Exhibit 99.1
| Suzano S.A. | |
 | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED BALANCE SHEET
| ASSET | Note | March 31, 2020 | December 31, 2019 | |||||||||
| CURRENT | ||||||||||||
| Cash and cash equivalents | 5 | 4,548,329 | 3,249,127 | |||||||||
| Marketable securities | 6 | 5,009,160 | 6,150,631 | |||||||||
| Trade accounts receivable | 7 | 4,447,957 | 3,035,817 | |||||||||
| Inventories | 8 | 4,262,511 | 4,685,595 | |||||||||
| Recoverable taxes | 9 | 836,043 | 997,201 | |||||||||
| Derivative financial instruments | 4 | 128,845 | 260,273 | |||||||||
| Advances to suppliers | 10 | 158,740 | 170,481 | |||||||||
| Other assets | 266,231 | 335,112 | ||||||||||
| Total current assets | 19,657,816 | 18,884,237 | ||||||||||
| NON CURRENT | ||||||||||||
| Marketable securities | 6 | 181,564 | 179,703 | |||||||||
| Recoverable taxes | 9 | 679,779 | 708,914 | |||||||||
| Deferred taxes | 12 | 9,363,252 | 2,134,040 | |||||||||
| Derivative financial instruments | 4 | 959,549 | 838,699 | |||||||||
| Advances to suppliers | 10 | 1,212,713 | 1,087,149 | |||||||||
| Judicial deposits | 267,338 | 268,672 | ||||||||||
| Other assets | 235,810 | 228,881 | ||||||||||
| Biological assets | 13 | 10,431,416 | 10,571,499 | |||||||||
| Investments | 14 | 326,879 | 322,446 | |||||||||
| Property, plant and equipment | 15 | 40,701,410 | 41,120,945 | |||||||||
| Right of use | 19.1 | 3,956,304 | 3,850,237 | |||||||||
| Intangible | 16 | 17,468,599 | 17,712,803 | |||||||||
| Total non-current | 85,784,613 | 79,023,988 | ||||||||||
| TOTAL ASSET | 105,442,429 | 97,908,225 | ||||||||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED BALANCE SHEET
| LIABILITIES | Note | March 31, 2020 | December 31, 2019 | |||||||||
| CURRENT | ||||||||||||
| Trade accounts payable | 17 | 2,408,286 | 2,376,459 | |||||||||
| Loans, financing and debentures | 18.1 | 6,523,908 | 6,227,951 | |||||||||
| Lease liabilities | 19.2 | 664,651 | 656,844 | |||||||||
| Derivative financial instruments | 4.5 | 4,642,367 | 893,413 | |||||||||
| Taxes payable | 226,565 | 307,639 | ||||||||||
| Payroll and charges | 308,756 | 400,435 | ||||||||||
| Liabilities for assets acquisitions and subsidiaries | 23 | 116,792 | 94,414 | |||||||||
| Dividends payable | 5,714 | 5,720 | ||||||||||
| Advance from customers | 67,897 | 59,982 | ||||||||||
| Other liabilities | 302,903 | 456,338 | ||||||||||
| Total current liabilities | 15,267,839 | 11,479,195 | ||||||||||
| NON CURRENT | ||||||||||||
| Loans, financing and debentures | 18.1 | 69,257,752 | 57,456,375 | |||||||||
| Lease liabilities | 19.2 | 4,062,710 | 3,327,226 | |||||||||
| Derivative financial instruments | 4.5 | 7,150,959 | 2,024,500 | |||||||||
| Liabilities for assets acquisitions and subsidiaries | 23 | 516,979 | 447,201 | |||||||||
| Provision for judicial liabilities | 20.1 | 3,460,373 | 3,512,477 | |||||||||
| Employee benefit plans | 21.2 | 739,595 | 736,179 | |||||||||
| Deferred taxes | 12 | 76,073 | 578,875 | |||||||||
| Share-based compensation plans | 22.3 | 160,949 | 136,505 | |||||||||
| Other liabilities | 84,323 | 121,723 | ||||||||||
| Total non-current liabilities | 85,509,713 | 68,341,061 | ||||||||||
| TOTAL LIABILITIES | 100,777,552 | 79,820,256 | ||||||||||
| EQUITY | 24 | |||||||||||
| Share capital | 9,235,546 | 9,235,546 | ||||||||||
| Capital reserves | 6,198,899 | 6,198,599 | ||||||||||
| Retained earnings reserves | 317,144 | 317,144 | ||||||||||
| Other reserves | 2,205,836 | 2,221,341 | ||||||||||
| Retained loss | (13,409,659 | ) | ||||||||||
| Controlling shareholder´s | 4,547,766 | 17,972,630 | ||||||||||
| Non-controlling interest | 117,111 | 115,339 | ||||||||||
| Total equity | 4,664,877 | 18,087,969 | ||||||||||
| TOTAL LIABILITIES AND EQUITY | 105,442,429 | 97,908,225 | ||||||||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED INTERIM STATEMENT OF INCOME (LOSS)
| Note | March 31, 2020 | March 31, 2019 | ||||||||||
| NET SALES | 27 | 6,980,793 | 5,698,999 | |||||||||
| Cost of sales | 29 | (4,819,999 | ) | (4,724,893 | ) | |||||||
| GROSS PROFIT | 2,160,794 | 974,106 | ||||||||||
| OPERATING INCOME (EXPENSES) | ||||||||||||
| Selling | 29 | (514,936 | ) | (441,303 | ) | |||||||
| General and administrative | 29 | (314,836 | ) | (330,765 | ) | |||||||
| Income from associates and joint ventures | 14 | 711 | 1,658 | |||||||||
| Other, net | 29 | 16,731 | (18,884 | ) | ||||||||
| OPERATING PROFIT BEFORE NET FINANCIAL INCOME (EXPENSES) | 1,348,464 | 184,812 | ||||||||||
| NET FINANCIAL INCOME (EXPENSES) | 26 | |||||||||||
| Financial expenses | (1,086,424 | ) | (992,804 | ) | ||||||||
| Financial income | 120,754 | 149,322 | ||||||||||
| Derivative financial instruments | (9,058,792 | ) | (636,934 | ) | ||||||||
| Monetary and exchange variations, net | (12,419,586 | ) | (455,727 | ) | ||||||||
| NET LOSS BEFORE TAXES | (21,095,584 | ) | (1,751,331 | ) | ||||||||
| Current income taxes | 12 | (54,360 | ) | (129,249 | ) | |||||||
| Deferred income taxes | 12 | 7,730,883 | 651,448 | |||||||||
| NET LOSS FOR THE PERIOD | (13,419,061 | ) | (1,229,132 | ) | ||||||||
| Attributable to | ||||||||||||
| Controlling shareholders’ | (13,422,530 | ) | (1,226,803 | ) | ||||||||
| Non-controlling interest | 3,469 | (2,329 | ) | |||||||||
| Loss per share | ||||||||||||
| Basic | 25.1 | (9.94835 | ) | (0.93686 | ) | |||||||
| Diluted | 25.1 | (9.94835 | ) | (0.93686 | ) | |||||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATEINTERIMSTATEMENT OF COMPREHENSIVE INCOME (LOSS)
March 31, | March 31, | |||||||
| Net loss for the period | (13,419,061 | ) | (1,229,132 | ) | ||||
| Items that will not be reclassified to profit or loss | ||||||||
| Exchange rate variation and fair value on financial assets measured at fair value through of comprehensive income | ||||||||
| Ensyn Corporation | 1,323 | |||||||
| CelluForce Inc. | 1,100 | 462 | ||||||
| Spinnova Oy | (315 | ) | ||||||
| Tax effect of the above items | (374 | ) | (500 | ) | ||||
| (13,418,335 | ) | (1,228,162 | ) | |||||
| Item that may be subsequently reclassified to profit or loss | ||||||||
| Exchange variation on conversion of financial statements and on foreign investments | (3,360 | ) | 11,745 | |||||
| Total comprehensive loss | (13,421,695 | ) | (1,216,417 | ) | ||||
| Attributable to | ||||||||
| Controlling shareholders’ | (13,425,164 | ) | (1,214,088 | ) | ||||
| Non-controlling interest | 3,469 | (2,329 | ) | |||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
| Share Capital | Capital reserves | Retained earnings reserves | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share Capital | Share issuance costs | Tax incentives | Stock options granted | Share issuance costs | Other | Treasury shares | Tax incentives | Legal Reserve | Reserve for capital increase | Special statutory reserve | Dividends proposed | Other reserves | Retained earnings (losses) | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2018 | 6,241,753 | 684,563 | 5,100 | (15,442 | ) | (218,265 | ) | 422,815 | 1,730,629 | 242,612 | 596,534 | 2,321,708 | 12,012,007 | 13,928 | 12,025,935 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net (loss) for the period | (1,226,803 | ) | (1,226,803 | ) | (2,329 | ) | (1,229,132) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income for the period | 12,715 | 12,715 | 12,715 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transactions with shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share capital increase (note 1.3.1.1) | 3,027,528 | 3,027,528 | 3,027,528 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share issuance costs | (33,735 | ) | 15,442 | (18,293 | ) | (18,293) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock options granted | 1,421 | 1,421 | 1,421 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-controlling interest arising from business combination | 110,616 | 110,616 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Internal changes in equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transfer of tax incentives | (684,563 | ) | 684,563 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Partial realization of deemed cost, net of taxes | (13,137 | ) | 13,137 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Realization of asset revaluation reserve | 6,290 | 6,290 | 6,290 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange variation of hyperinflation of foreign subsidiary | 5,387 | 5,387 | 5,387 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issue of common shares related to business combination (note 1.3.1.1) | 6,410,885 | 6,410,885 | 6,410,885 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2019 | 9,269,281 | (33,735 | ) | 6,521 | 6,410,885 | (218,265 | ) | 684,563 | 422,815 | 1,730,629 | 242,612 | 596,534 | 2,332,963 | (1,213,666 | ) | 20,231,137 | 122,215 | 20,353,352 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2019 | 9,269,281 | (33,735 | ) | 5,979 | 6,410,885 | (218,265 | ) | 317,144 | 2,221,341 | 17,972,630 | 115,339 | 18,087,969 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net (loss) for the period | (13,422,530 | ) | (13,422,530 | ) | 3,469 | (13,419,061) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income for the period | (2,634 | ) | (2,634 | ) | (2,634) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transactions with shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock options granted | 300 | 300 | 300 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-controlling interest arising from business combination | (1,697 | ) | (1,697) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Internal changes in equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Partial realization of deemed cost, net of taxes | (12,871 | ) | 12,871 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2020 | 9,269,281 | (33,735 | ) | 6,279 | 6,410,885 | (218,265 | ) | 317,144 | 2,205,836 | (13,409,659 | ) | 4,547,766 | 117,111 | 4,664,877 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
| March 31, 2020 | March 31, 2019 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) for the period | (13,419,061 | ) | (1,229,132 | ) | ||||
| Adjustment to | ||||||||
| Depreciation, depletion and amortization (Notes 26 and 29) | 1,590,393 | 2,443,326 | ||||||
| Amortization of right of use (Note 29) | 39,330 | 27,959 | ||||||
| Interest expense on lease liabilities | 95,350 | 38,715 | ||||||
| Results from sale, disposals and provision for losses (impairment) of property, plant and equipment and biological assets, net (Note 29) | 4,488 | (11,288 | ) | |||||
| Income from associates and joint ventures (Note 14.2) | (711 | ) | (1,658 | ) | ||||
| Exchange rate and monetary variations, net (Note 26) | 12,419,586 | 455,727 | ||||||
| Interest expenses with financing, loans and debentures, net (Note 18.2) | 886,270 | 823,958 | ||||||
| Accrual of interest on marketable securities | (58,870 | ) | (228,047 | ) | ||||
| Amortization of fundraising costs (Note 18.2) | 25,250 | 31,574 | ||||||
| Derivative (gains) losses, net (Note 26) | 9,058,792 | 636,934 | ||||||
| Deferred income tax and social contribution expenses (Note 12.1) | (7,730,883 | ) | (651,448 | ) | ||||
| Interest on employee benefits (Note 21.2) | 13,195 | 13,421 | ||||||
| Reversal for judicial liabilities, net | (8,772 | ) | (10,296 | ) | ||||
| Allowance for doubtful accounts, net (Note 7.3) | 5,522 | 7,724 | ||||||
| Provision for (reversal of) inventory losses, net (Note 8.1) | 16,168 | (1,739 | ) | |||||
| Provision for loss of ICMS credits, net (Note 9.1) | 19,571 | 37,063 | ||||||
| Other | 5,439 | 65,227 | ||||||
| Decrease (increase) in assets | ||||||||
| Trade accounts receivables | (608,145 | ) | 331,901 | |||||
| Inventories | 424,128 | (942,669 | ) | |||||
| Recoverable taxes | 200,988 | 58,745 | ||||||
| Other assets | 101,406 | 84,564 | ||||||
| Increase (decrease) in liabilities | ||||||||
| Trade accounts payables | (94,248 | ) | 75,087 | |||||
| Taxes payable | (59,487 | ) | 245,692 | |||||
| Payroll and charges | (92,262 | ) | (332,520 | ) | ||||
| Other liabilities | (208,734 | ) | (304,819 | ) | ||||
| Cash provided by operations, net | 2,624,703 | 1,664,001 | ||||||
| Payment of interest with financing, loans and debentures | (1,167,141 | ) | (783,745 | ) | ||||
| Interest received from marketable securities | 52,486 | 175,057 | ||||||
| Payment of income taxes | (28,931 | ) | (310,977 | ) | ||||
| Cash provided by operating activities | 1,481,117 | 744,336 | ||||||
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
INVESTING ACTIVITIES | ||||||||
| Additions to property, plant and equipment (Note 15) | (299,426 | ) | (705,246 | ) | ||||
| Additions to intangible assets (Note 16) | (469 | ) | (636 | ) | ||||
| Additions to biological assets (Note 13) | (578,224 | ) | (791,684 | ) | ||||
| Proceeds from sale of property, plant and equipment | 27,905 | 33,933 | ||||||
| Increase of capital in subsidiaries and associates (Note 14.3) | (11,216 | ) | ||||||
| Marketable securities, net | 1,145,994 | 21,756,512 | ||||||
| Advance for acquisition of wood from operations with development | (68,957 | ) | (126,866 | ) | ||||
| Acquisition of subsidiaries, net cash (Note 1.2.2.2) | (26,002,541 | ) | ||||||
| Cash provided (used) in investing activities, net | 226,823 | (5,847,744 | ) | |||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from loans, financing and debentures (note 18.2) | 3,663,623 | 7,671,829 | ||||||
| Payment of derivative transactions (note 4.5.4) | (172,797 | ) | 24,765 | |||||
| Payment of loans, financing and debentures (note 18.2) | (4,503,548 | ) | (3,735,541 | ) | ||||
| Payment of leases (note 19.2) | (157,209 | ) | (118,237 | ) | ||||
| Payment of dividends | (68 | ) | ||||||
| Liabilities for assets acquisitions and subsidiaries | (2,838 | ) | (1,701 | ) | ||||
| Other financing | (377 | ) | ||||||
| Cash provided (used) by financing activities | (1,172,769 | ) | 3,840,670 | |||||
| Exchange variation on cash and cash equivalents | 764,031 | (28,830 | ) | |||||
| Increase (reduction) in cash and cash equivalents, net | 1,299,202 | (1,291,568 | ) | |||||
| Cash and cash equivalents at the beginning for the period | 3,249,127 | 4,387,453 | ||||||
| Cash and cash equivalents at the end for the period | 4,548,329 | 3,095,885 | ||||||
| Increase (reduction) in cash and cash equivalents, net | 1,299,202 | (1,291,568 | ) | |||||
The accompanying notes are an integral part of this unaudited condensed consolidated interim financial information.
| Suzano S.A. | |
| | |
| Notes to theUnaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 1 | COMPANY´S OPERATIONS |
Suzano S.A., together with its subsidiaries (“Suzano” or collectively “Company”), is a public company with its headquarters office in the city of Salvador, State of Bahia, Brazil.
Suzano owns shares traded in B3 S.A. (“Brasil, Bolsa, Balcão -“B3”), listed on the New Market under the ticker SUZB3. On December 10, 2018, Suzano began trading its American Depositary Receipts ("ADRs") in a ratio of 1 (one) common share, Level II, traded in the New York Stock Exchange under the ticker SUZ, pursuant to a program approved by the Brazilian Securities and Exchange Commission (“CVM”).
The Company holds 11 industrial units, located in Aracruz (Espírito Santo, State), Belém (Pará, State), Eunápolis (Bahia, State) and Mucuri (Bahia, State), Fortaleza (Ceará, State), Imperatriz (Maranhão, State), Jacareí, Limeira, Rio Verde and Suzano (São Paulo, State) and Três Lagoas (Mato Grosso do Sul, State).
These units produce hardwood pulp from eucalyptus, paper (coated paper, paperboard, uncoated paper and cut size paper) and packages of sanitary paper (consumer goods - tissue) to serve the domestic and foreign markets.
Pulp and paper are sold in the foreign market directly by Suzano, as well as through its wholly-owned subsidiaries in Argentina, the United States of America, Switzerland, Austria and sales offices in China.
The Company's corporate purpose also includes the commercial operation of eucalyptus forest for its own use, the operation of port terminals, and the holding of interest, as partner or shareholder, in any other company or project, and the generation and sale of electricity.
The Company is controlled by Suzano Holding S.A., through a Voting Agreement whereby it holds 45.85% of the common shares of its share capital.
These unaudited condensed consolidated interim financial information was approved by Company’s Management on May 11, 2020.
| Suzano S.A. | |
| | |
| Notes to theUnaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 1.1. | Equity interest |
The Company holds equity interest in the following entities:
| % equity interest | ||||||||||||||||
| Entity | Main activity | Country | Type of investment | Accounting method | March 31, 2020 | December 31, 2020 | ||||||||||
| AGFA – Com. Adm. e Participações Ltda. | Holding | Brazil | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Asapir Produção Florestal e Comércio Ltda. | Eucalyptus cultivation | Brazil | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| CelluForce Inc. | Nanocrystalline pulp research and development | Canada | Direct | Fair value through other comprehensive income | 8,3 | % | 8,3 | % | ||||||||
| Comercial e Agrícola Paineiras Ltda. | Lease of reforestation land | Brazil | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Ensyn Corporation | Bio fuel research and development | United States of America | Direct | Equity | 25.3 | % | 25.3 | % | ||||||||
| Facepa - Fábrica de Papel da Amazônia S.A. | Industrialization and commercialization of tissue paper | Brazil | Direct/Indirect | Consolidated | 92.8 | % | 92.8 | % | ||||||||
| Fibria Celulose (USA) Inc. | Business office | United States of America | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Fibria Terminal de Celulose de Santos SPE S.A. | Port operation | Brazil | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Fibria Overseas Finance Ltd. | Financial fundraising | Cayman Island | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Fibria Terminais Portuários S.A. | Port operation | Brazil | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| FuturaGene AgriDev Xinjiang Company Ltd. | Biotechnology research and development | China | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| FuturaGene Biotechnology Shangai Company Ltd. | Biotechnology research and development | China | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| FuturaGene Brasil Tecnologia Ltda. | Biotechnology research and development | Brazil | Direct/Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| FuturaGene Delaware Inc. | Biotechnology research and development | United States of America | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| FuturaGene Hong Kong Ltd. | Biotechnology research and development | Hong Kong | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| FuturaGene Inc. | Biotechnology research and development | United States of America | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| FuturaGene Israel Ltd. | Biotechnology research and development | Israel | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| FuturaGene Ltd. | Biotechnology research and development | England | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| F&E Tecnologia do Brasil S.A. | Biofuel production, except alcohol | Brazil | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| F&E Technologies LLC | Biofuel production, except alcohol | United States of America | Direct | Equity | 50 | % | 50 | % | ||||||||
| Gansu FuturaGene Biotech Co. Ltd.(1) | Biotechnology research and development | China | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| Ibema Companhia Brasileira de Papel | Industrialization and commercialization of paperboard | Brazil | Direct | Equity | 49.9 | % | 49.9 | % | ||||||||
| Itacel - Terminal de Celulose de Itaqui S.A. | Port operation | Brazil | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| Maxcel Empreendimentos e Participações S.A. | Holding | Brazil | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Mucuri Energética S.A. | Power generation and distribution | Brazil | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Ondurman Empreendimentos Imobiliários Ltda. | Lease of reforestation land | Brazil | Direct/Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| Paineiras Logística e Transporte Ltda. | Road freight transport | Brazil | Direct /Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| Portocel - Terminal Espec. Barra do Riacho S.A. | Port operation | Brazil | Direct | Consolidated | 51 | % | 51 | % | ||||||||
| Projetos Especiais e Investimentos Ltda. | Commercialization of equipment and parts | Brazil | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Rio Verde Participações e Propriedades Rurais S.A. | Forest assets | Brazil | Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| Spinnova OY | Research and development of sustainable raw materials (wood) for the textile industry | Finland | Direct | Equity | 24,06 | % | 24,06 | % | ||||||||
| Stenfar S.A. Indl. Coml. Imp. Y. Exp. | Commercialization of computer paper and materials | Argentine | Direct /Indirect | Consolidated | 100 | % | 100 | % | ||||||||
| Suzano Áustria GmbH. | Business office | Austria | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Suzano Canada Inc. | Lignin research and development | Canada | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Suzano International Trade GmbH. | Business office | Austria | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Suzano Participações do Brasil Ltda. | Holding | Brazil | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Suzano Pulp and Paper America Inc. | Business office | United States of America | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Suzano Pulp and Paper Europe S.A. | Business office | Switzerland | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Suzano Shanghai Ltd.(2) | Customer relationship services | China | Direct | Consolidated | 100 | % | ||||||||||
| Suzano Trading Ltd. | Business office | Cayman Island | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Suzano Trading International KFT | Business office | Hungary | Direct | Consolidated | 100 | % | 100 | % | ||||||||
| Veracel Celulose S.A.(3) | Industrialization, commercialization and exportation of pulp | Brazil | Direct | Consolidated | 50 | % | 50 | % | ||||||||
| 1) | On April 8, 2020, disposal of equity interest. |
| 2) | On February 26, 2020, establishment of legal entity arising from corporate reorganization. |
| 3) | Joint operation with Stora Enso, a company located in Finland. |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 1.2. | Major events in the three-month period ended March 31, 2020 |
| 1.2.1. | Effects arising from COVID 19 |
Suzano has been adopting preventive and mitigating measures in line with guidelines issued by the national and international health authorities, in order to minimize as far as possible, the harmful effects of the pandemic of COVID-19, popularly known as the new coronavirus, referring to the safety of people and the inheritance of their businesses.
The Company's initiatives are based on three pillars: (i) people (ii) society and (iii) business continuity.
| (i) | people: in order to provide security to its employees and third parties, Suzano adopted a series of rules and procedures to minimize the exposure of its team. |
| (ii) | society: Suzano now understands its responsibility to the communities in which it operates and based on its guideline “It is only good for us, if it is good for the world”, made the donation of toilet paper and diapers produced by the Company for needy regions. With regard to support to its business partners, the Company decided to maintain payment of 100% of the cost of the payroll of service providers' workers who will have their activities suspended for 60 days (until the end of May) in order to consequent job preservation. |
| (iii) | business continuity: so far, the Company continues with its normal operations and a crisis management committee has been implemented. |
The paper and pulp sector were recognized by the World Health Organization (“WHO”), as well as by several countries, as a producer of goods essential to society. Therefore, in order to fulfill the responsibility arising from the essentiality of the business, Suzano has taken measures to ensure operational normality and full service to its customers, increasing the level of wood and raw material inventories in the factories and has been working to advance its inventories of finished goods product bringing them closer to their customers to mitigate possible risks of disruption in the factories' supply chain and the sale of their products.
The current situation resulting from the coronavirus also implies a higher credit risk, especially for its customers in the paper business. Thus, the Company has also been monitoring the evolution of this risk and implementing measures to mitigate it, and so far, there has been no significant financial impact.
Due to the social isolation measures adopted in Brazil and in several countries around the world, causing schools and offices to close, for example, the demand for printing and writing papers was reduced and due to uncertainty about their recovery, Suzano decided to stop temporary production with a forecast of 30 days from April 27, 2020 and May 1, 2020 on the paper production lines of the Rio Verde and Mucuri industrial units, respectively. However, the reduction in production volumes resulting from this decision is not material to the business and to the Company's economic and financial performance. We note that in several countries around the world similar measures have already been announced to temporarily reduce the production of printing and writing papers.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
An effect also resulting from the coronavirus concerns the decision to postpone Suzano's Ordinary and Extraordinary General Meetings (“AGOE”), initially called for April 24, 2020 and changed to May 22, 2020, in order to allow the digital modality, with content kept for deliberation by the shareholders.
Finally, it is also opportune to inform that, as a result of the current scenario, the Company has made a vast communication effort to further increase the interaction with its main stakeholders, with the objective of guaranteeing the adequate transparency and flow of information with the them in a timely manner to the dynamics of the social and economic conjuncture. For example, Suzano held a conference call on March 19, 2020 with its investors to update them about the Company in the context of COVID-19. The presentation used in the conference call, as well as the audio of the event, are available on the Company's Investor Relations website. There you will also find the Market Announcements published on the subject on March 17 and 30, 2020.
| 1.2.2. | Business combination with Fibria |
Due to the relevance of the information, the Company considered it necessary to maintain the disclosure of information related to the business combination with Fibria performed during 2019.
On January 3, 2019, acquisition date of control by Suzano, after all fulfilled conditions for the conclusion of business combination and shareholding base, Fibria’s shares were exchanged for Suzano’s shares and on January 14, 2019, Suzano concluded the corporate reorganization process, following the terms of the
Agreement signed by both entities on March 15, 2018.
The transferred consideration by Suzano for acquisition of control of Fibria, defined in terms of the Agreement, was as follows:
| 1.2.2.1. | Share exchange ratio |
On January 2, 2019, according to Notice to Shareholders, the exchange ratio of the common shares issued by Eucalipto Holding S.A. (“Holding”) held by Fibria’s shareholders for shares issued by Suzano was adjusted from 0.4611 to 0.4613, being the exchange ratio of 0.4613 considered as final. The adjustment in the exchange ratio, compared to the originally announced, was due to (i) a change in the total number of shares issued by Fibria ex-treasury and disregarding the shares resulting from the vesting of option plans between those in the Protocol and Justification and that date of 553,080,611 shares for 553,733,881 shares and (ii) alteration of the number of shares issued by Suzano ex-treasury and disregarding the shares resulting from the vesting of option plans between that contained in the Protocol and Justification and that present date of 1,091,984,141 shares to 1,093,784,141 shares.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
As consequence of this adjustment, (i) Suzano issued, as a result of the merger of the Holding, 255,437,439 new common shares in the market value of R$36.95, totaling amount of R$9,438,413, of which R$3,027,528 was recognized as capital increase and R$6,410,885, as capital reserve and (ii) the amount attributed to Suzano's common share to calculate the capital gain, as disclosed in the Notice of Shareholders on November 29, 2018, increased from R$15.38 attributed to 0.4611 common share for R$15.39 attributed to 0.4613 common share of Suzano.
| 1.2.2.2. | Cash installment |
On January 10, 2019, by means of the Notice to Shareholders, the Company communicated the final value of the Adjusted Cash Installment, corresponding to the redemption value of each Holding's redeemable preferred share, originally equivalent to R$52.50, (i) reduced by the amount of dividends declared by Fibria on December 3, 2018 and paid in Brazil on December 12, 2018 in the amount of R$5.03 per share issued by Fibria (ii) plus R$2.73, corresponding to the variation of the average daily rate of Brazilian interbank deposits expressed as an annual percentage, based on 252 business days, measured and disclosed daily by B3 ("DI Rate"), between March 15, 2018 and the Expiration Date of the Transaction including January 10, 2019 (including) and January 14, 2019 (including), the DI Rate was estimated at 6.40% per annual, with a total and final amount of R$50.20 per share, making up the final amount of the Adjusted Cash Amount of R$27,797,441.
The amounts mentioned above are gross, not considering any tax impacts on the payment to Fibria Resident or Non-Resident Shareholders, which are detailed in the Notice to Shareholders disclosed on November 29, 2018.
Suzano performed a valuation analysis of the fair value of the assets acquired and liabilities assumed of Fibria and, using the total transferred consideration for the Merger, and allocated for such assets and liabilities.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
The following table summarizes the final purchase price allocation based on the appraisal report prepared by an independent and specialized entity:
| Cash consideration | 27,797,441 | |||
| Issuance of shares by Suzano | 9,438,413 | |||
| Total consideration | 37,235,854 | |||
| Book value of Fibria's shareholders' equity | 14,149,004 | |||
| Write-off of the book value of existing goodwill, net of the deferred income taxes | (3,495,077 | ) | ||
| Mandatory minimum dividends (eliminated from the balance sheet at the date of acquisition) | 724,829 | |||
| Book value of Fibria's shareholders' equity, net of goodwill | 11,378,756 | |||
| Fair value adjustment on business combination with Fibria (assets and liabilities): | ||||
| Inventories | 2,178,903 | (1) | ||
| Property, plant and equipment | 9,362,315 | (2) | ||
| Customer relationship | 9,030,779 | (3) | ||
| Port assets | 749,060 | (4) | ||
| Contingent liabilities | (2,970,546 | )(5) | ||
| Loans and financing | (59,921 | )(6) | ||
| Taxes recoverable | (235,843 | )(7) | ||
| Other assets and liabilities, net | 451,624 | (8) | ||
| Deferred taxes, net | (546,324 | )(9) | ||
| Total impact of fair value | 17,960,047 | |||
| Goodwill on the expectation of future profitability | 7,897,051 | (10) |
| 1) | Measured considering the balance of finished products based on selling price, net of selling expenses and an accepted margin based on the results achieved in 2018. |
| 2) | Determined based on the analysis of market data on comparable transactions and cost quantification, based on the estimate of replacement or replacement value of the assets. |
| 3) | In order to determine the fair value adjustment in the customer portfolio, the income approach and the method were used to measure the present value of the income that will be generated during the remaining useful life of the asset. Considering the 5-year history of Fibria's sales data and the customer churn rate that measures customer satisfaction and customer permanence in the portfolio, the adjustment was measured using estimated discounted cash flows. The customer churn rate and the discounted cash flows were considered as significant assumptions to determine the fair value of the customer portfolio. |
| 4) | Fibria has concession contracts and port assets to assist in port operations in Brazil. For fair value measurement of these assets was considered the income approach, the Multi Period Excess Earnings Method (“MPEEM”) that measures the present value of the income that will be generated during the remaining useful life of the asset and method of direct cost differential. |
| 5) | In the business combination, for the contingencies fair value measurement, whose chances of loss were classified as possible and remote, Fibria's Management and its external and independent advisors were considered for their fair values, whose amounts were measured based on the analyzes of Company’s external lawyers. Thus, the estimate and assumptions with respect to the probability of loss of the possible and remote lawsuits for the fair value calculation of contingent liabilities assumed were considered as significant assumptions to determine the fair value of the contingent liabilities. |
| 6) | The adjustment to fair value of loans and financing was measured based on the fair value of the Bonds, based on the quotation of the security in the secondary market, and the adjustment to present value considering the market rate at the base date on December 31, 2018. |
| 7) | For the measurement of the fair value of the taxes to be recovered, the amount to be recovered, discounted to the present value considering the expected Selic rate for the tax period, was considered. |
| 8) | In other net assets and liabilities, including supply contracts, accounts receivable and advances to suppliers, the income evaluation methodology, the present value and the direct cost differential were used. |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 9) | Deferred asset on income tax on fair value adjustments of assets of Veracel and Portocel. For the remaining fair value, we did not recognize deferred liability on income taxes liabilities due to Fibria’s Legal Merger in April 2019. |
| 10) | Goodwill is attributable to the strong market position and expected future profitability of Fibria in negotiations in the eucalyptus pulp market. |
| 2. | BASIS OF PREPARATION AND PRESENTATION OF UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION |
The Company’s unaudited condensed consolidated interim financial information are prepared in accordance with and in compliance with the international standard IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board (“IASB”) and disclose all the applicable significant information related to the financial information, which is consistent with the information utilized by Management in the performance of its duties.
The Company’s unaudited condensed consolidated interim financial information are expressed in thousands of Brazilian Reais (“R$”), as well as the amounts of other currencies disclosed in the unaudited condensed consolidated interim financial information, when applicable, were also expressed in thousands, unless otherwise stated.
The preparation of unaudited condensed consolidated interim financial information requires Management to make judgments, use estimates and adopt assumptions in the process of applying accounting practices, that affect the disclosed amounts of revenues, expenses, assets and liabilities, including contingent liabilities. However, the uncertainty inherent to these judgements, assumptions and estimates could result in material adjustments to the carrying amount of certain assets and liabilities in future periods.
The Company reviews its judgments, estimates and assumptions continually as disclosed in the annual financial statements for the year ended December 31, 2019 (Note 3.2.32). In the three-month period ended March 31, 2020, the Company reviewed the judgments, estimates and assumptions related to the measurement of the fair value of biological assets and the impairment test of the intangible asset, which are disclosed in the respective notes 13 and 16 of this interim financial statement.
The unaudited condensed consolidated interim financial information were prepared on the historical cost basis, except for the following material items recognized:
| (i) | derivative and non-derivative financial instruments measured at fair value; |
| (ii) | share-based payments and employee benefits measured at fair value; |
| (iii) | biological assets measured at fair value; and |
| (iv) | deemed cost of property, plant and equipment. |
The main accounting polices applied in the preparation of these unaudited condensed consolidated interim financial information are presented in note 3.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
The unaudited condensed consolidated interim financial information were prepared under the going concern assumption.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The unaudited condensed consolidated interim financial information was prepared based on the information of Suzano and its wholly-owned subsidiaries on the three-month period ended March 31, 2020, as well as in accordance with consistent accounting practices and policies.
The unaudited condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended December 31, 2019, considering that its purpose is to provide an update on the activities, events and significant circumstances in relation to those disclosed in the consolidated financial statements. Therefore, unaudited condensed consolidated interim financial information focus on new activities, events and circumstances and do not duplicate the information previously disclosed, except when Management judges that the maintenance of the information is relevant.
The accounting policies have been consistently applied to all consolidated companies.
There were no changes on such policies and estimates calculation methodologies, except for the application of the new accounting policies as of January 1, 2020 and whose estimated impact was disclosed in the annual financial statements of December 31, 2019, as described in the Note 3.1.
| 3.1. | New accounting policies and changes in the accounting policies adopted |
| 3.1.1. | Translation into currency presentation |
Due to the merger with Fibria, the Company had several changes in the structure, activities and operations during 2019 that led management to conclude that they needed to reassess the functional currency of its subsidiaries whose functional currency was different from Brazilian Reais.
Those facts resulted in the corporate reorganization, as well as, it has impacted how management conducted the Company's business in order to achieve the alignment between the cultures of the two Companies, the unification of processes, operating, tax systems and strategies, through synergy gains arising from the business combination. In this process some of Company’s wholly-owned subsidiaries were considered an extension of the activities of the parent company.
These circumstances collectively justify the change in the functional currency to Brazilian Real and they have occurred gradually during 2019, therefore it was not practicable to determine the date of the change at a precise point during the reporting period. Thus, the Company changed the functional currency of those wholly-owned subsidiaries as of January 1, 2020.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
The cumulative translation adjustment (“CTA”) arising from the translation of a foreign operation previously recognized in other comprehensive income will not be reclassified from equity to profit or loss until the disposal of the operations. The total or partial disposal of interest in wholly-owned subsidiaries occurs through sale or dissolution, of all or part of operation.
Therefore, the financial statements of foreign subsidiaries, whose functional currency was different from Brazilian Reais in 2019, were translated using the criteria established below:
| (i) | assets and liabilities are translated at the exchange rate in effect at period-end; |
| (ii) | revenues and expenses are translated based on the monthly average rate; |
| (iii) | the cumulative effects of gains or losses upon translation are recognized as accumulated foreign currency translation adjustments component of other comprehensive income. |
And as from January 1, 2020, the financial statements of foreign subsidiaries are translated using the following criteria:
| (i) | monetary assets and liabilities are translated at the exchange rate in effect at period-end; |
| (ii) | non-monetary assets and liabilities are translated at the historical rate of the transaction; |
| (iii) | revenues and expenses are translated based on monthly average rate; |
| (iv) | the cumulative effects of gains or losses upon translation are recognized in the other comprehensive income period-end. |
| 3.1.2. | Business combination – IFRS 3 |
This pronouncement was amended and clarifies definition of a “business”. It’s also permitted a simplified assessment of whether an acquired set of activities and assets is a group of assets rather than a business. The Company assessed the content of this pronouncement and did not identify any material impacts.
| 3.1.3. | Presentation of financial statements – IAS 1 and Accounting policies, changes in accounting estimates and errors – IAS 8 |
This pronouncement was amended and clarifies definition of a “material” and how it should be applied by (i) including in the definition guidance that until now has featured elsewhere in IFRS Standards; (ii) improving the explanations accompanying the definition; and (iii) ensuring that the definition of material is consistent across all IFRS Standards. The Company assessed the content of this pronouncement and did not identify any material impacts.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 3.1.4. | Conceptual framework for financial reporting |
This pronouncement was amended and includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts, the main changes are set forth below:
| (i) | the objective of financial reporting describes the objective of general purpose financial reporting, the information needed to achieve that objective and who uses the financial reports. The term “stewardship” was reintroduced, in order to clarify its meaning and defining the information needed to assess management’s stewardship and separates this from the information that users need to assess the prospects of the entity’s future net cash flows. Both types of information are required to provide information that is useful for making decisions about providing resources to the entity, and therefore achieves the objective of financial reporting. |
| (ii) | qualitative characteristics of useful financial information: the concepts of prudence and substance over form were reintroduced. It was also defined the concept of measurement uncertainty in assessing the usefulness of financial information, since in some cases, relevant information may have a high level of measurement uncertainty, which may reduce its usefulness. Slightly less relevant information with a lower measurement uncertainty may be preferable in such case. |
| (iii) | financial statements and the reporting entity: describes about new concepts, in which it is clarified the scope and objective of financial statements and also provides a description of the reporting entity. |
| (iv) | the elements of financial statements: the definitions of assets and liabilities were revised and the definitions of income and expenses were updated accordingly, as set forth below: |
| Previous definition | New definition | |
Asset: A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. | Asset: A present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits. | |
| The new definition clarifies that an asset is an economic resource, and that the potential economic benefits no longer need to be ‘expected’ to flow to the entity. Thus, they do not need to be certain or even likely, but if this is the case, the recognition and measurement of the asset may be affected. | ||
Liability: A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. | Liability: A present obligation of the entity to transfer an economic resource as a result of past events. | |
| The main difference is that the new definition clarifies that a liability is the obligation to transfer an economic resource, and not the ultimate outflow of economic benefits. The outflow also no longer needs to be ‘expected’, similar to the change in the definition of an asset, above. It was also introduced the concept of ‘no practical ability to avoid’ to the definition of an obligation, and factors used to assess this will depend on the nature of an entity’s duty or responsibility, which requires the use of judgement. | ||
| Income: increases in economic benefits during the accounting period in the form of inflows or enhancements of assets, or decreases of liabilities, that result in increases in equity, other than those relating to contributions from equity participants. | Income: Increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims. | |
| Expense: Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets, or incurrences of liabilities, that result in decreases in equity, other than those relating to distributions to equity participants. | Expense: Decreases in assets, or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims. | |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| (v) | recognition and derecognition: the criteria for recognizing assets and liabilities in the financial statements were reviewed. The pronouncement states that recognition is only appropriate if it results in both relevant information about the element being recognized, and faithful representation of that element. On the other hand, derecognition should aim to faithfully represent those assets and liabilities retained after the transaction, if any, and any change in assets and liabilities as a result of the transaction that led to the derecognition. |
| (vi) | measurement: new guidance was introduced about measurement bases and provide factors to consider when selecting a measurement basis. Therefore, two categories of measurement basis were identified: |
| · | historical cost: |
| · | current value: which comprises fair value, value in use of assets and fulfilment value for liabilities and current cost. |
| (vii) | Presentation and disclosure: the concepts were reviewed (i) how information should be presented and disclosed in financial statements (ii) classifying income and expenses in the statement of income and (iii) whether and when income and expenses included in other comprehensive income (“OCI”) should subsequently be recycled to statement of income. Additionally, reinforces that statement of income is the primary source of information about the entity’s financial performance. |
| (viii) | concepts of capital and capital maintenance: describes the concepts of capital and capital maintenance and profit determination and adjustments for capital maintenance, the content of this item has not changed. |
The Company assessed the content of this pronouncement and did not identify any material impacts.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 3.2. | New standards, revisions and interpretations not yet in force |
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company’s unaudited consolidated condensed interim financial information.
| 4. | Financial Instruments and Risks Management |
| 4.1. | Financial risks management |
| 4.1.1. | Overview |
In the three-month period ended March 31, 2020, there were no significant changes in the financial risk management policies and procedures compared to those reported in note 4 to the financial statements of December 31, 2019.
The Company maintained its conservative approach and strong cash and marketable securities position, as well as its hedge policy, during the crisis caused by the pandemic of COVID-19 and even though there were impacts on the fair value of its financial instruments due to the effects on all global economies, the impacts were as expected, according to sensitivity analyses disclosed in previous reports, and measures were taken in relation to the risks associated to the financial instruments, in particular to the risks of liquidity, credit and exchange rate variation, as described following items set forth.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 4.1.2. | Rating |
All transactions with financial instruments are recognized for accounting purposes and classified in the following categories:
March 31, 2020 | December 31, 2019 | |||||||
| Assets | ||||||||
| Amortized cost | ||||||||
| Cash and cash equivalents (Note 5) | 4,548,329 | 3,249,127 | ||||||
| Trade accounts receivable (Note 7) | 4,447,957 | 3,035,817 | ||||||
| Other assets | 502,041 | 563,993 | ||||||
| 9,498,327 | 6,848,937 | |||||||
| Fair value through other comprehensive income | ||||||||
| Other investments (Note 14) | 23,770 | 20,048 | ||||||
| 23,770 | 20,048 | |||||||
| Fair value through profit or loss | ||||||||
| Derivative financial instruments (Note 4.6) | 1,088,394 | 1,098,972 | ||||||
| Marketable securities (Note 6) | 5,190,724 | 6,330,334 | ||||||
| 6,279,118 | 7,429,306 | |||||||
| 15,801,215 | 14,298,291 | |||||||
| Liabilities | ||||||||
| Amortized cost | ||||||||
| Loans, financing and debentures (Note 18.1) | 75,781,660 | 63,684,326 | ||||||
| Lease liabilities (Note 19.2) | 4,727,361 | 3,984,070 | ||||||
| Liabilities for assets acquisitions and subsidiaries (Note 23) | 633,771 | 541,615 | ||||||
| Trade accounts payable (Note 17) | 2,408,286 | 2,376,459 | ||||||
| Other liabilities | 387,226 | 578,061 | ||||||
| 83,938,304 | 71,164,531 | |||||||
| Fair value through profit or loss | ||||||||
| Derivative financial instruments (Note 4.5) | 11,793,326 | 2,917,913 | ||||||
| 11,793,326 | 2,917,913 | |||||||
| 95,731,630 | 74,082,444 | |||||||
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 4.1.3. | Fair value of loans and financing |
The estimated fair values of loans and financing are set forth below:
| Yield used to discount | March 31, 2020 | December 31, 2019 | ||||||||
| Quoted in the secondary market | ||||||||||
| In foreign currency | ||||||||||
| Bonds | U.S.$ | 32,356,046 | 30,066,087 | |||||||
| Estimated to present value | ||||||||||
| In foreign currency | ||||||||||
| Export credits (“Pre-payment”) | LIBOR U.S.$ | 22,556,880 | 17,213,963 | |||||||
| Export credits (“ACC/ACE”) | DI 1 | 756,150 | 575,521 | |||||||
| In local currency | ||||||||||
| BNP – Forest Financing | DI 1 | 182,872 | 193,646 | |||||||
| BNDES – TJLP | DI 1 | 1,806,819 | 1,895,959 | |||||||
| BNDES - TLP | DI 1 | 510,941 | 535,812 | |||||||
| BNDES – Fixed | DI 1 | 104,127 | 113,979 | |||||||
| BNDES – Selic (“Special Settlement and Custody System”) | DI 1 | 678,599 | 693,969 | |||||||
| BNDES - Currency basket | DI 1 | 61,232 | 54,420 | |||||||
| CRA (“Agribusiness Receivables Certificate”) | DI 1 | 6,047,925 | 6,039,983 | |||||||
| Debentures | DI 1 | 5,537,898 | 5,534,691 | |||||||
| FINAME (“Special Agency of Industrial Financing”) | DI 1 | 12,881 | 14,168 | |||||||
| FINEP (“Financier of Studies and Projects”) | DI 1 | 3,218 | 5,138 | |||||||
| NCE (“Export Credit Notes”) | DI 1 | 1,353,644 | 1,445,383 | |||||||
| NCR (“Rural Credit Notes”) | DI 1 | 280,716 | 288,122 | |||||||
| Export credits (“Pre-payment”) | DI 1 | 1,417,420 | 1,464,798 | |||||||
| FDCO (“West Center Development Fund”) | DI 1 | 575,670 | 571,904 | |||||||
| 74,243,038 | 66,707,543 | |||||||||
The Management considers that for its other financial liabilities measured at amortized cost, its book values approximate to their fair values and therefore the information on their fair values is not being presented.
| 4.2. | Liquidity risk |
As disclosed in note 4 to the financial statements as of December 31, 2019, the Company’s purpose is maintaining a strong cash and marketable securities position to meet its financial and operating obligations. The amount held as cash is used for payments expected in the normal course of its operations, while the cash surplus amount is invested in highly liquid financial investments according Cash Management Policy. The cash position is monitored by the Company’s senior management, by means of management reports and participation in performance meetings with determined frequency. In the three-month period ended March 31, 2020, there was no relevant impact in cash and marketable securities, and the Company believes that, eventually, the crisis scenario caused by the COVID-19 pandemic would be extend and the Brazilian Reais keep devalued against the U.S.Dollar, adjustments of derivative instruments that will mature in the coming months would be negatively impacted, however those would, be offset by higher cash generation, which will benefit from this devaluation and exceeds the cost of any adjustments to derivatives.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
As material fact disclosed to the market on February 14, 2020, the Company, voluntarily prepaid the principal amount of U.S.$750,000 (equivalent to R$3,237,225), related to an export prepayment, with quarterly interest payments of 1.15% p.a. plus quarterly LIBOR, which was scheduled to mature in February 14, 2023. At the same time, the Company entered into a new transaction related to an export prepayment in the amount of U.S.$850.000 (equivalent to R$3,668,855), of 1.15% p.a. plus quarterly LIBOR, which was scheduled to mature in February 13, 2026. Furthermore, as material fact disclosed to the market on February 28, 2020, the Company through its wholly-owned subsidiary Suzano Trading Ltd. (“Suzano Trading”) exercised its right to redeem all of the outstanding aggregate principal amount of the 5.875% senior notes issued by it and guaranteed by Suzano due 2021 (“2021 Notes”) currently outstanding, in the total aggregate principal amount of U.S.$189.630.
Such transactions were performed under market conditions, considered attractive by the Company, and even though they were carried out before the crisis caused by the COVID-19 pandemic, they were in line with the debt management strategy based on cost reduction and extension of the term portfolio, thus reinforcing our liquidity position.
In line with the material fact disclosed to the market on March 30, 2020, there was a disbursement of U.S.$500,000 (equivalent to R$2,632,550) of its revolving credit facility maintained with certain financial institutions, of 1.30% plus quarterly LIBOR and maturity in February 2024. The disbursement is in line with the preventive measures that the Company has been taking to mitigate eventual impacts resulting from the COVID-19 pandemic and aims to bring even more strength to the liquidity position of the Company. The funds were credited on April 1, 2020.
The remaining contractual maturities of financial liabilities are disclosed at the date of this financial information reporting date. The amounts as set forth below, consist in the undiscounted cash flows and include interest payments and exchange rate variation, and therefore may not be reconciled with the amounts disclosed in the balance sheet.
March 31, 2020 | ||||||||||||||||||||||||
| Total book value | Total future value | Up to 1 year | 1 - 2 years | 2 - 5 years | More than 5 years | |||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Trade accounts payables | 2,408,286 | 2,408,286 | 2,408,286 | |||||||||||||||||||||
| Loans, financing and debentures(1) | 75,781,660 | 106,324,064 | 9,184,688 | 4,519,542 | 38,260,341 | 54,359,493 | ||||||||||||||||||
| Lease liabilities | 4,727,361 | 8,305,229 | 669,471 | 1,309,502 | 1,724,706 | 4,601,550 | ||||||||||||||||||
| Liabilities for asset acquisitions and subsidiaries | 633,771 | 728,961 | 130,790 | 126,604 | 360,237 | 111,330 | ||||||||||||||||||
| Derivative financial instruments(1) | 11,793,326 | 16,588,383 | 4,717,622 | 1,806,315 | 2,721,021 | 7,343,425 | ||||||||||||||||||
| Other liabilities | 387,226 | 387,226 | 302,903 | 84,323 | ||||||||||||||||||||
| 95,731,630 | 134,742,149 | 17,413,760 | 7,846,286 | 43,066,305 | 66,415,798 | |||||||||||||||||||
| 1) | The variation is due to the increase in the exchange rate variation in the three-month period ended March 31, 2020. |
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| December 31, 2019 | ||||||||||||||||||||||||
| Total book value | Total future value | Up to 1 year | 1 - 2 years | 2 - 5 years | More than 5 years | |||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Trade accounts payables | 2,376,459 | 2,376,459 | 2,376,459 | |||||||||||||||||||||
| Loans, financing and debentures | 63,684,326 | 89,708,210 | 8,501,278 | 5,692,149 | 29,088,292 | 46,426,491 | ||||||||||||||||||
| Lease liabilities | 3,984,070 | 7,109,966 | 559,525 | 1,426,011 | 1,186,386 | 3,938,044 | ||||||||||||||||||
| Liabilities for asset acquisitions and subsidiaries | 541,615 | 618,910 | 103,132 | 101,149 | 315,989 | 98,640 | ||||||||||||||||||
| Derivative financial instruments | 2,917,913 | 8,299,319 | 1,488,906 | 415,791 | 1,258,200 | 5,136,422 | ||||||||||||||||||
| Other liabilities | 578,061 | 578,061 | 456,338 | 121,723 | ||||||||||||||||||||
| 74,082,444 | 108,690,925 | 13,485,638 | 7,756,823 | 31,848,867 | 55,599,597 | |||||||||||||||||||
| 4.3. | Credit risk management |
In the three-month period ended March 31, 2020, there were no significant changes in the credit risk management policies and procedures compared to those reported in note 4 to the financial statements of December 31, 2019, except for described set forth below.
| 4.3.1. | Trade accounts receivable and advances to supplier |
As a result of the crisis caused by COVID-19, the Company started to accept requests for the extension of customer invoices, limiting these postponements to those invoices close to maturity, with due interest charges.
Most of the customers who requested extension are related to the domestic market in the paper segment and do not represent a significant amount compared to the Company's total accounts receivable.
In the three-month period ended March 31, 2019, the Company did not observe an increase in customer default due to the COVID-19 crisis. The Company believes that delays in receipts may behave more accentuated than the historic over the next few months, however, internal analyzes and credit metrics do not demonstrate that these delays may have a significant impact on the Company's liquidity position.
All policies aimed at mitigating the possible risks arising from the default of its customers were maintained, as well as the collection policies and procedures. Moreover, the policy of expected credit losses normally follows, without any changes.
| 4.3.2. | Banks and financial institutions |
In the three-month period ended March 31, 2020, there were no significant changes in the credit risk management policies and procedures related to bank and financial institutions compared to those reported in note 4 to the financial statements of December 31, 2019.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 4.3.3. | Market risk management |
In the three-month period ended March 31, 2020, there were no significant changes in the market risk management policies and procedures compared to those reported in note 4 to the financial statements of December 31, 2019.
| 4.4. | Exchange rate risk management |
As disclosed in note 4 of the financial statements for the year ended December 31, 2019, the Company contracts sales operations of U.S.Dollar in the futures markets, including strategies with options, in order to ensure attractive levels of operating margins for a portion of revenue. These operations are limited to a percentage of the net foreign exchange surplus over the 18-month horizon and, therefore, are attached to the availability of ready-to-sell foreign exchange in the short term.
Due to pandemic COVID-19 and the effects on all global economies during the first quarter, financial markets have experienced volatility throughout the period with a strong sense of aversion to risk, with a consequent substantial devaluation of the Real against the U.S.Dollars. For the calculation of mark-to-market (“MtM”) the PTAX of the penultimate business day of the quarter was used, in December 2019 it was R$4.0307 and in March 2020 it was R$5.1594, with an increase of 28%. These market movements caused a negative impact on the mark-to-market hired hedge position.
It is important to mention that even if there is negative impact on the fair value of derivative operations, whereas hedging contracts are limited by policy in a maximum of 75% of the exposure in US Dollars, the exchange devaluation benefits, in a net way, the Company's cash generation.
The net exposure of assets and liabilities in foreign currency which is substantially in U.S. dollars, is set forth below:
March 31, 2020 | December 31, 2019 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | 4,082,697 | 2,527,834 | ||||||
| Trade accounts receivables | 3,495,423 | 2,027,018 | ||||||
| Derivative financial instruments | 221,081 | 9,440,141 | ||||||
| 7,799,201 | 13,994,993 | |||||||
| Liabilities | ||||||||
| Trade accounts payables | (961,279 | ) | (1,085,207 | ) | ||||
| Loans and financing | (57,627,985 | ) | (45,460,138 | ) | ||||
| Liabilities for asset acquisitions and subsidiaries | (376,376 | ) | (288,172 | ) | ||||
| Derivative financial instruments | (10,445,752 | ) | (11,315,879 | ) | ||||
| (69,411,392 | ) | (58,149,396 | ) | |||||
| Net liability exposure | (61,612,191 | ) | (44,154,403 | ) | ||||
| Suzano S.A. | |
| | |
| Notes to theUnaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 4.4.1.1. | Sensitivity analysis – foreign exchange rate exposure – except financial instruments derivatives |
For market risk analysis, the Company uses scenarios to jointly evaluate assets and liabilities positions in foreign currency, and the possible effects on its results. The probable scenario represents the amounts recognized, as they reflect the translation into BrazilianReais on the base date of the balance sheet (R$ to U.S.$ = R$5.1987).
This analysis assumes that all other variables, particularly, the interest rates, remains constant. The other scenarios considered the appreciation/depreciation of the Brazilian real against the U.S.$. at the rates of 25% and 50%, before taxes.
The following table set forth the potential impacts in absolute amounts:
March 31, 2020 | ||||||||||||
| Effect on profit or loss and equity | ||||||||||||
| Probable | Possible (25%) | Remote (50%) | ||||||||||
| Cash and cash equivalents | 4,082,697 | 1,020,674 | 2,041,349 | |||||||||
| Trade accounts receivable | 3,495,423 | 873,856 | 1,747,712 | |||||||||
| Trade accounts payable | (961,279 | ) | (240,320 | ) | (480,640 | ) | ||||||
| Loans and financing | (57,627,985 | ) | (14,406,996 | ) | (28,813,993 | ) | ||||||
| Liabilities for asset acquisitions and subsidiaries | (376,376 | ) | (94,094 | ) | (188,188 | ) | ||||||
| 4.4.1.2. | Sensitivity analysis – foreign exchange rate exposure – financial instruments derivatives |
This analysis assumes that all other variables, particularly, the interest rates, remains constant. The other scenarios considered the appreciation/depreciation of the Brazilian real against the U.S.$. at the rates of 25% and 50%, before taxes.
The following table set forth the potential impacts assuming these scenarios:
March 31,2020 | ||||||||||||||||||||
| Effect on profit or loss and equity | ||||||||||||||||||||
| Probable | Possible (+25%) | Remote (+50%) | Possible (-25%) | Remote (-50%) | ||||||||||||||||
| 5.1594 | 6.4493 | 7.7391 | 3.8696 | 2.5797 | ||||||||||||||||
| Financial instruments derivatives | ||||||||||||||||||||
| Derivative options | (3,096,523 | ) | (4,526,159 | ) | (9,220,221 | ) | 3,820,861 | 8,317,034 | ||||||||||||
| Derivative NDF(1) | (42,522 | ) | (58,194 | ) | (116,388 | ) | 58,194 | 116,388 | ||||||||||||
| Derivative swaps | (8,198,092 | ) | (5,573,098 | ) | (11,146,189 | ) | 5,573,083 | 11,146,174 | ||||||||||||
| 1) | NDF: Non-Deliverable Forward |
| 4.4.2. | Interest rate risk management |
| 4.4.2.1. | Sensitivity analysis – exposure to interest rates – except financial instruments derivatives |
For market risk analysis, the Company uses scenarios to evaluate the sensitivity that variations in operations impacted by the rates: Interbank Deposit Rate (“CDI”), Long Term Interest Rate (“TJLP”), Special System for Settlement and Custody ("SELIC") and the London Interbank Offered Rate (“LIBOR”) may have on its results. The probable scenario represents the amounts already booked, as they reflect the best estimate of the Management.
| Suzano S.A. | |
| | |
| Notes to theUnaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
This analysis assumes that all other variables, particularly exchange rates, remain constant. The other scenarios considered appreciation/depreciation of 25% and 50% in the market interest rates.
The following table set forth the potential impacts in absolute amounts:
March 31, 2020 | ||||||||||||
| Effect on profit or loss and equity | ||||||||||||
| Probable | Possible (25%) | Remote (50%) | ||||||||||
| CDI | ||||||||||||
| Cash and cash equivalents | 337,309 | 3,078 | 6,156 | |||||||||
| Marketable securities | 5,190,724 | 47,365 | 94,731 | |||||||||
| Loans and financing | 11,463,323 | 104,603 | 209,206 | |||||||||
| TJLP | ||||||||||||
| Loans and financing | 1,772,356 | 22,553 | 45,106 | |||||||||
| LIBOR | ||||||||||||
| Loans and financing | 21,268,682 | 77,126 | 154,251 | |||||||||
| 4.4.2.2. | Sensitivity analysis – exposure to interest rates – financial instruments derivatives |
This analysis assumes that all other variables, particularly exchange rates, remain constant. The other scenarios considered appreciation/depreciation of 25% and 50% in the market interest rates.
The following table set forth the potential impacts assuming these scenarios:
| March 31, 2020 | ||||||||||||||||||||
| Effect on profit or loss and equity | ||||||||||||||||||||
| Probable | Probable (+25%) | Remote (+50%) | Probable (-25%) | Remote (-50%) | ||||||||||||||||
| CDI | ||||||||||||||||||||
| Financial instruments derivatives | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Derivative options | (3,096,523 | ) | (76,517 | ) | (152,503 | ) | 77,090 | 154,697 | ||||||||||||
| Derivative swaps | (8,198,092 | ) | (37,176 | ) | (72,822 | ) | 38,689 | 78,906 | ||||||||||||
| LIBOR | ||||||||||||||||||||
| Financial instruments derivatives | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Derivative swaps | (8,198,092 | ) | 84,881 | 169,738 | (84,929 | ) | (169,884 | ) | ||||||||||||
| Suzano S.A. | |
| | |
| Notes to theUnaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 4.4.2.3. | Sensitivity analysis for changes in the consumer price index of the US economy |
For the measurement of the probable scenario, the United States Consumer Price Index (US-CPI) was considered on December 31, 2019. The probable scenario was extrapolated considering an appreciation/depreciation of 25 % and 50% in the US-CPI to define the possible and remote scenarios, respectively, in absolute amounts.
March 31, 2020 | ||||||||||||
| Impact of an increase/decrease of US-CPI on the fair value | ||||||||||||
| Probable | Possible (25%) | Remote (50%) | ||||||||||
| Embedded derivative in forestry partnership and standing wood supply agreements | 589,197 | (62,007 | ) | (125,396 | ) | |||||||
| 4.4.3. | Commodity price risk management |
The Company is exposed to commodity prices that reflect mainly on the pulp sale price in the foreign market. The dynamics of opening and closing production capacities in the global market and the macroeconomic conditions may have an impact on the Company´s operating results.
Through a specialized team, the Company monitors the pulp price and analyses future trends, adjusting the forecast which that aims to assisting preventive measures to properly conduct the different scenarios. There is no liquid financial market to sufficiently mitigate the risk of a material portion of the Company's operations. Price protection operations cellulose available on the market have low liquidity and volume and large distortion in price formation. No relevant changes were observed in relation to pulp prices and future markets related to this index due to the crisis caused by the pandemic of COVID-19.
The Company is also exposed to international oil prices, which is reflected on logistical costs for selling to the export market. In this case, the Company assess, when comprehend necessary, hiring derivative financial instruments to set oil price. The crisis caused by the COVID-19 pandemic significantly impacted the global demand for oil and its derivatives, which caused a substantial devaluation of the prices of these assets in the spot and future markets. In this context, and considering attractive market conditions, the Company increased its oil hedge position in line with its hedge strategy and policies and set a good part of its exposure at levels below the estimated price levels for the 2020 budget.
In the three-month period ended March 31, 2020, a contracted position to hedge its logistics costs was purchased in the amount of U.S.$95,117 (U.S.$ 0.364 as of December 31, 2019).
| Suzano S.A. | |
| | |
| Notes to theUnaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 4.4.3.1. | Commodity price risk management |
This analysis assumes that all other variables, except price risk, remain constant. The other scenarios considered appreciation/depreciation of 25% and 50% of oil price in the market.
The following table set forth the potential impacts assuming these scenarios:
March 31, 2020 | ||||||||||||
| Impact of an increase/decrease of price risk | ||||||||||||
| Probable | Possible (25%) | Remote (50%) | ||||||||||
| Oil derivative | (147,240 | ) | 234,052 | 320,863 | ||||||||
| 4.5. | Derivative financial instruments |
The Company determines the fair value of derivative contracts, which differ from the amounts realized in the event of early settlement due to bank spreads and market factors at the time of quotation. The amounts presented by the Company are based on an estimate using market factors and use data provided by third parties, measured internally and compared to calculations performed by external consultants.
| Suzano S.A. | |
| | |
| Notes to theUnaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 4.5.1. | Outstanding derivatives by type of contract, including embedded derivatives |
The positions of outstanding derivatives are set forth below:
| Notional value in U.S.$ | Fair value | |||||||||||||||
| March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | |||||||||||||
| Instruments contracted with protection strategy | ||||||||||||||||
| Operational Hedge | ||||||||||||||||
| NDF (R$ x U.S.$) | 45,000 | (42,500 | ) | |||||||||||||
| Zero Cost Collar (R$ x U.S.$)(1) | 3,667,000 | 3,425,000 | (3,090,095 | ) | 67,078 | |||||||||||
| Debt hedge | ||||||||||||||||
| Interest rate hedge | ||||||||||||||||
| Swap LIBOR to Fixed (U.S.$)(1) | 3,683,333 | 2,750,000 | (1,139,261 | ) | (444,910 | ) | ||||||||||
| Swap IPCA to CDI (notional inReais) | 843,845 | 843,845 | 216,854 | 233,255 | ||||||||||||
| Swap IPCA to Fixed (U.S.$) | 121,003 | 121,003 | (160,910 | ) | 30,544 | |||||||||||
| Swap CDI x Fixed (U.S.$)(1) | 3,099,156 | 3,115,614 | (6,366,297 | ) | (1,940,352 | ) | ||||||||||
| Pre-fixed Swap to U.S.$ (U.S.$) | 350,000 | 350,000 | (564,868 | ) | (33,011 | ) | ||||||||||
| Hedge de Commodity | ||||||||||||||||
| Swap US-CPI standing wood (U.S.$)(2) | 668,346 | 679,485 | 589,197 | 268,547 | ||||||||||||
| Swap Bunker (oil) | 95,117 | 365 | (147,052 | ) | (92 | ) | ||||||||||
| (10,704,932 | ) | (1,818,941 | ) | |||||||||||||
| Current assets | 128,845 | 260,273 | ||||||||||||||
| Non-current assets | 959,549 | 838,699 | ||||||||||||||
| Current liabilities | (4,642,367 | ) | (893,413 | ) | ||||||||||||
| Non-current liabilities | (7,150,959 | ) | (2,024,500 | ) | ||||||||||||
| (10,704,932 | ) | (1,818,941 | ) | |||||||||||||
| 1) | The variation is due to the increase in the exchange rate in the three-month period ended March 31, 2020. |
| 2) | The embedded derivative refers to swap contracts for the sale of US-CPI variations within the term of the forest partnership and standing wood supply contracts. |
The COVID-19 pandemic negatively impacted the financial markets and, consequently, caused increased volatility throughout the first quarter, devaluing the Real against the US Dollar by 28%, as previously mentioned. The variation in the fair value of derivatives for the three-month period ended March 31, 2020 compared to the fair value measured on December 31, 2019 is explained substantially by this significant devaluation of the local currency. There were also less significant impacts caused by the variation in the Pre, Foreign Exchange Coupon and LIBOR curves in transactions.
It is important to highlight that, the outstanding agreements in the three-month period ended March 31, 2020, are over-the-counter market, without any kind of guarantee margin or early settlement clause forced by changes from mark to market, including possible variations caused by the COVID-19 pandemic.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 4.5.2. | Fair value by maturity schedule |
March 31, 2020 | December 31, 2019 | |||||||
| 2020 | (3,880,979 | ) | (633,644 | ) | ||||
| 2021 | (1,729,476 | ) | 98,850 | |||||
| 2022 | (916,271 | ) | (154,734 | ) | ||||
| 2023 | (447,481 | ) | 185,209 | |||||
| 2024 | (693,886 | ) | (197,718 | ) | ||||
| 2025 | (1,677,310 | ) | (606,827 | ) | ||||
| 2026 onwards | (1,359,529 | ) | (510,077 | ) | ||||
| (10,704,932 | ) | (1,818,941 | ) | |||||
| 4.5.3. | Outstanding of assets and liabilities derivatives positions |
The outstanding derivatives positions are set forth below:
| Notional value | Fair value | |||||||||||||||||||
| Currency | March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | ||||||||||||||||
| Debt hedge | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Swap CDI x Fixed (U.S.$) | R$ | 11,443,605 | 11,498,565 | 11,847,439 | 11,673,117 | |||||||||||||||
| Swap Pre-Fixed to U.S.$ (U.S.$) | R$ | 1,317,226 | 1,317,226 | 1,452,533 | 1,478,336 | |||||||||||||||
| Swap LIBOR x Fixed (U.S.$) | US$ | 3,683,333 | 2,750,000 | 19,322,891 | 11,063,970 | |||||||||||||||
| Swap IPCA xCDI | IPCA | 948,932 | 933,842 | 1,087,479 | 1,093,067 | |||||||||||||||
| Swap IPCA x U.S.$ | IPCA | 507,511 | 499,441 | 574,523 | 579,307 | |||||||||||||||
| 34,284,865 | 25,887,797 | |||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Swap CDI x Fixed (U.S.$) | US$ | 3,099,156 | 3,115,614 | (18,213,736 | ) | (13,613,469 | ) | |||||||||||||
| Swap LIBOR x Fixed (U.S.$) | US$ | 350,000 | 350,000 | (2,017,401 | ) | (1,511,347 | ) | |||||||||||||
| Swap LIBOR x Fixed (U.S.$) | US$ | 3,683,333 | 2,750,000 | (20,462,152 | ) | (11,508,880 | ) | |||||||||||||
| Swap IPCA xCDI | R$ | 843,845 | 843,845 | (870,625 | ) | (859,812 | ) | |||||||||||||
| Swap IPCA x U.S.$ | US$ | 121,003 | 121,003 | (735,433 | ) | (548,763 | ) | |||||||||||||
| (42,299,347 | ) | (28,042,271 | ) | |||||||||||||||||
| (8,014,482 | ) | (2,154,474 | ) | |||||||||||||||||
| Operational hedge | ||||||||||||||||||||
| Zero cost collar (U.S.$ x R$) | US$ | 3,667,000 | 3,425,000 | (3,090,095 | ) | 67,078 | ||||||||||||||
| NDF (R$ x U.S.$) | US$ | 45,000 | (42,500 | ) | ||||||||||||||||
| (3,132,595 | ) | 67,078 | ||||||||||||||||||
| Commodity hedge | ||||||||||||||||||||
| Swap US-CPI (standing wood) | US$ | 668,346 | 679,485 | 589,197 | 268,547 | |||||||||||||||
| Swap Bunker (oil) | US$ | 95,117 | 365 | (147,052 | ) | (92 | ) | |||||||||||||
| 442,145 | 268,455 | |||||||||||||||||||
| (10,704,932 | ) | (1,818,941 | ) | |||||||||||||||||
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 4.5.4. | Fair value settled amounts |
The settled derivatives positions are set forth below:
March 31, 2020 | December 31, 2019 | |||||||
| Operational hedge | ||||||||
| Zero cost collar (R$ x U.S.$) | (161,713 | ) | (104,040 | ) | ||||
| NDF (R$ x U.S.$) | 63,571 | |||||||
| (161,713 | ) | (40,469 | ) | |||||
| Commodity hedge | ||||||||
| Swap Bunker (oil) | (92 | ) | 3,804 | |||||
| (92 | ) | 3,804 | ||||||
| Debt hedge | ||||||||
| Swap CDI x Fixed (U.S.$) | (19,783 | ) | (68,362 | ) | ||||
| Swap IPCA x CDI | 23,024 | |||||||
| Swap Pre-Fixed to U.S.$ (U.S.$) | 34,099 | (26,358 | ) | |||||
| Swap LIBOR x Fixed (U.S.$) | (25,308 | ) | (27,088 | ) | ||||
| (10,992 | ) | (98,784 | ) | |||||
| (172,797 | ) | (135,449 | ) | |||||
| 4.6. | Fair value hierarchy |
For the three-month period ended March 31, 2020, there were no changes between the 3 (three) levels of hierarchy and no transfers between levels 1, 2 and 3 during the periods disclosed.
March 31, 2020 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Fair value through profit or loss | ||||||||||||||||
| Derivative financial instruments | 1,088,394 | 1,088,394 | ||||||||||||||
| Marketable securities | 503,321 | 4,687,403 | 5,190,724 | |||||||||||||
| 503,321 | 5,775,797 | 6,279,118 | ||||||||||||||
| Fair value through other comprehensive income | ||||||||||||||||
| Other investments - CelluForce | 23,770 | 23,770 | ||||||||||||||
| 23,770 | 23,770 | |||||||||||||||
| Biological assets | 10,431,416 | 10,431,416 | ||||||||||||||
| 10,431,416 | 10,431,416 | |||||||||||||||
| Total assets | 503,321 | 5,775,797 | 10,455,186 | 16,734,304 | ||||||||||||
| Liabilities | ||||||||||||||||
| Fair value through profit or loss | ||||||||||||||||
| Derivative financial instruments | 11,793,326 | 11,793,326 | ||||||||||||||
| Total liabilities | 11,793,326 | 11,793,326 | ||||||||||||||
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
December 31, 2019 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Fair value through profit or loss | ||||||||||||||||
| Derivative financial instruments | 1,098,972 | 1,098,972 | ||||||||||||||
| Marketable securities | 1,631,319 | 4,699,015 | 6,330,334 | |||||||||||||
| 1,631,319 | 5,797,987 | 7,429,306 | ||||||||||||||
| Fair value through other comprehensive income | ||||||||||||||||
| Other investments - CelluForce | 20,048 | 20,048 | ||||||||||||||
| 20,048 | 20,048 | |||||||||||||||
| Biological assets | 10,571,499 | 10,571,499 | ||||||||||||||
| 10,571,499 | 10,571,499 | |||||||||||||||
| Total assets | 1,631,319 | 5,797,987 | 10,591,547 | 18,020,853 | ||||||||||||
| Liabilities | ||||||||||||||||
| Fair value through profit or loss | ||||||||||||||||
| Derivative financial instruments | 2,917,913 | 2,917,913 | ||||||||||||||
| 2,917,913 | 2,917,913 | |||||||||||||||
| Total liabilities | 2,917,913 | 2,917,913 | ||||||||||||||
| 4.7. | Capital management |
The main objective is to strengthen its capital structure, aiming to maintain an adequate financial leverage, and to mitigate risks that may affect the availability of capital in business development.
The Company monitors constantly significant indicator, such as, consolidated financial leverage, which is the ratio of total net debt to its adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”).
| 5. | CASH AND CASH EQUIVALENTS |
| Average yield p.a. % | March 31, 2020 | December 31, 2019 | ||||||||||
| Cash and banks | 0.49 | 3,454,839 | 2,464,097 | |||||||||
| Cash equivalents | ||||||||||||
| Local currency | ||||||||||||
| Fixed-term deposits(1) | 102.90 ofCDI | 337,309 | 630,075 | |||||||||
| Foreign currency | ||||||||||||
| Fixed-term deposits(1) | 1.53 | 756,181 | 154,955 | |||||||||
| 4,548,329 | 3,249,127 | |||||||||||
| 1) | Refers to Time Deposit and Sweep Account applications, maturing up to 90 days. |
Time Deposit is a remunerated bank deposit with a specific maturity period.
Sweep Account: is a paid sweep account. At the end of the day, the balance remaining in the account is automatically applied and automatically made available the next business day in the morning.
| Suzano S.A. | |
| | |
| Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 6. | MARKETABLE SECURITIES |
| Average yield p.a. % | March 31, 2020 | December 31, 2019 | ||||||||||
| In local currency | ||||||||||||
| Investment funds | 54.00 of CDI | 6,625 | 6,683 | |||||||||
| Private funds | 29.85 of CDI | 947,857 | 1,431,303 | |||||||||
| Public titles measured at fair value through profit or loss | 29.85 of CDI | 503,321 | 1,631,319 | |||||||||
| Private Securities (Compromised) | 101.12 of CDI | 3,551,357 | 3,081,326 | |||||||||
| Private Securities (Compromised) - Escrow Account(1) | 102.00 of CDI | 181,564 | 179,703 | |||||||||
| 5,190,724 | 6,330,334 | |||||||||||
| Current | 5,009,160 | 6,150,631 | ||||||||||
| Non-Current | 181,564 | 179,703 | ||||||||||
| 1) | Refers to the guarantee account, which will be released only after obtaining the applicable governmental approvals and compliance by the Company with the precedent conditions to the conclusion of the Losango Project provided for in the agreement entered with CMPC Celulose Riograndense SA ("CMPC"). The Losango Project was a transaction to buy and sell lands and forests involving Fibria and CMPC, entered into in December 2012. |
| 7. | TRADE ACCOUNTS RECEIVABLE |
| 7.1 | Breakdown of balances |
March 31, 2020 | December 31, 2019 | |||||||
| Domestic customers | ||||||||
| Third parties | 967,206 | 1,027,034 | ||||||
| Receivables Investment Fund ("FIDC") | ||||||||
| Related parties (Note 11) | 34,192 | 23,761 | ||||||
| Foreign customers | ||||||||
| Third parties | 3,495,423 | 2,027,018 | ||||||
| (-) Expected credit losses | (48,864 | ) | (41,996 | ) | ||||
| 4,447,957 | 3,035,817 | |||||||
The Company performs factoring transactions for certain customers’ receivables where, substantially all risks and rewards related to these receivables are transferred to the counterpart, so that these receivables are derecognized from accounts receivable in the balance sheet. This transaction refers to an additional cash generation opportunity and may be discontinued at any time without significant impact on the Company's operation and is therefore classified as a financial asset measured at amortized cost. The impact of these factoring transactions on the accounts receivable in the balance sheet for the three-month period ended March 31, 2020, is R$3,671,869 (R$3,544,625 as of December 31, 2019).
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 7.2 | Breakdown of trade accounts receivable by maturity |
March 31, 2020 | December 31, 2019 | |||||||
| Current | 3,951,612 | 2,552,459 | ||||||
| Overdue | ||||||||
| Up to 30 days | 347,720 | 180,909 | ||||||
| From 31 to 60 days | 20,355 | 148,388 | ||||||
| From 61 to 90 days | 27,815 | 20,448 | ||||||
| From 91 to 120 days | 9,147 | 20,680 | ||||||
| From 121 to 180 days | 20,319 | 17,899 | ||||||
| More than 180 days | 70,989 | 95,034 | ||||||
| 4,447,957 | 3,035,817 | |||||||
| 7.3 | Rollforward of the expected credit losses |
March 31, 2020 | December 31, 2019 | |||||||
| Beginning balance | (41,996 | ) | (37,179 | ) | ||||
| Business combination with Fibria(1) | (5,947 | ) | ||||||
| Addition | (5,522 | ) | (18,650 | ) | ||||
| Reversal | 6,364 | |||||||
| Write-off | 872 | 13,383 | ||||||
| Exchange rate variation | (2,218 | ) | 33 | |||||
| Ending balance | (48,864 | ) | (41,996 | ) | ||||
| 1) | Business combination with Fibria and its subsidiaries held on January 3, 2019, Note 1.2.2. |
The Company maintains guarantees for overdue securities in its commercial operations, through credit insurance policies, letters of credit and other guarantees. These guarantees avoid the need to recognize expected credit losses, in accordance with the Company's credit policy.
| 7.4 | Main customers |
The Company has 1 (one) customer for 8.92% of net sales of pulp segment for the three-month period ended March 31, 2020 (1 (one) customer for 10% of net sales of pulp segment as of December 31, 2019).
| 8. | INVENTORIES |
March 31, 2020 | December 31, 2019 | |||||||
| Finished goods | ||||||||
| Pulp | ||||||||
| Domestic (Brazil) | 578,102 | 575,335 | ||||||
| Foreign | 1,538,644 | 2,229,206 | ||||||
| Paper | ||||||||
| Domestic (Brazil) | 281,213 | 199,635 | ||||||
| Foreign | 114,186 | 70,199 | ||||||
| Work in process | 112,512 | 75,377 | ||||||
| Raw material | 1,259,298 | 1,047,433 | ||||||
| Spare parts and other | 378,556 | 488,410 | ||||||
| 4,262,511 | 4,685,595 | |||||||
For the three-month period ended March 31, 2020, inventories are net of estimated losses in the amounts of R$62,725 (R$106,713 as of December 31, 2019).
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 8.1 | Rollforward of estimated losses |
March 31, 2020 | December 31, 2019 | |||||||
| Beginning balance | (106,713 | ) | (33,195 | ) | ||||
| Business combination with Fibria(1) | (11,117 | ) | ||||||
| Addition(2) | (15,104 | ) | (111,077 | ) | ||||
| Reversal | 44 | 9,734 | ||||||
| Write-off(3) | 59,048 | 38,942 | ||||||
| Ending balance | (62,725 | ) | (106,713 | ) | ||||
| 1) | Business combination with Fibria and its subsidiaries held on January 3, 2019, Note 1.2.2. |
| 2) | For the three-month period ended March 31, 2020, refers, substantially, to estimated losses of inventories of finished goods and raw material, in the amounts of R$1,025 and R$13,504, respectively (R$42,470 and R$39,382 as of December 31, 2019). |
| 3) | For the three-month period ended March 31, 2020, refers, substantially, to write-off of finished pulp product, raw material, work in process (tissue) and spare parts in the amounts of R$30,539, R$24,831, R$2,463 and R$1,146 respectively (R$5,786 and R$26,093 spare parts and raw material, respectively as of December 31, 2019). |
For the three-month period ended March 31, 2020, additional write-offs were booked in the income statement in the amount of R$1,108 (R$5,190 as of December 31, 2019).
For the three-month period ended March 31, 2020, there were no inventory items pledged as collateral (there were no inventory items pledged as collateral as of December 31, 2019).
| 9. | RECOVERABLE TAXES |
March 31, 2020 | December 31, 2019 | |||||||
| IRPJ/CSLL – prepayments and withheld taxes | 502,498 | 575,351 | ||||||
| PIS/COFINS – on acquisition of property, plant and equipment(1) | 118,542 | 61,376 | ||||||
| PIS/COFINS – operations | 332,518 | 507,919 | ||||||
| PIS/COFINS – exclusion ICMS(2) | 128,115 | 128,115 | ||||||
| ICMS – on acquisition of property, plant and equipment(3) | 112,197 | 115,560 | ||||||
| ICMS – operations(4) | 1,513,742 | 1,515,840 | ||||||
| Reintegra program(5) | 112,254 | 108,657 | ||||||
| Other taxes and contributions | 19,856 | 18,758 | ||||||
| Provision for loss of ICMS credits(6) | (1,323,900 | ) | (1,304,329 | ) | ||||
| Provision for loss of PIS/COFINS credits | (21,132 | ) | ||||||
| 1,515,822 | 1,706,115 | |||||||
| Current | 836,043 | 997,201 | ||||||
| Non-current | 679,779 | 708,914 | ||||||
| 1) | Social Integration Program (“PIS”) and Social Security Funding Contribution (“COFINS”): Credits whose realization is in connection with depreciation year of the corresponding asset. |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 2) | The Company filed legal actions claiming the exclusion of ICMS from the PIS and COFINS contribution tax basis, in relation to certain operations for certain periods starting from March 1992. |
Regarding this subject, the Federal Supreme Court (“STF”) initially decided on March 15th, 2017, that ICMS is not included in the tax basis of the aforementioned contributions. The Federal Government made an appeal(“Embargos de Declaração”) in October 2017, requesting the reversal of the Supreme Court’s initial decision among other items. The appeal has yet to be judged.
Based on the Supreme Court’s initial decision and the legal opinion provided by external legal consultants, the Company believes that the probability of the Supreme Court altering its decision is remote. The Company thus started to exclude the ICMS from the tax basis of the referred contributions since August 2018, a practice also supported by court decisions.
For certain PIS and COFINS credits to be recovered, the Company has received final favorable court decisions. The balance of R$128,115 recognized in the statement of income (loss) in 2019 within other operational results, regarding certain claims for the calculation period from 2006 to July 2018. The Company has estimated the amount attributable to these claims based on the available relevant fiscal documents, and this amount is subject to adjustments to be recorded by management in the future periods.
The Company has additional claims for which a final decision has not been received and for which no asset or gain have been recorded.
| 3) | Tax on Sales and Services (“ICMS”): Credits from the acquisition of property, plant and equipment are recovered on a linear basis over a four period, from the acquisition date, in accordance with the relevant regulation, ICMS Control on Property, Plant and Equipment (“CIAP”). |
| 4) | ICMS credits accrued due to the volume of exports and credit generated in operations of entry of products: Credits are concentrated in the state of Maranhão, Espírito Santo, Bahia and Mato Grosso do Sul, where the Company realizes the credits through sale of credits to third parties, after approval from the State Ministry of Finance. Credits are also being realized through consumption in its consumer goods (tissue) operations in the domestic market that are already operational in Maranhão. |
| 5) | Special Regime of Tax Refunds for Export Companies ("Reintegra"): Reintegra is a program that aims to refund the residual costs of taxes paid throughout the exportation chain to taxpayers, to make them more competitive in foreign markets. |
| 6) | Includes the provision for discount on sale to third parties of the accumulated ICMS credit in Maranhão and the provision for full loss of the low probability of realization of the units of Espírito Santo, Bahia and Mato Grosso do Sul due to the difficulty of its realization. |
| 9.1. | Rollforward of provision for loss |
| ICMS | PIS/COFINS | Total | ||||||||||
| Balance as of December 31, 2018 | (10,792 | ) | (10,792 | ) | ||||||||
| Business combination with Fibria(1) | (1,211,109 | ) | (1,211,109 | ) | ||||||||
| Addition | (82,428 | ) | (21,132 | ) | (103,560 | ) | ||||||
| Balance as of December 31, 2019 | (1,304,329 | ) | (21,132 | ) | (1,325,461 | ) | ||||||
| Write-off | 21,132 | 21,132 | ||||||||||
| Addition | (19,571 | ) | (19,571 | ) | ||||||||
| Balance as of March 31, 2020 | (1,323,900 | ) | (1,323,900 | ) | ||||||||
| 1) | Business combination with Fibria and its subsidiaries held on January 3, 2019, Note 1.2.2. |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 10. | ADVANCE TO SUPPLIERS |
March 31, 2020 | December 31, 2019 | |||||||
| Forestry development program | 1,212,714 | 1,087,149 | ||||||
| Advance to suppliers | 158,739 | 170,481 | ||||||
| 1,371,453 | 1,257,630 | |||||||
| Current | 158,740 | 170,481 | ||||||
| Non-current | 1,212,713 | 1,087,149 | ||||||
In the financial statements for the year ended December 31, 2019, additional information on advances was disclosed, which did not change during the period.
| 11. | RELATED PARTIES |
The Company's commercial and financial operations with controlling shareholder and Companies owned by controlling shareholder Suzano Holding S.A. ("Suzano Group"). For transactions with related parties, it is determined that the usual market prices and conditions for these transactions are observed, as well as the corporate governance practices adopted by the Company and those recommended and/or required by the legislation.
For the three-month period ended March 31, 2020, there were no material changes in the terms of the agreements, deal and transactions entered into, nor were there any new contracts, agreements or transactions of different natures entered into between the Company and its related parties in relation to those disclosed in the annual financial statements for the year ended December 31, 2019.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 11.1 | Balances recognized in assets and liabilities |
| Balances receivable (payable) | ||||||||||
| Nature | March 31, 2020 | December 31, 2019 | ||||||||
| Transactions with controlling shareholders | ||||||||||
| Suzano Holding | Granting of guarantees and administrative expenses | 5 | 3 | |||||||
| 5 | 3 | |||||||||
| Transactions with companies of the Suzano Group and other related parties | ||||||||||
| Bexma | Reimbursement for expenses | 2 | 1 | |||||||
| Bizma | Reimbursement for expenses | 1 | 1 | |||||||
| Ecofuturo | Social services | (1,730 | ) | (9 | ) | |||||
| Ensyn Technologies | Reimbursement for expenses | 2,004 | ||||||||
| Ibema | Sale of pulp | 32,180 | 23,755 | |||||||
| Ibema | Purchase of products | (1,364 | ) | (2,467 | ) | |||||
| Management | Reimbursement for expenses | (72 | ) | (1 | ) | |||||
| 31,021 | 21,280 | |||||||||
| 31,026 | 21,283 | |||||||||
| Assets | ||||||||||
| Trade accounts receivable | 34,192 | 23,761 | ||||||||
| Liabilities | ||||||||||
| Trade accounts payable | (3,166 | ) | (2,478 | ) | ||||||
| 31,026 | 21,283 | |||||||||
| 11.2 | Amounts transacted in the period |
| Expenses (income) | ||||||||||
| Nature | March 31, 2020 | March 31, 2019 | ||||||||
| Transactions with controlling shareholders | ||||||||||
| Suzano Holding | Granting of guarantees and administrative expenses | (1,072 | ) | (1,647 | ) | |||||
| (1,072 | ) | (1,647 | ) | |||||||
| Transactions with companies of the Suzano Group and other related parties: | ||||||||||
| Bexma | Reimbursement for expenses | 3 | 1 | |||||||
| Bizma | Reimbursement for expenses | 2 | 5 | |||||||
| Ecofuturo | Social services | (2,016 | ) | (1,557 | ) | |||||
| Ibema | Sale of pulp | 24,419 | 36,881 | |||||||
| Ibema | Purchase of products | (1,007 | ) | (933 | ) | |||||
| IPFL | Reimbursement for expenses | 1 | ||||||||
| Mabex | Aircraft services | 50 | (35 | ) | ||||||
| Management | Reimbursement for expenses | (3,494 | ) | (115 | ) | |||||
| Nemonorte | Real estate advisory | (50 | ) | (45 | ) | |||||
| 17,908 | 34,202 | |||||||||
| 16,836 | 32,555 | |||||||||
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 11.3 | Management compensation |
Expenses related to the compensation of key management personnel, which include the Board of Directors, Fiscal Council and Board of Statutory Executive Officers, recognized in the statement of income for the period, are set for the below:
| March 31, 2020 | March 31, 2020 | |||||||
| Short-term benefits | ||||||||
| Salary or compensation | 10,204 | 8,955 | ||||||
| Direct and indirect benefits | 230 | 467 | ||||||
| Bonus | 3,437 | 2,897 | ||||||
| 13,871 | 12,319 | |||||||
| Long-term benefits | ||||||||
| Share-based compensation plan | 50,669 | 38,238 | ||||||
| 50,669 | 38,238 | |||||||
| 64,540 | 50,557 | |||||||
Short-term benefits include fixed compensation (salaries and fees, vacation, mandatory bonus and “13th salary” bonus), payroll charges (Company share of contributions to social security – INSS) and variable compensation such as profit sharing, bonus and benefits (company car, health plan, meal voucher, market voucher, life insurance and private pension plan).
Long-term benefits include the stock option plan and phantom shares for executives and key members of the Management, in accordance with the specific regulations as disclosed in Note 22.
| 12. | INCOME AND SOCIAL CONTRIBUTION TAXES |
The Company and its wholly-owned subsidiaries located in Brazil are subject to the tax regime based on taxable income. The wholly-owned subsidiaries located abroad are taxed in their respective jurisdictions, according to local regulations.
In Brazil, the Law nº. 12,973/14 revoked article 74 of Provisional Measure nº.2,158/01 and determines that the parcel of the adjustment of the value of the investment in wholly-owned subsidiary, direct and indirect, located abroad, equivalent to the profit earned by it before income tax, except for exchange rate variation, must be added in the determination of taxable income and the social contribution calculation basis of the controlling entity located in Brazil, at the each period ended.
Management’s Company believes on the validity of the provisions of international treaties entered into Brazil to avoid double taxation. In order to guarantee its right to non-double taxation, the Company filed a lawsuit in April 2019, which aims at a non-double taxation, in Brazil, of profit earned by its wholly-owned subsidiary located in Austria, according to Law n°. 12,973/14. Due to the preliminary injunction granted in favor of the Company in the records of the aforementioned lawsuit, the Company decided to not to add the profit from Suzano International Trading GmbH, located in Austria, in determining of taxable income and social contribution basis of the net profit of the Company for the three-month period ended March 31, 2020. There is no provision for tax related to the profit of such wholly-owned subsidiary in 2020.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 12.1. | Deferred income and social contribution taxes |
| March 31, 2020 | December 31, 2019 | |||||||
| Tax loss carryforwards | 740,344 | 600,249 | ||||||
| Negative tax base | 205,619 | 146,346 | ||||||
| Provision for judicial liabilities | 260,132 | 265,571 | ||||||
| Operating provisions and other losses | 915,293 | 933,818 | ||||||
| Exchange rate variation - Taxation on a cash basis(1) | 6,320,713 | 2,001,942 | ||||||
| Losses on derivatives(1) | 3,639,677 | 618,427 | ||||||
| Fair value adjustment on business combination – Amortization | 713,429 | 713,656 | ||||||
| Unrealized profit on inventories | 381,321 | 293,322 | ||||||
| Lease | 262,096 | 2,922 | ||||||
| Assets temporary differences | 13,438,624 | 5,576,253 | ||||||
| Goodwill - Tax benefit on unamortized goodwill | 283,982 | 216,857 | ||||||
| Property, plant and equipment - deemed cost adjustment | 1,498,177 | 1,506,220 | ||||||
| Accelerated tax depreciation | 1,090,709 | 1,113,200 | ||||||
| Borrowing cost | 117,035 | 104,549 | ||||||
| Fair value of biological assets | 73,104 | 53,502 | ||||||
| Tax provision on results of subsidiaries abroad | 533,821 | 463,850 | ||||||
| Fair value adjustment on business combination – Deferred taxes, net | 494,393 | 502,347 | ||||||
| Tax credits - gains in tax lawsuit (ICMS from the PIS/COFINS calculation basis) | 43,559 | 43,559 | ||||||
| Other temporary differences | 16,665 | 17,004 | ||||||
| Liabilities temporary differences | 4,151,445 | 4,021,088 | ||||||
| Non-current assets | 9,363,252 | 2,134,040 | ||||||
| Non-current liabilities | 76,073 | 578,875 | ||||||
| 1) | The variation is due to the increase in the exchange rate in the three-month period ended March 31, 2020. |
Except for tax loss carryforwards, the negative basis of social contribution and accelerated depreciation are only achieved by the Income Tax (“IRPJ”), other tax bases were subject to both taxes.
The breakdown of accumulated tax losses and social contribution tax loss carryforwards is set forth below:
| March 31, 2020 | December 31, 2019 | |||||||
| Tax loss carry forward | 2,961,376 | 2,400,998 | ||||||
| Social contribution tax loss carryforward | 2,284,660 | 1,626,064 | ||||||
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
The rollforward of net balance of deferred income tax is set for the below:
| March 31, 2020 | December 31, 2019 | |||||||
| Beginning balance | 1,555,165 | (1,029,135 | ) | |||||
| Business combination with Fibria(1) | 1,034,842 | |||||||
| Tax loss | 140,094 | 270,559 | ||||||
| Tax loss carryforwards | 59,273 | 139,719 | ||||||
| (Reversal)/provision for judicial liabilities | (5,439 | ) | 31,262 | |||||
| Operating provisions and other losses | (18,525 | ) | (21,757 | ) | ||||
| Exchange rate variation - Taxation on a cash basis(2) | 4,318,771 | 552,421 | ||||||
| Derivative losses(2) | 3,021,250 | 319,860 | ||||||
| Fair value adjustment on business combination – Amortization | 7,730 | 699,527 | ||||||
| Unrealized profit on inventories | 87,998 | 65,492 | ||||||
| Lease | 259,173 | (3,274 | ) | |||||
| Tax benefit on unamortized goodwill | (67,125 | ) | (203,696 | ) | ||||
| Property, plant and equipment - Deemed cost | 8,043 | 46,359 | ||||||
| Accelerated depreciation | 22,491 | 82,982 | ||||||
| Borrowing cost | (12,486 | ) | 44,727 | |||||
| Fair value of biological assets | (19,602 | ) | (60,778 | ) | ||||
| Tax provision on results of subsidiaries abroad | (69,971 | ) | (351,485 | ) | ||||
| Tax credits - gains in tax lawsuit (ICMS from the PIS/COFINS calculation basis) | (43,559 | ) | ||||||
| Other temporary differences | 339 | (18,901 | ) | |||||
| Ending balance | 9,287,179 | 1,555,165 | ||||||
| 1) | Business combination with Fibria and its subsidiaries held on January 3, 2019, Note 1.2.2. |
| 2) | The variation is due to the increase in the exchange rate in the three-month period ended March 31, 2020. |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 12.2. | Reconciliation of the effects of income tax and social contribution on profit or loss |
| March 31, 2020 | March 31, 2019 | |||||||
| Net income (loss) before taxes | (21,095,584 | ) | (1,751,331 | ) | ||||
| Income tax and social contribution benefit (expense) at statutory nominal rate of 34% | 7,172,499 | 595,453 | ||||||
| Tax effect on permanent differences | ||||||||
| Taxation (difference) on profit ofwholly-ownedsubsidiaries abroad(1) | 573,858 | (70,924 | ) | |||||
| Tax incentive – Reduction SUDENE(2) | 6,534 | |||||||
| Equity method | 242 | 82 | ||||||
| Thin capitalization(3) | (45,213 | ) | ||||||
| Credit related to Reintegra Program | 1,404 | 1,097 | ||||||
| Tax incentives applicable to income tax(4) | 3,557 | 1,767 | ||||||
| Director bonus | (2,345 | ) | (42,682 | ) | ||||
| Other | (27,479 | ) | 30,872 | |||||
| 7,676,523 | 522,199 | |||||||
| Income tax | ||||||||
| Current | (50,399 | ) | (98,379 | ) | ||||
| Deferred | 5,683,928 | 475,511 | ||||||
| 5,633,529 | 377,132 | |||||||
| Social Contribution | ||||||||
| Current | (3,961 | ) | (30,870 | ) | ||||
| Deferred | 2,046,955 | 175,937 | ||||||
| 2,042,994 | 145,067 | |||||||
| Income and social contribution benefits (expenses) on the period | 7,676,523 | 522,199 | ||||||
| Effective rate of income and social contribution tax expenses | 36.40 | % | 29.80 | % | ||||
| 1) | The effect of the difference in taxation of subsidiaries is substantially due to the difference between the nominal rates of Brazil and subsidiaries abroad. |
| 2) | Benefit used to reduce 75% of the tax calculated based on the operating profit of the Mucuri / BA and Imperatriz / MA facilities. |
| 3) | The Brazilian thin capitalization rules establish that interest paid or credited by a Brazilian entity to a related party may only be deducted for income tax purposes if the interest expense is viewed as necessary for the activities of the local entity and when determined limits and requirements are met. On March 31, 2020 the Company did not meet all limits and requirements, therefore a provision for tax payment was recorded. |
| 4) | Income tax deduction amount referring to the use of the PAT (“Worker Feeding Program”) benefit and donations made in cultural and sports projects. |
| 12.3. | Tax incentives |
Company has a tax incentive for the partial reduction of the income tax obtained by the operations carried out in areas of the Northeast Development Superintendency (“SUDENE”) in the Mucuri (BA) and Imperatriz (MA) regions. The IRPJ reduction incentive is calculated based on the activity profit (exploitation profit) and considers the allocation of the operating profit by the incentive production levels for each product. The incentive of lines 1 and 2 of Mucuri (BA) facility expire, respectively, in 2024 and 2027 and Imperatriz facility expire in 2024.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 13. | BIOLOGICAL ASSETS |
The rollforward of biological assets is set forth below:
| Balances on December 31, 2018 | 4,935,905 | |||
| Business combination with Fibria(1) | 4,579,526 | |||
| Addition | 2,849,039 | |||
| Depletion | (1,905,118 | ) | ||
| Gain on fair value adjustment | 185,399 | |||
| Disposal | (23,764 | ) | ||
| Other write-offs | (49,488 | ) | ||
| Balances on December 31, 2019 | 10,571,499 | |||
| Addition | 578,224 | |||
| Depletion | (697,675 | ) | ||
| Transfers | 678 | |||
| Disposal | (15,203 | ) | ||
| Other write-offs | (6,107 | ) | ||
| Balances on March 31, 2020 | 10,431,416 |
| 1) | Business combination with Fibria and its subsidiaries held on January 3, 2019, Note 1.2.2. |
As a result of disclosed in note 1.2.1., which deals with the effects arising from COVID19, the Company reassessed the main assumptions used in measuring the fair value of biological assets disclosed in the financial statements of December 31, 2019 and concluded that there were no significant changes in the assumptions relatively with the three-month period ended March 31, 2020. Therefore, Management believes that the revaluation of biological assets in this period will not be necessary, which will be revalued in the next period, in line with the Company's internal policy.
The Company has no biological assets pledged for the three-month period ended March 31, 2020 (has no biological assets pledged as of December 31, 2019).
| 14. | INVESTMENTS |
| 14.1. | Investments breakdown |
| March 31, 2020 | December 31, 2019 | |||||||
| Investments in associates and joint ventures | 136,290 | 140,934 | ||||||
| Goodwill | 166,819 | 161,464 | ||||||
| Other investments evaluated at fair value through other comprehensive income | 23,770 | 20,048 | ||||||
| 326,879 | 322,446 | |||||||
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 14.2. | Investments in associates and joint ventures |
| Information of joint ventures as of | Company Participation | ||||||||||||||||
| March 31, 2020 | In equity | In the income of the period | |||||||||||||||
| Participation equity (%) | March 31, 2020 | December 31, 2019 | March 31, 2020 | March 31,2019 | |||||||||||||
| Associate | |||||||||||||||||
| Ensyn Corporation | 25.30 | 12,730 | 21,437 | (3,351) | |||||||||||||
| Spinnova | 24.06 | 85,529 | 86,969 | (1,439) | |||||||||||||
| 98,259 | 108,406 | (4,790) | |||||||||||||||
| Joint ventures | |||||||||||||||||
| Ibema | 35,161 | 28,487 | 6,672 | 1,635 | |||||||||||||
| F&E Technologies LLC | 2,870 | 4,041 | (1,171) | 23 | |||||||||||||
| 38,031 | 32,528 | 5,501 | 1,658 | ||||||||||||||
| 136,290 | 140,934 | 711 | 1,658 | ||||||||||||||
| 15. | PROPERTY, PLANT AND EQUIPMENT |
| Lands | Buildings | Machinery, equipment and facilities | Work in progress | Other(1) | Total | |||||||||||||||||||
| Average rate % | 3 | 5 | 10 to 20 | |||||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| Balance as of December 31, 2018 | 5,104,717 | 3,058,520 | 16,441,031 | 466,156 | 332,089 | 25,402,513 | ||||||||||||||||||
| Additions | 337,932 | 1,943 | 136,855 | 1,477,420 | 47,524 | 2,001,674 | ||||||||||||||||||
| Write-offs | (92,705 | ) | (36,276 | ) | (172,458 | ) | (1,462 | ) | (34,858 | ) | (337,759 | ) | ||||||||||||
| Business combination with Fibria | 2,151,338 | 3,918,552 | 20,255,811 | 425,868 | 454,759 | 27,206,328 | ||||||||||||||||||
| Fair value adjustment - Fibria | 2,637,671 | 1,502,021 | 5,109,939 | 195,684 | 9,445,315 | |||||||||||||||||||
| Fair value adjustment – Facepa | 3,072 | (883 | ) | (111 | ) | 2,078 | ||||||||||||||||||
| Fair value adjustment – Ibema | 5,448 | 5,448 | ||||||||||||||||||||||
| Transfer and other(3) | 182,621 | 323,029 | 740,879 | (1,397,398 | ) | (61,761 | ) | (212,630 | ) | |||||||||||||||
| Balance as of December 31, 2019 | 10,321,574 | 8,767,789 | 42,520,577 | 969,701 | 933,326 | 63,512,967 | ||||||||||||||||||
| Additions | 1,470 | 46,068 | 249,713 | 2,175 | 299,426 | |||||||||||||||||||
| Write-offs | (15,656 | ) | (4,338 | ) | (5 | ) | (397 | ) | (20,396 | ) | ||||||||||||||
| Transfer and other(3) | 9,692 | 11,955 | 20,089 | (44,982 | ) | (10,639 | ) | (13,885 | ) | |||||||||||||||
| Balance as of March 31, 2020 | 10,315,610 | 8,781,214 | 42,582,396 | 1,174,427 | 924,465 | 63,778,112 | ||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||
| Balance as of December 31, 2018 | (906,616 | ) | (7,248,143 | ) | (227,495 | ) | (8,382,254 | ) | ||||||||||||||||
| Additions | (255,888 | ) | (2,123,193 | ) | (91,170 | ) | (2,470,251 | ) | ||||||||||||||||
| Write-offs | 26,886 | 115,732 | 13,944 | 156,562 | ||||||||||||||||||||
| Business combination with Fibria(2) | (1,804,967 | ) | (9,552,825 | ) | (249,087 | ) | (11,606,879 | ) | ||||||||||||||||
| Additions - Fair value adjustment from business combination – Fibria | (63,495 | ) | (543,468 | ) | (17,364 | ) | (624,327 | ) | ||||||||||||||||
| Fair value adjustment from business combination – Facepa | (5,742 | ) | (6,481 | ) | (95 | ) | (12,318 | ) | ||||||||||||||||
| Fair value adjustment from business combination - Ibema | (593 | ) | (593 | ) | ||||||||||||||||||||
| Transfer and other(3) | 29,906 | 508,585 | 9,547 | 548,038 | ||||||||||||||||||||
| Balance as of December 31, 2019 | (2,979,916 | ) | (18,850,386 | ) | (561,720 | ) | (22,392,022 | ) | ||||||||||||||||
| Additions | (69,211 | ) | (594,445 | ) | (24,773 | ) | (688,429 | ) | ||||||||||||||||
| Write-offs | 3,395 | 354 | 3,749 | |||||||||||||||||||||
| Balance as of March 31, 2020 | (3,049,127 | ) | (19,441,436 | ) | (586,139 | ) | (23,076,702 | ) | ||||||||||||||||
| Residual amount | ||||||||||||||||||||||||
| Balance as of December 31, 2019 | 10,321,574 | 5,787,873 | 23,670,191 | 969,701 | 371,606 | 41,120,945 | ||||||||||||||||||
| Balance as of March 31, 2020 | 10,315,610 | 5,732,087 | 23,140,960 | 1,174,427 | 338,326 | 40,701,410 | ||||||||||||||||||
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 1) | Includes vehicles, furniture and utensils and computer equipment. |
| 2) | Business combination with Fibria and its subsidiaries held on January 3, 2019. |
| 3) | Includes transfers carried out between the items of property, plant and equipment, intangible assets and inventories (On December 31, 2019 includes right of use). |
For the three-month period ended March 31, 2020, the Company did not identify any impairment of property, plant and equipment.
| 15.1. | Items pledged as collateral |
For the three-month period ended March 31, 2020, property, plant and equipment items that are pledge as collateral for loans transactions and lawsuits, consisting substantially of the units of, Imperatriz, Limeira, Mucuri, Suzano and Três Lagoas] totaled R$21,613,361 (R$24,985,741 consisting substantially of the units of Imperatriz, Limeira, Mucuri and Suzano as of December 31, 2019).
| 15.2. | Capitalized expenses |
For the three-month period ended March 31, 2020, the Company capitalized interest in the amount of R$3,803 (R$606 as of March 31, 2019). The weighted average interest rate utilized to determine the capitalized amount was 9.21% p.a. (9.08% p.a. as of March 31, 2019).
| 16. | INTANGIBLE |
| 16.1. | Goodwill and intangible assets with indefinite useful life |
March 31, | December 31, 2019 | |||||||
| Vale Florestar | 45,435 | 45,435 | ||||||
| FACEPA | 119,332 | 119,332 | ||||||
| Fibria | 7,897,051 | 7,897,051 | ||||||
| Other(1) | 1,196 | 1,196 | ||||||
| 8,063,014 | 8,063,014 | |||||||
| 1) | Refer to other intangible assets with indefinite useful life such as servitude and electricity. |
The goodwill is based on expected future profitability supported by valuation reports, after purchase price allocation.
Goodwill are allocated to cash-generating units as presented in Note 28.4.
As a result of disclosed in note 1.2.1., which deals with the effects arising from COVID19, the Company reassessed the main assumptions used in the impairment test of the intangible disclosed in the financial statements of December 31, 2019 and concluded that there were no significant changes in the assumptions compared to the three-month period ended March 31, 2020. Therefore, Management understands that it is not necessary to carry out the impairment test of the intangible in this period.
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
For the three-month period ended March 31, 2020, the Company did not identify any impairment of intangible.
| 16.2. | Intangible assets with determined useful life |
March 31, 2020 | December 31, 2019 | |||||||||||
| Beginning balance | 9,649,789 | 180,311 | ||||||||||
| Business combination with Fibria(1) | 308,681 | |||||||||||
| Additions | 469 | 17,715 | ||||||||||
| Fair value adjustment on business combination with Ibema | 702 | |||||||||||
| Write-offs | (17 | ) | ||||||||||
| Amortization | (244,842 | ) | (74,332 | ) | ||||||||
| Fair value adjustment on business combination with Fibria | 10,159,550 | |||||||||||
| Customer portfolio | 9,030,779 | |||||||||||
| Supplier agreements | 172,094 | |||||||||||
| Port services agreements | 694,590 | |||||||||||
| Port concession | 54,470 | |||||||||||
| Lease agreements | 44,371 | |||||||||||
| Cultivars | 142,744 | |||||||||||
| Software | 20,502 | |||||||||||
| Fair value adjustment on business combination with Fibria - Amortization | (956,577 | ) | ||||||||||
| Customer portfolio | (820,980 | ) | ||||||||||
| Supplier agreements | (72,097 | ) | ||||||||||
| Port services agreements | (29,362 | ) | ||||||||||
| Port concession | (2,147 | ) | ||||||||||
| Lease agreements | (7,499 | ) | ||||||||||
| Cultivars | (20,392 | ) | ||||||||||
| Software | (4,100 | ) | ||||||||||
| Fair value adjustment on business combination with Facepa - Amortization | (15,430 | ) | ||||||||||
| Fair value adjustment on business combination with Ibema - Amortization | (24 | ) | ||||||||||
| Exchange rate variation | 2,930 | |||||||||||
| Transfers and others | 186 | 26,263 | ||||||||||
| Ending balance | 9,405,585 | 9,649,789 | ||||||||||
| Represented by | Average rate % | |||||||||||
| Non-compete agreement | 5 | 1,980 | 2,150 | |||||||||
| Research and development agreement | 19 | 73,696 | 74,643 | |||||||||
| Ports concession | 4 | 216,893 | 219,256 | |||||||||
| Lease agreements | 17 | 34,996 | 36,871 | |||||||||
| Supplier agreements | 13 to 100 | 96,293 | 99,997 | |||||||||
| Port service contracts | 4 | 657,887 | 665,228 | |||||||||
| Cultivars | 14 | 117,257 | 122,352 | |||||||||
| Development and implementation of systems | 20 | 1,610 | 1,687 | |||||||||
| Trademarks and patents | 5 to 10 | 18,095 | 20,649 | |||||||||
| Customer portfolio | 9 | 8,015,803 | 8,217,192 | |||||||||
| Supplier agreements | 5 | 48,984 | 51,562 | |||||||||
| Software | 20 | 116,400 | 135,668 | |||||||||
| Others | 5,691 | 2,534 | ||||||||||
| 9,405,585 | 9,649,789 | |||||||||||
| 1) | Business combination with Fibria and its subsidiaries held on January 3, 2019, Note 1.2.2. |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 17. | TRADE ACCOUNTS PAYABLE |
March 31, 2020 | December 31, 2019 | |||||||
| In local currency | ||||||||
| Related party (note 11.1) | 3,166 | 2,478 | ||||||
| Third party | 1,443,841 | 1,288,774 | ||||||
| In foreign currency | ||||||||
| Third party(1) | 961,279 | 1,085,207 | ||||||
| 2,408,286 | 2,376,459 | |||||||
| 1) | The Company had a take or pay agreement with Klabin S.A., under conditions differentiated in terms of volume, exclusivity, guarantees and payment terms in up to 360 days, and prices were practiced under conditions of contractually established. Following the requirements imposed by the European Union's competition authority, the contract with Klabin expired in July 2019. For the three-month period ended March 31, 2020, the amount of R$360,290 in the consolidated refers to purchases of Klabin's pulp. |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 18. | LOANS, FINANCING AND DEBENTURES |
| 18.1. | Breakdown by type |
| Current | Non-current | Total | ||||||||||||||||||||||||||||
| Type | Interest rate | Average annual interest rate - % | March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
| In foreign currency | ||||||||||||||||||||||||||||||
| BNDES | UMBNDES | 6.0 | 32,292 | 26,307 | 28,156 | 27,620 | 60,448 | 53,927 | ||||||||||||||||||||||
| Bonds(1) | Fixed | 5.7 | 359,440 | 640,177 | 34,332,730 | 27,375,673 | 34,692,170 | 28,015,850 | ||||||||||||||||||||||
| Export credits (ACC - pre-payment)(1) | LIBOR/Fixed | 1.8 | 2,577,025 | 1,994,868 | 20,341,103 | 15,431,478 | 22,918,128 | 17,426,346 | ||||||||||||||||||||||
| Others | 3,383 | 3,481 | 3,383 | 3,481 | ||||||||||||||||||||||||||
| 2,972,140 | 2,664,833 | 54,701,989 | 42,834,771 | 57,674,129 | 45,499,604 | |||||||||||||||||||||||||
| In local currency | ||||||||||||||||||||||||||||||
| BNDES | TJLP | 7.3 | 288,744 | 283,658 | 1,457,035 | 1,517,649 | 1,745,779 | 1,801,307 | ||||||||||||||||||||||
| BNDES | TLP | 8.6 | 26,275 | 18,404 | 436,516 | 441,233 | 462,791 | 459,637 | ||||||||||||||||||||||
| BNDES | Fixed | 5.1 | 36,027 | 39,325 | 68,982 | 77,333 | 105,009 | 116,658 | ||||||||||||||||||||||
| BNDES | SELIC | 6.0 | 79,187 | 78,458 | 705,981 | 718,017 | 785,168 | 796,475 | ||||||||||||||||||||||
| FINAME | Fixed | 6.5 | 4,005 | 4,781 | 8,881 | 9,564 | 12,886 | 14,345 | ||||||||||||||||||||||
| BNB | Fixed | 6.7 | 35,321 | 37,815 | 148,134 | 156,904 | 183,455 | 194,719 | ||||||||||||||||||||||
| CRA (“Agribusiness Receivables Certificates”) | CDI/IPCA | 4.6 | 2,901,906 | 2,860,938 | 2,978,865 | 2,952,451 | 5,880,771 | 5,813,389 | ||||||||||||||||||||||
| NCE (Export credit note) | CDI | 6.7 | 52,762 | 131,914 | 1,271,734 | 1,270,065 | 1,324,496 | 1,401,979 | ||||||||||||||||||||||
| Rural producer Certificate | CDI | 9.2 | 1,187 | 5,840 | 273,372 | 273,303 | 274,559 | 279,143 | ||||||||||||||||||||||
| Export credits (“Pre payment”) | Fixed | 8.1 | 41,828 | 77,694 | 1,312,855 | 1,312,586 | 1,354,683 | 1,390,280 | ||||||||||||||||||||||
| FCO (“Central West Fund”), FDCO (“Central West Development Fund”) and FINEP | Fixed | 8.0 | 85,315 | 76,596 | 475,976 | 475,905 | 561,291 | 552,501 | ||||||||||||||||||||||
| Others (Revolving Cost, Working capital and Industrial Development Fund (“FDI”) and fair value adjustment on business combination | Fixed | 0.4 | (56,794 | ) | (62,302 | ) | 4,641 | 4,559 | (52,153 | ) | (57,743 | ) | ||||||||||||||||||
| Debentures | CDI | 7.1 | 56,005 | 9,997 | 5,412,791 | 5,412,035 | 5,468,796 | 5,422,032 | ||||||||||||||||||||||
| 3,551,768 | 3,563,118 | 14,555,763 | 14,621,604 | 18,107,531 | 18,184,722 | |||||||||||||||||||||||||
| 6,523,908 | 6,227,951 | 69,257,752 | 57,456,375 | 75,781,660 | 63,684,326 | |||||||||||||||||||||||||
| Interest on financing | 658,966 | 886,886 | 136,799 | 658,966 | 1,023,685 | |||||||||||||||||||||||||
| Non-current funding | 5,864,942 | 5,341,065 | 69,257,752 | 57,319,576 | 75,122,694 | 62,660,641 | ||||||||||||||||||||||||
| 6,523,908 | 6,227,951 | 69,257,752 | 57,456,375 | 75,781,660 | 63,684,326 | |||||||||||||||||||||||||
| 1) | The variation is due to the increase in the exchange rate in the three-month period ended March 31, 2020. |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 18.2. | Rollforward in loans, financing and debentures |
March 31, 2020 | December 31, 2019 | |||||||
| Beginning balance | 63,684,326 | 35,737,509 | ||||||
| Amounts from the business combination with Fibria(1) | 20,667,096 | |||||||
| Reclassification - accounts payable from lease operations | (18,225 | ) | ||||||
| Fundraising | 3,663,623 | 18,993,837 | ||||||
| Interest accrued | 886,270 | 3,362,250 | ||||||
| Exchange rate variation, net | 13,187,550 | 1,781,562 | ||||||
| Settlement of principal | (4,503,548 | ) | (13,994,708 | ) | ||||
| Settlement of interest | (1,167,141 | ) | (2,977,957 | ) | ||||
| Amortization of fundraising costs | 25,250 | 185,807 | ||||||
| Other | 5,330 | (52,845 | ) | |||||
| Ending balance | 75,781,660 | 63,684,326 | ||||||
| 1) | Business combination with Fibria its subsidiaries held on January 3, 2019, Note 1.2.2. |
| Suzano S.A. | |
| | |
| Notes to the Unaudited condensed consolidated interim financial information | |
| Three-month period ended March 31, 2020 | |
| (In thousands of R$, unless otherwise stated) |
| 18.3. | Breakdown by maturity – non current |
| 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 onwards | Total | |||||||||||||||||||||||||
| In foreign currency | ||||||||||||||||||||||||||||||||
| BNDES - Currency basket | 4,546 | 12,878 | 10,732 | 28,156 | ||||||||||||||||||||||||||||
| Bonds | 3,099,772 | 3,071,688 | 3,628,144 | 24,533,126 | 34,332,730 | |||||||||||||||||||||||||||
| Export credits (ACC pre-payment) | 94,956 | 2,395,102 | 9,549,643 | 4,556,435 | 3,259,393 | 485,574 | 20,341,103 | |||||||||||||||||||||||||
| 99,502 | 2,407,980 | 9,560,375 | 7,656,207 | 6,331,081 | 4,113,718 | 24,533,126 | 54,701,989 | |||||||||||||||||||||||||
| In local currency | ||||||||||||||||||||||||||||||||
| BNDES – TJLP | 203,997 | 268,788 | 268,023 | 239,884 | 292,572 | 169,102 | 14,669 | 1,457,035 | ||||||||||||||||||||||||
| BNDES – TLP | 14,149 | 18,866 | 18,866 | 18,866 | 17,618 | 20,120 | 328,031 | 436,516 | ||||||||||||||||||||||||
| BNDES – Fixed | 21,709 | 24,558 | 18,602 | 4,113 | 68,982 | |||||||||||||||||||||||||||
| BNDES – Selic | 57,472 | 74,067 | 97,309 | 89,264 | 212,549 | 175,320 | 705,981 | |||||||||||||||||||||||||
| FINAME | 2,868 | 2,786 | 1,656 | 1,198 | 373 | 8,881 | ||||||||||||||||||||||||||
| BNB | 26,351 | 33,081 | 35,199 | 33,080 | 10,258 | 10,165 | 148,134 | |||||||||||||||||||||||||
| CRA (“Agribusiness Receivables Certificates”) | 1,496,085 | 1,482,780 | 2,978,865 | |||||||||||||||||||||||||||||
| Export credit note | 636,366 | 635,368 | 1,271,734 | |||||||||||||||||||||||||||||
| Rural producer certificate | 136,789 | 136,583 | 273,372 | |||||||||||||||||||||||||||||
| Export credits (“Pre payment”) | 1,312,855 | 1,312,855 | ||||||||||||||||||||||||||||||
| FCO (“Central West Fund”), FDCO (“Central West Development Fund”) and FINEP | 68,053 | 67,986 | 67,987 | 67,987 | 67,987 | 67,987 | 67,989 | 475,976 | ||||||||||||||||||||||||
| Others (Revolving costs, working capital, FIDC and FDI) | 4,641 | 4,641 | ||||||||||||||||||||||||||||||
| Debentures | 2,326,833 | 2,336,846 | 749,112 | 5,412,791 | ||||||||||||||||||||||||||||
| 399,240 | 1,986,217 | 1,990,422 | 1,767,247 | 3,701,345 | 3,551,491 | 1,159,801 | 14,555,763 | |||||||||||||||||||||||||
| 498,742 | 4,394,197 | 11,550,797 | 9,423,454 | 10,032,426 | 7,665,209 | 25,692,927 | 69,257,752 | |||||||||||||||||||||||||
| 18.4. | Breakdown by currency |
| March 31, 2020 | December 31, 2019 | |||||||
| BrazilianReais | 17,297,622 | 17,362,903 | ||||||
| U.S. Dollar | 57,627,985 | 45,460,138 | ||||||
| Selic(1) | 795,605 | 807,358 | ||||||
| Currency basket | 60,448 | 53,927 | ||||||
| 75,781,660 | 63,684,326 | |||||||
| 1) | Contractual definition of currency in contracts with Brazilian National Bank for Economic and Social Development (“Banco Nacional de Desenvolvimento Econômico e Social or “BNDES”) that are in BrazilianReais plus SELIC interest. |
| 18.5. | Fundraising costs |
The fundraising costs are amortized based on terms agreements and effective interest rate.
| Balance to be amortized | ||||||||||||||||
| Nature | Cost | Amortization | March 31, | December 31, 2019 | ||||||||||||
| Bonds | 343,642 | 98,784 | 244,858 | 201,467 | ||||||||||||
| CRA and NCE | 125,222 | 82,046 | 43,176 | 47,443 | ||||||||||||
| Export credits (ACC pre-payment) | 94,863 | 33,144 | 61,719 | 40,382 | ||||||||||||
| Debentures | 24,467 | 6,159 | 18,308 | 19,065 | ||||||||||||
| BNDES (“IOF”)(1) | 53,730 | 16,840 | 36,890 | 38,447 | ||||||||||||
| Others | 18,147 | 13,747 | 4,400 | 4,590 | ||||||||||||
| 660,071 | 250,720 | 409,351 | 351,394 | |||||||||||||
| 1) | Tax on Financial Operations |
| 18.6. | Relevant transactions entered into the period |
| 18.6.1. | Export Prepayment Agreements (“EPP”) |
On February 14, 2020, Suzano, through its wholly-owned subsidiaries Suzano Pulp and Paper Europe S.A., Suzano Austria GmbH and Fibria Overseas Finance Ltd., entered into a syndicated export prepayment agreement in the amount of US$850,000 (equivalent to R$3,668,855), with a term of six years and maturity in February 2026, grace period of 4 years, quarterly interest payments of 1.15% p.a. plus LIBOR 3M. This transaction is fully and unconditionally guaranteed by Suzano S.A.
| 18.7. | Relevant transactions settled in the period |
| 18.7.1. | Export Prepayment Agreements (“EPP”) |
On February 14, 2020, Suzano, through its wholly-owned subsidiary Suzano Pulp and Paper Europe S.A., voluntarily prepaid the export prepayment agreement in the amount of U.S.$755,864 (equivalent to R$3,262,534), with quarterly interest payments of 1.15% p.a. plus quarterly LIBOR, which was scheduled to mature in February 2023.
| 18.7.2. | Make-whole Senior Notes (“Notes 2021”) |
On March 31, 2020, the Company through its wholly-owned subsidiary Suzano Trading Ltd., redeem all of the outstanding of Senior Notes 2021 in the total amount of US$199,864 (equivalent to R$1,039,032) considering redemption price of 104.287% plus interest proportional to the period.
| 18.8. | Guarantees |
Some loan and financing agreements have guarantees clauses, in which the financed equipment or other property, plant and equipment are offered by the Company, as disclosed in Note 15.1.
The Company does not have contracts with restrictive financial clauses (financial covenants) to be complied with.
| 19. | LEASE |
| 19.1. | Right of use |
The rollforward of three-month period ended March 31, 2020 is set forth below:
| Lands and Farms | Machines and Equipment’s | Buildings | Ships and boats | Vehicles | Total | |||||||||||||||||||
| Balance as of December 31, 2018 | ||||||||||||||||||||||||
| Initial adoption on January 1, 2019 | 1,762,943 | 143,685 | 41,570 | 1,408,640 | 1,012 | 3,357,850 | ||||||||||||||||||
| Additions | 260,982 | 1,529 | 39,794 | 612,022 | 914,327 | |||||||||||||||||||
| Amortization(1) | (254,280 | ) | (15,163 | ) | (35,365 | ) | (116,207 | ) | (925 | ) | (421,940 | ) | ||||||||||||
| Balance as of December 31, 2019 | 1,769,645 | 130,051 | 45,999 | 1,904,455 | 87 | 3,850,237 | ||||||||||||||||||
| Additions | 176,781 | 3,501 | 9,046 | 63 | 189,391 | |||||||||||||||||||
| Amortization(1) | (44,236 | ) | (1,041 | ) | (4,082 | ) | (33,725 | ) | (240 | ) | (83,324 | ) | ||||||||||||
| Balance as of March 31, 2020 | 1,902,190 | 132,511 | 50,963 | 1,870,730 | (90 | ) | 3,956,304 | |||||||||||||||||
| 1) | The amount of R$43,994 (R$53,832 as of March 31, 2019) related to land is reclassified to biological assets to compose the formation cost. |
For the three-month period ended March 31, 2020,the Company is committed to lease agreements not yet in force for ships expected to be delivered one unit in first quarter 2020.
| 19.2. | Lease liabilities |
The balance of lease payables for the three-month period ended March 31, 2020, measured at present value and discounted by the respective discount rates are set forth below:
| Nature of agreement | Average rate - % p.a.(1) | Maturity(2) | Present value of liabilities | |||||||
| Lands and farms | 10.89 | November 2046 | 2,040,361 | |||||||
| Machines and Equipment’s | 10.15 | July 2032 | 247,986 | |||||||
| Buildings | 10.92 | April 2027 | 31,393 | |||||||
| Ships and boats | 10.76 | February 2039 | 2,407,566 | |||||||
| Vehicles | 8.99 | April 2020 | 55 | |||||||
| 4,727,361 | ||||||||||
| 1) | To determine the discount rates, quotes were obtained from financial institutions for agreements with characteristics and average terms similar to the lease agreements. |
| 2) | Refers to the original maturities of the agreements and, therefore, do not consider eventual renewal clause. |
On March 12 and April 12, 2020, for a period of 10 months, two of the ships leased by the Company were made available for chartering from third parties. In the amount of U.S.$.7,500 (equivalent to R$38,990)
The rollforward in the balances in the year ended December 31, 2019 and the three-month period ended March 31, 2020 are as follows:
| Balance as of December 31, 2018 | ||||
| Initial adoption on January 1, 2019 | 3,428,897 | |||
| Additions | 914,327 | |||
| Payments | (646,487 | ) | ||
| Accrual of financial charges(1) | 275,404 | |||
| Exchange rate variation | 11,929 | |||
| Balance as of December 31, 2019 | 3,984,070 | |||
| Additions | 189,391 | |||
| Payments | (157,209 | ) | ||
| Accrual of financial charges(1) | 114,781 | |||
| Exchange rate variation | 596,328 | |||
| Balance as of March 31, 2020 | 4,727,361 | |||
| Current | 664,651 | |||
| Non-current | 4,062,710 | |||
| 1) | The amount of R$19,057 related to interest expenses on leased lands is capitalized to biological assets to compose the formation cost. |
The maturity schedule of future payment not discounted to present value related to lease liabilities is disclosed in Note 4.2.
| 19.2.1. | Amounts recognized in the statement of income for the period |
In the three-month period ended March 31, 2020 and 2019, the amounts recognized in the unaudited condensed consolidated interim financial information, are set for the below:
March 31, 2020 | March 31, 2019 | |||||||
| Expenses relating to short-term assets | 3,527 | 14,790 | ||||||
| Expenses relating to low-value assets | 1,577 | 2,251 | ||||||
| 5,104 | 17,040 | |||||||
| 20. | PROVISION FOR JUDICIAL LIABILITIES |
The Company and its subsidiaries are involved in certain legal proceedings arising from the normal course of business, which include tax, labor and civil risks.
The Company classifies the risk of unfavorable decisions in the legal proceedings as probable, possible or remote. The Company records provisions for losses classified as probable, as determined by the Company’s Management, based on legal advice, which reflect the estimated probable losses. Contingencies classified as possible loss are disclosed based on reasonably estimated amounts.
The Company’s management believes that, based on the elements existing at the base date of these unaudited condensed consolidated interim financial information, its provision for tax, civil, commercial and other, as well for labor risks, accounted for according to IAS 37 is sufficient to cover estimated losses related to its legal proceedings, as set forth below:
| 20.1. | Provisions for probable losses |
The rollforward of provisions according to lawsuit natures is set forth below:
March 31, 2020 | ||||||||||||
| Judicial deposits | Provision | Provision, net | ||||||||||
| Taxes | (129,426 | ) | 3,139,677 | 3,010,251 | ||||||||
| Labor | (53,632 | ) | 237,747 | 184,115 | ||||||||
| Civil | (3,305 | ) | 269,312 | 266,007 | ||||||||
| (186,363 | ) | 3,646,736 | 3,460,373 | |||||||||
December 31, 2019 | ||||||||||||
| Judicial deposits | Provision | Provision, net | ||||||||||
| Taxes | (124,133 | ) | 3,176,503 | 3,052,370 | ||||||||
| Labor | (50,464 | ) | 227,139 | 176,675 | ||||||||
| Civil | 273 | 283,159 | 283,432 | |||||||||
| (174,324 | ) | 3,686,801 | 3,512,477 | |||||||||
The change in the provision according to the nature of the proceedings is set forth below:
March 31, 2020 | ||||||||||||||||
| Tax | Labor | Civil and environment | Total | |||||||||||||
| Beginning balance | 3,176,503 | 227,139 | 283,159 | 3,686,801 | ||||||||||||
| Payments | (22,662 | ) | (9,858 | ) | (13,784 | ) | (46,304 | ) | ||||||||
| Write-off | (23,540 | ) | (7,731 | ) | (7,461 | ) | (38,732 | ) | ||||||||
| Additions | 5,199 | 18,969 | 5,792 | 29,960 | ||||||||||||
| Monetary adjustment | 4,176 | 9,229 | 1,606 | 15,011 | ||||||||||||
| Ending balance | 3,139,676 | 237,748 | 269,312 | 3,646,736 | ||||||||||||
December 31, 2019 | ||||||||||||||||
| Tax | Labor | Civil and environment | Total | |||||||||||||
| Beginning balance | 296,869 | 50,869 | 3,532 | 351,270 | ||||||||||||
| Business combination with Fibria(1) | 139,462 | 185,157 | 64,974 | 389,593 | ||||||||||||
| Payments | (34 | ) | (34,794 | ) | (5,532 | ) | (40,360 | ) | ||||||||
| Write-off | (3,875 | ) | (55,730 | ) | (13,434 | ) | (73,039 | ) | ||||||||
| Additions | 46,603 | 50,521 | 10,100 | 107,224 | ||||||||||||
| Monetary adjustment | 13,388 | 31,116 | 5,257 | 49,761 | ||||||||||||
| Fair value adjustment on business combination with Fibria | 2,684,090 | 218,262 | 2,902,352 | |||||||||||||
| Ending balance | 3,176,503 | 227,139 | 283,159 | 3,686,801 | ||||||||||||
| 1) | Business combination with Fibria and its subsidiaries held on January 3, 2019. |
| 20.1.1. | Tax |
For the three-month period ended March 31, 2020, the Company was a defendant in 44 administrative proceedings as well as tax lawsuits in which the disputed matters related, CSLL, IRRF, PIS, COFINS, ICMS, Tax on Services (“ISS”), among others whose amounts are provisioned for when the likelihood of loss is deemed probable by the Company’s external legal counsel and the Management.
| 20.1.2. | Labor |
For the three-month period ended March 31, 2020, the Company was a defendant in 1,306 labor lawsuits.
In general, labor lawsuits are related primarily to matters frequently contested by employees in agribusiness companies, such as certain wages and/or severance payments, in addition to suits filed by outsourced employees of the Company.
| 20.1.3. | Civil and environment |
For the three-month period ended March 31, 2020, the Company is a defendant in approximately 27 civil and environmental lawsuits.
Civil proceedings are related primarily to payment of damages, such as those resulting from contractual obligations, traffic-related injuries, possessory actions, environmental restoration obligations, claims and others.
| 20.2. | Provisions for possible losses |
The Company is involved in tax, civil and labor lawsuits, for which losses have been assessed as possible by management with the support from legal counsel and therefore no provision was recorded:
March 31, 2020 | December 31, 2019 | |||||||
| Taxes(1) | 8,244,746 | 7,504,398 | ||||||
| Labor | 320,143 | 279,934 | ||||||
| Civil(1) | 2,898,659 | 2,995,576 | ||||||
| 11,463,548 | 10,779,908 | |||||||
| 1) | Amounts net of the fair value adjustment on business combination with Fibria related to possible contingencies, as mentioned above. |
Main nature of these contingencies are disclosed in the annual financial statements for the year ended December 31, 2019 and have not been significantly changed during this period.
| 21. | EMPLOYEE BENEFIT PLANS |
The Company offers supplementary pension plan and defined benefit plan, such as medical assistance and life insurance. The characteristics of such benefits were disclosed in the annual financial statements for the year ended December 31, 2019 and have not been changed during this period.
| 21.1. | Pension plan |
Contributions made by the Company, for Suzano Prev pension plan managed by BrasilPrev, for the three-month period ended March 31, 2020 amounted R$1,732 (R$5,993 as of December 31, 2019) recognized in under cost of sales, selling and general and administrative expenses.
Contributions made by the Company, for Senador José Ermírio de Moraes Foundation (FUNSEJEM) pension plan, for the three-month period ended March 31, 2020 amounted to R$2,214 (R$9,920 as of December 31, 2019), recognized under cost of sales, selling and general and administrative expenses.
| 21.2. | Defined benefits plan |
The Company offers the following post-employment in addition to the pension plans, which are measured by actuarial calculation and recognized in the unaudited condensed consolidated interim financial information.
The rollforward of actuarial liability prepared based on actuarial report, are set forth below:
| Balance at December 31, 2017 | 351,263 | |||
| Interest on employee benefits | 35,920 | |||
| Actuarial loss | 69,305 | |||
| Benefits paid in the year | (26,061 | ) | ||
| Balance at December 31, 2018 | 430,427 | |||
| Business combination with Fibria(1) | 147,877 | |||
| Interest on employee benefits | 44,496 | |||
| Actuarial loss | 147,640 | |||
| Benefits paid in the year | (34,261 | ) | ||
| Balance on December 31, 2019 | 736,179 | |||
| Interest on employee benefits | 13,195 | |||
| Benefits paid in the period | (9,779 | ) | ||
| Balance on March 31, 2020 | 739,595 |
| 1) | Business combination with Fibria its subsidiaries held on January 3, 2019, Note 1.2.2. |
| 22. | SHARE-BASED COMPENSATION PLAN |
For the three-month period ended March 31, 2020, the Company had 3 (three) share-based, long-term compensation plans, (i) Phantom stock option plan (“PS”) and (ii) Share Appreciation Rights (“SAR”), both settled in local currency and (iii) common stock options, settled in shares.
The characteristics and measurement method of such each plan were disclosed in the annual financial statements for the year ended December 31, 2019 and have not been changed during this period.
| 22.1 | Long term compensation plans (“PS and SAR”) |
The rollforward is set forth below:
March 31, 2020 | December 31, 2019 | |||||||
| Number of shares in the beginning balance | 5,996,437 | 5,045,357 | ||||||
| Granted during of the period | 2,413,038 | |||||||
| Exercised(1) | (61,851 | ) | (827,065 | ) | ||||
| Exercised due to resignation(1) | (106,983 | ) | ||||||
| Abandoned / prescribed due to resignation | (48,654 | ) | (527,910 | ) | ||||
| Number of shares in the ending balance | 5,885,932 | 5,996,437 | ||||||
| 1) | The average price for share options exercised and exercised due to termination of employment, for the three-month period ended March 31, 2020 was R$38.97 (R$31.75 as of December 31, 2019). |
| 22.2 | Common stock option plan |
The position is set forth below:
| Program | Date of grant | Deadline for the options to become exercisable | Price on grant date | Shares Granted | Restricted year for transfer of shares | ||||||||||||
| Program 4 | 01/02/2018 | 01/02/2019 | R$ | 39.10 | 130,435 | 01/02/2022 | |||||||||||
| 22.3 | Balances and result |
The amounts corresponding to the services received and recognized in the unaudited consolidated interim financial information are set forth below:
| Liabilities and equity | Income Statement | |||||||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2020 | March 31, 2019 | |||||||||||||
| Non-current liabilities | ||||||||||||||||
| Provision for phantom stock plan | 160,949 | 136,505 | (25,337 | ) | (16,209 | ) | ||||||||||
| Shareholders' equity | ||||||||||||||||
| Stock option granted | 6,279 | 5,979 | (300 | ) | (1,421 | ) | ||||||||||
| Total general and administrative expenses from share-based transactions | (25,637 | ) | (17,630 | ) | ||||||||||||
| 23 | LIABILITIES FOR ASSETS ACQUISITIONS AND SUBSIDIARIES |
March 31, 2020 | December 31, 2019 | |||||||
| Lands and forests acquisition | ||||||||
| Real estate receivables certificates(1) | 77,851 | 78,345 | ||||||
| 77,851 | 78,345 | |||||||
| Business combination | ||||||||
| Facepa(2) | 43,220 | 42,533 | ||||||
| Vale Florestar Fundo de Investimento em Participações ("VFFIP")(3) | 512,700 | 420,737 | ||||||
| 555,920 | 463,270 | |||||||
| 633,771 | 541,615 | |||||||
| Current liabilities | 116,792 | 94,414 | ||||||
| Non-current liabilities | 516,979 | 447,201 | ||||||
| 1) | Refers to obligations with the acquisition of land, farms, reforestation and houses built in Maranhão, restated by the IPCA. |
| 2) | Acquired in March 2018, for the amount of R$307,876, upon payment of R$267,876 and the remaining restated at the Amplified Consumer Price Index (“IPCA”), adjusted by any losses incurred through the payment date, with maturities in March 2023 and March 2028. |
| 3) | On August 2014, the Company acquired the Vale Florestar S.A. through VFFIP, for the total amount of R$528,941 with a upon payment of R$44,998 and remaining with maturity to August 2029. The monthly settlements are subject to interest and restated at the variation of the U.S. dollar exchange rate and partially restated by variation of the IPCA. |
| 24 | SHAREHOLDERS’ EQUITY |
| 24.1 | Share capital |
On March 31, 2020, the Suzano’s share capital is R$9,269,281 divided into 1,361,263,584 common shares, all nominative, book-entry shares without par value. The share capital is net of the public offering expenses of R$33,735.
The breakdown of the share capital is set forth below:
| Ordinary | ||||||||
| Shareholder | Quantity | (%) | ||||||
| Controlling Shareholders | ||||||||
| Suzano Holding S.A. | 367,612,329 | 27.01 | ||||||
| Controller | 194,809,797 | 14.31 | ||||||
| Managements | 35,564,742 | 2.61 | ||||||
| Alden Fundo de Investimento em Ações | 26,154,741 | 1.92 | ||||||
| 624,141,609 | 45.85 | |||||||
| Treasury | 12,042,004 | 0.88 | ||||||
| BNDESPAR | 150,217,425 | 11.04 | ||||||
| Votorantim S.A. | 75,180,059 | 5.52 | ||||||
| Other shareholders | 499,682,487 | 36.71 | ||||||
| 1,361,263,584 | 100.00 | |||||||
By resolution of the Board of Directors, the share capital may be increased, irrespective of any amendment to the Bylaws, up to the limit of 780,119,712 common shares, all exclusively book-entry shares.
For the three-month period ended March 31, 2020, SUZB3 common shares ended the period quoted at R$35.75 (R$39.68 on December 31, 2019).
| 24.2 | Treasury shares |
The Company has 12,042,044 common shares of own issuance held in treasury, with an average cost of R$18.13 (eighteen Brazilian Reais and thirteen cents) per share, with historical value of R$218,265 and market value corresponding to R$430,503. For the three-month period ended March 31, 2020, there was no movement of purchase or sale.
| 25 | EARNINGS (LOSS) PER SHARE |
| 25.1 | Basic |
The basic (loss) earnings per share is measured by dividing the profit attributable to the Company’s shareholders by the weighted average common shares issued during the period, excluding the common shares acquired by the Company and held as treasury shares.
March 31, 2020 | March 31, 2019 | |||||||
| Resulted of the period attributable for controlling shareholders’ | (13,422,530 | ) | (1,226,803 | ) | ||||
| Weighted average number of shares in the period | 1,361,264 | 1,321,529 | ||||||
| Weighted average treasury shares | (12,042 | ) | (12,042 | ) | ||||
| Weighted average number of outstanding shares | 1,349,222 | 1,309,487 | ||||||
| Basic loss per common share - R$ | (9.94835 | ) | (0.93686 | ) | ||||
| 25.2 | Diluted |
The diluted earnings per share is measured by adjusting the weighted average of outstanding common shares, assuming the conversion of all common shares that would cause dilution.
March 31, 2020 | March 31, 2019 | |||||||
| Resulted of the period attributed to controlling shareholders’ | (13,422,530 | ) | (1,226,803 | ) | ||||
| Weighted average number of shares in the period (except treasury shares) | 1,349,222 | 1,309,487 | ||||||
| Adjustment by stock options | ||||||||
| Weighted average number of shares (diluted) | 1,349,222 | 1,309,487 | ||||||
| Diluted loss per common share - R$ | (9.94835 | ) | (0.93686 | ) | ||||
Due to the loss in the periods, the Company does not consider the dilution effect in the measurement.
| 26 | NET FINANCIAL RESULT |
March 31, 2020 | March 31, 2019 | |||||||
| Financial expenses | ||||||||
| Interest on loans, financing and debentures(1) | (885,584 | ) | (823,352 | ) | ||||
| Amortization of fundraising costs | (25,569 | ) | (31,574 | ) | ||||
| Amortization of fair value adjustment on business combination | (5,330 | ) | (2,167 | ) | ||||
| Other financial expenses | (169,941 | ) | (135,711 | ) | ||||
| (1,086,424 | ) | (992,804 | ) | |||||
| Financial income | ||||||||
| Marketable securities and cash equivalents | 70,052 | 140,055 | ||||||
| Amortization of fair value adjustment on business combination | 23,809 | |||||||
| Other financial income | 26,893 | 9,267 | ||||||
| 120,754 | 149,322 | |||||||
| Income from derivative financial instruments | ||||||||
| Income | 34,803 | 507,466 | ||||||
| Expenses | (9,093,595 | ) | (1,144,400 | ) | ||||
| (9,058,792 | ) | (636,934 | ) | |||||
| Monetary and exchange rate variation, net | ||||||||
| Exchange rate variation on loans, financing and debentures | (13,187,550 | ) | (305,531 | ) | ||||
| Lease | (596,328 | ) | (16,037 | ) | ||||
| Other assets and liabilities(2) | 1,364,292 | (134,159 | ) | |||||
| (12,419,586 | ) | (455,727 | ) | |||||
| (22,444,048 | ) | (1,936,143 | ) | |||||
| 1) | Does not include the amount of R$3,803 arising from capitalized interest for the three-month period ended March 31, 2020 (R$606 as of March 31, 2019). Includes the amount of R$3,118 endorsement and guarantee in the three-month period ended March 31, 2020 (R$662 on March 31, 2019) |
| 2) | Includes effects of exchange rate variations of customers, suppliers, cash and cash equivalents, marketable securities and others. |
| 27 | NET SALES |
March 31, 2020 | March 31, 2019 | |||||||
| Gross sales | 8,257,293 | 6,885,416 | ||||||
| Sales deductions | ||||||||
| Adjustment to present value | (5,518 | ) | ||||||
| Returns and cancelations | (21,673 | ) | (23,592 | ) | ||||
| Discounts and rebates(1) | (945,349 | ) | (794,495 | ) | ||||
| 7,290,271 | 6,061,811 | |||||||
| Taxes on sales | (309,478 | ) | (362,812 | ) | ||||
| Net sales | 6,980,793 | 5,698,999 | ||||||
1) | The customer contracts of Fibria, a wholly-owned subsidiary incorporated on April 1, 2019, provide for contractual discounts that were maintained and that, therefore, impacted the Company's income in 2019. |
| 28 | SEGMENT INFORMATION |
| 28.1 | Criteria for identifying operating segments |
In the financial statements for the year ended December 31, 2019, the information by segment used by the Company was disclosed, which did not change during the period.
| 28.2 | Information of operating segments |
| March 31, 2020 | ||||||||||||||||
| Pulp | Paper | Not segmented | Total | |||||||||||||
| Net sales | 5,886,723 | 1,094,070 | 6,980,793 | |||||||||||||
| Domestic market (Brazil) | 398,367 | 763,672 | 1,162,039 | |||||||||||||
| Foreign market | 5,488,356 | 330,398 | 5,818,754 | |||||||||||||
| Asia | 3,099,243 | 23,159 | 3,122,402 | |||||||||||||
| Europe | 1,616,602 | 53,657 | 1,670,259 | |||||||||||||
| North America | 651,503 | 53,567 | 705,070 | |||||||||||||
| South and Central America | 97,420 | 184,597 | 282,017 | |||||||||||||
| Africa | 23,588 | 15,418 | 39,006 | |||||||||||||
| Cost of sales | (4,129,175 | ) | (690,824 | ) | (4,819,999 | ) | ||||||||||
| Gross profit | 1,757,548 | 403,246 | 2,160,794 | |||||||||||||
| Gross margin (%) | 29.9 | % | 36.9 | % | 31.0 | % | ||||||||||
| Operating income (expenses) | (631,643 | ) | (180,687 | ) | (812,330 | ) | ||||||||||
| Selling | (418,221 | ) | (96,715 | ) | (514,936 | ) | ||||||||||
| General and administrative | (224,053 | ) | (90,783 | ) | (314,836 | ) | ||||||||||
| Other operating, net | 16,592 | 139 | 16,731 | |||||||||||||
| Income from associates and joint ventures | (5,961 | ) | 6,672 | 711 | ||||||||||||
| Operating profit before net financial income (“EBIT”)(1) | 1,125,905 | 222,559 | 1,348,464 | |||||||||||||
| Operating margin (%) | 19.1 | % | 20.3 | % | 19.3 | % | ||||||||||
| Financial result, net | (22,444,048 | ) | (22,444,048 | ) | ||||||||||||
| Net income (loss) before taxes | 1,125,905 | 222,559 | (22,444,048 | ) | (21,095,584 | ) | ||||||||||
| Income taxes | 7,676,523 | 7,676,523 | ||||||||||||||
| Net income (loss) for the period | 1,125,905 | 222,559 | (14,767,525 | ) | (13,419,061 | ) | ||||||||||
| Profit (loss) margin for the period (%) | 19.1 | % | 20.3 | % | (192.2 | )% | ||||||||||
| Result of the period attributable to controlling Shareholders | 1,125,905 | 222,559 | (14,770,994 | ) | (13,422,530 | ) | ||||||||||
| Result of the period attributed to non-controlling shareholders | 3,469 | 3,469 | ||||||||||||||
| Depreciation, depletion and amortization | 1,539,864 | 108,338 | 1,648,202 | |||||||||||||
| 1) | Earnings before interest and tax. |
March 31, 2019 | ||||||||||||||||
| Pulp | Paper | Not segmented | Total | |||||||||||||
| Net sales | 4,601,986 | 1,097,013 | 5,698,999 | |||||||||||||
| Domestic market (Brazil) | 505,535 | 807,671 | 1,313,206 | |||||||||||||
| Foreign market | 4,096,451 | 289,342 | 4,385,793 | |||||||||||||
| Asia | 1,754,884 | 23,904 | 1,778,788 | |||||||||||||
| Europe | 1,556,894 | 50,077 | 1,606,971 | |||||||||||||
| North America | 773,128 | 71,049 | 844,177 | |||||||||||||
| South and Central America | 11,545 | 133,004 | 144,549 | |||||||||||||
| Africa | 11,308 | 11,308 | ||||||||||||||
| Cost of sales | (3,980,055 | ) | (744,838 | ) | (4,724,893 | ) | ||||||||||
| Gross profit | 621,931 | 352,175 | 974,106 | |||||||||||||
| Gross margin (%) | 13.5 | % | 32.1 | % | 17.1 | % | ||||||||||
| Operating income (expenses) | (596,505 | ) | (192,789 | ) | (789,294 | ) | ||||||||||
| Selling | (354,200 | ) | (87,103 | ) | (441,303 | ) | ||||||||||
| General and administrative | (228,760 | ) | (102,005 | ) | (330,765 | ) | ||||||||||
| Other operating, net | (13,545 | ) | (5,339 | ) | (18,884 | ) | ||||||||||
| Income from associates and joint ventures | 1,658 | 1,658 | ||||||||||||||
| Operating profit before net financial income (“EBIT”)(1) | 25,426 | 159,386 | 184,812 | |||||||||||||
| Operating margin (%) | 0.5 | % | 14.5 | % | 3.0 | % | ||||||||||
| Financial result, net | (1,936,143 | ) | (1,936,143 | ) | ||||||||||||
| Net income (loss) before taxes | 25,425 | 159,387 | (1,936,143 | ) | (1,751,331 | ) | ||||||||||
| Income taxes | 522,199 | 522,199 | ||||||||||||||
| Net income (loss) for the period | 25,425 | 159,387 | (1,413,944 | ) | (1,229,132 | ) | ||||||||||
| Profit (loss) margin for the period (%) | 0.3 | % | 14.5 | % | (21.7 | )% | ||||||||||
Result of the period attributable to controlling Shareholders | 25,425 | 159,387 | (1,411,615 | ) | (1,226,803 | ) | ||||||||||
| Result of the period attributed to non-controlling shareholders | (2,329 | ) | (2,329 | ) | ||||||||||||
| Depreciation, depletion and amortization | 2,351,650 | 119,635 | 2,471,285 | |||||||||||||
| 1) | Earnings before interest and tax. |
| 28.3 | Net sales by product |
The following table set forth the breakdown of consolidated net sales by product:
| Products | March 31, 2020 | March 31, 2019 | ||||||
| Market pulp (1) | 5,886,723 | 4,601,986 | ||||||
| Printing and writing paper (2) | 881,758 | 909,555 | ||||||
| Paperboard | 197,446 | 176,635 | ||||||
| Other | 14,866 | 10,823 | ||||||
| Net sales | 6,980,793 | 5,698,999 | ||||||
| 1) | Revenue from fluff pulp represents (around 0.5% of total net sales) and, therefore, was included in market pulp sales. |
| 2) | Tissue is a recently launched product and its revenues represent less than 2.6% of total net sales. Therefore, it was included in the sales of printing and writing paper. |
| 28.4 | Goodwill based on expected future profitability |
The goodwill based on expected future profitability arising from the business combination were allocated to the disclosable segments, which correspond to the Company's cash-generating units (“CGU”), considering the economic benefits generated by such intangible assets. The allocation of intangibles is set forth below:
March 31, 2020 | December 31, 2019 | |||||||
| Pulp | 7,942,486 | 7,942,486 | ||||||
| Consumer goods | 119,332 | 119,332 | ||||||
| 8,061,818 | 8,061,818 | |||||||
| 29 | EXPENSES BY NATURE |
| March 31, 2020 | March 31, 2019 | |||||||
| Cost of sales(1) | ||||||||
| Personnel expenses | (236,980 | ) | (369,144 | ) | ||||
| Variable cost | (1,720,594 | ) | (1,350,556 | ) | ||||
| Logistics cost | (1,007,721 | ) | (537,430 | ) | ||||
| Depreciation, depletion and amortization | (1,381,201 | ) | (2,235,330 | ) | ||||
| Other | (473,503 | ) | (232,433 | ) | ||||
| (4,819,999 | ) | (4,724,893 | ) | |||||
| Selling expenses | ||||||||
| Personnel expenses | (43,930 | ) | (59,257 | ) | ||||
| Services | (28,799 | ) | (20,814 | ) | ||||
| Logistics cost | (182,515 | ) | (117,999 | ) | ||||
| Depreciation, depletion and amortization | (233,679 | ) | (217,413 | ) | ||||
| Other(2) | (26,013 | ) | (25,820 | ) | ||||
| (514,936 | ) | (441,303 | ) | |||||
| General and Administrative expenses | ||||||||
| Personnel expenses | (186,008 | ) | (189,283 | ) | ||||
| Services | (67,651 | ) | (65,600 | ) | ||||
| Depreciation, depletion and amortization | (25,101 | ) | (14,936 | ) | ||||
| Other(3) | (36,076 | ) | (60,946 | ) | ||||
| (314,836 | ) | (330,765 | ) | |||||
| Other operating (expenses) income net | ||||||||
| Rents and leases | 1,080 | 133 | ||||||
| Result from sale of other products, net | 18,977 | 3,561 | ||||||
| Result from sale and disposal of property, plant and equipment and biological assets, net | (4,488 | ) | (15,770 | ) | ||||
| Insurance reimbursement | 6,461 | |||||||
| Provision for loss of judicial deposits | (3,284 | ) | ||||||
| Amortization and depletion | (8,221 | ) | (5,564 | ) | ||||
| Other operating income (expenses), net | 9,383 | (4,421 | ) | |||||
| 16,731 | (18,884 | ) | ||||||
| 1) | Includes the amount of R$92,868, related to idle capacity and maintenance downtime (there were no expenses as of March 31, 2019). |
| 2) | Includes expected credit losses, insurance, materials of use and consumption, expenses with travel, accommodation, participation in trade fairs and events. |
| 3) | Includes corporate expenses, insurance, materials of use and consumption social projects and donations, expenses with travel and accommodation. |
| 30 | SUBSEQUENT EVENTS |
| 30.1 | Disbursement of Revolving Credit Facilities |
On April 2, 2020, the Company through its wholly-owned subsidiary Suzano Pulp and Paper Europe S.A, disbursement of US$500,000 (equivalent to R$2,632,550) of its revolving credit facility characterized as an export prepayment loan with quarterly payments of 1.30% plus quarterly LIBOR and maturity in February 2024.
The disbursement is in line with the preventive measures that the Company has been taking to mitigate eventual impacts resulting from the COVID-19 pandemic and aims to bring even more strength to the liquidity position of the Company, contributing for Suzano to go through the challenges resulting from such pandemic on a consistent manner.