Suzano S.A. — 2020 Form 20-F Summary
Business context and reporting period
This is an audited annual report for the fiscal year ended December 31, 2020, prepared under IFRS as issued by the IASB. It is not a standalone fourth-quarter filing; the source text does not provide a clear Q4-only set of results. Suzano is a Brazilian pulp and paper producer, with pulp, paper and tissue operations and substantial export exposure. The 2019 comparison includes Fibria for the first time following the January 2019 merger, so comparisons with 2018 are not like-for-like.
Financial and operating performance
| Metric | 2020 | 2019 |
|---|---|---|
| Net sales | R$30.46 billion | R$26.01 billion |
| Gross profit / gross margin | R$11.49 billion / 37.7% | R$5.27 billion / 20.3% |
| Operating profit before net financial result / operating margin | R$8.44 billion / 27.7% | R$2.63 billion / 10.1% |
| Net loss | R$10.71 billion | R$2.81 billion |
| Adjusted EBITDA (non-IFRS) | R$14.95 billion | R$10.72 billion |
| Cash from operating activities | R$13.12 billion | R$7.58 billion |
| Capital expenditures, cash basis | R$4.90 billion | R$4.87 billion |
- Net sales rose 17.1%, largely due to higher pulp volumes and the weaker real, partly offset by lower pulp prices in U.S. dollars. Pulp sales revenue increased 21.6% to R$25.58 billion; paper revenue fell 2.1% to R$4.88 billion.
- Pulp sales volume increased 15% to 10.8 million tons. The reported average pulp price was US$458 per ton, down 19% year over year; pulp cash cost excluding downtime declined 9% to R$604 per ton. Paper sales volume declined to about 1.2 million tons.
- The operating improvement reflected higher pulp volumes, currency translation benefits and lower cost of sales. Cost of sales fell 8.6% to R$18.97 billion. Selling and administrative expenses increased.
- The net loss widened primarily because net financial expense grew to R$26.09 billion from R$6.73 billion. This included R$12.53 billion of net monetary and exchange-rate losses and R$9.42 billion of derivative losses. A R$6.93 billion income-tax benefit, largely deferred, partially offset the pre-tax loss.
- Adjusted EBITDA is a management-defined non-IFRS measure and includes exclusions for selected exceptional and non-cash items; it should not be treated as a substitute for IFRS earnings or compared across companies without checking definitions.
Liquidity, debt and balance sheet
- Cash and cash equivalents were R$6.84 billion at year-end, versus R$3.25 billion a year earlier. Marketable securities totaled R$2.40 billion. Management reported positive working capital of R$9.79 billion and current assets equal to 2.2 times current liabilities.
- Operating cash flow was R$13.12 billion; net cash used in investing activities was R$0.74 billion and net cash used in financing activities was R$9.79 billion. Investing cash flow was affected by movements in marketable securities; it should not be read as a measure of capital spending.
- Total loans, financing and debentures were R$72.90 billion, up from R$63.68 billion. Of this, R$2.04 billion was current and R$70.86 billion non-current. Most debt was denominated in U.S. dollars. The filing says there were no financial covenants and reports compliance with other applicable covenants at year-end.
- Derivative instruments had a net fair-value liability of R$6.78 billion, compared with R$1.82 billion in 2019. Total equity declined to R$7.34 billion from R$18.09 billion, largely reflecting the annual loss.
Material changes and unusual items
- Revenue and operating margins improved substantially versus 2019, while the net loss increased sharply because of foreign-exchange and derivative impacts. The real’s depreciation also boosted reported export revenue in reais while increasing the translated value of foreign-currency debt.
- COVID-19 reduced demand for printing and writing paper amid office and school closures. Suzano temporarily halted paper lines at Mucuri and Rio Verde, resuming normal activity at the beginning of July 2020. Management said operations had not been materially affected to date, while cautioning that further impacts remained possible.
- The company raised funds through 2031 sustainability-linked notes and used proceeds in part to repurchase portions of notes due in 2024, 2025 and 2026. The 2031 notes’ coupon can increase by 25 basis points if the stated emissions target is not met.
- In November 2020, Suzano agreed to sell rural properties and forests for approximately R$1.06 billion. The transaction closed on January 5, 2021; the filing reports a net gain of approximately R$391 million on the property component in 2021, not as 2020 operating income.
- Auditors issued an unqualified opinion on the financial statements and internal controls. Critical audit matters included the Fibria-related pulp goodwill impairment test, deferred-tax-asset recoverability, tax litigation provisions and biological-asset valuation.
Outlook, risks and contingencies
- The company announced a 2021 capital-expenditure budget of approximately R$4.94 billion, primarily for maintenance and previously announced projects, including port logistics and potential land and forest investments. This is a spending plan, not earnings guidance.
- Management described global pulp markets as strong in 2020, supported by tissue and packaging demand, while noting weaker graphic-paper demand. It expects market conditions, pulp prices, exchange rates and inventory cycles to remain important drivers; the filing provides no quantified earnings or price forecast.
- Key risks include pulp and paper price cyclicality, COVID-19 effects, real/dollar and interest-rate volatility, high indebtedness and refinancing needs, derivative valuation, wood supply and forest exposure to drought, fire, pests and climate change, logistics disruption, environmental permits, and Brazilian political, regulatory and tax uncertainty.
- Net provisions for probable legal losses were R$3.26 billion. Possible-loss matters totaled R$10.48 billion, including R$7.15 billion in tax cases, R$3.07 billion in civil and environmental cases, and R$264 million in labor cases; these possible losses were not provisioned.
- The filing identifies material judgment in recovering R$8.68 billion of deferred tax assets and testing R$7.90 billion of pulp goodwill. Realization and impairment depend on estimates including future pulp prices, exchange rates, discount rates and taxable profits.
Important facts for investors to verify
- Reconcile the R$10.71 billion net loss with the much stronger operating results, particularly the exchange-rate and derivative effects, their cash versus non-cash components, and any subsequent settlements.
- Review debt maturities, foreign-currency exposure, available credit facilities and the effect of the R$6.78 billion net derivative liability on liquidity and leverage.
- Assess the assumptions supporting deferred-tax-asset recoverability and the annual pulp goodwill impairment test, including pulp-price and discount-rate sensitivities.
- Track the status and potential outcomes of the disclosed possible-loss tax, civil and environmental proceedings, as well as the conditions attached to tax incentives.
- Confirm execution and funding of the 2021 capex plan, the realized proceeds and accounting for the January 2021 forest sale, and progress toward the sustainability targets tied to debt costs.