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Suzano Cellulose Giant Increases Investments in Cerrado Project That Promises to Generate Great Job Boom
Suzano Papel e Celulose, the world’s largest market pulp producer, increased its investment forecast in the Cerrado Project by 15%, considering contract adjustments for inflation and the company’s option to produce or have certain products and services in-house, instead of purchasing from third parties. Now, the giant plans to invest R$ 22.2 billion in the construction of the new pulp factory, generating thousands of new jobs.
Cerrado Project Already Reaches 57% Physical Progress
The new factory of Suzano Papel e Celulose, which will be located in Ribas do Rio Pardo (MS), was previously expected to receive investments of R$ 19.3 billion, with an increase in expected disbursements for 2024. The company’s revision in investments also includes a gain of R$ 300 million related to exchange rate variation, particularly regarding the euro.
These options to make or buy accounted for R$ 1.3 billion of the increase in the Cerrado Project budget, according to Marcelo Bacci, director of Finance, Legal Affairs, and Investor Relations at Suzano.
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Bacci explains that this applies to the chemical plant, housing for workers. We reached the conclusion that it is more advantageous to build these assets than to buy them, which generates additional competitiveness.
The company’s project has already achieved 57% physical progress and 43% financial progress. The company finished the first quarter with a net profit of R$ 5.2 billion, a decrease of 49%, amid lower gains from exchange rate variation in the financial line.
The performance of the activities fared better in comparison to the previous year, but was weaker than what was seen in the fourth quarter, due to declining pulp prices and the volume of paper and fiber sales, as well as the depreciation of the average dollar.
Cerrado Project Promises to Generate 13 Thousand Jobs for the Community
The new factory of Suzano Papel e Celulose will have the capacity to produce 2.3 million tons of eucalyptus pulp per year. The company plans to start production at the new unit, which promises to generate thousands of jobs as early as the first quarter of 2024.
In addition to creating opportunities, the Cerrado Project will increase the company’s current pulp production capacity, which currently stands at 10.9 million, by 20%.
Walter Schalka, the company president, emphasizes the importance of the new unit for the company’s long-term strategy, highlighting its relevance in job creation and carbon capture capacity generated by the expansion of the forest base.
According to the Minister of Agriculture, Livestock, and Supply (Mapa), Tereza Cristina Dias, this is the largest investment that the state has received during this period. This will certainly bring development, income, and jobs. Once completed, the new unit is expected to generate 3,000 jobs among direct and outsourced employees, thus boosting the entire regional economic chain.
Suzano Papel e Celulose in Numbers
The adjusted Ebitda of the company rose by 20%, to R$ 6.16 billion, with a margin of 55%, driven mainly by a 13% higher average net price of pulp in dollars, partially offset by the cost of goods sold. Compared to the fourth quarter, there was a decrease of 25%, following a decline of 13% in the average net price of pulp in dollars.
According to Walter, for several players, the prices are already below the cost of production. The question is how long it will take for them to start shutting down factories. On the other hand, pulp stocks are at much lower levels throughout the value chain, and at some point, consumers will have to return to buying.
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