Suzano Papel e Celulose SA, Brazil’s most indebted pulpmaker, will suspend investments in the region’s biggest biomass-pellet project and its Piaui pulp plant as it seeks to cut debt.
The projects will be shelved until the company lowers its net debt to 2.5 times its earnings before interest, taxes, depreciation and amortization, Walter Schalka, chief executive officer for the Salvador, Brazil-based company, said today in an earnings call. Its fourth-quarter net debt was five times Ebitda.
Suzano will focus on extracting value from existing assets and bringing its Maranhao pulp factory online by the end of the year, almost doubling its production capacity for the paper raw material, Schalka said.
“The company is not comfortable with the current level of debt and is taking action to correct that,” he said.
Suzano may sell 250 million reais ($127 million) of non-operating assets and expects debt levels to fall after it starts operating the Maranhao project, which will require 2.3 billion reais of investment this year, he said.
Suzano said in July 2010 it would invest $800 million in three pellet plants and forests in the northeast.
“This would have been the biggest pellet-export project in Latin America by a massive margin,” David Hostert, an analyst at Bloomberg New Energy Finance’s London office, said today in an e-mail. “They would have been the first in the region to do this on a large scale.”