Suzano SA (SUZ) 2025 Q3 法說會逐字稿

Ladies and gentlemen, thank you for holding, and welcome to Suzano's conference call to discuss the results for the third quarter of 2025. 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. (Operator Instructions)

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.

Hi, everyone. Thank you for attending our third quarter call results. Let me start with the highlights of the quarter, which most of the figures was quite aligned with what we planned for the quarter. But I'd like to highlight a couple of things. The first one, it's send to the team in Pine Bluff, our congratulation for the process of turning around the business.

So as you saw, we have the first positive EBITDA result for the quarter for Pine Bluff, and I think this is the new trend for the business. So the team over there is doing a great job. So we are very glad about what we have achieved at this time.

And -- but the most important one here regarding the highlights is the cash cost. So we are glad to having the chance to keep the trend of reducing our cash cost. This is something that we're going to keep working, of course, not only for the next quarter, but also for the next couple of years, so we still see opportunities to keep gaining efficiency to gaining productivity. And this is an area that is under our control, and this will be in the next two years, our main focus.

So reducing the total operational disbursement, it's absolutely key and will be the first priority for the organization here in the next two years. So this is something that is under our control, and we understand that we don't need to expect or to live a different cycle of price to do the job that we have been doing. We must anticipate ourselves to make sure that we bring to the organization any kind of opportunity to give -- to keep efficiency and productivity in our business.

The consequence of that, it's, of course, deleveraging the company, which is absolutely a priority for us. So having the chance to deleverage the company even on a low cycle of price, it's something that we believe and that we want to keep doing, and not waiting, do you know, different cycles in terms of price to focus on deleveraging the company. We believe that we can do that even on scenarios as the one that we are living right now, okay? So that's my highlight. That's the main message.

So now I will hand over to Fabio that will cover the Paper and Packaging business.

Thanks, Beto. Good morning, everyone. Please let's turn to the next page of the presentation. Our third quarter results were highlighted by strong sales volumes in all markets in our first quarterly positive EBITDA for Suzano Packaging. We have had stable operations in all our mills with lower cash costs versus previous quarter in Brazil and also in the United States, with lack of annual planned shutdowns.

Our third quarter volume marks the highest quarterly volume for our Paper and Packaging business unit in history, even faced very challenging paper market conditions. Print and write demand, including imports in the Brazilian market according to IBA, declined by 7% in the first two months of the third quarter compared to the same period of last year.

However, domestic producers outperformed imports with a more moderate 4% decline and a 29% drop in imported volumes. The overall contraction in demand was primarily driven by the coated paper segment, which had benefited from additional demand during the 2024 election period. Demand for cut size and uncoated papers remained relatively stable. Turning to the international markets served by the company.

We see that despite the structural reduction for print and write in mature markets, uncoated paper grades, our main export product performs better than the other grades. On the negative side, there are continued negative effects of economic headwinds and uncertainties related to the ongoing trade war.

In Europe, demand has been more sensitive to those trends, reducing 6% on the year-to-date, while in North America and LatAm, demand for uncoated wood-free continue to be stable. Now looking at paperboard demand. In Brazil, we saw a 4% demand decrease in the first two months of the Q3 compared to the same period of last year.

Sales from domestic producers dropped only 1%, while imports shrunk minus 14% in the same comparison period. In the US market, data from the American Forest and Paper Association show SBS shipments have grown 5.9% on a year-over-year basis, while inventories have grown 17% on the same basis. This is mainly due to the ramp-up of a new SBS machine in the second quarter of the year. Yet, according to FP&A, our operating rate for SBS producers grew 3.4 percentage points versus Q2, reaching 86.5% albeit below historical levels.

Looking at Suzano figures, our sales volumes were higher on a quarter-over-quarter and year-over-year basis. Our export volumes in Brazil remained strong in the period. Better sales performance in Brazil quarter-over-quarter reflect demand for uncoated and cut size while on the year-over-year reduction in Brazilian sales is led by the coated paper segment.

Suzano packaging volumes recovered from the maintenance outage and increased 7% versus the previous quarter. In terms of pricing, prices from sales in Brazil reduced 2% on a quarter-over-quarter due to seasonality and product mix, but were 2% higher on a year-over-year basis.

Prices on other external markets suffered by our Brazilian operations, reduced 6% quarter-over-quarter and 10% year-over-year, reflecting challenging market conditions across all regions as well as FX effects. Prices in dollars for Suzano packaging grew 2% quarter-over-quarter, reducing 1% in reais due to FX effects.

Our EBITDA has reached BRL542 million in the quarter, an 11% increase quarter-over-quarter and a 10% decrease year-over-year. On a quarter-over-quarter basis, we have had improvements in our cash costs in Brazil and also in the US, higher sales volumes and on the down side, lower prices in our export markets and unfavorable exchange rate. On a year-over-year basis, the decrease in EBITDA is mainly due to lower export prices and exchange rate.

This is our first positive quarterly EBITDA for Suzano packaging. Looking ahead to Suzano's Paper and Packaging business performance, we have planned maintenance outages in Limeira and Suzano mills in Q4, which would have an impact on costs. During the Limeira outage, we will finalize the implementation of a series of improvements at the mill, which will upgrade the site's sustainability attributes and reduce its pulp and paper cash costs moving forward.

Ex outage, we expect costs to be stable in the next quarter for all our paper operations and sales volumes should increase in line with the historical seasonality for the period. We expect a stable sales prices in Q4 and better regional mix due to higher sales volume in the Brazilian domestic market. Suzano Packaging EBITDA will continue to improve in Q4 and beyond.

Now I'll hand over to Leo, who will be presenting our Pulp business results.

Thanks, Fabio, and good morning, everyone. Let's now turn to our Pulp business unit, where I'd like to share some highlights for the third quarter. The early July announcement of potential 50% tariffs from Brazilian pulp exports to the US, which could compromise the midterm continuity of pulp flows into this market and its customers introduced an unprecedented short-term turbulence in the market.

This uncertainty affected logistics streams and reduced visibility for market participants regarding near-term dynamics, which contributed to a deterioration in sentiment and triggering a further drop in pulp prices in China to sub-500 levels.

Prices in Europe and North America follow the same downward price trend with the usual lag. As the quarter evolved, when Brazilian pulp was included in the US exemption list, the restored tariff-free access allowed operations to stabilize and ease commercial risk. It's worth noting that although the potential new US tariffs on Brazilian pulp would likely be neutralized over the medium term given the tendency of global pulp markets to rebalance through interconnected trade flows, the initial reaction from pulp and paper participants underscored market sensitivity to trade policy signals.

As usual, in pulp cycles, the sub-500 price point triggered a strong buying activity from Chinese customers, including integrated paper producers who also secured significant pulp volumes during the quarter. Our order intake levels in China were abnormally high throughout the quarter, generating backlogs of deliveries, which persist to this day as our sales to the other regions in the world were executed as previously planned for the quarter.

We have effectively sold all our production volumes during Q3, keeping our inventory stable in line with our commercial strategy. Our invoice volumes were, however, impacted by our announced production curtailment, which started in July in the last 12 months. We have announced three rounds of price increases for all markets starting August, which are being implemented as we speak, but still not yet reflected in our third quarter's invoiced prices due to the carryover effect on our higher-than-usual backlog, as well as the lagging effect in Europe and North America.

Looking to the right side of the slide, despite strong volumes, a combination of lower prices in US dollar terms and a less favorable FX resulted in a BRL4.5 billion EBITDA for our pulp business unit, equivalent to 49% EBITDA margin.

Now looking forward, I would like to highlight the following points. In China, following our strong sales performance in the previous quarter, October order intake also reached high levels with all of our customers confirming purchases with a new $10 price hike, including integrated paper producers who keep buying market pulp. As these orders were received or closed in the last days of October, you probably saw that, that's already reflected on today's index publication.

Since September, paper and board production in China has continued to grow, driven by seasonally higher demand during this time of the year and supported by exports of coated paper, tissue and carton board that exceeded levels seen in the same period of 2024.

In China, price increases were announced by paper and paperboard producers for November across most grades. Although this is still in the process of being implemented, these moves may indicate a turning point in paper pricing dynamics.

Still on the outlook for paper pricing and pulp demand, September brought yet another shift for Chinese producers. Stricter regulations on imported recycled grades, which represent over 3 million tons of furnishing to this market, prompted domestic pulp producers to fill the gap using unbleached BCTMP and other mechanical pulp grades made from local hardwood, which has consequently driven up demand for local wood.

In addition, wood chip demand in China is being fueled by the ramp-up of new integrated capacities launched since late 2024 as well as the restart of some of Chenming's operations. Despite uncertainties around local wood prices and its full market impact, these developments are expected to intensify demand in the coming months and further pressure wood chip prices.

We continue to monitor wood cost dynamics in the region as rising demand for Chinese wood chips also supported by tighter recycled fiber imports points to a more favorable paper pricing environment and higher cash costs for Chinese market pulp and integrated paper producers.

All considered, we expect that pulp prices will continue to move up from the current levels. During the next months, we will seek the implementation of the remaining part of our price increase announcement, meaning $20 on a net basis, which were still not implemented.

Volume-wise, as we progress through the fourth quarter, we continue to allocate our targeted volumes across all regions with full confidence in closing 2025 as planned. On the supply side of the equation, it's important to notice that hardwood pulp prices have remained below the estimated cash cost of roughly $600 per ton for 13 consecutive months.

According to a leading consultancy in our sector, over 15% of global hardwood market pulp production today is operating underwater, and softwood pulp producers are facing an even greater pressure.

Zooming into Europe, producers have now enjoyed one year below breakeven levels considered their regional sales only, and we estimate that more than 25% of European capacity is currently unprofitable, all based on local delivery costs and the European price index net of rebates.

As I have stated in multiple occasions, I view this scenario as completely unsustainable and believe that more significant supply side adjustments are likely to take place going forward. Still on the supply side, just this week, a major Brazilian competitor has announced further capacity swings to dissolving pulp, taking approximately 600,000 tons of paper grid pulp out of the market in '26 when compared to 2025, which should improve the S&D fundamentals for the upcoming months.

With that said, I would now like to invite Aires to address our cash cost performance for the past quarter.

Okay, Leo. Thank you very much. Moving to next slide. The cash costs, excluding downtime in the third quarter came in at BRL801 per ton, making a 4% decrease compared to the second quarter. The most significant driver of this reduction was the lower cost, the lower wood cost mainly due to improved wood quality, resulting in a lower specific consumption and operational efficiencies in harvesting and logistics.

Additional contributing factors included lower consumption and price of key inputs such as caustic soda, chlorine dioxide and lime, reduced energy costs, especially for natural gas, driven by the decline in the Brent price and FX appreciation, which lowered the cost of dollar-denominated foods in local currency.

When we compare to our cash cost to the third quarter in '24, the cash cost decreased 7%, reflecting gains from operational efficiencies, input cost reductions and scale. The key highlight was the broad contribution of Ribas units, which supported improvements across all cash cost components.

The highlights of improved performance were wood costs, which saw the most significant reduction driven by shorter average ratios, better performance on the field and a lower diesel price, which scale gains also helping dilute indirect costs and lower input consumption, especially caustic soda and fuel oil, supported by operational improvements and fuel to gas conversion in the lime kilns at the Ribas and Imperatriz mills.

Looking ahead, we are pleased to share that the cash cost production ex downtime, is already running below the BRL800 per ton mark. This solid performance give us confidence that we will deliver in the fourth quarter '24-'25. The most competitive quarterly cash cost of the year, while also supporting a full year average close to the level recorded in fourth quarter '24.

Now I hand over to Marcos to continue the presentation.

Thank you, Aires. Good morning, everyone. So I'll start with the leverage. Our leverage in dollar terms ticked up to 3.3 times. Despite our net debt remained stable in the quarter, our EBITDA last 12 months declined mainly because of lower pulp prices.

In terms of our net debt, as I mentioned, it remained stable on a quarter-on-quarter basis, and I would like to highlight that we continue to generate positive free cash flow throughout the quarter, and that we saw some nonrecurring events impacting our liquidity and leverage in the quarter, namely the wood deal that we did with Eldorado and also the premium we paid for the repurchase of the bonds of 2026 and 2027. These events totaled close to BRL1 billion.

In terms of liability management, we did a lot of different transactions with a highlight of the issuance in September of $1 billion new 10-year bond for Suzano issued at the lowest corporate spread ever for the company, and we also repurchased the bonds maturing in the short term, 2026 and 2027.

The result of that is that we were able to reduce our short-term maturity risk, and we also were able to increase our average terms of our debt from 74 months to 80 months without changing the average cost of our debt, which remains stable at 5%.

Moving to slide number 8. We highlight the healthy hedge portfolio that we have at this point with a put option of BRL564 and a call option above BRL650. Our total portfolio is at $6 billion. And if we were to -- if the BRLremains stable at BRL532, which was the level of the closing of the third quarter, we would have a positive cash impact of nearly BRL2.5 billion in the upcoming two years, including the fourth quarter, with the impact of positive BRL800 million in 2026.

Moving to the next slide number 9. We would like to reinforce our guidance for CapEx for 2025 at BRL13.3 billion, which implies a CapEx of BRL2.9 billion in the last quarter of the year. Now I would like to hand over to Beto for his final remarks.

Thank you very much, Marcos. A couple of things that we understand that it's absolutely key to send as a final message regarding the next couple of quarters. So looking ahead, as I said, we will keep focusing the whole team in the cash production cost, not only for the fourth quarter, but we understand that, that must be attendance in the way that we manage the business, and this is dealing with something that we control to be prepared for any kind of scenario in the long term. So that's the first thing.

The second one is that we have a couple of investments that we made in the last, mainly a couple of two years. As I mentioned, Suzano Packaging. There's a new tissue mill in Aracruz that just start up and also keep working in the progress to the closing of the JV with K-C.

So this is an investment that we have made that we must keep working to gradually improve performance in packaging, in Aracruz, but make sure that we will extract the values and the efficiency that we mentioned when we signed a JV with K-C. So having said that, the focus is extracting value from the investment that we have made already and not putting other initiatives on the table.

So how to summarize this is, focus on what we control. We keep reducing cash cost and also making sure that we will extract the value from the investment that we have been making. Having said that, I will open for the questions.

(Operator Instructions)

Caio Ribeiro, Bank of America.

So I wanted to dive into a little bit more detail on your view on the dynamics of wood chips and softwood in the Chinese market specifically. So first of all, I wanted to ask you if you've noted any meaningful changes in terms of the prices of domestic wood chips in China as a result of all of the supply additions that we've been seeing coming from Huatai, Nine Dragons, and in particular, Chenming's announced resumption, right? And whether that has had any meaningful impact in your perception on the marginal cost of production of pulp in China?

And then secondly, in terms of softwood, right, clearly, the dynamics for that fiber have been weaker in comparison to hardwood with prices dropping, while hardwood has been on a recovery track. And our perception is that this has largely to do with an abundance of this type of fiber, right, softwood in Chinese markets as a result of higher domestic production. So I wanted to ask whether you've seen any meaningful changes there in terms of domestic producers in China perhaps reducing softwood output as a result of the recent drop in softwood prices, and whether that incentive from customers to switch from softwood into hardwood is still present, or if there have been any changes there given that reduction in the spread between both fibers?

Caio, this is Leo here. Thank you for your questions. Regarding wood chips, yes, we have seen an uptick in the prices, not only of the Chinese wood chips, but also of imported wood chips in this last two, three months. Imported wood chips on a BDMT basis have increased almost $10, which would generate roughly an effect of $20 in the cash cost of bleached hardwood production, while Chinese wood chip prices as per our monitoring has increased from $25 and in some cases, $40, and that's always a double effect, approximately on the cash cost of production.

So your assumption is aligned with ours that yes, this will create an effect in an increasing cash cost of Chinese producers, both of market pulp and also integrated paper and packaging producers, which we are seeing that are now and more intensely pushing for paper price increases. I believe obviously, this is a consequence of higher costs in their season, and that should support the S&D fundamentals for hardwood for the upcoming months.

Regarding softwood, yes, indeed, it's weaker. It seems to be trending in the opposite direction than hardwood for the past months, especially in China. I think there are two effects. First is the availability of the unforeseen softwood chips at a very competitive price, in some cases, at the same price as hardwood chips since the beginning of this year due to the infected wood and the policy to try to cut and use this wood as soon as possible. We believe that this wood will last more two to three quarters in the market.

And that is putting pressure on softwood both by some integrated players, now producing softwood in their system, and they used to buy it, but also having less -- putting -- leaving less space for softwood pulp.

And the second factor, which I would like to call your attention is the fiber-to-fiber movement. Obviously, even with the gap that has reduced from over $200 to roughly $150, $160, it's a huge incentive still for fiber substitution. We see a lot of traction, a lot of action in China, many, many customers interested in seeking our support in this journey. So in terms of how can they be less and less dependent on softwood and more and more dependent on hardwood fibers like ours. So I think it's a double effect that is making the scenario for software producers a bit worse than what we see in hardwood today.

Daniel Sasson, Itau BBA.

My first question goes to Aires. Aires, if you could comment a little bit about your cash costs. You mentioned that you're running already below BRL800 per tonne in the fourth quarter. But considering the deal you announced with Eldorado that -- and the TOD and that you are not that far from your expected cash cost level in 2027, according to our TOD, if there is room for additional improvements or lower cash costs in the medium term? I'm thinking more specifically about 2027, not to anticipate what -- any revisions you might make to your TOD, but to think if this cost-cutting trajectory is going to be somewhat linear throughout 2026 and 2027 or if you have specific events that we should see maybe in 2027 so as to drive your costs down?

And my second question to Grimaldi. Thank you so much for the comprehensive backdrop that you viewed for pulp prices. Grimaldi, if you could just discuss a little bit about your expectations for the main topics to be discussed in two weeks at the London Pulp Week or in one week at the London Pulp Week -- last week, Chenming's stoppage was maybe the most important topic.

And exactly, you mentioned in your speech that you're thinking -- that you are still hopeful or optimistic about price increases going through. Is there anything that changed over the past couple of weeks, so as to give you or to leave you more optimistic given that the industry was not able to absorb the price increase attempts in September and October, right? Is there anything that changed at all? Or if you could explain why you are optimistic or more optimistic now than you were in the past maybe two months?

Daniel, thank you for your question, Aires speaking. Considering the deal with Eldorado, we start to supply our facilities in Mato Grosso do Sul with this wood probably in January. Then we do not suffer any impact, just probably reschedule the sequence that we receive at the facility in the fourth quarter to rebalance consider this new volumes.

But the main reason of this deal that give you our rationale to do this was that our reduced -- our consumption per ton of wood, consumption wood per tonne in the coming years. When we compare with your previous analysis, we are considering in the business case and with the first samples that we have of this wood, a reduction of around 4% the necessity of wood per ton in Mato Grosso do Sul.

If you consider that we will supply on an average, 18 million cubic meters per year, we will need 4% and less for the coming years to produce the same amount of pulp. That's the rationale that you have to do this deal. We'll try to explain better in the Suzano days in the next month. Then the rationale to next year and the other one is to running always below 800 tonnes per quarter. Of course, we can be affected with some sched off downtimes that will affect in a specific quarter. But the idea that we have in our plans that our average will be below 800 tonnes per year.

Okay. And Daniel, now it's Leo here. I'm going to answer the second part of your question regarding expectations for London Pulp Week. I think first, expectation, which is more and more clear is that this market scenario is completely unsustainable. And as we are going to a market that is a core of production of softwood, I think this tonne is even higher than what we see or sense when we're talking about South American pulp production.

It's completely unsustainable, even if we consider European cash costs and sales into the European market. Again, as I stated in my speech, as per our calculations, more than a year already bleeding 25% of the local hardwood production. So this is unsustainable and the fact that the market is unsustainable as is, I think, will be one of the main factors being discussed during London Pulp Week.

I also think that what will be a topic is the rhythm of unexpected closures. As I mentioned during the last call, we saw a very low level of unexpected closures in the first half of this year. And our line of thought is that all the instabilities around the world and geopolitical issues made some decisions not to be taken in the short term as many were on the wait-and-see mode to try to see what could be the scenario after there was a clear view on tariffs. As this is now clear, we see that the addition of this unsustainable scenario with a clarity in terms of tariffs will speed up the amount of unexpected closures, commercial downtimes that we see in the market.

And in fact, as per our controls according to consultancies numbers, if we compare the unexpected closures of beach chemical pulp in the first half of the year, and just the four months of the second half of the year, meaning until October, there is already a 40% increase on disclosed unexpected closures. So our thoughts or our line of thought seems to be executing or seems to be happening as we speak. And we again believe much more has to happen under this very depressed pricing scenario.

Now regarding your question on my optimism a quarter ago and today, I think my optimism level is slightly better now despite I was optimistic in the last quarter. Thus, the reason we have announced a sequence of 3 price increases.

And the reason why we did that is because, obviously, we were monitoring order inflows in all markets and in China, more deeply even with the purchasing patterns of integrated paper producers, the amount of capacity on the water in the world as we speak, and this feeling of optimism now has been a bit upgraded, if I could put it this way, due to the fact that we're seeing a reversion in the cost of wood chips to Chinese producers.

As I mentioned to Caio previously, we have seen this $25 to $40-ish increase on the prices of BDMT, meaning an impact of anywhere from $50 to $80 in the cash cost of Chinese producers who are using Chinese wood. And this obviously put pressures in the whole system and establishes a new grown for what they can accept or base their decisions in terms of timing that they buy market pulp rather than consume local wood as well.

So it's my optimism increased a bit, I would say, due to the effect of this new scenario regarding regulations on recycled fiber, as I mentioned, and wood increase. It is, however, important to say that my optimism is somehow limited. We see gradual price increases, but under this oversupply scenario, unless something major happens on the supply side of the equation, my optimism is not as big as you can imagine. So I would just like to point this out.

I'm sorry, just complementing the first question regarding the TOD that you asked. Just a remark here, we are completely committed with the guidance that we shared with the market regarding what we have to deliver by 2027 and confident that we're going to be able to deliver, okay?

Rafael Barcellos, Bradesco BBI.

Beto, I wanted to use one of your highlights during your speech. I mean, congratulations for the results in your US Packaging business. It's good to see that you are on track to keep delivering in this new business. And my first question is exactly about it.

I mean, what can we expect in the coming quarters? Or do you have any sense of EBITDA contribution from this business for next year? And ultimately, what is the full potential in the long term for the business?

And the second question, Beto. The second question is about Lenzing. If I'm not wrong, you can already exercise the option to acquire an additional stake in the company. So could you -- could you please share with us your overall thoughts on the investment? I mean, other than that, after roughly a year, I mean, what has changed in terms of how do you see Lenzing as part of your portfolio?

Thank you very much. Yes, since October, we already have the option to execute if we want, as you know. We are not considering to use this coal in the short term. We're still with the team, analyzing all the trends, all the investment in further capacity in the business, mainly on dissolving pulp globally. This is a market that it's also facing a business environment in terms of competition, mainly in Asia, which we should further analyze.

So I'd say that the best answer for Lenzing now is we will keep as it is with the 15% and keep analyzing the business and keep this study. There is no plan for using the coal in the short term.

Regarding Suzano Packaging, as I mentioned, we are very glad to be anticipating, I would say, the business plan. Firstly, in terms of positive EBITDA after taking a business that used to have a negative EBITDA. A lot of initiatives have been implemented on the commercial side, on the procurement side, on the logistics side. On the logistics side, we have been able to take the advantage that we have a strong logistic operation in US that's led by Leo's team in US and there's our synergy on those negotiations to do all the logistics for the business.

We were able also to adjust the team for the reality that we have in the company and in the market. I would say that it's still a lot to come. Fabio has a clear plan for the next two years, not only for generating positive EBITDA, but also generating the amount of cash that we are expecting for the business. It's a small business, as you know, but it's helping us a lot to understand the market, of course, to extract value from the unit, but also to understand what is for a company moving abroad. Having the chance to implement our principles in terms of management in a different future.

I think we are also learning a lot in Pine Bluff that will help us on the K-C JV in the future. So I cannot disclose a number in terms of next figures, but I would say that we are very glad regarding what we have delivered so far.

Caio Greiner, UBS.

My first question on pulp. I wanted to go back to that discussion on the long-term fundamentals that Suzano discussed during the Investor Day. I mean we've seen a significant amount of capacity additions in China in 2026, but pulp production in China still seems to be growing only gradually. Still, I guess, the market in general and investors have been really concerned about this idea of China becoming the dominant player in the industry. And again, I know you provided a deep dive on this during our Investor Day in 2024.

So I just wanted to understand if there are any updates on that structural view being that maybe a tighter wood chip market as we already discussed, anti-involution ideas in China. So I guess the question is, since last year, have you become more or less concerned at the margin regarding the structural fundamentals for pulp?

The second question on Kimberly-Clark and following up on this last topic. Just maybe Beto or Fabio, if you guys can give us an update of how the asset is performing. How -- if you have been able to dig a bit deeper into each asset that you're acquiring, if there's more clarity on the synergy potential, fiber-to-fiber potential? Or maybe if you got the chance to understand if there are any assets that don't really fit quite well into the portfolio that are likely to be sold. Anything that you could comment here would be really helpful.

Caio, this is Leo here. I try to answer your question, not taking color out of our Suzano Day 2025 as we are planning to update completely the scenario that we presented last year, bringing insights on the verticalization effect of Chinese production in our hardwood market. And again, it's important to say that as we have local market intel teams in most major markets, China included, this anticipation of view of trend makes us, I guess, more prepared for any kind of reaction or action that we need to take in terms of what's coming ahead of us.

So our view, I would say, is quite neutral at this time. I think the same trend that I have presented to you and to all of you during our last investors call is maintained. We see -- we still see this verticalization affecting our market. But as you mentioned, we are not seeing this pulp production yet growing. Obviously, when you put all these projects in a time line, still a lot of them, I think the effect we are going to see on a bit more short to midterm, the next four quarters, which has two ways of looking at this, right?

The negative way is impacting, obviously, market fundamentals. And the positive way is a much bigger demand for local wood chips and a pressure that this could further pose on wood chip prices. And again, we have to monitor that. And as we speak and see what's going on is that this market prices that we still see, which are low, despite they're going slightly up from the 494 valley a few months ago, still is incentivizing many, many Chinese producers, paper producers, integrated paper producers to buy market pulp. And this is the reason why we see that pulp production is yet not growing or is not growing, while imports of pulp are booming in the market.

You probably saw that hardwood pulp is -- the imports of hardwood pulp is growing more than 11% year-to-date to China. However, I would say that our view remains cautious, right? We are in a cautious mode, which obviously will depend on how we interact and see these moving parts in the wood chip prices in China. And also, as I mentioned, this completely unsustainable pricing scenario and how it correlates to cash costs around the world and will depend on supply side adjustments in the near term.

Luis, do you want to jump in and I can complement?

Okay, Beto. Caio, this is Luis speaking. As we have already disclosed before, during the phase pre-signing, we have visited all the mills around the globe, and we were very positively impressed at that time with the conditions of the plants and also housekeeping and everything. So at this stage, we have received more information and have been talking to KC given the constraints that the process requires. And we are more positive with the initial estimates that we had.

And as time goes by, we will have more time to fine-tune the estimates and to build a business plan for closing. So our idea is when we close the deal, we will have already a business plan for the coming two years with the right level of detail on which are the levers to generate value on the deal.

Just to complement on that, we see the value creation in the business that we mentioned. It's very clear for us the elements that we have analyzed before the deal and maybe further elements that we will find, and we are already discovering. I would say that our main concern is not regarding the assets. If there's opportunity to optimize the asset, we will do it. If there's opportunity to optimize geographies, we will do it. This is something that usually is not in the agenda of a big multi-national, but we will consider portfolio management as if necessary.

I would say that the main elements that we should take into account against not the assets, it's not the carve-out that we have to do, which is difficult. But it's putting two cultures to walk together with the same values, but having the ability to extract the best of each one. That's the main challenge that this organization have in this process.

Yuri Pereira, Santander.

I'd like to ask maybe if you have any information about the floods in Southeast Asia, if you see any impact -- any further impacts on wood prices in China, if you have any information, please? And regarding dissolving pulp, do you see more shifts like Bracell's one for the next year? If you can recap for us what's going on in the dissolving pulp market to result in this shift or if it's only low hardwood prices per se?

Yuri, this is Leo here. I'm going to answer both questions. Obviously, floods have influenced also wood chip prices in the short term. I didn't mention it because obviously, this is very, very punctual and short-term-ish, first in the southern part of China. And now as you probably saw in Vietnam two, three days ago where the daily rainfall was a record all-time high. But, yes, obviously, this is also influencing wood chip price and its dynamics.

In terms of dissolving pulp, what we see is that today, prices in DWP is trending higher than the historic average of delta between hardwood and DWP over $250, and that's incentivizing this flex capacity to swing in that direction. So in this case, yes, we expect that possible new flex capacity moving or shifting from hardwood, which, as I mentioned, is unsustainable to dissolving is possible.

Lucas Laghi, XP.

I just have one, I mean, on CapEx. But could you please provide us an update on -- specifically on expansion CapEx. I mean, if we exclude the BRL935 million expected from your three main projects, I mean, according to your latest presentation deck and considering the BRL1.6 billion in the guidance for 2025. I mean, is it reasonable to expect that this line should reduce in the next year proportionally to this reduction on the three main projects that you guys are concluding this year? Or I mean should we expect Suzano to continue to approve new competitive projects like those ones already in 2026?

And if you could also link your rationale for this -- the approval of this competitive related projects in terms of market conditions. I mean, it would be important as well for us to better understand how to think of this expansion CapEx line going forward?

Lucas, Marcos here. We will update the market with our guidance for 2026 CapEx by the end of this month. But I will try to give you a little bit of a trend, what we see in terms of CapEx. As you mentioned, we still had in 2025 disbursements for the Cerrado project. And we also had the conclusion of some growth projects that we undertook in 2025, namely the Fluff project at Limeira mill, which will start up in the fourth quarter.

Also the additional capacity in tissue at Aracruz Mill and the new biomass boiler at Aracruz as well. So going forward, we should expect a declining trend in terms of CapEx for next year as we will have lower disbursements and also we'll have less projects in our pipeline.

Henrique Marques, Goldman Sachs.

So just regarding pulp prices, I mean, Leo, you mentioned that pulp price situation is unsustainable. But at the same time, the pulp price cycle has been -- the hikes have been very gradual, right? So I think this is the main difference from what we've seen in other cycles. At the same time, we have APP OKI entering the first half of next year alongside other projects in China. So just to get a sense of where exactly do you see pulp price cycles in the future?

Like do you think we are seeing a derating of this range of prices? Like in the past, I mean, we would usually see prices going above $700 per tonne in both cycles. And now the -- I think it's hard to think that we'll see prices reaching $700 again. So just wanted to get your sense on what exactly do you see these price ranges going forward?

Hi, Henrique, thank you for this question. It's a tricky one to answer as obviously, it has several parts that are connected to our commercial strategy and are very sensitive in that case. But let me try -- and I'm going to give a lot of color in terms of how we are seeing the variables that can change this game in the short term and looking forward during our Investors Day. But in principle, they all originate from the fact that we have now been living a scenario where for several, several months the industry is bleeding, right? And several things could happen to change this scenario.

First is, again, reintensifying of permanent closures. We have seen a decline in permanent closures in BCP during this year. Again, we suppose that a lot of that has to do with the uncertainties that the geopolitical and tariffs have created in the decision-making process of this extremely high cost and unsustainable producers that we see in the Northern Hemisphere.

Second is the unexpected downtime rhythm going forward. Even though I mentioned that we see an uptick already in the four months of the second semester, compared to the first semester of this year, it's still low compared to previous years. For the same, we expect or we suppose for the same reasons of the one that I mentioned regarding permanent closures and all the uncertainties during these tariffs and geopolitical timing. This, again, is unsustainable and something should or could happen in that direction.

Third point that could change these dynamics is the timing of the new projects being implemented. Today, we have official news regarding OKI, which are the same as you have. But obviously, all of this more challenging scenarios can stimulate different actions in terms of time to market of new projects. And in the same token, time to market of the verticalized projects in China or their ramp-up curves, right? So that is a variable that we have to follow very closely and could change completely the game as we look forward.

And fourth and very important as we talk about verticalization in China and the impact it has on reducing demand for hardwood pulp. But there is a huge opportunity, which is what we see on the Western world. More than -- or two-third of the pulp produce in the world is integrated into paper and packaging production.

Many, many old sites, old mills, which were the origin of paper production and board production are in Europe and in North America and persisting this trend or this pricing trend, we believe that these mills are unviable or unsustainable. So we believe a lot in the thesis of deep verticalization in the western part of the world as a consequence of what we're seeing in China as we speak.

Eugenia Cavalheiro, Morgan Stanley.

I wanted to explore a bit more what you're seeing as growth opportunities in the paper market in the US And also on the profitability side, where do you feel like -- what level you feel like it's reasonable for the company to achieve? And how far are you from that right now?

Eugenia, it's Fabio here. Beto, I can take that about the US We're still a very small player here in the American market. We have 45% of the SDS market. So still plenty of rooms to grow.

At the moment, what we are doing here, Eugenia, is focusing on our growth in foodservice. It's trying to diversify a little bit from the liquid packaging board market that we are concentrated, and it's doing well. Regarding business moving forward and our profitability moving forward, we cannot provide any color on that, but I would like to say that there's still lots of opportunities for us to improve in terms of costs here, and we're going to be addressing that in the next quarters and moving in the next year.

Thank you, Fabio. Absolutely aligned with what we said in the beginning, which is focus on efficiency. So as Fabio said, a lot of -- still a lot of opportunity to improve portfolio and cost in the current facility that we have in US And Eugenia, there is no further, let's say, inorganically alternative for US in the short term at this time.

So we are again completely focused on extracting the value from those assets that we have a prior already. We finalize the call here. And I want to remember that we have the Suzano Investor Day 2025 on December 11. So we will be great to have all of you with us. So thank you for attending the call. And the RI team is always available to clarify any further questions.

Thank you very much.

The Suzano S.A. third quarter of the 2025 conference call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good day.