Adjusted EBITDA Margin1   51%   36%   15p.p.   52%   -2p.p.   46%
Adjusted EBITDA Margin¹ ex- Klabin2   51%   39%   12p.p.   52%   -2p.p.   46%
Net Financial Result   (4,223)   (6,493)   -    (5,657)   -    (30,699)
Net Income   (1,158)   (3,460)   -    (2,053)   -    (15,455)
Operating Cash Generation3   2,854    1,516    88%   3,372    -15%   10,103 
Net Debt /Adjusted EBITDA1 (x) - R$   5.1x   4.7x   0.4x   5.6x   -0.5x   5.1x
Net Debt /Adjusted EBITDA1 (x) - US$   4.4x   4.3x   0.1x   4.7x   -0.3x   4.4x

 

Operational Data ('000 tons)   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    LTM5 3Q20 
Sales   2,846    2,862    -1%   3,013    -6%   12,271 
Pulp   2,527    2,549    -1%   2,778    -9%   11,080 
Paper4   319    313    2%   235    36%   1,191 
Production   2,825    2,406    17%   2,815    0%   10,870 
Pulp   2,529    2,095    21%   2,543    -1%   9,676 
Paper4   296    311    -5%   272    9%   1,194 

 

¹Excludes non-recurring items and PPA effects. | 2 Excludes Klabin’s sales volume | 3 Considers Adjusted EBITDA less sustaining capex (cash basis). | 4 Includes the results of the Consumer Goods Unit. | 5Last 12 months.

 

 

 

 

 

3Q20 EARNINGS RELEASE

  

 

The consolidated quarterly information has been prepared in accordance with the Securities and Exchange Commission (CVM) and Accounting Standards Committee (CPC) standards and is in compliance with International Accounting Standard (IFRS) issued by the International Accounting Standard Board (IASB). The data contained in this document was obtained from the financial information as made available to the CVM. The operating and financial information is presented based on consolidated numbers in Reais (R$). Summaries may diverge due to rounding. Non-financial data, such as volume, quantity, average price, average price, in Reais and Dollars, were not reviewed by independent auditors.

 

CONTENTS

 

EXECUTIVE SUMMARY 3
PULP BUSINESS PERFORMANCE 3
PULP SALES VOLUME AND REVENUE 3
PULP CASH COST 5
PULP SEGMENT EBITDA 7
OPERATING CASH FLOW FROM THE PULP SEGMENT 7
PAPER BUSINESS PERFORMANCE 8
PAPER SALES VOLUME AND REVENUE¹ 8
OPERATING CASH FLOW FROM THE PAPER SEGMENT 10
ECONOMIC AND FINANCIAL PERFORMANCE 11
NET REVENUE 11
PRODUCTION 11
COST OF GOODS SOLD 12
SELLING EXPENSES 12
GENERAL AND ADMINISTRATIVE EXPENSES 13
ADJUSTED EBITDA 13
FINANCIAL INCOME 14
DERIVATIVE OPERATIONS 15
NET INCOME (LOSS) 18
INDEBTEDNESS 18
CAPITAL EXPENDITURE 21
OPERATING CASH GENERATION 21
FREE CASH FLOW 22
COVID-19 22
ESG 24
SYNERGIES 24
TOTAL OPERATIONAL EXPENDITURES -  PULP 24
EVENTS AFTER THE REPORTING PERIOD 24
CAPITAL MARKETS 25
FIXED INCOME 26
RATING 26
UPCOMING EVENTS 27
IR CONTACTS 27
APPENDICES 28
APPENDIX 1 - Operating Data 28
APPENDIX 2 -  Consolidated Statement of Income and Goodwill Amortization 30
APPENDIX 3 -  Consolidated Balance Sheet 31
APPENDIX 4 -  Consolidated Statement of Cash Flow 32
APPENDIX 5 -  EBITDA 33
APPENDIX 6 -  Segmented Income Statement 34
Forward-Looking Statements 36

 

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 3Q20 EARNINGS RELEASE

  

 

EXECUTIVE SUMMARY

 

Despite the effects of the typical seasonality during this period of the year, Suzano maintained consistent results in the third quarter. In the pulp business, the highlights were the strong sales volume, stable inventories and a healthy production cash-cost in comparison with the previous quarter, once again demonstrating the continued gains in structural competitiveness, driven by the synergies resulting from the merger with Fibria. The performance of the paper business was boosted by strong growth in domestic sales, as a result of the seasonality of the period and with emphasis on the paperboard segment, after the second quarter marked by a historical decline in demand on account of the pandemic, especially in the printing & writing paper segment. The combination of healthy operating performance and the strong depreciation of average BRL against the USD fueled the 58% growth in adjusted EBITDA in relation to 3Q19 to reach R$ 3.8 billion.

 

As for financial management, in the third quarter the Company reduced its net debt in USD and leverage, measured by net debt/Adjusted EBITDA in the last twelve months. Its liquidity position remained solid, representing zero refinancing risk until 2022. Suzano has remained focused on financial discipline, as evident from its clear and consistent policies, and diligently plays its role of generating and sharing value in the long term.

 

The third quarter also witnessed progress on Environmental, Social and Governance (ESG). As part of its debt management, in September Suzano repurchased its bonds 2024, 2025 and 2026 issued by its wholly-owned subsidiary Suzano Austria GmbH ("Suzano Austria") new bonds to be placed in the international market at the principal amount of US$750 million. The new bonds have an environmental performance indicator (KPI) associated with the Company’s target to reduce greenhouse gas (GHG) emissions by 2025, which underscores Suzano’s commitment to be part of the solution to the global climate crisis and is aligned with the implementation of its Long-Term Target 2030 of reducing emissions, announced in the beginning of this year. Hence, the new bonds are classified as sustainability-linked bonds according to the principles established by the International Capital Markets Association. As a result, Suzano became the 2nd Company in the world and the 1st Company in the Americas to issue such a type of instrument, which allowed the monetization of the ESG aspect through the lower cost of funding obtained when compared to the issue of similar securities. This achievement keeps us motivated, after all it is only good for us if it is good for the world.

 

PULP BUSINESS PERFORMANCE

 

PULP SALES VOLUME AND REVENUE

 

The impact of COVID-19 on the global industry of pulp and paper in 3Q20 has been different in shape and intensity in the main markets. The quick resumption of economic activities in China has favored, throughout the 3Q20, the gradual boosting of demand for printing & writing paper and specialty papers and, specially, tissue. In Europe, the resumption of the demand for printing & writing paper and specialty papers has been slow but at the end of the quarter we have seen an improvement in the utilization rate of the industry assets. At the same time, the demand for tissue continued to show solid growth, above the historical average in markets such as North America and Europe, driven mainly by domestic consumption (at home) and a slight recovery in the institutional segment during holidays in the northern hemisphere. Packaging papers continued to perform positively, following the new consumption habits. In this context, Suzano's pulp sales in the 3Q20 totaled 2,527 thousand tons, practically stable when compared to the 3Q19 and a 9% below the 2Q20.

 

On the supply standpoint, the highlight was the increase of maintenance downtimes for pulp producers, intensified since August, which were supposed to occur in the first half of the year. The combination of a higher intensity of downtimes, the lower availability of pulp from integrated producers and the increase in the production of dissolving pulp, enabled a reduction in supply and, therefore, a better balance of the market fundamentals during the quarter.

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In the quarter, pulp was sold by Suzano at a net average price of US$454/ton, down US$12/ton (-3%) from 2Q20 and US$73/ton (-14%) year-on-year, reflecting the drop in global pulp prices. Average net pulp price in the export market was US$458/ton (compared to US$471/ton in 2Q20 and US$526/ton in 3Q19).

 

 

 

Average net price in BRL was R$2,441/ton in 3Q20, down 3% when compared to 2Q20, however an increase of 17% when compared to 3Q19, due to the depreciation of the Brazilian real against the U.S. dollar in the period.

 

Net revenue from pulp was 16% higher than in 3Q19, mainly due to the 35% appreciation in average USD against the BRL, which was partially offset by the lower average net price in USD (-14%).

 

Compared to 2Q20, the 12% reduction in revenue was explained by the 9% decrease in sales and the 3% reduction in net average price in USD.

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PULP CASH COST

 

Cash cost excluding downtime in 3Q20 stood at R$600/t, decreasing R$54/ton from 3Q19 (-8%), due to: i) the lower wood cost on account of lower harvest costs, thanks to better operating performance, higher operating productivity and lower cost of diesel. Moreover, there was a decline in Company’s average supply radius, especially related to the decreases observed at Aracruz (non-utilization of Losango wood) and Maranhão, and the lower diesel costs; ii) the lower costs with energy as a result of lower price, especially of natural gas, and lower consumption, in turn resulting from optimization projects, as well as synergy and energy-efficiency gains. These effects were partially offset by the appreciation of 35% in the average USD against the BRL (impact of R$ 32/t), higher cost of chemicals, mainly due to higher consumption and lower energy sales price.

 

  

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¹Excludes the impact of maintenance and administrative downtimes.

 

Cash cost excluding downtime in 3Q20 remained stable in relation to 2Q20. The positive variations were observed in: i) the cost of energy, due to lower prices of natural gas and lower consumption due to greater operating stability; and ii) lower wood costs, due to the mix effect (consumption of wood with lower price), mainly in Mucuri and Maranhão Units. These positive factors were offset by: i) higher cost of chemicals, mainly due to the increase in prices of caustic soda; ii) higher fixed costs due to higher maintenance costs.

 

 

 

¹Excludes the impact of maintenance and administrative downtimes.

 

 

 

 

¹Based on cash cost excluding downtimes. Excludes energy sales.

Page 6 of 36

 

 

 

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PULP SEGMENT EBITDA

 

Pulp segment   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    LTM 3Q20 
Adjusted EBITDA (R$ million)   3,384   2,012    68%   3,862    -12%   11,997 
Sales volume (k ton)   2,527   2,347    8%   2,777    -9%   10,879 
Pulp adjusted¹ EBITDA (R$/ton)   1,339   857    56%   1,391    -4%   1,103 

 

¹ Excludes non-recurring items and PPA effects.

 

The 68% increase in Adjusted EBITDA from pulp in 3Q20 compared to 3Q19 mainly reflects the 35% appreciation in the average USD against the BRL, lower cash COGS (decline in cash production cost and lower impact of downtimes) and higher sales volume (+8%), which were partially offset by the lower net average pulp price in USD (-14%). The 56% increase in adjusted EBITDA per ton is mainly due to the exchange variation and the cost factor, which were partially offset by the lower average net pulp price in USD.

 

Compared to 2Q20, the 12% drop in adjusted EBITDA from pulp mainly reflects the 9% decrease in sales volume and lower net average price in USD (-3%). The negative impact from scheduled maintenance downtimes on cash COGS was offset by lower logistics expenses and other less significant impacts. In the case of Adjusted EBITDA per ton, price was the main factor for the 4% decline, which was partially offset by the reduction in COGS and SG&A expenses, as explained earlier.

 

 

 

¹ Excludes non-recurring items and PPA effects.

 

OPERATING CASH FLOW FROM THE PULP SEGMENT

 

Operating cash flow - Pulp (R$ million)   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    LTM 3Q20 
Adjusted EBITDA1   3,384    2,012    68%   3,862    -12%   11,997 
Maintenance Capex2   (854)   (811)   5%   (742)   15%   (3,072)
Operating Cash Flow   2,530    1,201    111%   3,120    -19%   8,925 

 

¹ Excludes non-recurring items and PPA effects.

² Cash basis.

 

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 3Q20 EARNINGS RELEASE

  

 

¹ Excludes sales volume related to the agreement with Klabin.

 

Operating cash generation per ton in the pulp segment increased 96% from 3Q19, reflecting the increase in Adjusted EBITDA per ton and the reduction in sustaining capex per ton. Compared to 2Q20, the 11% reduction was due to the lower per-ton EBITDA (as explained above) and the increase in sustaining capex per ton.

 

PAPER BUSINESS PERFORMANCE

 

The following data and analyses incorporate the joint results of the consumer goods and paper businesses.

 

PAPER SALES VOLUME AND REVENUE¹

 

According to the Forestry Industry Association (Ibá), domestic sales of printing & writing paper and paperboard decreased 7% between July and August in relation to the same period last year. From January to August 2020, sales contracted 18% in relation to 2019, reflecting the restrictive measures imposed to combat COVD-19 during the year. With the resumption of economic activity, domestic sales recovered gradually, with July and August registering a 46% growth in relation to the average of 2Q20.

 

Imports till August decreased 36% in relation to the same period last year. In July and August, imports decreased 62% in relation to the same period in 2019.

 

Domestic paperboard sales were positively affected by the resumption of diverse industrial sectors and retail consumption, as well as the accelerated changes in consumer habits at the peak of physical distancing, due to the COVID-19 pandemic. In July and August, the market expanded 22% in relation to the same period last year. As with the packaging market, the tissue market was also affected positively. According to Ibá, domestic sales in this market increased 4% from January to August in relation to the same period last year.

 

Suzano’s paper sales (printing & writing, paperboard and tissue) in Brazil totaled 220,000 tons in 3Q20, up 57% from 2Q20 and 4% from 3Q19, driven by higher sales of products for packaging and papers used for municipal election campaigns.

 

Paper sales in both the domestic and export markets in 3Q20 totaled 319,000 tons, up 36% from 2Q20 and 2% from 3Q19. Paper exports represented 31% of the total volume (vs. 40% and 33% in 2Q20 and 3Q19, respectively).

 

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 3Q20 EARNINGS RELEASE

  

 

 

Average net price was R$4,081/ton in 3Q20, increasing R$57/ton (+1%) from 3Q19, due to the exchange rate effect on exports and a reduction of R$ 249/ton (-6%) versus 2Q20, due to the reduction in paper prices on international markets.

 

Net revenue from paper was R$1,302 million in 3Q20, up 28% from 2Q20, reflecting higher sales volumes in 3Q20 compared to the second quarter, which was more impacted by the COVID-19 restrictive measures.

 

Compared to the same period last year, net revenue from paper increased 3%.

 

 

 

*Includes the Consumer Goods Unit.

 

PAPER SEGMENT EBITDA

 

Paper segment   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    UDM 3Q20 
Adjusted EBITDA (R$ million)¹   394    385    3%   317    24%   1,453 
Sales volume (k ton)   319    313    2%   235    36%   1,191 
Paper adjusted¹ EBITDA (R$/ton)   1,236    1,229    1%   1,348    -8%   1,220 

 

¹ Excludes non-recurring items and PPA effects.

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Adjusted EBITDA from paper in 3Q20 was 3% higher than in 3Q19, mainly due the 35% appreciation of the USD against the average BRL. Adjusted EBITDA was virtually stable.

 

Compared to 2Q20, paper Adjusted EBITDA increased 24%, mainly due to higher sales volume (+36%). In relation to per-ton EBITDA, a decrease of 8% was observed, explained by the reduction on net average price (-6%), which was partially offset by the reduction in COGS, mainly resulting from the lower effect of administrative downtimes and lower SG&A and other operating expenses.

 

 

 

¹ Excluding non-recurring items.

 

OPERATING CASH FLOW FROM THE PAPER SEGMENT

 

Operating cash flow - Paper (R$ million)   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    LTM 3Q20 
Adjusted EBITDA1   394    385    3%   317    24%   1,453 
Maintenance Capex2   (70)   (70)   0%   (65)   7%   (275)
Operating Cash Flow   325    314    3%   252    29%   1,178 

 

¹ Excluding non-recurring items.

² Cash basis.

 

 

Operating cash generation per ton of paper in 3Q20 was R$1,018/t, up 1% from the previous year due to the increase in adjusted EBITDA.

 

Compared to 2Q20, although EBITDA was higher in 3Q20, net price was lower (-6%), resulting in a drop in per-ton cash generation (-5%).

 

Page 10 of 36

 

 

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ECONOMIC AND FINANCIAL PERFORMANCE

 

NET REVENUE

 

Suzano’s net revenue in 3Q20 was R$7,471 million, 82% of which came from exports (vs. 80% in 3Q19 and 88% in 2Q20). Compared to 3Q19, the 13% growth in net revenue mainly reflected the 35% appreciation in the average USD against the BRL, partially offset by the 14% decline in the average net pulp price in USD. The reduction of 7% in consolidated net revenue in 3Q20 when compared to the 2Q20 is basically explained by the 9% decrease in pulp sales. The total volume of pulp and paper sales in the quarter was 2,846 thousand tons, stable compared to the same period last year and 6% lower than 2Q20.

 

 

¹ Excludes service revenue from Portocel.

 

PRODUCTION

 

Production (k ton)   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    LTM 3Q20 
Market Pulp   2,529    2,095    +21%   2,543    -1%   9,676 
Paper   296    311    -5%   272    +9%   1,194 
Total   2,825    2,406    +17%    2,815    +0%    10,871 

 

In 3Q20, the following units underwent scheduled maintenance downtimes: lines A and C at the Aracruz Unit, line 2 of the Mucuri Unit, the Suzano Unit and the Veracel Unit. As already disclosed by the Company, given the current social scenario caused by the COVID-19 pandemic, in order to protect people and society, the Company decided to postpone most of its maintenance downtimes initially scheduled for the second half of the year. Pulp production remained stable in relation to 2Q20. The negative impact of downtimes was largely compensated by the acceleration of the production rate at the mills. Compared to the same period last year, apart from the accelerated pace of production at its pulp mills, there was a greater impact of downtimes (general maintenance and administrative) during that quarter.

 

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Following is the calendar of Suzano’s scheduled maintenance downtimes:

 

Mill - Pulp capacity 2019 2020 2021
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21
Aracruz - Linha A (ES) – 590 kt                                
Aracruz - Linha B (ES) – 830 kt                            
Aracruz - Linha C (ES) – 920 kt                              
Imperatriz (MA)² – 1,650 kt                      No downtime
Jacareí (SP) – 1,100 kt                    No downtime
Limeira (SP)² – 690 kt                            
Mucuri - Linha 1 (BA)² – 580 kt                   No downtime
Mucuri - Linha 2 (BA) – 1,100 kt                            
Suzano (SP)² – 620 kt                            
Três Lagoas - Linha 1 (MS) – 1,300 kt                     No downtime
Três Lagoas - Linha 2 (MS) – 1,950 kt                     No downtime
Veracel (BA)¹ – 560 kt                            
                                             

 

¹ Veracel is a joint operation between Suzano (50%) and Stora Enso (50%) with total annual capacity of 1,120 thousand tons.

² Includes integrated capacities and fluff.

 

COST OF GOODS SOLD

 

COGS (R$ million)  3Q20  3Q19  Δ Y-o-Y   2Q20  Δ Q-o-Q   LTM 3Q20 
COGS   4,474    4,986    -10%   4,789    -7%   19,893 
Depreciation, depletion and amortization   1,399    1,265    11%   1,462    -4%   5,792 
Cash COGS   3,075    3,721    -17%   3,327    -8%   14,101 
Sales volume   2,846    2,862    -1%   3,013    -6%   12,271 
Cash COGS/ton (R$/ton)   1,081    1,300    -17%   1,104    -2%   1,149 

 

¹ Includes amortization of goodwill surplus/loss (PPA)

 

Cash COGS in 3Q20 totaled R$3,075 million, or R$1,081/ton. Compared to 3Q19, cash COGS declined 17%, mainly due to lower production cost (especially in pulp, explained by the factors detailed in the cash cost analysis, as well as the lower impact from downtimes) and the absence of Klabin’s pulp sales. These effects were partially offset by the 35% appreciation in the average USD against the BRL. On a per-ton basis, the 17% reduction is also explained by the same factors.

 

Compared to 2Q20, cash COGS decreased 8% mainly due to lower sales volume (-6%). On a per-ton basis, the indicator was 2% lower than in the previous quarter due to lower selling expenses and the mill/region mix.

 

SELLING EXPENSES

 

Selling expenses (R$ million)   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    LTM 3Q20 
Selling expenses   523    469    12%   547    -4%   2,123 
Depreciation, depletion and amortization1   241    229    5%   227    6%   935 
Cash selling expenses   282    240    18%   320    -12%   1,188 
Sales volume   2,846    2,862    -1%   3,013    -6%   12,271 
Cash selling expenses/ton (R$/ton)   99    84    18%   106    -7%   97 

 

¹ Includes amortization of goodwill surplus/loss (PPA)

 

Cash selling expenses increased 18% from 3Q19, mainly due to the 35% appreciation of the average USD against the BRL and higher logistics expenses, especially in the paper segment. On a per-ton basis, cash selling expenses increased 18% mainly due to the effect of exchange rate variation on expenses in foreign currency.

 

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When compared to 2Q20, the 12% reduction in cash selling expenses is mainly explained by lower sales volume. Per-ton cash selling expenses decreased 7%, due to lower logistics expenses in the pulp segment in the export market.

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

General and Administrative Expenses (R$ million)  3Q20  3Q19  Δ Y-o-Y   2Q20  Δ Q-o-Q   LTM 3Q20 
General and Administrative Expenses   313    279    12%   336    -7%   1,249 
Depreciation, depletion and amortization1   10    13    -23%   19    -47%   47 
Cash general and administrative expenses   303    266    14%   317    -4%   1,202 
Sales volume   2,846    2,862    -1%   3,013    -6%   12,271 
Cash general and administrative expenses/t (R$/ton)   106    93    14%   105    1%   98 

 

¹ Includes amortization of goodwill surplus/loss (PPA).

² Inverse effect due to the write-off of PPA on contingencies (write-off of cases initially reassessed in the business combination).

 

Compared to 3Q19, the 14% increase in cash general and administrative expenses is mainly due to the increase in personnel expenses. On a per-ton basis, there was an increase of 14% due to the same factors.

 

Compared to 2Q20, cash general and administrative expenses decreased 4% due to lower expenses related to the COVID-19 pandemic in the previous quarter, partially offset by higher personnel expenses. On a per-ton basis, the 1% increase is explained by the same factors and by the lower dilution of fixed expenses.

 

Other operating income (expenses) amounted to an expense of R$4 million in 3Q20, compared to an income of R$116 million in 3Q18 and income of R$196 million in 2Q20. Compared to 3Q19, the variation is mainly explained by the R$128 million credit generated by excluding ICMS from the PIS and COFINS calculation base in that quarter. Compared to 2Q20, the variation is mainly explained by the result of the adjustment to fair value of biological assets, which occurred in the second and fourth quarter of each fiscal year.

 

ADJUSTED EBITDA

 

Consolidated  3Q20   3Q19  Δ Y-o-Y   2Q20  Δ Q-o-Q   LTM 3Q20 
Adjusted EBITDA (R$ million)¹   3,779    2,396    58%   4,180    -10%   13,450 
Adjusted EBITDA¹ Margin - ex-Klabin   51%   39%   12p.p.   52%   -2p.p.   46%
Sales Volume ex-Klabin (k ton)   2,846    2,661    7%   3,013    -6%   12,070 
Adjusted EBITDA¹ ex-Klabin/ton (R$/ton)   1,328    901    47%   1,387    -4%   1,114 

 

¹ Excludes non-recurring items and PPA effects.

 

The increase in Adjusted EBITDA in 3Q20 compared to 3Q19 is explained by: (i) the appreciation in the average USD against the BRL (+35%); (ii) the decrease in cash COGS, as detailed above; and (iii) the higher sales volume ex-Klabin. These effects were partially offset by the lower net pulp price in USD (-14%) and higher SG&A, as explained above. The 47% increase in per-ton EBITDA is explained by the exchange variation and lower production costs, which were partially offset by the increase in SG&A.

 

Compared to 2Q20, the 10% drop in Adjusted EBITDA was mainly due to lower pulp sales (-6%) and lower net average pulp price in USD (-14%). The 4% decline in per-ton adjusted EBITDA is basically due to the price factor.

 

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 3Q20 EARNINGS RELEASE

  

 

FINANCIAL INCOME

 

Financial Result (R$ million)  3Q20  3Q19   Δ Y-o-Y   2Q20  Δ Q-o-Q 
Financial Expenses   (1,365)   (1,058)   29%   (1,033)   32%
Interest on loans and financing (local currency)   (171)   (355)   -52%   (191)   -11%
Interest on loans and financing (foreign currency)   (1,007)   (597)   69%   (660)   53%
Capitalized interest1   2    0    -    4    -53%
Other financial expenses   (190)   (106)   79%   (187)   2%
Financial Income   58    108    -46%   82    -29%
Interest on financial investments   20    91    -78%   38    -49%
Other financial income   39    17    128%   44    -12%
Monetary and Exchange Variations   (1,645)   (3,685)   -    (2,930)   - 
Foreign exchange variations (Debt)   (1,851)   (3,627)   -    (3,177)   -42%
Other foreign exchange variations   206    (58)   -455%   247    -16%
Derivative income (loss), net2   (1,271)   (1,857)   -    (1,776)   -28%
Cash flow hedge   (459)   (654)   -    (679)   -32%
Debt hedge   (766)   (1,246)   -39%   (1,064)   -28%
Others3   (46)   43    -    (33)   39%
Net Financial Result   (4,223)   (6,493)   -    (5,657)   - 

 

¹ Capitalized interest due to construction in progress.

² Variation in mark-to-market adjustment (3Q20:-R$10,778 million | 2Q20:-R$10,820 million), plus adjustments paid and received (3Q20: -R$1,288 million).

³ Includes commodity hedging and embedded derivatives.

 

Financial expenses totaled R$1,365 million in 3Q20, up 32% from 2Q20 and 29% from 3Q19. When compared to 3Q19, there was an impact of interest expenses in foreign currency as a result of expenses related to the repurchase of Senior Notes issued by Suzano's foreign subsidiaries, whose amount totaled US$69 million (equivalent on the payment date to R$366 million). This effect was partially offset by decrease in debt indexes, both in national currency (CDI) and in foreign currency (Libor 3M). When compared to 2Q20, the variation is explained by the same factors.

 

Financial income decreased 46% compared to 3Q19 and 29% compared to 2Q20. When compared to 3Q19, the variation was due to the reduction in interest rates that remunerate the company's cash, mainly in foreign currency, where most of the cash and cash equivalents are concentrated. When compared to 2Q20, in addition to the decrease in interest rates mentioned, it is worth noting the reduction in cash position, impacted by the advance payment of RCF (US$500 million).

 

Inflation adjustment and exchange variation had a negative impact of R$1,645 million on the Company’s financial result in the quarter, due to the 3% appreciation in the end-of-period rate of the USD against the BRL especially on the foreign currency portion of debt (79% of total debt). Note that the accounting impact from exchange variation on foreign currency debt has a cash impact only on the respective maturities.

 

Derivative operations generated a loss of R$1,271 million in 3Q20, due to weaker BRL and the volatility of market curves applicable to debt hedge and cash flow transactions. The impacts of the COVID-19 pandemic on economies around the world continued throughout 3Q20, and the risk aversion trend once again affected the local currency in a scenario of high volatility. There also was a significant impact caused by the increase in the Pre, Cupom and Libor rate curves on transactions. The mark-to-market adjustment of derivative instruments on September 30, 2020 generated a loss of R$10,778 million, compared to a loss of R$ 10,820 million from the mark-to-market adjustment on June 30, 2020, representing a positive variation of R$42 million. As with exchange variation on the debt, the impact of BRL depreciation on the derivatives portfolio generates a cash impact only upon the respective maturities. The net effect on cash, which refers to the settlement of operations coming due in the third quarter, was negative in the amount of R$1,313 million (R$ 346 million expense from debt hedge and R$ 967 million from operating hedge and commodities).

 

Due to the aforementioned factors, the net financial expense was R$4,223 million in 3Q20, compared to the net financial expense of R$5,657 million and R$ 6,493 million in 2Q20 and 3Q19, respectively.

 

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 3Q20 EARNINGS RELEASE

  

 

DERIVATIVE OPERATIONS

 

Suzano carries out derivative operations exclusively for hedging purposes. Note that none of the company’s hedge operations has margin calls. The following table reflects the position of derivative hedging instruments at September 30, 2020:

 

   Notional (US$ million)   Fair value (R$ million) 
Hedge1  Sep/2020   Jun/2020   Sep/2020   Jun/2020 
Debt   6,870    6,986    (8,706)   (8,286)
Cash Flow   3,535    3,396    (2,497)   (2,980)
Others2   709    745    425    445 
Total   11,114    11,127    (10,778)   (10,821)

 

¹ Refer to note 4 of the 3Q20 Quarterly Financial Statements (ITR) for further details and fair value sensitivity analysis.

² Includes commodity hedge and embedded derivatives.

 

The Company’s financial policy seeks to minimize the volatility of its cash generation and to impart greater flexibility to cash flow management. Currently, the policy stipulates that surplus dollars may be partially hedged (up to 75% of exchange variation exposure over the next 18 months) using plain vanilla instruments such as Zero Cost Collars (ZCC) and Non-Deliverable Forwards (NDF).

 

ZCC transactions establish minimum and maximum limits for the exchange rate that minimize adverse effects in the event of significant appreciation in the BRL. If the exchange rate is within such limits, the Company neither pays nor receives any financial adjustments. Therefore, the Company is protected in scenarios of extreme BRL appreciation. However, these transactions also limit potential gains in scenarios of extreme BRL depreciation. This characteristic allows for capturing greater benefits from export revenue in a potential scenario of USD appreciation within the range contracted.

 

On September 30, 2020, the outstanding notional value of operations involving forward dollar sales through ZCCs was US$3,446 million, whose maturities are distributed from October 2020 to March 2022, with an average forward rate ranging from R$4.54 to R$5.16. On the same date, the amount outstanding of the operations (notional) involving forward dollar sales through NDFs was US$89 million, whose maturities are distributed between October 2020 and March 2020 and with an average strike of R$5.36. In 3Q20, cash flow hedge operations resulted in a loss of R$459 million. The mark-to-market adjustment (fair value) of ZCC transactions was a loss of R$2,467 million and for NDFs was a loss of R$30 million at the end of the quarter, with the difference between the fair value of the third quarter and the financial result related to adjustments paid during 3Q20.

 

The following table presents a sensitivity analysis of the cash impact that the Company could have on its cash flow hedge portfolio (ZCC and NDF) if the future exchange rate remains the same as that at end of September (R$/US$ = 5.64) in the coming quarters; as well as the projected variation in cash impact for each R$0.10 variation at the same reference exchange rate (3Q20). Note that the figures presented in the table are Company projections based on the end-of-period curves and could fluctuate depending on market conditions.

 

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 3Q20 EARNINGS RELEASE

  

 

           Cash adjustment (R$ million) 
Maturity
(up to)		  Strike Range   Notional
(US$ million)		   Actual   R$ / US$ = 5.64 (3Q20)²  

Sensitivity at R$ 0.10 / US$

variation (+/-)1

 
Zero Cost Collars
3Q20   -    -    (913)   -    - 
4Q20   4.19 – 4.63    522    -    (550)   (52)
1Q21   4.27 – 4.76    736    -    (690)   (74)
2Q21   4.27 – 4.75    840    -    (796)   (83)
3Q21   4.75 – 5.54    617    -    (236)   (62)
4Q21   5.18 – 6.15    485    -    -    (46)
1Q22   5.25 – 6.05    245    -    -    (25)
Total   4.54 – 5.16    3,446    (913)   (2,272)   (342)
NDF
3Q20   -    -    (29)   -    - 
4Q20   77.47³    9    -    -    0 
1Q21   -    -    -    -    0 
2Q21   -    -    -    -    0 
3Q21   5.33    50    -    (6)   (5)
4Q21   -    -    -    0    0 
1Q22   5.42    30    -    (1)   (3)
Total   5.36    89    (29)   (7)   (8)

 

¹ Note: sensitivity of adjustments for foreign exchange levels above maximum value of the strike range.

² To calculate the mark-to-market adjustment, the PTAX rate of the next to last business day for the period under analysis was adopted.

³ NDF with strike in ARS (argentine peso) at Stenfar.

 

The Company also uses currency and interest rate swaps to mitigate the effects from exchange and interest rate variations on the balance of its debt and on its cash flow. Contracts swapping different interest rates and inflation indexes may be entered to mitigate the mismatch between financial assets and liabilities.

 

On September 30, 2020, the Company held US$6,870 million (notional value) in swaps, distributed as shown in the table below. In 3Q20, the result of liability hedge transactions was a loss of R$766 million, mainly due to the BRL depreciation in the period due to the COVID-19 pandemic. The mark-to-market (fair value) of such operations was negative by R$8,706 million at the end of the quarter, the difference between the change in fair value occurring in the third quarter and the financial result related to adjustments paid in the course of 3Q20.

 

          Notional (US$ million)   Fair value (R$ million) 
Debt Hedge  Maturity (up to)   Currency  Sep/2020   Jun/2020   Sep/2020   Jun/2020 
Swap (PRÉ x USD)  2024   USD   350    350    (719)   (637)
Swap (CDI x USD)  2026   USD   2,567    2,677    (6,792)   (6,454)
Swap (IPCA x USD)  2023   USD   121    121    (195)   (173)
Swap (LIBOR x USD)  2026   USD   3,683    3,683    (1,252)   (1,273)
Swap (IPCA x CDI)  2023   BRL   149¹   154    252    252 
Total          6.870    6.986    (8.706)   (8.285)

 

1Translated at the closing exchange rate (5.64).

 

The following table presents a sensitivity¹ analysis of the cash impact that the Company could have on its debt hedge portfolio (swaps) if the future exchange rate remains the same as that at end-3Q20 (R$/US$ = 5.64) in the coming quarters; as well as the projected variation in cash impact for each R$0.10 variation at the same reference exchange rate (3Q20). Note that the figures presented in the table are Company projections based on the end-of-period curves and could fluctuate depending on market conditions.

 

Page 16 of 36

 

 

 

 3Q20 EARNINGS RELEASE

  

 

        Cash adjustment (R$ million) 
Maturity (up to)   Notional
(US$
million)		   Actual   R$ / US$ = 5.64 (3Q20)  

Sensitivity at R$

0.10 / US$

variation (+/-)1

 
3Q20   -    (346)   -    - 
4Q20   300    -    (992)   (37)
2021    333    -    (725)   (21)
2022    737    -    (1,206)   (60)
2023    2,167    -    (616)   (50)
2024    1,331    -    (599)   (46)
2025    1,156    -    (1,475)   (90)
>2026    845    -    (1,493)   (82)
Total    6,870    (346)   (7,106)   (386)

 

¹ Sensitivity analysis considers variation only in the exchange rate (R$/US$), while other variables are presumed constant.

 

Other transactions involving the Company’s derivatives are related to the embedded derivative resulting from the forestry partnerships and commodity hedges (maritime fuel), as follows:

 

   Maturity       Notional (US$ million)   Fair Value (R$ million) 
Other hedges1 

(up to)

   Index  Sep/2020   Jun/2020   Sep/2020   Jun/2020 
Embedded derivative  2035   Fixed USD | USD US-CPI   646    657    474    522 
Commodities  2021   Brent/VLSFO   63    87    (49)   (77)
Total          709    744    425    445 

 

1In 3Q20 there was a cash disbursement of R$25 million related to commodities derivatives.

 

Forestry partnership agreements and timber supply agreements signed on December 30, 2013 by Fibria Celulose S.A. are denominated in USD per cubic meter of standing timber, adjusted by U.S. inflation measured by the Consumer Price Index (CPI), which is not related to inflation in the economic environment where the forests are located and, hence, constitutes an embedded derivative. Such instrument, which is presented in the table above, consists of a swap contract with the short leg consisting of the variations in the US-CPI during the period of the aforementioned agreements. See note 4 of the 3Q20 Financial Statements for more details and for a sensitivity analysis of the fair value in the event of substantial variation in the US-CPI. On September 30, 2020, the outstanding amount (notional) of the operation was US$646 million. The result from the swap in 3Q20 was a loss of R$48 million. The mark-to-market adjustment (fair value) of such operations generated a gain of R$474 million at the end of the quarter.

 

The Company also is exposed to the international oil price, which is reflected in the logistics costs of sales to export markets. In this case, the Company analyzes the contracting of derivative financial instruments to fix the price of maritime fuel.

 

On September 30, 2020, the outstanding amount (notional) of the operation was US$63 million. The result from the swap in 3Q20 was a gain of R$2 million. The mark-to-market (fair value) adjustment of these operations generated a loss of R$49 million at the end of the quarter.

 

Page 17 of 36

 

 

 3Q20 EARNINGS RELEASE

  

 

 

 

*Debt in BRL translated into USD at the closing exchange rate of the month (R$/US$ 5.64 on 09/30/2020).

 

NET INCOME (LOSS)

 

In 3Q20, the Company posted net loss of R$1,158 million, compared to net loss of R$3,460 million in 3Q19 and net loss of R$2,053 million in 2Q20. The variation in relation to 3Q19 is explained by the lower financial loss, which in turn is due to the effects from exchange variation on liabilities, the gain/loss from derivative transactions, and the higher operating result. Compared to 2Q20, the R$859 million decrease in net loss mainly reflects the positive variation in the net financial result (lower exchange variation on liabilities and derivatives), which was partially offset by the reduction in operating results due to the above-mentioned factors.

 

 

INDEBTEDNESS

 

Debt (R$ million)  09/30/2020   09/30/2019   Δ Y-o-Y   06/30/2020   Δ Q-o-Q 
Local Currency   16,359    17,278    -5%   16,765    -2%
Short Term   1,651    2,620    -37%   1,966    -16%
Long Term   14,709    14,658    0%   14,799    -1%
Foreign Currency   62,131    46,743    33%   63,863    -3%
Short Term   2,673    2,472    8%   3,580    -25%
Long Term   59,458    44,271    34%   60,283    -1%
Gross Debt   78,490    64,021    23%   80,629    -3%
(-) Cash   9,758    8,790    11%   12,687    -23%
Net debt   68,731    55,231    24%   67,941    1%
Net debt/Adjusted EBITDA1(x) - R$   5.1x   4.7x   0.4 p.p.    5.6x   -0.5 p.p. 
Net debt/Adjusted EBITDA1(x) - US$   4.4x   4.3x   0.1 p.p.    4.7x   -0.3 p.p. 

 

1 Excluding non-recurring items.

 

On September 30, 2020, gross debt was R$78.5 billion, composed of 94% long-term maturities and 6% short-term maturities. Debt denominated in foreign currency accounted for 79% of the Company's total liabilities, while debt denominated in local currency accounted for the remaining 21%. The percentage of gross debt denominated in foreign currency, considering the effect from debt hedge, was 94%. Gross debt declined 3% from 2Q20 (R$2.1 billion), due to settlements related to Liability Management (such as CRAs and ACCs) and the repayment of the revolving credit of US$ 500 million. Also regarding debt management operations, worth mentioning the partial repurchase of US$690 million of bonds 2024, 2025 and 2026 and the issue by its wholly-owned subsidiary Suzano Austria GmbH ("Suzano Austria") of new securities debt for placing on the international market in the principal amount of US$750 million characterized as “Sustainability-Linked Bonds”, with the cost (coupon) associated with the sustainability goal.

.

Page 18 of 36

 

 

 3Q20 EARNINGS RELEASE

  

 

Suzano contracts debt in foreign currency debt as a natural hedge, since net operating cash generation is denominated in foreign currency (U.S. dollar) due to its prevailing status as an exporter. This structural exposure allows the Company to match loans and financing payments in USD with receivable flows from sales.

 

 

 

* Corresponding mainly to transaction costs (emission, funding etc.) and impacts from surplus value resulting from the operation with Fibria.

 

On September 30, 2020, the average cost of debt in U.S. dollar was 4.5% p.a. (considering debt in BRL adjusted by the market swap curve) as against 4.5% on June 31, 2020. The average term of consolidated debt at the end of the period was 84 months (vs. 82 months in June 2020).

 

 

 

¹ Considers the portion of debt with currency swaps. The original debt was 79% denominated in USD and 21% in BRL.

 

Cash and cash equivalents at the end of September 30, 2020 were R$9,758 million, 59% of which were invested in foreign currency, in fixed-income short-term investments, while the local currency share was invested in government bonds and fixed income, remunerated at a percentage of the DI rate.

 

The company has two standby credit facilities totaling R$3,820 million – one in Brazilian real of R$1 billion available until 2021 and another one of US$500 million available until 2024. These facilities help improve the company's liquidity position and can be withdrawn during times of uncertainty, such as during the first half of the year, as a result of the COVID-19 pandemic outbreak. As a result, the current cash position of R$9,758 million plus the facilities described above amount to a readily available cash position of R$13,578 million.

 

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 3Q20 EARNINGS RELEASE

  

 

 

 

On September 30, 2020, net debt stood at R$68.7 billion (US$12.2 billion), compared to R$67.9 billion (US$12.4 billion) on June 30, 2020. As informed earlier, the increase in net debt in BRL is due to the depreciation of the Brazilian currency in the period.

 

The ratio of net debt to Adjusted EBITDA in BRL stood at 5.1x on September 30, 2020 (vs 5.6x at 2Q20). The same ratio in USD (a measure established in Suzano’s financial policy) fell to 4.4x on September 30, 2020 (vs. 4.7x at 2Q20).

 

 

 

The breakdown of total gross debt between trade and non-trade finance on September 30, 2020 is shown below:

 

   2020   2021   2022   2023   2024  

2025

onwards

   Total 
Trade Finance¹   63%   23%   56%   84%   72%   11%   34%
Non Trade Finance²   37%   77%   44%   16%   28%   89%   66%

 

¹ ACC, ACE, NCE, PPE

² Bonds, BNDES, CRA, Debentures, among others.

 

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 3Q20 EARNINGS RELEASE

  

 

CAPITAL EXPENDITURE

 

In 3Q20, capital expenditures (cash basis) totaled R$1,167 million, down 27% from 3Q19, mainly due to lower expenses with land and forests, port terminals and mill maintenance (lower expenses with projects), which were partially offset by higher volume of timber purchases, the 35% appreciation of the U.S. dollar against the Brazilian real, and higher production. Compared to 2Q20, the 13% increase was mainly due to higher expenses with forest development, industrial projects and forest and land acquisitions.

 

Investiments (R$ million)   3Q20   3Q19    Δ Y-o-Y    2Q20   Δ Q-o-Q    LTM 3Q20    

Guidance

2020

 
Maintenance   924    881    5%   808    14%   3,347    3,508 
Industrial maintenance   149    211    -29%   113    32%   514    611 
Forestry maintenance   745    630    18%   691    8%   2,734    2,801 
Others   31    40    -24%   4    679%   99    97 
Expansion and modernization   55    69    -20%   86    -36%   274    248 
Land and forestry   163    541    -70%   105    55%   621    389 
Port terminals   25    102    -76%   33    -24%   210    104 
Total   1,167    1,593    -27%   1,031    13%   4,452    4,249 

 

OPERATING CASH GENERATION

 

Operating cash flow - Consolidated (R$ million)   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    LTM 3T20 
Adjusted EBITDA1   3,779    2,396    58%   4,180    -10%   13,450 
Maintenance Capex2   (924)   (881)   5%   (808)   14%   (3,338)
Operating Cash Flow   2,854    1,515    88%   3,372    -15%   10,112 
Operating Cash Flow (R$/ton)   1,003    570    76%   1,119    -10%   957 

 

¹ Excludes non-recurring items and PPA effects.

² Cash basis.

³ Excludes sales volume from Klabin.

 

Operating cash generation, measured by Adjusted EBITDA less sustaining capex (cash basis), amounted to R$2,854 million in 3Q20. The 88% increase compared to 3Q19 mainly reflects the higher EBITDA, as explained above, which was partially offset by the increase in sustaining capex. The increase in operating cash generation per ton compared to 3Q19 is largely related to EBITDA growth per ton. The 15% drop in relation to 2Q20 is related to the decline in EBITDA mentioned earlier and higher sustaining capex. On a per-ton basis, the 10% decrease is also due to the same factors.

 

 

 

Page 21 of 36

 

 

 

 3Q20 EARNINGS RELEASE

  

 

FREE CASH FLOW

 

Free Cash Flow (R$ million)  3Q20  3Q19  Δ Y-o-Y   2Q20  Δ Q-o-Q   LTM 3Q20 
Adjusted EBITDA   3,779    2,396    58%   4,180    -10%   13,450 
(-) Total Capex¹   (1,226)   (1,088)   13%   (1,077)   13%   (4,312)
(+/-) D Working capital   1,290    1,653    -    593    -    1,150 
(-) Net interest   (1,560)   (831)   88%   (441)   253%   (3,708)
(-) Income taxes   (67)   69    -198%   (34)   100%   (185)
(-) Dividend payment   0    (0)   -    -    -    (5)
Free cash flow   2,215    2,199    -    3,221    -31%   6,390 
(+) Capex ex-maintenance   163    68    139%   138    18%   651 
(+) Dividend payment   0    0    -    0    -    5 
Free cash flow - Adjusted   2,378    2,268    5%   3,381    -29%   7,046 
(-) Derivative cash adjustment   (1,313)   (51)   -    (1,661)   -21%   (3,227)
Free cash flow - Adjusted - after derivatives   1,065    2,216    -52%   1,720    -37%   3,819 

¹ On an accrual basis.

² Free cash flow prior to dividend payments and capex ex-maintenance (accrual basis).

  

Free cash flow considering the adjustment for derivatives stood at R$1,065 million in 3Q20, compared to R$2,216 million in 3Q19 and R$1,691 million in 2Q20. The decline in comparison with the same period last year was mainly due to the higher loss on derivative operations, increase in interest payments (of 2024, 2025 and 2026 bonds tender offer, exchange rate variation and bond 2030 retap) and the decline in working capital (notably the inventory drawdowns in 3Q19), which were partially offset by the growth in adjusted EBITDA.

 

Compared to 2Q20, the 37% decline was chiefly due to the increase in interest payments (higher concentration of bond payments and payments related to the partial repurchase of Senior Notes 2024, 2025 and 2026) and the 10% decline in Adjusted EBITDA. These effects were partially offset by the increase in working capital and lower payments resulting from the adjustment of derivatives. As for working capital, it is worth highlighting the increase in accounts receivable, caused by the reduction in sales volume and lower pulp prices.

 

COVID-19

 

Suzano has been adopting preventive and mitigatory measures aligned with the guidelines established by Brazilian and international health authorities to minimize the impacts from the COVID-19 pandemic with regard to people safety and the continuity of its businesses.

 

The Company’s actions are based on three pillars: (1) People; (2) Society; (3) Business Continuity.

 

(1)People: to ensure the safety of its employees and contractors, Suzano has adopted a series of measures and procedures to mitigate their exposure to the novel coronavirus. The measures to protect people include the Company’s decision to maintain all direct jobs and to pay in advance 50% of the 13th salary bonus normally paid in December.

 

(2)Society: Suzano understands its responsibility at this time to the communities in which it operates, guided by its culture driver “It’s only good for us if it’s good for the world.” Accordingly, from the onset of the outbreak to the present date, the Company has adopted a series of measures to protect the general public, including:

 

·Donation of toilet paper, napkins and disposable diapers made by the Company to needy communities;

 

·Donation of 159 ventilators and 1 million medical masks to federal and state governments;

 

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·Participation in the joint efforts with Positivo Tecnologia, Klabin, Flex Eletronics and Embraer to support the Brazilian company Magnamed in its delivery to the federal government of 6,500 ventilators by August 2020;

 

·Construction of a field hospital in Teixeira de Freitas, Bahia, jointly with Veracel, which already has been delivered to the state government and was inaugurated in July 2020;

 

·Partnership with the FATEC vocational school in Capão Bonito to produce hand sanitizer;

 

·Forklifts lent to transport the donations received by the Red Cross

 

·Maintenance of all direct jobs at the moment

 

·Ensuring for 90 days (to end-June 2020) the payment of 100% of the payroll expenses of the workers of service providers whose operations were suspended because of the pandemic, seeking to protect jobs.

 

·Creation of a support program for small suppliers, a social program to help small farmers sell their products via a home delivery system in 38 communities assisted by Suzano’s Rural Land Development Program (“PDRT”) in 5 states, and a social program for producing 125,000 masks in local communities for donation in 5 states;

 

·Launch of a support program for small and midsized paper clients called “We’re Together” to ensure that these companies have the financial and managerial capacity to resume operations.

 

Expenditures to support the social actions sponsored by Suzano totaled R$49 million as of September 30, 2020. Also important noting is that another R$81 million was spent to adapt our operations to the current scenario of combating the coronavirus (see note 29 - Result by Nature of the ITR).

 

(3)Business continuity: to date, the company is maintaining its operations normally and has formed crisis management committees that act daily at the corporate levels and at each business unit. Suzano has a business continuity plan prepared for 100% of its operations, with various levels of contingency plans.

 

The current scenario arising from the novel coronavirus also implies higher credit risk. The Company is monitoring this risk and implementing measures to mitigate it, and considers such risk adequately controlled. To date, there have been no significant financial impacts.

 

Due to the physical distancing measures adopted in Brazil and many other countries that entail, for instance, the closure of schools and offices, the demand for printing & writing paper has decreased. In light of this scenario, and as announced by various paper manufacturers around the world, Suzano has opted to temporarily reduce the volume of its paper production. As previously disclosed in the quarterly financial statements for the period ended March 31, 2020, the Company temporarily shut down its paper production lines at the Mucuri and Rio Verde mills. However, the operations of these mills were resumed in early July 2020.

 

Lastly, it is also important to mention that due to the current scenario, the Company has undertaken and maintained intensive communication efforts to further increase interactions with its main stakeholders, striving to ensure the adequate transparency and flow of information with them in a timely manner aligned with the current social and economic situation. All key messages published to provide updates on its measures and activities in the context of COVID-19 are available on the Company’s Investor Relations website.

 

In addition, the Company has created a webpage with information on all its actions related to COVID-19: https://www.suzanocontraocoronavirus.com.br

 

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ESG

 

Suzano made significant advances in its ESG agenda in 3Q20. In July, it published the new version of the Wood Supply Policy, which underlines its commitment to zero deforestation for 100% of the wood supply. The Policy also clarifies that all the wood used in the production comes from planted forests either in its own areas or at third-party areas, and all plantations follow the strict principles established in the document as well as internationally recognized forest certification guidelines. The Policy also describes Suzano's relations with the diverse stakeholders involved in planting, harvesting and transporting wood in order to ensure social legitimacy for the business relationship. This Wood Supply Policy and other policies, such as the Human Rights Policy, are available at Company’s Investor Relations website.

 

In September, Suzano became the first company in Americas, emerging markets and the pulp & paper sector to issue bonds in the international market linked to the achievement of sustainability targets. Suzano’s Sustainability-Linked Bonds (SLB) have coupon linked to environmental performance indicator, related to greenhouse gas intensity reduction target for the Company up to 2025. This issue underscores Suzano's commitment to be a part of the solution to the global climate crisis and evolves in convergence to the implementation of its 2030 long-term goal of reducing GHG emissions published in February 2020. Suzano's SLB issue was the second in the world to be carried out in this format. It was also the first global operation to publish a Framework in line with the Sustainability-Linked Bond Principles, laid down by the International Capital Markets Association (ICMA) and the first to seek an independent third-party opinion, provided by ISS-ESG. More information about the scope of sustainability associated with the new bonds is available in the Sustainability-Linked Securities Framework available on the Company's Investor Relations website.

 

SYNERGIES

 

On February 12, 2020, through a Material Fact notice, the Company updated its projections for the synergy gains resulting from its business combination with Fibria Celulose S.A. Suzano expects to capture, from 2019 to 2021, operating synergies estimated at between R$1,100 million and R$1,200 million per year (before taxes), and on a recurring basis after 2021, through reductions in costs, expenses and capital expenditures in the procurement, forest, industrial, logistics, sales, administrative and people areas, and also expects to capture tax synergies that result in deductions of around R$2.0 billion a year. The synergies continue to be captured in line with the planning.

 

The estimated amount of operating synergies mentioned above does not include the costs of implementing the initiatives linked to these synergies, which remain estimated by the Company at approximately R$200 million through 2021.

 

TOTAL OPERATIONAL EXPENDITURES - PULP

 

As disclosed through a Material Fact notice dated February 13, 2020, the estimate for total operating expenditures in 2024 remains approximately R$1,300/t, and the trend for the indicator remains in line with the planning.

 

EVENTS AFTER THE REPORTING PERIOD

 

On October 6, 2020, the Company informed its shareholders and the market of the closure of the secondary offering of 150,217,425 common shares, without par value, issued by Suzano and held by BNDES Participações S.A. (BNDESPAR), including 13,180,000 shares in the form of American Depositary Shares (“ADS”), at a price per share of R$46.00, totaling R$6.9 billion and a price per share in the form of ADS, at US$8.15 per ADS.

 

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CAPITAL MARKETS

 

On September 30, 2020, Suzano’s stock was quoted at R$45.55/share (SUZB3) and US$8.17/share (SUZ). The Company’s stock is listed on the Novo Mercado, the listing segment of the São Paulo Exchange (B3) with the highest corporate governance standards, and is also traded on the New York Stock Exchange (NYSE) - Level II.

 

 

Source: Bloomberg.

 

Source: Bloomberg.

 

On September 30, 2020, the Company's share capital was represented by 1,361,263,584 common shares, of which 12,042,004 were held in Treasury. Suzano’s market capitalization stood at R$62.0 billion on September 30, 2020. In 3Q20, the free-float corresponded to 53.3% of the total capital.

 

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Free Float distribution 09/30/2020
(B3 + NYSE)		 Ownership structure (09/30/2020)

  

 

 

1The BNDES Secondary Offering Public Offering was concluded on October 6, 2020.

  

FIXED INCOME

 

   Unity  Sep/20   Jun/20   Sep/19   Δ Y-o-Y   Δ Q-o-Q 
Suzano 2021 – Price  USD/k   -    -    103.76    -    - 
Suzano 2021 – Yield  %   -    -    2.92    -    - 
Fibria 2024 – Price  USD/k   110.3    107.5    106.9    3.2%   2.6%
Fibria 2024 – Yield  %   2.3    3.2    3.6    -37.3%   -28.8%
Fibria 2025 – Price  USD/k   106.2    103.3    102.1    4.1%   2.9%
Fibria 2025 – Yield  %   2.5    3.2    3.6    -31.0%   -23.8%
Suzano 2026 – Price  USD/k   114.6    109.5    110.6    3.6%   4.6%
Suzano 2026 – Yield  %   3.0    4.0    3.9    -24.4%   -24.7%
Fibria 2027 – Price  USD/k   113.4    108.1    107.7    5.3%   4.9%
Fibria 2027 – Yield  %   3.1    4.1    4.3    -26.4%   -23.0%
Suzano 2029 – Price  USD/k   114.1    109.1    108.8    4.9%   4.6%
Suzano 2029 – Yield  %   4.0    4.7    4.8    -17.2%   -15.2%
Suzano 2030 – Price  USD/k   108.0    102.3    102.5    5.3%   5.5%
Suzano 2030 – Yield  %   4.0    4.7    4.7    -15.4%   -15.5%
Suzano 2047 – Price  USD/k   100.3    -    -    -    - 
Suzano 2047 – Yield  %   3.7    -    -    -    - 
Treasury 10 years  %   118.5    110.1    114.7    3.3%   7.6%

 

Note: Senior Notes issued with face value of 100 USD/k

 

RATING

 

Agency  National Scale  Global Scale  Outlook
Fitch Ratings  AAA  BBB-  Negative
Standard & Poor’s  brAAA  BBB-  Negative
Moody’s  Aaa.br  Ba1  Stable

 

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 3Q20 EARNINGS RELEASE

  

UPCOMING EVENTS

 

Earnings Conference Call (3Q20)

 

Date: October 30, 2020 (Friday)

 

Portuguese (simultaneous translation) English
10:00 a.m. (Brasilia) 10:00 a.m. (Brasília)
9:00 a.m. (New York) 9:00 a.m. (New York)
2:00 p.m. (London) 2:00 p.m. (London)
Tel.: +55 (11) 3181-8565 Tel.: +1 412 717-9627

 

Please connect 10 minutes before the conference call is scheduled to begin.

 

The conference call will be held in English and feature a presentation, with a simultaneous webcast. The access links will be available on the Company’s Investor Relations website. (www.suzano.com.br/ri).

 

If you are unable to participate, the webcast link will be available for future consultation on the Investor Relations website of Suzano S.A.

 

IR CONTACTS

 

Marcelo Bacci

Camila Nogueira

Camilla Galvão

Mariana Dutra

Roberto Costa

 

Tel.: +55 (11) 3503-9330

ri@suzano.com.br

www.suzano.com.br/ri

 

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APPENDICES

 

APPENDIX 1 - Operating Data

 

Revenue

breakdown

(R$ '000)

   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    9M20   9M19   Δ Y-o-Y 
Exports   6,140,197    5,277,949    16%   7,043,721    -13%   19,002,672    15,066,030    26%
Pulp   5,753,923    4,892,176    18%   6,633,011    -13%   17,875,291    13,963,834    28%
Paper   386,274    385,774    0%   410,710    -6%   1,127,381    1,102,196    2%
Domestic Market   1,330,638    1,321,963    1%   951,952    40%   3,444,629    3,897,960    -12%
Pulp   414,431    448,042    -8%   343,201    21%   1,155,999    1,432,137    -19%
Paper   916,207    873,921    5%   608,751    51%   2,288,630    2,465,823    -7%
Total Net Revenue   7,470,835    6,599,909    13%   7,995,673    -7%   22,447,301    18,963,990    18%
Pulp   6,168,354    5,340,215    16%   6,976,212    -12%   19,031,290    15,395,971    24%
Paper   1,302,481    1,259,695    3%   1,019,461    28%   3,416,011    3,568,019    -4%

 

Sales volume (‘000)   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    9M20   9M19   Δ Y-o-Y 
Exports   2,432,865    2,442,076    0%   2,710,040    -10%   7,854,566    6,172,894    27%
Pulp   2,334,152    2,340,238    0%   2,615,068    -11%   7,575,759    5,881,145    29%
Paper   98,713    101,838    -3%   94,972    4%   278,807    291,749    -4%
Paperboard   15,204    17,673    -14%   21,935    -31%   52,738    44,304    19%
Printing & Writing   82,347    83,712    -2%   69,425    19%   220,438    245,922    -10%
Other paper1   1,162    453    157%   3,612    -68%   5,631    1,523    270%
Domestic Market   412,826    420,143    -2%   303,030    36%   1,128,305    1,207,051    -7%
Pulp   192,415    208,929    -8%   162,540    18%   584,713    610,989    -4%
Paper   220,411    211,214    4%   140,490    57%   543,592    596,062    -9%
Paperboard   37,362    32,173    16%   27,854    34%   94,021    95,214    -1%
Printing & Writing   152,069    150,248    1%   81,399    87%   356,335    429,028    -17%
Other paper1   30,980    28,793    8%   31,237    -1%   93,236    71,820    30%
Total Sales Volume   2,845,691    2,862,219    -1%   3,013,070    -6%   8,982,871    7,379,945    22%
Pulp   2,526,567    2,549,167    -1%   2,777,608    -9%   8,160,472    6,492,134    26%
Paper   319,124    313,052    2%   235,462    36%   822,399    887,811    -7%
Paperboard   52,566    49,846    5%   49,789    6%   146,759    139,518    5%
Printing & Writing   234,416    233,960    0%   150,824    55%   576,773    674,950    -15%
Other paper1   32,142    29,246    10%   34,849    -8%   98,867    73,343    35%

 

Average net price

(R$/ton)

   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    9M20   9M19   Δ Y-o-Y 
Exports   2,524    2,161    17%   2,599    -3%   2,419    2,441    -1%
Pulp   2,465    2,090    18%   2,536    -3%   2,360    2,374    -1%
Paper   3,913    3,788    3%   4,325    -10%   4,044    3,778    7%
Domestic Market   3,223    3,146    2%   3,141    3%   3,053    3,229    -5%
Pulp   2,154    2,144    0%   2,111    2%   1,977    2,344    -16%
Paper   4,157    4,138    0%   4,333    -4%   4,210    4,137    2%
Total   2,625    2,306    14%   2,654    -1%   2,499    2,570    -3%
Pulp   2,441    2,095    17%   2,512    -3%   2,332    2,371    -2%
Paper   4,081    4,024    1%   4,330    -6%   4,154    4,019    3%

 

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Average net price

(US$/ton)

   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    9M20    9M19    Δ Y-o-Y  
Exports   469    544    -14%   583    -20%   477    628    -24%
Pulp   458    526    -13%   569    -20%   465    611    -24%
Paper   727    954    -24%   971    -25%   797    972    -18%
Domestic Market   599    792    -24%   704    -15%   601    831    -28%
Pulp   400    540    -26%   473    -15%   390    603    -35%
Paper   773    1,042    -26%   972    -20%   829    1,064    -22%
Total   488    581    -16%   595    -18%   492    661    -26%
Pulp   454    528    -14%   563    -19%   459    610    -25%
Paper   759    1,014    -25%   971    -22%   818    1,034    -21%

 

¹ Paper of other manufacturers sold by Suzano and tissue paper,

 

FX Rate R$/US$   3T20   3T19   Δ Y-o-Y    2T20   Δ Q-o-Q 
Closing   5.64    4.16    35%   5.48    3%
Average   5.38    3.97    35%   5.39    0%

 

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 3Q20 EARNINGS RELEASE

  

APPENDIX 2 - Consolidated Statement of Income and Goodwill Amortization

 

Income Statement

(R$ ‘000)

   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q    9M20   9M19   Δ Y-o-Y 
Net Revenue   7,470,835    6,599,909    13%   7,995,673    -7%   22,447,301    18,963,990    18%
Cost of Goods Sold   (4,473,994)   (4,986,414)   -10%   (4,788,694)   -7%   (14,082,687)   (14,933,426)   -6%
Gross Debt   2,996,841    1,613,495    86%   3,206,979    -7%   8,364,614    4,030,564    108%
Gross Margin   40,1%   24,4%   16 p,p,    40,1%   0 p,p,    37,3%   21,3%   16 p,p, 
                                         
Operating Expense/Income   (829,110)   (616,180)   35%   (690,805)   20%   (2,332,245)   (1,965,376)   19%
Selling Expenses   (522,594)   (469,014)   11%   (547,098)   -4%   (1,584,628)   (1,367,298)   16%
General and Administrative Expenses   (312,735)   (278,976)   12%   (335,715)   -7%   (963,286)   (887,772)   9%
Other Operating Income (Expenses)   (4,135)   116,132    -104%   195,671    -102%   208,267    268,447    -22%
Equity Equivalence   10,354    15,678    -34%   (3,663)   -383%   7,402    21,247    -65%
EBIT   2,167,731    997,315    117%   2,516,174    -14%   6,032,369    2,065,188    192%
                                         
Depreciation, Amortization & Depletion   1,653,560    1,514,089    9%   1,709,381    -3%   5,011,119    6,313,082    -21%
                                         
EBITDA   3,810,937    2,495,726    53%   4,229,218    -10%   11,036,086    8,357,023    32%
EBITDA Margin (%)   51,0%   37,8%   13 p,p,    52,9%   -2 p,p,    49,2%   44,1%   5 p,p, 
                                         
Adjusted EBITDA1   3,778,534    2,396,425    58%   4,179,838    -10%   10,984,519    8,258,187    33%
Adjusted EBITDA Margin1   50,6%   36,3%   14 p,p,    52,3%   -2 p,p,    48,9%   43,5%   5 p,p, 
                                         
Net Financial Result   (4,222,644)   (6,493,278)   -35%   (5,657,238)   -25%   (32,323,930)   (8,350,355)   287%
Financial Expenses   58,413    108,143    -46%   82,419    -29%   261,586    393,374    -34%
Financial Revenues   (1,365,381)   (1,058,484)   29%   (1,033,126)   32%   (3,484,931)   (3,123,771)   12%
Exchange Rate Variation   (1,644,611)   (3,685,540)   -55%   (2,930,209)   -44%   (16,994,406)   (3,383,054)   402%
Net Proceeds Generated by Derivatives   (1,271,065)   (1,857,397)   -32%   (1,776,322)   -28%   (12,106,179)   (2,236,904)   441%
Earnings Before Taxes   (2,054,913)   (5,495,963)   -63%   (3,141,064)   -35%   (26,291,561)   (6,285,167)   318%
                                         
Income and Social Contribution Taxes   897,206    2,035,728    -56%   1,088,546    -18%   9,662,275    2,295,649    321%
                                         
Net Income (Loss)   (1,157,707)   (3,460,235)   -67%   (2,052,518)   -44%   (16,629,286)   (3,989,518)   317%
Net Margin   -15,5%   -52,4%   37 p,p,    -25,7%   10 p,p,    -74,1%   -21,0%   -53 p,p, 

 

Goodwill amortization - PPA (R$ ‘000)   3Q20   3Q19   Δ Y-o-Y    2Q20   Δ Q-o-Q 
COGS   (126,165)   (180,036)   -30%   (153,704)   -18%
Selling Expenses   (206,474)   (206,700)   0%   (207,107)   0%
General and administrative expenses   10,620    794    -    2,287    - 
Other operational revenues (expenses)   (14,686)   (6,820)   -    (5,085)   - 
Financial results   (1,303)   (31,143)   -    18,479    -107%

 

             1 Excluding non-recurring items and PPA effects,

 

Page 30 of 36

 

 

 

 3Q20 EARNINGS RELEASE

  

 

APPENDIX 3 - Consolidated Balance Sheet

 

Assets (R$ ´000)  09/30/2020   06/30/2020   09/30/2019 
Current Assets               
Cash and cash equivalents   7,247,184    10,473,701    3,714,646 
Financial investments   2,327,353    2,030,560    4,897,585 
Trade accounts receivable   3,036,769    3,762,875    2,058,731 
Inventories   4,245,766    4,206,778    6,258,364 
Recoverable taxes   874,152    888,245    1,235,668 
Derivative financial instruments   209,970    152,978    239,161 
Advance to suppliers   102,765    106,636    138,127 
Other assets   479,903    281,471    279,096 
Total Current Assets   18,523,862    21,903,244    18,821,378 
Non-Current Assets               
Financial investments   183,893    182,936    177,453 
Recoverable taxes   748,584    712,279    557,373 
Deferred taxes   11,399,116    10,454,646    3,083,218 
Derivative financial instruments   922,225    925,459    677,305 
Advance to suppliers   1,071,249    1,149,832    1,100,257 
Judicial deposits   266,214    268,462    338,971 
Biological assets   10,759,599    10,672,724    10,280,967 
Investments   336,929    325,420    279,263 
Property, plant and equipment   39,736,484    40,242,196    41,500,872 
Right of use on lease agreements   4,242,105    4,199,804    4,359,907 
Intangible   17,014,465    17,225,097    17,968,738 
Other assets   235,309    231,633    201,374 
Total Non-Current Assets   86,916,172    86,590,488    80,525,698 
                
Total Assets   105,440,034    108,493,732    99,347,076 

 

Liabilities and Equity (R$ ´000)   09/30/2020    06/30/2020    09/30/2019 
Current Liabilities               
Trade accounts payable   2,157,286    2,081,533    3,325,724 
Loans, financing and debentures   4,323,325    5,546,123    5,091,236 
Accounts payable for lease operations   629,329    704,174    587,910 
Derivative financial instruments   4,117,393    4,529,091    1,111,477 
Taxes payable   315,080    274,858    212,378 
Payroll and charges   478,732    380,762    439,615 
Liabilities for assets acquisitions and subsidiaries   102,013    127,721    92,098 
Dividends payable   4,888    4,891    9,904 
Other liabilities   292,387    284,828    310,540 
Total Current Liabilities   12,420,433    13,933,981    11,180,882 
                
Non-Current Liabilities               
Loans, financing and debentures   74,166,284    75,082,454    58,929,307 
Accounts payable for lease operations   4,662,805    4,469,798    3,946,474 
Derivative financial instruments   7,792,461    7,369,241    2,865,034 
Liabilities for assets acquisitions and subsidiaries   429,357    530,414    463,835 
Provision for judicial liabilities   3,403,233    3,441,451    3,495,447 
Actuarial liabilities   747,984    744,105    592,467 
Deferred taxes   74,736    75,354    589,148 
Other liabilities   286,951    235,499    248,223 
Total Non-Current Liabilities   91,563,811    91,948,316    71,129,935 
                
Shareholders’ Equity               
Share capital   9,235,546    9,235,546    9,235,546 
Capital reserves   6,201,165    6,200,079    6,201,676 
Retained earnings reserves   317,144    317,144    3,081,740 
Equity valuation adjustment   2,180,733    2,191,704    2,348,132 
Retained loss   (16,599,888)   (15,453,035)   (3,947,403)
Total Equity   1,334,700    2,491,438    16,919,691 
                
Non-controlling shareholders interests   121,090    119,997    116,568 
                
Total Liabilities and Equity   105,440,034    108,493,732    99,347,076 

 

Page 31 of 36

 

 

 3Q20 EARNINGS RELEASE

  

 

APPENDIX 4 - Consolidated Statement of Cash Flow

 

Cash Flow (R$ ‘000)   3Q20   3Q19   9M20   9M19
Cash flow from operating activities                    
Net income/(loss) for the period   (1,157,707)   (3,460,234)   (16,629,286)   (3,989,518)
Depreciation, depletion and amortization   1,633,305    1,505,201    4,871,983    6,136,760 
Amortization of right of use   33,492    43,036    126,801    106,925 
Sublease of ships   (11,956)   -    (23,321)   - 
Interest expense on lease liabilities   80,742    56,068    284,230    153,061 
Results from sale and disposals of property, plant and equipment and
biological assets, net		   10,839    22,777    1,496    26,281 
Equity equivalence   (10,354)   (15,678)   (7,402)   (21,247)
Exchange rate and monetary variations, net   1,644,611    3,685,550    16,994,406    3,383,054 
Interest expenses with loans, financing and debentures, net   785,989    855,140    2,522,764    2,531,255 
Interest expense with bond repurchases   391,390    -    391,390    - 
Capitalized interest   (1,951)   (1,535)   (9,891)   (2,952)
Accrual of interest on marketable securities   (8,505)   (43,250)   (82,607)   (290,303)
Amortization of fundraising costs   31,248    12,947    72,516    172,803 
Derivative (gains) losses, net   1,271,065    1,857,397    12,106,179    2,236,904 
Fair value adjustment of biological assets   -    -    (173,733)   (83,453)
Deferred income tax and social contribution expenses   (944,676)   (2,066,142)   (9,767,574)   (2,517,641)
Tax credit – Gain on tax action   -    (128,115)   -    (128,115)
Interest on employee benefits   13,279    11,920    39,806    38,762 
Provision (reversal) of judicial liabilities, net   9,494    (24,333)   (12,758)   (21,858)
Allowance for doubtful accounts, net   (5,040)   (4,436)   5,210    (14,364)
Provision for (reversal of) inventory losses and write-offs   (61,338)   42,818    (28,718)   30,790 
Provision for loss of ICMS credits, net   (141,526)   18,305    (93,375)   87,496 
Other   13,115    (73,516)   25,913    (6,861)
Decrease (increase) in assets   927,038    2,077,625    1,875,852    1,962,550 
Trade accounts receivables   809,670    949,806    1,016,240    2,015,294 
Inventories   93,542    864,625    560,017    (343,929)
Recoverable taxes   147,884    155,818    262,385    137,786 
Other assets   (124,058)   107,376    37,210    153,399 
Increase (decrease) in liabilities   362,967    (732,125)   (329,320)   (1,093,513)
Trade accounts payables   154,281    (725,711)   (198,694)   (726,528)
Taxes payable   111,414    10,905    135,649    263,662 
Payroll and charges   97,972    66,863    78,293    (196,046)
Other liabilities   (700)   (84,182)   (344,568)   (434,601)
Cash provided by operations, net   4,865,521    3,639,420    12,160,561    8,696,816 
Payment of interest with financing, loans and debentures   (1,200,748)   (899,650)   (2,883,161)   (2,362,331)
Payment of interest on bonds repurchase   (378,382)   -    (378,382)   - 
Interest received from marketable securities   19,572    68,614    146,151    354,536 
Payment of income taxes   (67,402)   68,777    (130,096)   (336,480)
Cash provided by operating activities   3,238,561    2,877,161    8,915,073    6,352,541 
                     
Investing activities                    
Additions to property, plant and equipment   (1,226,298)   (1,088,202)   (3,187,361)   (3,744,152)
Proceeds from sale of property, plant and equipment   26,927    70,044    88,814    153,739 
Increase of capital in subsidiaries and associates   -    (34,640)   -    (45,856)
Marketable securities, net   (308,816)   (1,405,165)   3,755,545    20,428,121 
Advance for acquisition of wood from operations with development   81,334    (82,012)   87,878    (294,162)
Acquisition of subsidiaries, net cash   -    -    -    (26,002,540)
Dividends received   753    -    753    - 
Other investments   -    4    -    (265)
Cash used in investing activities, net   (1,426,100)   (2,539,971)   745,629    (9,505,115)
                     
Financing activities                    
Proceeds from loans, financing and debentures   3,882,643    90,839    10,583,172    16,315,910 
Payment of derivative transactions   (1,313,206)   (51,335)   (3,147,456)   (55,997)
Payment of loans, financing and debentures   (7,527,204)   (238,030)   (13,752,144)   (12,249,522)
Payment of leases   (222,838)   (154,711)   (577,127)   (425,297)
Payment of dividends   -    (4)   -    (601,735)
Liabilities for assets acquisitions and subsidiaries   (145,512)   (466,971)   (151,182)   (470,396)
Other financing   -    2,196    -    4,575 
Cash provided (used) by financing activities, net   (5,326,117)   (818,016)   (7,044,737)   2,517,538 
                     
Exchange variation on cash and cash equivalents   287,139    90,831    1,382,092    (37,771)
                     
Increase (reduction) in cash and cash equivalents   (3,226,517)   (389,995)   3,998,057    (672,807)
Cash and cash equivalents at the beginning for the period   10,473,701    4,104,641    3,249,127    4,387,453 
Cash and cash equivalents at the end for the period   7,247,184    3,714,646    7,247,184    3,714,646 
Increase (reduction) in cash and cash equivalents   (3,226,517)   (389,995)   3,998,057    (672,807)

 

Page 32 of 36

 

 

 3Q20 EARNINGS RELEASE

  

 

APPENDIX 5 - EBITDA

 

(R$ '000, except where otherwise indicated)   3Q20   3Q19   9M20   9M19
Net income   (1,157,707)   (3,460,235)   (16,629,286)   (3,989,518)
Net Financial Result   4,222,644    6,493,278    32,323,930    8,350,355 
Income and Social Contribution Taxes   (897,206)   (2,035,728)   (9,662,275)   (2,295,649)
EBIT   2,167,731    997,315    6,032,369    2,065,188 
Depreciation, Amortization and Depletion   1,653,560    1,514,089    5,011,119    6,313,082 
EBITDA1   3,810,937    2,495,726    11,036,086    8,357,023 
EBITDA Margin   51,0%   37,8%   49,2%   44,1%
                     
Expenses with Fibria's transaction   (4)   1,355    933    75,946 
PPA effect (asset write down)   12,806    505    21,043    24,868 
Indemnity – FACEPA   -    -    (1,093)   - 
Accruals for losses on ICMS credits   (134,111)   17,357    (91,892)   84,056 
ICMS accrual complement   176    -    2,808    - 
Expenses related to social actions to fight the Coronavirus   55,024    -    81,254    - 
Expenses with obligations and contract cancellations   -    -    6,008    - 
Adjustment of the fair value of biological assets   -    -    (173,733)   (83,453)
Provision for loss of PIS and COFINS   3,211    -    11,063    - 
COVID-19 – Donations   530    -    48,553    - 
ITBI Provision and Fees   -    -    10,529    - 
Project Mucuri Closure   30,684    -    30,684    - 
Judicial credits sale   -    -    -    (87,000)
Exclusion of ICMS on PIS and COFINS base   -    (128,115)   -    (128,115)
Others   (719)   9,597    2,276    14,862 
Adjusted EBITDA   3,778,534    2,396,425    10,984,519    8,258,187 
Adjusted EBITDA Margin   50,6%   36,3%   48,9%   43,5%

 

1 The Company's EBITDA is calculated in accordance with CVM Instruction 527 of October 4, 2012,

 

Page 33 of 36

 

 

 3Q20 EARNINGS RELEASE

  

 

APPENDIX 6 - Segmented Income Statement

  

Segmented Financial
Statement (R$ '000)		  3Q20   3Q19 
   Pulp   Paper  

Non
Segmented

  

Total
Consolidated

   Pulp   Paper  

Non
Segmented

  

Total
Consolidated

 
Net Revenue   6,168,354    1,302,481    -    7,470,835    5,340,215    1,259,694    -    6,599,909 
Cost of Goods Sold   (3,592,529)   (881,465)   -    (4,473,994)   (4,166,295)   (820,119)   -    (4,986,414)
Gross Profit   2,575,825    421,016    -    2,996,841    1,173,920    439,575    -    1,613,495 
Gross Margin   41,8%   32,3%   -    40,1%   22,0%   34,9%   -    24,4%
                                         
Operating Expense/Income   (635,221)   (193,889)   -    (829,110)   (559,831)   (184,464)   128,115    (616,180)
Selling Expenses   (427,581)   (95,013)   -    (522,594)   (372,734)   (96,280)   -    (469,014)
General and Administrative Expenses   (219,793)   (92,942)   -    (312,735)   (187,439)   (91,537)   -    (278,976)
Other Operating Income (Expenses)   (10,739)   6,604    -    (4,135)   (6,065)   (5,918)   128,115    116,132 
Equity Equivalence   22,892    (12,538)   -    10,354    6,407    9,271    -    15,678 
EBIT   1,940,604    227,127    -    2,167,731    614,089    255,111    128,115    997,315 
                                         
Depreciation, Amortization &
Depletion		   1,508,897    144,663    -    1,653,560    1,377,539    136,550    -    1,514,089 
                                         
EBITDA   3,426,609    384,328    -    3,810,937    1,985,221    382,390    128,115    2,495,726 
EBITDA Margin   55,6%   29,5%   -    51,0%   37,2%   30,4%   -    37,8%
                                         
Adjusted EBITDA1   3,384,057    394,477    -    3,778,534    2,011,755    384,670    -    2,396,425 
Adjusted EBITDA Margin1   54,9%   30,3%   -    50,6%   37,7%   30,5%   -    36,3%
                                         
Net Financial Result   -    -    (4,222,644)   (4,222,644)   -    -    (6,493,278)   (6,493,278)
                                         
Earnings Before Taxes   1,940,604    227,127    (4,222,644)   (2,054,913)   614,088    255,112    (6,365,163)   (5,495,963)
                                         
Income and Social Contribution
Taxes		   -    -    897,206    897,206    -    -    2,035,728    2,035,728 
                                         
Net Income (Loss)   1,940,604    227,127    (3,325,438)   (1,157,707)   614,088    255,112    (4,329,435)   (3,460,235)
Net Margin   31,5%   17,4%   -    -15,5%   11,5%   20,3%   -    -52,4%

 

1 Excluding non-recurring items and PPA effects,

 

Page 34 of 36

 

 3Q20 EARNINGS RELEASE

  

 

Segmented Financial
Statement (R$ '000)		  9M20   9M19 
   Pulp   Paper  

Non
Segmented

  

Total
Consolidated

   Pulp   Paper  

Non
Segmented

  

Total
Consolidated

 
Net Revenue   19,031,290    3,416,011    -    22,447,301    15,395,971    3,568,019    -    18,963,990 
Cost of Goods Sold   (11,839,056)   (2,243,631)   -    (14,082,687)   (12,581,007)   (2,352,419)   -    (14,933,426)
Gross Profit   7,192,234    1,172,380    -    8,364,614    2,814,964    1,215,600    -    4,030,564 
Gross Margin   37,8%   34,3%   -    37,3%   18,3%   34,1%   -    21,3%
                                         
Operating Expense/Income   (1,815,181)   (517,064)   -    (2,332,245)   (1,532,136)   (561,355)   128,115    (1,965,376)
Selling Expenses   (1,302,925)   (281,703)   -    (1,584,628)   (1,084,740)   (282,558)   -    (1,367,298)
General and Administrative Expenses   (680,019)   (283,267)   -    (963,286)   (606,419)   (281,353)   -    (887,772)
Other Operating Income (Expenses)   159,473    48,794    -    208,267    153,222    (12,890)   128,115    268,447 
Equity Equivalence   8,290    (888)   -    7,402    5,801    15,446    -    21,247 
EBIT   5,377,053    655,316    -    6,032,369    1,282,828    654,245    128,115    2,065,188 
                                         
Depreciation, Amortization &
Depletion		   4,635,402    375,717    -    5,011,119    5,936,578    376,504    -    6,313,082 
                                         
EBITDA   10,004,165    1,031,921    -    11,036,086    7,213,605    1,015,303    128,115    8,357,023 
EBITDA Margin   52,6%   30,2%   -    49,2%   46,9%   28,5%   -    44,1%
                                         
Adjusted EBITDA1   9,955,041    1,029,478    -    10,984,519    7,217,238    1,040,949    -    8,258,187 
Adjusted EBITDA Margin1   52,3%   30,1%   -    48,9%   46,9%   29,2%   -    43,5%
                                         
Net Financial Result   -    -    (32,323,930)   (32,323,930)   -    -    (8,350,355)   (8,350,355)
                                         
Earnings Before Taxes   5,377,053    655,316    (32,323,930)   (26,291,561)   1,282,829    654,244    (8,222,240)   (6,285,167)
                                         
Income and Social Contribution
Taxes		   -    -    9,662,275    9,662,275    -    -    2,295,649    2,295,649 
                                         
Net Income (Loss)   5,377,053    655,316    (22,661,655)   (16,629,286)   1,282,829    654,244    (5,926,591)   (3,989,518)
Net Margin   28,3%   19,2%   -    -74,1%   8,3%   18,3%   -    -21,0%
                                         

 

1 Excluding non-recurring items and PPA effects,

 

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 3Q20 EARNINGS RELEASE

  

 

Forward-Looking Statements

 

This release may contain forward-looking statements, Such statements are subject to known and unknown risks and uncertainties that could cause the expectations expressed to not materialize or differ substantially from expected results, These risks include, among others, changes in future demand for the Company’s products, changes in factors affecting domestic and international product prices, changes in the cost structure, changes in the seasonal patterns of markets, changes in prices charged by competitors, foreign exchange variations, changes in the political or economic situation of Brazil, as well as emerging and international markets, The forward-looking statements were not reviewed by our independent auditors.

 

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