Investing.com -- Fitch Ratings has revised the outlook for Suzano S.A., a global leader in pulp production, from stable to positive while maintaining its Long-Term Foreign Currency and Local Currency Issuer Default Ratings (IDRs) at 'BBB-'. The rating agency also affirmed Suzano Austria Gmbh and Suzano International Finance B.V.'s senior notes at 'BBB-', and Suzano's national scale debentures at 'AAA(bra)'. The outlook for the National Scale Long-Term rating remains stable.

The revision in outlook reflects Fitch's expectations for Suzano's net leverage to decrease to below 3.0x by 2026, driven by robust operating cash flow generation. Suzano's increased size and market position following the start of the Ribas mill is projected to sustain positive Free Cash Flow (FCF).

Suzano is recognized as the world's top producer of market pulp, with an annual capacity of 13.4 million tonnes of bleached eucalyptus kraft pulp following the ramp up of the Ribas mill. The company also holds a leading position in the production of printing and writing paper and paperboard in Brazil.

In 2024, Suzano entered the paperboard business in the U.S. with the acquisition of two industrial assets, adding approximately 420,000 metric tonnes to its production capacity. The company's paper operations contributed about 14% of EBITDA in 2024, with margins around 30%.

Fitch expects Suzano to generate EBITDA and cash flow from operations (CFFO) of $4.7 billion and $2.6 billion respectively in 2025, and $6.2 billion and $3.8 billion in 2026. This is an increase from $4.2 billion of EBITDA and CFFO in 2024. Suzano's FCF is projected to be around $200 million in 2025, and increase to approximately $1.7 billion in 2026, absent any significant investments.

Fitch also noted Suzano's sustainable low-cost structure due to its modern pulp mills, high-yielding forestry plantations, low average forest-to-mill distance, and efficient logistics. The new Ribas mill further strengthens Suzano's position as a low-cost producer in the pulp industry.

Suzano's significant forestry holdings, with an accounting value of around $3.8 billion as of December 31, 2024, are a key credit consideration that supports the company's investment-grade credit profile.

Fitch expects the company to maintain a conservative liquidity and an extended debt amortization profile, in line with Suzano's historical track record. As of December 31, 2024, Suzano held $3.6 billion in cash and marketable securities and $17.5 billion in total debt. The company's current cash position covers debt maturities up to the end of 2026.

Suzano is the world's leading producer of market pulp, with 13.4 million tons of bleached eucalyptus kraft pulp capacity. It also leads in the production of paperboard, and printing and writing paper in Brazil, with a production capacity of 1.5 million tons of paper.

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