BTG Pactual VI Latin American CEO Conference October, 2015 FIBRIA APP WITH THIS PRESENTATION IS AVAILABLE FOR DOWNLOAD AT APPLE STORE AND GOOGLE PLAY.
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.
1 Company 2 Pulp 3 Financial 4 Final Overview and Paper Market and Operational Highlights Remarks Agenda 3
Company Overview 4
A Winning Player Superior Asset Combination Main Figures 2Q15 LTM Pulp capacity million tons 5,300 Net revenues R$ billion 8.0 Total Forest Base (1) thousand hectares 967 Belmonte Veracel Caravelas Portocel Aracruz Planted area (1) thousand hectares 563 Net Debt R$ billion 8.2 Net Debt/EBITDA (in Dollars) (2) X 1.95 Três Lagoas Jacareí Santos 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
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 Fibria s Commercial Strategy Sales Mix by End Use - Fibria Highlights Region - 2Q15 North 24% Europe 42% Asia LatAm 26% 8% Tissue 49% End Use - 2Q15 Specialties 15% Printing & Writing 36% 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 Net Revenues by Region - Fibria 9% 9% 10% 9% 10% 8% 9% 8% 10% 9% 10% 10% 10% 9% 29% 20% 22% 25% 26% 21% 25% 26% 26% 27% 24% 23% 26% 26% 18% 26% 26% 30% 22% 29% 31% 31% 19% 23% 27% 27% 17% 24% 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) 44% 44% 42% 37% 43% 43% 35% 36% 46% 42% 39% 40% 47% 42% 1T12 2T12 3T12 4T12 1T13 2T13 3T13 4T13 1T14 2T14 3T14 4T14 1T15 2T15 Europe North America Asia Other
8 Pulp Supply Agreement: Puma Project Pulp volumes: Minimum of 900 kt of hardwood for the first 4 years 75% of 900 kt for the fifth year (phase out 1) 50% of 900 kt for the sixth year (phase out 2) Selling price based on the average net price charged by Fibria at the Port of Paranaguá (FOB Paranaguá) Sales destination: Globally, except for South America Operational startup: Mar/2016 Agreement benefits: Logistics and commercial structure synergies; Ensure sales volumes; Ensure pulp market access with Klabin brand. Logistics and commercial optimization and synergies; Support customers growth and enhance customers needs; Potential development of new customers. Mutual value creation, with better servicing for both Companies customer s base
Shareholder Structure and Corporate Governance Votorantim Industrial S.A. (1) BNDES Participações (1) Free Float (2) General Meeting 29.42% 29.08% 41.50% Fiscal Council 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 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 41.44% + 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 Antitrust Genetically Modified Eucalyptus 9
Pulp and Paper Market 10
In 2013, we stressed the difference between the expected scenario and the realized one... BHKP CAPACITY CHANGES Expected scenario for 2013 in Nov 2012 Realized scenario in 2013 Eldorado 1,275 Eldorado 1,270 Suzano Maranhão Montes del Plata 320 555 DELAYED UPM Fray Bentos 100 Sappi Cloquet -155 Sappi Cloquet -155 Jari -410 Jari -410 Cellulose du Maroc Sodra Tofte -140-60 Unexpected Closures Net 1,585 Net 605 BEKP demand growth* 1,080 BEKP demand growth* 1,310 *Source: PPPC Outlook for Eucalyptus Market Pulp November 2012 *Source: PPPC Outlook for Eucalyptus Market Pulp September 2014 11
As a result we had better prices than expected BHKP Delivered to Europe (USD/t) 820 814 810 800 790 788 795 784 791 780 770 765 772 767 770 772 760 750 740 1Q13 2Q13 3Q13 4Q13 Annual 2013 Consultants average for 2013 Realized PIX/FOEX price Consultants: Hawkins Wright, RISI and Brian McClay (published in the end 2012 for 2013 prices) 12
The better than expected scenario happened again last year... BHKP CAPACITY CHANGES Expected scenario for 2014 in Dec 13 Realized scenario in 2014 Eldorado 230 Eldorado 230 Suzano Maranhão 1,275 Suzano Maranhão 1,100 Montes del Plata 830 Montes del Plata 550 Oji Nantong* 560 Oji Nantong* 235 UPM 100 Sappi Cloquet -115 Sappi Cloquet -70 Sodra Tofte -120 Sodra Tofte -120 APRIL Rizhao Old Town Ence Huelva -65-85 -105 More unexpected mill closures Net 2,660 Net 1,770 BEKP demand growth** 1,380 BEKP demand growth 1,734 *Partly integrated to existing PM **Source: PPPC Outlook for Eucalyptus Market Pulp November 2013 *Approved license only for 500,000 t/y 13
14 and also better prices than initially projected BHKP Delivered to Europe (USD/t) 800 780 782 760 740 720 768 737 752 729 734 746 733 700 696 718 680 660 640 1Q14 2Q14 3Q14 4Q14 Annual 2014 Consultants average for 2014 Realized PIX/FOEX price Consultants: Hawkins Wright, RISI and Brian McClay (published in the end 2013 for 2014 prices)
Then, what about 2015? BHKP CAPACITY CHANGES Expected scenario for 2015 in Dec 14 Realized scenario in 2015 Suzano Maranhão Montes del Plata Oji Nantong CMPC Guaiba II Eldorado Portucel Cacia Old Town (Expera) Sappi Cloquet April Rizhao Ence Huelva Possible closures* Net BEKP demand growth** 400 750 265 750 200 30 85 115-65 -315-400 to -800 1,415 to 1,815 1005? *Based on annual closures average (400,000 to 800,000 t/yr) **Source: PPPC Outlook for Eucalyptus Market Pulp September 2014 15
Global Market BEKP Demand Shipments of Eucalyptus Pulp 11% 2014 vs. 2013 (1) 6M2015 vs. 6M2014 (2) 1,734 kt 10% Total 5% 92 kt North America 6% 386 kt Western Europe 20% 717 kt China 13% 537 kt Others 790 kt Total 12% 4% 99 kt 130 kt North America Western Europe 17% 11% 319 kt 242 kt China Others (1) Source: PPPC World 20 January/2015 December/2014 (2) Source: PPPC World 20 Jun/2015 Paper Capacity increase in China 2014 2015 Total FORECAST REALIZED PREVIOUS FORECAST LATEST FORECAST PREVIOUS LATEST Woodfree 256 256 760 760 1,016 1,016 Tissue 1,390 1,278 727 1,365 2,117 2,643 Cartonboard 2,100 1,326 380 730 2,480 2,056 Total 3,746 2,860 1,867 2,855 5,613 5,715 Source: Fibria and Independent Consultants 16
17 China GDP vs. Eucalyptus Shipments (base 100) 200 180 160 172 140 120 100 80 60 77 40 20 - China GDP Eucalyptus Shipments Source: Bloomberg and PPPC.
Commodities Differentiation China GDP breakdown 8% 4% 4% 3% 3% 2% 2% 2% 2% 2% 2% 44% 47% 48% 48% 48% 48% 48% 48% 47% 47% 46% 49% 49% 48% 49% 49% 50% 50% 50% 51% 51% 52% 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E Consumption Investment Net Exports China commodity demand - basis 100 Corn Soybeans Wheat Crude oil Iron ore Sugar BHKP 248 100 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E Source: Itaú Macroeconomic Department and PPPC May/15 204 190 166 153 124 120 18
Technical Age and Scale in the Market Pulp Industry Further closures are expected due to lack of adequate investments in the industry 19 Hardwood (BHKP) Market Pulp Softwood (BSKP) Market Pulp 3.000 PM Capacity, 1000 t/a Weighted average technical age 12.3 years STRONG 3.000 PM Capacity, 1000 t/a Weighted average technical age 21 years STRONG 2.500 2.000 Aracruz 2.500 2.000 1.500 Weighted average capacity 1,277,000 t/a Jacareí Três Lagoas 1.500 1.000 500 Old Town Ence Huelva Veracel 1.000 500 Weighted average capacity 527,000 t/a 0 30 WEAK 20 Technical Age, years 10 0 0 30 WEAK 25 20 15 10 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.
Capacity closures DO happen Closures of Hardwood Capacity Worldwide (000 ton) -85-105 -540-500 -445-750 -910-1,260-1,180-1,085 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-2017 E (1) Source: PPPC and Fibria (1) As of April 2015 20
BHKP prices - CIF Europe (US$/ton) Capacity (000 ton) 21 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$724/t in 2014 1.000 900 APP South Sumatra (2) Horizonte II 2,0 1,8 800 700 600 500 APP Hainan Fray Bentos Mucuri Veracel Nueva Aldea Rizhao Três Lagoas Maranhão Eldorado Montes del Plata Guaíba II Klabin 1,6 1,4 1,2 1,0 400 300 Valdivia Santa Fé Kerinci PL3 APP Guangxi Chenming Zhanjiang Oji Nantong 0,8 0,6 200 0,4 100 0,2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0,0 (1) Source: Hawkins Wright, Poyry and Fibria Analysis. Pulp price estimates according to Hawkins Wright (July/15), Brian McClay (Sept./15) and RISI (May/15) (2) Partially integrated production.
Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 In the last 15 years, pulp volatility has been just 8%...why? 160 BHKP - FOEX Europe (base 100) CPI (base 100) 120 80 40 2008-2009 Economic crisis 0 Market price closer to producer s marginal cost The marginal cost producers are based in Europe and North America Flattish industry cost curve Higher flexibility to adjust supply side during imbalanced market Lower dependency on Asian market (~25%) compared to hard commodities (70%+) Market end users are linked to consumer goods, such as tissue Incipient pulp price futures market and low liquidity Source: Bloomberg July 31, 2015
The only commodity with lower volatility than FX Historical Volatility of Commodities (US$) 35% 32% 30% 25% 25% 23% 23% 23% 15% 12% 6% Sugar Nickel WTI Crude Oil Soy Copper Iron Ore LME Metals Ibovespa Cattle FX FOEX PIX BHKP Since 2009 23
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 24 Lowest volatility among commodities 100 = January 1 st, 2012 220 210 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 215 124 74 50 46 40 Iron Ore Soy Bean Crude Oil Sugar BHKP Price (FOEX Europe) Exchange Rate (USD - BRL) Source: Bloomberg - September, 29 th 2015. Low volatility of hardwood pulp price, even though new capacities have come on stream in the period.
Financial and Operational Highlights 25
Each 5% depreciation of the Real increases EBITDA by around R$403m (11%) and FCF by R$482 m (45%) Exchange Rate Average (R$/US$) Fibria net pulp price (US$/t) Fibria net pulp price (R$/t) 2.00 1.76 1.67 1.95 670 639 581 456 1,179 912 1,067 1,133 3.39 (3) 2.15 2.35 2.69 610 572 561 583 1,976 1,311 1,344 1,509 Market Consensus (2) 40% 34% 36% 40% 39% 46% 29% EBITDA Margin 3,682 1,522 2,526 1,964 2,253 2,796 2,791 EBITDA (R$ million) 2009(1) 2010(1) 2011 2012 2013 2014 LTM 2Q15 2015 E (1) Excludes Conpacel (2) 2015 year-end market consensus (3) According to Focus Report (Brazilian Central Bank September 25, 2015) 26
FX sensitivity of Free Cash Flow R$ million FCF (R$ million)(1) FX Sales proceeds which were 4.00 received after the end of the quarter (3) 78 248 116 263 373 466 (2) 2Q14 3Q14 4Q14 1Q15 2Q15 Oct. EBITDA Margin 35% 35% 45% 50% 50% 2T14 2T15 % Average FX 2.2295 3.0731 +38% Free cash flow (R$ million) 248 544 +119% (1) Does not consider non recurring items (2) Not considering dividends payment (3) Ptax as of October 2nd, 2015. 27
Free Cash Flow (1) LTM 2Q15 R$ million 3,682 (1,657) ( 357 ) ( 408 ) ( 70 ) 29 1.219 ( 149 ) 1.070 Adjusted EBITDA Capex Interest (paid/received) (1) (2) Working Capital Taxes Others Free Cash Flow Dividends Free Cash Flow 2Q14 2Q15 (3) Evolution on return metrics ROE = 9.0% ROE = 13.4% ROIC = 10.1% ROIC = 13.9% (1) Does not include non-recurring items. (2) Not considering dividends payment. (3) Cash basis. For detailed information,, see 2Q15 Results Earnings Release (page 17). 28
Cash Production Cost saw a annual increase of 4.2% over the past 6 years Fibria Cash Production Cost (1) (R$/ton) CAGR: + 4.2% 432 448 471 473 505 519 531 Consistently controlling the production cash cost at a level below the inflation pace. 2009 (2) 2010 (2) 2011 2012 2013 2014 LTM 2Q15 (1) Constant Currency (2) Excludes Conpacel 29
Indebtdeness Net Debt (Million) Gross Debt and Interest Expenses (Million) Net Debt/EBITDA (R$) Net Debt/EBITDA (US$) 2.88 2.34 2.23 2.43 2.30 1.95 8,991 8,197 50 Interest (US$) - 35% 35 33 6,681 8,457 9,352 9,015-24% 3,033 2,803 2,642 3,840 2,915 2,906 Jun/14 Mar/15 Jun/15 R$ US$ Debt Amortization Schedule (US$ Million) Jun/14 Mar/15 Jun/15 R$ US$ Average Tenor (months) and Cost of Debt* in US$ (% p.a.) 818 554 626 600 3.5 3.5 3.6 (revolver) 350 447 369 52 54 52 (cash) 264 186 213 90 21 3 Liquidity 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Cash on hand : US$ 470 million Pre-payment BNDES ECN ACC/ACE Voto IV Bond Jun/14 Mar/15 Jun/15 (*) Considering the portion of debt in reais fully adjusted by the market swap curves at the end of each period. 30
Capital Structure: Fibria has achieved the lowest leverage ratio among its Latin American peers Net Debt/EBITDA (x) (1) 14.8 13.2 4.8 11.7 11.1 4.5 4.5 3.6 3.7 3.6 2.9 3.1 3.1 2.4 2.3 1.7 1.7 2.7 2.4 8.9 7.7 6.4 4.1 4.2 4.5 3.8 3.2 3.4 3.3 3.0 3.1 3.1 2.7 2.9 2.2 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Fibria Suzano Klabin CMPC Arauco Eldorado Fibria Arauco CMPC Klabin Suzano S&P BBB-/Stable BBB-/Stable BBB-/Stable BBB-/Negative BB+/Stable Moody s Ba1/Positive Baa3/Stable Baa3/Negative - Ba2+/Stable Fitch BBB-/Stable BBB/Stable BBB+/Stable BBB-/Stable - (1) Fibria s historical data in BRL. 31
A consistent and disciplined approach focused on reducing debt and its cost Debt (US$ million) x Leverage (US$) Interest (US$ million) x Cost of Debt (US$) 7.29 8.6 6.3 4.11 4.25 3.32 2.60 2.41 1.95 2.9 2.6 6.3 473 5.9 5.5 414 408 350 5.2 268 4.6 200 3.4 3.6 (1) 164 2009 2010 2011 2012 2013 2014 Jun/15 2009 2010 2011 2012 2013 2014 LTM 2Q15 Gross Debt Net Debt Interest Reduction Free Cash Flow Increase Cost of Debt Reduction These dynamics creates a virtuous cycle (*) Considering the portion of debt in reais fully adjusted by the market swap curves of June. 30, 2015. 32
33 Recent funding transactions CRA (Certificate of Agribusiness Receivables) Amount: up to R$675m Tenor: 6 years bullet Coupon: max 102.5% CDI Booking period: Sept/2015 Reopening of the Syndicated Export Prepayment Upsized Amount: US$400m Book of US$515m Average term: 5 years Average Cost: Libor 3M + 1.43% p.a. LatAm Investment Grade Loan Spread over Libor (bps) 113 120 140 143 150 160 175 215 Avg. Term (years) COPEC Raizen Ecopetrol Fibria Colbun Braskem Molymet Argos USA 4 5 5 5 6 5 5 5
One of the best performances among Brazilian corporate issuers (1) 961 1050 362 367 401 416 440 480 486 489 607 675 786 Fibria 2024 BRF 2024 Embraer 2023/25 Globopar 2022/255 Brazil 2022/25 Klabin 2024 Suzano 2024 Vale 2022 Samarco 2024 Gerdau 2024 Braskem 2024 Odebrecht 2023/25 Petrobras 2024 (1) G-spread on September 28, 2015. Source: Bloomberg 34
35 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
Final Remarks 36
37 Fibria is able to create value for its shareholders with capital discipline FREE CASH FLOW BIO-ENERGY AND INDUSTRY CONSOLIDATION? PULP Growth with discipline Best portfolio of projects DIVIDENDS OTHER OPPORTUNITIES Complementary to pulp Portocel Land and forest WITHOUT JEOPARDIZING CREDIT METRICS
Horizonte 2 Project 38
39 What is the importance of growth for Fibria? Wider fixed costs dilution Competitiveness Cost curve position improvement Greater bargaining power with suppliers Follow the growth of strategic customers Commercial positioning Developing new customers Distribution to new geographic markets Efficiency and competitiveness gains in logistics Higher quality in customer service Long-term growth potential Greater ability to capture new expansion market windows Strong M&A position
40 Why expand Três Lagoas? ESTIMATED BHKP CAPACITY RANKING 2017 (000T) Brownfield Project, synergies with current operations Modern plant, prepared for potential expansion Availability of wood and low average distance from forest to mill Forest based on the optionality concept and prioritizing lease and partnership models Additional energy surplus of 120 MWh Start-up: 4Q2017 Capacity: 1.75 million tons Fibria 7,950 CMPC RGE/APRIL Suzano APP Eldorado UPM Stora Enso Arauco Cenibra ENCE Altri IP Marubeni Mitsubishi Oji Mondi Nippon Paper Verso Resolute Georgia-Pacific Portucel Soporcel Lwart Pulp Mill Holding Domtar Klabin Others Current Capacity New Capacity 0 2000 4000 6000 8000 New Capacity Klabin Agreement New Capacity Horizonte II Project Source: Poyry and Fibria Analysis (as of May 2015)
41 Pulp sales destination: Fibria growing where the market grows 37% 42% 19% 24% 36% 25% 4% 9% Total sales volume distribution after H2 start up (2) Current sales volume distribution (1) (1) Considers 2Q15 last twelve months. (2) Includes Klabin s sales volume
42 Schedule Purchase of the industrial plants Beginning of forest machinery deliveries Beginning of infrastructure and purchase of the TGs Beginning of construction Beginning of assembly Beginning of harvest Startup Negotiations with concession holders and Port of Santos tendering Definition of outbound logistics formats Initial hiring of harvest workers L1 interconnections during maintenance downtime Utilities clearance and commissioning Hiring of operational team 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 2015 2016 2017
Forestry base 43
44 H2 Project will have the forest base ready for the start-up Forestry base required: H1: 120,000 ha H2: 174,000 ha Total: 294,000 ha
Logistics 45
Forestry Logistics Low average distance from forest to mill 46 FOREST MILL 95 km H1 + H2 consolidated
Outbound logistics Fibria has logistical alternatives on a competitive basis 47 Data Collection / Preliminary Analysis Ports Highways Railroads Waterways Analysis Logistics Costs Opex - Rates Capex Qualitative Modal conditions Mato Grosso Goiás Brasilia Mato Grosso do Sul
Financials 48
Even more competitive cash production cost BHKP (US$/t) 49 457 421 351 347 298 291 214 170 155 China USA Iberia Canada Chile/Uruguay Indonesia Brazil Fibria 2Q15 LTM Fibria w/ H2 Source: Hawkins Wright (Outlook for Market Pulp, July 2015) - FX considered by the consultant of R$/US$3.14. H2 cash cost was estimated according to weighted average cost, after mill balance, converted by R$3.14. Includes energy sales.
Where the competitiveness comes from Fixed cost dilution 50 Headcount synergy, by department Engineering Industrial Procurement Commercial Logistics Forestry Others (1) Full synergy Strong synergy Little synergy (1) Accounting, Legal, HR, R&D, Environmental, GRC, IT and Communication departments.
51 Up to now, 70% of the expansion capex is committed Expansion Breakdown by currency (1) Expansion capex updated expected curve R$ MILLION % Index R$ 5,548 72 Inflation indices 58% EUR (1) 2,004 26 FX 30% USD (1) /Swedish Krona 154 2 FX Total 7,7067 100 7% 1% 4% 2015 2016 2017 2018 2019 onwards (1) Considering USD/BRL of 2.80 and EUR/BRL of 3.13, according to budget.
Funding for the H2 project Sources (estimated amounts in R$ billion) 7.8 0.6 Q2 Excess Cash(1) BNDES CRA FDCO ECAs Banks Working Capital(2) Total Even with expansion capex at current levels of FX, leverage ratios can continue to decrease (1) Cash on hand above minimum cash balance at end of Jun-2015 (2) Working capital to be released in 2016 and 2017 in commercial deal with Klabin 52
Rating agencies understand that the Project will not jeopardize Fibria s credit metrics 53 We expect Fibria to continue benefiting from higher operating cash flows which would allow it to enlarge its Três Lagoas industrial complex while keeping its debt at reasonable levels for a low investment-grade rating Fitch s base case, which assumes that the company builds a new pulp mill (Três Lagoas II) starting in 2015 and uses net pulp prices of between USD575 and USD675 per ton during the construction period, results in net leverage reaching 3.5x (1). Net leverage would quickly decline to around 2.5x (1) once the mill becomes operational in the second half of 2017 (1) According to rating agency methodology
54 Project financials at a glance UNIT Pulp production/year (1) k tons 1,750 Expansion capex (2) R$ billion 7.7 Sustaining capex (3) R$/t 193 Cash cost (4) R$/t 341 Energy surplus MWh 120 (1) Creep capacity will increase production to 1,850 kt/year (2) Includes chemical leasing and investments in order to increase capacity to 1,850 kt/year. (3) Estimated sustaining capex in perpetuity considering capacity of 1,850 kt/year. (4) Estimated weighted average cost, after mill balance. Includes energy sales.
We don t think that such competitiveness is easily replicable, since the scenario is becoming more complex Land Public funding constraints Infrastructure/Logistics Governance standards Certified wood availability Environmental requirements Cost of capital Credit rating Although some potential brownfields are listed, there are significant challenges.
Backup 56
57 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$89 million (tax) Remaining Balance JUN/15: R$ 0,965 billion (base) 2015 tax deduction related to depletion: R$ 9 million 2018 Undefined Benefit Tax loss carryforward Accumulated tax credits Amount Balance up to JUN. 15: R$ 601 million (base) Balance JUN./2015: - PIS/COFINS: R$ 600 million - Withholding tax (IR and CSLL): R$ 776 million - Befiex: R$ 405 million - Reintegra: R$ 67 million Tax payment (cash basis) 2010 2011 2012 2013 2014 2015 R$ 16 million R$ 4 million R$ 15 million R$ 31 million R$ 29 million R$ 45.8 million
Leadership Position Industry Outlook (1) Fiber Consumption 406 million t Recycled Fiber 238 million t 59% 41% Pulp 168 million t Mechanical 30 million t 18% 82% Chemical 138 million t 59% Integrated Mills 82 million t 41% Market Pulp 56 million t 46% 54% Softwood/Other 26 million t Hardwood 30 million t 33% 67% Acacia/Other 10 million t Eucalyptus 20 million t 74% Other Eucalyptus Pulp producers: 15 million t 26% (1) Fiber Consumption, Recycled Fiber and Pulp: RISI Market Pulp, Hardwood and Eucalyptus: PPPC Global 100 Report December 2014 58
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Global Market Pulp Demand Hardwood demand will continue to increase at a faster pace than Softwood Hardwood (BHKP) vs. Softwood (BSKP) (000 ton) Demand growth rate 40.000 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0 2014-2019 CAGR: Hardwood: +2.5% Softwood: +0.8% 000 ton 1999 2009 2019 Growth 1999-2009 Growth 2009-2019 Hardwood 16.3 24.8 33.8 52% 36% Eucalyptus 6.0 15.9 24.1 165% 52% Softwood 19.0 21.4 24.9 13% 16% Source: PPPC report (Sept. 2015) Hardwood Softwood Market Pulp 35.3 46.2 58.7 30% 27% Source: PPPC reports. Excludes Sulphite and UKP market pulp (Sept./15) Paper Production Runnability with BHKP Source: RISI conference, August 2014. 59
Benefiting From China s Growth China s Hardwood Imports of BHKP by Country (1) ( 000s t) 4.014 4.651 2.199 1.880 BHKP Total Latin America (1) 6M2014 6M2015 1.0301.048 1.203 977 Latin America is the leading exporter of BHKP to China, accounting to approximately 47% of China's total imports in 6M15. 95 95 19 101 9 1 Indonesia Others(2) USA Canada Western Europe (1) includes South Africa and New Zealand. (2) Includes China, Japan, Malaysia, Russia, Thailand and Vietnam. (million t) 35 30 25 20 15 10 5 0 World Tissue Consumption, 1991-2013 (3) LTM Growth Rate +4.2% (kg/person/year) 1991 1996 2001 2006 2009 2010 2011 2012 2013 N.America W.Europe E.Europe L.America Middle East Japan China Asia FE Oceania Africa 25% 20% 15% 10% 5% 0% Between 2005 and 2014, the Chinese market share of eucalyptus shipments increased by 19 p.p. (total market pulp: + p.p.) 10% 10% China's Share of Market Pulp (2) 12% 14% 21% 17% 22% (million t) 23% 23% 23% 12 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Eucalyptus Hardwood Total % Compared to the global Market Pulp (1) PPPC Pulp China Flash Report June 2015 (2) PPPC W20. Coverage for chemical market pulp is 80% of world capacity (3) RISI 10 8 6 4 2 0 Per Capita Consumption of Tissue by World Region (3) (Kg/capita/year) 24 15 15 N. West America Europe 12 Japan Oceania 7 East Europe 6 5 LatAm China Africa 1 60