Suzano S.A. Q4 FY2025 Earnings Call

Ladies and gentlemen, thank you for holding, and welcome to Suzano's conference call to discuss the results for the fourth quarter of 2025. They will be addressed by CEO, Mr. Beto Abreu, and other executive officers. This call will be presented in English with simultaneous translation to Portuguese. Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management and on 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 presentation.

Thank you for joining us for our fourth quarter results call. I want to focus on three key highlights regarding our fourth quarter results and our outlook for 2025. First, I want to emphasize the record shipment volumes in pulp during the fourth quarter, which reflects the excellent operational performance of our supply chain team. Their flawless execution has been commendable. Secondly, our paper business unit also saw strong volumes, with notable improvements at the Pine Bluff operation in the U.S. We have gained valuable insights there that will benefit our future operations. Regarding costs, we aligned our cash costs with our objectives. Additionally, I'd like to draw your attention to the TDO of Suzano. I see 2025 as a pivotal year, setting the stage for a new trend in TDO that supports our strategy to enhance competitiveness. Furthermore, we experienced strong operational cash flow and free cash flow in the fourth quarter, even in a lower price cycle. This showcases the resilience and competitiveness of our business, which is poised to become even stronger in the future. In summary, we achieved solid results in volume, cost management, and cash generation across varying business scenarios. Now, I’ll hand over to Fabio, who will discuss the Paper and Packaging business.

Thank you, Beto, and good morning, everyone. Let's proceed to the next slide of the presentation. In the fourth quarter of 2025, our Paper and Packaging division achieved robust volume growth from operations in Brazil and the U.S. Favorable seasonality contributed to an increase in volumes for the quarter, although we are seeing a decline in paper prices in export markets. In the U.S., Suzano Packaging was a notable performer with consistent prices quarter-over-quarter and a significant 21% increase year-over-year. This quarter also included our scheduled maintenance downtimes for both Suzano and Limeira. During the downtime at Limeira, we completed essential upgrades to the mill, which will enhance our cash cost competitiveness as detailed in our last Suzano Day. In Brazil, print and write paper demand, according to IBA, rose by 1% in the first two months of the fourth quarter compared to the same timeframe last year, driven chiefly by demand for uncoated paper due to seasonal factors. Demand for cut size and coated paper remained relatively stable year-over-year. International markets showed weakness with falling demand and an excess supply. Latin America demonstrated more resilience compared to the U.S. and Europe, although the region has faced an influx of low-priced Asian papers. Demand for paperboard in Brazil increased by 2% in the first two months of Q4 compared to the same period last year, reflecting similar improvements to last quarter. In the U.S. market, data from FP&A showed that SBS shipments were stable quarter-over-quarter and year-over-year in the fourth quarter, while production grew by 2% as new capacity came online. This new capacity has created pressure on operating rates, particularly in the folding box and foodservice market segments, while the liquid packaging board segment remains relatively protected. Looking at EBITDA performance, there was a 10% increase over Q4 attributed to the ongoing recovery of Suzano Packaging, which reported better EBITDA compared to both the previous quarter and the same quarter last year. Our EBITDA from Brazilian operations was impacted by lower prices and foreign exchange despite higher volumes on both year-over-year and quarter-over-quarter bases. The maintenance downtimes at Suzano and Limeira were completed on schedule and within budget, though they did affect costs. Looking ahead, we anticipate that sales volumes from our Brazilian and U.S. operations will be lower in Q1 in line with the typical seasonality. We also expect prices to improve through the gradual implementation of announced price increases in Brazil and export markets. Prices for Suzano packaging should stay stable in dollars since most of our volumes are sold under fixed-price contracts. Regarding cost performance, with no planned downtimes in Q1, we expect to see improvements in cash costs in our Brazilian operations. While we're focused on reducing cash costs in Suzano Packaging, we may encounter some pressures in Q1 due to winter conditions in the region and higher than expected natural gas prices. Finally, in January, we decided to discontinue our paper operations at the Rio Verde mill. This small facility was our only non-integrated mill, producing approximately 50,000 tonnes of paper annually and had the highest cash costs in our portfolio. The closure is expected to positively impact our 2026 results by reallocating production to the more competitive Suzano and Limeira mills and adjusting our commercial strategy. Now, I'll turn it over to Leo, who will discuss our pulp business results.

Thanks, Fabio, and good morning, everyone. Let’s now turn to our pulp business unit, where I’d like to highlight the key developments from the fourth quarter of 2025. This past quarter was marked by price recovery in all markets due mainly to a higher demand for hardwood pulp in China and Asia in general as well as a more pressured cost base for wood in Asia, consequently increasing cash costs for those producers as anticipated in our Investors Day. In China, paper and board production according to SCI posted a 17% increase in Q4 2025 when compared to Q4 2024, and the full year analysis presents another positive year with 3% growth in paper and board production with highlights to Ivory Board, which posted 8% growth in tissue with a 6% growth in 2025. This has reflected in a higher demand for pulp, with pulp imports growing 1.7 million tonnes in 2025 according to Chinese custom statistics, of which 1.4 million tonnes of hardwood pulp. Purchases of hardwood pulp have been further incentivized by the softwood fiber substitution trend and also by players in the textile markets increasing their purchases of paper-grade pulp, mostly hardwood. Our order intake during the quarter was above expectations, meaning that despite a very strong quarter in terms of invoicing, we are still carrying backlogs of deliveries to markets where we invoice directly out of Brazil, like China, Southeast Asia, and the Middle East. Looking at our price performance in Q4 2025, the $538 per tonne that you see on the slide, although higher than the previous quarter, is a backward-looking figure. Market prices are already above that level, as you know, but our reported prices in Q4 were impacted by invoicing backlogs. All incoming orders during the quarter and in all regions in the world were captured at a higher price set point, fully aligned with our price increase announcements with a strong month-after-month order intake trend that is still ongoing. We sold record volumes in Q4 and above our production output during the period, meaning we are bringing year-end inventories to very low levels and placing pressure on our logistics operations as inventories fell below optimum operational levels. Looking at the right side of the slide, the BRL 4.8 billion in EBITDA, up 8% quarter-over-quarter, was supported by higher volumes and better prices in U.S. dollar terms. Now looking forward, I would like to highlight the following points. In China, following a strong production pace of paper and board producers in Q4 2025, January has posted upbeat figures according to SCI, even slightly above the strongest production month in 2025, which was December, and 27% higher when compared to January 2025. Importantly, this increase has not led to a paper inventories build-up at paper producers compared to the past month's levels. And just to connect that to pulp demand, as an example, these figures translate into an additional consumption of 250,000 tonnes of pulp compared to January 2025 just for Chinese tissue producers. Also in January, order intake from our customers continued quite strong with full implementation of the announced price increase. Our announced price increases were also implemented in all Western markets. As the year began, news on the supply side have positively affected short- and midterm price perspectives. First, news about the Indonesian government revoking forestry permits covering an area of over 1 million hectares, including plantations for industrial users such as pulp and paper, on top of the 500,000 hectares that had that permit revoked during 2025. This brings two tailwinds to pulp markets as Indonesia currently produces over 4.5 million tonnes of market hardwood pulp, of which 3.5 million tonnes are exported to China. One of them is that a key pulp producer has promptly announced an immediate and unexpected curtailment of 150,000 tonnes of market pulp for February and March combined. Another is that, according to our market intelligence analysis, Indonesians are likely intensifying their wood chip purchases mostly from Vietnam, placing upward pressure on wood chip prices. This would affect not only Indonesian costs, but also Chinese and Japanese pulp producers who are major offtakers of Vietnamese wood chips. Even before the developments in Indonesia, we had been observing rising imported wood chip prices into China, which, as I have shared in our last Investor Day, represents roughly 50% of the wood furnace for Chinese pulp and paper industry. Separately from that and very importantly, APP has announced the delay of the OK 2 project start-up from early Q2 to mid-Q4 2026. As this was the only market pulp capacity addition considered for 2026, now no incremental market pulp capacity is expected to reach markets this year. The addition of positive paper production figures in China with their gradual price increases in Tissue and Ivory board grades added to unforeseen news on the supply side of the equation results in a positive short-term dynamic for hardwood pulp, way better than we had expected for the beginning of the year. We don't believe that this trend is short-lived, and we expect that it should continue post-February. For Suzano, Q1 and Q2 2026 concentrate most of our planned maintenance downtime program for the year, as you saw on our previous earnings release. Therefore, we now need to ensure the proper inventory buildup in Q1 after the record Q4 2025 invoicing performance, which is focused on recovering our global inventories to optimum operational levels. This will reflect in improved logistics efficiency and also service levels to our customers. We also need to especially prepare our inventories for Q2 when our planned maintenance downtimes will peak, resulting in almost 300,000 tonnes of lower output compared to Q2 2025 according to our production plan. This requires ensuring that our inventories are strategically positioned to serve contracted customers in line with their agreed inventory policies. As a consequence, we have lower pulp availability to be sold to customers who purchase directly out of Brazilian ports, such as China, Asia markets, Middle East, and Africa, meaning that our volumes will remain constrained in the coming months with zero allocation to spot markets and customers. To finish my presentation, I would also like to call your attention to the fact that despite price increase implementations during recent months and taking the latest China PIX indexes as a reference, just yesterday night, updates from Hawkins Wright present that an equivalent of approximately 7 million tonnes of bleached chemical pulp are currently loss-making, and this is still clearly unsustainable.

Thank you, Leo. Good morning, everyone, and move to the cash cost slide. We closed the fourth quarter confirming the cost path we had anticipated at the beginning of last year, reaching the lowest level of 2025 with a cash cost of BRL 778 per tonne. Compared with the third quarter of 2025, the 3% reduction was mainly driven by lower input costs, supported by stronger operational stability across our mills, and by lower prices for key energy and chemical items such as natural gas and caustic soda. Fixed costs also declined driven by lower labor costs, while wood costs benefited from a shorter average radius and better wood quality, which in turn reduced the specific consumption in the pulp production. In addition, higher energy export volumes and more appreciated FX contributed positively to cash cost performance in the period. Fourth quarter 2025 marks our best cash cost performance since 2021 with the lowest nominal level since the fourth quarter of 2021 and even better performance in real terms as it represents the lowest level since the first quarter of 2021. For 2026, we expect the average cash production cost of pulp to be broadly in line with the fourth quarter of 2025. The partner should mirror 2025, meaning a more pressured first quarter versus fourth quarter 2025 due to planned maintenance and nonrecurring events such as two turbines overhaul, followed by a gradual decline in cash cost over the course of the year. Moving on to the next slide. As I recently shared with you at our latest Investor Day, Suzano is implementing a comprehensive multiyear program to improve its competitiveness with a clear focus on reducing what we call total operation disbursement or TOD. As you can see on the slide, the 2025 TOD reached BRL 2,060 per tonne, improving on a year-over-year basis and reinforcing the downward trend toward our 2025 guidance also shared with the market at our Investor Day last December.

Thank you, Aires, and good morning, everyone. Moving to the next slide, I will start commenting about the positive free cash flow generation of $400 million in Q4 2025, even in a scenario of pressured pulp prices. This cash flow generation contributed to reduce our net debt to $12.6 billion by the end of 2025. And as a result, our leverage in dollar terms declined to 3.2x. On liability management, I would like to emphasize that last week, we renewed our revolving credit facility with 20 banks. The result of that was that we upsized the line from $1.3 billion to $1.8 billion, and we were also able to reduce the cost of this new line. Moving to the next slide, I would like to highlight our financial discipline with regard to three key metrics. First, we delivered our 2025 CapEx in line with our guidance. Second, we are reducing our 2026 CapEx guidance by nearly 20% year-on-year. And third, we are maintaining a very healthy portfolio of FX hedges. By December 2025, we had a $6.2 billion portfolio with an interval of BRL 5.83 to BRL 6.73 per dollar. So as reported in this big orange box, the expected cash adjustments for our zero-cost collars portfolio, if the FX remains at BRL 5.50, which was the level at the closing of 2025, we would receive positive cash adjustments of BRL 2.7 billion. If BRL remains at BRL 5.20, for example, which was close to the level of yesterday's closing, our adjustment would surpass BRL 4 billion in the upcoming 24 months. Now moving to the last slide, I'd like to update you with our shareholder remuneration program. Last week, we paid BRL 1.4 billion in dividends, which equates to more than a 2% dividend yield. We also concluded our fifth buyback program on February 9, in which we acquired 15 million shares. We announced yesterday a new buyback program to acquire up to 40 million shares in the upcoming 18 months. Now I would like to turn it over to Beto for his final remarks.

Thank you, Marcos. As we just heard, I think a couple of things to clarify when we look ahead. From Leo's presentation, what we saw is a more constrictive business environment for 2026, and this was related to clear and concrete events that somehow have changed the supply and demand balance. On the cash, Aires also had a chance to share the level of ambition that he has for cash cost during 2026. We also expect the same level of trend when we look for the TOD. We still see opportunities in sustaining CapEx and also in this logistic infrastructure and cost. This will also allow us to keep reducing our net debt in line with our deleverage objective for the business. I would also like to highlight that our JV with K-C is progressing absolutely as planned for closing in mid-2026. The level of liquidity that we have today is also considering the payment in the third quarter for our JV. So having said that, I will hand over to the group to hear all the questions for the Q&A. Thank you very much.

Our first question is from Mr. Rodolfo Angele from JPMorgan.

I have two questions for you. First, I think the main discussions with investors have been on what Leo has discussed in his remarks. So I just wanted to dig a little bit deeper on that front. Aside from all the topics that you mentioned, Leo, can you talk a little bit more about what do you see in China? You mentioned that paper demand is strong, but I would like to hear a bit more about what do you see on the pulp side? Any updates, any change in the trend that we were seeing of increased production out of China? Any risks to the numbers that you presented on the Investor Day of close to 6 million tonnes of distance. So that's my first question. And my second question is to Marcos. I think the message from Beto was very clear on the trends on the cost side. But I wanted to hear from you a little bit on CapEx, especially if we look ahead, not for this year, but the trends, especially into '27. We believe there is a case for lowering CapEx through time. We don't need a hard number, but if you could comment on at least the trend, that would be great.

Thank you for your question, Rodolfo. This is Leo addressing the pulp situation. To recap what we discussed during our Investor Day, we outlined a five-year plan focused on upstream verticalization in China, although we didn't share year-over-year figures. I'll clarify this for 2025 and 2026. In 2025, our thorough assessment of upstream verticalization indicates about 2 million tonnes of new pulp capacity will be introduced. However, this increase is mostly offset by lower operating rates of the mills initially and the negative impact from Chenming's shutdown in 2025 compared to 2024. Additionally, several integrated pulp-to-paper companies and buyers exchanged hardwood pulp volumes, particularly in Q3 when prices were at their lowest. Consequently, there was a net zero impact from verticalization in 2025. This helps explain the significant imports of hardwood and a growth of over 1.7 million tonnes or 1.4 million tonnes into China, as mentioned in my earlier remarks. For 2026, we've closely tracked new upstream verticalization, which is anticipated to yield between 2.8 million to 3 million tonnes of capacity. Unlike last year, almost all these projects, except for one, are set to commence in Q4 2026, with one starting in Q3 2026. Therefore, we likely won't see any impact at the year's start, possibly only towards the end of 2026, unless there are delays. This timing shows stronger fundamentals for the short-term dynamics in hardwood.

Rodolfo, thank you for your question regarding CapEx. Yes, there are a lot of moving parts on CapEx, including inflation for sure. But we see a couple of nonrecurring items that we will have to pay on our CapEx in 2026. To give you a couple of examples, first, we have our SAP upgrading version. We also have the Pangea Deal that we did, which was the wood swap with Eldorado, which had a payment in the first quarter of 2026. We even had an additional investment at Cerrado regarding the bonus for the productivity that we had over the initial 12 months of the project. We also had spillover payments from a couple of industrial projects that we concluded in the second half of 2025. So considering all of those nonrecurring items, let’s say, there is room for us to see a lower number on CapEx, but I would not like to give you that as a guidance, okay?

Our next question is from Mr. Caio Ribeiro from Bank of America.

So my first question is on buyback execution, right? I'm just wondering if you could talk a little bit about the mentality and the process that goes behind deciding whether to execute the buyback or not, particularly as you look at the previous program execution versus the new one that was announced. Looking at the past program, I'm wondering if the M&A transactions that were announced by the company impacted the magnitude or pace of execution of the buyback program. And going forward, as the company focuses on absorbing those assets acquired and assuming that no more M&A is carried out, does it make sense to execute a higher portion of the new buyback program or fully execute it? And then my second question is on potential divestments. I just wanted to see if you could share a little bit more color on how this divestment lever could be used to accelerate the deleveraging progress of the company? What assets you could consider as potential divestments and what the timing would be? And if there is a targeted leverage level for the company?

Okay. Caio, at our Suzano Day, we discussed our goal of reducing our net debt to $11 billion. This is our top priority. In relation to your question about buybacks, our focus remains on lowering our balance sheet debt. However, we aim to be strategic with our buyback program. We consider various factors when deciding on buybacks, including our debt level, our outlook on share prices, short-term pulp price expectations, and currency trends. There are many variables we take into account, and we strive to be opportunistic to provide value for our shareholders. As for divestments, as we also stated at Suzano Day, this represents a small part of our free cash flow expectations for 2026. It's about changing our mindset to look for non-core business opportunities for divestment. The primary opportunities we see are in the forestry sector, where we could use the land more effectively. Sometimes, land used for forestry might be more valuable for other crops or businesses, and we could potentially convert that land into cash by pursuing those other business opportunities. Therefore, this is likely what we will see regarding divestments, and, as I mentioned, it is not a significant part of our free cash flow generation expectations for 2026.

Caio, I just want to complement what Marcos just said. The deleverage plan for the company is not related to any divestment. The deleverage will come from the operational side. That's our plan here. If there's any specific opportunity in terms of generating value for the shareholder with specific assets, this is something that we will consider.

Our next question is from Mr. Marcio Farid from Goldman Sachs.

I have two questions. First, Leo, you provided a clear overview of the pulp markets. However, I'm curious about the paper prices in China, which appear to be at historical lows or haven't performed as well as pulp. Does this have any significance? Clearly, the upstream and downstream markets operate on their own supply-demand dynamics, but they usually correlate. Does the lack of movement in paper prices matter for pulp prices moving forward? Furthermore, what is your assessment of the relationship between hardwood and softwood, given that the gap has narrowed considerably with hardwood performing better? I'm trying to understand these two points, which are also important for building the pulp mill. Secondly, Fabio, there's noticeable momentum in the U.S. Packaging sector. It seems that you're making good strides in operational efficiency and renegotiating contracts with suppliers and clients. However, looking at your global competitors, particularly the largest ones in Europe and the U.S., many have reported a negative outlook for demand, especially in Europe due to competition from imports. How do you plan to navigate this? Can you succeed in the current market environment? Additionally, could you share your insights on your specific products in the U.S., which is a more protected market? It would be great if you could also provide a broader market perspective and update us on the progress in the U.S. packaging business.

Thank you for your question about the pulp market and its correlation to paper prices in China and softwood. Tissue is our primary business driver, and we are currently experiencing good margins. We have started to see a recovery in prices for those grades, and we are monitoring this alongside the fiber mix being utilized. As companies shift their purchases more towards hardwood, it helps to alleviate their cost structure. Typically, pulp prices tend to influence paper prices rather than the reverse. While the margins and prices for paper in China are important factors in our decision-making process, they are not the sole considerations. Additionally, we have been strategic with our pricing; our recent adjustments were modest, around $20 per month, allowing our paper customers to adapt their market prices. With respect to the hardwood-softwood price gap, we have noted that prices in China were previously above $200 but are now closer to $100 in other regions. Our focus on fiber-to-fiber strategies is gaining traction, enabling paper producers globally to better utilize hardwood pulp. Consequently, producers are facing margin pressures, and regardless of whether the price gap is $170, $150, or $200, the emphasis on efficiently using hardwood remains strong, and I don’t foresee this trend changing.

Marcio, this is Fabio. Thank you for your question. I will address your question about packaging market. You're right. The global packaging market is undergoing a major challenge with lots of oversupply in most of the grades of packaging papers and also some weak demand, especially in Europe. In the U.S., I don’t think demand is the main issue here. What’s happening, the market is kind of insulated with the tariffs. What’s happened is that we have new capacity coming to market this year and also last year. This is causing some imbalance in the supply and demand curve, and the operating rates for SBS have gone down. When you look at the major results for the players that have announced their results, there are some concerns about this imbalance and its impact on prices. But this has happened mainly on the open market for SBS, which is Folding Box Board and also food service market. We are kind of insulated from that. You know that our production here at Suzano Packaging, 80%, 85% of that goes into liquid packaging in a market where we have a very large market share. And we have 2- to 3-year contracts with our major customers. In that 80% to 85% of our exposure, we are protected. Demand is quite stable. Our prices are covered and protected under our contracts. On the 15%, 20% that we sell to the market, that's the type of pressure that we feel momentarily from the market. But we're confident that there are still some costs that we can take out of our operation here, and the resilience of the liquid packaging market in 80% of our business is going to help us to survive well during these tough market conditions. The U.S. markets have adjusted themselves in terms of supply and demand imbalances, and we have started to see some capacity closures as well. So I expect operating rates to come back to normal in the near future.

Our next question is from Mr. Daniel Sasson from Itau BBA.

Congrats on the results. My first question is related to the cost front. Aires, you mentioned that you do want to have a better performance on average in 2026 versus 2025, but you're already running at 5% below the average of 2025 in the 4Q. I know it's not a straight line, but if you could compare your current performance at the margin with your total disbursement operation guidance or maybe let us quantify a little bit the sort of improvement that you expect in 2026, if the 4Q 2025 is a good proxy. I think that would help us think about the evolution from now until your guidance in 2027. And my second question, Leo, it was great to hear you say that the order intakes that you've received so far this year have had prices above the average of the 4Q for all regions. But can you please comment a little bit if you're seeing any changes at the margin over the past few weeks, maybe? My question is more related to the decline in resale prices that we've seen or the fact that you guys are trying to increase prices by $10 per tonne this time around and not by $20 per tonne as you had been doing since the end of last year. I mean, are you seeing any weakness or signs at all? And if you could comment a little bit about the current wood price or wood cost for Chinese producers in China, the domestic wood and the import wood chips mainly from Vietnam, which have also shown a slight decline in prices or in that case, cost for Chinese producers, that would be great.

Thank you for your question, Daniel. As I mentioned, we plan to operate in 2026 at a similar level to what we achieved in the fourth quarter of 2025, which was BRL 778 per tonne. If we look at our average for 2025, which is BRL 817 per tonne, it aligns closely with your observation of about a 5% decrease. However, we face challenges in the first two quarters due to scheduled stoppages. In the first quarter, we will have maintenance at Imperatriz, Veracel, and Aracruz Linha A, which will significantly impact our costs, particularly because of Ribas performance that will lower our costs. Similarly, in the second quarter, the two lines at Tres Lagoas will add more pressure. Our pattern is reminiscent of last year when we began the first quarter with higher cash costs compared to the fourth quarter, but we expect a downward trend in the following quarters, aiming to end at the same level we reached in the fourth quarter of 2025.

Okay. Good. Daniel, this is Leo here. I’m going to address the several questions on pulp together. First, to rephrase, I mentioned that our order intake in Q4 showed prices higher than our delivered and invoiced prices for all months. January is following the same trend. The month-over-month pricing in Q4 was higher than the $538 price mentioned in our release. Regarding the margin and market outlook, January is quite strong, and we see no changes. Despite the upcoming Chinese New Year holiday where customers will be away until around February 23 or 24, all our customers have confirmed their purchasing intentions before leaving. We will be finalizing details after the holiday, and there have been no indications from customers in China and Asia of skipping their planned purchases for February. This indicates a consistent purchasing pattern we’ve observed for several months. Our choice not to implement a higher price increase in February was mainly related to the short negotiation window due to the holidays; we wanted to avoid extending negotiations. Therefore, our February price increase is non-negotiable and will be enforced. As for resale, we anticipate this will respond after the Chinese New Year. Currently, it’s trending about $10 to $15 below the imported PIX price references. We are confident as we continuously track and sell to our customer base in China, which includes integrated pulp and paper producers and traders who significantly influence resale prices. I can confirm that major traders in China have already purchased volumes at prices higher than current resale prices, leading us to expect a reaction in this index after the holiday. Now on wood costs, we noted an increase in wood costs for China at the end of last year, which has been contributing to higher cash costs as discussed previously. At the end of last year and early this year, we observed increases in imported wood chip prices by 12% to 15%, while Chinese wood prices fell by 10% to 12%. Since the Chinese industry uses a mix of imported and local wood, we believe that these wood costs are stable compared to the end of last year, with higher imported wood prices balancing the lower costs of Chinese wood. This is in light of recent floods and license revocations in Indonesia. To clarify, Vietnam, which is a key wood chips supplier, sends about 70% of its output to China, roughly 25% to Japan, and currently 7% to Indonesia. Our market analysis suggests that with the recent land revocations, Indonesia's demand could increase and take almost 20% of the available wood chips from Vietnam, adding pressure to the wood chip market going forward. We expect that the imported wood prices will likely increase as a result.

Our next question is from Mr. Rafael Barcellos from Bradesco BBI.

Congratulations on the results. The first question is a follow-up regarding the pulp market discussions. Leonardo, I have another question for you. To summarize what you've shared during the call, there seems to be a clear positive shift, especially compared to our previous discussions. Can you elaborate on the key development that prompted this change in tone? Additionally, Beto, regarding the Paper division, there were three significant developments in 2025: the acquisition of K-C, the first positive EBITDA in your paperboard assets in the U.S., and the new tissue mill in Brazil. What do you anticipate will be the key highlights for the division in 2026?

Okay. So Rafael, I want to explain what prompted us to adjust our outlook from our previous discussions. The first factor is the increased revocation of forestry licenses in Indonesia, which is now directly impacting the pulp and paper sector. By the end of last year, when we had nearly 500,000 hectares of licenses revoked, we did not link that directly to the pulp and paper industry. However, that has changed. This is a significant development, as it is already impacting a key producer, resulting in an immediate reduction of 150,000 tonnes of market pulp in just two months, which in turn affects all wood dynamics, as I mentioned previously. The second key change is the postponement of the OKI project from April to the fourth quarter of this year. This means there will be no new pulp entering the market in 2026. This change is significant. Additionally, APP is expected to launch a board machine with a capacity of over 1 million tonnes in Indonesia by March, which was intended to be integrated with OKI 2. With the delay of OKI 2, we now have a compounded effect of reduced market pulp availability, with no extra supply in 2026. Simultaneously, they will need to supply this new machine, and we anticipate an extra consumption of 350,000 tonnes of pulp in 2026 to operate it. In summary, the major changes have primarily affected the supply side, completely altering market dynamics at a rapid pace, as I noted in my opening remarks.

Thank you, Leo. Regarding the questions for 2026, what do we expect from K-C paper business in the U.S. and also the tissue after the investment that we made in Aracruz, as you mentioned on the tissue side, we are expecting to increase the level of return of the business. Firstly, we were able to deliver another project on time and on budget, as was the case of the tissue mill in Aracruz. We expect to now in 2026, extract the right level of value that we expect from this investment. So at the end of the day, we expect to have a better ROIC in this business with a lower cash cost and higher volume. On the Pine Bluff business in the U.S., I want to highlight again the great turnaround that the local team was able to implement. We have now a positive EBITDA differently from the asset that we have received. But we are looking to generate cash with the business. So we still have a journey in this process of not only generating positive EBITDA but, of course, generating cash with the business. So what we expect for 2026 is to keep moving forward in this direction of having assets that can generate value for the shareholders. On the K-C JV, I think there are two main elements that we must consider for 2026. One, of course, is the carve-out being finalized on time. So that’s not a simple process. It’s complex, considering the amount of countries that we have. We are on track, but still a lot to do. So finalizing this process on time is absolutely key. So keep working very closely with the clean teams to make sure that we will deliver this on time. On the other side, we also have the value creation stream. So making sure that we have all the details regarding the levers that we must consider in the beginning of this operation to start generating value as soon as we can is also the second priority. So I’m glad about how both teams are working together in this process. But for 2026, we would like to see value being created in the JV in the beginning and the carve-out being finalized on time. So again, the bottom line of everything is what I have been saying, for 2026, we must extract value from the investment that we have made in the past.

If possible, I would like to understand better where do you expect the cost reductions in the pulp business to come from? I mean, you already disclosed a bit the level that you expect for the year, but just to understand what are the levers for that cost reduction.

We gave some drive for this year. We are not hoping for coming years, just in TOD that we presented in our last Investor Day. For this year, our intention is to work at the same level that we closed the fourth quarter of 2025, roughly BRL 780 per tonne. That’s the idea for the average of 2026.

The Q&A session is over. We would like to hand the floor back to Mr. Beto Abreu for his final remarks. Thank you very much, everyone. Thank you for the questions. If there are still any doubts, as you know, our IR team is always available. So thank you very much, and see you in the next quarter call. Bye.

The Suzano S.A. Fourth Quarter of 2025 Conference Call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good day.