Ladies and gentlemen, thank you for holding, and welcome to Suzano’s Conference Call to discuss the results for the Second Quarter of 2024. We would like to inform that all participants will be in a listen-only mode during the presentation that will be addressed by the CEO, Mr. Beto Abreu and other executive officers. This call will be presented in English with simultaneous translation to Portuguese. To change the audio, you can press the globe icon on the lower right side of your Zoom screen and then choose to enter the Portuguese Room. After that, you can select mute original audio. Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano’s management and known information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Suzano and could cause results to differ materially from those expressed in such forward-looking statements. Now I will turn the conference over to Mr. Beto Abreu. Please, you may begin your conference.

Thank you. Hello, everyone, I'm very happy to be here interacting with all of you now as part of the Suzano's team. I really would like to thank all of you for attending the call. So I will start the presentation. My first slide will highlight a couple of important achievements related to our strategic avenues and implementation of our strategy. As you can see here, we made investments in two assets. The first one was in Lenzing in Austria, a good movement to understand and to test the market in Europe, specifically the textile market. The other movement was in Pactiv in the US in the packaging business, also an important movement to understand the market. The team here personally likes the movements that we are making. A few things are important to share with you. The first is an important movement with no impact on our balance sheet but a huge opportunity to understand those geographies and markets; it's like we are testing the waters in those geographies. Another point is how able we are to implement and use all the knowledge we have in these operations to extract value. Of course, these are also markets and segments that we can scale in the future. For Lenzing, it’s a small acquisition with seats on the board, providing a significant opportunity to understand the business and a call for the future if we decide to execute. In the case of Pactiv, it’s a business with 420 tons of capacity in the paperboard business, also at a fair price to test the market and understand the environment and begin planning future movements. These movements align with our pipeline since last year, and we are bringing them to fruition now. We should have the closing in the last quarter of this year. Another highlight I want to share is the Cerrado project, all of you are familiar with. I would say that this is a unique milestone for the company that will strengthen our position in the market pulp and offer a competitive advantage in terms of cost. Keeping our relevance in the market pulp and continually working hard every day on cash costs to maintain our competitiveness against competitors is something we commit to. We see this in the next slide with some highlights related to the results. One significant detail is the level of cash costs again this quarter. This is something we'll continue to work hard to keep and even further reduce in the future. The EBITDA is R$6.3 billion, showcasing the resilience of our business. An important point is that we are already deleveraging the company even before realizing all the opportunities that Cerrado will bring. There are many good news in the second quarter concerning these figures as we will cover throughout this call. I'm going to hand over to the team now to delve into the details, starting with Fabio, and then I will return.

Thank you, Beto, and good morning everyone. Please let's turn to the next page on the presentation. In the second quarter, we had a solid performance supported by better market conditions domestically and abroad, albeit challenged by international logistics. In the domestic markets, according to Ibá, print and write demand increased 12% in the first two months of the second quarter year-over-year. Growth occurred in both uncoated and coated paper grades. Demand was bolstered by the election cycle tailwind, which will take place at the end of the year. The demand for paperboard increased by a strong 14% during the first two months of the quarter compared to the same period last year. This significant growth was primarily driven by increased packaging consumption from the food, beverage, and pharmaceutical sectors. We have also seen the end of the destocking process that impacted previous quarters. On international markets, demand in the quarter was healthy in North America, Latin America, and other markets we serve. Prices were slightly up in dollar terms, supported by higher pulp prices in all markets, coupled with higher container freight rates and longer logistics cycles in most international routes. Looking at Suzano's figures, our sales volume in the quarter was 3% higher year-over-year and nearly 6% above first-quarter performance, pushed by higher sales volumes in the domestic market. Our export volumes have been impacted by difficulties with vessel delays and port permissions, hampered by port congestions in most container terminals in Brazil. The average net price growth during the quarter over the first quarter was led by the implementation of previously announced price increases in the external market and favorable foreign exchange rates. On a year-over-year comparison, the price decline was caused by the abnormal price levels witnessed in the first half of 2023. Looking at our EBITDA performance, the 14% increase quarter-over-quarter was driven by a higher top line and lower costs in the period, also benefiting EBITDA per ton. When compared to the second quarter of 2023, EBITDA dropped 15% led by lower prices in both the domestic and international markets despite higher sales volumes. Looking ahead, we expect better demand for print, writing, and cartonboard in the domestic market compared with the first half of the year, favored by seasonality. The upcoming elections in Brazil should keep playing a role in driving higher demand in Q3, mainly for coated paper. Rising costs continue to push prices of paper produced globally, and new price increases have been announced in most regions. It’s also worth mentioning that a strong dollar against BRL has raised prices on imported papers in the domestic market, benefiting local prices from our exports. As disclosed in the earnings release for Q3, the annual maintenance downtime will occur at Suzano and the Mato mills. We anticipate our cash costs in the coming quarters, excluding downtimes, to remain stable compared to the first quarter. Now I will hand it over to Leo, who will present on our pulp business results.

Thanks, Fabio, and good morning everyone. Please, moving to the next slide of our presentation, I would like to begin by sharing some facts related to this past quarter. Market dynamics were quite strong in North America and Europe, where paper production and pulp demand were healthier compared to low levels seen in 2023, and pulp inventories remained below historic volumes. In China, paper and ivory board production has remained solid since the beginning of the year, achieving a 4% growth year-to-date, benefited by paper exports, which posted a 16% growth in the same period. Additionally, in China, similar to other regions, pulp inventories have been trending below normalized levels throughout the chain. Despite this, producer margins in paper remain squeezed as pricing sentiment from the new supply on the horizon has led buyers to reduce their pulp purchases since April, especially by the end of the quarter. We navigated Q2 by focusing on positioning our products in Europe and North America, as stated previously, to comply with our pulp supply agreements and our customers' needs, accompanied by efforts to reduce our order backlogs to other markets like Asia, the Middle East, and Africa, improving delivery schedules for our customers in these regions. This dynamic led to a strong invoicing during the quarter, keeping our inventories at low levels similar to the end of Q1 2024. Even with the invoicing push, our order backlogs only returned to normalized levels by the end of July. This quarter was also marked by converting our previously announced price increases into the P&L, resulting in an average export price of $701 per ton, 12% higher than the first quarter of the year. The combination of higher prices, favorable FX, solid volumes, and good cost performance led us to achieve an EBITDA of R$5.5 billion, a 60% EBITDA margin. Looking ahead, I would like to highlight the following points. First, we are extremely excited about the startup of our Cerrado project at our brand-new Ribas mill. As per our production and operational plan, our contracts and volume agreements take into consideration a ramp-up of sales by year-end, when we expect the bulk of our new pulp supply to start arriving in major markets. For the second half of 2024, we forecast healthy demand in all regions. As this third quarter begins, North America and Europe continue to post solid paper production, and pulp inventories have yet to recover to historic normalized levels. In China, paper production should continue to trend positively, especially as of September due to stronger market seasonality. Tissue and packaging producers are expected to heighten their production further in preparation for the November 11th shopping event. We also expect that paper and board exports should continue to show favorable figures during the next months, consequently benefiting producers' operating rates. According to our assessments in China, pulp inventories across the chain continue to remain below balanced levels. Importantly, taking into account the effect of lower order entry in Q2, we expect that pulp inventories at Chinese ports and in the hands of our paper customers or paper producers and traders in this market should keep trending below normalized levels in the upcoming months. Despite these positive market fundamentals regarding Q2 and expectations for Q3, in order to reestablish an active market in the region, we have repositioned our prices in the second half of July, prompting a rebound in order intake since. It's clear that we have entered an environment of lower pulp prices, and at Suzano, we are prepared to navigate this cycle carefully. Additionally, we confirm our determination to keep our inventories at current low levels with no major increases to the set points during this cycle. As previously stated, at Suzano, we manage our business not by an average cost and margins of our assets bought forward, but through a detailed event-based analysis. Thus, our financial team will continually assess the returns of our marginal production costs at different price levels during this new cycle. If returns become inappropriate, production will need to be adjusted accordingly, impacting our volume availability and commercial strategy. With that said, I would now like to invite Iris to discuss cash cost performance during the quarter.

Thank you, Leo. Good morning, everyone. We are currently on Slide 7, looking at flash performance quarter-over-quarter. We faced a negative impact on the wood supply mix due to a higher average from forest to mill distance close to 200 kilometers and a higher share of third-party wood at around 35%. On the positive side, we achieved better efficiency in the harvesting activities, mitigating this pressure. Additionally, while the depreciation of BRL is beneficial for the company since it increases EBITDA, it does add pressure on cash cost levels as some chemicals are dollar-linked. Nonetheless, the decline in chemical costs was primarily driven by lower energy consumption and a decrease in prices for natural gas, caustic soda, and lime. The cash costs settled at R$828 per ton in the second quarter, aligning closely with our budget. Looking ahead to the third quarter, we anticipate low single-digit increases due to potential higher FX rates and the startup of Cerrado. By year-end, assuming no other related input cost issues arise, we expect cash cost performance to improve with the new Ribas operation. Moving to the following slides about Cerrado, a few weeks ago, we successfully delivered on time and on budget the longest single-line pulp mill in the world after a three-year execution. The physical and financial progress along the way were thoroughly shared with you all. In the same transparent manner, we will outline what to expect in the learning curve phase ahead. As noted on the slide, there is still R$2.4 billion CapEx to be disbursed from the total of R$2.2 billion, with the mill already running. The Ribas mill is currently operating at 4,000 tons of pulp per day, fully aligned with August targets. Now I hand it over to Bacci.

Thank you, Aires. Moving to the next page, I'd like to highlight that we are seizing opportunities the market provides to keep strengthening our balance sheet. In terms of leverage, as mentioned by Beto at the outset, the peak leverage related to the Cerrado project is behind us, and we are starting the deleveraging process that will likely continue in the coming months. We currently stand at 3.2 times net debt-to-EBITDA, with a flat net debt of $12 billion. Regarding our amortization schedule, we have capitalized on the curve in Brazil to issue domestic notes, improving the quality of our portfolio by extending tenors and reducing rates. We continually seek alternatives to enhance this profile with transactions below the bond curve. On the following page, I'd like to highlight our discipline in capital allocation. We have executed four consecutive share repurchase programs, acquiring 93 million shares thus far. We are approaching the end of this fourth program, with about 7 million shares remaining to be purchased. This morning, we decided to launch a fifth share buyback program for an additional 40 million shares over the next 18 months. We will also cancel 40 million shares from the current program. Over the last three years, we have returned more than R$10 billion to our shareholders through dividends, interest on equity, and share repurchases. With that, I will turn it back to Beto.

Thank you, Marcelo. In the last slide, we have a few takeaways, but I would like to reinforce a couple of them. The first one relates to operating performance. Solid results and operating effectively within our control are, in our view, the best way to ensure we can keep delivering despite the scenarios we might face later. This focus is essential for us. The other point relates to the Cerrado project - I think Aires addressed it well, but I want to emphasize the capability of this team in delivering challenging tasks. I invite you not only to the Suzano Investor Day at year-end but also to visit the site. It’s an experience that will help you truly understand what has been implemented. Lastly, I want to reiterate what Marcelo Bacci mentioned regarding our discipline in capital allocation and our focus on maximizing long-term returns. With that, I would appreciate it if we now move on to the Q&A session. Thank you very much.

We will now begin the Q&A session for investors and analysts. Our first question comes from Daniel Sasson with Itau BBA. You can open your microphone.

Hello everyone. Good morning, thank you so much for taking my questions. My first question is on pulp prices. I know that you cannot discuss forward-looking statements concerning your expectations regarding the price floor for pulp, but if you could help us think about it by sharing your view on current demand from China at these pricing levels. Prices have declined by more than $100 per ton over the past couple of weeks. Was that enough to bring buyers back to the negotiating table? Conversely, are your customers able to skip purchases while waiting for prices to decline further, or do they have only normalized levels of inventories that would necessitate them to return to the negotiating table? My second question relates to capital allocation. If you could explain what the effective acquisition brings to your strategy for moving further downstream. Is there room to test fiber-to-fiber substitution with some products in the US? Additionally, regarding Lenzing, it appears that growing into dissolving pulp is being considered, right? If you could comment on whether you're exploring the possibility of converting one of your plants into dissolving pulp production, that would be appreciated. Thank you for your questions.

Hi, Daniel. This is Leo here. Thank you for your questions regarding pulp prices. To start with, I believe our customers are not able to skip another month of purchases. As I mentioned, they have been reducing orders since April, and public information regarding pulp inventories suggests they are below normalized levels. As September marks a significant seasonality period with increasing production levels, I believe it's crucial for them to resume purchases. This was our main objective when we recently announced a substantial price adjustment, prompting customers to become active once more. As of the day we made that announcement, various customers from different segments and sizes expressed interest in buying pulp again from us. While order intake has not fully recovered, I think market confidence will continue to rise, leading to normalized purchasing rates. It's challenging to predict specific price levels for reestablishing demand, as we are coming from low inventories and unforeseen closures that still significantly affect availability. Additionally, with Cerrado starting up and competition in China, the ramp-up curves will add uncertainty. We will closely monitor these variables and act accordingly.

Thank you so much.

We will continue, Daniel, this is Marcelo speaking. I’ll respond to the Lenzing part while transitioning the Pactiv discussion to Fabio after that. With the Lenzing deal, we expect the same phenomenon observed in other products in terms of fiber substitution to occur in the textile market, reflecting an increasing participation of short fiber replacing long fiber. We see significant potential for the demand for fiber-based products to replace those derived from fossil fuels. This rationale supports our positioning in that sector. Given our lack of experience in this area, it seemed prudent to establish our position with a minority stake in a leading company in the sector, well-positioned throughout the supply chain, including pulp production and high-end products supported by R&D capabilities. Currently, we hold a 15% stake with board seats, allowing the opportunity to increase our stake to 30% and become the largest shareholder over the coming years, should we choose. Our objective is to learn about this market through our partnership with Lenzing, and while there are no immediate plans for conversion of our facilities to dissolving pulp, such developments could be considered moving forward. On the assets in the US, Pine Bluff and Waynesville represent well-positioned assets with strong market presence in a growing segment. The assets are not best in class but possess considerable potential, and we believe we can build on their existing capabilities. This will allow us to enhance cash cost competitiveness and we also inherit a skilled team of 850 knowledgeable about operations and the market. Now I’ll turn it to Fabio to discuss fiber-to-fiber opportunities.

Daniel, thank you for your question. As you may know, today, the portfolio produced by these two mills predominantly targets the liquid packaging segment, in which they are market leaders for the fresh liquid package segment. Currently, these products primarily utilize softwood fiber, with some usage of hardwood, as softwood is abundant and cost-competitive in Arkansas, while hardwood is not as competitive. Although fiber-to-fiber substitution wasn't the only basis for our decision, we see it as a potential advantage moving forward as we discuss additional products for the portfolio and production increases at the mill.

Perfect. Thank you. Thank you, Bacci, Leo and Fabio.

Our next question comes from Jon Brandt with HSBC.

Hi, good morning. Thanks for taking my questions. Leo, I just wanted to follow up on the pulp market. The US and Europe, as you indicated, are strong, with prices slightly better there. I'm curious about how much of your volumes you can shift from China towards those regions. Is that an active strategy for you, or are you maxed out with your current mix? Additionally, regarding potential production downtime, I understand you're not quantifying pricing levels, but are you actively considering downtime at current spot levels, or do prices need to drop significantly for that consideration? Lastly, Beto, regarding capital allocation, there's been much discussion about making packaging and tissue segments more relevant. With tissue, it seems challenging to grow outside of your current areas, and its relevance in your portfolio appears limited. What are the medium-term plans for the tissue segment? On the packaging side, there are organic and inorganic growth plans. Do you envision packaging making up 25% or 50% of EBITDA, and how should we consider that moving forward? Finally, Bacci regarding the share buyback, you mentioned canceling 40 million shares, but if I'm not mistaken, you've already bought more than that in the current program. Why not cancel all the remaining shares?

So Jon, this is Leo here. Regarding shifting volumes from China to stronger markets like Europe and North America, I must be careful in disclosing sensitive information. Typically, we sell based on contracts and while we’ve already forecasted our customer needs with higher volume agreements through contracts as Cerrado ramps up from late '24 into '25, currently there’s limited flexibility to shift volumes in the short term. As for production downtime, that decision falls into the financial realm so I will pass it to Bacci to elaborate.

In light of production and sales decisions, we always evaluate marginal costs and marginal prices to guide production volumes across our plants. This systematic approach enables us to optimize the value of each asset.

Jon, this is Beto here. Addressing your question on capital allocation regarding tissue and packaging, I want to clarify that tissue is not a focus for us in terms of investment. Our goal is to maintain a strong position in tissue through contracts with customers globally, ensuring we continue to service them exceptionally well. As for packaging, we are actively exploring opportunities to differentiate and scale this segment, both organically and inorganically. We aim to pursue growth in this area. However, I'm not going to specify the packaging segment's future EBITDA contribution percentage as our priority is delivering value and not achieving a specific EBITDA percentage. Thank you, Jon.

Our next question comes from Marcio Farid with Goldman Sachs. You can open your microphone.

Morning, everyone. Thanks for the opportunity. A couple of follow-ups on my side as well. Bacci, you just outlined the strategy for production adjustments. Last year in May, prices hit low levels, leading to a 4% production cut. However, despite recent price levels, it seems you may still be operating below capacity, given that prices in China were well above long-term averages. Does this imply certain marginal tons are unprofitable at the current price levels, or are there mills/assets with available fire capacity you're conserving for the future? Additionally, Beto, you've taken office a month ago, yet much has transpired. Discussions have revolved around potential partnerships with Lenzing, Pactiv, Cerrado startup, and low pulp prices. Do you foresee continuing the current strategy is necessary? Are there changes or areas of focus you feel necessitate adjustment compared to six months ago? Regarding your pricing strategy, I remember your effectiveness in delivering the right pricing strategy previously and would like to understand how that experience will be applied at Suzano.

Thank you, Marcio. This is Marcelo. To clarify regarding the strategy: we do not offer guidance or information about our current production levels. The estimated production reflected last year's decisions, particularly the 4% reduction made previously. Our production level reflects that previous strategy. Currently, we do not have marginal production that wouldn’t be profitable at this price. However, we cannot adjust production daily.

Thank you for your question, Farid. Regarding strategy, Suzano has a solid platform for future growth as we've recognized. Our focus will continue to be on growth avenues downstream, while we retain our strong standing in the pulp market and maintain our competitiveness as a priority. Regarding the pricing strategy, I embrace the approach of utilizing data analytics and technology to improve our awareness and optimize pricing. Enhancing our pricing system is part of our ongoing journey, allowing us to respond tactically based on market shifts.

Our next question comes from Caio Ribeiro with Bank of America. You can open your microphone.

Thanks, and good morning, everyone. My first question returns to capital allocation. Recently, we've seen several smaller M&A announcements such as the Lenzing stake acquisition and Pactiv Evergreen, following the decision against a much larger container board transaction. I understand the company remains vocal about internationalization into complementary products. Can you provide insights into whether you'll continue pursuing smaller transactions like these that have minimal impacts on leverage, or will larger transformative acquisitions still be assessed? Regarding the robust free cash flow generation, especially as you ramp up operations and capture benefits from cost reductions, have you considered boosting dividends, particularly if large M&A doesn’t materialize? Could you look at a dividend formula pegged to free cash flow generation to provide visibility on potential distributions?

Thank you, Caio. This is Beto. On capital allocation, as you’ve noted with the recent transactions, it's essential to focus on assets that can scale with our size and differentiate us while leveraging our knowledge. However, I can't share specifics about potential deals. This remains sensitive. Our discipline and track record in generating value will guide our strategy. As Marcelo mentioned earlier, we can invest in us through buybacks, supporting our capital allocation strategy. I will now pass the floor to Marcelo for further insights.

You're spot on, Caio. We anticipate substantial free cash flow, primarily directed at reducing debt to target the 2 to 3x net debt-to-EBITDA range. We aim for a disciplined decision-making process, weighing returns against buybacks, dividends, and growth projects. Presently, our preference leans toward buybacks, given our assessment of the current share price versus intrinsic value. While we've established a minimum dividend policy tied to cash flow generation, we aren't considering altering this policy currently.

Our next question comes from Rafael Barcellos with Bradesco BBI. You can open your microphone.

Hello, good morning, and thank you for taking my question. Beto, you officially joined Suzano in early July, correct? This is your first conference call at Suzano, so welcome, and we wish you good luck. I would like to understand your initial conclusions. Suzano has delivered impressive results and improved across various areas over the years, but which aspects do you believe require continued focus and improvement in the coming years? Regarding costs, could we get your insight into the expected cost evolution in the second half of the year and how the Cerrado project will affect costs in the coming quarters? Thank you.

Thank you, Rafael. I appreciate your question. Firstly, I want to emphasize how well-managed this company is, with a remarkable track record in delivery. I'm impressed by the focus on execution, operations, and cost management. We have a strong future in performing. This foundational strength isn't easy to replicate. We're standardizing operations, taking advantage of a highly skilled talent pool to ensure we maintain our competitive position and continuously make the best capital allocation decisions for current and future cash flows. Regarding the Cerrado project, I will pass it over to Aires for more details.

Rafael, good morning, and thank you for your question. In terms of cash cost, we anticipate a slight increase in the third quarter due to FX changes and the startup of Cerrado. However, by year-end, we expect cash cost performance to improve thanks to the new Ribas operation. For 2024, we foresee relative stability in cash costs with the new projects coming to fruition and further enhancements from efficient operations.

Our next question comes from Eugenia Cavalheiro with Morgan Stanley. You can open your microphone. I believe Eugenia is experiencing technical difficulties. We will proceed to the next question from Igor Guedes with Genial. You can open your microphone.

Hello, good morning everyone. Thank you for taking my questions. I would like to understand why in your cash flow table, you designated a working capital variation line and included capitalized loan costs in the debt line. Typically, there's a separation between variations in working capital and debt payment flows, including borrowings and disbursements. The way this is currently structured makes it challenging to distinguish between what was debt flow and what resulted from working capital variations. Could you explain this separation?

Thank you, Igor. This is Marcelo. While this may seem technical, the capitalized interest is associated with CapEx; it represents interest related to the execution of the Cerrado project that must be capitalized during the construction phase based on accounting rules. Since this number doesn't appear on the CapEx side, it must be adjusted in the cash flows statement. For further details, our Investor Relations team would be happy to help you reconcile these figures.

Okay. Thank you very much.

The Q&A session is over. We would like to hand the floor back to Mr. Beto Abreu for his final remarks.

I would like to thank you for being here with us on the call today and for your interest in Suzano. As always, our IR team remains available for any additional questions you may have. I wish you a great day. Thank you very much.

The Suzano S.A. second quarter of 2024 conference call is concluded. The Investor Relations Department is available to answer further questions you may have. Thank you, and have a good afternoon.