JP Morgan 7th Annual - Global Emerging Markets Corporate Conference
Transcript of JP Morgan 7th Annual - Global Emerging Markets Corporate Conference
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FIBRIA APP WITH THIS PRESENTATION IS AVAILABLE FOR DOWNLOAD AT APPLE STORE AND GOOGLE PLAY.
JP Morgan 7th Annual - Global Emerging MarketsCorporate Conference
March, 2016
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The information contained in this presentation may include statements whichconstitute 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 ExchangeAct of 1934, as amended. Such forward-looking statements involve a certain degree of risk and uncertainty with respect to business, financial, trend, strategy and otherforecasts, and are based on assumptions, data or methods that, although consideredreasonable by the company at the time, may turn out to be incorrect or imprecise, ormay not be possible to realize. The company gives no assurance that expectationsdisclosed in this presentation will be confirmed. Prospective investors are cautionedthat any such forward-looking statements are not guarantees of future performanceand involve risks and uncertainties, and that actual results may differ materially fromthose in the forward-looking statements, due to a variety of factors, including, but notlimited to, the risks of international business and other risks referred to in thecompany’s filings with the CVM and SEC. The company does not undertake, andspecifically disclaims any obligation to update any forward-looking statements, whichspeak only for the date on which they are made.
Disclaimer
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Company Overview1Pulp and Paper Market2Financial and Operational Highlights3
Agenda
Final Remarks
4
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Company Overview
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Shareholder Structure and Corporate Governance
(1) Controlling group (2) Free Float 41.44% + Treasury 0.06%
Votorantim
S.A.(1)
29.42%
BNDES
Participações(1)
29.08%
Free
Float(2)
41.50%
► Only 1 class of shares →100% voting rights
► 100% tag along rights (Brazilian corporate lawestablishes 80%)
► Board of Directors with minimum 20% independentmembers
► Financial Statements in International Standards – IFRS
► Adoption of Arbitration Chamber
► SEC Registered ADR Level III program
Listed on Novo Mercado ,highest level at BM&FBovespa:
Policies approvedby the Board of Directors:
FiscalCouncil
Board ofDirectors
20% independentmembers
Role of CEO andchairman is split
Personneland
Remuneration Committee
StatutoryAudit
Committee
FinanceCommittee
SustainabilityCommittee
InnovationCommittee
30%independent
members
100%independent
members
50%independent
members
45%independent
members-
GeneralMeeting
► Indebtedness and Liquidity► Market Risk Management► Risk Management► Corporate Governance► Related Parties Transactions► Anti-Corruption► Information Disclosure► Securities Trading► Antitrust► Genetically Modified Eucalyptus► Dividend Policy► Sustainability NEW
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Pulp and Paper Market
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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
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)
Sales Mix by End Use - Fibria Highlights
Fibria’s Commercial Strategy
Net Revenues by Region - Fibria
Region - 4Q15 End Use - 4Q15
42% 37% 43% 43% 35% 36%46% 42% 39% 40%
47% 42% 42% 42%
26% 30% 22%29%
31% 31%19% 23% 27% 27% 17% 24% 25%
29%
22% 25% 26%21% 25% 26% 26% 27% 24% 23% 26% 26% 25%
20%
10% 9% 10% 8% 9% 8% 10% 9% 10% 10% 10% 9% 8% 9%
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Europe North America Asia Other
50%
35%
15%
Printing &Writing
Specialties
TissueEurope
42%
N.America
29%
Asia20%
LatAm9%
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The “better than expected scenario” has become a reality again in2015…
BHKP CAPACITY CHANGES
EXPECTED SCENARIO FOR 2015 IN DEC’14 REALIZED SCENARIO IN 2015
1,095
-315
-65
115
85
30
200
750
265
750
400
BEKP demand growth**
Net
Possible closures*
Ence Huelva
April Rizhao
Sappi Cloquet
Old Town (Expera)
Portucel Cacia
Eldorado
CMPC Guaiba II
Oji Nantong
Montes del Plata
Suzano Maranhão
-400 to -800
1,415 to 1,815
*Based on annual closures average (400,000 to 800,000 t/yr)**Source: PPPC Outlook for Eucalyptus Market Pulp December 2014
1230
1,450
-400-315
-190
115
40
40
30200
500
265
750
400
BEKP demand growth**
Net
Unexpected DowntimesEnce Huelva
April Rizhao
Sappi Cloquet
Ence Navia
Old Town (Expera)
Portucel Cacia
Eldorado
CMPC Guaiba II
Oji Nantong
Montes del Plata
Suzano Maranhão
Indonesia, China,Uruguay and Brazil
**Source: PPPC Market Pulp World 20
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…and so has been the price scenario
BHKP Delivered to Europe (USD/t)
735
721709
738
726
750
781
804 802
784
1Q15 2Q15 3Q15 4Q15 Annual 2015
Consultants average at the end previous year Realized PIX/FOEX price
Consultants: Hawkins Wright, RISI and Brian McClay (published in the end 2014 for 2015 prices)
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Better worldwide macroeconomics are the key drivers… But thespecial focus is on Europe
Real GDP % Annual Growth
Source: International Monetary Fund, World Economic Outlook Database, January 2016
3,4
-0,8
2,2
7,7
3,3
-0,3
1,5
7,7
3,4
0,9
2,4
7,3
3,1
1,5
2,4
6,9
3,5
1,72,4
6,3
World Euro Area USA China
2012 2013 2014 2015 2016
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But the special focus is on Europe
Hardwood and Eucalyptus Shipments (000 t and % annual growth)
Source: PPPC World 20
-0.3%-0.8%
3.3%
3.8%
-0.8% -0.6%
6.0%5.0%
-200
0
200
400
2012 2013 2014 2015
BHKP BEKP
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So, what can we expect for 2016?
BHKP CAPACITY CHANGES
EXPECTED SCENARIO FOR 2016 IN NOV’15 FIBRIA’S EXPECTED SCENARIO FOR 2016
930
-120
-55
-90
-40
30
660
800
BEKP demand growth**
Net
Possible closures*
APRIL Kerinci
Verso Wickliffe
Woodland
Old Town (Expera)
Altri Celbi
Klabin
CMPC Guaiba II
-400 to -800
385 to 785
1500
*Based on annual closures average (400,000 to 800,000 t/yr)**Source: PPPC Outlook for Eucalyptus Market Pulp May 2015 (930kt) andFibria’s estimates
1500
985
-200
-120
-55
-90
-40
30
660
800
BEKP demand growth**
Net
Possible closures*
APRIL Kerinci
Verso Wickliffe
Woodland
Old Town (Expera)
Altri Celbi
Klabin
CMPC Guaiba II
Positive Supply/Demand Balance!
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Shipments of Eucalyptus Pulp
Global Market BEKP Demand
Paper Capacity increase in China
2014 2015 2016
FORECAST REALIZED PREVIOUSFORECASTLATEST
FORECASTLATEST
FORECAST
Woodfree 256 256 760 980 1,000
Tissue 1,390 1,278 1,365 965 568
Cartonboard 2,100 1,326 730 900 630
Total 3,746 2,860 2,855 2,845 2,198Source: Fibria and Independent Consultants
1,232 kt
90 kt330 kt
611 kt201 kt
7%
5%5%
14%
4%
Total NorthAmerica
WesternEurope
China Others
(1) Source: PPPC World 20 – January/2015
2015 vs. 2014 (2)
(1) Source: PPPC World 20 – December/2015
CAGR 2012-2015
3,787kt
387 kt 662 kt
1,980 kt
758 kt
8%
7% 3%
19%
6%
Total NorthAmerica
WesternEurope
China Others
(2) Source: PPPC World 20 – Dec/2015
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Technical Age and Scale in the Pulp IndustryFurther closures are expected due to lack of adequate investments in the industry…
Hardwood (BHKP) Producers – Integrated and MarketPulp Mills
Softwood (BSKP) Producers – Integrated and MarketPulp Mills
STRONG
Weighted averagetechnical age 12.3 years
Weighted averagecapacity 1,350,000 t/a
Aracruz
Três La go as
Veracel
Jacareí
WEAK
STRONGWeighted averagetechnical age 21 years
Weighted averagecapacity 534,000 t/a
North American Pulp Mills Other Pulp Mills
WEAK
More than 6.6 million tons of capacity above 25 years and with annual capacity below 500,000 t/y.
PM Capacity, 1000 t/a
0
500
1000
1500
2000
051015202530Technical age, years
PM Capacity, 1000 t/a
0
100
200
300
400
500
600
700
800
900
1000
051015202530Technical age, years
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Gross capacity addition should not be counted as the only factorinfluencing pulp price volatility…. (1)
List Price bottoming at US$650/t in 2011 and US$724/t in 2014
C a p a c i t y
( 0 0 0 t o n
)
B H K P p r i c e s -
C I F E u r o p e
( U S $
/ t o n
)
(1) Source: Hawkins Wright , Poyry and Fibria Analysis. Pulp price estimates according to Hawkins Wright (Dec/15), Brian McClay (Dec./15) and RISI (Jan/16)(2) Partially integrated production.
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
1,8
2,0
0
100
200
300
400
500
600
700
800
900
1.000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Valdivia
APPHainan
Veracel Nueva Aldea
Santa Fé
Mucuri
FrayBentos
KerinciPL3
TrêsLagoas
Rizhao
APP Guangxi
ChenmingZhanjiang
EldoradoMontesdel Plata
Maranhão
Guaíba II
APP SouthSumatra (2)
Klabin
OjiNantong
Horizonte II
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In the last 15 years, pulp volatility has been just 8%...why?
► 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 – February 1 , 2016
0
40
80
120
160
D e c - 9
9
M a y - 0
0
O c t - 0
0
M a r - 0
1
A u g - 0 1
J a n - 0
2
J u n - 0
2
N o v - 0 2
A p r - 0 3
S e p - 0
3
F e b
- 0 4
J u l - 0 4
D e c - 0
4
M a y - 0
5
O c t - 0
5
M a r - 0
6
A u g - 0 6
J a n - 0
7
J u n - 0
7
N o v - 0 7
A p r - 0 8
S e p - 0
8
F e b
- 0 9
J u l - 0 9
D e c - 0
9
M a y - 1
0
O c t - 1
0
M a r - 1
1
A u g - 1 1
J a n - 1
2
J u n - 1
2
N o v - 1 2
A p r - 1 3
S e p - 1
3
F e b
- 1 4
J u l - 1 4
D e c - 1
4
M a y - 1
5
O c t - 1
5
BHKP - FOEX Europe (base 100) CPI (base 100)
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Lowest volatility among commodities
Source: Bloomberg – February 22, 2016
2535455565758595
105115125135145155165175185195205215225
J a n - 1
2
F e b
- 1 2
M a r - 1 2
A p r - 1 2
M a y - 1 2
J u n - 1
2
J u l - 1 2
A u g - 1
2
S e p - 1
2
O c t - 1 2
N o v - 1
2
D e c - 1
2
J a n - 1
3
F e b
- 1 3
M a r - 1 3
A p r - 1 3
M a y - 1 3
J u n - 1
3
J u l - 1 3
A u g - 1
3
S e p - 1
3
O c t - 1 3
N o v - 1
3
D e c - 1
3
J a n - 1
4
F e b
- 1 4
M a r - 1 4
A p r - 1 4
M a y - 1 4
J u n - 1
4
J u l - 1 4
A u g - 1
4
S e p - 1
4
O c t - 1 4
N o v - 1
4
D e c - 1
4
J a n - 1
5
F e b
- 1 5
M a r - 1 5
A p r - 1 5
M a y - 1 5
J u n - 1
5
J u l - 1 5
A u g - 1
5
S e p - 1
5
O c t - 1 5
N o v - 1
5
D e c - 1
5
J a n - 1
6
F e b
- 1 6
Iron Ore Soy Bean Crude Oil Sugar BHKP - FOEX Europe Exchange Rate (R$/US$)
117
212
74
54
37
Low volatility of hardwood pulp price, even thoughnew capacities have come on stream during the period.
32
100 = January 1, 2012
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The only commodity with lower volatility than FX
Historical Volatility of Commodities (US$)
Since 2009 until feb/16
18
37%35% 34%
27% 26% 25% 24% 24%
16%14%
6%
WTICrude Oil
Sugar Nickel Copper Soy Iron Ore Ibovespa LMEMetals
Cattle FX FOEX PIXBHKP
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h % d i i f h l i A b d
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Each 5% depreciation of the Real increases EBITDA by aroundR$403m (11%) and FCF by R$482 m (45%)
815
1,4881,173 1,153 1,295 1,185
1,560
2009 2010 2011 2012 2013 2014 2015
Exchange Rate
Average (R$/US$)
EBITDA Margin
EBITDA (US$ million)
Fibria net pulp price(US$/t)
Fibria net pulp price(R$/t)
2.00 1.76 1.67 1.95 2.16 2.353.33
4.20(1)
456670 639 581 610 572 582 559(2)
29%40% 34% 36% 40%
39%
53%
912 1,179 1,067 1,1331,311 1,344
1,9512,348
(1) According to Focus Report (Br azilian Central Bank – February 19, 2016) I (2) 2016 market consensus
2016 E
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Cash Production Cost (US$/t) – 4Q15
186171
148
11
(56) 610
113
(14) (10)
4Q14 Inflation FX Lowerenergy price
Maintenancedowntime
Non recurringwood
Non recurringenergy
consumption
Cash cost4Q15
Total nonrecurring
Maintenancedowntime
4Q15 recurringcash cost
ex-downtime
Management initiatives gains partially offset the inflation impact
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Net Results (US$ million) – 2015
1,600
107
(909)(249)
(101)
-0,227
155
-
(567)178
AdjustedEBITDA FX Debt MtMHedge Net Interest Deprec., amortiz.and depletion
Taxes Others Net Income
Non-recurringeffects
∆∆(1)
Dividend proposal of US$90 million, representing 84% of net income.
(1) Includes other exchange rate/monetary variations, other financial income/expenses and other operating income/expenses.
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Free Cash Flow(1) – LTM 4Q15US$ million
1,600
859636
(484) (89)(151) (23) 6
( 223 )
AdjustedEBITDA
Capex(ex-H2 project &
land deal)
NetInterest
WorkingCapital
Taxes Others FCF(ex-H2 project &
land deal)
CapexH2 &
land deal
FCF(3)
(1) Notconsidering dividend payments, capex related to theHorizonte 2 Project and theland acquisition in December 2015.(2) Not considering dividendpayments.(3) Includes other financial results.
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ROE and ROIC (US$)
25
ROE = Adjusted EBIT(1)/ Equity before IAS 41(2)
4.8%3.4%
5.7% 6.2%
25.1%
32.0%
2011 2012 2013 2014 2015 Annualized4Q15 US$
ROIC = Adjusted EBIT(3)/ Invested Capital before IAS 41 (2)
(1) Adjusted EBITDA – CAPEX – Net Interest – Taxes(2) International accounting standards for biological assets.
(3) Adjusted EBITDA – CAPEX – Taxes
3.9%6.9%
9.2% 8.0%
22.8%
29.2%
2011 2012 2013 2014 2015 Annualized4Q15 US$
1.67 1.95 2.16 2.35 3.34 3.84 1.67 1.95 2.16 2.35 3.34AverageFX
3.84
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One of the best performances among Brazilian corporate issuers (1)
(1) G-spread on February 25, 2016
450 450 474 477 489526 543
660
826
1.112
FIBRIA BRFOODS BRAZIL SUZANO EMBRAER GLOPAR KLABIN BRASKEM VALE GERDAU
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200
400
600
800
1.000
1.200
1.400
2010 2011 2012 2013 2014 2015
Fibria 2020 Fibria 2021 Fibria 2024
Interest expense, leverage and average cost of debt in US$ Historical G-spread (bps)
Strong Credit Quality
7.29
4.11 4.25
3.32
2.60 2.41
1.78
Leverage
6.3 5.95.5
5.24.6
3.4 3.3 (1)
Cost of debt
473414 408
350268
200141
2009 2010 2011 2012 2013 2014 2015
Interest Expense(US$ million)
BBB- BBB- Ba1
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Why expand Três Lagoas?
• Brownfield Project, synergies with currentoperations
• Modern plant, prepared for potentialexpansion
• Availability of wood and low average
distance from forest to mill
• Forest based on the optionality concept andprioritizing lease and partnership models
• Additional energy surplus of 120 MWh
Start-up: 4Q2017Capacity: 1.85 million tons
ESTIMATED BHKP CAPACITY RANKING 2017 (000T)
Source: Poyry and Fibria Analysis (as of May 2015)
0 2000 4000 6000 8000
OthersKlabin
Domtar Pulp Mill Holding
LwartPortucel Soporcel
Georgia-PacificResolute
VersoNippon Paper
MondiOji
MitsubishiMarubeni
IPAltri
ENCECenibraArauco
Stora EnsoUPM
EldoradoAPP
SuzanoRGE/APRIL
CMPC
Fibria 7,950
Current Capacity
New Capacity
New Capacity – Klabin Agreement
New Capacity – Horizonte II Project
Even more competitive cash production cost w/ H2
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Even more competitive cash production cost w/ H2BHKP (US$/t)
Source: Hawkins Wright (Price Forecast December 2015) and Fibria’s 4Q15 Earnings Release - FX considered by the consultant at R$/US$3.87.H2 cash cost was estimated according to weighted average cost, after mill balance, converted at R$3.87. Includes energy sales.
447 419331 335
272 281174
160 142
35 60
62 1836 23
36 46
482 479
393353
308 304
210 354812025371
China USA Canada Iberia Chile/Uruguay Indonesia Brazil Fibria 2015 Fibria w/ H2
Cash Cost (US$/t) Delivery CIF Europe
BHKP (US$/t)
Interest
Capex
SG&AIncome Tax
2,025 1,445 1,030 2,210 4,595 3,520 14,065 Total: 28,890BHKP
capacity(000’ t)
Working Capital
Expansion CAPEX update
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Expansion CAPEX updateFrom US$2.5 bi to US$2.2 bi
0.65
0.32
0.05
0.20
2.5
2.2
Original Revised
BRL EUR USD and others
72%
26%
2%
72%
19%
9%
FX and inflation partially offset by the negotiation with suppliers
CAPEX (US$ billion)
3%
60%
33%
3%1%
2015 2016 2017 2018 2019 andthereafter
Timetable
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Funding
Amortization Schedule – 4Q15 Proforma with TLS II – US$ million
Cost and maturity:
4Q15 4Q15 + H2
Average Cost (US$ p.a)
Average Maturity (years)
3.3%
4.3
2.8%
5.0
H22.0%
6.3
(1) Considering swap transactions. | (2) Debt FX 3Q15: 3.9729 / FX considering new funding for the TLS II Project: 3.90
275 274
581
1.113
482
668
140 126
721
115 10345 13
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
BNDES Bond PPE NCE ACC/ACE CRA ECA Outros FDCO Total
Capex H2: 1,350 668
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Project financials at a glance
UNIT R$ US$
Pulp production/year k tons 1,850 1,850
Expansion capex (1) $ billion 8.7 2.2
Expansion capex (1) $/t 4,702 1,204
Sustaining capex (2) $/t 193 49
Cash cost (3) $/t 341 87
Energy surplus MWh 120 120
(1) Includes chemical leasing and investments in order to increase capacity to 1,850 kt/year.
(2) Estimated sustaining capex in perpetuity considering capacity of 1,850 kt/year.
(3) Estimated weighted average cost, after mill balance. Includes energy sales.
Note: FX 2015: 3.9048
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34Final Remarks
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Fibria’s structural fundamentals drive the leading return metrics
► Less volatile commodity in US$
► Costs in BRL
► The highest forest productivityworldwide
► Operational excellence
► Unique customer base with steadysales volumes through long-termcontracts
► Low cost of debt
► Strong corporate governance
High ROE/ROIC in the long-term
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Fibria is able to create value for its shareholders with capital discipline
INDUSTRY
CONSOLIDATION ?
PULPGrowth with discipline
Best portfolio of projects
DIVIDENDS
BIO-ENERGY AND
OTHER OPPORTUNITIESComplementary to pulp
Portocel
Land and forest
FREE CASH FLOW
WITHOUT JEOPARDIZING CREDITMETRICS
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38Backup
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Pulp sales destination: Fibria growing where the market grows
(1) Considers 4Q15 last twelve months. | (2) Includes Klabin’s sales volume
37%
36%
43%
24%
19%25%
4%8%
Total sales volume distributionafter H2 start up (2)
Current net revenue distribution (1)
Outbound logistics
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Outbound logisticsFibria has logistical alternatives on a competitive basis
PortsHighwaysRailroadsWaterways
Data Collection / PreliminaryAnalysis Logistics Costs
Opex - RatesCapex
QualitativeModal conditions
Analysis
Mato Grosso
MatoGrosso do
Sul
Goiás
Brasilia
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Rating agencies understand that the Project will not jeopardize
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g g j j pFibria’s credit metrics
“We expect Fibria to continue benefiting from higher operating cash flows whichwould 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 (TrêsLagoas 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)
. Netleverage would quickly decline to around 2.5x (1) once the mill becomes operationalin the second half of 2017 ”
(1) According to rating agency methodology
Capital Structure: Fibria has achieved the lowest leverage ratio among
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p g gits Latin American peers
Net Debt/EBITDA (x)(1)
Fibria Arauco CMPC Klabin Suzano
S&P BBB-/Stable BBB-/Stable BBB-/Stable BBB-/Negative BB+/Stable
Moody’s Ba1/Negative Baa3/Stable Baa3/Negative - Ba2+/Stable
Fitch BBB-/Stable BBB/Stable BBB+/Stable BBB-/Stable BB/Positive
(1) Fibria’s historical data in BRL.
2.1
2.7
6.3
3.5
2.9
4.2
4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Fibria Suzano Klabin CMPC Arauco Eldorado
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2. Forestry operations productivity
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Possible Restrictions
Declivity
0: Higher than 35°1: Btw 24°and 35°
2: Btw 0° and 24°
ConservationAreas
0: Within CAs(1)
1: Within EPA (2) andEBZ(3)
2: Out of EPAs andEBZ
MunicipalRestrictions
0: Total restrictions1: Partial restrictions2: No restrictions
EPA Altitude
0: Higher than1800m1: Lower than1800m
Urban Zones
0: Urban Zones1: Outside urbanareas
Remnants of nativevegetation
0: Remnants areas1: Outside remnantsareas
Possible Impediments
Possible combinations
X 0, 1 and 2, removed;
4 e 8, high potential(1) ConservationAreas(2) EnvionmentalProtection Areas(3) Environmental Buffer Zones
2. Forestry operations productivityIdentifying opportunities based on these combinations
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2. Forestry operations productivity
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Roads
Transportation
SilvicultureHarvest
2. Forestry operations productivityCost and Capex KPI’s were also included in this geo-model
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2. Forestry operations productivity
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Mixed Harvest Mechanization (Hilly areas)
► Mixed cutting operation with highdemand for MO and high risk to safety;
► Harvest limitations in areas above24 degrees;
► Increase annual capacity to harvest inareas up to 35 degrees , previously "locked up" byharvesting capacity of manual staff;
► NPV: R$71 million► Capex: R$5 million► Operational since Aug 2015
PROJECT DESCRIPTION (JACAREÍ UNIT)
Harvest
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2. Forestry operations productivity
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PIFF
► Freight cost reduction;► Increased load box for timber/woodchip
transport► Use of lightweight steel;
► Operational risk reduction (flipping);► Investment: R$33 million► NPV: R$139 million► Startup: 2015 / 2016
PROJECT DESCRIPTION (ARACRUZ, JACAREÍ AND TRÊS LAGOAS UNITS)
Timber transportation Woodchip transportation
y p p y
Transportation
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2. Forestry operations productivity
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Maritime Wood Shipping Project
► Capex and Opex reduction;
► Increase in cargo handling due to increase in
stack height volume
► Reduction in heavy truck road traffic
► Capex: R$38 million
► NPV: R$95 million
► Startup: Jan/2017
PROJECT DESCRIPTION (ARACRUZ UNIT)
2. Forestry operations productivityTransportation
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10%
30%
50%
70%
90%100%
0%
20%
40%
60%
80%
100%
2015 2016 2017 2018 2019 2020
2. Structural change in forestry operations productivity
• Structural cost reduction of R$170 million per year (Capex + Opex) in 2020;
• NPV of approximately R$2 billion
• Seek opportunities for purchase / lease of more attractive areas, divest from unattractive land/forest, as well as the implementation of
technologies that will lead us to the structural cost
NPV Expected Curve
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3. Industrial: maintenance downtimes schedule change
► Regulatory Standard 13 (Boiler and Pressure Vessel Inspection) extended the maximum period betweenrecovery boiler inspections from 12 to 15 months.
► Fibria was the first company to use the extended period benefit
► NPV: R$385 million
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Mills
Aracruz A
Aracruz B
Aracruz C
Jacareí
Três Lagoas
Veracel
12 months 15 months
No maintenance downtime
No maintenance downtime
No maintenance downtime
No maintenance downtime
No maintenance downtime
2014 2015 2016 2017 2018
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Biological Sludge Dryness Process
3. Industrial: Biological Sludge Dryer
► Variable cost reduction associatedwith the disposal of sludge operationsin external landfill
► Capex: R$18 million► NPV: R$100 million► Startup: Dec./2016
PROJECT DESCRIPTION (JACAREÍ UNIT)
Operational Flow – Conditioning and biological sludge burn
• 00Effluent+SludgeAeration Tank
Biological
Sludge Tank
• 00Biomass Pile
Sludge Dryer
BiomassBoiler
Sludge drying and burn in biomass boiler
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Fibria’s tax structure
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Fibria s tax structure
Fiscal - annual adjustment
Benefit Amount Maturity
Goodwill(Aracruzacquisition)
Annual tax deduction:US$23 million (tax)
Remaining Balance Sept/15:US$ 0.213 billion (base)
2018
Forestry Capexin Mato Grossodo Sul state
2015 tax deduction relatedto depletion: US$9.4 million
Undefined
Tax loss carry forward and tax credits
Benefit Amount
Tax losscarryforward
Balance up to Dec./15: US$33million (base)
Accumulated taxcredits
Balance Dec./15:- PIS/COFINS: US$186 million
- Withholding tax (IR and CSLL):R$195 million
- Befiex: US$91 million
- Reintegra: US$23 million
2010 2011 2012 2013 2014 2015
US$ 9 million US$ 2 million US$ 8 million US$ 14 million US$ 12 million US$ 23 million
TAX BENEFITS
TAX PAYMENT(cash basis)
(1)
(2)
(1) Considering FX 3.9048 | (2) Considering average FX for the period.
Leadership Position
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Recycled Fiber242 million t
46% 54%
59%
18% 82%
59% 41%
41%
30% 70%
25%75%
Fiber Consumption412 million t
Pulp169 million t
Chemical140 million t
Mechanical30 million t
Integrated Mills83 million t
Market Pulp57 million t
Hardwood31 million t
Other EucalyptusPulp producers:
16 million t
Softwood/Other26 million t
Acacia/Other9 million t
Eucalyptus21 million t
Industry Outlook (1)
Leadership Position
(1) Fiber Consumption, RecycledFiber and Pulp: RISI | Market Pulp, Hardwood and Eucalyptus: PPPC Global 100 Report December 2015
Global Market Pulp Demand
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Global Market Pulp Demand
Demand growth rateHardwood (BHKP) vs. Softwood (BSKP) (000 ton)
Hardwood demand will continue to increase at a faster pace than Softwood
Source: PPPC report (Sept. 2015) Source: PPPC reports. Excludes Sulphite and UKP market pulp (Sept./15)
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
1 9 9 8
1 9 9 9
2 0 0 0
2 0 0 1
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
2 0 1 4
2 0 1 5
2 0 1 6
2 0 1 7
2 0 1 8
2 0 1 9
Hardwood Softwood
2014 - 2019 CAGR:Hardwood: +2.5%Softwood: +0.8%
000 ton 1999 2009 2019Growth1999-2009
Growth2009-2019
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%
Market Pulp 35.3 46.2 58.7 30% 27%
Paper Production – Runnability with BHKP
Source: RISI conference, August 2014.
Benefiting From China’s Growth
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World Tissue Consumption, 1991-2013 (3)
Per Capita Consumption of Tissue by World Region (3)China's Share of Market Pulp (2)
24
15 1512
7 6 5
1
N.America
WestEurope
Japan Oceania EastEurope
LatAm China Africa
10% 10%12% 14%
21%
17%
22%23% 23% 23%
0
2
4
6
8
10
12
0%
5%
10%
15%
20%
25%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Eucalyptus Hardwood Total % Compared to the global Market Pulp
(Kg/capita/year)
(million t) (kg/person/year)
Between 2005 and 2014,the Chinese market shareof eucalyptus shipmentsincreased by 19 p.p. (totalmarket pulp: + p.p.)
0
5
10
15
20
25
30
35
1991 1996 2001 2006 2009 2010 2011 2012 2013N.America W.Europe E.Europe L.America
Middle East Japan China Asia FEOceania Africa
LTM GrowthRate +4.2%
g
(1) PPPC – Pulp China – Flash Report – September 2015(2) PPPC – W20. Coverage for chemical market pulp is 80% of world capacity(3) RISI
(million t)
8.724
4.301
2.154 2.029
166 59 15
9.185
4.898
2.041 1.849
201 189 8
BHKP Total LatinAmerica (1)
Indonesia Others(2) USA Canada WesternEurope
2014 2015
Latin America is theleading exporter of BHKPto China, accounting to
approximately 53% ofChina's total imports in2015.
(‘000s t)
(1) includes South Africa and New Zealand. | (2) Includes China, Japan, Malaysia, Russia, Thailand and Vietnam.
China’s Hardwood Imports of BHKP by Country (1)
Commodities Differentiation
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China GDP breakdown
China commodity demand - basis 100
49% 49% 48% 49% 49% 50% 50% 52% 51% 53% 53%
44% 47% 48% 48% 48% 48% 48% 46% 47% 45% 45%
8% 4% 4% 3% 3% 2% 2% 2% 2% 2% 2%
2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E
Consumption Investment Net Exports
2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E
Corn Soybeans Wheat Crude oil Iron ore Sugar BHKP
100
248
201194172152
124115
Source: Itaú Macroeconomic Department and PPPC – Oct/15
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Capacity closures DO happen
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Source: PPPC and Fibria
Closures of Hardwood Capacity Worldwide
(000 ton)
p y pp
-910
-85
-1,260-1,180
-540 -500
-105
-1,085
-445
-315
-580
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-2017 E (1)
(1) As of January 2016 | 2016: -40kt Old Town (USA), -90kt Woodland (USA), -55kt Verso Wickliffe (USA), -120 April Kerinci (Indonesia) | 2017: -275kt Arauco Valdivia (Chile)
Growth rate Chinese GDP vs Eucalyptus Shipments to China
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Growth rate Chinese GDP vs. Eucalyptus Shipments to China(Sept-09 = base 100)
180
-
50
100
150
200
250
China GDP Eucalyptus Shipments
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