Suzano S.A. — 2022 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2022. Although the request identifies 2022 Q4, this filing is an annual report and does not provide a standalone fourth-quarter results summary. Financial statements are prepared under IFRS as issued by the IASB; amounts below are in Brazilian reais (R$).
Business context
Suzano is a Brazil-based pulp and paper producer, with eucalyptus pulp, paper and tissue operations. It reported 11.9 million tonnes of installed eucalyptus pulp capacity and 1.4 million tonnes of paper capacity at year-end. Pulp is its largest business, and exports account for most sales.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Net sales | R$49.831 billion | R$40.965 billion |
| Gross profit / margin | R$25.010 billion / 50.2% | R$20.350 billion / 49.7% |
| Operating profit / margin | R$22.223 billion / 44.6% | R$18.180 billion / 44.4% |
| Net income | R$23.395 billion | R$8.636 billion |
| EBITDA / Adjusted EBITDA | R$29.631 billion / R$28.195 billion | R$25.222 billion / R$23.471 billion |
| Cash provided by operating activities | R$21.641 billion | R$17.637 billion |
| Cash capital expenditures | R$16.309 billion | R$6.342 billion |
EBITDA and Adjusted EBITDA are non-IFRS measures defined by management and should be read alongside IFRS results. Operating cash flow less reported cash capex was approximately R$5.332 billion in 2022; this is a simple calculation, not a company-defined free-cash-flow measure.
Material changes versus 2021
- Net sales increased 21.6%, principally reflecting higher prices: pulp revenue rose 19.2% to R$41.384 billion and paper revenue rose 35.0% to R$8.447 billion. Total sales volumes were broadly stable.
- Gross profit rose 22.9%; gross margin improved by 0.5 percentage points. Higher input costs, including Brent, caustic soda and wood, partly offset selling-price gains.
- Net income increased 170.9%. Net financial results swung from an expense of R$9.347 billion to income of R$6.433 billion, substantially reflecting derivatives and currency/monetary movements. Income-tax expense rose to R$5.261 billion, including deferred-tax effects. The earnings increase therefore was not solely operating-driven.
- Adjusted EBITDA increased to R$28.195 billion. Pulp sales were 10.60 million tonnes; average international pulp prices rose, while reported paper sales reached 1.31 million tonnes.
- Cash from operations increased, while investment outflows rose to R$17.016 billion, including spending on property, plant and equipment, biological assets and acquisitions. Financing activities used R$8.107 billion, including debt repayments, dividends and share repurchases.
Debt, liquidity and capital allocation
- Cash and cash equivalents were R$9.506 billion; marketable securities totaled R$7.966 billion. Total consolidated loans, financing and debentures were R$74.575 billion, down from R$79.629 billion in 2021. Lease liabilities were a further R$6.183 billion.
- Working capital was R$22.630 billion, and current assets were 2.6 times current liabilities. Suzano stated that working capital was sufficient for present requirements. It had US$1.275 billion of undrawn revolving credit facilities at year-end.
- Management reported no financial covenants and compliance with other applicable non-financial covenants at year-end. The filing describes substantial debt-service and refinancing, foreign-exchange and interest-rate exposures.
- 2022 capital expenditure included R$7.367 billion for the Cerrado project and R$5.632 billion for maintenance. The approved 2023 capex budget was R$18.495 billion; the filing also cites approximately R$6.360 billion of planned 2023 maintenance capex.
- Suzano paid R$2.350 billion of interim dividends in December 2022, imputing this amount to the 2022 minimum dividend and proposed additional dividend.
Outlook, risks and unusual items
- The Cerrado pulp mill, with planned annual capacity of 2.55 million tonnes, was expected to start operations in the second half of 2024. In an April 2023 update after year-end, estimated total project investment was revised from R$19.3 billion to R$22.2 billion.
- Management described 2022 hardwood-pulp market conditions as favorable, with solid demand and constrained supply. The filing does not provide earnings or price guidance for 2023.
- Key risks include cyclical global pulp and paper prices and demand; real/U.S. dollar movements; high debt and financing costs; wood supply, drought, fire, pests and climate effects; logistics interruptions; Brazilian economic, political, tax and regulatory changes; and environmental, land and community disputes.
- Probable legal liabilities, net of judicial deposits, totaled R$3.256 billion. Possible-loss claims totaled R$12.938 billion: R$8.201 billion tax, R$4.415 billion civil/environmental and R$321 million labor; these possible losses were not provisioned.
- The proposed acquisition of Kimberly-Clark’s Brazilian tissue business had a base price of US$175 million and remained subject to closing conditions and antitrust approval as of the filing’s reporting. Subsequent events included favorable antitrust clearance in April 2023, subject to remaining conditions.
- The auditor issued an unmodified opinion on the IFRS financial statements and concluded internal control over financial reporting was effective. Critical audit matters included deferred-tax-asset recoverability, biological-asset valuation, pulp goodwill impairment and tax-litigation provisions.
Important facts for investors to verify
- Whether 2022 earnings and cash generation are sustainable after separating operating performance from substantial derivatives, exchange and deferred-tax effects.
- Debt maturities, currency and interest-rate exposure, and the distinction between reported debt and additional lease liabilities.
- Updated Cerrado project cost, funding, construction progress, ramp-up assumptions and expected cash costs.
- Whether forecast pulp and paper prices, costs and demand support the assumptions behind goodwill, biological assets and deferred tax assets.
- Progress and potential financial exposure in significant tax, land, environmental and civil proceedings.
- Completion terms and expected contribution of the tissue-business acquisition, and the scale and effect of ongoing capital spending and dividends.