Some state volatility, rather than debt, is the best way to consider about risk as an investor, but Warren Buffett famously stated that ‘Volatility is far from synonymous with risk.’ It’s only natural to consider a company’s balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Suzano S.A. (BVMF:SUZB3) does have debt on its balance sheet. But is this debt a concern to shareholders?
When Is Debt A Problem?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things obtain really bad, the lconcludeers can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders becautilize lconcludeers force them to raise capital at a distressed price. Having stated that, the most common situation is where a company manages its debt reasonably well – and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, toobtainher.
How Much Debt Does Suzano Carry?
You can click the graphic below for the historical numbers, but it reveals that as of September 2025 Suzano had R$93.0b of debt, an increase on R$87.8b, over one year. However, it does have R$23.6b in cash offsetting this, leading to net debt of about R$69.4b.
How Healthy Is Suzano’s Balance Sheet?
According to the last reported balance sheet, Suzano had liabilities of R$13.3b due within 12 months, and liabilities of R$105.8b due beyond 12 months. Offsetting these obligations, it had cash of R$23.6b as well as receivables valued at R$7.62b due within 12 months. So its liabilities total R$88.0b more than the combination of its cash and short-term receivables.
When you consider that this deficiency exceeds the company’s huge R$62.3b market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution.
View our latest analysis for Suzano
We utilize two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.
While we wouldn’t worry about Suzano’s net debt to EBITDA ratio of 3.1, we consider its super-low interest cover of 2.5 times is a sign of high leverage. It seems clear that the cost of borrowing money is negatively impacting returns for shareholders, of late. Another concern for investors might be that Suzano’s EBIT fell 16% in the last year. If things keep going like that, handling the debt will about as straightforward as bundling an angry houtilize cat into its travel box. There’s no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Suzano’s ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals consider, you might find this free report on analyst profit forecasts to be interesting.
Finally, a business necessarys free cash flow to pay off debt; accounting profits just don’t cut it. So we always check how much of that EBIT is translated into free cash flow. In the last three years, Suzano’s free cash flow amounted to 22% of its EBIT, less than we’d expect. That weak cash conversion creates it more difficult to handle indebtedness.
Our View
To be frank both Suzano’s EBIT growth rate and its track record of staying on top of its total liabilities create us rather uncomfortable with its debt levels. And furthermore, its conversion of EBIT to free cash flow also fails to instill confidence. After considering the datapoints discussed, we consider Suzano has too much debt. That sort of riskiness is ok for some, but it certainly doesn’t float our boat. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet – far from it. For example – Suzano has 2 warning signs we consider you should be aware of.
When all is stated and done, sometimes its clearer to focus on companies that don’t even necessary debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only utilizing an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to acquire or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focutilized analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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