Suzano S.A. (NYSE:SUZ) Q3 2022 Results Conference Call October 28, 2022 9:00 AM ET
Company Participants
Walter Schalka – CEO and Member of Management Board
Fabio Almeida de Oliveira – Executive Officer of Paper and Packaging
Leonardo Grimaldi – Executive Officer of Commercial Pulp
Aires Galhardo – Executive Officer of Pulp Operation and Member of Management Board
Marcelo Bacci – CFO, Executive Officer of Finance and IR
Luis Renato Costa Bueno – Executive Officer of Consumer Goods and Corporate Affairs
Conference Call Participants
Caio Ribeiro – Bank of America
Rafael Barcellos – Santander
Jonathan Brandt – HSBC
Daniel Sasson – Itaú BBA
Leonardo Correa – BTG Pactual
Isabella Vasconcelos – Bradesco BBI
Walter Schalka
[Foreign Language]
Fabio Almeida de Oliveira
Thanks, Walter. Good morning, everyone. Let’s turn to Page number 4 on the presentation. Last quarter, we had informed you that the Paper and Packaging business unit has had its best quarter ever. Well, we have done it again. Our well-executed commercial strategy, aligned with a healthy demand for paper products delivered strong top and bottom line performance with a new best quarter EBITDA for the business unit. As discussed in previous quarter, demand for print and writing papers and cartonboard has continued to be solid in the domestic, international market served by Suzano. Latin America, our main export market has been the growth engine in demand during the Q3 with a sound growth for both print and write and paperboard papers.
Demand in North America and Europe continue to be resilient with imbalance on the supply side due to constraints in the supply chain. International Logistics have shown signs of improvement at the end of the quarter with better availability of container shipments and lower prices. Raw material and energy inflation continues to pressure the cash cost of paper producers, is still benefiting integrated producers moving forward.
Figures for the whole Q3 from EBA, related to print and write domestic demand, are yet not published. Considering the first 2 months of the third quarter when compared to the same period of 2021, the available data shows 8.5% demand increase, mainly due to increase on the demand for paper linked with the Brazilian National Government Program and the Brazilian general elections. Given the strong demand from the mainstream print and write obligations, volumes of uncoated paper sold into the containerboard market were not significant in the quarter.
EBA’s public data on paperboard demand shows a strong 11.7% increase in the first 2 months of the third quarter, even when taking into account the same strong comparison period in 2021. Regarding Suzano sales volumes in the Q3 were 2.5% higher when compared to the previous quarter and 2% below when compared to Q3 last year. Albeit higher sales volumes in the domestic market in a quarter-over-quarter and year-over-year basis, our export volumes reduced due to supply chain restrictions and lower inventory levels.
Domestic sales reached 71% of our total sales in the quarter, totaling 211,000 tons, 1% increase on a year-over-year basis. Inflation has continued to heat paper cost during the quarter. Still, we were able to manage our prices effectively, being successful in offset inflation impacts during the period. Our margins have expanded 6 percentage points on a quarter-over-quarter basis to all-time high of 43%. Our average net price during the quarter was 13% higher than our average price in Q2 and 43% higher than same quarter last year.
As a result of revenue management and operational stability, our EBITDA has reached BRL 859 million, a 58% increase on a year-over-year basis. Our Q3 EBITDA and EBITDA per ton were also new all-time highs for the Paper and Packaging business unit. As informed during our Q2 conference call, our paper inventories have been reduced, and we are running below our optimum level and should continue to do so for the next months. We don’t expect any impact while serving our strategic customers.
Looking ahead, we continue to see improvements in International Logistics, which would ease some of the supply imbalance we have seen last year. On the demand side, we expect a strong paper demand in Brazil during Q4, and we continue to see supportive demand for our products in our main export markets.
Now I will turn it over to Leo, who will present our Pulp business results.
Leonardo Grimaldi
Thanks, Fabio, and good morning, everyone. So please let’s move to Page 5 of our presentation so that we can address the results of our Pulp business units for the third quarter of 2022, marked by a new record EBITDA for the third quarter. As you can note on the upper left graph, our sales volume was very strong, reaching 2.8 million tons in the third Q ’22 with performance exceeding previous quarters, despite the historically lower seasonality period of the year. As a consequence of these positive sales figures, our inventories are still below optimum operational levels, and we kept withdrawing offering volumes to spot markets, therefore, focusing on ensuring the effect of supply fulfillment to our customers.
This third quarter was marked by tight supply and demand balance, mainly based on continued supply disruptions, especially in Europe, some of which weather-related and also due to a lack of birch for hardwood pulp production, as well as the effect of an absence of new volumes in the stream from new projects, which, as a result kept hardwood inventories low globally and throughout the whole chain. Demand and order entry levels for hardwood continued at a good pace during the quarter, which in addition to the low hardwood inventory scenario still places challenges in the management of supply chain for some paper and paperboard producers in order to keep their production rates unaffected.
We continued S&D tightness led to new rounds of price increases in all markets in the beginning of the quarter, which were fully implemented and with absolutely no concessions and price stability was later foreseen during August and September with no reductions to the planned order intake levels. Coming back to the slide, our average price for export markets has increased to $821 per ton during this third quarter, which is 12% higher than the second Q in U.S. dollar terms and 20% higher in Brazilian real terms. This price still does not capture our full price increases during the quarter, due mainly to existing backlogs of shipping and invoicing to our order books as we have yet not recovered the timing, invoicing to Asia.
Our EBITDA of BRL 7.7 billion, a new record for the third quarter, was mainly a result of higher prices and more favorable effects and higher invoice volumes, which led us to a 64% EBITDA margin.
Now looking forward, I would like to highlight the following points: we continue seeing an unchanged scenario of low hardwood inventories throughout the chain as a consequence of persisting value-related events and war-related sanctions affecting hardwood production, especially in Europe as well as no sizable volume from new projects coming into market up to year-end with no additional tonnage being visibly marketed as we speak. On top of these factors, the planned and announced recovery by the retrofit of Suzano’s Aracruz mill, impacting our pulp production in October, November, as well as new unlimited hardwood deliveries by some leading agent producers should constrain pulp availability in the market and so keeping the supply side of the S&D balance tight in this next period.
Diving deeper into unplanned downtimes in bleached chemical pulp, our new estimates bring us to 2.1 million tons year-to-date, an all-time record. We recognize a lower visibility for future midterm demand due to macroeconomic environment, most of which related to the Russia-Ukraine war. However, currently, the demand for pulp continues at strong levels in Europe and in North America, with pulp purchases and forecast trending at normalized set points of our key customers’ contractual volumes. We have noticed that some market segments like the core and corrugated packaging have been reporting lower sales forecast, but the furnish of hardwood pulp for them are quite limited, being quickly compensated in other markets, mainly tissue.
In China, paper production in segments, which are more related to BHKP, such as tissue, printing and writing and ivory board are expected to continue to post solid figures as producers are planning for a higher seasonality period and for the double 11 shopping gala as well as the healthy recovery of paper experts. To illustrate that, Yicai consultancy reports that for year-to-date September ’22 figures, production of tissue, printing and writing and ivory board in China has increased 7% when compared to the same period of 2021. Due to low inventories of hardwood that China exports and inland order intake in the region is expected to continue at current levels.
Regarding Suzano’s order intake, volumes were confirmed at unchanged prices in October. And during this week, we have announced to our customers and changed prices for November globally with the strong expectation that sales orders will continue to come at current levels, domain again, to still limited hardwood inventories and availability in major markets.
With that said, I would now like to invite Aires to address with you the cash cost performance of the quarter.
Aires Galhardo
Thank you, Leo. Good morning, everyone. We are on Slide #6. The cash production cost, excluding downtimes in the third quarter stood at BRL 18 per ton, a slight increase of 3% from second quarter, coming in line with our operational plan and guidance shared with you on the last earnings call. The book of the hit can expect on wood costs in turn due to the increase on diesel price, third-party wood and the forest-to-mill average distance. And on input costs, mainly impacted by natural gas and caustic soda price. The 7% average FX depreciation [asked to cut down.] These effects were partially offset by a higher dilution of fixed costs, thanks to greater operating efficiency of mills and better results from utilities with higher export volumes from Tres Lagoas sites.
When analyzing the year-over-year performance, cash production costs increased [Indiscernible] is quite similar of what we have presented on the last earnings call. The driver mostly came from — by commodities price which, as you can see, explains 83% of the total cash cost pressure. Once again, branch-based products, mainly natural gas and diesel used in the operations as well as caustic soda, the most important chemical on the cash cost performance were the highlights. On the positive side, the higher benefit of energy sales were due to improved operational efficiency and the higher export volumes from Imperatriz mill.
Looking forward to the fourth quarter, cash production cost ex downtimes, we currently expect a flattish performance over [third-party figure.] The downtimes impact on the COGS including not all of the regular maintenance downtimes of pulp lines, [P&C] of Aracruz sites, but also the announcing temporary shutdown [Indiscernible] on the same site should be below [Indiscernible].
Now I pass the floor to Marcelo Bacci to continue the presentation.
Marcelo Bacci
Thank you, Aires. Good morning, everyone. Let’s move to Page 7 and talk about our balance sheet. In the last 12 months, we managed to keep our net debt at a flattish level at $10.7 billion, in a period where we made $2.9 billion of CapEx, including maintenance and also the expansion CapEx. And also in a period where we returned $700 million of cash to our shareholders, including dividends and share buybacks. That was possible due to the $5 billion EBITDA that we generated on the period. That led our leverage ratio to 2.1% with a very low concentration of maturities in the next 3 years as a period where the disbursements of the CapEx of the Cerrado project will be concentrated. We continue to have more than 90% of our net debt at fixed rates, which is a big advantage in this period of increasing interest rates.
Moving to next page. We are announcing a slight change in our hedging policies, increasing to a gap between 90% and 110% the percentage of net debt that we can carry in dollar terms. And that will give us more flexibility to take advantage of the increasing interest rates in Brazil. We have also increased the horizon of our cash flow hedges up to 24 months, also to take advantage of the increasing carry in our currency. Considering the old policy, we today have 66% hedges on the cash flow, 55% on the Cerrado project, and we will be working from today on the new limits, therefore, changing this percentage for the future.
Moving to the following page. We talk about CapEx. We made BRL 4 billion of CapEx in the quarter, very much aligned with our expectations, adding year-to-date, BRL 11.2 billion, and we reaffirmed the guidance for the year at BRL 16.1 billion. On the following page, I’ll start as a new section on capital allocation, where we start by saying that in addition to the dividends already paid into the 2 share buyback programs that we already completed, we are announcing a new one for another 20 million shares that can be bought in the coming 18 months. We have already bought close to 6% of our free float and the new program will allow us to buy another up to 2.9% of the free float.
Moving to the following page. A word on the Cerrado project, we continue to have the project on time and on budget, reaching 31% physical progress and 24% financial progress, very much in line with our expectations.
With that, I will turn to Luis to continue the capital allocation chapter.
Luis Renato Costa Bueno
Thank you, Bacci. Good morning, everyone. Let’s move to Page 12. We started the tissue business in the end of 2017 with the production of [Indiscernible] Mucuri and Imperatriz mills. Throughout these 5 years, we have made the acquisition of a company focused on North and Northeast regions, enriched our maximum installed capacity in terms of production and sales, boosted by our latest conversion plant installed in [Espirito Santo state.]
During the Suzano Day in March, we discussed the trends in the Brazilian tissue market and highlighted the product premiumization and significant room for growth in the tissue per capita consumption in Brazil. Just to mention, the domestic consumption is 7 kilos per person per year compared to 14 in Chile and 29 in the U.S. At that time, we also presented the growth optionalities for our business. In the organic side, we announced our intention to build a new tissue plant in Aracruz, still pending approval by our Board of Directors, and we are very happy to announce the acquisition of Kimberly-Clark’s tissue business in Brazil.
Let’s move to the next page, please. This transaction involves both at-home and away-from-home businesses and includes one plant in [Mogi das Cruzes] with 130,000 tons of production capacity. The intellectual property for the Neve brand and licensing agreements for KC Global Brands, it’s important to mention that this deal will bring complementarity of both product categories and regions. Suzano is focused on the North and Northeast regions, while KC is stronger in the Southeast region. The 2 operations combined will have a market share of 22%. We are currently focused on the regulatory approval over the next month. And last, but not least, it’s worth mentioning that Suzano’s financial robustness and discipline allow this strategic move with no material impact on its financial leverage.
We will now open for the Q&A session.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from Caio Ribeiro with Bank of America.
Caio Ribeiro
So my first question here is on the scenario for Europe versus China, right, for 2023. We keep seeing a recessionary fears and pulp demand destruction concerns building in Europe, while pulp demand appears depressed in China, given the continued impact of the Zero COVID policy. So I just wanted to get a sense from you on how you see this playing out in 2023, right?
Do you see any potential catalysts that could trigger a recovery in China pulp demand to pre-pandemic levels? And is that enough, right, to compensate for potential demand weakness in Europe in your view? And then secondly, on the tissue business, right? You recently announced the acquisition of Kimberly-Clark assets in Brazil. Do you see room to continue to consolidate this market further via acquisitions? Or would you now shift gears and focus on growth more via greenfields/brownfields?
Leonardo Grimaldi
Thank you for your question. This is Leo here to answer the first part of it, related to demand in 2023. Actually, I’m going to be a bit more ample in my answer and talk about both sides of the equation, supply and demand. We recognize obviously new pulp projects starting up in 2023, but there is a lot of uncertainty on how supply and demand fundamentals will play out as the year folds.
On the supply side, there are possible delays of projects as well as the time to market of this new pulp production. And this should keep — should reach markets in a more timely and gradual manner. When we add on top of that, the risks of additional and increasing unexpected downtimes as we have seen this year, this is even harder to evaluate and to factor in how this will play out or in the timing of how this volume will reach and the impact to markets.
Despite the expected slowdown in Europe, and we recognize as I said in my speech, a lower visibility in that sense, consultancy such as [Indiscernible] factoring in that number, forecast global demand for hardwood pulp to grow close to 1 million tons in 2023, and that’s hardwood alone, which is in line with historical growth as tissue is very resilient even in more adverse scenarios. So that’s my answer to the first. Luis, please.
Luis Renato Costa Bueno
Thank you, Leo, and thanks, Caio, for your question. We are currently focused on closing the operation. And with all the pending analysis that will take place over the next month and we’re going to be very busy integrating this company and also implementing the organic avenue that I just mentioned with the plant in Aracruz. So that’s going to be our major focus over the next months.
Operator
Mr. Rafael Barcellos with Santander would like to make a question.
Rafael Barcellos
My first question is related to pulp prices. So we have seen demand headwinds emerging over the past few months in both Europe and China. However, pulp prices persist at record high levels. So in your view, what continues to support pulp prices at these levels? And how do you see pulp affordability at the moment?
And my second question is related to your long-term strategy, okay? So we have seen Suzano investing again in its paper division through the tissue segment, right? So how relevant your paper division could be going forward? And which other investment opportunities do you see for this division going forward? Also, as for your pulp division, is part of your strategy to switch part of your pulp production in the future to more niche products such as fluff or even dissolving pulp?
Leonardo Grimaldi
This is Leo here again, to answer your question on the pulp price scenario. Our belief is that an unprecedented curtailment on the supply side of the equation, favoring the S&D fundamentals is enabling us to be very bullish for these next months ahead of us. And actually, as I have said, already talking to our customers and confirming unchanged prices for November as well result up to now any displacement in our order entry levels and in our sales levels. Stocks are low throughout the chain.
In Europe, we just received yesterday night, the statistics. There is a new reduction to stocks at European ports of roughly 6% to 7% when compared to August. In China, there was also new reductions in September compared to August, approximately the same token, 7%. And as I have mentioned before, it is our view, talking to market sources that we have that the stock in China despite being smaller, the percentage of hardwood is much less than it was historically, meaning that hardwood is tighter and tighter in all major markets when compared to other grades. So manufacturing the tightness of the supply side, the consistent demand that I have been reporting in Europe, in U.S., in LatAm and also in China, where customers are running actually above what they were running a year ago, we see a very supportive short-term scenario.
Unidentified Company Representative
Rafael, thank you very much for your question as well to talking here. I’d like just to mention to you and to our colleagues that our strategy is based on 5 different avenues for the future. One of them is competitiveness. The second one is the relevance of pulp market in the world. The third one is verticalization. The fourth one is innovation. And the fifth one is sustainability. We have been working in all of 5 different dimensions that I mentioned. And paper and packaging have been performing extremely well, and we could consider organic growth for the future as well as a conversion from our paper grade pulp to other applications such as fluff and dissolving, as you mentioned. Then we do have several optionalities for the future, and this is the beautiful of our strategy that we are building along these many years. And we could consider several possibilities in order to new investments in the near future.
Operator
The next question comes from Jonathan Brandt with HSBC.
Jonathan Brandt
I first wanted to ask you about production and volume. Next year, you have a significant amount of downtime in the first half, concentrated mostly, I think, on the second quarter. And inventory at the moment is already very low, as you’ve mentioned. So I’m just wondering, are you going to start building inventory in the fourth quarter and first quarter or should we think about maybe 2023 volumes being less than 2022 volumes given that you have more maintenance downtimes next year than you’ve had over the past couple of years?
And then my second question, I guess, Walter, I mean, this is something you’ve talked about in the past. It would be great to get an update. Pulp prices continue to be volatile. I’d argue that your share price isn’t sort of reflecting the high pulp price and the record results that we’ve seen on a consolidated basis. And I think that part of the reason is because there is an expectation that pulp prices weakened in 2023. So I guess the question is, as the market leader, is it your responsibility? Or how do you reduce this volatility in prices? Would that be a benefit do you think, to your share price? Would you look to move more of your pulp volumes to an annual price agreement like that they had sort of 10, 20 years ago? Or are you sort of — do you just have to accept the volatility in prices going forward?
Leonardo Grimaldi
Jonathan, this is Leo here. Thank you for your question related on how we’re planning for actually very intense downtime or planned downtime schedule that we have for the beginning of ’22. So for this ending months of 2022, we do not expect to increase inventories as we have a very full order books to be delivered to our customer base. As I mentioned, we are still running late on Asia. So we have to really push hardly to make sure that we deliver on time without affecting the supply chain of our customers who are running with low pulp inventories.
And regarding 2023 and how we’re going to plan for this maintenance downtime season, this is very — this is part of our commercial strategy. So this is something that we do not share, but we’re going to prepare accordingly so that our customers and the service levels that we provide to them are kept unaffected.
Walter Schalka
Thank you, Jonathan. This is Walter here. I do recognize our ambition to reduce the volatility. The volatility is not performing well for our customers and not for us. The order chain is affected by the volatility. And our ambition is to reduce volatility over time. We have been working with different price schemes with an increased basis with our customers on the last years and is going to repeat the situation for the next year, where we are going to have instead of fixed discount and floating prices, we are going to have different schemes such as cap and floor, such as fixed price, that would be better for everyone.
And this is affecting our price realization when the price is going up, but we will protect our price when the price will go down. And this is going to reduce our volatility. We recognize this number is not yet at the level that we would like, but it’s improving year-over-year, and we will continue on this strategy in the coming years.
Operator
The next question comes from Daniel Sasson with Itaú BBA.
Daniel Sasson
Congratulations on the record high results. My first question is on the Kimberly Clark acquisition. If you could clarify if the $175 million is related only to the equity value of the transaction? If there is debt also involved that could increase that amount? And if there are any numbers that you could share with us in terms of those — that asset’s performance EBITDA in the last 12 months, volumes in the last 12 months or anything like that would be great. And if you — what are the main challenges that you expect in regards to the incorporation of this operation?
And my second question is on the cash cost — pulp cash cost. You mentioned last quarter that you expected a low single-digit increase versus the first half. Is this still the expectation? Or has anything changed at all? And maybe from the BRL 140 per ton of increase in your cash cost, how much of that you think could go back [of falling] normalization in the cost of chemicals and diesel? And what do you think could be more structural and could persist looking ahead?
Marcelo Bacci
Thank you, Daniel. This is Marcelo speaking. We are not going to give much detail on the price of the KC deal, nor on the numbers because this — what we’re buying is important — to mention what we’re buying is a part of the operations they have in Brazil where the numbers are not public. This is part — there’s going to be a drop down of assets, segregating the part that we’re not buying, which is the Personal Care business from the Family Care business, which is what we are bringing to poor numbers. What we can say is that, of course, this is a moment of lower profitability for the tissue business given the high level of pulp prices, but we are not in a position to share numbers in addition to what we already have shared, which is the capacity of 130,000 tons.
The main challenges we are — it’s difficult to say. Of course, we believe that there’s going to be significant synergies to be extracted. We will, as Luis said, start to plan for the synergies, but we expect that the incorporation of the operation should be smooth since we already at this point have been in this business for 5 years, and we have experienced enough to incorporate a new part of the business.
Unidentified Company Representative
Daniel, thank you for your question. And speaking for the fourth quarter, we are providing a [fresh] scenario because every change in the commodity price has a lag implementation in our company around 2 or 3 months. And [Indiscernible] Keeps the — remains the branch price and the caustic soda in the same level that we have had in the [Indiscernible] quarters. If you have any better scenario, especially in the branch that are totally connected with our natural gas price probably you can have some reduction percent of that, it’s before you predict anything.
Operator
The next question comes from Leonardo Correa with BTG Pactual.
Leonardo Correa
So a couple of questions on my side. The first one on price realizations in the pulp business. I mean it was clear from your speech that October was pretty much in line with prices at very high level, still November is following a similar path, right? So my question is whether there is a carryover effect still that you guys are expecting to extract heading into the fourth quarter, right? I mean looking at prices in the third quarter, you did something around $820 on the export side. So I can assume that there still is a gap to close. I just wanted to hear your thoughts. It could be high level, but just want to see if that makes sense that there still is some carryover effects on pricing.
The second question, moving back to the discussion on the supply/demand scenario in China, right? I mean we saw overnight that the pulp reselling price in China suffered a bit of softness, right? I mean we’re seeing prices at around $800. So there is a gap of about $50, $60 right to, let’s say, to benchmark. I understand all the issues and the low quality of reselling and the fact that it’s very illiquid. I just wanted to confirm if the message still from China is that you’re not seeing any cracks, and that supply demand remains quite tight. Is that it?
Leonardo Grimaldi
Well, thank you for both questions. This is Leo here answering both of them. So first, related to our view for the next quarter’s pricing. Obviously, we cannot share too much information regarding our pricing for the quarter, taking into account that this is key to our commercial strategy. However, I can share that our general view is that price realization dynamics on the pulp P&L should continue to be benefited as you asked, from the price increases and levels of the past months. October business and order intake was concluded at unchanged prices at really normal order entry levels, and our view is that this scenario should not change for upcoming months due to all factors, which I have mentioned previously.
Also related to our backlogs to Asia, mainly, as I had mentioned on the last quarter, we were running roughly at 60 days or 2 months late. We were not able to recoup or recover this scenario during the third quarter, but there are plans to reduce this as we get closer to year-end. So we’re still carrying these backlogs of roughly 2 months to Asia. Coming into resale prices, we have had a lot of discussions with our local sources to deeply understand the recent moves, including what was reported earlier today, Brazilian time. And our view is that this recent volatility on hardwood resale is mainly to the fact of a concentration of arrivals of imported and domestic pulp to domestic Chinese traders.
And these volumes are being quickly depleted in the market as hardwood inventories are low, and they should be returning to a normal level.
So my expectation, our expectations is that as we come into the next weeks, resale prices should recover in RMB terms, also to recover for the FX depreciation.
Operator
The next question comes from Isabella Vasconcelos with Bradesco BBI.
Isabella Vasconcelos
I think most of the questions have been answered, but I have one on the paper side, if you could provide more color on what you’re seeing in terms of domestic and export demand across different grades. And given very solid paper price realization recently and several price hike initiative if you continue to see solid order books or if you’re already registering some decline in demand. This is basically it…
Fabio Almeida de Oliveira
Isabella, it’s Fabio here. Thank you for your question. Regarding paper demand, we continue to see solid demand in the Brazilian and also in Latin America markets, which are the main markets for Suzano. As you know, 70% of our business in Q3 were sold in Brazil. And as I mentioned in my speech, we have also the high season for uncoated and also cut size business in the fourth quarter with the Brazilian books program and also for the return to school season that — which is preparing the stock during the end of the year now.
So we continue to see resilient demand here, strong in Brazil, and also in LatAm. In the other export markets, very solid demand in North America with imbalance in the supply side, and also in Europe, for uncoated paper. So on the demand side, no change, and we expect a good fourth quarter. In terms of pricing, we have realized all the price increases so far that we have announced to the market, we have implemented all of them. And we continue to analyze the market for price opportunities moving forward. So that’s it.
Operator
As there are no more questions, I would like to turn the floor over to the company’s CEO for final considerations. Please, Mr. Walter Schalka, you may proceed.
Walter Schalka
Thanks very much for joining us for this session. I think we are very proud and pleased with the results that they are living to the market right now. We have to recognize that at this point of time, we are seeing not — some hidden value in our shares that is not yet captured by the market yet. I’m going to mention 3 issues. One of them is Parkia. Parkia was a very important acquisition for our future with lower CapEx on our forest business. It’s the same with Caravelas, as we are not — at this point of time, no recognition of the Cerrado project. End of this year, we are going to be invested roughly BRL 7 billion on this project, and it’s — the value is 0 on our market analysis. And I would like to bring another very important issue, there is the cost of debt. Our cost of debt is 4.5% — 4.7%, sorry, with average maturity of 7 years. For exactly the same maturity right now, the cost of interest would be 7.3%, 7.4%.
Meaning that we have a huge benefit on our fixed interest rate policy. And this is not, at this point of time, bring to the surface by the market. I would like to see — and these are just 3 examples of that, that we have several of them that — on time, we are going to see more value on the Suzano shares. We are very pleased from what we are doing, and we are looking forward to the next steps of the company in the coming quarters. Thank you very much for the session. I hope you have a very nice day.
Operator
Thank you. Suzano’s third quarter results conference call is finished. Have a nice day.
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