Suzano Reports Solid Cash Flow Amid Pulp Market Volatility, Completes Arbex Acquisition
Brazilian pulp and paper giant navigates divergent market dynamics while advancing integration of July acquisition and targeting cost reduction.
Strong Cash Flow Despite Market Headwinds
Suzano S.A. reported resilient second-quarter results marked by "solid operational results with a strong free cash flow" despite volatile geopolitical conditions, CEO Beto Abreu told investors on the company's August 13 earnings call. The Brazilian pulp and paper producer successfully closed its Arbex acquisition on July 1, "fully aligned with what we have previously expected in terms of time line," and is now focused on integration and efficiency gains (earnings call, 2026-08-13).
The ~$10 billion market-cap company emphasized its commitment to "reducing the TOD, the total operational disbursing, and of course, on deleveraging the business," according to Abreu (earnings call, 2026-08-13).
Divergent Pulp Market Dynamics
The quarter revealed stark geographic contrasts in pulp demand. Leonardo Grimaldi, presenting pulp business results, noted that "in Europe and North America, pulp demand recurrently outperformed expectations, supported by stronger paper production due to war-related effects and inventory replenishments." However, China presented challenges as "the narrowing softwood hardwood price spread and the high availability of softwood pulp at Chinese ports weighed on purchasing activity" (earnings call, 2026-08-13).
Suzano's pulp sales reached 2.9 million tons during Q2, with average export prices climbing to $601 per ton. The business unit delivered BRL 4.2 billion in EBITDA with a 48% margin, reflecting higher U.S. dollar prices partially offset by increased cash costs and foreign exchange headwinds (earnings call, 2026-08-13).
Grimaldi offered a constructive outlook for the second half, citing seasonal demand strengthening, hardwood pulp prices moving below cash costs for Chinese producers, and a wider softwood-hardwood price spread. Notably, he highlighted industry stress, stating that "approximately 17 million tons of softwood and 5 million tons of hardwood capacity are currently operating below cash cost levels at the China prices, representing close to 30% of global market pulp production" (earnings call, 2026-08-13).
Paper and Packaging Performance
The paper business showed mixed results. In Brazil, domestic print and write volumes grew 4% year-over-year and 10% quarter-over-quarter, while paperboard volumes jumped 11% year-over-year and 28% sequentially, benefiting from customer inventory buildup ahead of price increases (earnings call, 2026-08-13).
Brazilian operations' EBITDA improved 28% quarter-over-quarter with higher volumes and better domestic prices, though it declined 20% versus Q2 2025. Suzano Packaging faced headwinds from scheduled maintenance and "increased costs due to the ongoing Middle East conflict, especially in oil-related inputs, mainly resins and logistics," according to Fabio Almeida Oliveira (earnings call, 2026-08-13).
Cost Management and Hedging
Cash costs excluding downtimes reached BRL 843 per ton in Q2, broadly aligned with guidance. Aires Galhardo noted the company "remains on track to deliver an average 2026 cash cost, excluding downtime of approximately BRL 800 per ton" (earnings call, 2026-08-13).
Marcos Assumpcao detailed the company's hedging effectiveness, reporting that oil-related cost increases of BRL 275 million were offset by nearly BRL 150 million in positive cash impact from hedging portfolios, "compensating nearly 60% of the negative impact." With 85% coverage of hedgeable exposure in H2 2026, the company is positioned to receive a positive BRL 250 million cash adjustment over 18 months if Brent prices remain at $87 per barrel (earnings call, 2026-08-13).
This article was generated by MarginX from the earnings call on 2026-08-13. It is not investment advice.