Fixed Income team
In 2018, Suzano acquired its second-biggest competitor in the Brazilian market, pulp producer, Fibria. This was a cash and shares transaction and required Suzano to take on an additional $9.2bn in debt. This led to a rise in its net leverage to 3.1x in USD at end of the year.
Although many investors could have seen the acquisition as a growth story involving greater financial risk, we saw the situation differently. The real potential for Suzano’s business profile to improve, combined with strong cash flows, well-signposted financial policy and potential benefits through synergies, meant that we took a positive view on the company’s credit profile.
Credit-rating agencies agreed. Standard & Poor’s, for instance, upgraded Suzano to investment-grade status immediately after the merger.
Today, the company is strengthening its disclosure on impacts concerning water, raw materials, energy, chemicals use. It has recently issued a sustainability-linked bond.
Looking ahead, we see opportunity in three key ESG-related areas:
- The new bio-economy as a principal long-term commercial driver (SDG 9)
- Sustainable forestry ecosystems management; carbon sequestration to get from net zero to net negative (SDGs 13, 15)
- Enhancing land-based community livelihoods in areas of operation (SDGs 8, 11, 17)
This information does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.