Papelera San Andrés de Giles

PSAG

Máximo Gagliardi, PresidentMiami, October 2017

An Example of High Efficiency at The Bottom of the World

Our History

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• Papelera San Andrés de Giles (PSAG) is a familybusiness that started 38 years ago.

• It is situated far from the economic and industrial powerof the developed world.

• Where? In San Andrés de Giles, 60 miles away fromBuenos Aires, Argentina, South America, at the bottom of the world.

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• At the beginning, in 1980, we wondered if we couldbecome the biggest mill in our market within the next 40 years. The answer was definitely NO as we did not havethe economic power to support that. So we focused ourmind on providing the highest quality possible.

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• That was, and still is, both our vision and mission: being a reference Company within the tissue paper field.

• At present, although we are not the biggest, we are considered as the most modern and efficient tissue paper mill in Argentina.

• Our history is a kind of cellulose version of the David and Goliath´s tale: while the big multinationals produce homogenous good, a small local producer has the varied goods specifically suited to that market. Our products have something else, a plus.

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PPI AWARD

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In November 2016, we received the PPI Award for TissueInnovation from RISI in Brussels, highlighting our strategicaccomplishments. How did we achieve that?- Giving priority to reinvestment.- Learning from the leading global tissue producers. - Investigating and studying our sector. - Maintaining a working philosophy that is sustainable and

updating it as necessary.

PSAG´s philosophy

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• We have developed our business with great passion and we encourage our employees to work with the same passion.

• Our working philosophy is flexible. We do not believe in a rigid structure. We listen and understand. It may be simple but it is not that easy.

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PSAG´s figures

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• Total surface:160.000 m2.• Built – up area: 35.000 m2.• 2016 Revenue: US$ 72.000.000.• Employment: 160.

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Customers: our Top priority!

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• We have a highly automated mill where jumbo rollsare produced, sent to converting lines and, fromthere, the final product is loaded onto trucks forshipment to customers. This process is completelyautomatic. Thanks to our effective order processing, once we receive our customers’ order, we are able to deliver it withhin the next 24 hours, or whenever theclient needs it. People familiar with the tissue industryknow that this is not the conventional process.

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Efficient equipmentselection

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• The special demand in the Argentinian market of a high quality simple bathroom tissue roll made us develop, together with Futura S.p.A, a line directly focused on this segment. We had clear challenges; we needed a high speed line, with high efficiency and optimum quality rewinding.

• The high speed requirement was a response to the kind of product to make: long-length rolls which implied that the production restriction was not in the packaging process but in the making of the rolls.

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• The result of our analysis was the decision to purchase Futura Tango II line, which started up in May 2015. This line has many technological advantages including a rewinder that features simplified tail sealing, an air cut sheet concept and the elimination of cam cuts.

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• In the design stage, the efficiency increase generated by the incorporation of SAB F71 module (automatic jumbo roll change), was estimated at around 4%, which represented a question for Papelera San Andrés de Giles due to a lack of previous experience with it.

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• We realized competitive advantages thanks to the synergy between the TMC and Elettric 80 equipment we chose.

• While TMC offers an advanced packaging solution, Elettric 80 allows us to significantly improve our logistics process.

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Argentinian tissue market

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• The Argentinian tissue market is composed by Papeleradel Plata, a leader with over 40% of the market, followed by Celulosa Campana, Celupaper, Kimberly-Clark, Samseng and PSAG (with nearly 10% of the market) as the most important.

• Now we are working on an integrated plan to double our volume in the next 5 years.

• It is based on: • Optimizing commercial areas and distribution.• Installing our brands at clients where we are not present.• Participating actively in commercial offers with clients.• Intensifying communication about our brands and

products.

• Although Argentina has suffered many economic and political fluctuations, we have always thought aboutthe long term sustainability of our company. That isnecessary but not enough.

• Many companies, facing such uncertainty, havefrozen their investments. Was that an error? No, webelieve that it was not a mistake as they hadinvestment alternatives outside Argentina.

• On the other hand, we did not have many choices, situation that favored us in the long term.

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• The Argentinian market has been suffering a decline in consumption from 2016 through the first four months of 2017. In this time, the Tissue market has fallen by 2,4%. PSAG has shown a growth of around 3% during the same period.

• At present, consumption is changing direction because many consumers buy in wholesale or in nearby markets. The migration to those markets is the most noticeable.

• Customers are migrating to private labels (about 15% of the market) as well as secondary brands.

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• During a survey done in 2016 by the consultant Kantar Worldpanel about brands that increased there presence in homes over the past five years, our brand Felpita, was first in the tissue market and fifth among all the goods in the total market.

• In the tissue market, bathroom tissue is the product with the highest volume followed by kitchen towels, napkins and facial tissue.

Growth Plans

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• According to the present market structure, we are eager to go on reinvesting, giving priority to efficiency and quality on new acquisitions and always setting customers´ necessities as our priority. We are constantly working on giving personalized attention to them. We perfectly know that clients are interested in high-quality products which are economical and frequently consumed as well.

• We are working on how to build adapted logistics process addressing the specific needs of each costumers, specially small customers´ necessities.

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Partnership: A key role

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• We have always worked next to our suppliers, who play a vital role in our Company. We respect and care for them. We believe in partnership: it is our way of developing our business. It has a key role in our firm. Working closely with suppliers is beneficial to both parties and help us both grow.

• PSAG is always willing to be the display window for our suppliers, knowing the great advantages that this brings.

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Conclusion

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• Continuing growth is one of our priorities, PSAG has been working hard to succeed beyond present boundaries, producing high – quality products with technological excellence, respecting our competitors, feeding partnership and highlighting our employees´satisfaction and safety.We are very proud of the results and we strongly

believe that we must go on working in the same way.

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Thank you