(Bloomberg) — Suzano SA surged to the highest level in more than a month as the world’s largest pulp supplier is expected to benefit from Brazil’s currency drop even after the move caused a large quarterly loss.
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A weaker real is seen boosting revenue from exports of the paper-making ingredient, which should more than offset an increase in debt and paper losses on certain derivatives caused by the currency move, according to Chief Financial Officer Marcelo Bacci.
“The more depreciated the currency, the more cash Suzano will generate,” Bacci said Thursday in an interview.
Shares of the Sao Paulo-based company jumped as much as 3.9% to the highest since July 5 before trimming gains in Sao Paulo trading.
Suzano surprised analysts late Thursday by reporting a 3.77 billion-real ($680 million) loss in the three months ended June. The weaker real bloated the size of the company’s foreign borrowings and eroded the market value of financial instruments such as options used to protect revenue from market fluctuations.
The Brazilian real has figured among the worst-performing currencies over the past year, losing more than 11% against the US dollar.
Suzano’s operational results were still strong as the company benefited from higher pulp prices and bigger sales volumes. A measure of profit that excludes one-time items as well as expenses such as interest and taxes jumped 60% from a year earlier to 6.29 billion reais.
“Suzano is well-positioned,” analysts at brokerage firm XP Inc. led by Lucas Laghi said in a note to clients. The weaker currency is set to “support free cash flow generation and profitability looking forward,” they added.
The company expects higher sales volumes in the coming quarters due to growing production capacity following the July start up of a new mill. That’s set to aid results even as pulp prices in top importer China have recently slid, Chief Executive Officer Joao Alberto Abreu said in the same interview.
The company is determined to keep a lid on supplies if a downturn in China demand accelerates, Leonardo Grimaldi, Suzano’s executive officer of commercial pulp and logistics, said Friday on a conference call with analysts.
–With assistance from Leda Alvim.
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