Suzano's Arbex Integration and Pulp Market Crossroads: A Deliberate Pivot to Deleveraging
Q2 2026 earnings highlight a completed acquisition, a cautious pulp outlook, and a firm commitment to balance sheet repair.
SUZ · Earnings Call · 2026-08-13
Arbex: The Integration Begins
The centerpiece of Suzano's second-quarter 2026 report is the closing of the Arbex transaction on July 1, exactly as scheduled. CEO Beto Abreu framed it as a disciplined execution milestone, noting that "the governance and the management team is already 100% in place" (component 8984191478907473210). In the Q&A, he elaborated that the clean teams from both Suzano and Kimberly-Clark had already "delivered tremendous job in terms of carve-out" and that all the value-capture premises from the announcement remain intact: “We are now focused to deliver the premise that we also shared with you.” — João Fernandez de Abreu · 2026-08-13 The company keyword history shows Arbex spiking to its highest momentum in any quarter (294), a clear company-unique theme. This is not boilerplate; it is a strategic pivot that will absorb management attention for the next two years. The integration is expected to deliver efficiency gains in the second half of 2026, with the full benefit landing in 2027–28. As CFO Marcos Assumpcao put it, "we expect Arbex to contribute on our deleveraging process as they will be able to generate efficiency gains over the upcoming quarters" (component 7109840615113530157).The Pulp Market Crossroads
Suzano's pulp business is navigating a bifurcated market. Demand in Europe and North America has been robust, but China remains the swing factor. Leonardo Grimaldi, head of pulp, painted a constructive picture for the second half: “We expect that August order intake will exceed significantly our average order intake pattern.” — Leonardo Grimaldi, Executive · 2026-08-13 He cited seasonality, a narrowing of the hardwood-softwood price spread, and the fact that hardwood prices have moved below the cash cost of many Chinese producers. Yet the global backdrop is tense, with the Middle East conflict pushing up input costs and a strong El Niño season threatening wood availability. The pulp market remains structurally oversupplied, but the company argues that curtailments are accelerating. Leo noted that unplanned downtimes and closures have already reached 2.5 million tons, a 45% increase year-to-date, and he sees more to come. Still, the company's own cash cost rose 5% sequentially to BRL 843/t, driven by higher natural gas, caustic soda, and chlorine dioxide prices. Management reaffirmed the full-year 2026 cash cost guidance of around BRL 800/t, pointing to a sharp decline in the second half as downtime normalizes and the Pangeia wood deal reduces consumption. The Middle East conflict is a recurring theme across the market, and Suzano is mitigating it with a robust hedging program. Marcos quantified the impact: oil-related costs were up BRL 275 million in the quarter, but hedging recovered nearly 60% of that. The FX portfolio also delivered BRL 480 million in positive cash adjustments. "We continue to be very focused on our strategy," Marcos said, adding that the company is "ever satisfied in terms of how competitive we can be in our operations" (component 1648426507293765568).Staying the Course on Deleveraging
Capital allocation is now entirely subordinated to the balance sheet. The company's net debt ticked down from $13 billion to $12.8 billion, but leverage rose to 3.4x due to lower trailing EBITDA. Management reiterated its ambition to reach below 2.5x by 2027–28, primarily through operational free cash flow. "We are definitely focused on bringing the leverage to the level that we believe it's healthy for the company, 2.5x," Marcos said (component 1648426507293765568). CEO Beto Abreu was emphatic that no M&A is under consideration:That message echoes prior quarters. In February 2026, Beto said, "The deleverage plan for the company, it's not related to any divestment" (component 809768517830357966), and in November 2025, Leo called the pulp market scenario "completely unsustainable" (component 6379090506357405499). What has changed is the intensity: Arbex is now a reality, and the focus has shifted to integration and cash generation. Suzano also sees optionality in noncore asset sales, particularly land plots designated for higher-best-use. The company owns nearly 1 million hectares, and a small portion could be monetized. "We have a small part of that, very small part of that, that we call higher and best usage of the land," Beto said, adding they have already started (component 7284815833227243008). For shareholders, the message is patience. The free cash flow is strong, but every incremental dollar goes toward reducing leverage. The company is not considering a change in dividend policy or an aggressive buyback until it hits its target. As Marcos noted, "As we reach that, we will be able to decide on a more aggressive or not return to shareholders" (component 1648426507293765568). Suzano's story this quarter is less about a sudden shock and more about a deliberate, multi-quarter pivot. The deleveraging is real, the integration is underway, and the pulp market, while fragile, is showing signs of a floor. The company's resilience is evident in its operational performance and its ability to manage geopolitical fallout through hedging. What matters most from here is execution—delivering the Arbex synergies and maintaining cost discipline in a volatile environment.There's no M&A in the pipeline at all. So this is what we're going to keep focused.