SUZ

Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management, and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to the future events, and therefore depend on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Suzano and could cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Beto Abreu. Please, you may begin your presentation.

Hi, everyone. Thank you for attending our the second quarter result call. I want to start with the highlights of the following three points. The first one, we reported solid operation results with a strong free cash flow, once again showing resilience of the business, even with more volatile geopolitical conditions. The second point that I also would like to highlight is that on July 1st, we had the Arbex closing, fully aligned with what we had previously expected in terms of timeline. The governance and the management team is already 100% in place, and now we will focus on the integration and on capturing efficiency gains of this new organization. The third point, I also would like to say that Suzano will keep the focus on reducing the TOD, the Total Operational Disbursement, and, of course, on de-leveraging the business.

I also want to take the opportunity to say that today is the last call for Aires Galhardo, our Vice President for the industry operation and also engineering. Aires is leaving a legacy of major achievements of Suzano, and we all want to wish him every success in his next journey. So thank you very much, Aires. On the next call, we will already have Carlos Aníbal as the company's Industrial and Engineering Executive Vice President. Carlos has been with us for 23 years already, has previously held the roles of Paper Business Vice President, Commercial Vice President, and also a Forestry Vice President. So huge experience in many areas of the company, and he has been both a supplier and a customer to the industrial area. So we wish him great success in this new cycle. Very welcome, Carlos.

Having said that, I will turn over to Fabio to talk about the paper business.

Thanks, Beto. Good morning, everyone. Please, let's turn to the next slide. Our the second quarter performance reflect higher sales volumes and prices, as well as lower SG&A on a quarter-over-quarter basis. These positive factors were offset by inflationary pressures on wood and oil-related products and logistics, as well as longer than expected ramp-up following our annual maintenance downtime in Pine Bluff mill. Looking at our addressable markets in Brazil, print and write demand, according to Ibá, remained stable in the the second quarter compared to the same period of last year. On a quarter-over-quarter basis, the 4% growth was driven by seasonality and higher demand for coated papers, benefiting from increased promotional and communication-related activity ahead of this year's elections. In such context, Suzano domestic print and write volumes grew 4% on a year-over-year basis and 10% on a quarter-over-quarter basis.

In the export markets, print and write demand declined 4% year-over-year in the U.S. and Europe, according to PPPC. Latin America showed stability, led by an increase in participation of Asian players in the region. Now looking at paperboard. Demand in Brazil grew 8% in the the second quarter when compared to the same period of last year, and grew 11% against the the first quarter. We noticed some customer inventory build-up in the first half of the year ahead of the implementation of paperboard price increases. Against this backdrop, Suzano domestic paperboard volumes grew 11% on a year-over-year basis and 28% on a quarter-over-quarter basis. In the U.S., according to AF&PA's data, SBS shipments grew by 11% year-over-year, albeit at an operating rate around 82%, which is softer year-over-year and stable quarter-over-quarter .

Adjusted for recent capacity closure of its Smurfit Westrock La Tuque mill, Clearwater's Cypress Bend capacity reduction, and the interruption of operations at the Nippon Dynawave facility, operating rates increases to 90% and should support better market dynamics in the second half of the year. Our Suzano Packaging sales volumes were quite stable on quarter-over-quarter and year-over-year basis. Turning to the EBITDA performance, our Brazilian operations improved 28% on a quarter-over-quarter basis, with higher volumes and better prices domestically and from our exports, despite unfavorable FX. Compared to the second quarter 2025, the EBITDA from our Brazilian operations declined 20% due to lower prices, export volumes, and FX.

Suzano Packaging EBITDA was impacted by the scheduled maintenance outage in May and operational instability returning from the outage, as well as increased costs due to the ongoing Middle East conflict, especially in oil-related imports, mainly resins and logistics. Looking ahead to Suzano's paper packaging business performance, sales volumes from our Brazilian operations tend to improve across both domestic and export markets, given historical. In the U.S., we start Q3 with a strong order book with improvements in supply and demand dynamics. We remain focused on managing inflationAires pressures related to the Middle East conflict, mainly in resin and logistics. Through initiatives already implemented or currently underway, we expect to mitigate most of these impacts going forward. Now I will hand over to Leo, who will be presenting our pulp business results.

Thanks, Fabio, and good morning, everyone. Let me highlight the main developments in our pulp business unit during Q2 2026 and share our outlook ahead. Q2 was marked by different dynamics in pulp markets. In Europe and North America, pulp demand recurrently outperformed expectations, supported by stronger paper production due to war-related effects and inventory replenishments across the value chain as customers aim to get ahead of expected cost increases. These factors led to consistent month-over-month increases in pulp prices during the quarter. In China, the narrowing softwood-hardwood price spread and the high availability of softwood pulp at Chinese ports weighed on purchasing activity from paper producers. Despite solid paper production, higher wood costs impacted integrated local producers and a greater clarity around the delayed startup of Oki 2 mill.

This unfavorable backdrop, driven primarily by softer dynamics, affected the broader pulp market and led to hardwood pulp price concessions towards quarter end. Even at lower prices, customer purchasing activity remained subdued in June. At Suzano, our Q2 was marked by constrained production output due to a concentration of planned maintenance downtimes added to our ongoing reduced operating rate, as well as an inventory rebuilding toward minimum operation levels required to support our operations, as previously discussed. As a result, our sales reached 2.9 million tons during Q2, lower compared to Q2 2025 and slightly above Q1 2026. Higher prices across all markets, combined with the recovery of delayed invoicing to China and Asia, drove our average export price to $601 per ton in the quarter.

Turning to the right side of the slide, the BRL 4.2 billion in EBITDA with a 48% margin reflected higher prices in USD, partially offset by higher cash costs and FX headwinds. Looking forward, I would like to share our view on the key factors influencing pulp market fundamentals. Market dynamics in July were quite similar to those observed at the end of the the second quarter. Healthy demand in Europe and North America, but mounting pressure in Asia for the same reasons pointed out before. As hardwood pulp prices in China approach the mid $500 range, paper producers stepped up buying activity and our July order intake returned to healthy levels. In addition, our market intelligence team indicates that hardwood pulp inventory levels remain well-balanced, both at Chinese ports and on the hand of paper producers in China.

As we move into August, we see a more constructive environment developing in Asia. Seasonal demand is expecting to strengthen. Hardwood pulp prices have moved below the cash cost of a number of Chinese producers and a wider softwood-hardwood price spread, enhance the competitiveness of hardwood grades. Together, these factors should support higher order intake volumes in China and Asia, reinforcing our confidence in a stronger second half of the year. Furthermore, the prospect of paper price increase announcements in Asia should provide additional tailwind for pulp demand in the coming months. While demand indicators are becoming more constructive, the supply side also presents potential upside risks to market fundamentals. At current CIF China price levels, a meaningful share of global pulp capacity remains under economic pressure.

According to a well-known industry consultancy, their just updated numbers, approximately 17 million tons of softwood and 5 million tons of hardwood capacity are currently operating below cash cost levels at these China prices, representing close to 30% of global market pulp production. Production curtailments announcements have reached the headlines during these past months, mostly in softwood pulp, but still insufficient to rebalance the market fundamentals. At the same time, industry profitability continues to be pressured by rising input costs, several of which are linked to ongoing geopolitical tensions.

Still on the pulp supply side of the equation, a stronger El Niño season this year may increase the likelihood of weather-related disruptions in key producing regions, with possible implications for wood availability and production costs. Together with the recent forest license revocations in Indonesia, these factors could contribute to a tighter than expected S&D scenario in the short term. To conclude, I would like to reiterate that Suzano's unmatched business platform, supported by our best-in-class assets and unique end-to-end logistics capability, provide us the agility to respond quickly to any market conditions and capture commercial opportunities. With our inventory levels already aligned with our operational needs, we remain well-positioned to navigate the ongoing volatile global environment. With that said, I would now like to invite Aires to share our cash cost performance for the quarter.

Thank you, Leo. Good morning, everyone. Cash cost excluding downtime reached BRL 843 per ton in the the second quarter of 2026, broadly in line with our guidance. The 5% sequential increase mainly reflect higher input costs, particularly natural gas, caustic soda, and chlorine dioxide, amid continued pressure from global commodity and energy markets from the conflict in the Middle East. Wood costs also increased quarter-over-quarter, mostly driven by longer cartages and mill production mix. These effects were partially offset by stronger utilities results, supported by higher export volumes, favorable FX, and fixed cost dilution from higher production volumes. The conflict in the Middle East remain a factor affecting our year-over-year cost performance, contributing to higher chemical and energy price. Wood costs were pressured by higher logistics and harvesting activities driven by transportation mix, labor, and maintenance.

These headwinds were partially offset by the same positive factors discussed in the quarter-over-quarter analysis, namely favorable FX effects and a stronger energy sales performance. In addition to the higher energy export volumes, energy price benefited from the excess energy auction related to Ribas mills, which became effective in January 2026. Beyond the information presented on the slide, I would like to provide some additional color on maintenance downtime costs. The BRL 129 per ton required in the the second quarter of 2026 mainly reflect a heavier maintenance schedule during the quarter, extending downtime at the Três Lagoas mill and the remaining impact of Ribas mill downtime that began in the the first quarter of 2026.

Looking ahead, the company remains on track to deliver an average 2026 cash cost, excluding downtime, of approximately 800 reais per ton, in line with its guidance and disclosure assumptions, supported by the gradual cash cost decline and coming contracts. I pass the word to Marcos to continue the presentation.

Thank you, Aires, and good morning, everyone. I will start on slide seven, explaining the impact of higher oil prices in our operations and the effectiveness of our hedging strategy. the the second quarter 2026, our costs increased by BRL 275 million due to higher oil-related prices, and we had a positive cash impact of nearly BRL 150 million from our hedging portfolios, compensating nearly 60% of the negative impact. Looking ahead, we have 85% of coverage over our hedgeable exposure in the second half of 2026 and 35% in 2027. As a sensitivity, if Brent prices remain at today's level of $87 per barrel, Suzano will receive a positive cash adjustment of BRL 250 million over the upcoming 18 months. Moving to slide eight, I will show that our currency portfolio continues to protect our free cash flow.

the the the second quarter 2026, we had a positive cash adjustment of BRL 480 million from our FX hedges. Our portfolio of zero cost dollars remains solid at $4.6 billion, with an average put option of BRL 6.11 per dollar, covering 57% of our U.S. dollar exposure. As a sensitivity, if the BRL remains at today's level of 5.19, Suzano will receive more than BRL 4 billion on positive cash adjustments in the upcoming 24 months. Moving to slide nine. Our positive free cash flow in the quarter contributed to reduce our net debt from $13 billion the the first quarter 2026 to $12.8 billion the the the second quarter. our leverage ticked up from 3.3x the the first quarter 2026 to 3.4x the the second quarter, namely explained by the contraction in our last 12-month EBITDA.

Following the acquisition of Arbex in the third quarter, we will consolidate 100% of Arbex net debt and only one quarter of EBITDA. But we believe that the correct way of looking at this metric will be to consider the last 12-month EBITDA of Arbex. We remain highly focused on executing our strategy to reduce Suzano's leverage following the conclusion of this transaction. Lastly, we maintain a very healthy cost of debt at 5.1% in U.S. dollars with a comfortable amortization schedule of 76 months, with limited amortizations in the short term. Important to mention that we continued our liability management effort the the second quarter 2026, and we issued BRL 2.5 billion, or $500 million in local instruments with an average tenure of nearly 11 years and a final cost 60 basis points below the Brazilian benchmark rate for the same period.

Now I'd like to turn the call to Beto for his final remarks.

Thank you, Marcos. I want to highlight three main points looking forward. The first one is that we still expecting higher demand on the second semester and then stronger sales. That's the first point. The second one is that we're still confident that we will deliver the guidance regarding the cash costs that we share with all of you. The third one is that we are already expecting efficiency gains from the Arbex operation in the second semester, since the team is already in place. Having said that, I will open for que-

We will now begin the Q&A session for investors and analysts. If you wish to ask a question, please click on Raise Hand. If your question has already been answered, you can leave the queue by clicking on Put Hand Down. Our first question comes from Caio Ribeiro with Bank of America.

Good morning. Thank you for the opportunity. My first question is on your cash cost guidance for the year, which you kept at BRL 800 per tonne, which points to a drop to levels below BRL 800 per tonne in the second half of the year to achieve that. I know that you guys are confident on achieving that, but I just wanted to see if you can share some more color on the main components of that cash cost and the variables that should help you deliver that guidance. If you can give us also some color on the general trends that you're seeing for next year, how sticky some of those cost impacts from the conflict are, that would also be great. Secondly, a question on leverage.

With the company targeting to reach that level below 2.5x that debt to EBITDA in 2027-2028, you still have to consolidate the net debt from Arbex. I just wanted to see if you can share some color on the pathway towards achieving that level. If you believe at this point that it can be reached solely with free cash flow generation in the period, or to what extent you are incorporating divestments as part of that assumption to reach that level, that would also be very helpful. Thank you.

I will start. Hi, Caio. Thank you. I will start with the leverage question. The bulk of the free cash flow generation will continue to come from our operations. We expect to generate that from our business. As Beto mentioned, we also expect Arbex to contribute on our deleveraging process as they will be able to generate efficiency gains over the upcoming quarters, namely in 2027 and in 2028. On top of that, as we started mentioning in our last Suzano Day in December last year, we are also focused on a couple of divestments on non-core assets. We mentioned to you that we will have a strategy of selling land plots in Brazil that could be sold to a higher best use than only being used by planting forestry.

We started that in the last months and last quarters, and we expect that to also help on the deleveraging process going forward.

Hi, Caio. Aires speaking here. For second semester, there are three main reasons to us expecting a decrease in our cash cost. First of all, we do not have significant downtimes at our facilities that will increase our production, delivering the deletion of the fixed costs. The second one, these downtimes normally impact other costs in the analysis because normally we bring to the general shutdown some other maintenance that we have scheduled to the year. The third most important factor, we expect a reduction of the consumption in the woods, especially because we have been totally in place our deal with Pangea that we presented in the end of last year. It will take place in a good amount, and we reduce probably our ratios and our wood consumption in the coming years. There is another important fact, that is energy.

Probably in a specific quarter, we have an increase of surplus and it will deliver a better result. For next year, I prefer Carlos be in place to say what you are waiting for coming year.

Okay. That is very clear. Thank you, gentlemen.

Our next question comes from Marcio Farid with Goldman Sachs. You can open your microphone.

Thank you. Morning, everyone. Well, first of all, Aires, I have been following your work since your Fibria times, and very well done. Congrats on the great journey on Fibria and then on Suzano. It has been truly remarkable, the operational deliveries you guys have delivered. So congrats and good luck on the next steps. I have a couple of questions. The first one on Arbex. I have seen many LinkedIn updates. Clearly, you have been moving fast in terms of putting the team together, and I am sure by now you probably have an even better idea on what the company and the assets and the markets look like versus when you did the due diligence for the acquisition. So it would be great to hear your updates, early impressions, next steps, and your ongoing conviction on the deliveries that can be expected.

Secondly, maybe on the paper side, I think Fabio mentioned China imports have been hitting the market. We have been hearing about Chinese and Indonesian imports being more harmful to the Brazilian market as well. Trying to understand if you can see actions being taken by the government in terms of tariffs and how you are positioned for that, and also if you can comment on the U.S. profitability side, that would be great as well. Thank you both.

Hi, Marcio. This is Beto. Let me go over the Arbex and then the team here will cover the other questions. I think three things that we should highlight on the Arbex deal. The first one it is that the team, I will say the clean team from Suzano and from Kimberly-Clark, have been working together during all this period of time, and they have delivered tremendous job in terms of carve-out and also in terms of writing down all the value gain streams that we had in place. All the premises that we share once we announce the deal, we want to confirm that they all are still in place. We are now focused to deliver the premise that we also share with you. The second thing is that the governance also it is working already.

We have a board already in place with three members from Suzano, two from Kimberly-Clark. They already had a first meeting. They already are working to implement the plan that we have approved. Secondly, we are very glad about the management team that we were able to put together with people from both companies and also hiring people from outside. We are confident that we have a very strong team to extract all the efficiencies that we share with you once we announce the deal. The team very confident about what we are able to build with this initiative. Thank you. Let us take the— I will hand over to Leo.

No, it is Fabio here.

To Fabio.

Marcio, thank you for your question. Let me take the first part about the Chinese imports. Yes, we have seen a big inflow of Chinese ports in the first half of the year. This is mainly given the stronger BRL for most of the first part of the year, and also lower freights that we have seen, especially in the beginning of the year. Things have changed a little bit. We have seen some price increases announced by Indonesian, Chinese paper producers. We have also seen rising freight costs, mainly with the Middle East conflict. The Brazilian real has also weakened a little bit. Let's see what happens in the second half of the year with these adjustments.

Through Ibá, the main players are discussing ways of protecting the domestic industry, looking at our import duties and see if we have the right level of import duties in order to protect what we are doing. We are discussing with the Brazilian government ways of protecting the national industry here. Your second question regarding U.S. profitability, we have had a difficult the second quarter. Part of that was expected. We had a cold maintenance outage, which is first time that we have done that in Pine Bluff. It's the one that we turn off all the utilities at the mill. We have some difficulties bringing the mill back to operations, and that affected our results in the the second quarter. We also have a delay in pricing protection.

We have 80% of our volume under contract, and our contracts, they offer some inflation protection prices, but there's a lag of three months in between when the cost hit us and when we can increase price to customers. That the second quarter was the lag period that we had higher costs and prices that will start rising now in the third quarter. We are optimistic about the second half of the year, as I mentioned. There's some things happening in the market. Our main competitor had a major accident at the mill. It's still down, not operating. That's Nippon Dynawave. We have received a very strong orders book for the second half of the year. We now need to produce well so that we can collect all these volumes that we have already in place here with us in terms of orders.

We are very positive about the second half of the year. We have no major event in terms of maintenance planned for that period. We see the mill running much better now in August already. We are optimistic.

Great. Thanks a lot, Beto and Fabio. I will turn it over.

Our next question comes from Rafael Barcellos with Bradesco BBI. Your microphone is open, sir.

Good morning. Thanks for taking my questions. Aires, thanks for the interactions over the past few years. Wishing you good luck and congrats on Aníbal for the new position. First question on pulp market. Leo, your speech seemed a bit more constructive versus what we have been hearing over the past one or two months. I just wanted to hear your thoughts on how strong you believe demand will be in the end of August as we approach a stronger demand seasonality. If you are comfortable to call where we are in hardwood pulp as the bottom. Any other comments that you can provide on the cycle could be interesting as well. The second question, Beto, on capital allocation. The company still have some potential investments going forward. You have the right to increase your share in Lenzing, in Arbex.

You also have a buyback program opened. You have this priority now to deleverage. I just wanted to hear your thoughts and your framework here on which areas you should prioritize. If you can consider any sort of asset sales to accelerate deleveraging, and your overall thoughts on how you're going to balance the buybacks, the potential investments, and this deleveraging process. Thank you.

Hi, Rafael, and good morning. Thank you for your question. Yes, indeed, we are a bit more constructive when it comes to volume allocations. As we know, second half of the year is certainly higher than the first half of the year. During this first weeks of August, all interactions that we are having with our Asian customers, and Chinese customers, obviously, are extremely positive. We expect that August order intake will exceed significantly our average order intake pattern. We are quite confident of that. We are also seeing now the first signs of integrated Chinese producers, mainly the higher cost ones, already coming to the table to start discussing a negotiation. That's always a big indication of higher volumes going forward. Regarding your question, if we see hardwood pulp reaching the bottom, obviously, we cannot give forward-looking statements.

But we are confident, as negotiations have started, that at current levels or very close to them, we will see the industry moving in China and in Asia, and consecutively in Europe and North America as well. We are very confident of a strong second half of the year.

Hi, Rafael. Thank you for your question. To be very straightforward in terms of capital allocation, our priority, it's really deleveraging. This is where we're going to focus despite rights that we might have on those deals that you mentioned before. This is also related to buyback. Again, the focus and the main priority of the company is deleveraging, and this is what we're going to focus on. Regarding asset sales, you know that we own nearly 1 million hectares in terms of land, and we have a very small part of that we call higher and best usage of the land that we might divest. Actually, we have started already

Besides that, there's no other important divestment process that we are taking into consideration at this time.

Perfect. Thank you, Beto and Leo.

Our next question comes from Daniel Sasson with Itaú BBA. Your microphone is open, sir.

Hi, everyone. Thanks for the opportunity. Before we start, I'd also like to thank Aires for all the changes we've had over the years, your constant availability to engage with us. It's really been a privilege to follow your journey across Aracruz, Fibria, and Suzano. So best of luck in your next steps. My first question, Marcos, you mentioned that you expect the internal free cash flow generation to be the main driver of your deleveraging path over the next few years, followed by some opportunities to divest from non-core assets and so on and so forth. At what time or at what point do you believe the company can rethink about its formal policy, so as to maybe send a clearer message to the market with regards to shareholders' returns? For instance, by changing its dividend policy.

Because I think that the main point of discussion we've had with investors since last night was the super strong free cash flow operating that you posted this quarter, right? Once this continues to materialize after the incorporation of Arbex, maybe you are going to start to be asked about capital allocation and so on and so forth. I would like to understand how your official policies enter into this discussion. Then maybe my second question to Leo, if you could expand a little bit more. Leo, of course, you cannot say whether you are close or not to the bottom of prices for this cycle, but if you could give us more information or more details about what you just said, that there are some high-cost integrated Chinese producers maybe considering buying market pulp, right? What are your estimates in regards to the Chinese pulp production cost?

Depending on if they use domestic wood or if they import wood chips from Vietnam, for instance, because we are seeing wood chip prices increasing across Southeast Asia in general. That would be really helpful. Thank you, everyone.

Hi, Daniel. Thank you for your question. First, I would say that we continue to be very focused on our strategy. The first point is we will continue to be never satisfied in terms of how competitive we can be in our operations. We are always looking for opportunities to improve our efficiency in all the value chain that we have. Starting from the nursery, to the forestry, to the logistics on the commercial area, in the industrial area, so on and so forth. This will be a top priority for us. We believe that this will help and contribute to generate cash to reduce our leverage. Second point, as we mentioned, we will continue to extract value from our recent growth investment that we made, and the most relevant one is Arbex for sure.

We are confident that we will be able to deliver the efficiency gains that we are expecting for that business. Last point, we should look for optionalities that we can have and that we can bring to the table as we have a replicable asset base in our hands. We start that with the land plots, as we mentioned. But we could extrapolate that into other business that we have. Of course, whenever trying to extract value from our asset base, this could take some time. We mentioned to you before that we have very strong and competitive logistic assets that we have in Brazil, replicable as well, that we could extract value from that in the future, but could take more time. For the short term, we are definitely focused on bringing the leverage to the level that we believe it is healthy for the company, 2.5x.

As we reach that, we will be able to decide on a more aggressive or not return to shareholders. I would say that the main assumption behind considering a new return to shareholder will be focused on deleveraging the company to 2.5x.

Super clear, Marcos. Thank you.

Hi, Daniel. This is Leo here. Thanks for your question. I am going to try to give color in other variables other than just wood to fundament why we see a constructive the second quarter or second half of the year with several potential upsides in the model. First, with all our market intelligence team in China and all the work we do, our current estimate of average cash costs for pulp production in China ranges from USD 535-USD 550. That is the average Chinese cash cost. Obviously, older mills operate at a higher cash cost and newer mills

at a lower cash cost. Prices, as you know, are very close to these levels and already breaching the cash cost of higher cost Chinese producers. I am not even talking about marginal cash cost because that is, in our view, around USD 630. We really think that something has to go on this global pulp scenario, as I mentioned before. I continue to say it is completely unsustainable to see an industry operating with 30% of the total production underwater. This cannot be sustained for a longer time. A bigger evidence of that is the amount of unplanned downtimes and closures announcements that we have seen so far. I have always been saying that this is one of the drivers of change. That is not in our forecasting models, but that happened and could happen in cycles like this.

Just to exemplify, the unplanned downtimes and closures last year totaled roughly 1.7 million tons adding softwood and hardwood. What we know up to today, with yesterday's announcement of Metsä Kemi, we are now reaching 2.5 million tons already. Again, that's just until yesterday. It's a 45% increase in unplanned downtimes and closures, up into August. That's almost 1 million tons of product that's now less available to markets, but in my view, still insufficient. We still need to see more closures for market to recover balance. Last but not least, it's important also to look at the inventory levels at Chinese ports. They are high indeed, but they are reducing. We see a reduction from peak of roughly 300,000 tons. In our view, that's all softwood inventories being reduced.

A few months ago, inventories of softwood represented 65% of what was available at ports based on our market info and teams on the ground. Today, we see maybe a 50/50 build up in terms of what is the Chinese stocks. Meaning that if you make the calculations, hardwood is completely on balance. There's still an overstock in softer grades, which we believe with this number of announcements of closures and expected future announcements to come under this economic scenario which I mentioned, should again reshape and rebalance Chinese inventories, and consequently, the market as well.

Thank you, Leo.

Our next question comes from Rodolfo Angeli with JPMorgan. You can open your microphone.

Good morning. I have a couple of questions. One is just to Marcos on working capital outlook. Just wanted to hear if you have any visibility on potentially freeing up some working capital, to help that process of deleveraging in the second half of the year. The main question I have is for Beto on strategy. When we discuss the investment case for Suzano, one pushback that we constantly receive is, again, because of the past, and the fears of potential opportunistic M&A shifting the focus away from deleveraging and shareholder returns into more investments. I just wanted to make the question very vocally to you, so that we can for sure clarify even better how management sees M&A as in your toolkit of potential things to do and just how you look at it as a whole. That's it from me. Thank you very much.

Hi, Rodolfo. Thank you for your question. On working capital, definitely we have a very strong focus on improving that line. This is an internal target for the company and it resounds on the never satisfied approach that we have. How can we be more effective and more efficient on our inventories? How can we be more efficient on our CapEx? So on and so forth. We will continue to look at this line with the very close eyes and looking to capture opportunities. However, I would say that there are fluctuations in that line that are very frequent, right, in most of the accounts that are relevant. Accounts receivables, accounts payable, CapEx, postponements, so on and so forth. It's very difficult to predict or to forecast anything on that line.

You can bear in mind that this is a strong focus of the management at this point in time.

Hi, Rodolfo. Thank you for your question. I have been saying that our strategy, it's very concentrated currently on, I'll call reshaping the level of competitiveness of our company. We still have a lot to do on that area in the next couple of years. The commercial team have been doing a great job in what we can call creating new demand through the fiber-to-fiber strategy.

The potential of those initiatives is still in place and is still growing. As I said, on the very short term, the nexttwo, three years, deleveraging the business. There is no M&A in the pipeline at all. This is what we are going to keep focused, and this is what we want to do. Thank you, Rodolfo, for your question.

Very clear. Thank you.

Our next question comes from Alfonso Salazar with Scotiabank. You can open a microphone, sir.

Yes. Thank you. The question that I have tries to put together some of the comments that you have made during the presentation. The fact that China is exporting more, what you mentioned about the situation in China. We know that consumption in China has been very weak recently, overall consumption, not only paper. This is something that more people are starting to think this is structural, not something cyclical, and at the same time, they are producing more. I am wondering if, at some point, are you considering what could happen if you start having over capacity and more supply in China, more exports, the need for more exports, as we have seen in many other industries. What grades and what markets you think could be more exposed? What would be the strategy?

This is important, especially as you are getting more exposure to new markets through Arbex. If you can comment on how this situation could unfold, or what are your thoughts about what we are seeing today.

This is Leo here. I'm going to answer your question, but before that, I missed. I'm going to get back to Daniel's question when he asked about the wood impact in China. Just to clarify, because I skipped that one. We are seeing today the Chinese industry using roughly 58%-60% of their needs from local wood in China, and roughly 40%-42% imported. The imported part of it, there is a price increase. As we all know, that ranges from $30-$50 from end of last year. I think in two calls ago, I mentioned that this could be a probable impact related to the revocation of the Indonesian licenses and now Indonesia importing wood from Vietnam, which is what's happening. In China, there's also an uplift in prices compared to early last year's prices of roughly $30 BDMT.

We see a lot of volatility in the short term, very related to the typhoon season. There's a big correlation of wood prices in China and these weather-related events. Every time a typhoon occurs, and obviously the recurrence of those in a strong El Niño year is higher. We see peaks every once in a while. All in all, if we consider the lowest part of this range of $30 BDMT increase, we're talking about $60 increase in the cash cost of the Chinese producers. If we consider the upper range of $50, that's a $100 per ton cash cost increase for Chinese integrated or pulp producers. That's our view on wood. Now going to Alfonso's question. This is a big dilemma, right, Alfonso? First of all, I would start by saying what I don't agree to.

We don't agree that the consumption in China in paper grades is weak. We see, in most grades, packaging and tissue, double-digit growth, demand growth in China. It is not our view that we're seeing a contraction of demand in that grades. Obviously, printing and writing grades still grow domestically. The demand for those still grow, but at a lower pace and not double digits. We're not seeing at all, in any of these grades, a trend in paper grades that point out to a negative consumption trend. It is a positive consumption trend in China, obviously excluding exports and adding imports to that. Yes, there is an overcapacity in the industry. This is not new. This is not 2026 information. This has been going on for many years or decades.

But it's important to say that there are grades that are easier to be exported, which are more efficient in logistics. I would say printing and writing and packaging grades. As you correlated to Arbex, your question and tissue. Tissue, obviously, is a product that's much harder to be exported because logistics and the cost of logistics is a key component. So it's a product that usually you would reach efficiency closer to your production basis. So risk levels differ among different grades in terms of paper production.

That's very helpful. Thank you.

The Q&A section is over. We would like to hand the floor back to Mr. Beto Abreu for his closing remarks.

Thank you very much again, all, for our the second quarter 2026 results. I want to thank you, and if there is any further question, please get in contact with our IR team. We will be keen to answer any further doubts. So thank you very much, and have a good day.

The Suzano S.A. the second quarter of 2026 conference call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good day.

That Suzano business model has distinct attributes that set it apart in the pulp and paper industry, and provide greater resiliency in the current global environment. Our consistent long-term focus and conservative financial management reduce the company exposure to risk associated with the current geopolitical landscape. For example, in international logistics, Suzano operates under long-term contracts with dedicated vessels. We have more than 50 vessels, and 10 of them fully dedicated to our operations, which protects the company against increases in freight rates and ensures reliable services to customers worldwide. Additionally, the company has inside the fence production of critical inputs for its manufacturing process, mitigating supply risk and also cost pressures. Finally, to reduce the impact of energy cost pressure linked to higher international oil price, Suzano maintains a hedge portfolio that mitigate its exposure to Brent related volatility.

During our presentation, Marcos Assumpção will give you further details about that. Turning to our results, let me start with the EBITDA of the first quarter. In our view, the numbers reflects a solid performance with volumes above first quarter of 2025 given historical seasonality compared with fourth quarter 2025, supported by higher pricing and G&A expenses that fully offset year-over-year inflation. These results are starting to show the management clear focus on strengthening the company structural competitiveness. As a highlight, I also would like to share with you that we are currently running our operation with 10% less headcount when compared with a year ago. Besides that cash production cost delivering in the first quarter of 2026 was 100% aligned with our operational plan, and also aligned with what we mentioned in the previous call.

Despite cost pressures arising from the current geopolitical environment, and based on the visibility we have today, we continue to expect our average cash costs in 2026 to be below 2025 levels. Let me move for free cash flow. The free cash flow in the first quarter of 2026 reflects specific cash flow items in the quarter. As we know, dividends payment, also the timing of interest payments under our debt schedule, and also a one-off CapEx related to the wood swap with Eldorado last year. Our capital allocation priority remains focused on further strengthening Suzano's capital structure with a clear emphasis on reducing net debt.

Before handing to the call to Fabio Almeida, I also would like to note that we are encouraged by the efficiency gains already mapped in our JV with Kimberly-Clark, which reinforce our expectation of value creation going forward and confirm the quality of the capital allocation decision underlying this partnership. Having said that, let me hand over to Fabio that will cover paper and packaging business.

Thanks, Alberto. Good morning, everyone. Looking at our markets in Brazil, printing and writing demand, according to IBÁ, increased by 3% in the 1st two months of the 1st quarter compared to the same period of last year, led by stronger coated paper demand and higher volumes of imported uncoated wood-free. International markets continue to face a challenging environment with a weaker demand and excess capacity for papers. According to PPPC, demand in mature markets declined by approximately 7%. In contrast, Latin America posts demand growth of 5% year-over-year. However, prices remained under pressure, giving very low prices from Asian producers across major markets. In paperboard, Brazilian demand grew 6% in the 1st two months of the 1st quarter when compared to the same period of last year, supported by imported improved economic activity.

In the U.S., AF&PA data shows that SBS shipments and production were broadly stable year-over-year, albeit at a lower operating rate around 82%. Production of liquid packaging board grades dropped 20% year-over-year, reflecting softer end consumer demand and inventory reduction by packaging converters during the quarter. In this context, during the first quarter, we experienced different dynamics across our Brazilian U.S. operations. While all Brazilian operations delivered stable volumes when compared to Q1 2025, we have seen lower volumes from Suzano Packaging as a result of lower demand and LPB inventory reduction at the converter's end. Turning to price performance in Q1 2026, continued to see sequential improvements at Suzano Packaging on a dollar basis, while our prices from our Brazilian operations suffered from lower export prices and FX impacts.

Our export prices were further affected by reduced shipments to the U.S. market, which used to be one of our strongest combinations of prices and volumes abroad prior to the imposition of tariffs. At EBITDA level, the 8% year-over-year decline was mainly driven by lower export prices from Brazil together with FX appreciation. Meanwhile, Suzano Packaging EBITDA delivered strong EBITDA increase of 167% year-over-year, reflecting our turnaround effects. I would like to highlight the cost improvements achieved in our Brazilian operations, which delivered 8% lower COGS per ton on a year-over-year basis and a 6% reduction on quarter-over-quarter. These gains were driven by lower cash costs across all mills and lower logistics costs, supported by our continuous focus on operational excellence.

At Suzano Packaging, costs in first quarter were impacted by higher natural gas consumption and prices during the severe winter storm in major part of the U.S. at the end of January. Total weather-related costs were estimated around $5 million. Looking ahead to the performance of Suzano's paper and packaging business, sales volumes and prices for our Brazilian and U.S. operations will improve in Q2, following the usual seasonality and with the implementation of price increases and the pass-through of cost and the indexes in our U.S. contracts. Market conditions are expected to lead paper producers to increase prices since higher raw materials, energy, and logistics costs are expected to hit paper producers hard as a result of the ongoing conflict in the Middle East.

We expect our industrial cash costs from our Brazilian operations to be stable in Q2 versus Q1, while logistics costs should trend slightly higher due to increased diesel prices and container rates. At Suzano Packaging, our annual maintenance is scheduled for early May, which will temporarily impact production costs in the quarter, in line with our business plan. We don't expect any sales impact from the annual maintenance shutdown, and we are fully committed in delivering full full-year results for Suzano Packaging better than what we did last year. I'll hand it over to Leo, who will present our Pulp business result.

Thanks, Fabio. Good morning, everyone. Let's now turn to our Pulp Business Unit, where I'd like to share with you the highlights of the first quarter of 2026, as well as my view for the upcoming months. This past quarter was marked by more balanced market fundamentals as a consequence of healthy paper production in key markets and supply-side events reducing short-term availability of hardwood pulp. In China, paper and board production, according to SEI, posted a 15% increase compared to Q1 2025, with growth across all paper segments in January and March production levels in line with the highest in record production month of 2025.

Recent supply-side developments, notably pulp production curtailment in Indonesia following the revocation of forestry licenses and a greater clarity on the delay of APP's OKI-2 project startup to year-end, meaning that no new market pulp volume will reach the market in 2026. This all has supported hardwood pulp price increases during the quarter to all markets with strong order intake levels and slightly above our forecast, resulting in continued delivery backlogs, particularly for Asian markets, including China. In this context, Suzano sold 2.84 million tons of pulp in Q1 2026, representing almost 200,000 tons increase compared to Q1 2025, which was fully consistent with our sales plan designed accordingly to market seasonality. Pulp production volumes during the quarter came in below budgeted levels due to some non-recurrent events during plant maintenance and the ramp-up following the scheduled downtimes.

As a result, we were unable to rebuild inventories throughout the quarter, and our inventory levels ended Q1 2026 quite low and flattish like year-end 2025. Our industrial teams are fully committed to gradually recover these lost volumes, mostly on the 2nd half of this year as demand picks up towards year-end. With the unfolding of the year-end war affecting logistics to key markets where we have important customers, our unique and irreplaceable logistics, as Alberto has said, enabled us to keep delivering pulp to our customers in the region, being able to surpass any eventual additional war-related surcharges to ensure pulp supply chain continuity.

Looking to the right side of our slide, the BRL 4.1 billion in EBITDA was a result on a year-over-year basis of higher volumes, lower costs, and better prices in US dollar terms, however, facing a toll from FX appreciation during the period. Compared to the previous quarter, EBITDA declined despite higher pulp prices in US dollars, primarily due to seasonality, a stronger Brazilian real, and a more intensive maintenance schedule. Looking ahead, I would like to highlight a few key points. The conflict involving Iran war has unfolded so far, uneven implications across regions and markets.

In Europe and North America, demand has exceeded our expectations with paper producers increasing their operating rates to capture temporary market opportunities amid reduced competition or longer and more expensive logistics affecting prices, as well as a surge in these markets to build up finished goods inventory on the whole value chain. This dynamic has led us to announce a new round of price increases for May, specifically directed to Europe and North America. The war has also been affecting cost structures of different pulp players in different regions as energy matrixes vary, while also raising imported wood delivery costs to key markets and impacting logistic costs and flows. Overall, supply and demand dynamics have diverged meaningfully between hardwood and softwood grades. Hardwood pulp fundamentals will remain quite balanced and healthy, a backdrop that contrasts with the current situation faced by softwood producers.

In softwood, we continue to observe high inventory levels in China, which combined to declining prices throughout the past months, result in an increasingly unsustainable environment in our view. According to a recently updated report from a well-known industry consultant, roughly 11 million tons of softwood, which is equivalent to 40% of global softwood capacity, is currently operating at a loss. Again, 40% of total softwood production is currently operating at a loss. The situation is further aggravated by higher war-related cost pressures still to impact their cost structures. These dynamics point out to a higher likelihood of commercial downtimes or permanent closures of softwood mills, especially in the Northern Hemisphere, while also incentivizing projects of de-verticalization of integrated pulp and paper producers in the western part of the world, as we have been stating before.

The ongoing convergence of hardwood and softwood pricing with different dynamics in Western and Eastern markets has increasingly shaped recent discussions with our customers as softwood market imbalances intensify competitive pressure. Our commercial strategy is structurally focused on maximizing our sales, also taking into account seasonality and regional dynamics while reinforcing the fiber substitution and expanding the addressable market for hardwood. Fostering fiber to fiber and increasing the addressable market for hardwood is totally key for us. Looking specifically into Suzano's Q2 2026 sales volumes performance compared with Q2 2025, our production output will be constrained by previously announced planned maintenance downtimes at major pulp lines, such as Três Lagoas 1 and 2, Mucuri Line 2, and Jacareí. As well as by the lower operating rates at some of our mills, resulting in almost 300,000 tons of production reduction year-over-year.

In addition, some inventory rebuild will definitely occur in Q2 2026 as we were unable to increase inventory levels in Q1. We plan to keep this rebuild in minimum possible levels. It is critical to ensure our high service level standards to our global customer base, as well as operational efficiency. To conclude, I would like to reinforce that Suzano's unmatched business platform, supported by our best-in-class assets and a unique logistics structure, provide us agility and resilience across our supply chain. This enables us to respond quickly to changing market conditions, capture commercial opportunities, and consistently maximize value, even in an increasingly volatile and uncertain global environment. We are very well prepared to navigate these rougher seas. With that said, I would like to invite Aires to address our cash cost performance during this past quarter.

Thank you, Leo. Good morning, everyone. Cash costs in the first quarter 2026, excluding stoppages, it reached BRL 802 per ton, up 3% quarter-on-quarter. The increase was mainly driven by temporary operational factors, including higher input consumption, especially auxiliary materials, reflecting the scheduled replacement calendar associated with planned shutdowns. In addition, purchased energy costs were higher due to a no recur event at mills. We also saw a temporary pressure from wood costs driven by higher specific consumption, as well as a lower fixed cost dilution following the addition of production volumes in the quarter. These effects were partially offset by a lower input price and by the 3% average depreciation of the US dollar versus the real, which reduced the costs in local currency for items such as caustic soda and natural gas.

Finally, energy sales performance improved, supported by a higher average price and the start of volumes contract in the auction for surplus energy from the Ribas do Rio Pardo mill. Importantly, there was no impact from the Middle East conflict on our cash cost in the first quarter 2026. Year-over-year, cash costs excluding stoppages decreased 7% in the first quarter 2026, driven by a combination of favorable factors. The main driver was the 10% average depreciation of the U.S. dollar against the Brazilian real, which reduced the cost of key dollar linking inputs, particularly caustic soda, natural gas and chlorine dioxide. We also benefit from the lower wood costs, reflecting a shorter average from forest to the mill distance, lower diesel prices in the harvest and transportation, and a favorable mixed effect related to wood sourcing and mill allocation.

In addition, input price excluding effects came down, especially caustic soda and natural gas, while fixed costs were also lower following reduced spending on the labor and service. Energy sales delivered a stronger result, supported by a higher average energy price, including a contribution from the previously mentioned energy auction. Look ahead to the second quarter 2026. Our initial expectation was for cash costs to be closer to the first quarter 2026, reflecting the high intensity of scheduled maintenance shutdowns according to our operation plan for the year. We now anticipate some pressure on the cash cost in the quarter related to the impacts from Middle East conflict, particularly through energy and other input markets. Our current expectation is for our cash cost in the second quarter 2026 to increase by low single digits versus first quarter 2026.

This headwind is partially mitigated by our Brent hedge portfolio, which our CFO will now address in more details. First, additionally, even with this conflict scenario, based in our assumptions that we have today, we expect to close 2026 with average cash costs lower than compared to 2024, 2025, even on nominal basis. Again, a disclaimer, this forecast is based on the assumptions for Brent and here say a year to go at $85 the Brent, and inputs that we have today. Marcos, the floor is yours.

Thank you, Aires. Good morning, everyone. I'll start my presentation explaining Suzano's exposure related to oil and also detailing our hedge portfolio, which offers a clear competitive advantage in the current volatile environment. On the left part of the slide, we show a sensitivity to the variation of Brent prices, assuming a full pass-through of all the impact of Brent to local prices, which have not occurred yet. In this case, for every $1 per barrel increase in Brent, our EBITDA will decline by BRL 47 million. However, our current net cash impact of the event of $1 per barrel increase in Brent prices is only BRL 12 million, less than 25% of the full impact that we showed in this table.

The diminished impact is explained namely by long-term diesel contracts which have not been impacted by higher oil prices yet, and most importantly, by our portfolio of hedges on oil that we built over the past two years, which will likely compensate higher costs with positive derivatives and financial results. Moving to the right part of the slide, we show our current portfolio of oil hedges, due to our exposure to shipping costs and also natural gas prices. We also use zero-cost collars for our hedges, but in this case, we buy options and we're selling put options with the same premium. Our current portfolio ranges between $57-$69 per barrel on average, which means that our cost of oil for the hedges that we made is capped at $69 per barrel.

Of course, we gave away the possibility of having lower than $57 per barrel cost, as we did the zero-cost collar. We are nearly 90% covered for our 2026 exposure. As we made in the sensitivity, if Brent prices stays at $104 per barrel, which was the level that we closed by the end of first quarter 2026, we will receive a cash adjustment of BRL 810 million over the upcoming two years. In the first quarter of 2026, we already benefited from our hedges, and we had the positive cash impact of BRL 48 million in our results due to our oil hedges. Moving to the next slide. I also like to reinforce our FX hedge portfolio, which is already offsetting the impact of BRL appreciation.

As you can see, our current portfolio stays at $5.6 billion, which means more than 60% of our FX exposure, with an average put option of $5.97 and a call option of $6.90. The chart on the right, we show our full portfolio and also the impact, the cash expected impact if the currency remains at BRL 5.22, which was the same level that we closed the first quarter of 2022. If that was the case, we will receive more than BRL 4 billion in positive cash adjustments over the upcoming quarters as well. Moving to the next slide. On the top part of the slide, we can see that our net debt increased slightly to $13 billion in this quarter, namely impacted by the dividend payment in the beginning of the year.

Also higher CapEx out payouts and a concentration of interest payments in the period. Our leverage remain relatively stable at 3.3x when measured in US dollars. Regarding our amortization schedule, we continue to have a healthy average maturity of more than six years, while we maintain our average cost at 5%, which is also a clear competitive advantage for the company. I also like to highlight that following the end of the quarter in April, we concluded two other very important transactions in the local market. We issued a CPR of near BRL 2.5 billion, nearly $500 million, with an average term of 11 years, and we swapped that into CDI, and we stayed at 96% all-in swapped cost of CDI. A very, very competitive instrument.

We were also able to issue an additional BRL 180 million in incentivized debentures with a 15-year average maturity and with even more competitive costs. Now I would like to hand it over to Alberto for his final remarks.

Thank you very much, Marcos. I think the summary of what you just said, I would say that we should have a unique portfolio, hedging portfolio for FX and Brent in the industry. I would say at least one of the most robust hedging portfolio to face the current business environment. I think this is the first thing. The second one, going back to Fabio's presentation, let me highlight one of his point, which is he is expecting sales in pricey in U.S. and Brazil improving already in the Q2. On the pulp cost, we, as we mentioned, continue to improve our performance, is showing the commitment of this management on this line of our business, not only on cash costs, but many other line of costs.

On the JV, as I mentioned, we are moving fast and the closing is estimated to be on the third quarter of 2026. A 100% alignment of what we planned. This management will keep the focus on strengthening our balance sheet, competitiveness, and also reducing our net debit. Having said that, we will open for questions. Thank you very much.

We will now begin the Q&A section for investors and analysts. If you wish to ask a question, please click on raise hand. If your question has already been answered, you can leave the queue by clicking on Put Hand Down. Our first question comes from Daniel Sasson with Itau BBA.

Hi, everyone. Thank you so much for taking my questions. My first question for Leo. I mean, since the last call, the price drivers seem broadly unchanged, Leo. I'd like to know if you agree with that. Restrictions in Indonesia, reasonably healthy Chinese demand, still somewhat tight supply. The announced price hikes have been harder to implement, right? I'd like to know if that's also your view. Digging deeper into that, what explains, you know, the main increase being focused on Europe rather than in China? How do you see, you know, the continuation of land revocations in Indonesia, the impact on pulp costs in China?

If you could give us some color on that, it would be great. My second question is actually more of a follow-up in your, from your initial speech. You haven't been able to replenish inventory levels because of the maintenance stoppages you mentioned. You also mentioned logistic challenges in the quarter. Can you please elaborate a bit more? I mean, did the logistic challenges translated into lower revenues in the first quarter that were pushed to the second quarter, or did you have any one-offs in terms of production that didn't allow you to replenish inventories as quickly as you thought you would? Those would be my questions. Thank you very much.

Hi, Daniel. This is Leo here. Thank you for your questions. On the first one, you are correct. The price drivers that I mentioned in the last call, related to hardwood are unchanged. We still see a positive demand and actually a positive surprise coming from Europe and U.S. tissue, where we see even stronger demand than we had originally forecasted. On the supply side of the equation, again, you are correct. The factors that we had pointed out are confirmed or even further confirmed, being the revocation of forestry licenses in Indonesia affecting pulp, market pulp production and availability in Q1. Also the postponement, now very clear, of OKI-2 to year-end and maybe even beginning of 2027. That is really unchanged.

Regarding implementation of price hikes, I think we have to separate the world in two. We have Eastern markets, and we have Western markets. Eastern markets, our prices have been increasing continuously since mid last year, while softwood prices have been declining continuously since mid last year. Now this price differences have reached a point where all our negotiations are much harder with our customers if we want to sustain this fiber to fiber agenda, which as I have mentioned in my speech, is a priority to us. At this time in Asia, we are being cautious. We are waiting. We understand that something has to happen in softwood. As I mentioned, 40% of the global production is bleeding as we speak.

We are not in a position to make moves that will jeopardize our overall strategy of supporting a much bigger market, an addressable market for hardwood in not only short-term, but mid and long-term. In Western markets, different than that, still the price gap between fibers allow us to keep increasing our pricing, our prices. That's why I can confirm to you all now that we have managed to implement full the $50 increase in all Western markets as we had announced, and now we are back getting prepared for this new implementation of the recently announced $50 for May. Different market conditions, depending not only on regional demand, but also in how we are positioned against softwood pulp, with the strategy of maintaining this fiber to fiber agenda.

Our lower sales in Q1 is not related to logistics impacts. It's really related to our plan. We had a very strong Q4 last year. We understand and our customer base has a seasonality where we have a lower Q1 traditionally to a Q4 of the previous year. Despite that, we were able to sell 200,000 tons above last year or Q1 2025. In terms of our plan, we were completely aligned with our sales plan, but some one-off events in the maintenance downtimes and their ramp-ups, as I have mentioned, did not allow us to make this replenishment of inventories, which was our original plan.

I have also confirmed in my speech, Aires and his team are fully devoted and aligned to recover this production, mainly on the second half of the year, which is actually good for us because that's when we have demand pickup. That would be a perfect match for us as well. That all said, we will have to do some inventory replenishment in Q2 2026. We're gonna try to keep it to a minimum possible, not to affect our overall figures, but it is necessary, and we have to do it now.

Thank you so much, Leo.

Our next question comes from Marcio Farid with Goldman Sachs.

Thank you. Morning, everyone. Leo, I think we spoke last time in China, and you mentioned the plan to try and create, you know, a business outside of China, and especially with the integrated mills pushing for a potential disintegration as well. It caught our attention. Seems like there is potential there. Just wanted to understand, you know, what is the latest there, and if you have any updates and more details you can disclose to us. Maybe second question to Alberto. Alberto, obviously, share price performance has been a disappointment.

We look at the last, you know, whatever window you wanna look, one year to date, five years, you know, share price is basically below, where, you know, even before Cerrado start up, which was a $5 billion investment, right? We speak to investor, obviously capital allocation and the leverage levels, it's, you know, two main points of attention. Obviously the sector has derated with all the structural change that we have been observing as well. I wanted to hear from you and, you know, from management from the board side, is there a level of discomfort with the recent trend?

If there is anything that can be done or you think it's a matter of market understanding that Suzano's strategy might take, you know, longer to be reflected on share price and on investors perception to what value generation is. I think it's inevitable that we discuss that given the recent trends, it would be great to hear from you. Thank you.

Hi, Marcio. This is Leo here. I would just to answer your question, do a step back so that we have all stakeholders aligned in terms of what we talked about in China. Suzano's strategy in leading the fiber to fiber agenda consists in two very clear avenues. The first one is fiber substitution itself throughout education projects, refining pilot plans, and then applying our knowledge in our customers machines and mills to be able to substitute not only softer grades, but also other kinds of fibers like U.S. mix, hardwood or bamboo or any other alternative fiber as well. That's a one of the avenues.

The second avenue is a very important one, a bit more complex in terms of timing, which is how to deverticalize integrated pulp to paper producers, right? We all know that globally, now we are reaching almost 120 million tons of pulp to paper or packaging vertical lines producers. A big part of that is on Western markets, and a big part of that are old mills. Very old mills or old mills which are being pressured for a quite a while now in terms of their cost structures, in terms of pulp production. I would say that even further pressure now with war related cost pressure. This is a key part of our strategy.

We have been engaging with several of these players, very known in their markets. The idea is to together with them discuss an alternative route where they are becoming more asset light, shutting down their pulp productions and Suzano being able to virtually integrate with them as their solution in terms of pulp supply, making them more competitive in this challenging and competitive world ahead of us and ahead of them. Projects are ongoing. These are longer maturity projects than the first avenue of fiber to fiber. We are in the imminence of confirm the first project, and we are gonna give full visibility obviously when that happens.

Because I personally believe that this hero case will show not only to the customers that we have already engaged with, but several others that there is a possibility, there is an alternative to verticalization which is happening in Asia.

Marcio, thank you for your question. A couple of things regarding your question. The first one, of course, the management is not comfortable with the share price. I think there's a couple of things that's related to that. Firstly, we don't think it's aligned with the robustness of the business. That's the first thing. There's not a single reason, of course. For sure the FX situation and the geopolitical moment, it's something that for sure affects. We see here in the management when we look the base that we have in terms of asset, in terms of asset portfolio, in terms of logistic, in terms of the trend of our cost.

Let's look for the trend and how do we see this in the mid long term, and not only about cash costs, but also all the other line of cost. We see a very robust and resilient business to face the moment and in the very, and I would say in the mid long term, we see a positive trend for the business despite the current situation. Based on that, regarding capital allocation, of course, on those moment, despite our focus on deleveraging the business that I have been saying and also reducing our net debt, buybacks is always an alternative.

In a moment like that, of course, we are analyzing right now that possibility, since it's regional level that we have to consider this kind of alternative. We also must take into account our track record on capital allocation. This is the way that we should be moving with the discipline and concentrated again on the elements that I just mentioned and extracting value from the investment that we made. Having said that, I do not foresee, just to clarify, any kind of movement that can impact our cash. Our, I would say inorganic move that can impact our cash in the next coming years.

Again, to keep very disciplined, and maintain the track record that we that we have been seeing on capital allocation. Thank you very much, Marcio, for the question.

Thanks, Alberto. Maybe a quick follow-up to Leo. Leo, you mentioned you wanna replenish inventories. In our calculation, you should have been lost about 160,000 tons of production from capacity already considering the 400,000 tons that you lost. But by the numbers reported, it seems like you lost 400,000 tons. You have not recovered any inventories, which might suggest that the downtimes were much longer than expected. You're talking about, you know, replenishing inventories on a even more aggressive downtime in the 2nd quarter, which means sales are gonna be even weaker. Is that the right way to think about it? Was the downtime more aggressive than expected in the 1st quarter? Thank you. Thank you, Alberto, again.

Marcio, thanks for your analysis and questions, but unfortunately, we do not close our production figures nor our inventory figures for the past quarter, and also not looking and going forward. What I can tell you is that despite the concentrated maintenance downtime seasons that we have now even further in Q2 2026, which we had zero, by the way, in Q2 2025. The need to reestablish inventories and we will push that to the minimum possible levels. The sales output in Q2 tends to be above what we have performed now in Q1 2026. Again, this is not a guidance. It's just to show the trend that we are seeing here at Suzano.

Obviously due to the implementation of the price increase rounds that I have mentioned previously in our backlogs, we see a much better also pricing in Q2 compared to Q1 2026. All this in US dollar terms, obviously.

Great. Thank you very much.

Our next question comes from Rafael Barcellos with Bradesco BBI.

Hello, good morning. Thanks for taking my questions. Alberto, Marcos, in recent months you announced a buyback program, right? I understand that the company is now running with a leverage level which is above of where you feel comfortable. Other than that, you have the KC disbursements in the 3Q. When do you think that you'll be ready to start accelerating the execution of the program? You just, you know, discussed, you know, how low the shares are at the moment and so on. So just wanted to understand, I mean, when you believe you'll be ready to accelerate the program. Given, and that said, I would say that there's any sort of asset sales that you could use to accelerate the deleveraging process.

Just going back to the dividend policy question. I mean, if you see any room for a discussion of a more robust dividend policy in the company. My second question. Leo, sorry for one more question on pulp markets, you know, last quarter market a big change in your tone about pulp markets, right? I mean, you were clearly much more positive versus the previous quarters. I just wanted to, you know, wrapping up everything that you just said here in the call. I mean, you mentioned that Western markets are going up, prices are going up. Eastern markets, then you've seen more challenges, but you're still not seeing any sort of downward pressure on prices in Eastern markets, right?

I just wanted to, if you can wrap up, I'm understanding that in Western markets, you're still seeing good trends. Eastern markets, kind of mixed, but so far, you know, stable prices in the Eastern markets. If you can just wrap up, your views could be helpful. Thanks a lot.

Hi, Rafael. Thank you for your question. Marcos here. Regarding buybacks, I think Alberto already mentioned, we are already analyzing. It's, for sure it's, an interesting capital allocation for the company. We always look at that considering our leverage levels, but we also consider the valuation levels of the company as well. We would like to highlight and reemphasize that we continue to be one of the companies in our sector with the highest free cash flow yields, with nearly 14% as we included in our report. We also look at our valuation levels. We're trading well below our historical valuation levels. Definitely this is an option for us.

Regarding dividends, we would rather have a lower and more normalized leverage level before changing our dividend policy. We see room in the future as we deleverage to improve dividend payout, but that's not being discussed at the moment.

Okay. Rafa, this is Leo here. First, you really don't need to be sorry for sending us questions. We are well prepared, you guys can keep coming and keep sending us the pulp questions at all means. I think, Rafa, that the big change compared to our last quarter's call is really the trend that's going on on softwood, which has been deteriorating further than what we had already been seeing three months ago. It's impressive to say, as I have mentioned in my speech, that 40% of this industry, of the softwood pulp producers today have cash costs above current market prices, 40%.

This is a big change to the model, and as we want to be supportive to the fiber-to-fiber strategy, as I mentioned, this changes a bit, the tactic, in order how to navigate, especially in China, right? Because in Europe the situation, and also the U.S. is different, as I have mentioned. Just a quick sum up then as you asked. The war has been in fact resulting in different dynamics in different markets. Softwood scenario is unsustainable and has been an increasing headwind to our pricing strategy, especially in China and in Asia. In China, we are cautious to be able to support our commercial strategy and keep pushing this fiber-to-fiber agenda.

In Western markets we have a heated up demand, a bit over what we had expected or over what we have expected originally. Market dynamics have been changing quickly now further challenged by the Iran war. I am really confident that we at Suzano are the best position to navigate any scenario ahead of us.

Okay. Just a quick follow-up, Marcos. Would you consider any sort of asset sales to accelerate the deleveraging process?

Yes. We are analyzing, as we mentioned even in our Suzano Day last year, a couple of divestitures, mainly for non-core assets. I would say that land plots that could be measured or valued at square meter, not at hectares, for example, is a first option for us. The high best use for our land. This is one of the things that we have been considering, but there could be other options as well that we have been analyzing in order to reduce our leverage even quicker.

Okay. Thank you. Thanks a lot.

Our next question comes from Leo Correa with BTG.

Good morning, everyone. Thank you. A couple of pending numerical questions for me. Just first, reverting back to the cost discussion, right, Aires. You talked about a bit of a guidance, right, for the second quarter, which is of an increase, mid-single digits, vis-à-vis the first quarter, right? Which is probably gonna put things above BRL 900 per ton pulp cash cost. I remember some months ago that you guys gave some indications of cash cost levels for 2026 of about BRL 800. Since then, of course, a lot has changed. I think as Marcos explained, the hedges have been working very well and very well executed, clearly a lot of protection there.

Still many moving parts and of course, the base is very high. My question is: Can that indication of BRL 800 still be maintained, or you would say the numbers for 2026 are up for some discussions and probably higher levels? The second question, again, sorry for the detail. I know this is something that you already said in the introduction was a one-off, right? The CapEx at Suzano specifically has been an issue for investors over many years, right? They're still high number and above maintenance levels. The BRL 3 billion here is above the guidance for the year of BRL 10.9 billion.

I can assume the guidance is still maintained and that the levels going forward will drop and things will normalize. I just wanted to double check on that. Thanks.

Leo, this is Alberto. Let me take the second question, and then I will hand over to Galhardo. Very simple. I just wanna mention that the CapEx guidance is completely maintained. There's no change on that. By the way, we also, as I mentioned before, see a trend of lower CapEx in the next coming years. This is absolutely aligned with our plan. Okay. On the cash costs for the second quarter, let me hand over to Aires.

Hi, Leo. First of all, I said that they're low in the middle, single digit to the 2nd quarter, ex downtimes. That's was in my speech. We remain our targets, our focus on keep our cash costs close to 800 BRL per ton ex downtimes for full year. As I mentioned, our assumptions at this moment in the cash costs, especially to Brent, is $85 per barrel year to go. That's important to note that our hedges don't enter in this line in our balance sheets. Coming in other line that Marcos present. I am consider here this level of BRL 805 per Brent. If you have more, it could impact negatively the cash costs.

Okay. Thank you very much. Understood.

Our next question comes from Caio Greiner with UBS.

Hello. Good morning, everyone. Thank you. Leo, just going back to the point on the current pulp backdrop, and more specifically about the China and Western markets divergence. I wanted to explore a little bit more the weakness in China specifically, because I think it's a little bit hard to understand considering that we're seeing strong level of paper demand. We're seeing wood chip prices on the rise. I think the only point that I caught from your speech that there was the main source of weakness was the war impact. Is that right? Is that the main point as to why you're seeing such weakness in China?

In other words, if we were to see the war to end shortly, would we be able to see a reason for pulp to go back on the rise? Then specifically on softwood, again, why do you think that we're seeing such weakness on softwood markets versus hardwood, specifically in China? Considering that we're even seeing cost inflation, we're even seeing pine wood chip prices on the rise. I think maybe something a little bit more specific to China would be really helpful to us. Then the second point on wood chips, again, not only pine chips, but wood chip prices in general have been on the rise already $30-$40 per ton higher versus 2025 lows.

Again, we understand the slightly tighter operating environment in China with some capacity restarts, new capacity starting up, lower exports out of Indonesia. I wanted you to explore two points here on wood chips markets for us. How do you see this backdrop impacting both fundamentals and prices going forward? If you see this upward trend as something more structural or more of a short-term impact. Thank you very much.

Okay. Caio. Leo here. I'm gonna answer both questions. First, regarding China and what's going on there. Yeah, you're right. The demand is positive. Paper production has been performing very well, as I mentioned, 15% over what happened in Q1 2025. Domestic consumption is good. Exports have actually even been increasing as well. All these indexes or KPIs related to paper production and consequently pulp demand are positive. Now, I will have to split the answer in two, first analyzing hardwood and then softwood. On hardwood we have balanced inventories, even trending a bit low. We are seeing a lower trend of imports going into China, meaning that this balanced inventories could even tighten up a bit.

We had on the supply side of the equation, these two major events being the Indonesian curtailment, and also the postponement of OKI taking place. That gives a very favorable condition, of which or for which we have been exploring month by month in Q1 and increasing prices in China, inclusive. When we look at softwood, the situation is different. First looking at the supply side, despite there obviously were not any new projects in the pipeline, we still have not seen accelerated amount of commercial downtimes or planned or permanent downtimes. Numbers are trending still very low. It seems that producers are still keeping decisions in terms of what to do looking forward, despite, again, 40% of them are losing money as we speak.

There were no supply adjustments. On demand side, you had two effects directly hitting softwood. First is fiber to fiber and the successful execution of our plan and other plans as our competitors as well. It's not only an exclusive to Suzano. It's, it's definitely, hardwood has been gaining throughout this year's space that was previously occupied by softwood. Second is the fact that with the softwood chips now available in China since approximately beginning of last year, we have also been observing roughly 1.6, 1.8 million tons of annual softwood now being produced in China, with costs very similar to hardwood pulp costs as well. This obviously occupies space that was previously being supplied by softwood.

The big difference to the model is coming from the softwood side of the equation. Obviously, if we were the only fiber, fundamentals would lead us to keep pushing prices up as per our plan. As we are not the only ones, and softwood keeps declining and approaching our prices, it is obviously a headwind that we have to pay attention, especially if we want to foster the fiber to fiber agenda, which we will foster. Meaning that we have to be cautious and how can I say? And hold the anxiety of trying to make moves that will further compromise or that could further compromise us in the midterm. I'm gonna move to your wood related question.

As we have been mentioning since Suzano Day, on December 11 last year, we at Suzano see that there's enough wood in China to support the new projects upgoing in this country. The upstream verticalization projects. However, the big question mark is the prices of this wood to be able to supply not only the new projects, but also now with a further pressure from the full restart of Chenming's operation and pulp production, obviously integrated, as well. That will keep putting pressure on the market. We have been seeing wood prices going up even before what we see are impacts of the Iran war and logistic costs.

Wood in China, domestic wood has been increasing $10-$20 the bone-dry metric ton, and imported wood has been increasing anywhere from $25-$35, $40 per metric ton. Obviously that puts a pressure and brings their cost structure up, and it is our view that this will be further incentivized as more and more of these projects are, have their go live. It's important to say that when we analyze what's going on today, based on 2024 production, our numbers point out that now producers occupy roughly 15%-18% of the wood basket today available in China.

As I have been saying before, just with the confirmed projects, that would move up to 40-ish % level and with the unconfirmed projects that would move up to almost 80% of the wood basket. Obviously, this analysis does not consider that they are going to import more and more volumes of wood chips as well. All based on 100% China-based wood supply. On the other side of the equation, it's important that other uses, other sectors also use Chinese wood. When we add up the furniture, the packaging and logistics, the forms work or directly linked to constructions segments, these segments traditionally used to use almost 90% of this wood basket available.

We see obviously as a result of the lower real estate market that they now use roughly 70%, that's our number, in terms of this wood basket available. Clearly there's gonna be a shock in the short term, right? As these projects in pulp continue to be deployed. Again, they are at roughly at 20% now, and as they keep increasing, this will put a lot of pressure on this wood supply and dimensionary in China, and we expect that this will keep moving up, and then obviously their cash costs will keep moving up consequently as well.

Thank you very much, Leo.

Our next question comes from Caio Ribeiro with Bank of America.

All right. Good morning, everyone. Thank you for the opportunity. I have another question on the pulp market, which is a little bit more longer-term structural in nature, touching on some of the topics that you mentioned in your previous response, Leo, maybe to dive a little bit deeper, right? I mean, you mentioned that 40% of the softwood production right now is underwater, clearly, you know, something has got to give there. Looking at the hardwood side of things and downstream side of the market, right, we continue to see potential new hardwood market pulp projects contemplated, other projects already confirmed and being built up even at lower pulp prices, which you can argue that maybe the returns aren't there to justify those projects, they're happening anyway.

Meanwhile, you know, there's integrated capacity additions in China that also keep coming and which generate implications for organic demand growth for market pulp, as Suzano has been flagging, right, in recent presentations. It also hampers downstream pricing power as well in China, right? My question to you is what in your view would be, you know, the main catalyst? I mean, what really needs to change in the market that could alter this trend, right? Reverse this recurring wave of supply additions, both on the market pulp side of things and integrated side of things in China. Secondly, you know, a different topic here, as you look at your operations today, do you see any additional opportunities in your current assets to repurpose some of those assets, right?

To shift diversifying to other grades, perhaps, you know, reducing your exposure to hardwood market pulp that way, and adding products that have, you know, less correlation with drivers for paper grade pulp like dissolving wood pulp, for example. Those would be my two questions. Thank you.

Okay, Caio, thank you for your question. Looking long-term, as we have been presenting, we see a oversupply scenario in the pulp markets, despite a constructive view on the increasing demand for pulp. Obviously, due to the fact that we have a headwind coming from verticalization in Asia, as well as at for the moment, two projects by OKI and Arauco confirmed in the pipeline going forward. These two by themselves already create a scenario of oversupply. As I have mentioned, we see that rebalancing factors can come, as I also have already said, in one of these four dimensions.

First is a recovery of permanent closures, as we had seen three, four, five years ago happening and especially in softwood assets. Again, as we have mentioned, it seems unsustainable that this much percentage of the global production is bleeding as we speak. The returning to previous patterns of permanent closures will be one of the key parts to rebalance the total market. The second is a higher amount of commercial related or unexpected downtimes. We are tracking that weekly. We see that growing over 2025, but still not to the levels of 2023 and 2024.

I, as I have mentioned in one of the previous questions, most of this still is hardwood, believe it or not. We have to see, or it's reasonable to understand that this kind of decisions will have to be seen on softwood assets as well. Third is the time to market of projects. On this more challenging market scenarios, projects and their time to markets which were previously announced can be reviewed, and this is a case that we have seen for OKI-2, and that can happen to other pulp projects, but also to other verticalization projects in China, which are very much concentrated now.

We have a big cycle in the fourth quarter of 2026, but it is very unclear and grayish to say when they are actually going to go live and come to market. Fourth, which was Marcio's question, is the unverticalization trend. This is something that we really believe that's going to happen. There's a huge amount, millions and millions of tons of the industry, which is verticalized pulp into paper packaging. It doesn't make sense. Their production costs are way higher than average historic pulp prices. We really believe that in the Western markets, we are gonna see this wave of de-verticalization happening in the months to come. I hope that Suzano is the one that will be able to confirm the first of this project.

Again, one of the four, two of the four, three of the four or these four factors can add up and change market dynamics to rebalance markets going forward. Again, sorry, you asked about repurposing assets. Yes, we can do that. We're actually doing that as we speak. You know, we have just confirmed, we started the fluff production at our Limeira, São Paulo site. That used to be solely a paper-grade pulp line, and it's now producing fluff pulp, and we could do that in other locations as well, as well as other alternative kind of pulp fibers like unbleached kraft and other grades as well. Yes, it is an alternative, and we're always looking how to tackle this kind of opportunities.

Perfect. That's very clear. Appreciate that, Leo.

Thank you. The Q&A section is over. We would like to hand the floor back to Mr. Alberto Abreu for his final remarks.

Thank you very much for all of you. I actually will take the opportunity of final remarks and to complement a few things on Caio's question to Leo regarding a little bit more about the mid, long-term view. Besides what Leo said, Caio, regarding permanent closing that might happen, shutdowns, even de-integration in the western part of the world, we have to share with you that in moments with the level of volatility that we have on the FX side, also on the geopolitical side, the level of confidence that the management has regarding how resilience and the level of robustness of our business increase. When we look about the mid, long term, besides those things, we also have to consider that consolidation might happen.

Relatively you have to analyze and see who will be prepared, more prepared in the situation like that because that's a natural consequence of a scenario that might happen. We have different scenario. We have optimist, middle and more, let's say, worst case scenario, and we have to be prepared for any one of them. Just to add those comments on the final remarks. Thank you very much for all of you and any question, any further question, the RI team will be fully available. Thank you very much.

The Suzano S.A. first quarter of the 2026 conference call is concluded. The Investor Relations Department is available to answer further questions you may have. Thank you and have a good day.