19 th Annual Santander LatAm CEO Conference January, 2015 FIBRIA APP WITH THIS PRESENTATION IS AVAILABLE FOR DOWNLOAD AT APPLE STORE AND GOOGLE PLAY.

Transcription

1 19 th Annual Santander LatAm CEO Conference January, 2015 FIBRIA APP WITH THIS PRESENTATION IS AVAILABLE FOR DOWNLOAD AT APPLE STORE AND GOOGLE PLAY.

2 2 Disclaimer The information contained in this presentation may include statements which constitute forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Such forward-looking statements involve a certain degree of risk and uncertainty with respect to business, financial, trend, strategy and other forecasts, and are based on assumptions, data or methods that, although considered reasonable by the company at the time, may turn out to be incorrect or imprecise, or may not be possible to realize. The company gives no assurance that expectations disclosed in this presentation will be confirmed. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements, due to a variety of factors, including, but not limited to, the risks of international business and other risks referred to in the company s filings with the CVM and SEC. The company does not undertake, and specifically disclaims any obligation to update any forward-looking statements, which speak only for the date on which they are made.

3 1 Company 2 Pulp 3 Financial 4 Final Overview and Paper Market and Operational Highlights Remarks Agenda 3

4 Company Overview 4

5 A Winning Player Superior Asset Combination Main Figures 3Q14 LTM Pulp capacity million tons 5,300 Net revenues R$ billion 7.0 Total Forest Base (1) thousand hectares 970 Três Lagoas Belmonte Veracel Caravelas Portocel Aracruz Jacareí Santos Planted area (1) thousand hectares 562 Net Debt R$ billion 7.3 Net Debt/EBITDA (in Dollars) (2) X 2.5 Net Debt/EBITDA (in Reais) X 2.7 Port Terminal Pulp Unit Source: Fibria (1) Including 50% of Veracel, excluding forest partnership areas and forest bases linked to the sales of Losango and forest assets in Southern Bahia State. (2) For covenants purposes, the Net Debt/EBITDA ratio is calculated in Dollars. 5

6 Fibria s Units Industrial Capacity * Veracel is a joint venture between Fibria (50%) and Stora Enso (50%) and the total capacity is 1,120 thousand ton/year 6

7 7 Fibria s Commercial Strategy Sales Mix by End Use - Fibria Highlights Region - 3Q14 Europe 39% N. America 26% Other 10% Asia 25% Tissue 55% Sales Mix by Region - Fibria End Use - 3Q14 Specialty 18% Printing & Writing 27% 11% 9% 11% 10% 10% 10% 11% 10% 9% 10% 8% 8% 8% 9% 9% 10% 22% 25% 14% 20% 31% 28% 20% 23% 25% 26% 21% 26% 26% 26% 27% 25% Worldwide presence Strong global customer base Long-term relationships Focus on customers with stable business Customized pulp products and services Sound forestry and industrial R&D Focus on less volatile end-use markets such as tissue Efficient logistics set up Low dependence on volatile markets such as China Low credit risk 100% certified pulp (FSC and PEFC/Cerflor) 37% 46% 46% 41% 35% 44% 43% 41% 36% 42% 43% 35% 36% 46% 42% 39% 30% 20% 29% 29% 24% 18% 26% 26% 30% 22% 28% 31% 30% 19% 22% 26% 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 North America Europe Asia Other

8 Shareholder Structure and Corporate Governance Votorantim Industrial S.A. (1) 29.42% BNDES Participações (1) 30.38% Free Float (2) 40.20% Fiscal Council General Meeting Board of Directors 20% independent members Role of CEO and chairman is split Finance Committee Statutory Audit Committee Personnel and Remuneration Committee Sustainability Committee Innovation Committee 30% independent members 100% independent members 50% independent members 45% independent members - Listed on Novo Mercado, highest CG level at BM&FBovespa: Only 1 class of shares 100% voting rights 100% tag along rights (Brazilian corporate law establishes 80%) Board of Directors with minimum 20% independent members Financial Statements in International Standards IFRS Adoption of Arbitration Chamber SEC Registered ADR Level III program (1) Controlling group (2) Free Float 40.14% + Treasury 0.06% Policies approved by the Board of Directors: Indebtedness and Liquidity Market Risk Management Risk Management Corporate Governance Related Parties Transactions Anti-Corruption Information Disclosure Securities Trading Genetically Modified Eucalyptus 8

9 Pulp and Paper Market 9

10 10 Today, according to public information, there will be a 10% increase of the market pulp capacity between 2014 and 2016 SOFTWOOD (1) 25.5 MT + HARDWOOD (1) = 31.1 MT MARKET PULP (1) 56.6 MT (2) : New capacities: 0.7 mt Announced Closures: (0.4) mt Net: 0.3 mt (3) : New capacities: 6.0 mt Announced Closures: (0.8) mt Net: 5.2 mt : New capacities: 6.7 mt Announced Closures: (1.2) mt Net: 5.5 mt (1) Source: PPPC Special Research Note May 2014 does not include Sulphite and UKP (2) Projects included: Paper Excellence (70kt); UPM Kymi (170kt); Klabin (200kt); Sodra Värö (275kt) Closures: Birla AV Terrace Bay (350kt) (3) Projects included: Maranhão (1.5mt); Montes del Plata (1.3 mt); Oji Nantong (700kt); Eldorado (200kt); CMPC Guaíba II (1.3 mt); Klabin Ortigueira (1.0mt) Closures: April Rizhao (130kt); Arauco Valdivia (300kt); Ence Huelva (400 kt).

11 Global Market Pulp Demand Hardwood demand will continue to increase at a faster pace than Softwood Hardwood (BHKP) vs. Softwood (BSKP) (000 ton) Paper Production Runnability with BHKP CAGR: Hardwood: +2.8% Softwood: +0.7% Source: PPPC Hardwood Demand growth rate Softwood Source: RISI conference, August NBSK vs. BHKP - Prices (1) 000 ton Growth Growth Hardwood % 34% Eucalyptus % 63% Softwood % 15% Spread Dec./14: US$ 191 Average spread: US$ Market Pulp Spread Average spread BHKP NBSK Source: PPPC. Excludes Sulphite and UKP market pulp. (1) Source: FOEX Average spread in the last 5 years. 11

12 USD/Adt, 2013 cost level Supply structural changes puts pressure on the industry MARKET PULP CAPACITY RANKING 2014 (000T) MAIN PROJECTS Fibria APRIL Arauco Suzano CMPC UPM-Kymmene Georgia Pacific Paper Excellence Metsa Group Stora Enso Weyerhaeuser Ilim Eldorado Mercer Domtar IP Sodra Resolute Forest Canfor ENCE Project Country Capacity Timing Fiber Status CMPC Guaíba II Brazil 1.3 Mt 2Q2015 BEKP Confirmed Klabin Paraná Brazil 1.5 Mt 2Q2016 BEKP/ BSKP/Fluff Confirmed APP South Sumatra Indonesia 2.0 Mt 1Q2017 BHKP Confirmed Fibria Três Lagoas II Brazil 1.75 Mt - BEKP Unconfirmed COST CURVE EVOLUTION Cost position of marginal producer Bleached Softwood Kraft Pulp (BSKP) Bleached Hardwood Kraft Pulp (BHKP) Unbleached Kraft Pulp (UKP) Mechanical Pulp (MP) Cumulative Capacity Million t/a Source: Hawkins Wright, Poyry and Fibria Analysis (as of Dec. 2014). 12

13 BHKP prices - CIF Europe (US$/ton) Capacity (000 ton) 13 Gross capacity addition should not be counted as the only factor influencing pulp price volatility.(1) List Price bottoming at US$650/t in 2011 and US$724/t in APP South Sumatra (2) 2,0 1, APP Hainan Fray Bentos Mucuri Veracel Nueva Aldea Rizhao Três Lagoas Maranhão Eldorado Montes del Plata Guaíba II Klabin 1,6 1,4 1,2 1, Valdivia Santa Fé Kerinci PL3 APP Guangxi Chenming Zhanjiang Oji Nantong 0,8 0, , , ,0 (1) Source: Hawkins Wright, Poyry and Fibria Analysis. Pulp price estimates according to Hawkins Wright (Sep/14), Brian McClay (Nov/14) and RISI (Nov/14) (2) Partially integrated production

14 Technical Age and Scale in the Market Pulp Industry Further closures are expected due to lack of adequate investments in the industry 14 Hardwood (BHKP) Market Pulp Softwood (BSKP) Market Pulp PM Capacity, 1000 t/a Weighted average technical age 12.3 years STRONG PM Capacity, 1000 t/a Weighted average technical age 21 years STRONG Aracruz Weighted average capacity 1,277,000 t/a Jacareí Três Lagoas Old Town Ence Huelva Veracel Weighted average capacity 527,000 t/a 0 30 WEAK 20 Technical Age, years WEAK Technical Age, years 5 0 North American Pulp Mills Other Pulp Mills Closures Grade Switch On & Off More than 7.7 million tons of capacity above 25 years and with annual capacity below 500,000 t/y.

15 15 Capacity closures DO happen Closures of Hardwood Capacity Worldwide (000 ton) ,260-1,180-1, E as of Dec.14 Source: PPPC and Fibria

16 16 Lowest Volatility Among Commodities Commodities Historical Volatility (US$) (1) 35% 21% 29% 26% 23% 23% 15% 7% Sugar Iron Ore WTI Crude Oil Soy LME Metals Ibovespa Cattle FOEX PIX BHKP Change Dec./2014 vs. Dec./2013 (3) Sugar Iron Ore Crude Oil Soy LME Metals Ibovespa Cattle Pulp BHKP Commoditiy Spot Price -12% -47% -46% -22% % -3% S&P Sector Index (2) -12% -34% -43% -21% -8% -3% 21% - FIBR3 FBR % 4% (1) Since 2009 (2) Except Iron Ore (Average of: Vale, Rio Tinto and BHP) and LME Metals (3) December, 31 st

17 Among the industry s lowest cash cost producers Total Cash Cost of BHKP delivered to Europe (US$/t) Capacity (k tons): 1, ,570 1,045 2, , ,010 3,950 7,450 5,300 = 31,385 Interest 3Q14 net price: US$ 554/t Interest Capex Income Tax SG&A Positive Working Capital: US$5/t Cash Cost (US$/t) Delivery (US$/t) Source: Hawkins Wright (Outlook for Market Pulp, September 2014) Fibria s 3Q14 considering a FX of R$/US$2.27. Gray bar includes cash expenses as Interest, CAPEX, SG&A and Taxes (Source: RISI and Fibria). 17

18 Global Market BEKP Demand Shipments of Eucalyptus Pulp (1) 2013 vs M2014 vs. 11M % 6% 23% +1,523 kt 22% +844 kt Total 12% +185 kt North America -1% -37 kt Western Europe +674 kt China 0% +11 kt Others Total 4% 6% +60 kt +319 kt North America Western Europe +688 kt China 12% +454 kt Others (1) Source: PPPC World 20 December/2013 (1) Source: PPPC World 20 November/2014 Paper Capacity increase in China Total FORECAST REALIZED PREVIOUS FORECAST LAST FORECAST PREVIOUS FORECAST LAST FORECAST PREVIOUS LATEST Woodfree ,215 Tissue 1, ,518 1, ,605 2,950 Cartonboard 2,428 2,128 1,300 2, ,158 8,773 Total 3,587 3,160 2,818 3,746 1,753 1,867 8,158 8,773 Source: Fibria and Independent Consultants 18

19 Benefiting From China s Growth China s Hardwood Imports of BHKP by Country (1) ( 000s t) BHKP Total Latin America 11M M2014 * includes Russia, China, Thailand and New Zealand. Latin America is the leading exporter of BHKP to China, accounting to approximately 48% of China's total imports in 11M Indonesia Others* USA Canada Western Europe (million t) World Tissue Consumption, (3) LTM Growth Rate +4.2% (kg/person/year) N.America W.Europe E.Europe L.America Middle East Japan China Asia FE Oceania Africa 10 (In percentage) China's Share of Market Pulp (2) Between 2005 and 2013, the Chinese market share of eucalyptus shipments 21 increased by 14 p.p. (total market pulp: + p.p.) Per Capita Consumption of Tissue by World Region (3) (Kg/capita/year) M Eucalyptus Hardwood Total (1) PPPC Pulp China (2) PPPC W20. Coverage for chemical market pulp is 80% of world capacity (3) RISI N. West America Europe Japan Oceania East Europe LatAm China Africa 19

20 Financial and Operational Highlights 20

21 No exposure eletricity shortage risks, in spite of which the company has benefited from the sale of its surplus energy ( 23 ) 2 3Q13 Maintenance Downtimes Wood Utilities Other 3Q % Energy sales and operational efficiency have contributed for cash production cost stability. (Utilities: 3Q14: R$ 34/t I 2Q14: R$ 36/t I 3Q13: R$ 12/t)

22 Cash Production Cost saw a annual increase of 3.7% over the past 6 years Fibria Cash Production Cost (1) (R$/ton) CAGR: + 3.7% Consistently controlling the production cash cost at a level below the inflation pace (2) 2010 (2) Q14 LTM (1) Excludes Conpacel. 22

23 FX and Pulp Price explain 80% of Fibria s EBITDA Margin Each 10% depreciation of the Real increases EBITDA by approx. R$600 million Exchange Rate Average (R$/US$) Fibria net pulp price (US$/t) Fibria net pulp price (R$/t) Marginal producer cost (US$/t) (4) , ,067 1, (3) ,281 1,310 1, Market Consensus EBITDA Margin 29% 1,522 40% 2,526 34% 36% 1,964 2,253 40% 38% 2,796 2,708 EBITDA (R$ million) 2009 (1) 2010 (1) LTM 3Q (1) Excludes Conpacel (2) 2014 year end market consensus (3) According to Focus Report (Brazilian Central Bank Jan.2014) (4) According to Poyry full cost estimate - includes Manufacturing + Delivered costs to Rotterdam + Depreciation + ROCE of 9% 23

24 Fibria delivers one of the highest EBITDA/t and FCF/t of the industry Free cash flow generation - 3Q14 LTM (R$ Million) 2,708 (1,509) (370) 317 (20) (7) 1,119 Adjusted EBITDA Capex Interest (paid/received) Working Capital Taxes Other Free Cash Flow Free Cash Flow per ton - 3Q14 LTM (R$/ton) (1) 507 (283) (69) 59 (4) (1) 210 Adjusted EBITDA Capex Interest (paid/received) Working Capital Taxes Other Free Cash Flow (1) Does not include: asset sales, expenses on bonds repurchase, expenses related to the REFIS on subsidiaries profits abroad and tax credits from the BEFIEX program. 24

25 Capital Structure: Fibria has achieved the lowest leverage ratio among its Latin American peers Net Debt/EBITDA (x) (1) Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q Fibria Suzano Klabin CMPC Arauco Eldorado 2 Fibria Arauco CMPC Klabin Suzano S&P BB+/Positive BBB-/Stable BBB+/Negative BBB-/Negative BB/Stable Moody s Ba1/Positive Baa3/Stable Baa3/Negative - Ba2/Stable Fitch BBB-/Stable BBB/Stable BBB+/Stable BBB-/Negative BB/Stable (1) Fibria s historical data in BRL. (2) Market consensus. 25

26 Continuation of the liability management plan, also focusing on improving maturities 26 December 2013 Cost of debt: 4.6% Average maturity: 52 months 1, , , , ,020 1, , Land Deal Bond buyback: Fibria 2020, 2021 and VOTO IV Fibria 2024 issuance Bank loans renegotiations Foreign Currency Local Currency September 2014 Cost of debt: 3.7% Average maturity: 55 months Lower cost of debt Foreign Currency Local Currency Smoother debt amortization schedule Estimated NPV of all initiatives until the end of 2014: US$300 million

27 27 But the initiatives have not finished. There are certain ongoing negotiations that will improve Fibria s debt profile even further Repurchase of costly debt Issuance of a Syndicated EPP (US$500 million) Joint Bookrunners: BNP Paribas and Natixis (full commitment) Tranche A: L % p.a. 5 year term loan with the amortization starting at the end of year 4. Cost reduction of 32.5 bps from our last comparable EPP. Tranche B: L % p.a. 5-year Term Loan with a bullet repayment. Average term increase of 1 year and cost reduction of 22.5 bps from our last comparable EPP. Tranche C: L % p.a. 6-year Term Loan with the amortization starting on Jan/2020. Average term increase of 1.5 years and cost reduction of 7.5 bps from our last comparable EPP. Amortization Schedule Pro-forma Dec/14 - US$ million 627 (revolver) FCF 3Q14 LTM: US$489 mn 514 (cash) Other ACC/ACE ECN BNDES Bond EPP

28 A consistent and disciplined approach focused on reducing debt and its cost 28 Debt (US$ million) x Leverage (US$) Interest (US$ million) x Cost of Debt (US$) Sept/ LTM 3T14 Gross Debt Net Debt Interest Reduction Free Cash Flow Increase Cost of Debt Reduction This dynamics creates a virtuous cycle

29 29 New issuance better priced than Investment Grade issuers Issuance Rating Maturity Volume T-Spread Coupon X Book Fibria Ba1 / BBB- / BB US$600 mn 275 bps 5.25% 11.5x Braskem Baa3/BBB-/BBB US$500 mn 340 bps 6.45% 11.0x Petrobras Baa1/BBB/BBB 2024 US$2.5 bn 350 bps 6.28% 3.3x Klabin BBB-/BBB US$500 mn 269 bps 5.25% 6.0x Samarco BBB-/BBB 2024 US$500 mn 288 bps 5.375% 3.6x Secondary Market - As of Jan. 08, 2015 Rating Maturity Volume G-Spread Yield Fibria Ba1 / BBB- / BB US$600 mn 316 bps 5.198% Braskem Baa3/BBB-/BBB US$500 mn 450 bps 6.387% Klabin BBB-/BBB US$500 mn 354 bps 5.635% Odebrecht Baa3/BBB-/BBB 2023 US$800 mn (1) 394 bps 5.986% Petrobras Baa1/BBB/BBB 2024 US$2.5 bn 533 bps 7.106% Gerdau Baa3/BBB-/BBB US$750 mn 384 bps 5.709% Samarco BBB-/BBB 2024 US$ 500 mn 456 bps 6.335% (1) Outstanding: US$102 mn

30 30 Fibria has the simplest and most transparent call in the industry Pulp supply Closures/conversions Inefficient capacities in China Demand Fiber and grade substitution Tissue China Pulp price Brazil GDP Energy crisis FX Capex inflation Cost inflation Rating Tax Corporate Governance Negative Neutral Positive

31 Final Remarks 31

32 32 Max Value Project Zero base budgeting The assumption for the new process is that the budget for next year is zero. Budget developed primarily based on input consumption indicators Only one discussion cycle, initially based on budgetary guidelines Individual discussion for each expenditure package, including Sustaining CAPEX and OPEX Discussion details based on the materiality of the expense within the package Robust basis increasing the visibility of the rationale for the proposed budget amounts Each expense and capex need to be explained, not only the additional ones Zero Base Budgeting encourages a questioning and challenging attitude of the status quo

33 Max Value Project Zero base budgeting Value achievement share by category NPV expected curve 23% 100% 80% 70% 65% 75% 43% 60% 50% 50% 33% 40% 30% 20% 15% 30% 10% Forestry Industrial Logistics/Other Total 0% Approx. R$1.5 billion NPV Note: (1) Technical Limit potential reflecting 2013 conditions; (2) Coverage of expenses with established Technical Limits (e.g. 374/3233=12%). Source: Fibria, ZBB team analysis. 33

34 34 Max Value Project A hidden asset value Book Value of own Land as of Sep/14: R$1.2 billion Market Price of own Land as of Sep/14: R$3.9 billion Fibria s Ha Book Value Market Value Owned Land ( 000) R$/ha R$/ha Total 491 2,535 7,964 Land sold in 2013 The Parkia Deal: - 206k ha; - Up to R$1.65 billion (~R$8k per ha).

35 35 Max Value Project Turning areas per hectare into square meter The targeted area represents only 0.6% of the land owned by Fibria; Real estate thinking: minimum value creation of R$500 million NPV.

36 36 Fibria is seeking value creation for its shareholders with capital discipline PULP - Growth with discipline - Best portfolio of projects INDUSTRY CONSOLIDATION? Potential Growth Prospects BIO-ENERGY - Complementary to pulp - Ensyn OTHER OPPORTUNITIES - Portocel - Land and forest

37 37 The maturity of synergies captured since Fibria s creation improved its operating indicators PRODUCTION VOLUME (000 t) BEST PRACTICES AND OPERATING STABILITY +14% CASH COST (R$/ton) -21% ,054 5,184 5,299 5,271 5, , * 2010* Q14 LTM SG&A (R$ million) STRUCTURE AND PROCESS SIMPLIFICATION 2009* 2010* Q14 LTM Historical Value Inflation Effect** EBITDA (R$ million) - EBITDA MARGIN (%) -28% % 1,522 40% 2,526 34% 36% 1,964 2,253 40% 38% 2,796 2, * 2010* Q14 LTM Historical Value Inflation Effect** 2009* 2010* Q14 LTM * Excludes Conpacel ** IPCA index considered to calculate the inflation effect

38 Back up 38

39 39 3Q14 Results Pulp Production and Sales ( 000 t) Net Revenue (R$ million) Q13 2Q14 3Q14 Production Sales Cash Production Cost (R$/t) 3Q13 2Q14 3Q14 EBITDA (R$ million) and EBITDA Margin (%) % % 35% Q13 2Q14 3Q14 Cash cost ex-scheduled downtimes Cash cost 3Q13 2Q14 3Q14

40 40 Fibria s tax structure Fiscal - annual adjustment Tax benefits (R$) Tax loss carry forward and tax credits Benefit Amount Maturity Goodwill (Aracruz acquisition) Forestry Capex in Mato Grosso do Sul state Annual tax deduction: R$85 million (tax) Remaining Balance Sep/14: R$1,2 bilion (base) LTM 3Q14 tax deduction related to depletion: R$31 million 2018 Undefined Benefit Tax loss carryforward Accumulated tax credits Amount Balance up to Sept. 14: R$332 million (base) Balance Sept./2014: -PIS/COFINS: R$556 million -withholding tax (IR and CSLL): R$604 million -Befiex: R$537 million Tax payment (cash basis) LTM 3Q14 R$ 7 million R$ 16 million R$ 4 million R$ 15 million R$ 31 million R$ 20 million

41 Due to productivity gains in its forests, Fibria had the opportunity to explore this new ownership model 41 FIBRIA S GAINS IN IMACEL DUE TO INVESTMENTS IN BIOTECHNOLOGY (TONS OF PULP/HA/YEAR) MAI* Pulp: (adt/ha/year) Conservative assumption 2012 field trials = *MAI: Mean annual increment Actions: Genetic improvement Excellence in forestry management Superior industrial efficiency

42 42 Leadership position Industry Outlook (1) Fiber Consumption 403 million t 58% 42% Recycled Fiber 234 million t Pulp 169 million t 18% 82% Mechanical 31 million t Chemical 139 million t 60% Integrated Mills 84 million t 40% Market Pulp 56 million t 49% 51% Softwood/Other 27 million t Hardwood 29 million t 35% 65% Acacia/Other 10 million t Eucalyptus 19 million t 71% Other Eucalyptus Pulp producers: 13 million t 29% (1) Fiber Consumption, Recycled Fiber and Pulp: RISI Market Pulp, Hardwood and Eucalyptus: PPPC Special Research Note - May 2014

43 Global Paper Consumption CAGR Developed Markets: + 1.7% Emerging Markets : + 6.0% 117,611 CAGR Developed Markets: - 4.0% Emerging Markets : + 4.1% 114,507 85,291 P&W Consumption (000 tons) (1) Developed Markets Emerging Markets CAGR Developed Markets: + 2.4% Emerging Markets : + 6.9% 26,877 CAGR Developed Markets: + 1.4% Emerging Markets : + 6.7% 37,474 15,548 Tissue Consumption (000 tons) (1) Developed Markets Emerging Markets Source: RISI 43