By Brazil Stock Guide – Suzano SA’s profit fell 64% from a year earlier as FX effects and weaker pulp volumes outweighed higher prices, while adjusted free cash flow reached R$3.3 billion, according to the company’s second-quarter earnings release published Wednesday.
The Brazilian pulp producer, traded as SUZB3 on B3 and SUZ on the New York Stock Exchange, reported net income of R$1.81 billion in the three months through June. That compared with R$5.01 billion a year earlier and R$4.31 billion in the first quarter.
Net revenue declined 13% from a year earlier to R$11.59 billion, mainly reflecting an 11% drop in pulp sales volume and an 11% decline in the average US$ against R$. Those effects were partly offset by an 8% increase in the average net pulp price in overseas markets.
Revenue rose 6% from the previous quarter, helped by higher pulp prices and increased pulp and paper volumes. About 80% of quarterly revenue came from overseas markets, compared with 83% a year earlier.
EBITDA rises sequentially but falls from year earlier
Adjusted EBITDA totaled R$4.7 billion, up 3% from the first quarter but down 23% from the same period in 2025. The adjusted EBITDA margin narrowed to 41% from 46% a year earlier and 42% in the previous quarter.
The sequential improvement was driven by a 7% increase in the average net pulp price in US$, a 2% rise in pulp sales and a 7% increase in paper volumes. Lower general and administrative expenses also supported the result.
Those gains were partly offset by a 9% increase in cash cost of goods sold per metric ton, higher selling expenses per ton and a 4% decline in the average US$ against R$.
Compared with a year earlier, adjusted EBITDA was pressured by FX movements, higher cash costs and lower pulp shipments. Adjusted EBITDA per ton declined 14% to R$1,424.
Pulp prices rise as shipments decline
Suzano sold 2.90 million metric tons of pulp during the quarter, down 11% from a year earlier but 2% higher sequentially. Paper sales totaled 406,000 tons, 1% below the year-earlier period and 7% above the first quarter.
The average net pulp price in overseas markets reached US$601 a ton, an increase of 8% from the previous year and 7% from the prior quarter.
Adjusted pulp EBITDA per ton fell 12% year over year to R$1,444. Adjusted paper EBITDA per ton declined 26% to R$1,281.
The company said global short-fiber pulp demand remained resilient despite geopolitical tensions and pressure on production and logistics costs. Price increases gained traction in major markets, with average short-fiber pulp benchmarks rising 3.4% in China and 13.8% in Europe from the first quarter.
Higher energy costs pressure production
Pulp cash production costs excluding maintenance shutdowns rose to R$843 a ton, up 5.1% sequentially and 1% from a year earlier. The result was slightly above Suzano’s previous quarterly forecast of R$830 to R$840 a ton.
The company attributed the increase partly to indirect effects from conflict in the Middle East. Average Brent prices reached US$97 a barrel during the quarter, compared with the US$87 assumption used in its forecast.
Suzano maintained its projection for average 2026 pulp cash production costs at about R$800 a ton, based on an average exchange rate of R$5.07 per US$ and Brent at US$84 a barrel.
Cash flow strengthens as investment declines
Adjusted free cash flow rose to R$3.32 billion from R$586 million in the first quarter and R$2.62 billion a year earlier. The annual increase was 27%.
The improvement reflected lower interest-payment concentration, positive cash settlements from derivatives, working-capital releases and reduced maintenance capital expenditure. Derivative settlements generated a positive cash impact of R$824 million, including R$147 million from commodity hedges.
Operating cash generation, calculated as adjusted EBITDA minus cash-basis maintenance capital expenditure, totaled R$2.89 billion. That represented a 14% sequential increase and a 30% decline from a year earlier.
Capital expenditure fell 20% both sequentially and annually to R$2.54 billion. Maintenance investments accounted for R$1.82 billion of the total.
Leverage rises despite lower net debt
Net debt declined 3% from March to R$66.09 billion, equivalent to US$12.77 billion. Gross debt totaled R$92.71 billion, while cash and financial investments reached R$26.62 billion.
Net debt to adjusted EBITDA rose to 3.4 times in US$ terms from 3.3 times in the previous quarter. The ratio was 3.3 times when measured in R$.
Suzano maintained its targets of reducing net debt to US$11 billion and leverage to below 2.5 times during 2027 and 2028.
Kimberly-Clark venture closes after quarter-end
Suzano completed the acquisition of a 51% stake in its international tissue joint venture with Kimberly-Clark Corp. (NYSE: KMB) on July 1, after the end of the reporting period.
Suzano paid US$1.3 billion for the controlling stake. The venture had initial net debt of about US$1 billion and includes 22 manufacturing plants across 14 countries.
Kimberly-Clark retained the remaining 49%. Suzano holds an option to acquire that stake from the third anniversary of the transaction’s closing, or earlier under specified circumstances.
Because the deal closed after June 30, it had no accounting impact on Suzano’s second-quarter financial statements.
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