Fitch affirms 'AA-(bra)' rating on Suzano Papel e Celulose S.A.
05 Dec '07
4 min read
Suzano generated BRL1.082 billion of EBITDA during the LTM ended Sept. 30, 2007 and BRL1.043 billion of cash flow from operations (CFO). These figures represented increases from BRL1.040 billion of EBITDA and BRL880 million of CFO during 2006.
The improvement in Suzano's operating figures were primarily a result of higher prices for its products. Suzano spent BRL3.254 billion on capital expenditures between January 2006 and September 2007, with most directed toward the construction of the Mucuri pulp mill.
As a result, Suzano's free cash flow, defined as CFO less dividends and capital expenditures, was negative BRL738 million during the LTM ended Sept. 30, 2007 and negative BRL1.526 billion during 2006.
At the end of September 2007, Suzano had BRL5.581 of debt, an increase from BRL5.444 billion as of Dec. 31, 2006. Suzano's cash and marketable securities balance fell to BRL1.337 billion from BRL1.500 billion during the same timeframe.
Liquidity is manageable with only BRL646 million of debt falling due during the next 12 months. Suzano's LTM total debt to EBITDA ratio was 5.2 times (x) while its net debt to EBITDA ratio was at 3.8x. These credit protection measures are weak for the 'AA-(bra)' rating category.
At current prices, output from the Mucuri mill should boost Suzano's EBITDA by more than BRL700 million per year. On a pro-forma basis, this would lower Suzano's total leverage ratio to 3.1x and its net leverage ratio to 2.4x, levels that are consistent with the rating category.
The Feffer family owns 100% of Suzano's voting shares and 50.1% of its total capital through Suzano Holding. BNDES is the second largest shareholder, owning 11.1% of Suzano's shares. About 35% of Suzano's capital is publicly traded.
Suzano supports its production facilities with fiber from the eucalyptus plantations it owns in the states of Bahia, Maranhao, Minas Gerais and Sao Paulo. As of September 2007, Suzano owned 423,000 hectares of land and had developed eucalyptus plantations on 227,000 hectares of this land.
Suzano also has access to pulpwood from 90,000 hectares that have been leased and 75,000 hectares of land that have been developed with hardwood plantations in conjunction with third parties as part of the Landowners Assistance Program.
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