Suzano closer to unveil new mill
The prices of hardwood pulp will rise again in April, leaving Suzano even closer to submit to the board of directors a project to build a $3 billion plant in Ribas do Rio Pardo, Mato Grosso do Sul.
During the "Suzano Day" this week, the company revealed that the plant will be able to produce 2.3 million tonnes per year, equivalent to 20% of its current installed capacity for pulp. The company did not elaborate on the disbursement.
The company's decision to raise hardwood pulp prices for China by $60 per tonne to $780 per tonne as of April sets an all-time high for the market. Until now, the highest was $760 per tonne in place around two years ago. Suzano CEO Walter Schalka says the pulpmaker expects the adjustment to be fully applied.
The company also announced price raises for Europe and North America, of $100 per tonne, as of April. With the adjustment, hardwood pulp prices rise to $1,010 per tonne in the European market and to $1,240 per tonne in the American market.
J.P.Morgan analysts Marcio Farid, Rodolfo Angele and Lucas F. Yang say many investors expected Suzano to make official the investment in Ribas do Rio Pardo at the annual meeting, which was virtual this time because of the Covid-19 pandemic.
However, Suzano will only take this step when the leverage converges to the levels foreseen in the company's financial policy - up to 3.5 times the net debt-to-EBITDA ratio at times of investment in expansion. In December, the ratio was at 4.3 times, compared to 4.9 times a year earlier, but the deleveraging process is accelerating amid rising pulp prices.
According to Marcelo Bacci, the company's Chief Financial, Investor Relations and Legal Officer, 2021 will represent an important turning point as the leverage ratio tends to converge to what is set in Suzano's financial policy. "We are committed to financial discipline and the maintenance of investment grade," he said. Suzano has investment-grade rating on stable outlook from all three rating agencies. Mr. Bacci says the higher cash generation will allow the company to launch new growth projects and resume the payment of dividends in the coming years.
The size of the future mill in Ribas derives from the projected global shortage for hardwood pulp in the coming years, and the unit will be the company's most competitive. Aires Galhardo, Suzanos's head of...
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