We maintain our Neutral recommendation on Suzano (Baa3/BBB-/BBB-) at the issuer level and keep the bond-level Overweight on the 3.125% 2032 notes as our preferred expression of the credit. The issuer stance reflects a credit with a credible deleveraging path but balance-sheet repair still to deliver following the Arbex acquisition. The bond-level call remains a valuation decision. The 2032s offer the clearest relative value in the belly, combining additional spread and yield with a materially lower dollar price than the 2031s.
The case for Neutral at the issuer level sits in the gap between the leverage ratios and the cash-flow trend. Gross leverage rose to 5.0x and net leverage to 3.6x in 2Q26 as LTM EBITDA declined. Pro forma for Arbex, leverage should remain elevated, requiring further balance-sheet repair. Set against that, net debt declined during the quarter, free operating cash flow turned positive, liquidity covered short-term debt by roughly 6.9x at quarter-end and remains strong after allowing for the US$1.3 billion Arbex payment, and management has explicitly placed deleveraging ahead of further buybacks and discretionary cash investments. We see an improving deleveraging path, but not yet enough balance-sheet progress to support an issuer-level Overweight.
