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MarketScreener Homepage  >  Equities  >  Bolsa de Valores de Sao Paulo  >  Suzano S.A.    SUZB3   BRSUZBACNOR0

SUZANO S.A.

(SUZB3)
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Credit Markets: Brazil Company Ties Bond to Emission Cuts -- WSJ

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09/04/2020 | 02:48am EDT

By Matt Wirz

As Brazil struggles with deforestation, one of the country's largest paper manufacturers is pitching investors a bond that will cost the company money if it fails to meet greenhouse gas-reduction targets.

The new type of security from Suzano SA is part of an evolution in the green bond market as companies and nations look for new ways to fund themselves by tapping into rising demand for investment products that further environmental, social and governance, or ESG, objectives.

Suzano also hopes the bond will help distance the company's image from the accelerating destruction of Brazil's rainforest under the administration of President Jair Bolsonaro.

"It's an important step to show we have skin in the game, especially in this moment," said Suzano Chief Financial Officer Marcelo Bacci. "The fires and deforestation are caused by criminals, and we want to make sure that everyone understands that Suzano has a completely different story."

Suzano will hold meetings with institutional investors next week to market a sustainability-linked bond, the first such deal in Latin America, people familiar with the matter said. The deal, which was structured by JPMorgan Chase & Co., is expected to raise $500 million to $1 billion and proceeds will be used to repay existing debt, they said.

Rarely used five years ago, so-called green bonds have grown mainstream with Germany issuing about EUR6 billion ($7.1 billion) of the securities this week. Sustainability-linked bonds are the next-generation securities Wall Street is offering environmentally and socially conscious investors.

While proceeds from green bonds and similar securities must be applied exclusively to environmental or social projects, borrowers can use cash borrowed through sustainability-linked bonds for general corporate purposes. The catch is that if the borrower fails to hit a key environmental performance indicator by a predetermined date, the interest rate of the bond will rise.

"There's a much larger opportunity set for companies to issue sustainability-linked bonds," said Scott Mather, a portfolio manager who oversees ESG integration at bond-fund giant Pacific Investment Management Co.

Suzano's new bond will be tied to its commitment to cut corporate greenhouse-gas-emission intensity to 0.19 tons of carbon-dioxide equivalent by 2025 through reduction of emissions from its own manufacturing and from the electricity it consumes. If the company misses that target, the interest rate on the bond will step up by 0.25 percentage point, according to marketing materials filed with the U.S. Securities and Exchange Commission.

Transparency has been a hot-button issue in the burgeoning marketplace for ESG investments, with some green bonds funding oil-and-gas companies and purportedly environmentally focused funds buying technology stocks instead.

The market linked to sustainable-development goals will autocorrect for borrowers that fail to deliver the environmental improvements they promise, Mr. Mather said. Companies that don't meet their objectives will see their bond prices fall and credit ratings drop, he said.

Elsewhere in debt markets, the yield on the benchmark 10-year U.S. Treasury note fell to 0.621% from Wednesday's close of 0.650%, according to Tradeweb data. The WSJ Dollar Index rose 0.2%.

Corrections & Amplifications Marcelo Bacci is the chief financial officer of Suzano. An earlier version of this article incorrectly said he was the chief executive officer. (Corrected on Sept. 3)

Write to Matt Wirz at matthieu.wirz@wsj.com

 


Stocks mentioned in the article
ChangeLast1st jan.
EURO / BRAZILIAN REAL (EUR/BRL) -0.61% 6.6101 Delayed Quote.47.07%
EURO / US DOLLAR (EUR/USD) -0.14% 1.1795 Delayed Quote.5.50%
JPMORGAN CHASE & CO. 3.53% 102.88 Delayed Quote.-28.72%
LBS (LBS) - CMG (ELECTRONIC)/C1 0.24% 532.7 End-of-day quote.31.11%
LONDON BRENT OIL 0.07% 42.42 Delayed Quote.-35.20%
SUZANO S.A. -1.32% 50.02 End-of-day quote.26.06%
WTI 0.07% 40.594 Delayed Quote.-35.02%
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Financials
Sales 2020 29 303 M 5 240 M 5 240 M
Net income 2020 -15 128 M -2 705 M -2 705 M
Net Debt 2020 66 712 M 11 929 M 11 929 M
P/E ratio 2020 -4,41x
Yield 2020 0,09%
Capitalization 69 620 M 12 469 M 12 449 M
EV / Sales 2020 4,65x
EV / Sales 2021 3,82x
Nbr of Employees 35 000
Free-Float 41,1%
Chart SUZANO S.A.
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Technical analysis trends SUZANO S.A.
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
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Mean consensus OUTPERFORM
Number of Analysts 12
Average target price 56,21 BRL
Last Close Price 50,02 BRL
Spread / Highest target 35,9%
Spread / Average Target 12,4%
Spread / Lowest Target -36,0%
EPS Revisions
Managers
NameTitle
Walter Schalka Chief Executive Officer
David Feffer Chairman
Marcelo Feriozzi Bacci CFO & Director-Investor Relations
Fernando de Lellis Garcia Bertolucci Executive Officer-Research & Development
Christian Orglmeister Executive Officer-People Management, Strategy & IT
Sector and Competitors
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SUZANO S.A.26.06%12 014
UPM-KYMMENE OYJ-15.76%16 482
STORA ENSO OYJ3.97%12 736
SVENSKA CELLULOSA25.42%9 604
HOLMEN AB23.77%6 676
EMPRESAS CMPC S.A.-3.26%5 677