Suzano S.A 6-K, filed Oct 26, 2023
Suzano S.A. (SUZ)
About this 6-K
Suzano S.A filed this 6-K on October 26, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October, 2023.
Commission File Number 001-38755
Suzano S.A.
(Exact name of registrant as specified in its charter)
SUZANO INC.
(Translation of Registrant’s Name into English)
Av. Professor Magalhaes Neto, 1,752
10th Floor, Rooms 1010 and 1011
Salvador, Brazil 41 810-012
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Enclosures:
INCORPORATION BY REFERENCE
This report and exhibits are incorporated by reference in our registration statements on Form F-3 filed with the U.S. Securities and Exchange Commission on January 24, 2020 (File Nos. 333-236083, 333-236083-01 and 333-236083-02), and shall be deemed to be a part thereof from the date on which this report is furnished to the SEC, to the extent not superseded by documents or reports subsequently filed or furnished.
This report and exhibits shall be deemed to be incorporated by reference in our registration statements on Form F-3 filed with the U.S. Securities and Exchange Commission on September 18, 2020 (File No. 333-248909), and shall be deemed to be a part thereof from the date on which this report is furnished to the SEC, to the extent not superseded by documents or reports subsequently filed or furnished.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 26, 2023
| SUZANO S.A. | ||
| By: | /s/ Marcelo Feriozzi Bacci | |
| Name: | Marcelo Feriozzi Bacci | |
| Title: | Chief Financial Officer and Investor Relations Director |
3
Exhibit 99.1
| Suzano S.A. |  |
| Unaudited condensed consolidated interim financial information | |
| Nine-month period ended September 30, 2023 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED BALANCE SHEET
| Note | September 30, 2023 |
December 31, 2022 |
||||||||||
| ASSETS | ||||||||||||
| CURRENT | ||||||||||||
| Cash and cash equivalents | 5 | 5,526,463 | 9,505,951 | |||||||||
| Marketable securities | 6 | 14,947,272 | 7,546,639 | |||||||||
| Trade accounts receivable | 7 | 6,650,210 | 9,607,012 | |||||||||
| Inventories | 8 | 6,478,233 | 5,728,261 | |||||||||
| Recoverable taxes | 9 | 933,616 | 549,580 | |||||||||
| Derivative financial instruments | 4.5 | 2,849,012 | 3,048,493 | |||||||||
| Advances to suppliers | 10 | 111,547 | 108,146 | |||||||||
| Dividends receivable | 11 | 7,334 | ||||||||||
| Other assets | 730,267 | 1,021,234 | ||||||||||
| Total current assets | 38,226,620 | 37,122,650 | ||||||||||
| NON-CURRENT | ||||||||||||
| Marketable securities | 6 | 453,301 | 419,103 | |||||||||
| Recoverable taxes | 9 | 1,393,137 | 1,406,363 | |||||||||
| Deferred taxes | 12 | 1,294,389 | 3,986,415 | |||||||||
| Derivative financial instruments | 4.5 | 1,537,438 | 1,825,256 | |||||||||
| Advances to suppliers | 10 | 2,113,874 | 1,592,132 | |||||||||
| Judicial deposits | 354,142 | 362,561 | ||||||||||
| Other assets | 354,913 | 279,955 | ||||||||||
| Biological assets | 13 | 17,383,360 | 14,632,186 | |||||||||
| Investments | 14 | 643,452 | 612,516 | |||||||||
| Property, plant and equipment | 15 | 57,718,542 | 50,656,634 | |||||||||
| Right of use | 19.1 | 5,267,493 | 5,109,226 | |||||||||
| Intangible | 16 | 14,877,234 | 15,192,971 | |||||||||
| Total non-current assets | 103,391,275 | 96,075,318 | ||||||||||
| TOTAL ASSETS | 141,617,895 | 133,197,968 | ||||||||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
1
| Suzano S.A. | |
| Unaudited condensed consolidated interim financial information | |
| Nine-month period ended September 30, 2023 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED BALANCE SHEET
| Note | September 30, 2023 |
December 31, 2022 |
||||||||||
| LIABILITIES | ||||||||||||
| CURRENT | ||||||||||||
| Trade accounts payable | 17 | 5,905,156 | 6,206,570 | |||||||||
| Loans, financing and debentures | 18.1 | 4,619,083 | 3,335,029 | |||||||||
| Lease liabilities | 19.2 | 755,867 | 672,174 | |||||||||
| Derivative financial instruments | 4.5 | 600,355 | 667,681 | |||||||||
| Taxes payable | 399,623 | 449,122 | ||||||||||
| Payroll and charges | 767,434 | 674,525 | ||||||||||
| Liabilities for assets acquisitions and subsidiaries | 23 | 93,167 | 1,856,763 | |||||||||
| Dividends payable | 2,682 | 5,094 | ||||||||||
| Advances from customers | 132,668 | 131,355 | ||||||||||
| Other liabilities | 294,974 | 494,230 | ||||||||||
| Total current liabilities | 13,571,009 | 14,492,543 | ||||||||||
| NON-CURRENT | ||||||||||||
| Loans, financing and debentures | 18.1 | 73,931,955 | 71,239,562 | |||||||||
| Lease liabilities | 19.2 | 5,633,226 | 5,510,356 | |||||||||
| Derivative financial instruments | 4.5 | 2,109,636 | 4,179,114 | |||||||||
| Liabilities for assets acquisitions and subsidiaries | 23 | 96,038 | 205,559 | |||||||||
| Provision for judicial liabilities | 20.1 | 3,198,343 | 3,256,310 | |||||||||
| Employee benefit plans | 21.2 | 704,258 | 691,424 | |||||||||
| Deferred taxes | 12 | 24,312 | 1,118 | |||||||||
| Share-based compensation plans | 22.3 | 251,089 | 162,117 | |||||||||
| Provision for loss on investments in subsidiaries | 14 | 1,134 | ||||||||||
| Advances from customers | 91,423 | 136,161 | ||||||||||
| Other liabilities | 127,719 | 157,339 | ||||||||||
| Total non-current liabilities | 86,169,133 | 85,539,060 | ||||||||||
| TOTAL LIABILITIES | 99,740,142 | 100,031,603 | ||||||||||
| SHAREHOLDERS’ EQUITY | 24 | |||||||||||
| Share capital | 9,235,546 | 9,235,546 | ||||||||||
| Capital reserves | 24,664 | 18,425 | ||||||||||
| Treasury shares | (1,484,014 | ) | (2,120,324 | ) | ||||||||
| Profit reserves | 22,690,645 | 24,207,869 | ||||||||||
| Other reserves | 1,637,970 | 1,719,516 | ||||||||||
| Retained earnings | 9,657,484 | |||||||||||
| Controlling shareholders´ | 41,762,295 | 33,061,032 | ||||||||||
| Non-controlling interest | 115,458 | 105,333 | ||||||||||
| Total equity | 41,877,753 | 33,166,365 | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 141,617,895 | 133,197,968 | ||||||||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
2
| Suzano S.A. | |
| Unaudited condensed consolidated interim financial information | |
| Nine-month period ended September 30, 2023 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
| Third quarter | 9 months YTD | |||||||||||||||||||
| Note | July 1 to September 30, 2023 | July 1 to September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||
| NET SALES | 27 | 8,948,013 | 14,198,749 | 29,384,030 | 35,461,239 | |||||||||||||||
| Cost of sales | 29 | (6,104,256 | ) | (6,472,670 | ) | (18,301,111 | ) | (18,028,435 | ) | |||||||||||
| GROSS PROFIT | 2,843,757 | 7,726,079 | 11,082,919 | 17,432,804 | ||||||||||||||||
| OPERATING INCOME (EXPENSES) | ||||||||||||||||||||
| Selling | 29 | (653,574 | ) | (625,114 | ) | (1,884,736 | ) | (1,822,822 | ) | |||||||||||
| General and administrative | 29 | (490,893 | ) | (392,663 | ) | (1,308,336 | ) | (1,093,895 | ) | |||||||||||
| Income (expense) from associates and joint ventures | 14 | (6,249 | ) | 257,638 | (5,830 | ) | 266,945 | |||||||||||||
| Other, net | 29 | (9,546 | ) | (18,562 | ) | 1,174,443 | 140,864 | |||||||||||||
| OPERATING PROFIT BEFORE NET FINANCIAL INCOME | 1,683,495 | 6,947,378 | 9,058,460 | 14,923,896 | ||||||||||||||||
| NET FINANCIAL INCOME (EXPENSES) | 26 | |||||||||||||||||||
| Financial expenses | (1,175,608 | ) | (1,216,422 | ) | (3,483,674 | ) | (3,399,945 | ) | ||||||||||||
| Financial income | 425,746 | 269,505 | 1,215,644 | 622,072 | ||||||||||||||||
| Derivative financial instruments | (864,399 | ) | 889,628 | 4,034,620 | 5,510,514 | |||||||||||||||
| Monetary and exchange variations, net | (1,880,055 | ) | (1,470,487 | ) | 1,744,880 | 1,700,202 | ||||||||||||||
| NET INCOME (LOSS) BEFORE TAXES | (1,810,821 | ) | 5,419,602 | 12,569,930 | 19,356,739 | |||||||||||||||
| Income and social contribution taxes | ||||||||||||||||||||
| Current | 12 | (51,800 | ) | (204,037 | ) | (262,803 | ) | (326,674 | ) | |||||||||||
| Deferred | 12 | 1,133,864 | 232,533 | (2,715,468 | ) | (3,094,068 | ) | |||||||||||||
| NET INCOME (LOSS) FOR THE PERIOD | (728,757 | ) | 5,448,098 | 9,591,659 | 15,935,997 | |||||||||||||||
| Attributable to | ||||||||||||||||||||
| Controlling shareholders’ | (732,993 | ) | 5,444,887 | 9,577,505 | 15,925,229 | |||||||||||||||
| Non-controlling interest | 4,236 | 3,211 | 14,154 | 10,768 | ||||||||||||||||
| Earnings (loss) per share | ||||||||||||||||||||
| Basic | 25.1 | (0.56846 | ) | 4.13200 | 7.36825 | 11.90890 | ||||||||||||||
| Diluted | 25.2 | (0.56824 | ) | 4.13132 | 7.36549 | 11.90699 | ||||||||||||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
3
| Suzano S.A. | |
| Unaudited condensed consolidated interim financial information | |
| Nine-month period ended September 30, 2023 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| Third quarter | 9 months YTD | |||||||||||||||
| July 1 to September 30, 2023 | July 1 to September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Net income (loss) for the period | (728,757 | ) | 5,448,098 | 9,591,659 | 15,935,997 | |||||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Fair value investments in equity measured at fair value through other comprehensive income | 373 | (897 | ) | (1,003 | ) | (2,955 | ) | |||||||||
| Tax effect on the fair value of investments | (127 | ) | 305 | 341 | 1,005 | |||||||||||
| Items with no subsequent effect on income (loss) | 246 | (592 | ) | (662 | ) | (1,950 | ) | |||||||||
| Exchange rate variations on conversion of financial information of subsidiaries abroad | 7,456 | (19,084 | ) | (1,376 | ) | (25,936 | ) | |||||||||
| Realization of exchange variation on investments abroad | 471 | (236,140 | ) | 471 | (236,154 | ) | ||||||||||
| Items with subsequent effect on income (loss) | 7,927 | (255,224 | ) | (905 | ) | (262,090 | ) | |||||||||
| Total comprehensive income (loss) | (720,584 | ) | 5,192,282 | 9,590,092 | 15,671,957 | |||||||||||
| Attributable to | ||||||||||||||||
| Controlling shareholders’ | (724,820 | ) | 5,189,071 | 9,575,938 | 15,661,189 | |||||||||||
| Non-controlling interest | 4,236 | 3,211 | 14,154 | 10,768 | ||||||||||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
4
| Suzano S.A. | |
| Unaudited condensed consolidated interim financial information | |
| Nine-month period ended September 30, 2023 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| Attributable to controlling shareholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Share capital | Capital reserves | Profit reserves | |||||||||||||||||||||||||||||||||||||||||||
| Share Capital | Share issuance costs | Stock options granted | Treasury shares | Tax incentives | Legal Reserve | Reserve
for capital increase | Special statutory reserve | Investment reserve | Dividends proposed | Other reserves | Retained earnings (losses) | Total | Non- controlling interest | Total equity | |||||||||||||||||||||||||||||||
| Balances at December 31, 2021 | 9,269,281 | (33,735 | ) | 15,455 | (218,265 | ) | 812,909 | 235,019 | 2,513,663 | 279,344 | 86,889 | 2,114,907 | 15,075,467 | 99,663 | 15,175,130 | ||||||||||||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||
| Net income for the period | 15,925,229 | 15,925,229 | 10,768 | 15,935,997 | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) for the period | (264,040 | ) | (264,040 | ) | (264,040 | ) | |||||||||||||||||||||||||||||||||||||||
| Transactions with shareholders | |||||||||||||||||||||||||||||||||||||||||||||
| Stock options granted (Note 22.3) | 4,001 | 4,001 | 4,001 | ||||||||||||||||||||||||||||||||||||||||||
| Shares granted (Note 22.3) | (2,365 | ) | 2,365 | ||||||||||||||||||||||||||||||||||||||||||
| Share repurchase (note 24.2) | (1,904,424 | ) | (1,904,424 | ) | (1,904,424 | ) | |||||||||||||||||||||||||||||||||||||||
| Unclaimed dividends forfeited | 2,309 | 2,309 | 2,309 | ||||||||||||||||||||||||||||||||||||||||||
| Fair value attributable to non-controlling interest | (3,883 | ) | (3,883 | ) | |||||||||||||||||||||||||||||||||||||||||
| Proposed additional dividend payment (note 1.2.2) | (97 | ) | (86,889 | ) | (86,986 | ) | (86,986 | ) | |||||||||||||||||||||||||||||||||||||
| Payment of supplementary dividends (note 1.2.3) | (719,903 | ) | (80,000 | ) | (799,903 | ) | (799,903 | ) | |||||||||||||||||||||||||||||||||||||
| Internal changes in equity | |||||||||||||||||||||||||||||||||||||||||||||
| Proposed minimum mandatory dividends | (502 | ) | 502 | ||||||||||||||||||||||||||||||||||||||||||
| Realization of deemed cost, net of taxes | (84,156 | ) | 84,156 | ||||||||||||||||||||||||||||||||||||||||||
| Balances at September 30, 2022 | 9,269,281 | (33,735 | ) | 17,091 | (2,120,324 | ) | 812,407 | 235,019 | 1,794,165 | 199,344 | 1,766,711 | 16,011,694 | 27,951,653 | 106,548 | 28,058,201 | ||||||||||||||||||||||||||||||
| Balances at December 31, 2022 | 9,269,281 | (33,735 | ) | 18,425 | (2,120,324 | ) | 879,278 | 1,404,099 | 19,732,050 | 2,192,442 | 1,719,516 | 33,061,032 | 105,333 | 33,166,365 | |||||||||||||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||
| Net income for the period | 9,577,505 | 9,577,505 | 14,154 | 9,591,659 | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) for the period | (1,567 | ) | (1,567 | ) | (1,567 | ) | |||||||||||||||||||||||||||||||||||||||
| Transactions with shareholders | |||||||||||||||||||||||||||||||||||||||||||||
| Shares granted (Note 22.3) | 6,239 | 6,239 | 6,239 | ||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased (Note 24.2) | (880,914 | ) | (880,914 | ) | (880,914 | ) | |||||||||||||||||||||||||||||||||||||||
| Treasury shares cancelled (Note 1.2.5) | 1,517,224 | (1,517,224 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Fair value attributable to non-controlling interest | (4,029 | ) | (4,029 | ) | |||||||||||||||||||||||||||||||||||||||||
| Internal changes in equity | |||||||||||||||||||||||||||||||||||||||||||||
| Constitution of reserves (Note 25.3) | (14,972,324 | ) | 14,972,324 | ||||||||||||||||||||||||||||||||||||||||||
| Realization of deemed cost, net of taxes | (79,979 | ) | 79,979 | ||||||||||||||||||||||||||||||||||||||||||
| Balances at September 30, 2023 | 9,269,281 | (33,735 | ) | 24,664 | (1,484,014 | ) | 879,278 | 1,404,099 | 4,759,726 | 675,218 | 14,972,324 | 1,637,970 | 9,657,484 | 41,762,295 | 115,458 | 41,877,753 | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
5
| |
| Suzano S.A. | |
| Notes to the unaudited condensed consolidated interim financial information | |
| Nine-month period ended September 30, 2023 |
CONSOLIDATED STATEMENTS OF CASH FLOW
| September 30, 2023 | September 30, 2022 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income for the period | 9,591,659 | 15,935,997 | ||||||
| Adjustment to | ||||||||
| Depreciation, depletion and amortization | 5,294,748 | 5,352,198 | ||||||
| Depreciation of right of use (Note 19.1) | 238,416 | 170,910 | ||||||
| Sublease of ships | (11,314 | ) | ||||||
| Interest expense on lease liabilities | 333,799 | 321,366 | ||||||
| Result from sale and disposal of property, plant and equipment and biological assets, net (Note 29) | 174,008 | (26,627 | ) | |||||
| Income (expense) from associates and joint ventures | 5,830 | (266,945 | ) | |||||
| Exchange rate and monetary variations, net (Note 26) | (1,744,880 | ) | (1,700,202 | ) | ||||
| Interest expenses on financing, loans and debentures, net (Note 26) | 3,537,499 | 2,902,537 | ||||||
| Capitalized loan costs (Note 26) | (816,763 | ) | (206,444 | ) | ||||
| Accrual of interest on marketable securities | (841,931 | ) | (487,890 | ) | ||||
| Amortization of transaction costs (Note 26) | 49,995 | 53,407 | ||||||
| Derivative gains, net (Note 26) | (4,034,620 | ) | (5,510,514 | ) | ||||
| Fair value adjustment of biological assets (Note 13) | (1,256,315 | ) | (171,618 | ) | ||||
| Deferred income tax and social contribution (Note 12.2) | 2,715,468 | 3,094,068 | ||||||
| Interest on actuarial liabilities (Note 21.2) | 51,989 | 44,443 | ||||||
| Provision for judicial liabilities, net (Note 20.1) | 81,011 | 101,717 | ||||||
| Tax litigation reduction program | 14,031 | |||||||
| Provision for doubtful accounts, net (Note 7.3) | 23,114 | 2,631 | ||||||
| Provision for inventory losses, net (Note 8.1) | 14,304 | 14,145 | ||||||
| Provision for loss of ICMS credits, net (Note 9.1) | 262,178 | 62,007 | ||||||
| Tax credits (note 29) | 1,324 | |||||||
| Other | 29,328 | 7,868 | ||||||
| Decrease (increase) in assets | ||||||||
| Trade accounts receivable | 2,587,427 | (2,074,641 | ) | |||||
| Inventories | (363,387 | ) | (1,092,801 | ) | ||||
| Recoverable taxes | (619,320 | ) | (342,011 | ) | ||||
| Other assets | 223,371 | 98,186 | ||||||
| Increase (decrease) in liabilities | ||||||||
| Trade accounts payable | 64,470 | 2,350,136 | ||||||
| Taxes payable | 226,151 | 286,491 | ||||||
| Payroll and charges | 73,625 | 56,758 | ||||||
| Other liabilities | (301,817 | ) | (232,613 | ) | ||||
| Cash generated from operations | 15,613,388 | 18,732,569 | ||||||
| Payment of interest on financing, loans and debentures (Note 18.3) | (3,936,938 | ) | (3,419,037 | ) | ||||
| Capitalized loan costs paid | 816,763 | 206,444 | ||||||
| Interest received on marketable securities | 516,001 | 348,536 | ||||||
| Payment of income taxes | (255,443 | ) | (216,064 | ) | ||||
| Cash provided by operating activities | 12,753,771 | 15,652,448 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Additions to property, plant and equipment (Note 15) | (8,824,534 | ) | (7,147,236 | ) | ||||
| Additions to intangible (Note 16) | (5,726 | ) | (80,651 | ) | ||||
| Additions to biological assets (Note 13) | (4,332,093 | ) | (3,522,875 | ) | ||||
| Proceeds from sales of property, plant and equipment | 145,216 | 166,057 | ||||||
| Capital increase in affiliates | (35,075 | ) | (32,144 | ) | ||||
| Marketable securities, net | (7,291,597 | ) | (3,096,515 | ) | ||||
| Advances for acquisition (receipt) of wood from operations with development and partnerships | (553,858 | ) | (231,636 | ) | ||||
| Dividends received | 4,869 | 6,604 | ||||||
| Asset acquisition (Note 23) | (1,615,140 | ) | ||||||
| Acquisition of subsidiaries (Note 1.2.3) | (1,060,718 | ) | (2,090,062 | ) | ||||
| Net cash from acquisition of subsidiaries | 5,002 | 10,590 | ||||||
| Cash used in investing activities | (23,563,654 | ) | (16,017,868 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from loans, financing and debentures (Note 18.3) | 9,971,740 | 341,481 | ||||||
| Receipt of derivative transactions (Note 4.5.4) | 2,385,114 | 26,346 | ||||||
| Payment of loans, financing and debentures (Note 18.3) | (3,483,991 | ) | (1,673,985 | ) | ||||
| Payment of leases (Note 19.2) | (869,973 | ) | (743,619 | ) | ||||
| Payment of dividends | (2,412 | ) | (1,801,579 | ) | ||||
| Liabilities for assets acquisitions and subsidiaries | (116,924 | ) | (107,520 | ) | ||||
| Shares repurchased (Note 24.2) | (880,914 | ) | (1,904,424 | ) | ||||
| Cash provided (used) by financing activities | 7,002,640 | (5,863,300 | ) | |||||
| EXCHANGE VARIATION ON CASH AND CASH EQUIVALENTS | (172,245 | ) | (403,895 | ) | ||||
| Increase (decrease) in cash and cash equivalents, net | (3,979,488 | ) | (6,632,615 | ) | ||||
| At the beginning of the period | 9,505,951 | 13,590,776 | ||||||
| At the end of the period | 5,526,463 | 6,958,161 | ||||||
| Increase (decrease) in cash and cash equivalents, net | (3,979,488 | ) | (6,632,615 | ) | ||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
6
| |
| Suzano S.A. | |
| Notes to the unaudited condensed consolidated interim financial information | |
| Nine-month period ended September 30, 2023 |
| 1. | COMPANY´S OPERATIONS |
Suzano S.A. (“Suzano”) and its subsidiaries (collectively the “Company”) is a public company with its headquarters in Brazil, at Avenida Professor Magalhães Neto, No. 1,752 - 10th floor, rooms 1010 and 1011, Bairro Pituba, in the city of Salvador, State of Bahia, and its main business office in the city of São Paulo.
Suzano’s shares are traded on B3 S.A. (“Brasil, Bolsa, Balcão - “B3”), listed in the New Market under the ticker SUZB3, and its American Depositary Receipts (“ADRs”) in a ratio of 1 (one) per common share, Level II, are traded in the New York Stock Exchange (“NYSE”) under the ticker SUZ.
The Company has 13 industrial units, located in the cities of Cachoeiro de Itapemirim and Aracruz (Espírito Santo State), Belém (Pará State), Eunápolis and Mucuri (Bahia State), Maracanaú (Ceará State), Imperatriz (Maranhão State), Jacareí, Limeira, Suzano, Rio Verde and Mogi das Cruzes (São Paulo State) and Três Lagoas (Mato Grosso do Sul State). Additionally, it has five technology centers, 23 distribution centers and three ports, all located in Brazil.
These units produce hardwood pulp from eucalyptus, coated paper, paperboard, uncoated paper and cut size paper and packages of sanitary paper (consumer goods - tissue) to serve the domestic and foreign markets.
Pulp and paper are sold in foreign markets by Suzano, as well as through its wholly-owned subsidiaries and/or its sales offices in Argentina, Austria, China, Ecuador, United States of America and Singapore.
The Company's operations also include the commercial management of eucalyptus forest for its own use, the operation of port terminals, and the holding of interests, as a partner or shareholder, in other companies or enterprises, and the generation of electricity in the pulp production process and its commercialization.
The Company is controlled by Suzano Holding S.A., through a voting agreement whereby it holds 46.97% of the common shares of its share capital.
These unaudited condensed consolidated interim financial information was authorized by the Board of Directors on October 26, 2023.
7
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| Suzano S.A. | |
| Notes to the unaudited condensed consolidated interim financial information | |
| Nine-month period ended September 30, 2023 |
| 1.1. | Equity interests |
The Company holds equity interests in the following entities:
| % equity interest | |||||||||||
| Entity/Type of investment | Main activity | Country | September 30, 2023 | December 31, 2022 | |||||||
| Consolidated | |||||||||||
| F&E Tecnologia do Brasil S.A. (Direct) | Biofuel production, except alcohol | Brazil | 100.00 | % | 100.00 | % | |||||
| Fibria Celulose (USA) Inc. (Direct) | Business office | United States of America | 100.00 | % | 100.00 | % | |||||
| Fibria Overseas Finance Ltd. (Direct) | Financial fundraising | Cayman Island | 100.00 | % | 100.00 | % | |||||
| Fibria Terminal de Celulose de Santos SPE S.A. (Direct) | Port operations | Brazil | 100.00 | % | 100.00 | % | |||||
| FuturaGene Ltd. | Biotechnology research and development | England | 100.00 | % | 100.00 | % | |||||
| FuturaGene Delaware Inc. (Indirect) | Biotechnology research and development | United States of America | 100.00 | % | 100.00 | % | |||||
| FuturaGene Israel Ltd. (Indirect) | Biotechnology research and development | Israel | 100.00 | % | 100.00 | % | |||||
| FuturaGene Inc. (Indirect) | Biotechnology research and development | United States of America | 100.00 | % | 100.00 | % | |||||
| Maxcel Empreendimentos e Participações S.A. (Direct) | Holding | Brazil | 100.00 | % | 100.00 | % | |||||
| Itacel - Terminal de Celulose de Itaqui S.A. (Indirect) | Port operations | Brazil | 100.00 | % | 100.00 | % | |||||
| MMC Brasil Indústria e Comércio Ltda (Direct)(1) | Industrialization and commercialization of wipes, cleaning and sanitary and personal hygiene products. | Brazil | 100.00 | % | |||||||
| Mucuri Energética S.A. (Direct) | Power generation and distribution | Brazil | 100.00 | % | 100.00 | % | |||||
| Paineiras Logística e Transportes Ltda. (Direct) | Road freight transport | Brazil | 100.00 | % | 100.00 | % | |||||
| Portocel - Terminal Espec. Barra do Riacho S.A. (Direct) | Port operations | Brazil | 51.00 | % | 51.00 | % | |||||
| Projetos Especiais e Investimentos Ltda. (Direct) | Commercialization of equipment and parts | Brazil | 100.00 | % | 100.00 | % | |||||
| SFBC Participações Ltda. (Direct) | Packaging production | Brazil | 100.00 | % | 100.00 | % | |||||
| Stenfar S.A. Indl. Coml. Imp. Y. Exp. (Direct) | Commercialization of paper and computer materials | Argentina | 100.00 | % | 100.00 | % | |||||
| Suzano Austria GmbH. (Direct) | Business office | Austria | 100.00 | % | 100.00 | % | |||||
| Suzano Canada Inc. (Direct) | Lignin research and development | Canada | 100.00 | % | 100.00 | % | |||||
| Suzano Ecuador S.A.S. (Direct) (2) | Business office | Ecuador | 100.00 | % | |||||||
| Suzano Finland Oy (Direct) | Industrialization and commercialization of cellulose, microfiber cellulose and paper | Finland | 100.00 | % | 100.00 | % | |||||
| Suzano International Finance B.V (Direct) | Financial fundraising | Netherlands | 100.00 | % | 100.00 | % | |||||
| Suzano International Trade GmbH. (Direct) | Business office | Austria | 100.00 | % | 100.00 | % | |||||
| Suzano Material Technology Development Ltd. (Direct) | Biotechnology research and development | China | 100.00 | % | 100.00 | % | |||||
| Suzano Operações Industriais e Florestais S.A. (Direct) | Industrialization, commercialization and exporting of pulp | Brazil | 100.00 | % | 100.00 | % | |||||
| Suzano Pulp and Paper America Inc. (Direct) | Business office | United States of America | 100.00 | % | 100.00 | % | |||||
| Suzano Pulp and Paper Europe S.A. (Direct) | Business office | Switzerland | 100.00 | % | 100.00 | % | |||||
| Suzano Shanghai Ltd. (Direct) | Business office | China | 100.00 | % | 100.00 | % | |||||
| Suzano Shanghai Trading Ltd. (Direct) (3) | Financial fundraising | China | 100.00 | % | |||||||
| Suzano Singapura Pte. Ltd (Direct) (4) | Business office | Singapore | 100.00 | % | |||||||
| Suzano Trading International KFT(Direct) | Business office | Hungary | 100.00 | % | 100.00 | % | |||||
| Suzano Ventures LLC (Direct) | Corporate venture capital | United States of America | 100.00 | % | 100.00 | % | |||||
8
| |
| Suzano S.A. | |
| Notes to the unaudited condensed consolidated interim financial information | |
| Nine-month period ended September 30, 2023 |
| % equity interest | |||||||||||
| Entity/Type of investment | Main activity | Country | September 30, 2023 | December 31, 2022 | |||||||
| Joint operation | |||||||||||
| Veracel Celulose S.A. (Direct) | Industrialization, commercialization and exporting of pulp | Brazil | 50.00 | % | 50.00 | % | |||||
| Equity | |||||||||||
| Biomas Serviços Ambientais, Restauração e Carbono S.A. (Direct) (5) | Restoration, conservation and preservation of forests | Brazil | 16.66 | % | 100.00 | % | |||||
| Ensyn Corporation (Direct) (6) | Biofuel research and development | United States of America | 26.07 | % | 26.59 | % | |||||
| F&E Technologies LLC (Direct/Indirect) | Biofuel production, except alcohol | United States of America | 50.00 | % | 50.00 | % | |||||
| Ibema Companhia Brasileira de Papel (Direct) | Industrialization and commercialization of paperboard | Brazil | 49.90 | % | 49.90 | % | |||||
| Spinnova Plc (Direct) (7) | Research of sustainable raw materials for the textile industry | Finland | 18.78 | % | 19.03 | % | |||||
| Woodspin Oy (Direct/Indirect) | Development and production of cellulose-based fibers, yarns and textile filaments | Finland | 50.00 | % | 50.00 | % | |||||
| Fair value through other comprehensive income | |||||||||||
| Celluforce Inc. (Direct) | Nanocrystalline pulp research and development | Canada | 8.28 | % | 8.28 | % | |||||
| 1) | On June 1, 2023, the Company completed the acquisition of MMC Brasil Indústria e Comércio Ltda.(Note 1.2.3.) | |
| 2) | On March 8, 2023, establishment of legal entity with full equity interest from Suzano S.A. | |
| 3) | On May 19, 2023, establishment of legal entity with full equity interest from Suzano S.A. | |
| 4) | On May 23, 2023, establishment of legal entity with full equity interest from Suzano S.A. | |
| 5) | On February 27 and March 21, 2023, equivalent contributions were made by the six shareholders of Biomas to constitute an equity interest (Note 1.2.6). | |
| 6) | On May 17, 2023, the percentage of interest was changed due to the dilution of the shares. | |
| 7) | Dilution of Company’s interest due issuance of new shares by Spinnova. |
9
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Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 1.2. | Major events in the nine-month period ended September 30, 2023 |
| 1.2.1. | Effects of the war between Russia and Ukraine, and Middle East conflict |
The Company has continuously monitored the impacts of the current war between Russia and Ukraine, and Middle East conflict, both direct and indirect, on society, the economy and markets (global and domestic), with the objective of evaluating possible impacts and risks for the business.
The Company's assessment has covered five main areas:
| (i) | Personnel: Suzano has local employees and facilities in the city of Rehovot in Israel, through its subsidiary, FuturaGene Israel Ltd. The Company continuously monitors the situation. |
In the context of the conflict between Russia and Ukraine, Suzano does not have employees or facilities of any kind in locations related to the conflict.
| (ii) | Supply Chain: the Company did not identify any short-term or long-term risk of possible interruptions or shortages of materials for its industrial and forestry activities. So far, the only effects observed have been greater volatility in commodities and energy prices. |
| (iii) | Logistics: internationally, there was no change in the Company’s logistical operations, with all the routes used remaining unchanged and the moorings in the planned locations being maintained. At the domestic level, no changes in logistical flows were identified. |
| (iv) | Commercial: to date, the Company has continued with its transactions as planned, maintaining service to its customers in all its sectors of activity. Sales to a few customers located in Russia were suspended, without any significant financial impact. |
| (v) | Continuity of operations: The conflict in Israel may result in disruptions to biotechnology research and development operations at FuturaGene Israel Ltd. |
As a result of the current scenario, the Company has taken steps to expand its monitoring of the situation, together with its main stakeholders, in order to ensure any updates and information flows required for its global decision-making are available in a timely manner.
| 1.2.2. | Cerrado Project |
On October 28, 2021, the Company's Board of Directors approved the realization of the Cerrado Project, which consists of building a pulp production mill in the municipality of Ribas do Rio Pardo, in the state of Mato Grosso do Sul.
The plant will have an estimated nominal capacity of 2,550,000 tons of eucalyptus pulp production per year, with an estimated period for starting operations in the first semester of 2024. The total investment is R$22,200,000, with substantial payments during the years of 2021 to 2024.
| 1.2.3. | Acquisition of tissue business in Brazil |
On June 1 2023, the Company acquired the totality of the quotas held by Kimberly-Clark Brasil Indústria e Comércio de Produtos de Higiene Ltda. (“KC Brasil”) in MMC Brasil Indústria e Comércio Ltda (“MMC Brasil”) for the consideration of US$212,029 million (equivalent to R$1,072,657) paid in cash (“Transaction”). On September 15, 2023, Suzano was reimbursed in the amount of R$11,939 due to variations on the closing balance related to working capital, cash and estimated value of inventory which results with an adjusted total purchase consideration of R$1,060,718.
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Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
MMC Brasil had no operations until the contribution made by KC Brasil as a result of the carve out carried out in May 25, 2023 of the assets related to the business of manufacturing, marketing, distributing and selling of tissue products, including toilet paper, paper towels, napkins, tissues, as well as other paper products in Brazil, including ownership of the brand “NEVE” of KC Brasil.
The following table summarizes the allocation of the purchase price:
| Total purchase consideration (full payment on closing) | 1,072,657 | |||
| Price Adjustment (working capital) | (11,939 | ) | ||
| Final total purchase consideration (full payment on closing) | 1,060,718 | |||
| Book value of Shareholders' Equity of MMC Brasil | 587,226 | |||
| Fair value adjustment | ||||
| Inventories (1) | 7,120 | |||
| Property, plant and equipment (2) | 105,858 | |||
| Trademark and patents (3) | 189,655 | |||
| Net identifiable assets acquired | 889,859 | |||
| Goodwill (4) | 170,859 |
(1) Measured considering the balance of finished products based on selling price, net of selling expenses.
(2) Measured based on the analysis of market data on comparable transactions and cost quantification, based on the estimate of replacement or replacement value of the assets.
(3) Measured based on revenue projections for products under the evaluated brands, according to the Refief from Royalties methodology.
(4) Goodwill is attributable to the workforce and expected future profitability of the acquired business. It will be deductible for tax purposes.
Considering the fact that MMC Brasil was created based on a carve out of a portion of the KC Brasil businesses, counterparty of the transaction, there is no previous history of revenue and/or profits specifically for the acquired entity to be considered or included in a pro forma consolidated revenue and pro forma consolidated profit as if the acquisition had occurred on January 1, 2023.
No deferred tax was recognized on the fair value adjustments, as MMC will be merged in the fiscal year of 2023.
Acquisition related costs of R$12,105 are included in administrative expenses in profit or loss.
| 1.2.4. | Federal Supreme Court (“STF”) decision – Effectiveness of final and unappealable tax decisions |
On February 8, 2023, the Federal Supreme Court in Brazil concluded the judgments of Items 881 and 885, which discussed the effects of res judicata. The Company is not a party to any litigation related to a tax not being collected due to a past decision considered unappealable, therefore, the Company has no material adjustment due to the decision.
| 1.2.5. | Treasury shares cancelled |
On February 28, 2023, the Board of Directors decided to cancel 37,145,969 common shares, with an average cost of R$40.84 (forty reais and eighty-four cents) per share, in the amount of R$1,517,224, that were being held in treasury, without changing the share capital and against the balances of available profit reserves. After the cancellation of shares, the share capital of R$9,269,281 is now divided into 1,324,117,615 common shares, all nominative, book-entry and without par value.
| 11 |
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Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 1.2.6. | Biomas |
On September 5, 2022, Biomas Serviços Ambientais, Restauração e Carbono Ltda. (“Biomas”) was initially established by Suzano S.A.
On November 12, 2022, Suzano in partnership with Itaú Unibanco S.A, Marfrig Global Foods S.A., Rabobank Foundational Investments B.B., Santander Corretora de Seguros, Investimentos e Serviços S.A. and Vale S.A., announced an alliance during an event held at the Climate Conference, COP27, in Egypt, for the creation of a company focused entirely to forest restoration, conservation and preservation activities in Brazil.
After the transformation of Biomas into a joint venture, Suzano, together with Marfrig, Rabobank and Vale, made a commitment to invest R$20,000 each partner, in accordance to the terms of the respective investment agreements on February 27, 2023, once the conditions precedent and closing acts established in said agreements were fulfilled. Itaú and Santander made their respective capital contributions on March 21, 2023.
For the period ended September 30, 2023, the amount of R$30,000 (R$5,000 for each partner) was fully paid with a remaining balance of R$90,000 (R$15,000 for each partner) to be paid.
With the completion of the above investments, each company now holds 16.66% of equity interest at Biomas.
| 2. | BASIS OF PREPARATION AND PRESENTATION OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION |
The Company’s unaudited condensed consolidated interim financial information, of the nine-month period ended September 30, 2023, are prepared in compliance with the international standard IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board (“IASB”) and disclose all the applicable significant information related to the financial information, which is consistent with the information used by Management in the performance of its duties.
The Company’s unaudited condensed consolidated interim financial information are expressed in thousands of Brazilian Reais (“R$”), as well as the amounts of other currencies, when applicable, were also expressed in thousands, unless otherwise stated.
The preparation of unaudited condensed consolidated interim financial information requires Management to make judgments, use estimates and adopt policies in the process of applying accounting practices that affect the disclosed amounts of revenues, expenses, assets and liabilities, including the disclosure of contingent liabilities assumed. However, the uncertainty inherent to these judgements, assumptions and estimates could result in material adjustments to the carrying amount of certain assets and liabilities in future periods.
The Company reviews its judgments, estimates and assumptions continually as disclosed in the annual financial statements for the year ended December 31, 2022 (Note 3.2.34). There were no changes in these judgments, estimates and assumptions compared to disclosed on December 31, 2022.
The unaudited condensed consolidated interim financial information prepared on historical cost basis, except for the following material items recognized:
| (i) | Derivative and non-derivative financial instruments measured at fair value; |
| (ii) | Share-based payments and employee benefits measured at fair value; and |
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Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| (iii) | Biological assets measured at fair value; |
The unaudited condensed consolidated interim financial information was prepared under the going concern assumption.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The unaudited condensed consolidated interim financial information was prepared based on the information of Suzano and its subsidiaries on the same base date, except for subsidiary MMC Brasil and associates Ensyn and Spinnova, as well as in accordance with consistent accounting policies and practices.
The unaudited condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended December 31, 2022, considering that its purpose is to provide an update on the activities, events and significant circumstances in relation to those disclosed in the consolidated financial statements. Therefore, unaudited condensed consolidated interim financial information focus on new activities, events and circumstances and do not duplicate the information previously disclosed, except when Management judges that the maintenance of the information is relevant.
The accounting policies have been consistently applied to all consolidated companies.
There were no changes on such policies and estimates calculation methodologies, except for the application of the new accounting policies as of January 1, 2023 and whose estimated impact was disclosed in the annual financial statements of December 31, 2022, as disclosed in the Note 3.1.
| 3.1. | New accounting policies and changes in accounting policies adopted |
The new standards and interpretations issued, until the issuance of the Company’s unaudited condensed consolidated interim financial information, are described below.
| 3.1.1. | Accounting policies adopted |
| 3.1.1.1. | Presentation of the financial statements – IAS 1 – Classification of liabilities as current and non-current (applicable for annual periods beginning on/or after January 1, 2023, with early adoption permitted) |
The amendments to IAS 1 affect only the presentation of liabilities as current or non-current in the balance sheet, and not the amount or the timing of the recognition of any asset, liability, income or expense, or the information disclosed about these items.
The amendments clarify that the classification of liabilities as current or non-current is based on the rights existing at the balance sheet date, specify that the classification is not affected by expectations about whether an entity will exercise its right to postpone the settlement of the liability, explain that the rights exist if restrictive clauses are complied with at the balance sheet date, and introduce the definition of 'settlement' to clarify that it refers to a transfer to a counterparty of an amount in cash, equity instruments, other assets or services.
The Company assessed the content of this pronouncement and did not identify any impacts.
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Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 3.1.1.2. | Amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements – Disclosure of Accounting Policies (applicable for annual periods beginning on/or after January 1, 2023, with early adoption permitted) |
The amendments change the requirements in IAS 1 with regard to the disclosure of accounting policies. The amendments replace all instances of the term ‘significant accounting policies’ with ‘material accounting policy information’. Accounting policy information is material if, considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence the decisions that the primary users of the financial statements make on the basis of those financial statements.
The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions, other events or conditions is immaterial, and need not be disclosed. Accounting policy information may be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, other events or conditions is itself material.
The Company assessed the content of this pronouncement and did not identify any impacts.
| 3.1.1.3. | Amendments to IAS 8 Definition of Accounting Estimates (applicable for annual periods beginning on/or after January 1, 2023) |
The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. The definition of a change in accounting estimates was deleted. However, the Board retained the concept of changes in accounting estimates in the Standard through the following clarifications:
| (i) | A change in accounting estimates that results from new information or new developments does not constitute the correction of an error |
| (ii) | The effects of a change in an input or a measurement technique used to develop an accounting estimate represent changes in accounting estimates if they do not result from the correction of prior period errors |
The Company assessed the content of this pronouncement and did not identify any impacts.
| 3.1.1.4. | Amendments to IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction (applicable for annual periods beginning on/or after January 1, 2023) |
The amendments introduce a further exception to the initial recognition exemption. Under the amendments, an entity may not apply the initial recognition exemption for transactions that give rise to equal taxable and deductible temporary differences.
Depending on the applicable tax law, equal taxable and deductible temporary differences may arise from the initial recognition of an asset and liability in a transaction that is not a business combination and affects neither the accounting nor the taxable profit. For example, this may arise upon the recognition of a lease liability and the corresponding right-of-use asset, applying IFRS 16 at the commencement date of a lease.
Following the amendments to IAS 12, an entity is required to recognise the related deferred tax asset and liability, with the recognition of any deferred tax asset being subject to the recoverability criteria in IAS 12.
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Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
The amendments apply to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, at the beginning of the earliest comparative period, an entity recognises:
| (i) | A deferred tax asset (to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilized) and a deferred tax liability for all deductible and taxable temporary differences associated with: |
| · | Right-of-use assets and lease liabilities; and |
| · | Decommissioning, restoration and similar liabilities and the corresponding amounts recognised as part of the cost of the related asset. |
| (ii) | The cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or another component of equity, as appropriate) at that date. |
The Company assessed the content of this pronouncement and did not identify any impacts.
| 4. | FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT |
| 4.1. | Financial risks management |
| 4.1.1. | Overview |
In the nine-month period ended September 30, 2023, there were no significant changes in the financial risk management policies and procedures compared to those disclosed in the annual financial statements for the year ended December 31, 2022 (Note 4).
The Company maintained its conservative approach and strong cash and marketable securities position, as well as its hedging policy.
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Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
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| 4.1.2. | Classification |
All transactions with financial instruments are recognized for accounting purposes and classified in the following categories:
| Note | September 30, 2023 | December 31, 2022 | ||||||||
| Assets | ||||||||||
| Amortized cost | ||||||||||
| Cash and cash equivalents | 5 | 5,526,463 | 9,505,951 | |||||||
| Trade accounts receivable | 7 | 6,650,210 | 9,607,012 | |||||||
| Dividends receivable | 11 | 7,334 | ||||||||
| Other assets (1) | 812,133 | 931,173 | ||||||||
| 12,988,806 | 20,051,470 | |||||||||
| Fair value through other comprehensive income | ||||||||||
| Investments - Celluforce | 14.1 | 23,912 | 24,917 | |||||||
| 23,912 | 24,917 | |||||||||
| Fair value through profit or loss | ||||||||||
| Derivative financial instruments | 4.5.1 | 4,386,450 | 4,873,749 | |||||||
| Marketable securities | 6 | 15,400,573 | 7,965,742 | |||||||
| 19,787,023 | 12,839,491 | |||||||||
| 32,799,741 | 32,915,878 | |||||||||
| Liabilities | ||||||||||
| Amortized cost | ||||||||||
| Trade accounts payable | 17 | 5,905,156 | 6,206,570 | |||||||
| Loans, financing and debentures | 18.1 | 78,551,038 | 74,574,591 | |||||||
| Lease liabilities | 19.2 | 6,389,093 | 6,182,530 | |||||||
| Liabilities for assets acquisitions and subsidiaries | 23 | 189,205 | 2,062,322 | |||||||
| Dividends payable | 2,682 | 5,094 | ||||||||
| Other liabilities (1) | 146,765 | 147,920 | ||||||||
| 91,183,939 | 89,179,027 | |||||||||
| Fair value through profit or loss | ||||||||||
| Derivative financial instruments | 4.5.1 | 2,709,991 | 4,846,795 | |||||||
| 2,709,991 | 4,846,795 | |||||||||
| 93,893,930 | 94,025,822 | |||||||||
| 61,094,189 | 61,109,944 | |||||||||
| 1) | Does not include items not classified as financial instruments. |
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Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
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| 4.1.3. | Fair value of loans and financing |
The estimated fair values of loans and financing are set forth below:
Yield used to methodology | September 30, 2023 | December 31, 2022 | ||||||||
| Quoted in the secondary market | ||||||||||
| In foreign currency | ||||||||||
| Bonds | Secondary Market | 37,778,994 | 40,309,832 | |||||||
| Estimated present value | ||||||||||
| In foreign currency | ||||||||||
| Export credits (“Prepayment”) | SOFR | 18,632,878 | 17,724,315 | |||||||
| Assets Financing | SOFR | 217,267 | 138,644 | |||||||
| IFC - International Finance Corporation | SOFR | 3,343,161 | ||||||||
| BNDES - Currency basket | DI 1 | 1,083 | 10,866 | |||||||
| In local currency | ||||||||||
| BNDES – TJLP | DI 1 | 223,382 | 292,487 | |||||||
| BNDES – TLP | DI 1 | 1,938,503 | 1,393,010 | |||||||
| BNDES – Fixed | DI 1 | 4,825 | 21,656 | |||||||
| BNDES – SELIC (“Special Settlement and Custody System”) | DI 1 | 650,296 | 575,129 | |||||||
| CRA (“Agribusiness Receivables Certificate”) | DI 1/IPCA | 728,446 | 1,835,336 | |||||||
| Debentures | DI 1 | 8,909,291 | 5,643,440 | |||||||
| NCE (“Export Credit Notes”) | DI 1 | 109,098 | 1,384,396 | |||||||
| NCR (“Rural Credit Notes”) | DI 1 | 2,163,521 | 294,089 | |||||||
| Export credits (“Prepayment”) | DI 1 | 766,409 | 1,320,415 | |||||||
| 75,467,154 | 70,943,615 | |||||||||
The book values of loans and financing are disclosed in Note 18.
Management considers that, for its other financial liabilities measured at amortized cost, their book values approximate their fair values, and therefore the fair value information is not being presented.
| 4.2. | Liquidity risk management |
The Company’s purpose is to maintain a strong cash and marketable securities position to meet its financial and operating commitments. The amount held in cash is intended to cover the expected outflows in the normal course of its operations, while the cash surplus is generally invested in highly liquid financial investments according to the Cash Management Policy.
The cash position is monitored by the Company’s Management, by means of management reports and participation in performance meetings with determined frequencies. During the nine-month period ended September 30, 2023, the variations in cash and marketable securities were as expected, and the cash generated from operations was mostly used for investments and debt service.
All derivative financial instruments were traded over the counter and do not require deposit guarantee margins.
The remaining contractual maturities of financial liabilities are presented as of the balance sheet date. The amounts as set forth below consist of undiscounted cash flow, and include interest payments and exchange rate variations, and therefore may not reconcile with the amounts disclosed in the balance sheet.
| 17 |
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
September 30, 2023 | ||||||||||||||||||||||||
| Book value | Undiscounted cash flow | Up to 1 year | 1 - 2 years | 2 - 5 years | More than 5 years | |||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Trade accounts payable | 5,905,156 | 5,905,156 | 5,905,156 | |||||||||||||||||||||
| Loans, financing and debentures | 78,551,038 | 109,541,333 | 8,786,397 | 13,485,360 | 32,987,532 | 54,282,044 | ||||||||||||||||||
| Lease liabilities | 6,389,093 | 11,222,745 | 1,163,069 | 2,031,294 | 1,805,878 | 6,222,504 | ||||||||||||||||||
| Liabilities for asset acquisitions and subsidiaries | 189,205 | 220,512 | 96,989 | 18,943 | 88,952 | 15,628 | ||||||||||||||||||
| Derivative financial instruments | 2,709,991 | 4,120,181 | 650,989 | 1,365,987 | 1,482,461 | 620,744 | ||||||||||||||||||
| Dividends payable | 2,682 | 2,682 | 2,682 | |||||||||||||||||||||
| Other liabilities | 146,765 | 146,765 | 56,688 | 90,077 | ||||||||||||||||||||
| 93,893,930 | 131,159,374 | 16,661,970 | 16,991,661 | 36,364,823 | 61,140,920 | |||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||||||
| Book value | Undiscounted cash flow | Up to 1 year | 1 - 2 years | 2 - 5 years | More than 5 years | |||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Trade accounts payable | 6,206,570 | 6,206,570 | 6,206,570 | |||||||||||||||||||||
| Loans, financing and debentures | 74,574,591 | 105,341,912 | 6,823,274 | 7,899,772 | 39,476,527 | 51,142,339 | ||||||||||||||||||
| Lease liabilities | 6,182,530 | 11,053,487 | 1,050,947 | 992,379 | 2,668,855 | 6,341,305 | ||||||||||||||||||
| Liabilities for asset acquisitions and subsidiaries | 2,062,322 | 2,203,302 | 1,986,633 | 99,331 | 57,421 | 59,917 | ||||||||||||||||||
| Derivative financial instruments | 4,846,795 | 6,515,262 | 728,070 | 1,341,108 | 4,299,970 | 146,114 | ||||||||||||||||||
| Dividends payable | 5,094 | 5,094 | 5,094 | |||||||||||||||||||||
| Other liabilities | 147,920 | 147,920 | 61,500 | 86,420 | ||||||||||||||||||||
| 94,025,822 | 131,473,547 | 16,862,088 | 10,419,010 | 46,502,773 | 57,689,675 | |||||||||||||||||||
| 4.3. | Credit risk management |
In the nine-month period ended September 30, 2023, there were no significant changes in the credit risk management policies compared to those disclosed in the annual financial statements for the year ended of December 31, 2022 (Note 4).
| 4.4. | Market risk management |
In the nine-month period ended September 30, 2023, there were no significant changes in the market risk management policies and procedures compared to those disclosed in the annual financial statements for the year ended December 31, 2022 (Note 4).
| 4.4.1. | Exchange rate risk management |
As disclosed in the financial statements for the year ended December 31, 2022 (Note 4), the Company enters into U.S.Dollar selling transactions in the futures markets, including strategies involving options, to ensure attractive levels of operating margins for a portion of revenue. Such transactions are limited to a percentage of the net surplus foreign currency over a 24-months’ time horizon and therefore, are matched to the availability of currency for sale in the short term. The Company's Board of Directors approved the contracting of extraordinary hedge, in addition to the strategy mentioned above, for investments in the Cerrado Project, with a term of up to 36 months as of November 2021, in an amount of up to US$1,000,000. On July 27, 2022, the Board of Directors approved the expansion of the program, increasing the maximum amount (notional) to US$1,500,000, maintaining the previously established deadline. In order to provide transparency on the hedge program for the Cerrado Project, since December 31, 2021 the Company has started to prominently disclose the respective contracted operations.
| 18 |
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
The assets and liabilities that are exposed to foreign currency, substantially in U.S. Dollars, are set forth below:
September 30, | December 31, | |||||||
| Assets | ||||||||
| Cash and cash equivalents | 4,655,025 | 8,039,218 | ||||||
| Marketable securities | 7,147,218 | 4,510,652 | ||||||
| Trade accounts receivable | 5,001,881 | 7,612,768 | ||||||
| Derivative financial instruments | 2,775,991 | 3,393,785 | ||||||
| 19,580,115 | 23,556,423 | |||||||
| Liabilities | ||||||||
| Trade accounts payable | (1,363,131 | ) | (2,030,806 | ) | ||||
| Loans and financing | (62,792,091 | ) | (61,216,140 | ) | ||||
| Liabilities for asset acquisitions and subsidiaries | (130,275 | ) | (2,053,259 | ) | ||||
| Derivative financial instruments | (2,076,699 | ) | (4,698,323 | ) | ||||
| (66,362,196 | ) | (69,998,528 | ) | |||||
| (46,782,081 | ) | (46,442,105 | ) | |||||
| 4.4.1.1. | Sensitivity analysis – foreign exchange rate exposure – except for derivative financial instruments |
For market risk analysis, the Company uses scenarios to evaluate both its asset and liability positions in foreign currency, and the possible effects on its results. The probable scenario represents the amounts recognized, as they reflect the conversion into Brazilian Reais on the balance sheet date (R$ to U.S.$ = R$5.0076).
This analysis assumes that all other variables, particularly interest rates, remain constant. The other scenarios considered the depreciation of the Brazilian Real against the U.S. Dollar at the rates of 25% and 50% before taxes.
The following table set forth the potential impacts at their absolute amounts:
September 30, | ||||||||||||
| Effect on profit or loss | ||||||||||||
Probable | Possible | Remote | ||||||||||
| Cash and cash equivalents | 4,655,025 | 1,163,756 | 2,327,513 | |||||||||
| Marketable securities | 7,147,218 | 1,786,805 | 3,573,609 | |||||||||
| Trade accounts receivable | 5,001,881 | 1,250,470 | 2,500,941 | |||||||||
| Trade accounts payable | (1,363,131 | ) | (340,783 | ) | (681,566 | ) | ||||||
| Loans and financing | (62,792,091 | ) | (15,698,023 | ) | (31,396,046 | ) | ||||||
| Liabilities for asset acquisitions and subsidiaries | (130,275 | ) | (32,569 | ) | (65,138 | ) | ||||||
| 4.4.1.2. | Sensitivity analysis – foreign exchange rate exposure – derivative financial instruments |
The Company has sales operations in US$ in the futures markets, including strategies using options, to ensure attractive levels of operating margins for a portion of its revenue. These operations are limited to a percentage of the total exposure to US$ over a 24-month horizon, or to investments in the Cerrado Project, according to the extraordinary hedge described above, and are therefore pegged to the availability of ready-to-sell foreign exchange in the short term.
In addition to the transaction described above, the Company also taken out derivative instruments linked to the US$ and subject to exchange fluctuations, seeking to adjust the debt's currency indexation to the cash generation currency, as provided for in its financial policies.
19
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
For the calculation of the mark-to-market (“MtM”) price, the exchange rate of the last business day of the period is used. These market movements caused a positive impact on the mark-to-market position entered into by the Company.
This analysis below assumes that all other variables, particularly the interest rates, remain constant. The other scenarios considered the depreciation of the Brazilian Real against the US$ by 25% and 50%, before taxes, based on the base scenario on September 30, 2023.
The following table set out the possible impacts assuming these scenarios:
September 30, | ||||||||||||
| Effect on profit or loss | ||||||||||||
Probable | Possible | Remote | ||||||||||
| Dollar/Real | ||||||||||||
| Derivative financial instruments | ||||||||||||
| Derivative options | 1,972,471 | (3,353,733 | ) | (7,722,371 | ) | |||||||
| Derivative swaps | (616,822 | ) | (1,314,397 | ) | (2,619,400 | ) | ||||||
| Derivative Non-Deliverable Forward (‘NDF’) Contracts | 22,002 | (53,398 | ) | (106,798 | ) | |||||||
| Embedded derivatives | 142,890 | (88,549 | ) | (177,099 | ) | |||||||
| NDF parity derivatives (1) | 62,556 | (7,442 | ) | (21,441 | ) | |||||||
| Commodity Derivatives | 93,362 | (23,348 | ) | (46,690 | ) | |||||||
| Dollar/Euro | ||||||||||||
| Derivative financial instruments | ||||||||||||
| NDF parity derivatives (1) | 62,556 | (455,892 | ) | (911,804 | ) | |||||||
| (1) | Long positions at US$/EUR parity in order to protect the Capex cash flow of the Cerrado Project against the appreciation of the Euro. |
| 4.4.2. | Interest rate risk management |
Fluctuations in interest rates could increase or reduce the costs of new loans and existing contracted operations.
The Company is constantly looking for alternatives for the use of financial instruments in order to avoid negative impacts on its cash flow due to fluctuations in interest rates in Brazil or abroad.
On July 1, 2023, loan contracts (with a volume of R$15,566,016) and derivatives (with a volume of R$15,150,974) began to be indexed by Secured Overnight Financing Rate (“SOFR”) (and no longer by London Interbank Offered Rate (“LIBOR”)), adopted as the new reference interest rate by capital market. The change in the interest rate did not have a substantial impact on the balances presented in the loan and financing and derivative instrument categories.
| 4.4.2.1. | Sensitivity analysis – exposure to interest rates – except for derivative financial instruments |
For its market risk analysis, the Company uses scenarios to evaluate the sensitivity of changes in operations impacted by the following rates: Interbank Deposit Rate (“CDI”), Long Term Interest Rate (“TJLP”), Special System for Settlement and Custody (“SELIC”) and SOFR, which could impact the results. The probable scenario represents the amounts already booked, as they reflect Management’s best estimates.
This analysis assumes that all other variables, particularly exchange rates, will remain constant. The other scenarios considered a depreciation of 25% and 50% in market interest rates.
20
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
The following table set forth the possible impacts assuming these scenarios in absolute amounts:
September 30, | ||||||||||||
| Effect on profit or loss | ||||||||||||
| Probable | Possible | Remote | ||||||||||
| CDI/SELIC | ||||||||||||
| Cash and cash equivalents | 797,474 | 25,220 | 50,440 | |||||||||
| Marketable securities | 8,253,355 | 261,012 | 522,025 | |||||||||
| Loans and financing | 8,673,723 | 274,306 | 548,613 | |||||||||
| TJLP | ||||||||||||
| Loans and financing | 266,502 | 4,664 | 9,328 | |||||||||
| SOFR | ||||||||||||
| Loans and financing | 20,255,567 | 273,222 | 546,445 | |||||||||
| 4.4.2.2. | Sensitivity analysis – exposure to interest rates – derivative financial instruments |
This analysis assumes that all other variables remain constant. The other scenarios considered a depreciation of 25% and 50% in market interest rates.
The following table sets out the possible impacts of these assumed scenarios:
September 30, | ||||||||||||
| Effect on profit or loss | ||||||||||||
| Probable | Probable 25% | Remote 50% | ||||||||||
| CDI | ||||||||||||
| Derivative financial instruments | ||||||||||||
| Liabilities | ||||||||||||
| Derivative options | 1,972,471 | (335,005 | ) | (645,456 | ) | |||||||
| Derivative swaps | (616,822 | ) | (3,565 | ) | (10,182 | ) | ||||||
| SOFR | ||||||||||||
| Derivative financial instruments | ||||||||||||
| Liabilities | ||||||||||||
| Derivative swaps | (616,822 | ) | 138,887 | 277,803 | ||||||||
| 4.4.2.3. | Sensitivity analysis to changes in the consumer price indices of the US economy |
For the measurement of the probable scenario, the United States Consumer Price Index (“US-CPI”) was considered on September 30, 2023. The probable scenario was extrapolated considering a depreciation of 25% and 50% in the US-CPI to define the possible and remote scenarios, respectively.
The following table sets out the possible impacts, assuming these scenarios in absolute amounts:
September 30, | ||||||||||||
| Effect on profit or loss | ||||||||||||
Probable | Possible (25%) | Remote (50%) | ||||||||||
| Embedded derivative in a commitment to purchase standing wood, originating from a forest partnership agreement | 142,890 | (33,038 | ) | (68,224 | ) | |||||||
21
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| 4.4.3. | Commodity price risk management |
The Company is exposed to commodity prices, mainly in the selling price of pulp in the international market. The dynamics of rising and falling production capacities in the global market and macroeconomic conditions may impact the Company´s operating results.
Through a specialized team, the Company monitors hardwood pulp prices and analyses future trends, adjusting the forecasts aimed at assisting with preventive measures to calculate the different scenarios. There is no sufficiently liquid financial market to mitigate the risk of a material portion of the Company’s operations. Hardwood pulp price protection instruments available on the market have low liquidity and low volume, and high levels of distortion in price formation.
The Company is also exposed to international oil prices, reflected in logistical costs for selling in the export market, and indirectly in the costs of other supply, logistics and service contracts. In such cases, the Company evaluates whether to contract derivative financial instruments to mitigate the risk of price variations in its results.
| 4.5. | Derivative financial instruments |
The Company determines the fair value of derivative contracts, which differ from the amounts realized in the event of early settlement due to bank spreads and market factors at the time of quotation. The amounts presented by the Company are based on an estimate using market factors and use data provided by third parties, measured internally and compared to calculations performed by external consultants and by counterparties.
Details of derivative financial instruments and their respective calculation methodologies are disclosed in the annual financial statements for the year ended December 31, 2022 (Note 4).
| 4.5.1. | Outstanding derivatives by type of contract, including embedded derivatives |
The positions of outstanding derivatives are set forth below:
| Notional value, net in U.S.$ | Fair value in R$ | |||||||||||||||
September 30, | December 31, 2022 | September 30, | December 31, 2022 | |||||||||||||
| Instruments as part of protection strategy | ||||||||||||||||
| Operational hedges | ||||||||||||||||
| Zero Cost Collar | 4,516,950 | 6,866,800 | 1,972,471 | 1,596,089 | ||||||||||||
| NDF (R$ x US$) | 43,500 | 248,100 | 22,002 | (2,474 | ) | |||||||||||
| NDF (€ x US$) | 358,998 | 544,702 | 62,556 | 161,055 | ||||||||||||
| Debt hedges | ||||||||||||||||
| Swap SOFR to Fixed (US$) | 2,929,252 | 3,200,179 | 921,438 | 1,052,546 | ||||||||||||
| Swap IPCA to CDI (notional in Brazilian Reais) | 4,306,552 | 1,741,787 | (48,307 | ) | 278,945 | |||||||||||
| Swap IPCA to Fixed (US$) | 121,003 | (29,910 | ) | |||||||||||||
| Swap CDI x Fixed (US$) | 1,015,000 | 1,863,534 | (1,256,567 | ) | (2,566,110 | ) | ||||||||||
| Pre-fixed Swap to US$ (US$) | 200,000 | 350,000 | (244,060 | ) | (503,605 | ) | ||||||||||
| Swap SOFR to SOFR (US$) | 150,961 | 10,674 | ||||||||||||||
| Commodity Hedge | ||||||||||||||||
| Swap US-CPI (US$) (1) | 129,271 | 124,960 | 142,890 | 40,418 | ||||||||||||
| Swap VLSFO/Brent | 90,126 | 93,362 | ||||||||||||||
| 1,676,459 | 26,954 | |||||||||||||||
| Current assets | 2,849,012 | 3,048,493 | ||||||||||||||
| Non-current assets | 1,537,438 | 1,825,256 | ||||||||||||||
| Current liabilities | (600,355 | ) | (667,681 | ) | ||||||||||||
| Non-current liabilities | (2,109,636 | ) | (4,179,114 | ) | ||||||||||||
| 1,676,459 | 26,954 | |||||||||||||||
| 1) | The embedded derivative refers to a swap contract for the sale of price variations in United States Dollars and US-CPI within the term of a forest partnership with a standing wood supply contract. |
22
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
The current contracts and the respective protected risks are set forth below:
| (i) | Swap CDI x Fixed US$: positions in conventional swaps exchanging the variation of the Interbank Deposit rate (“DI”) for a fixed rate in United States Dollars (“US$”). The objective is to change the debt indexed in Brazilian Reais to US$, in compliance with the Company's natural exposure to US$ receivables. |
| (ii) | Swap IPCA x CDI (notional in Brazilian Reais): positions in conventional swaps exchanging the variation of the Amplified Consumer Price Index (“IPCA”) for the DI rate. The objective is to change the debt indexed in reais, in compliance with the Company's cash position in Brazilian Reais, which is also indexed to DI. |
| (iii) | Swap IPCA x Fixed US$: positions in conventional swaps exchanging the variations of the IPCA for a fixed rate in US$. The objective is to change the debt indexed in Brazilian Reais to US$, in compliance with the Company's natural exposure to US$ receivables. |
| (iv) | Swap SOFR x Fixed US$: positions in conventional swaps exchanging a post-fixed rate (SOFR) for a fixed rate in US$. The objective is to protect the cash flow against changes in the US interest rate. |
| (v) | Pre-Fixed Swap R$ x Fixed US$: positions in conventional swaps of a fixed rate in Reais for a fixed rate in US$. The objective is to change the exposure of debts in Brazilian Reais to US$, in compliance with the Company's natural exposure to US$ receivables. |
| (vi) | SOFR x SOFR Swap: swap position exchanging a fixed rate added to SOFR for another fixed rate added to SOFR. The objective is to generate a fee discount for Prepayment with the banking institution, allowing for reversal mechanisms. |
| (vii) | Zero Cost Collar: positions in an instrument that consists of the simultaneous combination of a purchase of put options and the sale of call options in US$, with the same principal amount and maturity, with the objective of protecting the cash flow of exports. Under this strategy, an interval is established where there is no deposit or receipt of financial margin at the option maturity. The objective is to protect the cash flow of exports against the depreciation of the Brazilian Real. |
| (viii) | Non-Deliverable Forward contracts (“NDF”): short positions in US$ futures contracts with the objective of protecting the cash flow from exports against the depreciation of the Brazilian Real. |
| (ix) | Swap US-CPI: The embedded derivative refers to the swap contracts for selling price variations in US$ and the US-CPI in forest partnership with a standing wood supply contract. |
| (x) | Non-Deliverable Forward contracts: EUR and US$: call positions at EUR/US$ parity to protect the Capex cash flow of the Cerrado project against the appreciation of the Euro. |
| (xi) | Swap Very Low Sulphur Fuel Oil / Brent (“VLSFO”): Long positions in oil, aimed at hedging logistical costs related to maritime freight contracts against the increase in oil prices. |
The variation in the fair values of derivatives on September 30, 2023 compared to the fair values measured on December 31, 2022 are explained substantially by the appreciation of the Brazilian Real against the US Dollar and by settlements during the period. There were also impacts caused by the variations in the Pre, Foreign Exchange Coupon and SOFR curves in the operations.
23
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
It is important to highlight that the outstanding agreements on September 30, 2023 are over-the-counter market operations, without any type of collateral margin or forced early settlement clause due to variations from market marking.
| 4.5.2. | Fair value by maturity schedule |
September 30, | December 31, | |||||||
| 2023 | 1,096,345 | 2,380,812 | ||||||
| 2024 | 1,554,679 | 297,156 | ||||||
| 2025 | (363,924 | ) | (1,225,193 | ) | ||||
| 2026 onwards | (610,641 | ) | (1,425,821 | ) | ||||
| 1,676,459 | 26,954 | |||||||
| 4.5.3. | Outstanding assets and liabilities derivatives positions |
The outstanding derivatives positions are set forth below:
| Notional value | Fair value | ||||||||||||||||||
| Currency | September 30, | December 31, 2022 | September 30, | December 31, 2022 | |||||||||||||||
| Debt hedges | |||||||||||||||||||
| Assets | |||||||||||||||||||
| Swap CDI to Fixed (US$) | R$ | 3,644,441 | 7,081,545 | 294,841 | 617,835 | ||||||||||||||
| Swap Pre-Fixed to US$ | R$ | 738,800 | 1,317,226 | 45,329 | |||||||||||||||
| Swap SOFR to Fixed (US$) | US$ | 2,929,252 | 3,200,000 | 1,284,437 | 1,052,546 | ||||||||||||||
| Swap IPCA to CDI | IPCA | 4,324,405 | 2,041,327 | 221,985 | 427,417 | ||||||||||||||
| Swap IPCA to US$ | IPCA | 610,960 | |||||||||||||||||
| Swap SOFR to SOFR (US$) | US$ | 150,961 | 10,674 | ||||||||||||||||
| 1,811,937 | 2,143,127 | ||||||||||||||||||
| Liabilities | |||||||||||||||||||
| Swap CDI to Fixed (US$) | US$ | 1,015,000 | 1,863,534 | (1,551,408 | ) | (3,183,945 | ) | ||||||||||||
| Swap Pre-Fixed to US$ | US$ | 200,000 | 350,000 | (244,060 | ) | (548,934 | ) | ||||||||||||
| Swap SOFR to Fixed (US$) | US$ | 2,929,252 | 3,200,000 | (362,999 | ) | ||||||||||||||
| Swap IPCA to CDI | R$ | 4,306,552 | 1,741,787 | (270,292 | ) | (148,472 | ) | ||||||||||||
| Swap IPCA to US$ | US$ | 121,003 | (29,910 | ) | |||||||||||||||
| Swap SOFR to SOFR (US$) | US$ | 150,961 | |||||||||||||||||
| (2,428,759 | ) | (3,911,261 | ) | ||||||||||||||||
| (616,822 | ) | (1,768,134 | ) | ||||||||||||||||
| Operational hedge | |||||||||||||||||||
| Zero Cost Collar (US$ x R$) | US$ | 4,516,950 | 6,866,800 | 1,972,471 | 1,596,089 | ||||||||||||||
| NDF (R$ x US$) | US$ | 43,500 | 248,100 | 22,002 | (2,474 | ) | |||||||||||||
| NDF (€ x US$) | US$ | 358,998 | 544,702 | 62,556 | 161,055 | ||||||||||||||
| 2,057,029 | 1,754,670 | ||||||||||||||||||
| Commodity hedge | |||||||||||||||||||
| Swap US-CPI (standing wood) (1) | US$ | 129,271 | 124,960 | 142,890 | 40,418 | ||||||||||||||
| Swap VLSFO/Brent | US$ | 90,126 | 93,362 | ||||||||||||||||
| 236,252 | 40,418 | ||||||||||||||||||
| 1,676,459 | 26,954 | ||||||||||||||||||
| 1) | The embedded derivative refers to the swap contracts for selling price variations in US$ and the US-CPI in forest partnership with a standing wood supply contract. |
24
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 4.5.4. | Fair value settled amounts |
The settled derivatives positions are set forth below:
| September 30, 2023 | December 31, 2022 | |||||||
| Operational hedge | ||||||||
| Zero Cost Collar (R$ x US$) | 2,065,552 | 718,618 | ||||||
| NDF (R$ x US$) | 137,434 | 8,301 | ||||||
| NDF (€ x US$) | 67,687 | 7,113 | ||||||
| 2,270,673 | 734,032 | |||||||
| Commodity hedge | 31,977 | |||||||
| Swap VLSFO/other | 31,977 | |||||||
| Debt hedge | ||||||||
| Swap CDI to Fixed (US$) | (440,936 | ) | (261,570 | ) | ||||
| Swap IPCA to CDI (Brazilian Reais) | 272,904 | (5,180 | ) | |||||
| Swap IPCA to Fixed (US$) | (3,945 | ) | 171 | |||||
| Swap Pre-Fixed to US$ | (104,827 | ) | 54,128 | |||||
| Swap SOFR to Fixed (US$) | 359,268 | (239,356 | ) | |||||
| 82,464 | (451,807 | ) | ||||||
| 2,385,114 | 282,225 | |||||||
| 4.6. | Fair value hierarchy |
Financial instruments are measured at fair value, which considers the fair value as the price that would be received from selling an asset or paid to transfer a liability in an unforced transaction between market participants at the measurement date.
For the nine-month period ended September 30, 2023, there were no changes between the 3 (three) levels of hierarchy and no transfers between levels 2 and 3.
| September 30, 2023 | ||||||||||||
| Level 2 | Level 3 | Total | ||||||||||
| Assets | ||||||||||||
| At fair value through profit or loss | ||||||||||||
| Derivative financial instruments | 4,386,450 | 4,386,450 | ||||||||||
| Marketable securities | 15,400,573 | 15,400,573 | ||||||||||
| 19,787,023 | 19,787,023 | |||||||||||
| At fair value through other comprehensive income | ||||||||||||
| Other investments - CelluForce | 23,912 | 23,912 | ||||||||||
| 23,912 | 23,912 | |||||||||||
| Biological assets | 17,383,360 | 17,383,360 | ||||||||||
| 17,383,360 | 17,383,360 | |||||||||||
| Total assets | 19,787,023 | 17,407,272 | 37,194,295 | |||||||||
| Liabilities | ||||||||||||
| At fair value through profit or loss | ||||||||||||
| Derivative financial instruments | 2,709,991 | 2,709,991 | ||||||||||
| 2,709,991 | 2,709,991 | |||||||||||
| Total liabilities | 2,709,991 | 2,709,991 | ||||||||||
25
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| December 31, 2022 | ||||||||||||
| Level 2 | Level 3 | Total | ||||||||||
| Assets | ||||||||||||
| At fair value through profit or loss | ||||||||||||
| Derivative financial instruments | 4,873,749 | 4,873,749 | ||||||||||
| Marketable securities | 7,965,742 | 7,965,742 | ||||||||||
| 12,839,491 | 12,839,491 | |||||||||||
| At fair value through other comprehensive income | ||||||||||||
| Other investments - CelluForce | 24,917 | 24,917 | ||||||||||
| 24,917 | 24,917 | |||||||||||
| Biological assets | 14,632,186 | 14,632,186 | ||||||||||
| 14,632,186 | 14,632,186 | |||||||||||
| Total assets | 12,839,491 | 14,657,103 | 27,496,594 | |||||||||
| Liabilities | ||||||||||||
| At fair value through profit or loss | ||||||||||||
| Derivative financial instruments | 4,846,795 | 4,846,795 | ||||||||||
| 4,846,795 | 4,846,795 | |||||||||||
| Total liabilities | 4,846,795 | 4,846,795 | ||||||||||
| 4.7. | Climate change |
In the annual financial statements for the year ended December 31, 2022, the risks and opportunities information linked to climate change and the sustainability strategy were disclosed, which did not change significant during the nine-month period ended September 30, 2023, except for the items presented in Note 4.7.1.
| 4.7.1. | Opportunities linked to climate change and the sustainability strategy |
| 4.7.1.1 | Biomas |
As disclosed in Note 1.2.6, Suzano and five other global companies created Biomas with objective of restoring, conserving and preserving native forests in Brazil.
The initiative aims to restore and protect, over a period of 20 years, native forest in some of Brazil´s most valuable ecosystems, such as the Amazon, Atlantic Forest and Cerrado biomes – The area is equivalent to the territory of Switzerland or the state of Rio de Janeiro, in Brazil.
The initiative aims to promote a sustainable business model from a financial perspective, enabling each restoration, conservation, and preservation projects to be viable through the commercialization of carbon credits, as removals and avoided emissions, reducing tons of CO2e from the atmosphere.
The first stage will involve the identification and prospecting of areas, promoting nurseries for the large-scale production of native trees, engaging local communities in Biomas activities, discussing the application of the project in public areas, partnering with carbon certification platforms and implementing pilot projects.
26
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 4.7.1.2 | Generation of carbon credits |
The Company has ongoing carbon credit projects certifications, including:
| · | Horizonte de Carbono Project, which aims to restore degraded areas through the reforestation of native and eucalyptus trees. On March 30, 2023, the certifier Verra completed the validation and verification of 1.9Mt CO2e of the Horizonte Project (VCS ID 3350), of which 10% will be allocated to the Verra reserve and 1.7Mt CO2e is eligible for the issuance of credits. The Company has not yet issued such credits. |
The carbon credits are registered by Verra, an accredited company that holds a global platform, which is also responsible for the custody of the credits. This company has developed the Verified Carbon Standard (VCS) program, currently regarded as the global reference standard, in the best understanding of the company.
| 4.7.1.3 | Production of wood-based textile fiber |
In May 2023, Woodspin, located in Finland, inaugurated the first factory producing sustainable, recyclable and fully biodegradable textile fiber from responsibly grown wood, the result of the joint venture between Spinnova and Suzano. This new type of “green fabric” has the potential to replace less sustainable materials used in many products. This unit will be used for market development and technology improvement.
For the construction and operation of textile fiber projects, Woodspin uses Suzano's microfibrillated cellulose (MFC) as raw material.
| 4.8. | Capital management |
The main objective is to strengthen the Company’s capital structure, aiming to maintain an appropriate level of financial leverage while mitigating risks that could affect the availability of capital for business development.
The Company continuously monitors significant indicators, such as consolidated financial leverage, which is the ratio of total net debt to adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”).
| 5. | CASH AND CASH EQUIVALENTS |
| Average yield p.a. % | September 30, 2023 | December 31, 2022 | ||||||||||
| Cash and banks (1) | 5.60 | 3,714,314 | 8,064,193 | |||||||||
| Cash equivalents | ||||||||||||
| Local currency | ||||||||||||
| Fixed-term deposits (compromised) | 102.59 of CDI | 797,474 | 1,441,758 | |||||||||
| Foreign currency | ||||||||||||
| Fixed-term deposits (2) | 6.27 | 1,014,675 | ||||||||||
| 5,526,463 | 9,505,951 | |||||||||||
| 1) | Refers mainly to investments in foreign currency under the Sweep Account modality, which is a remunerated account the balance of which is invested and made available automatically each day. |
| 2) | Refers to Time Deposit applications, with maturity up to 90 days, which is a remunerated bank deposit with a specific maturity period and is subject to an insignificant risk of changes in value. |
27
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 6. | MARKETABLE SECURITIES |
| Average yield p.a. % | September 30, 2023 | December 31, 2022 | ||||||||||
| In local currency | ||||||||||||
| Private funds | 110.40 of CDI | 1,177,982 | 1,208,975 | |||||||||
| Private Securities (“CDBs”) | 102.48 of CDI | 6,622,072 | 1,827,012 | |||||||||
| CDBs - Escrow Account (1) | 101.89 of CDI | 453,301 | 419,103 | |||||||||
| 8,253,355 | 3,455,090 | |||||||||||
| Foreign currency | ||||||||||||
| Time deposits (2) | 6.74 | 6,912,009 | 4,386,589 | |||||||||
| Other | 235,209 | 124,063 | ||||||||||
| 7,147,218 | 4,510,652 | |||||||||||
| 15,400,573 | 7,965,742 | |||||||||||
| Current | 14,947,272 | 7,546,639 | ||||||||||
| Non-Current | 453,301 | 419,103 | ||||||||||
| 1) | Includes escrow accounts, which will be released only after obtaining the applicable governmental approvals, and pending compliance by the Company with the conditions precedent in transactions involving the sale of rural properties. |
| 2) | Refers to Time Deposit investments, with maturities over 90 days, which are remunerated bank deposits with specific maturity periods. |
| 7. | TRADE ACCOUNTS RECEIVABLE |
| 7.1. | Breakdown of balances |
| September 30, 2023 | December 31, 2022 | |||||||
| Domestic customers | ||||||||
| Third parties | 1,636,465 | 1,915,745 | ||||||
| Related parties (Note 11) (1) | 50,934 | 99,608 | ||||||
| Foreign customers | ||||||||
| Third parties | 5,001,881 | 7,612,768 | ||||||
| (-) Expected credit losses | (39,070 | ) | (21,109 | ) | ||||
| 6,650,210 | 9,607,012 | |||||||
| 1) | The balance refers to transactions with Ibema Companhia Brasileira de Papel. |
The Company carries out factoring transactions for certain customer receivables where transfers the control and all risks and rewards related to these receivables to the counterparty, so these receivables are derecognized from accounts receivable in the balance sheet. This transaction refers to an additional cash generation opportunity and is therefore classified as a financial asset measured at amortized cost. The impact of these factoring transactions on the accounts receivable as of September 30, 2023, was R$3,536,252 (R$6,889,492 as of December 31, 2022).
| 7.2. | Breakdown of trade accounts receivable by maturity |
| September 30, 2023 | December 31, 2022 | |||||||
| Current | 5,872,223 | 8,652,376 | ||||||
| Overdue | ||||||||
| Up to 30 days | 501,689 | 777,150 | ||||||
| From 31 to 60 days | 79,675 | 74,253 | ||||||
| From 61 to 90 days | 54,796 | 54,784 | ||||||
| From 91 to 120 days | 54,476 | 20,975 | ||||||
| From 121 to 180 days | 15,842 | 18,945 | ||||||
| From 181 days | 71,509 | 8,529 | ||||||
| 6,650,210 | 9,607,012 | |||||||
28
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 7.3. | Roll-forward of expected credit losses |
| September 30, 2023 | December 31, 2022 | |||||||
| Opening balance | (21,109 | ) | (34,763 | ) | ||||
| Additions | (23,381 | ) | (5,228 | ) | ||||
| Reversals | 267 | 3,576 | ||||||
| Write-offs | 5,057 | 12,355 | ||||||
| Exchange rate variations | 96 | 2,951 | ||||||
| Closing balance | (39,070 | ) | (21,109 | ) | ||||
The Company maintains guarantees for overdue receivables as part of its commercial operations, through credit insurance policies, letters of credit and other guarantees. These guarantees avoid the need to recognize expected credit losses, in accordance with the Company's credit policy.
| 7.4. | Main customers |
The Company has 1 (one) customer responsible for 11.97% of the net sales of pulp segment on September 30, 2023 (10.67% on December 31, 2022) and no main customer responsible for more than 10% of the net sales of paper segment on September 30, 2023 and December 31, 2022.
| 8. | INVENTORIES |
| September 30, 2023 | December 31, 2022 | |||||||
| Finished goods | ||||||||
| Pulp | ||||||||
| Domestic (Brazil) | 558,527 | 616,557 | ||||||
| Foreign | 1,603,245 | 1,440,207 | ||||||
| Paper | ||||||||
| Domestic (Brazil) | 633,208 | 359,322 | ||||||
| Foreign | 164,605 | 201,868 | ||||||
| Work in process | 120,806 | 93,964 | ||||||
| Raw materials | ||||||||
| Wood | 1,679,857 | 1,492,661 | ||||||
| Operating supplies and packaging | 791,602 | 732,140 | ||||||
| Spare parts and other | 1,018,515 | 897,531 | ||||||
| (-) Expected credit losses | (92,132 | ) | (105,989 | ) | ||||
| 6,478,233 | 5,728,261 | |||||||
| 8.1. | Roll-forward of estimated losses |
| September 30, 2023 | December 31, 2022 | |||||||
| Opening balance | (105,989 | ) | (91,258 | ) | ||||
| Additions | (41,131 | ) | (89,552 | ) | ||||
| Reversals | 26,827 | 33,492 | ||||||
| Write-offs | 28,161 | 41,329 | ||||||
| Closing balance | (92,132 | ) | (105,989 | ) | ||||
On September 30, 2023, and December 31, 2022, there were no inventory items pledged as collateral.
29
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 9. | RECOVERABLE TAXES |
| September 30, 2023 | December 31, 2022 | |||||||
| IRPJ/CSLL – prepayments and withheld taxes | 397,660 | 179,812 | ||||||
| PIS/COFINS – on acquisitions of property, plant and equipment (1) | 93,152 | 89,334 | ||||||
| PIS/COFINS – operations | 699,907 | 523,970 | ||||||
| PIS/COFINS – exclusions from ICMS (2) | 458,319 | 570,945 | ||||||
| ICMS – on acquisitions of property, plant and equipment (3) | 421,401 | 167,286 | ||||||
| ICMS – operations (4) | 1,510,132 | 1,423,375 | ||||||
| Reintegra program (5) | 64,179 | 65,971 | ||||||
| Other taxes and contributions | 47,988 | 39,057 | ||||||
| Provision for loss on ICMS credits (6) | (1,365,985 | ) | (1,103,807 | ) | ||||
| 2,326,753 | 1,955,943 | |||||||
| Current | 933,616 | 549,580 | ||||||
| Non-current | 1,393,137 | 1,406,363 | ||||||
| 1) | Social Integration Program (“PIS”) and Social Security Funding Contribution (“COFINS”): Credits whose realization is based on the years of depreciation of the corresponding asset. |
| 2) | The Company and its subsidiaries filed lawsuits over the years seeking the exclusion of ICMS from the PIS and COFINS contribution tax basis, in relation to certain transactions during various periods from March 1992, details on the initial recognition were disclosed in the financial statements of December 31, 2021. |
| 3) | Tax on Sales and Services (“ICMS”): Credits from the acquisition of property, plant and equipment are recovered on a straight-line basis over a four-year period, from the acquisition date, in accordance with the relevant regulation, the ICMS Control on Property, Plant and Equipment (“CIAP”). |
| 4) | ICMS credits accrued due to the volume of exports and credit generated from product import transactions: Credits are concentrated in the States of Espírito Santo, Maranhão, Mato Grosso do Sul e São Paulo, where the Company realizes the credits through the sale of credits to third parties, after approval from the State Ministry of Finance of each State. Credits are also being realized through the consumption of consumer goods (tissue) transactions in the domestic market. |
| 5) | Special Regime of Tax Refunds for Export Companies ("Reintegra"): Reintegra is a program that aims to refund the residual costs of taxes paid throughout the export chain to taxpayers, to make them more competitive in foreign markets. |
| 6) | Related to provisions for ICMS credit balances that are not probable to be recovered. |
| 9.1. | Roll-forward of provision for loss |
| ICMS | ||||||||
| September 30, 2023 | December 31, 2022 | |||||||
| Opening balance | (1,103,807 | ) | (1,064,268 | ) | ||||
| Addition (1) | (287,000 | ) | (221,903 | ) | ||||
| Write-off | 18,464 | |||||||
| Reversal | 24,822 | 163,900 | ||||||
| Closing balance | (1,365,985 | ) | (1,103,807 | ) | ||||
| 1) | Refers, substantially, to the accumulated ICMS credits of the state of Mato Grosso do Sul, arising from the construction operations of the Cerrado Project, and of the state of Espirito Santo, of the accumulated credits due to the volume of exports. |
30
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 10. | ADVANCES TO SUPPLIERS |
| September 30, 2023 | December 31, 2022 | |||||||
| Forestry development program and partnerships | 2,113,874 | 1,592,132 | ||||||
| Advance to suppliers - others | 111,547 | 108,146 | ||||||
| 2,225,421 | 1,700,278 | |||||||
| Current | 111,547 | 108,146 | ||||||
| Non-current | 2,113,874 | 1,592,132 | ||||||
In the annual financial statements for the year ended December 31, 2022, the characteristics of the advances were disclosed, which did not change during the nine-month period ended September 30, 2023.
| 11. | RELATED PARTIES |
The Company's commercial and financial transactions with the controlling shareholder and Companies owned by the controlling shareholder Suzano Holding S.A. ("Suzano Group") were carried out at specific prices and conditions, as well as the corporate governance practices adopted by the Company, and those recommended and/or required by the applicable legislation.
The transactions refers mainly to:
Assets: (i) accounts receivable from the sale of pulp, paper, tissue and other products; (ii) dividends receivable; (iii) reimbursement for expenses; and (iv) social services;
Liabilities: (i) loan agreements;(ii) reimbursement for expenses; (iii) social services; (iv) real estate consulting; and (v) dividends payable.
Amounts in the statements of income: (i) sale of pulp, paper, tissue and other products; (ii) loan charges and exchange variation; (iii) social services and (viii) real estate consulting.
For the nine-month period ended September 30, 2023, there were no material changes in the terms of the agreements, deals and transactions entered into, nor were there any new contracts, agreements or transactions of any different nature entered into between the Company and its related parties.
31
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 11.1. | Balances recognized in assets and liabilities and amounts of transactions during the period |
| Assets | Liabilities | Sales (purchases), net | ||||||||||||||||||||||
| September 30, 2023 | December 31, 2022 | September 30, 2023 | December 31, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||||||||
| Transactions with controlling shareholders | ||||||||||||||||||||||||
| Suzano Holding S.A. | 4 | 5 | 37 | 72 | ||||||||||||||||||||
| 4 | 5 | 37 | 72 | |||||||||||||||||||||
| Transactions with companies of the Suzano Group and other related parties | ||||||||||||||||||||||||
| Management (expect compensation – Note 11.2) | (5 | ) | (890 | ) | (25 | ) | ||||||||||||||||||
| Bexma Participações Ltda | 1 | 7 | 35 | |||||||||||||||||||||
| Bizma Investimentos Ltda | 1 | 5 | 8 | |||||||||||||||||||||
| Civelec Participações Ltda | 4,575 | 4,825 | ||||||||||||||||||||||
| Fundação Arymax | 2 | 3 | ||||||||||||||||||||||
| Ibema Companhia Brasileira de Papel (1) | 50,934 | 106,940 | (5,813 | ) | (3,705 | ) | 140,029 | 147,919 | ||||||||||||||||
| Instituto Ecofuturo - Futuro para o Desenvolvimento Sustentável | 1 | 3 | (1,122 | ) | (66 | ) | (5,279 | ) | (4,495 | ) | ||||||||||||||
| IPLF Holding S.A. | 23 | 3 | 15 | |||||||||||||||||||||
| Mabex Representações e Participações Ltda. | (178 | ) | ||||||||||||||||||||||
| Nemonorte Imóveis e Participações Ltda | (15 | ) | (132 | ) | (150 | ) | ||||||||||||||||||
| 55,510 | 106,968 | (6,950 | ) | (3,776 | ) | 138,392 | 143,310 | |||||||||||||||||
| 55,514 | 106,973 | (6,950 | ) | (3,776 | ) | 138,429 | 143,382 | |||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Trade accounts receivable (Note 7) | 50,934 | 99,608 | ||||||||||||||||||||||
| Dividends receivable | 7,334 | |||||||||||||||||||||||
| Other assets | 4,580 | 31 | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Trade accounts payable (Note 17) | (6,950 | ) | (3,776 | ) | ||||||||||||||||||||
| 55,514 | 106,973 | (6,950 | ) | (3,776 | ) | |||||||||||||||||||
1) Refers mainly to the sale of pulp.
32
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 11.2. | Management compensation |
Expenses related to the compensation of key management personnel, which include the Board of Directors, Fiscal Council and Board of Statutory Executive Officers, recognized in the statement of income for the period, are set out below:
| September 30, 2023 | September 30, 2022 | |||||||
| Short-term benefits | ||||||||
| Salary or compensation | 36,069 | 37,039 | ||||||
| Direct and indirect benefits | 1,544 | 700 | ||||||
| Bonus | 7,087 | 5,273 | ||||||
| 44,700 | 43,012 | |||||||
| Long-term benefits | ||||||||
| Share-based compensation plan | 26,916 | 26,993 | ||||||
| 26,916 | 26,993 | |||||||
| 71,616 | 70,005 | |||||||
Short-term benefits include fixed compensation (salaries and fees, vacation pay, mandatory bonus and “13th month’s salary” bonus), payroll charges (Company’s share of contributions to social security – “INSS”) and variable compensation such as profit sharing, bonuses and benefits (company car, health plan, meal voucher, market voucher, life insurance and private pension plan).
Long-term benefits include the stock option plan and phantom shares for executives and key members of Management, in accordance with the specific regulations disclosed in Note 22.
| 12. | INCOME AND SOCIAL CONTRIBUTION TAXES |
| 12.1. | Deferred taxes |
The Company calculates income tax and social contribution taxes, current and deferred, based on the following rates: (i) 15% plus an additional 10% on taxable income in excess of R$240 for IRPJ; and (ii) 9% for CSLL, on the net income. Balances are recognized in the Company's income on an accruals basis.
Subsidiaries domiciled in Brazil have their taxes calculated and provisioned in accordance with the current legislation and their specific tax regime, including, in some cases, the presumed profit method. Subsidiaries domiciled abroad are subject to taxation in their respective jurisdictions, according to local regulations.
Deferred income and social contribution taxes are recognized at the net amounts in non-current assets or liabilities.
In Brazil, Law nº. 12,973/14 revoked article 74 of Provisional Measure nº. 2,158/01 and determines that the parcel of the adjustment of the value of the investment in subsidiaries, direct and indirect, domiciled abroad, equivalent to the profit earned by them before income tax, except for exchange rate variation, must be added in the determination of taxable income and the social contribution calculation basis of the controlling entity domiciled in Brazil, at each year ended.
The Company management believes in the validity of the provisions of international treaties entered by Brazil to avoid double taxation. In order to ensure its right to non-double taxation, the Company filed a lawsuit in April 2019, which aims to exempt the double taxation in Brazil, of profits earned by its subsidiary located in Austria, according to Law No. 12,973/14. Due to the preliminary injunction granted in favor of the Company in the aforementioned lawsuit, the Company decided not to add the profit from Suzano International Trading GmbH, located in Austria, when determining its taxable income and social contribution basis of the net profit of the Company for the nine-month period ended September 30, 2023. There is no provision for tax related to the non-double taxation profits of such subsidiary in 2022.
33
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 12.1.1. | Deferred income and social contribution taxes |
| September 30, 2023 | December 31, 2022 | |||||||
| Tax loss | 1,207,830 | 1,207,096 | ||||||
| Negative tax basis of social contribution | 461,286 | 445,250 | ||||||
| Assets - temporary differences | ||||||||
| Provision for judicial liabilities | 302,435 | 268,596 | ||||||
| Operating provisions and other losses | 1,019,801 | 999,028 | ||||||
| Exchange rate variations | 2,995,010 | 4,297,503 | ||||||
| Amortization of fair value adjustments arising from business combinations | 662,040 | 680,142 | ||||||
| Unrealized profit on inventories | 188,560 | 363,052 | ||||||
| Leases | 381,358 | 364,838 | ||||||
| 7,218,320 | 8,625,505 | |||||||
| Liabilities - temporary differences | ||||||||
| Goodwill - tax benefit on unamortized goodwill | 1,230,564 | 1,023,103 | ||||||
| Property, plant and equipment - deemed cost | 1,156,310 | 1,217,349 | ||||||
| Depreciation for tax-incentive reason (1) | 816,997 | 869,997 | ||||||
| Capitalized loan costs | 527,356 | 210,834 | ||||||
| Fair value of biological assets | 950,350 | 703,274 | ||||||
| Deferred taxes, net of fair value adjustments | 376,692 | 398,950 | ||||||
| Tax credits - gains from tax lawsuit (exclusion of ICMS from the PIS and COFINS basis) | 155,828 | 194,121 | ||||||
| Derivatives gains (“MtM”) | 569,996 | 9,164 | ||||||
| Provision of deferred taxes on results of subsidiaries abroad | 140,034 | |||||||
| Other temporary differences | 24,116 | 13,416 | ||||||
| 5,948,243 | 4,640,208 | |||||||
| Non-current assets | 1,294,389 | 3,986,415 | ||||||
| Non-current liabilities | 24,312 | 1,118 | ||||||
| (1) | Tax depreciation is taken as a benefit only in the income tax calculation bases. |
| 12.1.2. | Breakdown of accumulated tax losses and social contribution tax losses carried forward |
| September 30, 2023 | December 31, 2022 | |||||||
| Tax loss carried forward | 4,831,320 | 4,828,384 | ||||||
| Negative tax basis of social contribution carried forward | 5,125,400 | 4,947,222 | ||||||
34
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 12.1.3. | Roll-forward of deferred tax assets |
| September 30, 2023 | December 31, 2022 | |||||||
| Opening balance | 3,985,297 | 8,729,929 | ||||||
| Tax loss | 734 | 50,220 | ||||||
| Negative tax basis of social contribution | 16,036 | 34,176 | ||||||
| Provision for judicial liabilities | 33,839 | 19,251 | ||||||
| Operating provisions and other losses | 20,773 | 33,898 | ||||||
| Exchange rate variation | (1,302,493 | ) | (2,257,699 | ) | ||||
| Derivative gains (“MtM”) | (560,832 | ) | (2,202,857 | ) | ||||
| Amortization of fair value adjustments arising from business combinations | 4,156 | 8,970 | ||||||
| Unrealized profit on inventories | (174,492 | ) | 64,164 | |||||
| Leases | 16,520 | (8,534 | ) | |||||
| Goodwill - tax benefit on unamortized goodwill | (207,461 | ) | (276,614 | ) | ||||
| Property, plant and equipment - deemed cost | 61,039 | 99,510 | ||||||
| Depreciation accelerated for tax-incentive reason | 53,000 | 74,952 | ||||||
| Capitalized loan costs | (316,522 | ) | (111,435 | ) | ||||
| Fair value of biological assets | (247,076 | ) | (272,308 | ) | ||||
| Deferred taxes on the results of subsidiaries abroad | (140,034 | ) | ||||||
| Credits on exclusion of ICMS from the PIS/COFINS tax base | 38,293 | 3,906 | ||||||
| Other temporary differences | (10,700 | ) | (4,232 | ) | ||||
| Closing balance | 1,270,077 | 3,985,297 | ||||||
| 12.2. | Reconciliation of the effects of income tax and social contribution on profit or loss |
| September 30, 2023 | September 30, 2022 | |||||||
| Net income (loss) before taxes | 12,569,930 | 19,356,739 | ||||||
| Income tax and social contribution benefit (expense) at the statutory nominal rate of 34% | (4,273,776 | ) | (6,581,291 | ) | ||||
| Tax effect on permanent differences | ||||||||
| Taxation (difference) on profits of subsidiaries in Brazil and abroad (1) | 1,305,189 | 3,396,390 | ||||||
| Equity method | (1,982 | ) | 90,761 | |||||
| Thin capitalization (2) | (41,520 | ) | (335,568 | ) | ||||
| Credit related to the Reintegra Program | 5,384 | 5,821 | ||||||
| Director bonuses | (3,485 | ) | (11,176 | ) | ||||
| Tax incentives | 76,172 | 36,527 | ||||||
| Donations/Fines – Other | (44,253 | ) | (22,206 | ) | ||||
| (2,978,271 | ) | (3,420,742 | ) | |||||
| Income tax | ||||||||
| Current | (238,762 | ) | (295,622 | ) | ||||
| Deferred | (1,996,712 | ) | (2,271,969 | ) | ||||
| (2,235,474 | ) | (2,567,591 | ) | |||||
| Social Contribution | ||||||||
| Current | (24,041 | ) | (31,052 | ) | ||||
| Deferred | (718,756 | ) | (822,099 | ) | ||||
| (742,797 | ) | (853,151 | ) | |||||
| Income and social contribution benefits (expenses) for the period | (2,978,271 | ) | (3,420,742 | ) | ||||
| Effective rate of income and social contribution tax expenses | 23.69 | % | 17.67 | % | ||||
| 1) | The difference in the taxation of subsidiaries is substantially due to the differences between the nominal tax rates in Brazil and those of subsidiaries located abroad. |
| 2) | The Brazilian thin capitalization rules establish that interest paid or credited by a Brazilian entity to a related party abroad may only be deducted for income tax and social contribution purposes if the interest expense is viewed as necessary for the activities of the local entity, and when certain limits and requirements are met. On September 30, 2023 and September 30, 2022, the Company did not meet all of the limits and requirements, and therefore the expense is not deductible for the period. |
35
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| 12.3. | Tax incentives |
The Company benefits from a tax incentive for partial reduction of the income tax obtained from operations carried out in areas under the jurisdiction of the Northeast Development Superintendence (“SUDENE”) and the Superintendence of Amazon Development (“SUDAM”). The IRPJ reduction incentive is calculated based on the activity profits (exploitation profits) and considers the allocation of the operating profit based on the incentive production levels for each product.
| Area/Regions | Company | Maturity | ||||||
| Northeast Development Superintendence (“SUDENE”) | ||||||||
| Mucuri (BA) - Line 1 | Suzano | 2024 | ||||||
| Mucuri (BA) - Line 2 | Suzano | 2027 | ||||||
| Eunápolis (BA) | Veracel | 2025 | ||||||
| Imperatriz (MA) | Suzano | 2024 | ||||||
| Aracruz (ES) | Portocel | 2030 | ||||||
| Aracruz (ES) | Suzano | 2031 | ||||||
| Superintendence of Amazon Development (“SUDAM”) | ||||||||
| Belém (PA) | Suzano | 2025 |
| 13. | BIOLOGICAL ASSETS |
The roll-forward of biological assets is as set forth below:
| September 30, 2023 | December 31, 2022 | |||||||
| Opening balance | 14,632,186 | 12,248,732 | ||||||
| Additions | 4,332,093 | 4,957,380 | ||||||
| Depletions | (2,718,069 | ) | (3,665,057 | ) | ||||
| Gain on fair value adjustments | 1,256,315 | 1,199,759 | ||||||
| Disposals | (57,898 | ) | (82,331 | ) | ||||
| Other write-offs | (61,267 | ) | (26,297 | ) | ||||
| Closing balance | 17,383,360 | 14,632,186 | ||||||
The Company reevaluates, on a semi-annual basis in June and December, the main assumptions used in measuring the fair value of biological assets, which are disclosed in Note 13 of the unaudited condensed consolidated interim financial information for the period ended June 30, 2023.
The Company has no biological assets pledged as collateral on September 30, 2023 and December 31, 2022.
36
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| 14. | INVESTMENTS |
| 14.1. | Investments breakdown |
September 30, | December 31, 2022 | |||||||
| Investments in associates and joint ventures | 386,025 | 354,200 | ||||||
| Goodwill | 232,381 | 233,399 | ||||||
| Other investments evaluated at fair value through other comprehensive income - Celluforce | 23,912 | 24,917 | ||||||
| 642,318 | 612,516 | |||||||
| Investments | 643,452 | 612,516 | ||||||
| Provision for loss on investments in subsidiaries | (1,134 | ) | ||||||
| 642,318 | 612,516 | |||||||
| 14.2. | Investments in associates and joint ventures |
| Information of joint ventures as at | Company Participation | |||||||||||||||||||||||||||
| September 30, | In the income (expenses) for | |||||||||||||||||||||||||||
| 2023 | Carrying amount | the period | ||||||||||||||||||||||||||
| Equity | Income (expenses) of the period | Participation | September30, | December 31, 2022 | September
30, | September
30, | ||||||||||||||||||||||
| Associate | ||||||||||||||||||||||||||||
| Ensyn Corporation | (4,352 | ) | (23,869 | ) | 26.07 | % | (1,134 | ) | 1,250 | (6,223 | ) | 289 | ||||||||||||||||
| Spinnova Plc (1) | 504,862 | (99,148 | ) | 18.78 | % | 94,813 | 113,079 | (18,620 | ) | 2,871 | ||||||||||||||||||
| 93,679 | 114,329 | (24,843 | ) | 3,160 | ||||||||||||||||||||||||
| Joint ventures | ||||||||||||||||||||||||||||
| Domestic (Brazil) | ||||||||||||||||||||||||||||
| Biomas | 26,659 | (3,337 | ) | 16.66 | % | 4,444 | (556 | ) | ||||||||||||||||||||
| Ibema Companhia Brasileira de Papel | 394,082 | 103,447 | 49.90 | % | 196,647 | 158,996 | 35,185 | 28,260 | ||||||||||||||||||||
| Foreign | ||||||||||||||||||||||||||||
| F&E Technologies LLC | 10,316 | 50.00 | % | 5,158 | 5,230 | - | ||||||||||||||||||||||
| Woodspin Oy | 172,194 | (28,254 | ) | 50.00 | % | 86,097 | 75,645 | (14,127 | ) | (432 | ) | |||||||||||||||||
| 292,346 | 239,871 | 20,502 | 27,828 | |||||||||||||||||||||||||
| Other movements | 23,912 | 24,917 | (1,489 | ) | 235,957 | |||||||||||||||||||||||
| 23,912 | 24,917 | (1,489 | ) | 235,957 | ||||||||||||||||||||||||
| 409,937 | 379,117 | (5,830 | ) | 266,945 | ||||||||||||||||||||||||
1) The average share price quoted on the Nasdaq First North Growth Market (NFNGM) was EUR3.29 (three euros and twenty-nine cents) on September 30, 2023 (EUR5.44 (five Euros and forty four cents) in December 31, 2022).
37
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| 15. | PROPERTY, PLANT AND EQUIPMENT |
| Land | Buildings | Machinery, | Work
in progress | Other (1) | Total | |||||||||||||||||||
| Average rate % | 3.55 | 6.31 | 17.64 | |||||||||||||||||||||
| Accumulated cost | 9,791,102 | 9,415,818 | 43,949,632 | 1,603,915 | 1,104,601 | 65,865,068 | ||||||||||||||||||
| Accumulated depreciation | (3,577,097 | ) | (23,344,836 | ) | (773,432 | ) | (27,695,365 | ) | ||||||||||||||||
| Balance as of December 31, 2021 | 9,791,102 | 5,838,721 | 20,604,796 | 1,603,915 | 331,169 | 38,169,703 | ||||||||||||||||||
| Additions | 5,089 | 516 | 381,741 | 11,220,806 | 15,832 | 11,623,984 | ||||||||||||||||||
| Additions of merged companies | 3,829,344 | 3,829,344 | ||||||||||||||||||||||
| Write-offs | (69,773 | ) | (10,613 | ) | (58,435 | ) | (3,384 | ) | (142,205 | ) | ||||||||||||||
| Depreciation | (310,429 | ) | (2,367,163 | ) | (124,464 | ) | (2,802,056 | ) | ||||||||||||||||
| Transfers | 930,646 | 246,782 | 1,057,714 | (2,451,570 | ) | 194,292 | (22,136 | ) | ||||||||||||||||
| Accumulated cost | 14,486,408 | 9,644,875 | 45,160,365 | 10,373,151 | 1,281,328 | 80,946,127 | ||||||||||||||||||
| Accumulated depreciation | (3,879,898 | ) | (25,541,712 | ) | (867,883 | ) | (30,289,493 | ) | ||||||||||||||||
| Balance as of December 31, 2022 | 14,486,408 | 5,764,977 | 19,618,653 | 10,373,151 | 413,445 | 50,656,634 | ||||||||||||||||||
| Additions (2) | 54,177 | 15 | 377,933 | 8,541,904 | 8,923 | 8,982,952 | ||||||||||||||||||
| Amounts from the acquisition of MMC Brasil (3) | 4,572 | 111,495 | 453,617 | 8,306 | 11,175 | 589,165 | ||||||||||||||||||
| Write-offs | (23,524 | ) | (31,537 | ) | (122,959 | ) | (58,724 | ) | (236,744 | ) | ||||||||||||||
| Depreciation | (232,556 | ) | (1,893,735 | ) | (103,834 | ) | (2,230,125 | ) | ||||||||||||||||
| Transfers | 325,013 | 217,275 | 1,691,383 | (2,471,888 | ) | 194,877 | (43,340 | ) | ||||||||||||||||
| Accumulated cost | 14,846,646 | 9,909,943 | 47,426,533 | 16,451,473 | 1,423,369 | 90,057,964 | ||||||||||||||||||
| Accumulated depreciation | (4,080,274 | ) | (27,301,641 | ) | (957,507 | ) | (32,339,422 | ) | ||||||||||||||||
| Balance as of September 30, 2023 | 14,846,646 | 5,829,669 | 20,124,892 | 16,451,473 | 465,862 | 57,718,542 | ||||||||||||||||||
| 1) | Includes vehicles, furniture and utensils and computer equipment. |
| 2) | The addition of work in progress refers, mainly to the Cerrado Project, of which R$158,418 is a non-cash effect in the period. |
| 3) | On June 1, 2023, the Company completed the acquisition of MMC Brasil Indústria e Comércio Ltda.(Note 1.2.3.) |
On September 30, 2023, the Company evaluated the business, market and climate impacts, and did not identify any event that indicated the need to perform an impairment test and to record any impairment provision for property, plant and equipment.
| 15.1. | Items pledged as collateral |
On September 30, 2023, property, plant and equipment items pledged as collateral for loan transactions and legal proceedings, consisting mainly of the unit of Três Lagoas totalling R$11,879,931 (R$12,773,662 in the same units as at December 31, 2022).
| 15.2. | Capitalized expenses |
For the nine-month period ended September 30, 2023, the Company capitalized loan costs in the amount of R$816,763 (R$359,407 as of December 31, 2022). The weighted average interest rate, adjusted by the equalization of the exchange rate effects, utilized to determine the capitalized amount was 11.25% p.a. (12.49% p.a. as of December 31, 2022).
| 16. | INTANGIBLE |
| 16.1. | Goodwill and intangible assets with indefinite useful lives |
September 30, | December 31, 2022 | |||||||
| Goodwill - Facepa | 119,332 | 119,332 | ||||||
| Goodwill - Fibria | 7,897,051 | 7,897,051 | ||||||
| Goodwill - MMC Brasil (1) | 170,859 | |||||||
| Other (2) | 4,834 | 3,405 | ||||||
| 8,192,076 | 8,019,788 | |||||||
| 1) | Refers to the goodwill of the MMC Brasil business combination, whose allocation of the purchase price is disclosed in note 1.2.3. |
| 2) | Refers to other intangible assets with indefinite useful lives such as servitude of passage and electricity. |
38
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
The goodwill is based on expected future profitability supported by valuation reports, after the purchase price allocation.
Goodwill is allocated to cash-generating units as presented in Note 28.4.
For the nine-month period ended September 30, 2023, the Company did not identify any event that indicated the need to perform the impairment test and to record any impairment provision for intangible assets.
| 16.2. | Intangible assets with limited useful lives |
September 30, | December 31, 2022 | |||||||||||
| Opening balance | 7,173,183 | 8,014,740 | ||||||||||
| Additions | 5,726 | 90,499 | ||||||||||
| Fair value adjustment MMC Brasil (1) | 189,655 | |||||||||||
| Write-offs | (51 | ) | ||||||||||
| Amortization | (739,475 | ) | (966,796 | ) | ||||||||
| Transfers and others | 56,069 | 34,791 | ||||||||||
| Closing balance | 6,685,158 | 7,173,183 | ||||||||||
| Represented by | Average rate % | |||||||||||
| Non-competition agreements | 5.00 | 4,894 | 5,128 | |||||||||
| Port concessions | 4.30 | 536,252 | 554,832 | |||||||||
| Lease agreements | 16.90 | 8,749 | 14,374 | |||||||||
| Supplier agreements | 12.90 | 44,443 | 55,554 | |||||||||
| Port service contracts | 4.20 | 557,161 | 579,289 | |||||||||
| Cultivars | 14.30 | 45,882 | 61,176 | |||||||||
| Trademarks and patents (1) | 9.05 | 194,397 | 10,935 | |||||||||
| Customer portfolio | 9.10 | 5,131,126 | 5,746,860 | |||||||||
| Supplier agreements | 17.60 | 13,501 | 21,427 | |||||||||
| Software | 20.00 | 134,570 | 113,946 | |||||||||
| Other | 5.75 | 14,183 | 9,662 | |||||||||
| 6,685,158 | 7,173,183 | |||||||||||
| Cost | 12,255,946 | 12,004,503 | ||||||||||
| Amortization | (5,570,788 | ) | (4,831,320 | ) | ||||||||
| Closing balance | 6,685,158 | 7,173,183 | ||||||||||
| 1) | On June 1, 2023, the Company completed the acquisition of MMC Brasil Indústria e Comércio Ltda.(Note 1.2.3.) |
| 17. | TRADE ACCOUNTS PAYABLE |
September 30, | December 31, | |||||||
| In local currency | ||||||||
| Related party (Note 11.1) (1) | 6,950 | 3,776 | ||||||
| Third party (2)(3) | 4,535,075 | 4,171,988 | ||||||
| In foreign currency | ||||||||
| Third party (3) | 1,363,131 | 2,030,806 | ||||||
| 5,905,156 | 6,206,570 | |||||||
| 1) | The balance refers mainly to transactions with Ibema Companhia Brasileira de Papel. |
| 2) | Within the balance of suppliers, there are values under supplier finance arrangement that were subject to anticipation with financial institutions at the exclusive option of certain suppliers, without changing the originally defined purchase conditions (payment terms and negotiated prices). The balance related to such operations on September 30, 2023 was R$260,001 (R$416,643 at December 31, 2022). |
| 3) | Within the balance of suppliers, the following balances refer to the Cerrado Project, R$1,183,178 (R$625,645 on December 31, 2022) in local currency and R$971,719 (R$1,370,833 on December 31, 2022) in foreign currency. |
39
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| 18. | LOANS, FINANCING AND DEBENTURES |
| 18.1. | Breakdown by type |
| Current | Non-current | Total | |||||||||||||||||||||||||||
| Type | Interest rate | Average
annual interest rate - % | September 30, | December 31, 2022 | September 30, | December 31, 2022 | September 30, | December 31, 2022 | |||||||||||||||||||||
| In foreign currency | |||||||||||||||||||||||||||||
| BNDES | UMBNDES | 7.5 | 1,076 | 11,207 | 1,076 | 11,207 | |||||||||||||||||||||||
| Bonds | Fixed | 5.0 | 346,637 | 907,059 | 41,495,436 | 43,218,286 | 41,842,073 | 44,125,345 | |||||||||||||||||||||
| Export credits (“export prepayments”) | SOFR/Fixed | 6.8 | 2,284,004 | 156,156 | 15,452,143 | 16,779,064 | 17,736,147 | 16,935,220 | |||||||||||||||||||||
| Assets financing | SOFR | 4.1 | 46,499 | 26,755 | 172,709 | 113,217 | 219,208 | 139,972 | |||||||||||||||||||||
| IFC - International Finance Corporation | SOFR | 6.5 | 5,910 | 2,962,957 | 2,968,867 | ||||||||||||||||||||||||
| Others | 13,909 | 5,980 | 13,909 | 5,980 | |||||||||||||||||||||||||
| 2,698,035 | 1,107,157 | 60,083,245 | 60,110,567 | 62,781,280 | 61,217,724 | ||||||||||||||||||||||||
| In local currency | |||||||||||||||||||||||||||||
| BNDES | TJLP | 8.4 | 55,372 | 69,495 | 209,846 | 246,004 | 265,218 | 315,499 | |||||||||||||||||||||
| BNDES | TLP | 11.6 | 51,766 | 41,640 | 2,365,878 | 1,775,991 | 2,417,644 | 1,817,631 | |||||||||||||||||||||
| BNDES | Fixed | 4.0 | 4,022 | 18,666 | 1,001 | 4,011 | 5,023 | 22,677 | |||||||||||||||||||||
| BNDES | SELIC | 13.9 | 68,234 | 67,115 | 846,829 | 814,320 | 915,063 | 881,435 | |||||||||||||||||||||
| CRA (“Agribusiness Receivables Certificates”) | CDI/IPCA | 11.6 | 726,678 | 1,829,966 | 726,678 | 1,829,966 | |||||||||||||||||||||||
| NCE (“Export credit notes”) | CDI | 13.5 | 3,661 | 76,463 | 100,000 | 1,277,616 | 103,661 | 1,354,079 | |||||||||||||||||||||
| NCR (“Rural producer certificates”) | CDI | 11.6 | 39,012 | 13,144 | 1,996,315 | 274,127 | 2,035,327 | 287,271 | |||||||||||||||||||||
| Export credits (“export prepayments”) | Fixed | 8.4 | 775,387 | 77,694 | 1,315,813 | 775,387 | 1,393,507 | ||||||||||||||||||||||
| Debentures | CDI | 12.5 | 196,916 | 33,689 | 8,328,841 | 5,421,113 | 8,525,757 | 5,454,802 | |||||||||||||||||||||
| 1,921,048 | 2,227,872 | 13,848,710 | 11,128,995 | 15,769,758 | 13,356,867 | ||||||||||||||||||||||||
| 4,619,083 | 3,335,029 | 73,931,955 | 71,239,562 | 78,551,038 | 74,574,591 | ||||||||||||||||||||||||
| Interest on financing | 801,268 | 1,238,623 | 801,268 | 1,238,623 | |||||||||||||||||||||||||
| Non-current funding | 3,817,815 | 2,096,406 | 73,931,955 | 71,239,562 | 77,749,770 | 73,335,968 | |||||||||||||||||||||||
| 4,619,083 | 3,335,029 | 73,931,955 | 71,239,562 | 78,551,038 | 74,574,591 | ||||||||||||||||||||||||
40
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 18.2. | Breakdown by maturity – non-current |
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 onwards | Total | ||||||||||||||||
| In foreign currency | ||||||||||||||||||||||
| Bonds | 1,677,912 | 2,563,502 | 3,489,084 | 2,491,058 | 31,273,880 | 41,495,436 | ||||||||||||||||
| Export credits (“export prepayments”) | 463,864 | 5,457,005 | 4,835,270 | 3,940,051 | 755,953 | 15,452,143 | ||||||||||||||||
| Assets financing | 22,143 | 45,686 | 47,509 | 46,811 | 10,560 | 172,709 | ||||||||||||||||
| IFC - International Finance Corporation | 184,339 | 907,659 | 1,870,959 | 2,962,957 | ||||||||||||||||||
| 486,007 | 7,180,603 | 7,446,281 | 7,660,285 | 3,409,277 | 33,900,792 | 60,083,245 | ||||||||||||||||
| In local currency | ||||||||||||||||||||||
| BNDES – TJLP | 10,123 | 99,044 | 85,775 | 7,107 | 3,599 | 4,198 | 209,846 | |||||||||||||||
| BNDES – TLP | 11,693 | 61,080 | 80,726 | 141,536 | 138,703 | 1,932,140 | 2,365,878 | |||||||||||||||
| BNDES – Fixed | 1,001 | 1,001 | ||||||||||||||||||||
| BNDES – SELIC | 13,282 | 224,128 | 224,174 | 28,980 | 29,026 | 327,239 | 846,829 | |||||||||||||||
| NCE (“Export credit notes”) | 25,000 | 25,000 | 50,000 | 100,000 | ||||||||||||||||||
| NCR (“Rural producer certificates”) | 1,996,315 | 1,996,315 | ||||||||||||||||||||
| Debentures | 2,337,120 | 2,337,882 | 748,386 | 2,905,453 | 8,328,841 | |||||||||||||||||
| 36,099 | 2,721,372 | 2,728,557 | 202,623 | 944,714 | 7,215,345 | 13,848,710 | ||||||||||||||||
| 522,106 | 9,901,975 | 10,174,838 | 7,862,908 | 4,353,991 | 41,116,137 | 73,931,955 | ||||||||||||||||
41
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 18.3. | Roll-forward of loans, financing and debentures |
| September 30, 2023 | December 31, 2022 | |||||||
| Opening balance | 74,574,591 | 79,628,629 | ||||||
| Fundraising, net of issuance costs | 9,971,740 | 1,335,715 | ||||||
| Interest accrued | 3,537,499 | 4,007,737 | ||||||
| Monetary and exchange rate variations, net | (2,161,839 | ) | (3,949,020 | ) | ||||
| Settlement of principal | (3,483,991 | ) | (2,517,934 | ) | ||||
| Settlement of interest | (3,936,938 | ) | (4,019,072 | ) | ||||
| Amortization of fundraising costs | 49,976 | 69,649 | ||||||
| Others (fair value adjustments to business combinations) | 18,887 | |||||||
| Closing balance | 78,551,038 | 74,574,591 | ||||||
| 18.4. | Breakdown by currency |
| September 30, 2023 | December 31, 2022 | |||||||
| Brazilian Reais | 15,758,947 | 13,347,244 | ||||||
| US Dollars | 62,791,015 | 61,216,140 | ||||||
| Currency basket | 1,076 | 11,207 | ||||||
| 78,551,038 | 74,574,591 | |||||||
| 18.5. | Fundraising costs |
The fundraising costs are amortized based on the terms of agreements and the effective interest rate.
| Balance to be amortized | ||||||||||||||||
| Type | Cost | Amortization | September 30, 2023 | December 31, 2022 | ||||||||||||
| Bonds | 434,970 | 256,671 | 178,299 | 210,822 | ||||||||||||
| CRA and NCE | 125,222 | 121,494 | 3,728 | 10,838 | ||||||||||||
| Export credits (“export prepayments”) | 196,526 | 136,733 | 59,793 | 75,520 | ||||||||||||
| Debentures | 123,216 | 18,257 | 104,959 | 9,984 | ||||||||||||
| BNDES | 63,588 | 53,215 | 10,373 | 12,016 | ||||||||||||
| IFC - International Finance Corporation | 41,943 | 340 | 41,603 | |||||||||||||
| Others | 18,147 | 17,481 | 666 | 873 | ||||||||||||
| 1,003,612 | 604,191 | 399,421 | 320,053 | |||||||||||||
| 18.6. | Guarantees |
Some loan and financing agreements have guarantees clauses, in which the financed equipment or other property, plant and equipment is offered as collateral by the Company, as disclosed in Note 15.1.
The Company does not have contracts with restrictive financial clauses (financial covenants) which must be complied with.
| 18.7. | Relevant transactions entered into during the period |
| 18.7.1. | BNDES |
On June 27, 2023, the Company raised R$500,000 from BNDES indexed to the Long-Term Rate ("TLP"), plus a fixed interest rate of 5.23% p.a., with a principal grace period of 7 (seven) years and maturity in December 2037. The funds were allocated to projects in the forestry sector.
42
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 18.7.2. | International Finance Corporation (“IFC”) |
On December 22, 2022, the Company obtained a new credit line ("A&B Loan") to be financed by the International Finance Corporation (IFC) and a syndicate of commercial banks, in a total amount of US$600,000 (equivalent to R$2,891,520).
The financing consists of the following parts: (i) "A-loan" in the amount of US$250,000 (equivalent to R$1,204,800) with IFC's own resources, at a cost of Term SOFR + 1.80% p.a. and a total term of eight years, with a principal grace period of six years; and (ii) "B-loan," a syndicated loan in the amount of US$350,000 (equivalent to R$1,686,720) at a cost of Term SOFR + 1.60% p.a. and a total term of seven years, with a principal grace period of five years.
This credit line was fully utilized by June 30, 2023.
The credit operation has sustainability performance indicators (KPIs) associated with goals for: (a) reducing greenhouse gas (GHG) emissions intensity, and (b) increasing the representation of women in leadership positions within the Company. The funds will be allocated to the Cerrado Project.
| 18.7.3. | Advance of exchange contract (“ACC”) |
On May 19, 2023, the Company raised US$100,000 (equivalent to R$481,920) from BNP Paribas at a fixed rate of 6.00%, with maturity in May 2024.
On June 21, 2023, the Company raised US$35,000 (equivalent to R$168,672) from BNP Paribas at a fixed rate of 6.52%, with maturity in June 2024.
| 18.7.4. | Debentures |
On June 29, 2023, the Company issued common debentures, non-convertible into shares, unsecured, in two series, which were object of a public offer in the amount of R$1,000,000.
The debenture consists of two parts: (i) an amount of R$500,000 at a cost of IPCA + 6.0188% p.a. and a total term of seven years, with a single maturity on June 15, 2030; and (ii) an amount of R$500,000 at a cost of IPCA + 6.2477% p.a. and a total term of ten years, with a single maturity on July 15, 2033.
On September 18, 2023, the Company issued common debentures, not-convertible into shares, unsecured, in a single serie, which were subject of a public offer for distribution in the amount of R$2,000,000, with a rate corresponding to IPCA + 6.1889% p.a. with a term of 15 years, due on September 15, 2038.
| 18.7.5. | Rural Credit Note |
On August 9, 2023, the Company raised a rural credit note from Banco Safra in the amount of R$2,000,000 with a post-fixed rate of CDI + 1, 25% p.a. with final maturity in August 2030.
| 18.7.6. | Export Prepayment |
On August 25, 2023, the Company raised an export prepayment with the bank JP Morgan in the amount of US$150,961 (equivalent to R$736,266), at a rate floating in Term SOFR 6M + 1.93% p.a., with final maturity in January 2029.
43
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 18.8. | Significant transactions settled during the period |
On June 22, 2023, the Company settled a CRA contract in the amount of R$685,239 (principal and interest), with an original maturity in June 2023 and a cost of IPCA + 5.9844% p.a.
On August 9, 2023, the Company settled, in advance, a rural credit note and two export credit notes, with Banco Safra, in the total amount of R$1,616,500 (principal and interest). The original debt maturities were in June and August 2026, and the rates were between CDI + 0.99% p.a. and CDI + 1.03% p.a.
On August 15, 2023, the Company settled a CRA contract, in the amount of R$561,502 (principal and interest), with original maturity in August 2023 and at the cost of IPCA + 5.9844% p.a.
On August 25, 2023, the Company settled, in advance, an export prepayment, with JP Morgan bank, in the total amount of US$118,653 (equivalent to R$587,333 (principal and interest)). The original maturity of the debt was in June 2024 with a pre-fixed rate in reais of 7.70% p.a.
| 19. | LEASES |
| 19.1. | Right of use |
The balances rolled-forward are set out below:
| Lands | Machinery and equipment | Buildings | Ships and boats | Vehicles | Total | |||||||||||||||||||
| Balance as at December 31, 2021 | 2,868,411 | 86,464 | 88,410 | 1,748,008 | 2,730 | 4,794,023 | ||||||||||||||||||
| Additions/updates | 849,996 | 66,821 | 61,647 | 4,216 | 982,680 | |||||||||||||||||||
| Depreciation (1) | (360,225 | ) | (40,732 | ) | (64,301 | ) | (124,890 | ) | (2,303 | ) | (592,451 | ) | ||||||||||||
| Write-offs (2) | (75,026 | ) | (75,026 | ) | ||||||||||||||||||||
| Balance as at December 31, 2022 | 3,283,156 | 112,553 | 85,756 | 1,623,118 | 4,643 | 5,109,226 | ||||||||||||||||||
| Additions/updates | 413,806 | 193,138 | 80,191 | 7,347 | 694,482 | |||||||||||||||||||
| Depreciation (1) | (287,065 | ) | (100,123 | ) | (42,442 | ) | (93,668 | ) | (2,183 | ) | (525,481 | ) | ||||||||||||
| Write-offs (2) | (10,734 | ) | (10,734 | ) | ||||||||||||||||||||
| Balance as at September 30, 2023 | 3,399,163 | 205,568 | 123,505 | 1,529,450 | 9,807 | 5,267,493 | ||||||||||||||||||
| 1) | The amount of depreciation related to land is substantially reclassified to biological assets to make up the formation costs. |
| 2) | Write-off due to cancellation of contracts. |
For the nine-month period ended September 30, 2023, the Company does not have commitments to lease agreements not yet in force.
| 19.2. | Lease liabilities |
The balance of lease payables on September 30, 2023, measured at present value and discounted at the respective discount rates are set forth below:
| Nature of agreement | Average rate - % p.a. (1) | Maturity (2) | Present value of liabilities | |||||||
| Lands and farms | 12.52 | August/2051 | 3,732,819 | |||||||
| Machinery and equipment | 11.43 | April/2035 | 293,537 | |||||||
| Buildings | 10.84 | May/2031 | 114,805 | |||||||
| Ships and boats | 11.39 | February/2039 | 2,241,847 | |||||||
| Vehicles | 10.83 | July/2026 | 6,085 | |||||||
| 6,389,093 | ||||||||||
| 1) | To determine the discount rates, quotes were obtained from financial institutions for agreements with characteristics and average terms similar to the lease agreements. |
| 2) | Refers to the original maturities of the agreements and, therefore, does not consider eventual renewal clauses. |
44
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
The balances rolled-forward are set out below:
| September 30, 2023 | December 31, 2022 | |||||||
| Opening balance | 6,182,530 | 5,893,194 | ||||||
| Additions | 694,482 | 982,680 | ||||||
| Write-offs (2) | (10,734 | ) | (75,026 | ) | ||||
| Payments | (869,973 | ) | (1,044,119 | ) | ||||
| Accrual of financial charges (1) | 495,515 | 612,042 | ||||||
| Exchange rate variations | (102,727 | ) | (186,241 | ) | ||||
| Closing balance | 6,389,093 | 6,182,530 | ||||||
| Current | 755,867 | 672,174 | ||||||
| Non-current | 5,633,226 | 5,510,356 | ||||||
| 1) | On September 30, 2023, the amount of R$161,716 related to interest expenses on leased lands was capitalized to biological assets to represent the formation cost (R$178,429 as of December 31, 2022). |
| 2) | Write-off due to cancellation of contracts. |
The maturity schedule for future payments not discounted to present value related to lease liabilities is disclosed in Note 4.2.
| 19.2.1. | Amounts recognized in the statement of income for the period |
The amounts recognized are set out below:
| September 30, 2023 | September 30, 2022 | |||||||
| Expenses relating to short-term assets | 6,479 | 1,038 | ||||||
| Expenses relating to low-value assets | 1,894 | 571 | ||||||
| 8,373 | 1,609 | |||||||
| 20. | PROVISION FOR JUDICIAL LIABILITIES |
The Company is involved in certain legal proceedings arising in the normal course of its business, which include tax, social security, labor, civil, environment and real estate.
The Company classifies the risk of unfavorable decisions in legal proceedings, based on legal advice, which reflects the estimated probable losses.
45
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
The Company’s Management believes that, based on the available information as of the date of these unaudited condensed consolidated interim financial information, its provisions for tax, social security, labor, civil, environment and real estate risks, accounted for according to IAS 37 are sufficient to cover estimated losses related to its legal proceedings, as set forth below:
| 20.1. | Roll-forward and changes in the provisions for probable losses based on the nature of the proceedings, net of judicial deposits |
September 30, 2023 | ||||||||||||||||||||
| Tax and social security | Labor | Civil, environment and real estate | Contingent liabilities assumed (1) (2) | Total | ||||||||||||||||
| Provision balance at the beginning of the period | 419,915 | 255,805 | 118,729 | 2,645,705 | 3,440,154 | |||||||||||||||
| Payments | (1,192 | ) | (30,432 | ) | (1,942 | ) | (33,566 | ) | ||||||||||||
| Reversal | (4,968 | ) | (70,109 | ) | (8,486 | ) | (95,237 | ) | (178,800 | ) | ||||||||||
| Additions | 32,336 | 114,802 | 17,436 | 164,574 | ||||||||||||||||
| Monetary adjustment | 22,271 | 16,276 | 13,244 | 51,791 | ||||||||||||||||
| Provision balance | 468,362 | 286,342 | 138,981 | 2,550,468 | 3,444,153 | |||||||||||||||
| Judicial deposits | (148,859 | ) | (79,116 | ) | (17,835 | ) | (245,810 | ) | ||||||||||||
| Provision balance at the end of the period | 319,503 | 207,226 | 121,146 | 2,550,468 | 3,198,343 | |||||||||||||||
| 1) | Amounts arising from tax-related lawsuits with a possible or remote probability of loss in the amount of R$2,403,738 and civil lawsuits in the amount of R$146,730, measured and recorded at the estimated fair value resulting from the business combination with Fibria, in accordance with paragraph 23 of IFRS 3 – Business Combinations. |
| 2) | Reversal due to a change in likelihood and/or due to settlement. |
December 31, 2022 | ||||||||||||||||||||
| Tax and social security | Labor | Civil, environment and real estate | Contingent liabilities assumed (1) (2) | Total | ||||||||||||||||
| Provision balance at the beginning of the year | 477,096 | 178,925 | 82,592 | 2,694,541 | 3,433,154 | |||||||||||||||
| Payments | (14,948 | ) | (44,516 | ) | (20,497 | ) | (79,961 | ) | ||||||||||||
| Reversal | (71,446 | ) | (53,211 | ) | (15,577 | ) | (48,836 | ) | (189,070 | ) | ||||||||||
| Additions | 14,036 | 157,562 | 56,834 | 228,432 | ||||||||||||||||
| Monetary adjustment | 15,177 | 17,045 | 15,377 | 47,599 | ||||||||||||||||
| Provision balance | 419,915 | 255,805 | 118,729 | 2,645,705 | 3,440,154 | |||||||||||||||
| Judicial deposits | (149,951 | ) | (12,270 | ) | (21,623 | ) | (183,844 | ) | ||||||||||||
| Provision balance at the end of the year | 269,964 | 243,535 | 97,106 | 2,645,705 | 3,256,310 | |||||||||||||||
| 1) | Amounts arising from tax-related lawsuits with a possible or remote probability of loss in the amount of R$2,448,564 and civil lawsuits in the amount of R$197,141, measured and recorded at the estimated fair value resulting from the business combination with Fibria, in accordance with paragraph 23 of IFRS 3 – Business Combinations. |
| 2) | Reversal due to a change in likelihood and/or due to settlement. |
| 20.1.1. | Tax and social security |
On September 30, 2023, the Company has 34 (thirty-four) (31 (thirty-one) as of December 31, 2022) administrative and judicial proceedings of a tax or social security nature in which the disputed matters are related to IRPJ, CSLL, PIS, COFINS, ICMS among others, whose amounts are provisioned when the likelihood of loss is deemed probable by the Company’s external legal counsel and by Management.
| 20.1.2. | Labor |
On September 30, 2023, the Company has 1,168 (one thousand, one hundred and sixty-eight) (1,117 (one thousand, one hundred and seventeen) as of December 31, 2022) labor lawsuits.
46
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
In general, the provisioned labor proceedings are related primarily to matters frequently contested by employees of agribusiness companies, such as wages and/or severance payments, in addition to suits filed by outsourced employees of the Company.
| 20.1.3. | Civil, environment and real estate |
On September 30, 2023, the Company has 75 (seventy-five) (66 (sixty-six) as at December 31, 2022) civil, environmental and real estate proceedings.
The provisioned Civil, environment and real estate proceedings are related primarily to the payment of damages, including those arising from contractual obligations, traffic-related injuries, possessory actions, environmental restoration obligations, claims and others.
| 20.2. | Contingencies with possible losses |
The Company is involved in tax, civil and labor lawsuits, whose losses have been assessed as possible by Management, supported by legal counsel, and therefore no provision was recorded:
September 30, 2023 | December 31, 2022 | |||||||
| Taxes and social security (1) | 9,365,206 | 8,201,246 | ||||||
| Labor | 202,126 | 321,428 | ||||||
| Civil and environmental (1) | 5,174,554 | 4,414,877 | ||||||
| 14,741,886 | 12,937,551 | |||||||
| 1) | The amounts above do not include the fair value adjustments allocated to possible loss risk contingencies representing R$2,530,709 (R$2,614,518 as of December 31, 2022), which were recorded at fair value resulting from business combinations with Fibria, in accordance with paragraph 23 of IFRS 3 – Business Combinations, as presented in Note 20.1. above. |
In the nine-month period ended September 30, 2023, there were no significant changes in the main nature of these contingencies compared to those disclosed in the annual financial statements for the year ended December 31, 2022 (Note 20).
| 20.3. | Contingent assets |
In the nine-month period ended September 30, 2023, there were no significant changes in the main nature of these contingencies compared to those disclosed in the annual financial statements for the year ended December 31, 2022 (Note 20).
| 21. | EMPLOYEE BENEFIT PLANS |
The Company provides supplementary pension plan and defined benefit plan, such as medical assistance and life insurance. The characteristics of such benefits were disclosed in the annual financial statements for the year ended December 31, 2022 (Note 21), which did not change during the nine-month period ended September 30, 2023.
| 21.1. | Pension plan |
Contributions made by the Company, for Suzano Prev pension plan managed by Brasilprev Seguros e Previdência S.A., for the nine-month period ended September 30, 2023 amounted R$13,373 (R$11,227 as of September 30, 2022) recognized under the cost of sales, selling and general and administrative expenses.
47
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 21.2. | Defined benefits plan |
The Company offers the following post-employment benefits in addition to the pension plans, which are measured based on actuarial calculations and recognized in the unaudited condensed consolidated interim financial information.
The roll-forward of actuarial liabilities prepared based on actuarial report is set forth below:
September 30, 2023 | December 31,
2022 | |||||||
| Opening balance | 691,424 | 675,158 | ||||||
| Interest on actuarial liabilities | 51,989 | 59,258 | ||||||
| Actuarial loss | 12,231 | |||||||
| Exchange rate variations | (577 | ) | ||||||
| Amount arising from the acquisition of MMC Brasil | 1,457 | |||||||
| Benefits paid | (40,612 | ) | (54,646 | ) | ||||
| Closing balance | 704,258 | 691,424 | ||||||
| 22. | SHARE-BASED COMPENSATION PLAN |
For the nine-month period ended September 30, 2023, the Company has 3 (three) share-based, long-term compensation plans: (i) Phantom stock option plan (“PS”); (ii) Share Appreciation Rights (“SAR”), both settled in local currency; and (iii) restricted shares, settled in shares.
The characteristics and measurement method of each plan were disclosed in the annual financial statements for the year ended December 31, 2022 (Note 22), which did not change during the nine-month period ended September 30, 2023.
| 22.1. | Long term compensation plans (“PS and SAR”) |
The roll-forward arrangements are set out below:
| Number of shares | ||||||||
September 30, 2023 | December 31, 2022 | |||||||
| Opening balance | 7,583,185 | 5,415,754 | ||||||
| Granted during of the period | 3,382,994 | 4,152,200 | ||||||
| Exercised (1) | (244,464 | ) | (1,474,506 | ) | ||||
| Exercised due to resignation (1) | (30,800 | ) | (175,552 | ) | ||||
| Abandoned/cancelled due to resignation | (295,355 | ) | (334,711 | ) | ||||
| Closing balance | 10,395,560 | 7,583,185 | ||||||
| 1) | The average price of the share options exercised and exercised due to termination of employment on September 30, 2023 was R$44.67 (forty four reais and sixty seven cents) ((R$48.79 (forty eight reais and seventy nine cents) as at December 31, 2022). |
48
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 22.2. | Restricted shares plan |
The position is set forth below:
| Program | Date of execution of the contract | Grant date | Price on grant date | Shares Granted | Restricted year for transfer of shares | ||||||||
| 2020 | 01/02/2020 | 01/02/2021 | R$ | 51.70 | 111,685 | 01/02/2024 | |||||||
| 2021 | 01/02/2021 | 01/02/2022 | R$ | 53.81 | 113,161 | 01/02/2025 | |||||||
| 2022 | 01/02/2022 | 01/02/2023 | R$ | 52.00 | 101,164 | 01/02/2026 | |||||||
| 2023 | 01/02/2023 | 01/02/2023 | R$ | 49.58 | 161,355 | 01/02/2026 | |||||||
| 487,365 | |||||||||||||
| 22.3. | Measurement assumptions |
The amounts corresponding to the services received and recognized are set forth below:
| Liabilities and Equity | Statement of income and Equity | |||||||||||||||
September 30, 2023 | December 31, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Non-current liabilities | ||||||||||||||||
| Provision for phantom stock plan | 251,089 | 162,117 | (100,430 | ) | (37,133 | ) | ||||||||||
| Equity | ||||||||||||||||
| Stock options granted | 24,664 | 20,790 | (6,239 | ) | (4,001 | ) | ||||||||||
| Shares granted | (2,365 | ) | 2,365 | |||||||||||||
| 24,664 | 18,425 | (6,239 | ) | (1,636 | ) | |||||||||||
| (106,669 | ) | (38,769 | ) | |||||||||||||
| 23. | LIABILITIES FOR ASSETS ACQUISITIONS AND SUBSIDIARIES |
September 30, 2023 | December 31,
2022 | |||||||
| Assets acquisitions | ||||||||
| Vitex/Parkia (1) | 1,758,365 | |||||||
| 1,758,365 | ||||||||
| Business combinations | ||||||||
| Facepa (2) | 25,722 | 42,655 | ||||||
| Vale Florestar Fundo de Investimento em Participações ("VFFIP") (3) | 163,483 | 261,302 | ||||||
| 189,205 | 303,957 | |||||||
| 189,205 | 2,062,322 | |||||||
| Current | 93,167 | 1,856,763 | ||||||
| Non-current | 96,038 | 205,559 | ||||||
| 1) | On June 22, 2022, the Company acquired all the shares of the Parkia structure companies, in the amount of US$667,000 (equivalent to R$3,444,255 on the date of execution of the agreement), upon the payment of US$330,000 (equivalent to R$1,704,054 on the date of the transaction), on June 22, 2023, the payment of the second installment in the amount of US$337,000 (equivalent to R$1,615,140 on the transaction date) was made. |
| 2) | Acquired in March 2018, for the amount of R$307,876, upon the payment of R$267,876, with the remainder updated at the IPCA, adjusted for possible losses incurred up to the payment date, with maturity in March 2028. |
| 3) | On August 2014, the Company acquired Vale Florestar S.A. through VFFIP, for a total amount of R$528,941 upon the payment of R$44,998, and the remainder with maturity up to August 2029. The annual settlements, carried out in the month of August, are subject to interest and updated by the variations of the US Dollar exchange rate, and partially updated by the IPCA. |
49
|
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 |
|
| 24. | SHAREHOLDERS’ EQUITY |
| 24.1 | Share capital |
On September 30, 2023, Suzano’s share capital was R$9,269,281 divided into 1,324,117,615 common shares, all nominative, book-entry shares without par value. Expenses related to the public offering were R$33,735, totaling a net share capital of R$9,235,546. The breakdown of the share capital is as set out below:
September 30, 2023 | December 31, 2022 | |||||||||||||||
| Quantity | (%) | Quantity | (%) | |||||||||||||
| Controlling Shareholders | ||||||||||||||||
| Suzano Holding S.A. | 367,612,329 | 27.76 | 367,612,329 | 27.01 | ||||||||||||
| Controller | 196,064,797 | 14.81 | 195,064,797 | 14.33 | ||||||||||||
| Managements and related persons | 32,093,322 | 2.42 | 34,102,309 | 2.51 | ||||||||||||
| Alden Fundo de Investimento em Ações | 26,154,744 | 1.98 | 26,154,744 | 1.91 | ||||||||||||
| 621,925,192 | 46.97 | 622,934,179 | 45.76 | |||||||||||||
| Treasury (Note 24.2) | 34,765,600 | 2.63 | 51,911,569 | 3.81 | ||||||||||||
| Other shareholders | 667,426,823 | 50.40 | 686,417,836 | 50.43 | ||||||||||||
| 1,324,117,615 | 100.00 | 1,361,263,584 | 100.00 | |||||||||||||
For the nine-month period ended September 30, 2023, SUZB3 common shares closed the period quoted at R$54.28 (fifty-four reais and twenty-eight cents) and R$48.24 (forty-eight reais and twenty-four cents) on December 31, 2022.
| 24.2 | Treasury shares |
On September 30, 2023, the Company had 34,765,600 (51,911,569 as of December 31, 2022) of its own common shares held in treasury, with an average cost of R$42.69 (forty-two reais and sixty-nine cents) per share, with a historical value of R$1,484,014 (R$2,120,324 as at December 31, 2022) and the market corresponding to R$1,887,077 (R$2,504,214 as at December 31, 2022).
On February 28, 2023, 37,145,969 common shares were cancelled, as described in Note 1.2.5.
In the nine-month period ended on September 30, 2023, the Company had repurchased 20,000,000 common shares with a total of R$880,914.
| Quantity | Average
cost per share | Historical value | Market value | |||||||||||||
| Balances at December 31, 2021 | 12,042,004 | 18.13 | 218,265 | 656,530 | ||||||||||||
| Exercised | (130,435 | ) | 18.13 | (2,365 | ) | (8,156 | ) | |||||||||
| Repurchase | 40,000,000 | 47.61 | 1,904,424 | 1,904,424 | ||||||||||||
| Balances at December 31, 2022 | 51,911,569 | 40.84 | 2,120,324 | 2,504,214 | ||||||||||||
| Repurchase | 20,000,000 | 44.05 | 880,914 | 880,914 | ||||||||||||
| Canceled | (37,145,969 | ) | 40.84 | (1,517,224 | ) | (1,570,532 | ) | |||||||||
| Balances at September 30, 2023 | 34,765,600 | 42.69 | 1,484,014 | 1,887,077 | ||||||||||||
50
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| 25. | EARNINGS (LOSS) PER SHARE |
| 25.1 | Basic |
The basic earnings (loss) per share is measured by dividing the profit attributable to the Company’s shareholders by the weighted average number of common shares issued during the period, excluding the common shares acquired by the Company and held as treasury shares.
September 30, | September 30, | |||||||
| Resulted of the period attributable to controlling shareholders | 9,577,505 | 15,925,229 | ||||||
| Weighted average number of shares in the period – in thousands | 1,332,009 | 1,361,264 | ||||||
| Weighted average treasury shares – in thousands | (32,174 | ) | (24,010 | ) | ||||
| Weighted average number of outstanding shares – in thousands | 1,299,835 | 1,337,254 | ||||||
| Basic earnings (loss) per common share – R$ | 7.36825 | 11.90890 | ||||||
| 25.2 | Diluted |
The diluted earnings (loss) per share is measured by adjusting the weighted average of outstanding common shares, assuming the conversion of all common shares with dilutive effects.
September 30, 2023 | September 30, 2022 | |||||||
| Resulted of the period attributed to controlling shareholders | 9,577,505 | 15,925,229 | ||||||
| Weighted average number of shares during the period (except treasury shares) – in thousands | 1,299,835 | 1,337,254 | ||||||
| Average number of potential shares (stock options) - in thousands | 487 | 215 | ||||||
| Weighted average number of shares (diluted) – in thousands | 1,300,322 | 1,337,469 | ||||||
| Diluted earnings (loss) per common share – R$ | 7.36549 | 11.90699 | ||||||
| 25.3 | Profit reserves |
Reserves are constituted by the allocation of the Company's profits, after the allocation for the payment of the minimum mandatory dividends and after the allocation to the various profit reserves.
In April 26, 2023, the shareholders' meeting approved the retention of profits in the amount of R$14,972,324, for investments on the Company's productive capacity and improvement of processes in order to meet the Company's growth strategy commitments.
51
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| 26. | NET FINANCIAL RESULT |
September 30, | September 30, | |||||||
| Financial expenses | ||||||||
| Interest on loans, financing and debentures (1) | (2,720,736 | ) | (2,696,093 | ) | ||||
| Amortization of transaction costs (2) | (49,976 | ) | (53,407 | ) | ||||
| Interest expenses on lease liabilities (3) | (333,799 | ) | (321,366 | ) | ||||
| Amortization of fair value adjustments | (14,163 | ) | ||||||
| Other | (379,163 | ) | (314,916 | ) | ||||
| (3,483,674 | ) | (3,399,945 | ) | |||||
| Financial income | ||||||||
| Cash and cash equivalents and marketable securities | 1,103,054 | 532,396 | ||||||
| Other | 112,590 | 89,676 | ||||||
| 1,215,644 | 622,072 | |||||||
| Results from derivative financial instruments | ||||||||
| Income | 8,201,656 | 9,907,450 | ||||||
| Expenses | (4,167,036 | ) | (4,396,936 | ) | ||||
| 4,034,620 | 5,510,514 | |||||||
| Monetary and exchange rate variations, net | ||||||||
| Exchange rate variations on loans, financing and debentures | 2,161,839 | 1,787,177 | ||||||
| Leases | 102,727 | 93,460 | ||||||
| Other assets and liabilities (4) | (519,686 | ) | (180,435 | ) | ||||
| 1,744,880 | 1,700,202 | |||||||
| Net financial result | 3,511,470 | 4,432,843 | ||||||
| 1) | Excludes R$816,763 arising from capitalized loan costs, substantially related to property, plant and equipment in progress of the Cerrado Project for the nine-month period ended September 30, 2023 (R$206,444 as at September 30, 2022). |
| 2) | Includes expense of R$19 arising from transaction costs on loans and financing that were recognized directly in the statement of income (R$232 as at September 30, 2022). |
| 3) | Includes R$161,716 referring to the reclassification to the biological assets item for the composition of the formation cost (R$84,470 as of September 30, 2022). |
| 4) | Includes effects of exchange rate variations of trade accounts receivable, trade accounts payable, cash and cash equivalents, marketable securities and others. |
| 27. | NET SALES |
September 30, | September 30, | |||||||
| Gross sales | 35,298,359 | 42,477,984 | ||||||
| Sales deductions | ||||||||
| Returns and cancellations | (104,935 | ) | (67,472 | ) | ||||
| Discounts and rebates | (4,248,057 | ) | (5,393,512 | ) | ||||
| 30,945,367 | 37,017,000 | |||||||
| Taxes on sales | (1,561,337 | ) | (1,555,761 | ) | ||||
| Net sales | 29,384,030 | 35,461,239 | ||||||
| 28. | SEGMENT INFORMATION |
| 28.1 | Criteria for identifying operating segments |
The Board of Directors and Board of Statutory Executive Officers evaluates the performance of the Company’s business segments through EBITDA.
The operating segments defined by the Company’s management are set forth below:
| i) | Pulp: comprised of the production and sale of hardwood eucalyptus pulp and fluff pulp, mainly to supply the foreign market. |
52
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| ii) | Paper: comprises the production and sale of paper to meet the demands of both the domestic and foreign markets. Consumer goods (tissue) sales are classified under this segment due to their immateriality. |
Information related to total assets by reportable segment is not disclosed, as it is not included in the set of information made available to the Company’s management, which makes investment decisions and determines the allocation of resources on a consolidated basis.
In addition, with respect to geographical information related to non-current assets, the Company does not disclose such information, as all property, plant and equipment, biological and intangible assets are in Brazil.
| 28.2 | Information of operating segments |
September 30, | ||||||||||||
| Pulp | Paper | Total | ||||||||||
| Net sales | 22,907,377 | 6,476,653 | 29,384,030 | |||||||||
| Domestic market (Brazil) | 1,690,353 | 4,747,618 | 6,437,971 | |||||||||
| Foreign markets | 21,217,024 | 1,729,035 | 22,946,059 | |||||||||
| EBITDA | 11,996,303 | 2,595,321 | 14,591,624 | |||||||||
| Depreciation, depletion and amortization | (5,533,164 | ) | ||||||||||
| Operating profit before net financial income (“EBIT”) (1) | 9,058,460 | |||||||||||
| EBITDA margin (%) | 52.37 | % | 40.07 | % | 49.66 | % | ||||||
| 1) | (“Earnings before interest and tax”). |
September 30, | ||||||||||||
| Pulp | Paper | Total | ||||||||||
| Net sales | 29,409,409 | 6,051,830 | 35,461,239 | |||||||||
| Domestic market (Brazil) | 1,937,291 | 4,167,961 | 6,105,252 | |||||||||
| Foreign market | 27,472,118 | 1,883,869 | 29,355,987 | |||||||||
| EBITDA | 18,036,703 | 2,384,824 | 20,421,527 | |||||||||
| Depreciation, depletion and amortization | (5,497,631 | ) | ||||||||||
| Operating profit before net financial income (“EBIT”) (1) | 14,923,896 | |||||||||||
| EBITDA margin (%) | 61.33 | % | 39.41 | % | 57.59 | % | ||||||
| 1) | (“Earnings before interest and tax”). |
| 28.3 | Net sales by product |
| Products | September 30, | September 30, | ||||||
| Market pulp (1) | 22,907,377 | 29,409,409 | ||||||
| Printing and writing paper (2) | 5,341,064 | 4,941,580 | ||||||
| Paperboard | 1,067,941 | 1,037,066 | ||||||
| Other | 67,648 | 73,184 | ||||||
| 29,384,030 | 35,461,239 | |||||||
| 1) | Net sales of fluff pulp represent approximately 0.8% of total net sales, and therefore were included in market pulp net sales. (0.8% as at September 30, 2022). |
| 2) | Net sales of tissue represent approximately 4.4% of total net sales, and therefore were included in printing and writing paper net sales. (2.3% as at September 30, 2022). |
53
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| 28.4 | Goodwill based on expected future profitability |
The goodwill based on expected future profitability arising from the business combination was allocated to the disclosable segments, which correspond to the Company's cash-generating units (“CGUs”), considering the economic benefits generated by such intangible assets. The allocation of goodwill is set out below:
September 30, | December 31, | |||||||
| Pulp | 7,897,051 | 7,897,051 | ||||||
| Paper (1) | 290,191 | 119,332 | ||||||
| 8,187,242 | 8,016,383 | |||||||
| 1) | On June 1, 2023, the Company completed the acquisition of MMC Brasil.(Note 1.2.3.) |
| 29. | INCOME (EXPENSES) BY NATURE |
September 30, | September 30, | |||||||
| Cost of sales | ||||||||
| Personnel expenses | (1,052,103 | ) | (1,039,270 | ) | ||||
| Costs of raw materials, materials and services | (8,026,536 | ) | (8,350,558 | ) | ||||
| Logistics costs | (3,166,101 | ) | (3,513,984 | ) | ||||
| Depreciation, depletion and amortization | (4,814,403 | ) | (4,728,282 | ) | ||||
| Other (1) | (1,241,968 | ) | (396,341 | ) | ||||
| (18,301,111 | ) | (18,028,435 | ) | |||||
| Selling expenses | ||||||||
| Personnel expenses | (203,856 | ) | (177,366 | ) | ||||
| Services | (103,639 | ) | (97,511 | ) | ||||
| Logistics costs | (774,909 | ) | (781,614 | ) | ||||
| Depreciation and amortization | (713,204 | ) | (712,633 | ) | ||||
| Other (2) | (89,128 | ) | (53,698 | ) | ||||
| (1,884,736 | ) | (1,822,822 | ) | |||||
| General and administrative expenses | ||||||||
| Personnel expenses | (798,123 | ) | (656,695 | ) | ||||
| Services | (273,919 | ) | (246,564 | ) | ||||
| Depreciation and amortization | (85,380 | ) | (76,573 | ) | ||||
| Other (3) | (150,914 | ) | (114,063 | ) | ||||
| (1,308,336 | ) | (1,093,895 | ) | |||||
| Other operating (expenses) income net | ||||||||
| Rents and leases | 3,029 | 1,570 | ||||||
| Results from sales of other products, net | 62,739 | 32,700 | ||||||
| Results from sales and disposals of property, plant and equipment, intangible and biological assets, net | (174,008 | ) | 26,627 | |||||
| Result on fair value adjustment of biological assets | 1,256,315 | 171,618 | ||||||
| Depletion and amortization | 79,823 | 19,857 | ||||||
| Tax credits - ICMS from the PIS/COFINS calculation basis | (1,324 | ) | ||||||
| Provision for judicial liabilities | (108,346 | ) | (101,717 | ) | ||||
| Other operating income (expenses), net | 54,891 | (8,467 | ) | |||||
| 1,174,443 | 140,864 | |||||||
| 1) | Includes R$650,592 related to maintenance downtime, costing (R$405,527 as at September 30, 2022). |
| 2) | Includes expected credit losses, insurance, materials for use and consumption, travel, accommodation, trade fairs and events. |
| 3) | Includes, substantially, corporate expenses, insurance, materials for use and consumption, social programs and donations, travel and accommodation. |
54
Suzano S.A.
Notes to the unaudited condensed consolidated interim financial information Nine-month period ended September 30, 2023 | |
| 30. | EVENT AFTER THE REPORTING PERIOD |
At the close of business on October 24, 2023, the Company received a notice regarding the issuance of a Tax Assessment charging Income Tax (IR) and Social Contribution (CSLL) in the amount of R$ 840 million, inclusive of interest and penalties. Over 50% of the assessment pertains to the non-addition of profits taxable in Brazil, earned by Suzano Trading International, a subsidiary of the Company in Austria, which is currently subject to a suspension of enforceability due to a favorable judgment in a Writ of Mandamus filed by the Company as a preventive measure in 2019 and disclosed in an explanatory note in the financial statements. The Company is currently assessing the received tax assessment with its legal advisors.
55