Lucas Laghi

Lucas Laghi requested an update on Suzano's CAPEX, specifically focusing on expansion CAPEX for 2025 and beyond. He asked if a proportional reduction in expansion CAPEX is expected for next year, considering the conclusion of major projects, and inquired about the rationale for approving new competitive projects in 2026 in relation to market conditions.

Answer

Marcos Moreno Chagas Assumpção, CFO, stated that Suzano will update its 2026 CAPEX guidance soon but indicated a declining trend for next year. He noted that 2025 still includes disbursements for the Cerrado project and the conclusion of growth projects like the fluff project at Limeira, additional tissue capacity at Aracruz, and a new biomass boiler at Aracruz, leading to lower disbursements and fewer projects in the pipeline for 2026.

Lucas Laghi from XP Inc. inquired about the rationale for Suzano's FX hedging strategy, particularly the higher strike prices on recent collars, and asked about the expected timeline for financial improvements from the acquired Pactiv operations.

Answer

Executive Marcos Assumpcao explained the hedging policy targets 40-75% of the company's net dollar exposure and that favorable market conditions led to hedging at the higher end of this range. Executive Fabio Almeida Oliveira stated that benefits from Pactiv's renegotiated contracts will be phased in during 2025, with a more significant impact expected in the second half of the year.

Lucas Laghi, Equity Research VP at XP Investments, focused on the Services division, inquiring about the future profitability profile given the increase in agnostic revenues and GTF engine contracts at OGMA. He asked whether margins are expected to be lower or higher with this shift and sought clarification on the Q3 EBIT margin decline, specifically if it was due to the changing revenue stream or conjunctural factors.

Answer

CFO Antonio Carlos Garcia attributed the Q3 EBIT margin decline in services to temporary 'bad guys' (delays, credits, payments) and expects a recovery in Q4, aiming for a normal 14-15% EBIT margin for the year. President and CEO Francisco Gomes Neto emphasized that Service & Support is a key growth driver, with significant investments in MROs (e.g., U.S. business jet, Dallas commercial jet facilities), projecting substantial revenue and profitability growth for the division over the next five years.

Lucas Laghi focused on the services division, asking about its future profitability profile given the increase in agnostic revenues and GTF engine contracts at OGMA, and whether margins would be lower or higher. He also sought clarification on the Q3 EBIT margin decline in services, asking if it was due to the changing revenue stream or conjunctural factors.

Answer

CFO Antonio Carlos Garcia attributed the Q3 EBIT margin decline in services to 'bad guys' (delays, credits/payments) and described it as a 'time lapse' that should normalize to a 14-15% EBIT margin for the full year. CEO Francisco Gomes Neto emphasized that Service & Support is a key growth driver, with significant investments in MROs (like the new Dallas facility and expanded U.S. business jet structure), and expects important growth in both revenues and profitability for the division over the next five years.

Lucas Laghi of XP Inc. asked about the potential for working capital optimization and free cash flow improvement resulting from the company's production leveling initiatives.

Answer

CFO Antonio Garcia acknowledged the ongoing challenge of cash flow seasonality but reiterated the full-year guidance. CEO Francisco Neto provided a long-term view, explaining the goal is to improve inventory turns from 1.6 to nearly 3.0, which could potentially release almost $1 billion from inventory over the next three years.

Lucas Laghi of XP Investments asked for an update on the strategy for securing C-390 orders in the United States, including potential partnerships and local production.

Answer

CEO Francisco Gomes Neto described the U.S. as a significant opportunity for the KC-390, confirming the aircraft is being actively showcased to U.S. officials. He affirmed that with a sizable order from the U.S. Air Force, the KC-390 would be assembled in the United States.

Lucas Laghi from XP Investimentos requested more detail on profitability drivers for the Executive and Defense divisions, asking if the current margins are sustainable.

Answer

CFO Antonio Garcia explained that Executive Aviation's Q4 margin reflects a more balanced delivery schedule compared to the prior year, which will continue. For Defense, he noted that while Q4 was strong due to specific contract milestones, it's better to view profitability on a yearly basis, which showed improvement from 5.5% in 2023 to 6.2% in 2024, a trend he expects to continue.

Lucas Laghi followed up on commercial profitability, asking if recent orders added to the backlog carry higher margins than older contracts, and how to think about the margin evolution for the E2 jets specifically.

Answer

CFO Antonio Carlos Garcia explained that current margins reflect the initial, tighter-priced E2 sales campaigns. He confirmed that newer orders, like the one from Mexicana, are accretive and will improve margins as they enter production. Future profitability will benefit from this improved backlog mix and increased operating leverage.

Asked about the specific drivers behind the market downturn in North America and the reasons for the company's market share gains in Europe, questioning if it was due to new clients or taking share from financially weaker competitors.

Answer

The company is seeing less impact in North America than the overall market but noted it's too early to know the ultimate outcome. The market share gain in Europe is broad-based across all segments and is attributed to the company's resilience, global support, innovation, and strong customer relationships, a situation they expect to continue.

Questioned if the company was capturing a margin benefit in North America from falling raw material prices. He also asked for an explanation for the differing performance between steel and aluminum wheels across North America, Europe, and South America.

Answer

A drop in raw material costs is passed through to clients, but due to inventory accounting (weighted average cost), there can be a temporary positive margin impact during a downtrend, though it's not a major driver. The different performance of steel vs. aluminum wheels across regions is not a structural shift but is driven by the specific client mix and their product cycles in each market.

Lucas Laghi asked about the North American market, seeking to understand customer inventory levels and the sustainability of the strong order backlog. He also questioned Gerdau's capital structure, specifically its comfort level with gross debt running slightly above its BRL 12 billion target.

Answer

An executive responded that the North American backlog remained robust at over 70 days into April, with no signs of customers pulling back, suggesting demand is resilient. Regarding debt, the company is not concerned with the gross debt figure, as the original policy was set under different economic conditions. The key metric, net debt to EBITDA, remains low and well within the company's comfort zone, indicating a healthy capital structure.

Lucas Laghi asked about the Q1 discrepancy between production and shipments, questioning if it was a one-off issue or a strategic inventory build. He also inquired if the Brazil export mix could improve from 20% to around 15% following the new trade quotas.

Answer

CFO Rafael Japur attributed the production/shipment mismatch partly to the recent divestment of joint ventures (which previously consumed internal steel production) and a slight slowdown in North American sales at the end of March. Regarding the export mix, he advised caution, stating that while the new quotas are positive, a significant and rapid change is not expected. CEO Gustavo Werneck added that the quotas only cover 25% of their Brazilian deliveries, and the company continues to pursue other trade defense measures like anti-dumping cases.