3rd Quarter of 2008 October/08 1
Forward Looking Statement The statements contained in this presentation related to the business outlook, operating and financial projections, and growth prospects of Klabin S.A. are merely projections, and as such are based exclusively on the expectations of the Company s management concerning the future of the business. These forward-looking statements depend substantially on the market conditions, the performance of the Brazilian economy, the industry and international markets, and therefore are subject to change without prior notice. This presentation on Klabin s performance includes non-accounting and accounting data, such as operating and financial information, as well as projections based on Management s expectations. Note that the non-accounting data has not been reviewed by the Company s independent auditors. The Company s management believes EBITDA may provide useful information on the Company s operating performance and allow for comparisons with other companies in the same industry. Note however that EBITDA is not a measure established in accordance with generally accepted accounting principles in Brazil (Brazilian Corporate Law or BR GAAP) or with U.S. generally accepted accounting principles (US GAAP), and may be defined and calculated differently by other companies. 2
Contents Company Profile 4 Businesses and Markets 13 Financial Performance 36 Expansion of Coated Boards 51 Future 55 3
Company Profile A forestry based company focused on wood, coated boards, packaging paper and paper packaging products: 17 plants in Brazil and 1 in Argentina Largest Brazilian producer and exporter of paper (packaging paper and coated boards) Installed production capacity: 2.0 million tpy Market Capitalization: US$ 1.3 billion (10/28/2008) Net Revenue: R$ 2,291 million in 9M08 Forestry Packaging Paper Paper Packaging Wood logs Kraftliner Coated Boards Industrial Bags Corrugated Boxes 7% 17% 30% 13% 31% Note: In 9M08, 2% of net revenue was composed of other products. 4
Integrated Business Concept After MA 1100 Expansion Project Forests Wood - 2.5 million tpy Lands 446,000 ha Planted Forests Pine 156,000 ha Eucalyptus 64,000 ha OCC 380,000 tpy Pulp NBSK BEKP CTMP 1.7 million tpy 100% Integrated Sack Kraft 155,000 tpy Coated Boards 740,000 tpy Kraftliner 770,000 tpy Recycled Paper 300,000 tpy 100% Integrated Liquid Packaging Board Carrier Board Folding Box Board 740,000 tpy Exports Exports 410,000 410,000 tpy tpy 35% Integrated 100% Integrated Industrial Bags 155,000 tpy Domestic Market 90,000 tpy Corrugated Boxes 540,000 tpy (*) Finished Products Domestic and Export Sales 2.0 million tpy (*) All figures refer to installed production capacity 5
Klabin's presence Corrugated Boxes Forestry Recycled Papers Pulp and Paper Mills Industrial Bags 6
Shareholder Structure 09/30/2008 Family control + Professional management Common Preferred Brazilian Investors 28% Monteiro Aranha 20% Brazilian Investors 38% BNDESPAR 31% Klabin Irmãos 52% Treasury Stock 2% Foreign Investors 29% 316,827,563 shares 600,855,733 shares IPO in 1979 Total shares 918 million Average daily trading volume R$ 9.3 million 7
Corporate Governance Highlights Joined BOVESPA s level 1 of Corporate Governance Tag along rights of 70% for preferred shares Liquidity:1,105 daily trades in 3Q08 Compensations for members of the Executive Board are linked to metrics that take into account the opportunity cost of investments Level 1 ADRs program Adopted insider trading policy for securities issued by the company and strict separation of Board of Directors and Executive Board 8
Investment Thesis Market Leadership and Growth Opportunities Solid Financial Performance Best global LPB supplier Top Sustainability Standards Successful R&D Track-Record Alternative fuels research Lowest Cash- Cost Producer 9
Successful R&D Track-Record Forest productivity: 5% increase in yield over the past three years Expectation of 50% yield growth over the next 10 years Genetic improvement, cloning and silvicultural development Savings with new forests of approximately US$50 million per year Allow for brownfield expansion more productivity at low fixed costs Ensure sustained competitiveness 10
Outstanding Product Quality Different fibers enable very specific and high quality products Coated boards with lower basis weight and same mechanical properties (due to internal R&D efforts) Sole supplier of Liquid Packaging Boards (LPB) in southern hemisphere Diversity of products Higher margins 11
Market Leadership and Growth Opportunities Market leadership in all segments in Brazil with space to grow: 20% of Brazil s Paper production 55% market share in Industrial Bags 20% market share in Corrugated Boxes 50% market share in Kraftliner 18% market share in Coated Boards 100% market share in Liquid Packaging Boards (LPB) Largest paper exporter more than 50 countries Regular exporter more than 25 years Coated boards growing twice the market average in Brazil 12
Business and Markets 13
Global Market Growth of Paper Demand 2007-2020 4,5 4 3,5 4,2% 3,8% Average Growth in Demand (%) 3 2,5 2 1,5 CAGR Average = 2.8% 1,9 % 2,5% 1 0,5 0 0,6% 1 50 99 Accumulated Participation in Global Demand 2007 (%) Source: RISI Printing and writing Newsprint Tissue Containerboard Others 14
Production of Packaging Paper - 2007 Global Production Europe 22% Brazil Production Klabin 35% Latin America 6% Rigesa 9% Noth America 27% Africa/ Oceania 5% Asia 40% Others 35% Irani 3% Inpa 3% S Roberto 3% Orsa 8% Trombini 4% 128 million tonnes 3.6 million tonnes Source: RISI and Bracelpa 15
Wood Products: wood logs Customers: Sawmills and laminators Species Main Products Destinations Pine Sawn Lumber Fence Clear Blocks Finger - Joint - Blanks Mouldings Plywood USA Europe Domestic Market Eucalyptus Sawn Lumber Veneer Plywood Glued Laminated Beams Edge Glued Panels Outdoor Furniture Europe Asia USA Domestic Market 16
Forests Forestry base Land and Forests 09/30/2008 Company Land Planted Forests Pine Eucalyptus Native preserved forests thousand ha 446 220 156 64 186 Average Hauling Distance Paraná Km 42 Santa Catarina Correia Pinto Otacílio Costa 76 66 São Paulo 95 17
Forests Competitive advantage Average Productivity (m 3 /ha/year) 09/30/2008 Paraná Santa Catarina São Paulo Pine 39 42 - Eucalyptus 50 27 34 Softwood - Rotation (years) Hardwood - Rotation (years) Klabin 20 Klabin 7 South Africa 25 South Africa 9 Chile 25 Chile 11 Australia 35 Portugal 13 USA 45 Sweden 37 Sweden 100 Finland 37 0 20 40 60 80 100 120 0 5 10 15 20 25 30 35 40 Source: Pöyry 18
Kraftliner Pioneerism and leadership in the production of kraftliner in Latin America Largest producer and exporter of packaging paper - 74% of Brazilian exports 6% share of the global market, exporting to more than 50 countries Supplies Klabin s 9 corrugated boxes converting plants 19
Kraftliner Price evolution US$/tonne 900 800 700 600 0% 541 539 12% 602 20% 720 5% 758 500 400 300 200 100 0 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 2004 2005 2006 2007 2008 Kraftliner price (free delivered Europe) Average Source: FOEX/Kraftliner Brown 175 g/m 2 20
Kraftliner Cost competitiveness Average cash cost (delivered Northern Europe) US$ / tonne 419 420 430 447 451 471 497 498 352 Klabin - MA Portugal Brazil France USA Poland Austria Russia Sweden Source: RISI Analytical Conerstone 2Q08 converted to October's exchange rate. 21
Coated Boards Liquid Packaging Boards (LPB) Folding Box Boards Carrier Boards 22
Global Board Market 28 million tpy 1.5 Eastern Europe 8.4 North America 5.6 Europe 10.5 Asia 0.6 Africa and Middle East 1.4 Latin America Klabin focus on the virgin fiber based segment, which amounts to 10 million tpy: - Liquid Packaging Board: 3.1 million tpy - Carrier Board: 2.7 million tpy - Folding Boxboard: 4.3 million tpy 23
Coated Boards Klabin - 6 th Largest Producer of Virgin Fiber Coated Boards MeadWestvaco Stora Enso International Paper Graphic Packaging Korsnas/Frovi Klabin M Real Iggesund Potlatch Georgia Pacific 0 500 1,000 1,500 2,000 2,500 3,000 1,000 tpy Liquid Packaging Board Folding Box Board Carrier Board Solid Bleached Sulphate Source: Pöyry 24
Coated Boards Klabin 3 rd Largest Tetra Pak Supplier in 2009 Stora Enso Korsnas/Frovi Klabin International Paper Potlatch MeadWestvaco Graphic Packaging M Real Iggesund 0 200 400 600 800 1,000 1,200 1,400 1,600 1,000 tpy Liquid Packaging Board Folding Box Board Carrier Board Source: Pöyry 25
Coated Boards Klabin's Market Share Evolution Sales in the domestic market (excluding LPB) 1995 / 2008* 16 % 19 % 10 % 9 % 8 % 7% 13 % 13 % 13 % 6 % 10 % 13 % 12 % 2 7% 11% 12 % 2 1% 15% 3% 15% 18% 3 2 % 3 4 % 3 1% 3 2 % 1995 2000 2005 2008* Suzano Klabin R ipasa P apirus Ibema Itapagé Outro s Source: Bracelpa - * Jan to Sep, 2008 26
Coated Boards Brazilian Consumption per Main Industries and Market Share Consumption Main Industries 2007 Market Share 2007 Others 4% Personal Care 3% Food/ Beverages 93% Klabin 38% Nobrecel 1% Ramenzoni 2% Miguel Forte Bonet 4% 3% Ibema 10% Suzano 25% Papirus 9% Ripasa/MD 8% Includes LPB Source: BRACELPA 27
Coated Boards List price evolution (Free delivered USA) 1,200 1,000 800 US$/tonne 847 897 936 1,003 1,048 600 400 200 0 2004 2005 2006 2007 2008 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Coated Board List Price (USA) Average Source: RISI Index List Price 20Pt. Clay-Coated Unbleached Folding Cartonboard 28
Coated Boards FBB cost competitiveness Average cash cost (delivered Northern Europe) US$ / tonne 903 904 915 577 643 702 780 827 472 Klabin - MA Brazil USA Poland France Sweden Finland Germany UK Source: RISI Analytical Conerstone 2Q08 converted to October's exchange rate. 29
Industrial Bags Market leadership in the segments of multiwall and SOS bags Recognized for high quality products and customized customer service Supplies for a variety of industries, highlighting the building industry, food, chemical products and agribusiness 30
Industrial Bags Brazilian Consumption per Main Industries Consumption Main Industries 2007 Building Industry 71% Food 3% Others 13% Seeds 4% Minerals 5% Chemicals 4% Source: Klabin 31
Industrial Bags Brazilian Consumption of Cement 5,0 Million tonnes 4,0 3,0 2,0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2006 2007 2008 Source: SNIC 32
Corrugated Boxes Leadership of the corrugated boxes market in Brazil Largest production capacity in Brazil with nine corrugated boxes converting plants Klabin s products reach every industry sector, providing total protection for packaged products transported 33
Corrugated Boxes Brazilian Consumption per Main Industries and Market Share Consumption Main Industries 2007 Market Share 2007 Rigesa 12% Orsa 10% Chemicals 9% Food / Beverages 38% Klabin 20% Trombini 7% Penha 6% Fruits 6% Others 47% Others 34% São Roberto 4% Adami INPA 4% 4% Ibéria 3% Source: ABPO 34
Corrugated Boxes Brazilian shipments 210 Thousand tonnes 200 190 180 170 179 176 180 182 187 193 160 157 150 140 Jan- 02 May- 02 Sep- 02 Jan- 03 May- 03 Sep- 03 Jan- 04 May- 04 Sep- 04 Jan- 05 May- 05 Sep- 05 Jan- 06 May- 06 Sep- 06 Jan- 07 May- 07 Sep- 07 Jan- 08 May- 08 Sep- 08 Shipments Annual Average Source: ABPO 35
Financial Performance 36
Income Statement Consolidated R$ Million 2005 2006 2007 9M07 9M08 3Q08 Volume (1,000 tonnes) 1,377 1,393 1,437 1,097 1,186 388 Net Revenue 2,706 2,713 2,796 2,128 2,291 770 Gross Profit 1,025 963 953 755 609 182 Gross Margin 38% 35% 34% 35% 27% 24% Total Operating Expenses (516) (497) (455) (334) (372) (133) Operating Profit (before fin Results) 356 598 842 730 (48) (398) Net Financial (Expenses)/Revenue (154) 132 345 310 (284) (447) Net Income (loss) 309 473 621 550 (1) (253) 37
Financial Highlights Consolidated R$ Million 2005 2006 2007 9M07 9M08 EBITDA 755 709 741 603 539 EBITDA Margin 28% 26% 27% 28% 24% EBIT 509 466 498 421 236 EBIT Margin 19% 17% 18% 20% 10% Total Assets 4,696 6,123 7,806 7,647 8,302 Net Debt 319 702 2,007 1,755 2,771 Equity 2,245 2,461 2,741 2,789 2,623 Minority Interest 97 112 128 120 139 Total Captalization 2,661 3,385 4,997 4,664 5,649 Net Debt / Capitalization 12% 21% 40% 38% 49% 38
Klabin's Performance Volume and Net Revenue growing Sales Volume 1.000 tonnes Net Revenue R$ million 8% 8% 1,097 1,186 2,128 2,291 9M07 9M08 9M07 9M08 Does not include wood Includes wood 39
Klabin's Performance Domestic Market Volume and net revenue growing with stable prices Sales Volume 1,000 tonnes Net Revenue R$ million 9% 9% 675 732 1,569 1,718 9M07 9M08 9M07 9M08 Does not include wood Includes wood 40
Klabin's Performance Export Market Growth of coated boards exports Sales Volume 1,000 tonnes Net Revenue R$ million Net Revenue US$ million 8% 3% 22% 422 454 558 573 279 340 9M07 9M08 9M07 9M08 9M07 9M08 41
Performance 9M08 Per Market Sales Volume Net Revenue Domestic Market 62% Exports 25% Domestic Market 75% Exports 38% Does not include wood 1,186 thousand tonnes Includes wood R$ 2,291 1405 million 42
Exports Destination 9M08 Africa 9% Sales Volume North America 5% Latin America 43% Africa 7% Net Revenue North America 6% Latin America 46% Asia 15% Asia 16% Europe 28% Europe 25% 454 thousand tonnes R$ 452 million 43
Performance 9M08 Per Product Sales Volume Net Revenue Industrial Others Bags 3% 8% Kraftliner 28% Others 2% Wood 7% Kraftliner 17% Industrial Bags 13% Coated Boards 30% Corrugated Boxes 29% Coated Boards 32% Corrugated Boxes 31% Does not include wood 1,186 thousand tonnes Includes wood R$ 2,291 million 44
EBITDA EBITDA Margin of 24% in the 9 months of 2008 28% 26% 27% 28% 24% 755 709 741 603 539 2005 2006 2007 9M07 9M08 EBITDA - R$ million EBITDA Margin 45
Capex and Net Debt MA-1100 Project: Final phase of implementation Capex R$ million Net Debt R$ million 1,914 2,272 606 836 312 1,308 524 486 432 54 2006 2007 9M08 Capex MA 1100 2,007 4.1x 2.7x EBITDA EBITDA 702 1.0x EBITDA 2006 2007 9M08 46
Debt Amortization Schedule 09/30/08 Low debt repayment in 4Q08 and 2009 Local Currency (50%) Others 21% 2,130 Average Debt Maturity Average Annual Cost Local Foreign 44 months 57 months 10.9% 5.1% BNDES 79% Total 51 months Foreign Currency (50%) Trade Finance 72% 434 669 646 806 847 602 839 Others 28% 58 Cash 4Q08 2009 2010 2011 2012 2013 2014 Foreign Currency 95 29 56 207 327 503 567 327 442 Local Currency 2.035 29 378 462 319 304 279 276 397 After 2015 47
Export and trade finance operations Low exposure level of the company s s exports to trade finance operations. US$ MM 600 500 510 550 550 550 550 550 550 550 550 550 550 550 400 300 200 100 118 0 Oct / Dec 08 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Free exports 113 404 388 376 308 238 366 469 476 550 550 524 499 Pre payment 5 18 67 153 216 273 146 43 0 0 0 0 0 Export credit note 0 88 95 22 27 39 38 38 74 0 0 26 51 Exposure 4% 21% 29% 32% 44% 57% 33% 15% 13% 0% 0% 5% 9% 48
Net Income and Dividends R$ million 6.0%* 6.1%* 621 3.5%* 473 309 231 293 252 172 117 2005 2006 2007 1H08 Net Income Declared Dividends * Dividend Yield 49
Share s s Performance at Bovespa Market capitalization and daily trading volume US$ million US$ billion 10.0 8.0 6.0 7.1 2.2 2.2 2.6 5.8 2.8 3.0 3.2 5.0 3.1 6.4 2.7 3.5 5.5 5.6 3.7 6.9 3.6 6.2 3.4 3.2 5.4 5.5 3.1 5.0 3.0 3.5 5.7 3.6 3.4 3.2 2.8 1.9 4.0 3.5 3.0 2.5 2.0 4.0 3.6 4.0 4.3 4.4 4.4 4.4 4.3 4.3 3.9 1.5 1.0 2.0 0.5 0.0 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct -07 Nov-07 Dec-08 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Daily Trading Volum e Market Capitalization 0.0 50
Expansion of Coated Boards 51
Projeto MA 1100 Brownfield project New coated board machine moving forward along the industrial and commercial learning curves Start up of the new power boiler (Biomass) Completed the energy source of the Monte Alegre mill 70% of electric energy consumption provided by self-generation 52
Paper machine #9 PM9 average daily production evolution 1,000 tonnes / day Forecast 2008 = 280,000 tonnes 823 756 792 756 791 861 873 620 541 368 386 198 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 2009 onwards Average Daily Production (tonnes) Nominal Capacity 53
Electrical Energy Reduced dependence on purchased energy 65% of electric energy self-sufficiency sufficiency 70% of electric energy self-sufficiency sufficiency Biomass 38% After MA-1100 Biomass 55% 85 MWh 150 MWh Hidro- Electric 27% Purchased E.Energy 35% Hidro- Electric 15% Purchased E.Energy 30% 54
Future 55
Growth Strategy Wood Coated boards Domestic Market Maintain leadership in every business segment Corrugated Boxes Industrial Bags 56
Growth Strategy Exports Increase share in the coated boards market Coated boards More value added products Less volatile prices Growing market Costs competitiveness Entrance barriers Financial capacity Technology: use of long and short fibers and coating Capacity increase opportunities Costs competitiveness Technology Kraftliner 57
Growth Strategy Operational stability and continuity Increase production capacity from 2.0 million tpy to 3.0 million tpy by 2013 / 2014 Cost reduction and higher productivity To prepare Klabin for the next growth cycle R$ 2.2 billion investments concluded to reach 2.0 million tonnes capacity Financial discipline Value creation Expansion program Future 4 3 Improving efficiencies Maturation of MA-1100 project 2 1 Solid Growth Prospects 58
Future 3.0 Million tonnes/year Feasibility studies for the capacity increase and modernization projects are under review, aiming to achieve higher profitability Capacity increase to 3 million tonnes by 2013 / 2014 Cost reduction and higher productivity 59
Value in all we do IR Contact Phone: (55 11) 3046-8404 / 8415 / 8416 www.klabin.com.br invest@klabin.com.br 60