UPDATE 1-Brazil's Suzano predicts better pulp prices, savings from merger; shares rise

(Adds context, Suzano exec quotes, share performance)

By Alberto Alerigi

SAO PAULO, Feb 13 (Reuters) – Brazilian pulpmaker Suzano SA raised its estimates for cost savings from a merger with Fibria and said it expected higher pulp prices this year, sending shares up 3.7% in afternoon trading in Sao Paulo even as the broader market fell.

Suzano’s director Carlos Anibal said he expects a recovery in pulp prices this year after a 30% drop in 2019 caused by excess inventories in Asia.

Anibal told journalists at an event on Thursday the company has not been adversely affected by the coronavirus outbreak in China, and expects a positive effect in the longer term, with higher demand for hygiene products made with tissue paper, for example.

“Chinese are now using paper towels to avoid touching knobs or elevator buttons directly,” he said, adding that the company was keeping an eye on potential problems transporting exports from ports to clients in China.

Suzano’s fourth-quarter results where within analysts expectations and the company raised estimates for the synergies from its merger with former rival Fibria. In a securities filing earlier on Thursday, it said it expects to reduce costs by up to 1.2 billion reais ($276 million) this and next year.

Anibal said pulp prices are now reaching an “inflection point” as clients begin to drawn down inventories.

Indeed, Suzano Chief Executive Walter Schalka said he expects to raise prices at some point this year, after the Chinese economy has weathered a slowdown caused by the coronavirus outbreak.

Schalka said the company will decide on building a new unit in Mato Grosso do Sul state after it reduces its leverage levels. Suzano’s net debt was equivalent to five times its earnings before interest, taxes, depreciation and amortization, known as EBITDA, by the end of last year.

Schalka ruled out any asset sales for now, saying it would “destroy value” during a time of low pulp prices.

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