Instituitional presentation november 2009


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Instituitional presentation november 2009

  1. 1. DisclaimerCertain statements in this presentation may constitute forward-lookingstatements. Such statements are subject to known and unknown risks anduncertainties that could cause the Company’s actual results to differ materiallyfrom those set forth in the forward-looking statements. These risks includechanges in customer demand for the Company’s products, changes in rawmaterial costs, seasonal fluctuations in customer orders, pricing actions bycompetitors, significant changes in the applicable rates of exchange of theBrazilian real against the US dollar, and general changes in the economicenvironment in Brazil, emerging markets or internationally. 2
  2. 2. AgendaCorporate Overview 4 Forestry Business Unit12 Pulp Business Unit 19 Paper Business Unit 27 Results 35 New Growth Cycle 42 3
  3. 3. Corporate Overview
  4. 4. Suzano Pulp and PaperOwnership and ManagementDefined controlling • Second largest eucalyptus pulpgroup producer in the world and one of• Reputation• Long term vision the top 10 market pulp producers. • Leader in the regional paper market • Certified plantations and products.Capital markets• Management performance • New growth cycle: from 2.8 to 7.2 assessment million tons per year of paper and• Transparency• Funding for growth pulp. • Pulp production costs: one of the lowest in the world. • Solid business structure abroad.Professional • Capital markets presence: freemanagement• Capital discipline float of 46%.• Rapid decision-making process 5
  5. 5. Diversified products and markets Balanced and complementary portfolio Papers (61% of net revenue) Market pulp Printing and Writing (48% of net revenue) (39% of net rev.) Paperboard Uncoated Coated (13% of net rev.) (41% of net rev.) (8% of net rev.) 2nd largest 2nd in Brazil 1st in Brazil 1st in Brazil eucalyptus pulp Market share: 26% Market share: 22% Market share: 27% producer in the world R$ 4.0 billion in net revenue 58% in exports / 42% in domestic marketNote: Market share figures include paper imports. Last twelve months until September, 2009. 6
  6. 6. Sustainable growth Suzano’s production capacity has increased by 130% 7,150 in the last five years. The Company is prepared for a New unit and Mucuri new growth cycle that will increase its capacity to 7.2 expansion million tons per year of pulp and paper. Piauí Unit Maranhão Unit 2,750 2,850 1,920 1,485 1,720 1,200 1,240Note: The effective capacities will depend on the learning curves. 7
  7. 7. Corporate structure BD committees Management Board of Directors (BD) Sustainability andThe Business Units modelprovides performance and 9 members (4 independent) Strategyreturns assessments in eachbusiness Audit CEO SP Operations Forestry BU Pulp BU Paper BU SP Strategy, BU: Business Unit Corporate Dev. and IR SP Finance Objectives: SP Human • Greater focus on customers Resources • Improved accountability • Development of leaders SP: Service Providers 8
  8. 8. Management modelOperational Excellence Alignment of Interests • Six Sigma • Executives compensation based on • Routine management EVA metrics • Matrix budgeting • Higher variable portion in total compensationCorporate Risk Management Strategic Planning • COSO1 methodology • Focused on Value Based • Corporate governance structure Management (VBM) based on committees – direct report • Innovation and R&D to the directors and Board. • Sustainability Awards and Certifications¹Internal control methodology of the Committee of Sponsoring Organizations of the Treadway Commission 9
  9. 9. Sustainability Triple Bottom Line – GRI approach Financial and Economic • Growing scale and revenues • Improving margins and returns • Solid cash flow generation SocialEnvironment • Focus on education:• FSC – forest management and custody – Public libraries chain management – Public schools remodeling• CCX e WBCSD member – Educational programs• ECOFUTURO (Parque das Neblinas) (with ECOFUTURO)FSC – Forest Stewardship CouncilCCX – Chicago Climate Exchange WBCSD - World Business Council for Sustainable Development 10
  10. 10. Growth platform Consolidated presence in the Consolidated New growthCompetitive main pulp cycle with managementassets with markets and competitive structure andglobal scale leader in the regional paper projects model market Qualified team that combines diversity and focus on execution 11
  11. 11. Forestry Business Unit
  12. 12. Forestry competitivenessBrazil: high productivity,forestry technology, lowproduction costs andavailable areas forexpansion Forest Planted Planted Planted Native Harvest cycle 7 8 12 80 (years) Indonesia, Spain, Canada, Malaysia Portugal, Finland Main producers Brazil and Chile and and Vietnam Uruguay Sweden 13
  13. 13. Evolution with state-of-the-art technology Forest yield evolution (m³/ha/year) Technology innovation Clones Monoprogeny planting Biotechnology Soils and nutrition • More wood/ ha 44 Classic • More pulp/ m 3 improvement • Higher quality 29 31 • Less planting areas 21 • Lower costs 1960 1970 1991 1998 2008 Productivity (admt¹/ha/year) Biotechnology Classic improvement 11 5.5 100% 1980 2008¹admt: air dried metric ton 14
  14. 14. Lands and forests Own land (tsd ha) State Forests Total Planted average distance: São Paulo 89 49 74 Km BA and ES 216 125 Minas Gerais 57 22 Maranhão 197 40 Forests average Conpacel¹ (SP) 51 36 distance: Total SPC³ 610 272 211 Km Independent - 92 Plants farmers3 Ports Forests Total preservation area:¹ Conpacel: corresponds to 50% of former Ripasa’s areas. 252 tsd ha2² Does not include infrastructure and available land for planting.³ Does not include new sites announced, except for land acquired from Vale.Suzano’s production is based on 100% renewable eucalyptus planted forests. Preserved nativeforest area of approximately 40% of own land. 15
  15. 15. DNA Suzano: pioneering and innovation Soil and climate conditions similar to Australia’s facilitated the development of superior clones in Brazil (innovation and R&D)1980 1990 2000 16
  16. 16. New forest frontiers North and Northeast: new expansion frontiers in eucalyptus’ plantations in Brazil. Suzano presents technological and Planted forests still positioning advantage. represent a small part of the available area in Brazil. Growth cycles Last frontier: Semiarid (2010’s and 20’s): North and Northeast regionSource: IBGE,2007 1980’s and 90’s: ES and South Planted areas (MM ha) BA 5.6 6.6 8.1 2000’s: Middle- 1960’s and 70’s: west and farthest South and South Southeast regionsSource: BRACELPA / FAO / FBU 17
  17. 17. Forestry Business Unit priorities Consolidate Explore new business Focus on cost Long term viewoperations in opportunities reductions, in research andthe Northeast related to the wood logistics development andregion: states forestry base and operational forestry of Maranhão and Suzano’s excellence technology and Piauí competences 18
  18. 18. Pulp Business Unit
  19. 19. Overview of the pulp and paper production chain 51% 185 Minerals 8% 391 8% 362 Recycled Global production of 8% paper and Total fiber needed 49% 177 paperboard Virgin fiber 391 28% 50 72% 127 Printing and Writing Market pulp Integrated pulp (13% of total fibers) Paperboard Million Tons Tissue Production 2008 (MM ton) Corrugated Newsprint Others Market pulp still represents the smaller part of the fiber used for paper production. New paper capacities are being installed near to consumer markets, while cash cost drives implementation of new pulp capacities.Source: Poyry, 2008 20
  20. 20. Pulp demand growth drivers Global paper demand growth (2008-15) of 2.2% per year: Chinese and Latin American markets, including Brazil, outperform global growth rate. Paper demand growth (2008-15) 391 Printing and Writing Million Tons Paperboard Tissue Corrugated Newsprint Others Annual growth per paper segment P&W 1.8%P&W: printing and writing Tissue 3.2%Source: Poyry, 2008 21
  21. 21. Global pulp demand Eucalyptus pulp demand increases 3.6% per year (2008-13), or 2.6 million tons in the period Actual Forecast % p.y. Var. Kton MM ton 2008 2009 2010 2011 2012 2013 2008-13 2008-13 Total BKP 21,250 19,640 19,930 20,195 20,195 20,220 -1.0% -1,030 softwood Total BKP 23,673 22,475 23,825 24,710 25,135 25,375 1.4% 1,702 hardwood Eucalyptus 13,241 14,095 14,795 15,090 15,430 15,805 3.6% 2,564 Sulphite 780 655 550 525 525 525 -7.6% -255 Total bleached 45,703 42,770 44,305 45,430 45,855 46,120 0.2% 417 pulp Increase in global production capacity in the period is limited due to projects’ cancellations and suspensions.Source: Hawkins Wright, July/ 09 22
  22. 22. Brazilian pulp cash cost: structurally low US$ / ton (CIF/ North Europe) US$ 490 - 630 / t 650 US$ 450 - 540 / t 550 Canada (British Columbia) 450 US$ 300 – 310 / t Iberia, Norway e Sweden Canada (East) France and Belgium West Europe Finland 300 Canada Finland USA Sweden SUZ USA Indonesia Chile Brazil Chile Low Cost High Cost Low Cost High CostMM ton1 15.2 11.8 2.5 21.2 Hardwood Softwood 1Includesworld total production of market pulp, not only the highlighted countries. Source: Hawkins Wright, July/ 09 - Volumes do not include production of unbleached pulp and high yield pulp. 23
  23. 23. Pulp Business Unit highlights 1,320 1,368 799 549 615 80% 88% 78% 84% 81% 16% 19% 22% 20% 12%• Total production capacity of 2.6 million tons per year. Market pulp represents 1.8 million tons.• Sales of 1,368 Kton in 9M09• Net revenue of R$ 1,198 million in 9M09• 88% of total sales destined to exports: more than 40 countries, China being the main destination• Production cash cost: one of the lowest worldwide• Organic growth projects increasing capacity by 4.3 million tons per year in the next years 24
  24. 24. Commercial approach • Local presence in international markets: Asia, Europe and North America • Technical support in each international office. • Strong presence in China, with close market relationships and long term contracts • FSC certified pulp • More than 150 active clientsP&W: printing and writing 25
  25. 25. Pulp Business Unit priorities Focus on Start up of theoperations: Local presence MA and PI cost and in main global projects – new logistics markets growth frontier efficiency in Brazil 26
  26. 26. Paper Business Unit
  27. 27. Global paper demand 456 391 398 Suzano’s focus • Global paper demand growth (2008-2015) of 2.2% per year: – P&W: +1.8% p.y. – Paperboard: +2.3 % p.y. • Industry is still considered fragmented, but with significant regional concentration • Emerging markets lead the supply and demand growthP&W – Printing and writing / Paperboard includes Liquid paperboardSource: Poyry – March, 2009 28
  28. 28. 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 Consumption, kg per capita 350 Education USA 300 Digital printing 250 Sweden Customized Taiwan Japan 200 Korea, Rep. media 150 100 UK Smart China packaging 50 Spain Brazil Electronic 0 0 5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 45.000 media GDP per capita, US$ Plastics India = 7kg USA = 300kgSource: Poyry, 2008 29
  29. 29. Brazil and Latin America: Suzano’s main markets • Economic growth and increase in the industrial activity • Education level improvement and access to new technologies • The P&W and PB demand is expected to grow at a rate of 4.1%, from 2010 to 2014: outperforming the capacity increase in the region • Latin America: net importing region • Competitive advantage: geographic proximity, lower logistic costs and shorter lead times¹P&W: printing and writing / PB: paperboard and liquid paperboardSource: RISI Latin America Forecast – August/09 30
  30. 30. Paper in Brazil The markets in which Suzano operates correspond to 31% of total consumption, or 2.7 million tons. Main seasonal factors in the domestic paper demand: • Government purchases for textbooks • Notebook exports • Back to school season • Year end holidays (packaging)Paperboard does not include liquid paperboardSource: Bracelpa – 2008 31
  31. 31. Paper Business in SuzanoMore than 90% integrated production (pulp + paper) • Fx hedge: approximately 60% of paper revenue in local currency • Hedge against the cyclicality of pulp prices • Operational synergies: drying / repulping, transport, taxes, environmental infrastructure synergies • Production capacity of 1.1 million ton per year • Approximately 400 clients, 300 in Brazil • 5 productive plants • 10 paper machines • Strong brands: Report, Reciclato, Paperfect and others • 2 paper merchants 32
  32. 32. Paper Business Unit highlights • Net revenue of R$ 1.7 billion in 9M09 • Brazil and Latin America represent approximately 70%¹ of total sales • Profitability and risks define sales distribution in different regions • Leadership in Printing & Writing and white paperboard in South America • 2 own paper merchants – SPP NEMO (2nd largest in Brazil) and Stenfar (Argentina) • Complementary graphic and consumption portfolio 1,140 1,071 1,098 916 794 37% 809 41% 43% 42% 51% 38% 62% 58% 63% 59% 57% 49%¹Last 12 months until September/09 33
  33. 33. Paper Business Unit priorities Portfolio management, Regional Logistics and Discipline insales and regional leadership in the commercial growth mix, focusing on main white paper approach opportunitiesoperational margin segments excellence assessments and return 34
  34. 34. Results
  35. 35. Results 9M09 Results 9M09 9M08 9M09/9M08 Sales volume (Kton) 2,176 1,850 17.6% Paper sales – domestic market (Kton) 422 487 -13.6% Pulp sales – exports (Kton) 1,180 811 45.6% Net revenue - R$ Million 2,933 2,963 -1.0% Net income - R$ Million 742 43 1,615.8% EBITDA - R$ Million 766 1,087 -29.6% EBITDA - US$ Million 367 644 -43.0% EBITDA margin 26.1% 36.7% -10.6 p.p. Average exchange rate (R$/US$) 2.09 1.69 23.6% Net debt 4,019 4,775 -15.8% Net debt / EBITDA (LTM) 3.5 3.7 n.a.Note: Since 2008, contemplates the adjustments of Law 11.638/07LTM – last twelve months 36
  36. 36. Net revenue and EBITDA 4,064 3,410 3,099 2,9332,640 2,787 54% 42% 47% 49% 47% 59% 51% 53% 58% 53% 46% 41%Note: the adjustments of Law 11.638/07 are contemplated since 2008. 37
  37. 37. Debt profile Implementation Start up of line of Mucuri project 2 at Mucuri (Line 2) Acquisition of RipasaNote: the adjustments of Law 11.638/07 are contemplated since 2008.¹ Debt 31/09/09 and EBITDA of the last twelve months until September/2009 38
  38. 38. Debt amortization scheduleAdequate debt amortization schedule and liquidity profile:• R$ 2.4 billion in cash (jun/09)• Competitive debt costs• Fitch affirms Suzano’s rating: AA- (bra) in May/09 178 Short term debt with renewal already agreed (R$178 million) 39
  39. 39. Capital marketsIncreasing daily number of trades and recovery of higher average daily volumes 40
  40. 40. Stock performance Stock Performance (Jan/09 to Sep/09)170% 164 (Ibov)160% 143 (IBrX50)150% 155140% (SUZB5)130%120%110%100%90%80%70% 41
  41. 41. New Growth Cycle
  42. 42. New growth cycle Considering the new projects, pulp annual capacity will increase 4.3 million tons and the New unit and total installed capacity will reach 7.2 million Piauí Mucuri tons per year. Maranhão Unit expansion Unit 7,150 5,450 4,150 2,850 2,850 2,850 2,850Mucuri Unit and new pulp line: analysis of the global economy and pulp market outlook Definition on the new implementation schedule and start up dates until the end of 20091 The effective capacity will depend on the learning curves 43
  43. 43. Maranhão UnitNecessary planted area: 133 tsd ha Final agreements with Vale in July 2009: • Acquisition of Vale’s forestry assets in Wood supply Maranhão: 84,5 thousand ha of land (2013-2028) (34,5 thousand ha already planted) • Acquisition of eucalyptus timber from the Vale Florestar Program, starting in 2014 until 2028 • Technology cooperation agreement • Railroad transportation for the pulp output to the port region of São Luiz until 2043. • Start up in 2013 ensured with Vale’s forestry assets (planted forest) – on a competitive basis 2009 to 2015 2011 to 2014 Forestry Capex US$ 200 Million Industrial Capex US$ 1,8 Billion 44
  44. 44. Piauí Unit • Final agreement withNecessary planted area: 160 tsd ha Transnordestina in July 2009: Wood supply • Railroad transportation for the (2015 onwards) pulp output from Piauí to the port region of São Luiz until 2028 • Planting already started in MA licensed area • Start up of Piauí unit scheduled for 2014, ensured with 5.5 years old forest 2009 to 2015 2012 to 2015 Forestry Capex US$ 370 Million Industrial Capex US$ 1,8 Billion 45
  45. 45. Maranhão and Piauí unitsMaranhão Unit Piauí Unit 46
  46. 46. Key messages Leading player in the regional paper market and one of the top Leadership 10 market pulp producersCompetitiveness One of the lowest cash costs in the world Vision Solid organic growth strategy Consolidated management structure/model and alignment with Management shareholders Capital Disciplined capital structure management structure 47
  47. 47. Investor (11) 48
  48. 48. Experienced and active Board of Directors DAVID FEFFER, 52 Experience of 35 years in the pulp and paper industry. CEO of Suzano Holding S/A and Chairman of the Board of Directors of Suzano Pulp and Paper S/A. CEO of IPLF Holding. CEO and Vice President of the Board of Directors of Polpar S/A. Vice President of Chairman Premesa S/A and Vocal. Experience of 31 years in the pulp and paper industry. Member of Sustainability and Strategy Committee, Chairman of Polpar’s DANIEL FEFFER, 49 Board of Directors, President of Premesa, Corporate VP of Suzano Holding, the IPLF Holding, President of Vocal, Chairman of Vice Chairman Lazam-MDS Insurance Brokers and Administrator’s Board of Directors, Chairman of Ecofuturo Institute’s Board of Directors. Experience of 34 years in the pulp and paper industry. Vice President FIESP. Member of ABRINQ and EMBRAER’s Board of BORIS TABACOF, 81 Directors. Member of BRACELPA’s Advisory Board. Former member of the Association Committee of Foreign Trade of Brazil and Vice Chairman Chairperson of the Advisory Committee on Paper and Wood Products of Food and Agriculture UN organization in Rome. Experience of 30 years in the pulp and paper industry. Member of the Board and the Committee of Sustainability and Strategy; JORGE FEFFER, 48 Director of Premesa, Corporate VP of Suzano Holding, a member of Lazam MDS Insurance Brokers and Administrator’s Board of Directors and VP and Director of the Council of Ecofuturo Institute. Coordinator of Sustainability and Strategy Committee and member of Audit Committee and member of the Compensation Commission of the Board of Directors; Former president of the board and CEO of Hoechst of Brazil and senior executive of HoechstCLÁUDIO SONDER, 67 AG, Frankfurt. Member of RBS Group’s Board of Directors, of Cyrela Brazil Realty, of OGX, of Chemical Group DSM/Holanda, President of Renner Stores’ Board of Directors. Senior partner of Machado, Meyer, and Sendacz Opice Lawyers and Director of OAB, Brazil. President of CESA.Former Legal ANTONIO MEYER, 63 Adviser and Chairman of the Legislative Committee of the American Chamber of Commerce and Director of ABRASCA’s Legislative Committee. Former Justice Secretary for the State of São Paulo. (Independent) Senior partner of Integra Associates. Member of Gerdau SA’s Board of Directors, Gerdau Metallurgical, Satipel Industrial SA, RBS Group, Sao Paulo Alpargatas, Locates, Delphi Corporation (USA) and Johnson Electric (Hong Kong); Board Member of BrazilsOSCAR BERNARDES, 63 Bunge, Brazil and Alcoa Veirano Assoc. Oscar was President of Bunge International and managing partner in Booz-Allen & Hamilton. (Independent) Coordinator of Suzano Pulp and Paper’s Audit Committee. Former General Manager of WTORRE and President of TAM Airlines.MARCO BOLOGNA, 54 Member of TAM and Daycoval Bank Board of Directors. (Independent) Chairman of Board of Directors of Perdigão. Board member of WEG SA, Ultrapar Participações SA and Iochpe-Maxion SA. FormerNILDEMAR SECCHES, 60 Director of the National Bank for Economic and Social Development - BNDES, and General Director of Corporate Group Iochpe- Maxion Industrial Holding. (Independent) 49
  49. 49. Distinguished management team Chief Executive Officer, 3 years at Suzano. Board of Directors’ Member of Archer Daniels Midland Company – ADM and of Marfrig. ANTONIO MACIEL BRACELPA’s VP. Former Board of Directors’ member of SEBRAE, Gradiente, Crecisa and Amcham. Former chaiman of Ford Brasil NETO, 51 and Ford Latin America, Itamarati Group, Ferronorte and Cecrisa and Executive of Petrobrás and of the Federal Government. Mechanical Engineer graduated at UFRJ. Pulp Business Unit Executive Officer, joined Suzano in 2009. Former CEO of European operations of RGM Group and ALEXANDRE commercial director of Aracruz. Graduated in Business Administration at Fundação Getúlio Vargas. YAMBANIS, 57 Chief Financial Officer, responsible for Legal, 14 years at Suzano. Has worked at pulp and paper sector for 29 years. Former BERNARDO Director, Executive Vice-President and member of the Board of Directors of Vale. PhD in Business Administration graduated at SZPIGEL, 63 University of California, Berkeley. Strategy, Corporate Development and Investor Relations Executive Officer, 6 years at Suzano. Former Paper Business Unit Executive Officer (2005-08). Former Executive of JPMorgan in Brazil and NY (Investment Banking Global and Latin America), ANDRÉ DORF, 36 Chase Manhattan and Banco Patrimônio/Salomon Brothers. Graduated in Business Administration at FGV. Chief Operation Officer, 5 years at Suzano. Has worked as Expansion Project Director of Mucuri Unit. Former executive of Dow ERNESTO Chemical Company, in Brazil, USA and Europe. Post-Graduated in Business Administration at FIA/USP. POUSADA, 41 Forest Business Unit Executive Officer, 2 years at Suzano. Former executive of Champion Pulp and Paper and International PaperJOÃO COMÉRIO, 44 in Brazil and USA. Post graduated in Forest Science and Wood Technology at USP – Piracicaba. Paper Business Unit Executive Officer, 6 years at Suzano. Former Executive Manager of Suzano’s Pulp Business Unit and Sales General Manager for Latin America at General Electric, at the Industrial Systems Division. MBA degree at Ibmec São Paulo.CARLOS ANIBAL, 39 Human Resources Area Executive Officer, joined Suzano in 2008. Former Human Resources Manager of Operations in General Electric in Brazil and abroad, Global HR Director for Information Technology in the United States and HR Director for Mexico andCARLOS GRINER, 45 Latin America. Former Executive of Carioca Engenharia, CR Almeida, and Bureau Veritas. Post Graduated in Business Administration at COPPEAD. 50