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COMPANYS OPERATIONS | 12 Months Ended
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Dec. 31, 2019
COMPANYS OPERATIONS |
COMPANYS OPERATIONS | 1.COMPANY’S OPERATIONS Suzano S.A., (current corporate name of Suzano Papel e Celulose S.A., as approved by Extraordinary General Meeting hold on April 1 st, 2019), 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”). After conclusion of business combination with Fibria Celulose S.A. (“Fibria”), on January 14, 2019, the Company now 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, 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 subsidiaries in Argentina, the United States of America, Switzerland and Austria and its 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 consolidated financial statements was approved by the Board of Directors on March 4, 2020. 1.1.Equity interest The Company holds equity interest in the following entities:
|  |  |  |  |  |  |  |  |  | % equity interest |
|  |  |  |  |  | Type of |  | Accounting |  | December 31, |  | December 31, |
Entity |  | Main activity |  | Country |  | investment |  | method |  | 2019 |  | 2018 |
AGFA – Com. Adm. e Participações Ltda. |  | Holding |  | Brazil |  | Direct |  | Consolidated |  | 100 | % | 100 | %
Asapir Produção Florestal e Comércio Ltda. (1) |  | Eucalyptus cultivation |  | Brazil |  | Direct |  | Consolidated |  | 100 | % | 50 | %
CelluForce Inc. |  | Nanocrystalline pulp research and development |  | Canada |  | Direct |  | Fair value through other comprehensive income |  | 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 | % |  |
Eucalipto Holding S.A. (2) |  | Holding |  | Brazil |  | Direct |  | Consolidated |  | 100 | % |  |
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 | % |  |
Fibria Terminal de Celulose de Santos SPE S.A. |  | Port operation |  | Brazil |  | Direct |  | Consolidated |  | 100 | % |  |
Fibria Overseas Finance Ltd. |  | Financial fundraising |  | Cayman Island |  | Direct |  | Consolidated |  | 100 | % |  |
Fibria Overseas Holding KFT. (3) |  | Consolidated |  |  |  |  |  |  |  | 100 | % |  |
Fibria Terminais Portuários S.A. |  | Port operation |  | Brazil |  | Direct |  | Consolidated |  | 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 |  |  |  |  |
F&E Tecnologies LLC |  | Biofuel production, except alcohol |  | United States of America |  | Direct |  | Equity |  | 50 | % |  |
Gansu FuturaGene Biotech Co. Ltd. |  | Biotechnology research and development |  | China |  | Indirect |  | Consolidated |  | 100 | % | 100 | %
Ibema Companhia Brasileira de Papel |  | Industrialization and commercialization of paperboard |  | Brazil |  | Direct |  | Joint venture |  | 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 | % |  |
Projetos Especiais e Investimentos Ltda. |  | Commercialization of equipment and parts |  | Brazil |  | Direct |  | Consolidated |  | 100 | % |  |
Rio Verde Participações e Propriedades Rurais S.A. (3) |  | Forest assets |  | Brazil |  | Indirect |  | Consolidated |  | 100 | % |  |
Spinnova Oy |  | Research and development of sustainable raw materials (wood) for the textile industry |  | Finland |  | Direct |  | Equity |  | 24.06 | % |  |
Stenfar S.A. Indl. Coml. Imp. Y. Exp. |  | Commercialization of computer paper and materials |  | Argentine |  | Direct /Indirect |  | Consolidated |  | 100 | % | 100 | %
Sun Paper and Board Limited (4) |  | Shared expenses |  |  |  |  |  | Consolidated |  | 100 | % | 100 | %
Suzano Áustria GmbH |  | Business office |  | Austria |  | Direct |  | Consolidated |  | 100 | % | 100 | %
Suzano Canada Inc. (5) |  | Lignin research and development |  | Canada |  | Direct |  | Consolidated |  | 100 | % |  |
Suzano International Trade GmbH (6) |  | Business office |  | Austria |  | Direct |  | Consolidated |  | 100 | % |  |
Suzano Luxembourg (7) |  | Financial fundraising |  | Luxembourg |  | Direct |  | Consolidated |  | 100 | % | 100 | %
Suzano Participações do Brasil Ltda (8) |  | Holding |  | Brazil |  | Direct |  | Consolidated |  | 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 Trading Ltd. |  | Business office |  | Cayman Island |  | Direct |  | Consolidated |  | 100 | % | 100 | %
Suzano Trading International KFT (9) |  | Business office |  | Hungary |  | Direct |  | Consolidated |  | 100 | % |  |
Veracel Celulose S.A. (10) |  | Industrialization, commercialization and exportation of pulp |  | Brazil |  | Joint operation |  | Consolidated |  | 50 | % |  |
| 1) |  | The full control was acquired arising from the business combination with Fibria.
| 2) |  | Company merged on January 2, 2019, as mentioned in note 1.2.1.1.
| 3) |  | Company established as a result of corporate restructuring on December 12, 2019.
| 4) |  | Company dissolution on June 2, 2019.
| 5) |  | Corporate name changed on September 30, 2019, former Fibria Innovations Inc.
| 6) |  | Corporate name changed on August 28, 2019, former Fibria International Trade GmbH.
| 7) |  | Company dissolution on September 17, 2019.
| 8) |  | Corporate name changed on December 06, 2019, former F&E Participações do Brasil Ltda.
| 9) |  | Corporate name changed on August 9, 2019, former Fibria Trading International.
| 10) |  | Joint operation with Stora Enso, a company located in Amsterdan.
1.2. Major events in the year ended 1.2.1.Business combination with Fibria 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: 1.2.1.1.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. 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. 1.2.1.2. 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. 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 churn rate that measures customer satisfaction and customer permanence in the portfolio, the adjustment was measured using estimated discounted cash flows. The 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 estimated and assumptions with respect to the probability of loss of the possible and remote lawsuit, 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.
| 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.
For more information on the business combination refer note 14.4. 1.2.2.Approval of the legal merger of Fibria On April 1st, 2019, the Company approved in the Extraordinary Shareholders Meeting of Suzano the legal merger of Fibria, a wholly-owned subsidiary of Suzano, with the transfer of all its equity to Suzano and its consequent winding up ("Legal Merger"), provided that the share capital of the Company not changed due to the Legal Merger. Because of the Legal Merger, the Suzano succeeded Fibria in all its rights and obligations. The following table summarizes, the main items balance sheet of Fibria as of March 31, 2019.
ASSETS |  |  |  | LIABILITIES |  |
CURRENT |  |  |  | CURRENT |  |
Cash and cash equivalents |  | 29,086 |  | Loans and financing |  | 816,180
Marketable securities |  | 2,734,027 |  | Lease liabilities |  | 420,241
Derivative financial instruments |  | 256,675 |  | Trade accounts payable |  | 955,210
Trade accounts receivable |  | 3,572,059 |  | Derivative financial instruments |  | 254,444
Inventories |  | 1,714,560 |  | Payroll and charges |  | 104,246
Recoverable taxes |  | 768,439 |  | Taxes payable |  | 36,057
Other assets |  | 161,238 |  | Related parties |  | 1,179,254
|  | 9,236,084 |  | Dividends payable |  | 4,015
|  |  |  | Other liabilities |  | 946,099
|  |  |  |  |  | 4,715,746
NON CURRENT |  |  |  | NON CURRENT |  |
Marketable securities |  | 175,559 |  | Loans and financing |  | 8,139,390
Derivative financial instruments |  | 723,084 |  | Derivative financial instruments |  | 678,833
Recoverable taxes |  | 546,234 |  | Lease liabilities |  | 1,972,531
Deferred taxes |  | 1,364,363 |  | Related parties |  | 16,305,560
Advances to suppliers |  | 696,767 |  | Employee benefits |  | 144,557
Judicial deposits |  | 190,533 |  | Provision for judicial liabilities |  | 190,698
Other assets |  | 100,877 |  | Other liabilities |  | 175,934
Biological assets |  | 4,355,102 |  |  |  | 27,607,503
Investments |  | 9,481,900 |  |  |  |
Property, plant and equipment |  | 14,633,114 |  | TOTAL LIABILITIES |  | 32,323,249
Right of use |  | 2,301,427 |  |  |  |
Intangible assets |  | 118,920 |  | Equity |  | 11,600,715
|  | 34,687,880 |  |  |  |
|  |  |  | TOTAL EQUITY AND LIABILITIES |  | 43,923,964
TOTAL ASSETS |  | 43,923,964 |  |  |  |

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