After the acquisition, what Suzano expects from Kimberly-Clark

Suzano, which bought the operations of the owner of the Neve brand, sees room for growth in the consumption of toilet paper in the country and believes that consumers are looking for higher quality products.

The largest pulp producer in the world, Suzano took a significant step in its expansion plan and vertical integration of activities with the announcement of the purchase of toilet paper operations (tissue) American company Kimberly-Clark in Brazil, owner of the Neve and Kleenex brands.

The move was not robust in financial terms, with the company planning to pay the agreed US$ 175 million with cash proceeds, without affecting the leverage ratio, which ended the third quarter at 2.2 times.

But it is important in strategic terms, by positioning Suzano within a market that has strong expansion potential in the country and by helping to mitigate the effects of fluctuating pulp prices, moving to a market that is a little more stable in terms of demand. .

“We have seen a migration from more basic single sheet products to double or triple sheet products over the last ten years and we expect this trend to continue,” said Luis Bueno, executive director of consumer goods and corporate relations. in an interview regarding the results of the third quarter.

According to him, the per capita consumption of paper in Brazil per year is still very low. and from Europe and the USA, between 25 and 29 kilos.

With the Kimberly-Clark operation, Suzano executives estimate that the tissue market share will go from the current 12.8% to 22.2%, based on data from the Nielsen consultancy, approaching Softys, one of the main names market share, whose share is 23.5%. Executives said they did not set targets for market share for the next few years.

In addition, the purchase of Kimberly-Clark will allow Suzano to enter markets that its tissue operations do not yet operate, as is the case with away from homewhich is the supply of toilet paper for institutional use.

Suzano started to operate in the tissue, in 2017, through the factory in Mucuri (BA). Subsequently, it expanded its operations to the Imperatriz (MA) unit and advanced its presence in the market with the acquisition of Facepa, in 2017, providing a leadership position in the North and Northeast regions.

Owner of the Mimmo and Floral toilet paper brands, Suzano has an installed capacity of 150 thousand tons per year and with the arrival of Kimberly-Clark, which has a factory in Mogi das Cruzes (SP), it adds a production capacity of 130 thousand tons per year. And with the factory being built in Aracruz, scheduled to open in two years, Suzano will be able to add another 60 thousand tons per year.

According to Bueno, the transaction brings complementarity of products and regions, strengthening Suzano’s position in the Southeast market. Because of this, there are no plans to make changes to the price or brand strategy after the transaction is approved by the Administrative Council for Economic Defense (Cade). “Our intention is to keep the brands [da Kimberly-Clark]because they are complementary, with different strengths by region”, he said.

record result

Suzano’s results in the third quarter reached record levels, with emphasis on the Ebitda line, exceeding analysts’ expectations, given the high pulp prices amidst the restriction of supply, together with a demand at robust levels, in addition to an improvement of the financial line.

Pulp supply problems were caused by logistical problems, unscheduled plant shutdowns, wood shortages due to sanctions against Russia and delays in the entry of new capacities.

In the case of the paper division, the company benefited from domestic demand and from the price adjustments made throughout the year in the paper division, which led to a 40% increase in average prices in the third quarter, compared to the same period. of 2021.

This combination of factors caused Suzano to record a net income of R$5.4 billion in the third quarter, reversing the loss recorded in the same period in 2021.

Net revenue grew 32%, in the same comparison, to R$ 14.2 billion, while adjusted Ebitda rose 36%, to R$ 8.6 billion. Adjusted Ebitda margin grew by 2 percentage points to 61%.

Adjusted Ebitda was 3% higher than expected by Itaú BBA’s analysts and surpassed the Santander team’s estimates by 5%.

At around 1:48 pm, Suzano’s shares rose 2.99% to R$54.71. In the year, they accumulate a fall of 6.8%, taking the market value to R$ 71.6 billion.

Source: Neofeed