Fitch affirms 'AA-(bra)' rating on Suzano Papel e Celulose S.A.
05 Dec '07
4 min read
Fitch Ratings has affirmed the 'AA-(bra)' national scale rating of Suzano Papel e Celulose S.A.'s (Suzano). Fitch has also affirmed the 'AA-(bra)' ratings of Suzano's Brazilian real (BRL) denominated debentures due in 2012 and 2014. The Rating Outlook is Stable.
Suzano's credit ratings are supported by the company's leading position in Brazil's printing and writing paper and paperboard markets. They also reflect the strength of Suzano's bleached eucalyptus kraft market pulp (BEKP) operations.
Further factored into the credit rating of Suzano is its large forestry base, which assures it of a competitive production cost structure in the future and provides it with organic growth opportunities.
Suzano is the leading producer of coated and uncoated printing and writing paper in Brazil with a market share of approximately 28%. It is also the largest producer of cartonboard in Brazil with a market share of 32%.
Paper products accounted for 58% of Suzano's revenues during the latest twelve months (LTM) ended Sept. 30, 2007, while cartonboard represented 18% of sales. Suzano's leading positions in these products plus the lack of a strong presence of imported products, allows the company to be a price leader.
Market pulp sales accounted for only 24% of Suzano's sales during the LTM. It was an important generator of foreign exchange, however, accounting for 43% of the company's exports. Positively from a credit perspective, within the next 12 months, pulp will become a more important component of Suzano's revenue mix and exports will increase.
Suzano started production of pulp during September 2007 at a new mill located at Mucuri that will increase its market pulp capacity from about 640,000 tons in 2006 to 1.640 million tons in 2008.
Like other producer of hardwood pulp in Brazil, Suzano enjoys a production cost structure that is among the lowest in the world. This enables Suzano to generate positive cash flows during troughs in the pulp and paper cycle.
Suzano's competitive advantage is viewed as sustainable, because its cost structure is low due to its access to inexpensive fiber, which it sources from its eucalyptus plantations, low labor costs and inexpensive energy.
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