Suzano SA (SUZ) Q1 2025 Earnings: Balancing Growth with Global Headwinds

Suzano SA (SUZ), a leading global pulp and paper producer, delivered a robust first-quarter 2025 performance despite navigating significant operational and macroeconomic challenges. The company reported record revenue growth, driven by strategic investments and favorable currency dynamics, but also faced headwinds from production downtimes, trade uncertainties, and oversupply in key markets. Here’s a deep dive into the key takeaways and what they mean for investors.

Record Revenue Growth, Fueled by Expansion and Exchange Rates

Suzano’s Q1 2025 net revenue soared to R$11.6 billion, a 22% year-over-year (YoY) increase, marking a new quarterly high. This growth was propelled by:
- New Capacity: Contributions from its Ribas do Rio Pardo mill and recently acquired U.S. paperboard facilities.
- Volume Expansion: Total sales volumes hit 3.1 million tonnes, up 12% YoY, with pulp sales rising 10% to 2.7 million tonnes and paper sales surging 25% to 390,000 tonnes.
- Currency Tailwinds: The weak U.S. dollar and strong Brazilian real amplified revenue from dollar-denominated debt and hedging gains, contributing to a R$6.3 billion net profit, a stark contrast to the R$1.2 billion profit in Q1 2024.

Operational Hurdles: Maintenance, Trade Wars, and Pricing Pressures

While revenue surged, Suzano faced near-term challenges:
1. Planned Downtimes: Maintenance at key facilities like Três Lagoas and Mucuri temporarily disrupted production, reducing output and constraining profitability.
2. Global Pulp Oversupply: International markets remain flooded, squeezing prices below marginal costs ($625/ton in April). Trade wars and tariffs further delayed pricing negotiations, creating uncertainty for customers.
3. Deleveraging Priorities: Net leverage reached 3.0x in U.S. dollars, near the upper end of the company’s target range, limiting flexibility for share buybacks or aggressive expansions.

Strategic Focus: Debt Reduction, Cost Efficiency, and U.S. Ambitions

CEO Beto Abreu emphasized a disciplined approach to navigating these challenges:
- Deleveraging: Suzano allocated R$2.2 billion to discretionary debt payments, aiming to reduce leverage to 2.5x by year-end.
- Cost Control: U.S. paper and packaging operations are on track to achieve break-even by late 2025, driven by price hikes, operational efficiency, and post-maintenance stability.
- M&A Opportunities: Despite trade risks, management remains open to U.S. acquisitions, particularly at lower valuations, to capitalize on its market position.

Market Outlook and Risks

Suzano’s long-term prospects hinge on global demand recovery and its ability to:
- Manage Pulp Pricing: Management expects stabilization by May as customer clarity improves, but oversupply risks persist.
- Leverage New Capacity: The Ribas mill and U.S. facilities are projected to push 2025 sales volumes above 2024 levels.
- Weather Macroeconomic Uncertainty: Trade wars, currency fluctuations, and interest rate pressures could further strain margins.

Conclusion: A Resilient Player with Mixed Near-Term Prospects

Suzano’s Q1 results underscore its ability to grow revenue through strategic investments and currency tailwinds, even amid operational and external headwinds. With adjusted EBITDA up 7% YoY to R$4.9 billion and operating cash flow rising 5%, the company demonstrates financial resilience. However, its 3.0x leverage ratio and dependency on volatile pulp prices highlight execution risks.

Investors should weigh these factors against Suzano’s long-term strengths: a diversified portfolio, cost leadership in Brazil, and a clear deleveraging roadmap. While near-term volatility persists, the company’s focus on free cash flow generation and disciplined capital allocation positions it to outperform peers if global demand recovers. For now, SUZ appears a hold for investors seeking a balanced mix of growth and risk, with upside potential tied to improved pulp pricing and trade stability.