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2010 apimec presentation Presentation Transcript

  • 1. Apimec 2010PresentationSão Paulo, December 9, 2010 1
  • 2. DisclaimerCertain statements in this presentation may constitute forward-looking statements. Such statements aresubject to known and unknown risks and uncertainties that could cause the Company’s actual results todiffer materially from those set forth in the forward-looking statements. These risks include changes incustomer demand for the Company’s products, changes in raw material costs, seasonal fluctuations incustomer orders, pricing actions by competitors, significant changes in the applicable rates of exchange ofthe Brazilian real against the US dollar, and general changes in the economic environment in Brazil,emerging markets or internationally.
  • 3. AgendaCorporate Overview and Growth Cycle 04Forestry Business Unit 14Pulp Business Unit 20Paper Business Unit 27Results 34
  • 4. Corporate Overview Timeline1924 until 1940 1950 1960 until 1990 2000 2024 Beginning of First investment in Growth and diversification in the Consolidation as one of the Suzano 2024operations in the the pulp sector pulp and paper businesses largest Brazilian Groups paper industry Acquisition of Ripasa (50%) 2008 2010 Start up of Bahia Sul 2007 Acquisition of Suzano mill New Growth Cycle Beginning of paper exports to Europe Start up of the first paper mill 2004 2005 1982 Pioneerism in 1992 eucalyptus plantation 1960 1975 Merger with Acquisition ofLeon Feffer Bahia Sul FuturaGene,starts paper PLC.trading activities 1956 Start up of Line 2 Launch of Report at Mucuri 1955 Acquisition of Indústrias de Papel Rio Verde’s control Adoption of Bovespa’s 1939 Level I corporate Suzano Renewable governance standards Energy and Professional 1924 Management 4 4
  • 5. Growth CycleSuzano’s StrategyConstant increases in forestry productivity guarantees competitiveness inthe pulp business and enables new business opportunities in Biotechnologyand Renewable Energy Forestry Competency Operational Organic Wood pellets Biotechnology excellence in growth paper in pulp5
  • 6. Growth CycleGrowth StrategySuzano reviewed its strategy and presents innovative growth plans supported by itscompetencies and forestry know-how Organic Growth in Pulp Investimento em Biotecnologia Investment in Renewable Energy Renovável Energia Biotechnology6
  • 7. Growth CycleOrganic Growth in PulpSuzano’s production capacity has increased by 130% in the last 5 years. The Company isprepared for a new growth cycle that will increase its capacity to5.6 MM ton/year of pulp and paper by 2014 Piauí Unit Maranhão Unit 5,650 4,250 2,750 2,850 2,850 2,850 2,850 1,920 1,720 1,485 1,240Mucuri Unit and new pulp line: analysis of the global economy and pulp market outlook for definition of theimplementation schedule and start up.7
  • 8. Growth CycleNew Units in Maranhão and PiauíProjects: Maranhão Piauí• Market pulp production capacity: Required planted area 154 tsd ha 170 tsd ha 1.5 MM ton/year per unit• Estimated industrial capex: Forestry capex US$ 575 US$ 710 (total estimated) million million US$ 2.3 billion per unit Start up (estimative) 2013 2014• Forestry capex already invested: US$ 407 million 68% own land 70% own land Wood supply 32% third 30% third• Funding: parties parties ~ 80% debt and remainder cash flow generation • BNDES and ECA’s1 • Competitive costs, long term and grace periodCompetitive Advantages:• 100 MW energy surplus per unit for sale• Logistics guaranteed by long term contracts• Projects’ updates with better returns• Tax incentives Draft of Piauí’s nursery Draft of the MA / PI mill 1 Export Credit Agency8
  • 9. Growth CycleFuturaGene• Acquisition concluded in July/2010 Biotechnology is on the right• Pioneer in biotechnology research and development side of Sustainability• Sustainable technologies Innovation• Environmentally oriented to meet growing demand for fiber and • Less land utilization biomass • Less water consumption• Techniques for higher forestry productivity • Less chemical expenditure• R&D forestry synergies: competitive main factor in the pulp and • Higher carbon sequestration paper markets9
  • 10. Growth CycleSuzano Renewable EnergySuzano Renewable Energy– 1st fase Wood pellets for energy, produced from• 3 units: 1 MM ton/year each renewable energy-oriented forests• Capex: US$ 800 million• World leader• Initial focus on the European market • Analysis of the clones portfolio: special clone selectionExperiments • Dedicated plantation (more plants per hectare) with • Higher yield “Energetic Forests” • Harvest in 2 to 3 years since 2008 • High lignin content – high calorific value • Unuseful for pulp production • Experimental “energetic” stewardship in Northeast10
  • 11. Growth CycleRenewable Energy Business RationaleInternal View Transfer of Suzano’s pulp• Competencies linked to the forestry business competitivity to the renewable energy market• Successful experiments with energetic forest• Excellence in industrial projects’ management and Know How High productivity based on forestry R&D relations with suppliers (i.e: equipments, logistics, etc) Time-to-market “Energetic” stewardship - harvest in 2 to 3 years: start up in 2013Market View Reliance• Global focus in energy from renewable sources and Integrated forests, scale and strong cash generation emission reduction Environmental and social “Footprint”• European challenges linked with future supply and Pellets: 100% from planted forests, with high 202020 targets environmental management standards• Need for structured pellets suppliers and long-term Operations in the Brazilian Northeast, with relevant contracts (big utilities) contributions to social development11
  • 12. Growth CycleProject Update Concluded Steps Ongoing Steps• Conceptual engineer • Commercial agreements: negotiation• Technology definition of final contracts with clients with suppliers - MoUs for 3.1 mm/ton/year• Chemical properties • Search and negotiation of lands aligned with the European market • Understandings with State governments• Forestry Base: harvesting tests • Discussions with ship-owners and• Dedicated team logistics providers • Funding: definition of the capital structure (1Q11)12
  • 13. AgendaCorporate View and Growth Cycle 04Forestry Business Unit 14Pulp Business Unit 20Paper Business Unit 27Results 34
  • 14. Forestry Business UnitForestry AssetsThe Forestry Business Unit (FBU) guarantees to Suzano100% eucalyptus wood supply from renewable planted forests 2010 Areas’ Chart FBU in Numbers 2010 MA, PI and TO Total area (tsd ha) 663 Total: 300 tsd ha Planted: 77 tsd ha Planted area (tsd ha) 290 Anual planting (tsd ha) 97 Planted saplings / day (tsd) 398 BA, ES and MG Harvested trees / day (tsd) 125 Total: 220 tsd ha Anual harvest (million m³) 11.1 Planted: 126 tsd ha Loaded trucks / year Forests 201 (tsd units) average distance: SP Preserved Area (tsd ha) 254 75 Km Total: 143 tsd ha Forests Planted: 87 tsd ha average distance: Suzano has developed forestry stewardship expertise and a complete genetic base for 246 Km various scenarios due to its presence in different places with temperature, climate, precipitation, soil, and relief variations.14
  • 15. Forestry Business UnitForestry Competitivity in Brazil Brazil presents competitive advantages to support continuous increase of its global forestry standing Competitive Advantages • Availability of productive landLeafy Productivity (m³/ha/year) • Excellent soil and climate conditions • Short harvesting cycle for planted forests • Regenaration potential of degraded areas 45.0 • Formation and maintenance low costs 41.0 25.0 • Continuously growing consumer market 20.0 13.0 6.0 4.0 Suzano’s Brazil Australia South Portugal USA FinlandEucalyptus AfricaSource: ABRAF, BRACELPA, Adapted by STCP Consulting • Logistics Challenges • Tax Structure • Cost of Capital • Education Level • Exchange Rate15
  • 16. Forestry Business UnitSuzano’s Forestry Competitivity Suzano’s pioneerism and innovation enabled the development of stewardship techniques’ improvements and formation of a genetic baseCompetitive Advantages New Businesses — Total clones: 14,729• Genetic portfolio — Field experiments: 614• Forestry technology — Total experimented area: 3,913 ha• Management abilities• Nutrition and soil research: potential to increase productivity• Operational development: precision forestry (↑ efficiency)• Forestry innovative concepts: “Night Planting” and “Energetic Forest”Pulp Productivity • More wood / hectare Biotechnology 11 admt1/ha/year • More pulp / m³ 5,5 admt1/ha/year • Superior quality +100% • Smaller area 1980 2010 • Decreasing costs / m³ Source: Suzano 1Admt: air dried metric ton16
  • 17. Forrestry Business UnitSustainability, Innovation and GovernanceSustainability Directive Plan considers a refined concept of theTriple Bottom Linecomprising Innovation and Governance Economic financial Governance • Global competitiveness and scale Innovation Application of • Consistent margins and returns • Processes, products sustainability principles • Capital discipline and clean technologies in the decision-making • Stakeholders’ knowledge process valorization Environment Social • Forest management and certified • 57 public libraries chain of custody • Renovation of 35 public • Member of CCX1 and WBCSD2 schools in 3 states • ECOFUTURO (Parque das • ECOFUTURO: 92 thousand Neblinas) benefited students 1 Chicago Climatic Exchange 2 World Business Council for Sustainable Development17
  • 18. Forestry Business UnitStrategy Operational Guarantee of Long-term view Consolidation of excellence: excellence research and operations in the focus on forestry Northeast: in new businesses development for management and Maranhão and Piauí linked to forestry forestry wood logistics competencies technologies18
  • 19. AgendaCorporate View and Growth Cycle 04Forestry Business Unit 14Pulp Business Unit 20Paper Business Unit 27Results 34
  • 20. Pulp Business Unit Overview Pulp and Paper Production Chain – 2010e 6% 3 2010e Production (MM ton) 51% 188 Others 72% 131 369 Recycled 8% Integrated Total fiber pulp 44% 22 consumption 49% 181 BSKP1 Minerals Virgin fiber 28% 50 8% 401 50% 25 Market pulp Global production of paper and (13% of total fibers) BHKP2 paperboard 401 64% 16 Market pulp still represents the smaller part of the fiber used for paper production. BEKP3 Printing and Writing New paper capacities are being installed near to Millions of tons Paperboard consumer markets, while cash costs drives 10% 1.6 Tissue implementation of new pulp capacities. 1 Bleached Softwood Kraft Pulp Corrugated 2 Bleached Hardwood Kraft Pulp 3 Bleached Eucalyptus Kraft Pulp Newsprint Others Suzano’s 2014 estimated production of 4,6 mm ton 2010e (26% of global production)Source: Poyry and Suzano 20
  • 21. Pulp Business UnitPulp demand growth driven by eucalyptus and by Europeanand Chinese markets Demand: Market Pulp (K ton) Demand: Eucalyptus Pulp (K ton) CAGR CAGR ’03 -’09: ’03 -’09: +2.2% +11.3% 55,755 19,710 20,560 54,555 18,580 53,215 17,405 15,715 51,610 49,085 10e 2010e 11e 2011e 12e 2012e 13e 2013e 14e 2014e 10e 2010e 11e 2011e 12e 2012e 13e 2013e 14e 2014e Eucalyptus Pulp – China (K ton) Eucalyptus Pulp – Europe (K ton) CAGR CAGR ’03 -’09: ’03 -’09: +26.9% +7.4% 5,385 8,655 4,950 8,485 4,355 3,930 8,185 2,945 7,785 7,420 10e 2010e 11e 2011e 12e 2012e 13e 2013e 14e 2014e 2010e 10e 2011e 11e 2012e 12e 2013e 13e 2014e 14e Source: PPPC21
  • 22. Pulp Business UnitSupply increase driven by eucalyptusshows Suzano as a relevant player Market Pulp Supply (K ton) Eucalyptus Pulp Supply (K ton) CAGR CAGR ’03 -’09: ’03 -’09: +2.7% +11.3% 21,170 22,415 61,535 19,610 60,140 17,530 18,905 57,670 58,330 55,045 10e 2010e 11e 2011e 12e 2012e 13e 2013e 14e 2014e 10e 2010e 11e 2011e 12e 2012e 13e 2013e 14e 2014e Eucalyptus’ Supply and Demand Balance (%) New Eucalyptus Pulp Capacities Forecast 2010 – 2014 (K ton) Global 6,385 100% Latin America 4,990 78% 95% 93% 92% 92% Brazil 4,315 68% 90% Suzano 3,000 47% 10e 2010e 11e 2011e 12e 2012e 13e 2013e 14e 2014e Source: PPPC, Suzano22
  • 23. Pulp Business UnitBrazilian Pulp Cash Cost: Structurally Low US$ / ton (CIF/ North Europe) US$ 511 - 696 / ton US$ 441 - 651 / ton 700 US$ 367-398 / ton 600 Canada (British Columbia Coast) 500 Canada (British Columbia) Canada (East) France, Austria and Belgium 400 US$ 300 – 401 / ton South Korea France and Belgium Japan Sweden Canada USA Finland 300 Iberia, Norway Sweden USA China Finland Indonesia Russia Chile Chile Brazil Hardwood Softwood Source: Hawkins Wright, jul/ 10 - Volumes do not include production of unbleached pulp and high yield pulp.23
  • 24. Pulp Business UnitHighlights Pulp Sales Volume (K ton) Pulp Sales Destinations – 9M10 1,780 Brazil 18% 1,608 South/Central Am. 1% 33% Asia 1,320 1,195 North 9% 85% 799 82% America 82% 82% 80% 18% 20% 18% 15% 18% Europe 39% 2007 2008 2009 LTM 9M10 Domestic Market Exports Note: LTM = last 12 months • Technical support in each international office: Sales per Segment – 9M10 China, Switzerland and USA • 80% of total sales with long term contracts Others 12% • More than 150 active clients 41% Printing and Writing • Strategic long-term partnerships with clients: Special 19% • Logistics • Technology • Pre and post sale technical assistance Tissue 28% • Strategic focus on high value added segments24
  • 25. Pulp Business UnitStrategy Focus on Presence in Strategic sustainable main growth relationship with international strategy clients markets25
  • 26. AgendaCorporate View and Growth Cycle 04Forestry Business Unit 14Pulp Business Unit 20Paper Business Unit 27Results 34
  • 27. Paper Business UnitGlobal Paper DemandGrowth Premises• Global paper demand growth (2010-2015) of 1.8% p.a. • Printing and Writing: +0.9% p.a. • Paperboard: +2.5 % p.a.• Industry is still considered fragmented, Global Paper Demand (MM ton) but with significant regional concentration CAGR 1.8% p.a.• Emerging markets lead supply and demand growth 438 401 Suzano’s Printing and Writing 121 116 Focus Paperboard1 52 Tissue 46 33 29 210 232 Others 2010e 2015e 1 2 1Paperboard + liquid packaging board Source: Poyry – 200927
  • 28. Paper Business Unit Demand Growth Drivers Historically there is a high correlation between GDP per capita and paper consumption. In Brazil, the positive economic growth forecasts represent an important driver for the domestic paper demand. Paper Consumption x GDP per Capita USA • Education Sweden • Digital printingConsumption (kg per capita) Taiwan Japan Korea Rep. • Electronic Media UK • Plastics China. Spain Brazil GDP per Capita (US$) Latin Am. and Brazil = 41kg USA = 300kg Source: Poyry, 2008 28
  • 29. Paper Business UnitBrazil and Latin America are the main Markets Brazilian Demand (MM ton) Latin Amercica ex-Brazil Demand (MM ton) 3.3% p.a. 5,287 4.3% p.a. 3,434 4,488 2,788 4.1% p.a. 1,875 4.2% p.a. 1,099 1,533 Paperboard1 895 Paperboard1 4.3% p.a. 2.9% p.a. 2,335 3,412 Printing & Writing2 1,893 Printing & Writing2 2,955 2010 2010e 2015 2015e 2010e 2010 2015e 2015 1Paperboard + liquid packaging board; 2 Uncoated + Coated Source: RISI Latin America Forecast –Nov/10• Economic growth, higher GDP and increased industrial activity• Education level improvement and access to new technologies• Latin America (ex-Brazil): net importing market• Suzano’s competitive advantage: - Geographic proximity and lower logistic costs - Brand recognition - Portfolio: wide range of products29
  • 30. Paper Business UnitHighlights Sales Volume (k ton) Sales Destination – 9M10 1,162 3% Others 1,125 1,116 1,146 Europe 11% 839 41% 43% 47% 44% 44% North 11% 56% Brazil America 59% 57% 53% 56% 56% 2007 2008 2009 LTM 9M10 South/ Central Am. 19% Domestic Market Exports Note: LTM = last 12 months• Leadership in printing & writing and white paperboard in South America• More than 90% integrated production (pulp + paper)• Fx hedge: approximately 60% of paper revenue in local currency• 2 own paper merchants – SPP NEMO (2nd largest in Brazil) and Stenfar (Argentina)• Premium pricing in the segments where we act• Lower price volatility in the domestic market30
  • 31. Paper Business UnitPrice Recovery to Pre-Crisis Levels Average Net Prices Paperboard 140 134 Domestic Market 120 113 • Market dominance in high value added segments Paperboard 100 • Low level presence of imports 80 • Growth of the consumer industry 60 Jan Jul Jan Jul Jan Jul Sep 08 08 09 09 10 10 10 140 Printing & Writing Printing & Writing 120 111 100 102 Domestic Market • Imports: high concentration of coated 80 • Exchange rate’s effects 60 • Fiscal control of Immune paper operations Jan Jul Jan Jul Jan Jul Sep 08 08 09 09 10 10 10 Domestic Market Exports Note: Prices of domestic market in R$; prices of exports in US$31
  • 32. Paper Business UnitStrategy Strengthening Products Revenue Asset of Distribution Portfolio Management Optimization Channels Management32
  • 33. AgendaCorporate Overview and Growth Cycle 04Forestry Business Unit 14Pulp Business Unit 20Paper Business Unit 27Results 3433
  • 34. Results Net Revenue and EBITDA Net Revenue (R$ million) and Volume (K ton) EBITDA (R$ million) and EBITDA Margin (%) 37.3% 39.9% 2,896 2,754 36.2% 2,482 33.5% 1,924 2,034 30.3% 1,686 4,338 25.8% 1,617 4,064 3,953 1,469 3,410 1,325 3,099 3,319 54% 57% 1,040 1,034 1,021 47% 58% 42% 58% 58% 53% 46% 42% 43% 42% 2006 2007 2008 2009 LTM 9M10 2006 2007 2008 2009 LTM 9M10R$/US$ R$/US$ 2.18 1.95 1.83 2.00 1.77 1.78 2.18 1.95 1.83 2.00 1.77 1.78avg. avg. Domestic Marlet Exports Volume Paper: Revenue (R$ million) and Volume (K ton) Pulp: Revenue (R$ million) and Volume (K ton) 1,071 1,125 1,162 1,116 1,146 1,780 1,608 839 1,320 1,195 615 799 1,928 2,525 1,539 1,609 2,336 2,458 2,344 2,411 1,517 37% 1,801 934 86% 31% 34% 39% 37% 86% 83% 37% 737 83% 69% 66% 63% 61% 63% 81% 63% 80% 2006 2007 2008 2009 LTM 9M10 2006 2007 2008 2009 LTM 9M10 Domestic Market Exports Volume Domestic Market Exports Volume Note: The amounts of 2010 include the adjustments introduced by the IFRS standards LTM = last 12 months 34
  • 35. ResultsAdequate Debt Amortization Schedule and Liquidity Profile• Cash: R$ 3.6 billion on 09/30/2010• Liquidity horizon: low rollover risk even under stress scenarios• Competitive cost of debt and duration of 3.7 years• Debt breakdown on 09/30/2010: 51% in foreign currency and 49% in local currency (R$)• Moody’s: Baa3 (stable) Investment Grade; S&P: BB+ (stable) Amortization schedule (R$ million) Debt - Sep/ 2010 R$ million Amount Leverage 1,951 BNDES 2,406 1.5x Nordic Investment Bank 80 0.0x 1,390 1,230 FINIMP 311 0.2x 1,006 966 Projetcs Debt 2,797 1.7x 516 Trade Finance 417 2,258 1.4x Debentures 784 0.5x 4Q10 2011 2012 2013 2014 2015 2016 Others 1,310 0.8x onwards Gross Debt 7,476 4.4x Local Currency Foreign Currency Cash and Cash Equivalents 3,617 2.2x Net Debt 3,850 2.4x 3535
  • 36. ResultsConservative Financial Policy• Benchmark: investment grade status• Net Debt/ EBITDA ratios may increase temporarily due to growth projects• Amortization in line with the projects’ cash flow• Capex discipline• Hedging for cash flow, not for accounting results• No use of complex, illiquid or exotic derivatives Implementation of World Mucuri Project Start up of line economic (line 2) 2 at Mucuri crisis Acquisition of Ripasa 3.8x 3.7x 3.7x 2.7x 3.9x7,000 2.4x6,000 1.6x 5,4595,000 3,919 4,285 3,966 3,850 2.04,000 2,4753,000 1,616 1,039 1,040 1,146 1,469 1,6172,000 913 1,0211,000 0 -3.0 2004 2005 2006 2007 2008 2009 LTM Net Debt (R$ MM) EBITDA (R$ MM) Net Debt/EBITDA (x) Note: The amounts of 2010 include the adjustments introduced by the IFRS standards LTM = last 12 months36
  • 37. ResultsWhy to Invest in Suzano? Defined Controlling Group 2024 Biotechnology Wood Pellets Organic Growth in Pulp Operational Excellence in Paper Professional Capital Management Markets 2010 + Revenue + EBITDA + Earnings + Market Appreciation 192437
  • 38. Investor Relations TeamAntonio Maciel (CEO and IR Director) +55 (11) 3503-9061 ri@suzano.com.brAndrea Fernandes (IR Executive Manager) +55 (11) 3503-9062 afernandes@suzano.com.brFernanda Nardy (Analyst) +55 (11) 3503-9066 fnardy@suzano.com.brMichelle Corda (Analyst) +55 (11) 3503-9359 mcorda@suzano.com.brRosely Onizuca (Analyst) +55 (11) 3503-9355 ronizuca@suzano.com.brÁurea Portugal (Assistant) +55 (11) 3503-9061 aportugal@suzano.com.brEduardo Oliveira (Intern) +55 (11) 3503-9306 epoliveira@suzano.com.brInvestor Relationswww.suzano.com.br/ri38