September 2013 Morgan Stanley - Global Natural Resources Conference
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 speakonlyforthedateonwhichtheyaremade. 2
1 Financial 2 Pulp 3 Questions Highlights and Paper Market & Answers Agenda
Financial Highlights
2Q13 Results Pulp Production and Sales ( 000 t) Net Revenue (R$ million) 1,275 1,263 1,291 1,265 1,186 1,269 1,491 1,449 +15% 1,669 2Q12 1Q13 2Q13 Production Sales Cash Cost (R$/t) 2Q12 1Q13 2Q13 EBITDA (R$ million) and EBITDA Margin (%) 455 505 463 507 488 546 37% 39% 39% 647 550 565 2Q12 1Q13 2Q13 Cash cost ex-maintenance downtimes Cash cost 2Q12 1Q13 2Q13 5
USD appreciation increased debt and leverage in Reais, but with no cash impact 4.2 4.7 Net Debt (Million) Net Debt/EBITDA (R$) Net Debt/EBITDA (US$) 3.1 3.3 3.1 3.0 Debt cost in US$ (% p.a) 11,882 5,878 Gross Debt (Million) 5.4 5.2 4.7 9,898 9,936 4,915 4,485 24% reduction in gross debt in US$ in twelve months 8,462 4,186 7,516 FX impact R$ 650 million 8,253 3,732 3,725 Jun/12 Mar/13 Jun/13 R$ US$ Closing FX (R$/US$) Jun/12 Mar/13 Jun/13 R$ US$ 2.02 2.01 2.22 +10% Debt Amortization Schedule (R$ million) Jun/13 2,212 1,643 1,141 1,195 792 780 932 724 504 13 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Bond BNDES Multilateral agencies and other Pre-Payment Trade Finance 6
Positive Free Cash Flow and High Single Digit Yields FCF Yield 7% 7% 956 836 FCF (R$ million) 2012 2Q13 LTM As previously announced, Fibria resumed part of its receivable discount operations, which positively impacted the free cash flow in the 2Q13. 7
Fibria delivers one of the highest EBITDA/t and FCF/t of the industry 1,247 LTM 2Q13 Results (R$/ton) (648) (109) (5) 485 (220) (102) 36 Free Cash Flow per ton (16) 183 (1) Net revenues COGS/Freight SG&A Others EBITDA (2) CAPEX Interest Working (3) Taxes/Others LTM 2Q2013 Capital (1) On a cash basis, does not include depreciation, amortization and depletion (2) Includes advance to forest partner program (3) IR/CS and other 8
FX and Pulp Price explain 80% of Fibria s EBITDA Margin Exchange Rate Average (R$/US$) 2.00 1.61 1.67 1.95 2.04 Average Price FOEX (US$/t) 844 810 751 783 562 EBITDA Margin 28% 40% 34% 36% 39% EBITDA (R$ million) 1,697 2,526 1,964 2,253 2,537 2009 2010 2011 2012 2Q13 LTM 9
Pulp vs Other Commodities Commodities Historical Volatility BHKP Correlation (USD) 50% 45% 40% 35% 30% 25% 20% 15% 10% 38% 32% 30% 26% 25% 21% 16% 8% 50% 40% 30% 20% 10% 0% -10% 10% 0% -2% 14% 0% 2% -3% -6% -5% 5% 0% Sugar Iron Ore WTI Crude Oil Soy LME Metals Ibovespa Cattle FOEX PIX BHKP -20% Ibovespa LME Metals WTI Iron Ore Sugar Soy Cattle CPI Brazil CPI US Crude Oil Pulp price has the lowest historical volatility (1) among all commodities. Considering pulp price in US$, a low correlation with hard commodities and traditional assets is observed. With a low correlation the inclusion of BHKP in the portfolio expands the efficient frontier of a commodities portfolio (2). Expected Return(% p.a.) Efficient Frontier (1) with and w/o BHKP 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% Com Without Minério Pulp de Ferro (1) Since 2009 (2) Considering the expected return of a portfolio comprised of: DJ, Ibovespa Index, Oil, Copper, Niquel, Libor 3M in US Dollar and BHKP. (3) R multiple regression of 80% Volatilidade (% a.a.) Com With BHKP pulp e Minério and others de Ferro 10
Fibria delivered the most significant leverage reduction in the LTM Net Debt/EBITDA (x) 5,7 4.7 5.2 4.7 5.0 5.0 5.1 5.3 3.9 3.6 3.2 4.2 4.8 4.7 4.5 3.4 3.7 4.1 (2) 3.4 3.3 2.9 3.1 2.9 2.7 2.4 2.0 Jun/10 Sep/10 Dec/10 Mar/11 Jun/11 Sep/11 Dec/11 Mar/12 Jun/12 Sep/12 Dec/12 Mar/13 Jun/13 2013E(1) Ratings Fibria Arauco CMPC Klabin Suzano S&P BB+/Stable BBB-/Stable BBB/Negative BBB-/Stable BB/Negative Moody s Ba1/Positive Baa3/Negative Baa3/Negative - Ba2/Stable Fitch BB+/Positive BBB/Stable BBB+/Stable BBB-/Stable BB-/Stable (1) 2013 year end market consensus (2) 2013 projection by Citibank. 11
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 12
Consolidation is needed, however, challenges are large Global Market Pulp Capacity (1) (000t) Challenges for Consolidation Fibria APRIL Arauco Georgia Pacific CMPC UPM-Kymmene Sodra Suzano Paper Excellence Weyerhaeuser Stora Enso Domtar Ilim IP Mercer Metsa Fibre Eldorado West Fraser ENCE Canfor 5,300 Bleached Softwood Kraft Pulp (BSKP) Bleached Hardwood Kraft Pulp (BHKP) Unbleached Kraft Pulp (UKP) Mechanical 0 1000 2000 3000 4000 5000 6000 Dependent upon strategic motivation and timing of parties Relative valuations Governance issues, level of control, etc Culture/ management challenges Indebtedness level of industry players (1) Hawkins Wright Outlook for Market Pulp, January 2013 13
Fibria has the best portfolio of brownfield projects Três Lagoas II: Decision: 2014 Start-up: 2016 Capacity: 1.5 million tons Forest base: 40k hectares of surplus Veracel II Aracruz s Expansion Três Lagoas Belmonte Veracel Caravelas Portocel Aracruz Jacareí Santos Port Terminal Pulp Unit 14
Additional Source of Growth Portocel I Portocel II 15
Opportunities to Enhance Returns New alternatives for biomass residues / lignin New Forest Model Biofuels and Bioproducts 16
Pulp and Paper Market
Pulp projects, net of closures, will add less than 10% of global capacity between 2013 and 2015, less than in other basic materials sectors SOFTWOOD (1) 25.0 MT + HARDWOOD (1) = 30.1 MT MARKET PULP (1) 55.1 MT 2013-2015 (2) : New capacities: 0.5 mt Announced Closures: (0.8) mt Net: (0.3) mt 2013-2015 (3) : New capacities: 5.8 mt Announced Closures: (1.2) mt Net: 4.6 mt 2013-2015: New capacities: 6.3 mt Announced Closures: (2.0) mt Net: 4.3 mt (1) Source: PPPC Special Research Note May 2013 does not include Sulphiteand UKP (2) Projects included:ilim Group (490kt) Closures: Resolute Forest (75kt) ; Domtar (125kt) ; Rayonier (280kt); Birla (350kt) (3) Projects included: Eldorado (1.5 mt); Montes del Plata (1.3 mt); Maranhão(1.5 mt); GuaíbaII (1.5 mt) Closures: Jari(410kt); Sappi Cloquet(270kt); Double A (85kt); SodraTofte(180kt); IlimGroup (100kt); April Rizhao(130kt) 18
Capacity closures DO happen 0-200 Closures of Hardwood Capacity Worldwide 000 ton -85-105 -400-600 -540-500 -800-1000 -910-1200 -1400-1180 -1200-1260 2006 2007 2008 2009 2010 2011 2012 2013-2015E Source: PPPC and Fibria 19
Gross capacity addition should not be counted as the only factor influencing pulp price volatility 1.000 2,0 900 1,8 BHKP prices -cifeurope (US$/ton) 800 700 600 500 400 300 200 Valdivia APP Hainan Veracel Nueva Aldea Santa Fé Fray Bentos Mucuri Kerinci PL3 Três Lagoas Rizhao APP Guangxi Chenming Zhanjiang Eldorado Maranhão Montes del Plata Guaíba II 1,6 1,4 1,2 1,0 0,8 0,6 0,4 Greenfield capacity (000 ton) 100 0,2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0,0 Source: Hawkins Wright 20
Technical Age and Scale in the Market Pulp Industry Further closures are expected due to lack of adequate investments in the industry Hardwood (BHKP) Market Pulp Softwood (BSKP) Market Pulp 3.000 Capacity, 1000 t/a Weighted average technical age 14.2 years 2013/Q1 STRONG 3.000 Capacity, 1000 t/a Weighted average technical age 21.2 years 2013/Q1 STRONG 2.500 2.500 2.000 2.000 1.500 Weighted average capacity 1 184 000 t/a 1.500 1.000 1.000 500 500 Weighted average capacity 503 000 t/a 0 30 WEAK 25 20 15 10 Technical Age, years 5 0 0 30 WEAK 25 20 15 10 Technical Age, years 5 0 North American Pulp Mills Other Pulp Mills North American Pulp Mills Other Pulp Mills Source: Poÿry 21
Fibria: Competitive Position on the Cost Curve Capacity (k tons): 1,130 1,700 370 1,975 570 505 2,430 3,320 3,805 945 11,385 = 29,965 590 123 70 41 86 38 45 Total Cash Cost of BHKP delivered to Europe (US$/t) 467 495 480 426 468 456 36 56 388 361 63 45 71 315 329 276 308 82 226 Cash Cost (US$/t) Delivery (US$/t) Source: Hawkins Wright (Outlook for Market Pulp, July 2013) Fibria sltm 2Q13 cash costs divided by the FX used for HW report R$/US$2.2. 22
Paper Capacity Expansion in China New capacities in China will generate additional demand for market pulp Ktons 2012 2013E 2014E Total P&W (woodfree) 720-460 1,180 Tissue 1,540 1,180 1,321 4,041 Cartonboard 2,210 2,528 1,300 6,038 Source: Fibria and Independent Consultants 23
Strong internal consumption will drive tissue demand in China Per Capita Consumption of Tissue by Region, 2012 (1) World Tissue Consumption, 1991-2012 (1) 24.3 Kg/capita 35 30 25 Average Growth Rate +3.5%a.a. Million tons 14.8 14.6 Growth Potential 20 15 11.1 10 6.3 6.1 4.4 2.2 0.8 0.6 5 0 1991 1996 2001 2006 2009 2010 2011 2012 N. America W. Europe Japan Oceania E. Europe L. America China N&M East Asia Far East Africa N.America W.Europe E.Europe L.America Middle East Japan China Asia FE Oceania Africa (1) Source: RISI 24
Internal Consumption and Urbanization China s private consumption vs. exports (CNY trillion and annual % change) (1) Chinese Urbanization Driver of Long-Term Growth (UN Population Projections, Millions) (2) Shift from exports to private consumption; Positive effects on households income and rising standards of living. Improve the lives of Chinese citizens: increasing minimum wages at 13% p.a. Sources: (1) the Economist. (2) RISI China Pulp Market Study. 25
Chinese consumption has still a lot of space to grow China is a larger driver of various global indicators (China as % ofglobal) Source: Deustche Bank,. 26
Different from other commodities, China accounts for 26% of hardwood demand compared to around 60% in other basic materials sectors China s Market Share of Market Pulp Shipments (%) (1) 8.000 6.000 25% 21% 26% 26% Latin America is the main supplier of pulp to China 4.000 14% 15% 16% 19% 18% 26% 20% 26% 25% 2.000 12% 15% 17% 0 2005 2006 2007 2008 2009 2010 2011 2012 Eucalyptus ('000 t) Hardwood ('000 t) (1) Source: PPPC Global 100 Report 2012 27
Fibria s Commercial Strategy Fibria s Pulp End Use 2012 Fibria s Historical Sales Distribution -% of sales volume Europe North America 21% 51% 2% 4% 28% 94% Asia 2Q103Q104Q101Q112Q113Q114Q111Q122Q123Q124Q121Q132Q13 North America Europe Asia Others 32% 22% 46% Fibria is exposed to the least volatile consumer markets (tissue) which brings stability to sales volume. Tissue Printing & Writing Specialties Fibria has a low dependence on China (less than 20% of total sales volume). 28
Questions & Answers
Investor Relations E-mail: ir@fibria.com.br Phone: +55 112138-4565 Website: www.fibria.com.br/ir THANK YOU
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Global Paper Consumption CAGR 1996 2006 Developed Markets: + 1.7% Emerging Markets : + 6.0% 117,611 CAGR 2007 2016 Developed Markets: - 4.0% Emerging Markets : + 4.1% 114,507 85,291 P&W Consumption (000 tons) (1) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Developed Markets Emerging Markets CAGR 1996 2006 Developed Markets: + 2.4% Emerging Markets : + 6.9% 26,877 CAGR 2007 2016 Developed Markets: + 1.4% Emerging Markets : + 6.7% 37,474 15,548 Tissue Consumption (000 tons) (1) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Developed Markets Emerging Markets Source: RISI 32
Inventories Hardwood Market Pulp Producers Inventories (days of supply) Hardwood Market Pulp Producers Inventories (000 tons) 65 55 45 35 Jun/13: 41 days Jul/12: 43 days Jul/13: 46 days 3000 2500 2000 1500 1000 Jul/13 x Jun/13: +7,9% or +181kt 25 500 15 05 06 07 08 09 10 11 12 13 0 05 06 07 08 09 10 11 12 13 Source: PPPC World 20 March 2013 Source: Fibria s estimates based on PPPC s methodology Hardwood European Pulp Consumers Inventories (days of supply) Hardwood European Pulp Consumers Inventories (000 tons) 30 25 600 500 BHKP': Jun/13 x May/13: -6.5% or -24kt 20 15 10 5 Jun 13: 19 days 400 300 200 100 0 05 06 07 08 09 10 11 12 13 0 05 06 07 08 09 10 11 12 13 BHKP BHKP Source: Utipulp Source: Utipulp 33
Inventories (1) Closing Stocks (k tons) Total Shipments (k tons) 3-month daily average (k tons) Inventories (days) 2475 1821 41 41 38 41 41 46 2288 2229 2214 2284 2294 1593 1711 1652 1680 1617 57 59 57 53 56 52 Feb-13 Mar-13 Apr-13 May-13 Jun-13Jul-13 (2) Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Inventories Calculation = closing stocks average daily shipments in the last 3 months (1) Source: PPPC Global World 20 June Report. (2) Fibria s estimates. 34
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 2011-2016 CAGR: Hardwood: +2.3% Softwood: +1.0% 000 ton 1996 2006 2016 Growth 1996-2006 Growth 2007-2016 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Hardwood 14.3 22.4 29.9 56% 27% Eucalyptus 5.4 11.1 21.4 106% 67% Softwood 16.4 22.0 24.1 35% 7% Market Pulp 30.8 44.4 54.0 Hardwood Softwood Source: PPPC 35