Institutional presentation september 2010


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Institutional presentation september 2010

  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 26 Results 34 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 5.9 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 45%.• Rapid decision-making process 5
  5. 5. Diversified products and markets Balanced and complementary portfolio Papers (57% of net revenue) Market pulp Printing and Writing (43% of net revenue) (43% of net rev.) Paperboard Uncoated Coated (14% of net rev.) (36% of net rev.) (7% of net rev.) 2nd largest 2nd in Brazil 1st in Brazil 1st in Brazil eucalyptus pulp Market share: 30% Market share: 19% Market share: 26% producer in the world R$ 4.1 billion in net revenue 57% in exports / 43% in domestic marketNote: Market share figures include paper imports.Data: Last 12 months until Jun, 2010. 6
  6. 6. Sustainable growth Suzano’s production capacity has increased by 130% in the last five years. The Company is prepared for a new growth cycle that will increase its capacity to 5.9 5,850 million tons per year of pulp and paper. Piauí Unit Maranhão Unit 2,750 2,850 1,720 1,920 1,240 1,485 1,200Note: 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: SP 87 47 75 Km BA, ES and MG 220 126 MA and PI 300 77 Conpacel¹ (SP) 56 40 Forests average Total SPC 663 290 distance: Independent farmers - 94 246 Km Plants Ports Forests Total preservation area: 254 tsd ha2Suzano’s production is based on 100% renewable eucalyptus planted forests. Preserved nativeforest area of approximately 40% of own land.¹ Conpacel: corresponds to 50% of former Ripasa’s areas. 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 Land use in Brazil North and Northeast: new expansion frontiers in eucalyptus’ plantations in Brazil. Suzano presents technological and Planted positioning advantage. forests still represent a small part of the available Growth cycles area in Brazil. 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 8.9 5.3 6.1 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, wood in research andthe Northeast related to the logistics and development andregion: states forestry base 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% 182 Minerals 8% 388 8% 357 Recycled Global production of 8% paper and Total fiber needed 49% 175 paperboard Virgin fiber 388 28% 49 72% 126 Printing and Writing Market pulp Integrated pulp (13% of total fibers) Paperboard Million Tons Tissue Production 2008 (MM ton) Corrugated Newsprint Market pulp still represents the smaller part of the fiber used for Others paper production. New paper capacities are being installed near to consumer markets, while cash cost drives implementation of new pulp capacities.Source: Poyry, 2009 20
  20. 20. Pulp demand growth drivers Global paper demand growth (2008-15) of 1.8% per year: Chinese and Latin American markets, including Brazil, outperform global growth rate. Paper demand growth (2008-15) 388 Printing and Writing Million Tons Paperboard Tissue Corrugated Newsprint Others Annual growth per paper segment P&W 0.9%P&W: printing and writing Tissue 2.6%Source: Poyry, 2009 21
  21. 21. Brazilian 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) 500 Canada (BC Coast) France, Austria and Belgium Canada (East) US$ 300 – 401 / ton South Korea 400 France and Belgium Japãn Iberia, Norway and Sweden Canada Finland USA 300 Sweden USA China Finland Sweden Indonesia Russia Chile Chile Brazil Low Cost High Cost Low Cost High CostMM ton1 18,3 7,1 3,1 14,7 Hardwood Softwood1Includesworld total production of market pulp, not only the highlighted countries.Source: Hawkins Wright, July / 10 - Volumes do not include production of unbleached pulp and high yield pulp. 22
  22. 22. Pulp Business Unit highlights Pulp sales (Kton) Pulp sales destinations – 1H10 1,780 1,320 86% 799 806 615 80% 78% 83% 81% 19% 22% 20% 14% 17%• Total production capacity of 2.6 million tons per year. Market pulp represents 1.8 million tons• Sales of 1,780 Kton in 2009 and 806 Kton in 1H10• Net revenue of R$ 1,609 million in 2009 and R$ 1.007 million in 1H10• 83% of total sales destined to exports in 2009: 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 23
  23. 23. 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 24
  24. 24. 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 25
  25. 25. Paper Business Unit
  26. 26. Global paper demand Global paper demand (Million Tons) 438 388 401 Suzano’s focus • Global paper demand growth (2008-2015) of 1.8% per year: – P&W: +0.9% p.y. – Paperboard: +2.5 % 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 – 2009 27
  27. 27. 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 28
  28. 28. Brazil and Latin America: Suzano’s main markets P&W and PB¹ demand (MM ton) • Economic growth and increase in the Latin America industrial activity • Education level improvement and access to new technologies • The P&W and PB demand is expected to grow at a rate of 3.9%, 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 – July/10 29
  29. 29. Paper in Brazil The markets in which Suzano operates correspond to 31% of total consumption, or 2.6 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 – 2009 30
  30. 30. 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 31
  31. 31. Paper Business Unit highlights• Net revenue of R$ 2.3 billion in 2009 and R$ 1,153 million in 1H10• Brazil and Latin America represent approximately 73% of total sales in 1H10• 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 Paper sales (Kton) Paper sales destination – 1H101,071 1,098 1,162 1,116 37% 41% 43% 53% 554 63% 59% 57% 46% 47% 54% 32
  32. 32. 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 33
  33. 33. Results
  34. 34. Results 1H10 Results 1H10 1H09 1H10/1H09 Sales volume (Kton) 1,360 1,516 -10.3% Paper sales (Kton) 554 547 1.3% Pulp sales (Kton) 806 969 -16.8% Net revenue - R$ Million 2,160 2,042 5.8% Net income - R$ Million 265 529 - 49.9% EBITDA - R$ Million 917 548 67.3% EBITDA - US$ Million 510 250 104.2% EBITDA margin 42.5% 26.8% 15.6 p.p. Average exchange rate (R$/US$) 1.80 2.19 -18.1% Net debt 3,741 4,495 - 16.8% Net debt / EBITDA (LTM) 2.7 3.5 n.a.Note: Since 2008, contemplates the adjustments of Law 11.638/07 35
  35. 35. Results 2009 Results 2009 2008 2009/2008 Sales volume (Kton) 2,896 2,482 16.7% Paper sales (Kton) 1,116 1,162 - 4.0% Pulp sales (Kton) 1,780 1,320 34.8% Net revenue - R$ Million 3,953 4,064 - 2.7% Net income - R$ Million 878 (451) n.a. EBITDA - R$ Million 1,021 1,469 - 30.5% EBITDA - US$ Million 511 800 - 36.2% EBITDA margin 25.8% 36.2% - 10.3 p.p. Average exchange rate (R$/US$) 2.00 1.84 8.9% Net debt 3,966 5,459 - 27.4% Net debt / EBITDA (LTM) 3.9 3.7 n.a.Note: Since 2008, contemplates the adjustments of Law 11.638/07 36
  36. 36. Net revenue and EBITDA Net Revenue (R$ million) EBITDA 4,064 3,953 3,410 3,099 2,787 42% 47% 54% 58% 2,160 47% 60% 53% 58% 53% 46% 42% 40% 1Note: the adjustments of Law 11.638/07 are contemplated since 2008.1 includes non recurring items: sale of forestry asset 37
  37. 37. Debt profile Implementation of Mucuri project Start up of line (Line 2) 2 at Mucuri Acquisition of RipasaNote: the adjustments of Law 11.638/07 are contemplated since 2008. 38
  38. 38. Debt amortization scheduleAdequate debt amortization schedule and liquidity profile:• R$ 2.5 billion in June 30th,2010• Competitive debt costs• Suzano’s rating: Moody’s: Baa3 (Stable) – Investment Grade; S&P: BB+ (Stable) Amortization schedule (R$ million) 39
  39. 39. Capital marketsRecovery of higher average daily volumes and daily number of trades 40
  40. 40. Stock performance150%140%130%120% 116.6 (SUZB5)110% 115.3 (IBOV) 112.1 (IBrX50)100%90%80%70% 41
  41. 41. New Growth Cycle
  42. 42. New growth cycle Considering the new projects, pulp annual capacity will increase 3.0 million tons and the total installed capacity will reach 5.9 million Piauí tons per year. Maranhão Unit Unit 5,650 5,850 4,250 2,850 2,850 2,850 2,850Mucuri Unit and new pulp line: analysis of the global economy and pulp market outlook fordefinition of the implementation schedule and start up.1 The effective capacity will depend on the learning curves 43
  43. 43. Maranhão UnitNecessary planted area: 154 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$ 575 Million Industrial Capex US$ 2.3 Billion 44
  44. 44. Piauí Unit • Final agreement withNecessary planted area: 170 tsd ha Transnordestina in July 2009: Wood supply • Railroad transportation for the pulp output from Piauí to the (2015 onwards) 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$ 710 Million Industrial Capex US$ 2.3 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 Experience of 36 years in the pulp and paper industry. CEO of Suzano Holding S/A, Chairman of the Board of Directors of Suzano DAVID FEFFER, 53 Pulp and Paper S/A and Coordinator of the Management Committee. CEO of IPLF Holding and Nemopar Investimentos Ltda. CEO Chairman and Vice President of the Board of Directors of Polpar S/A. Vice President of Premesa S/A and Vocal. Experience of 32 years in the pulp and paper industry. Member of Sustainability and Strategy Committee, Chairman of Polpar’s DANIEL FEFFER, 50 Board of Directors, President of Premesa, Corporate VP of Suzano Holding, IPLF Holding and Nemopar, President of Vocal and Vice Chairman Nemonorte, Chairman of Ecofuturo Institute’s Board of Directors. Experience of 35 years in the pulp and paper industry. Vice President of FIESP. Member of BRACELPA’s and IBEF’s Advisory BORIS TABACOF, 82 Board. Chairman of the Board of Directors for the Brazilian Committee of Britain Brazil Business Forum. Vice Chairman Experience of 31 years in the pulp and paper industry. Member of the Board and the Committee of Sustainability and Strategy; JORGE FEFFER, 49 Director of Premesa, Corporate VP of Suzano Holding and IPLF Holding, Executive Officer of Nemonorte and Vocal. Executive Vice President of Suzano Holding S/A. 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 ofCLÁUDIO SONDER, 68 Hoechst of Brazil. Board of Directors member of Lojas Renner S/A, RBS Group, Cyrela Brazil Realty, OGX and Chemical Group DSM/Holanda. Senior partner of Machado, Meyer, and Sendacz Opice Lawyers and former member of the Board of Directors of OAB Brazil. ANTONIO MEYER, 64 President of CESA. Former Legal Adviser and Chairman of the Legislative Committee of the American Chamber of Commerce and Director of ABRASCA’s Legislative Committee. (Independent) Member of Audit Committee. Senior partner of Integra Associates. Member of Gerdau S/A’s Board of Directors, Metalúrgica Gerdau, Sao Paulo Alpargatas, Localiza, and Johnson Electric (Hong Kong); Board Member of Bunge Brazil and Alcoa Brazil.OSCAR BERNARDES, 64 Oscar was President of Bunge International and Managing Partner in Booz-Allen & Hamilton. (Independent) Coordinator of Suzano Pulp and Paper’s Audit Committee. Member of the Board of Directors of TAM Airlines and TAM AviaçãoMARCO BOLOGNA, 55 Executiva. Former CEO of TAM Airlines and WTorre. (Independent) Co-Chairman of the Board of Directors of BRF-Brasil Foods. Board member of WEG S/A, Ultrapar Participações S/A and Iochpe-NILDEMAR SECCHES, 61 Maxion S/A. Former CEO of Perdigão Group. Former 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, also responsible for Investor Relations Department, 4 years at Suzano. Member of the Board of ANTONIO MACIEL Director Member of Marfrig Frigoríficos. Vice President of BRACELPA. Former member of the Board of Director of SEBRAE, NETO, 52 Gradiente, Cecrisa and Amcham. Former Chaiman of Ford Brasil and Ford Latin America, Itamarati Group, Ferronorte and Cecrisa and former Executive of Petrobras and 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 Getulio Vargas (FGV). YAMBANIS, 58 Chief Financial Officer, also responsible for the Legal and Strategy Departments, 15 years at Suzano. He has worked at Vale BERNARDO for 23 years as Director, Executive Vice-President and member of the Board of Directors. PhD in Business Administration SZPIGEL, 65 graduated at University of California, Berkeley. Mechanical Engineer graduated at ITA. Chief Executive Officer of Suzano Renewable Energy and Suzano Pulp and Paper Executive Officer, responsible for Corporate Development Department, 7 years at Suzano. Former Paper Business Unit Executive Officer (2005-2008). Former ANDRÉ DORF, 37 Executive of JPMorgan in Brazil and NY (Investment Banking Global and Latin America), Chase Manhattan and Banco Patrimônio/Salomon Brothers. Graduated in Business Administration at Fundação Getulio Vargas (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, 43 Forest Business Unit Executive Officer, 3 years at Suzano. Former executive of Champion Pulp and Paper and InternationalJOÃO COMÉRIO, 45 Paper as Global Forestry Strategy Officer in the 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 in the Industrial Systems Division. MBA degree at Ibmec-SP. ElectricalCARLOS ANIBAL, 40 Engineer at UFMG. Human Resources Executive Officer, 2 years at Suzano. Former Human Resources Manager for Aviation 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, 46 Latin America. Former Executive of Carioca Engenharia, CR Almeida, Comlurb and Bureau Veritas. Post Graduated in Business Administration at COPPEAD-UFRJ. 50