2q 14/15 earnings

Tereos Internacional Second Quarter 2014/15 Results

São Paulo – November 12th, 2014

2

Operational

Sugarcane Brazil:

H1 crushing volumes up +5% YoY. Tonnes of ATR/ha at Guarani 26% above average of C/S region,

thanks to improvements in agricultural performance

Own energy sales up 35% YoY to 344 GWh in Q2 14/15, due to start of cogeneration in Tanabi and

the ramp-up of Mandu and São José mills

Inventories up on last year (+7% in sugar and +34% in ethanol, in volume)

Efforts continue on “Guarani 2016” program

Sugarcane Indian Ocean/Africa: Lower volumes on delayed shipments in Indian Ocean, and slower

progress on crushing in Mozambique due to rainfall

Cereal Europe: Improved profitability thanks to “Performance 2015” benefits on track, despite

continuously soft demand in Europe

Cereal Brazil: Ramp-up progressing satisfactorily, with corn grinding up 32% sequentially. Plant

reached nominal capacity level in August

Cereal Asia: Improvements on corn grinding and stability of production at Tieling. Performance

improvements at Redwood

Financial

Guarani: R$240.2 million capital injection from Petrobras completed in October, 2014 as planned.

Tereos Internacional’s stake in Guarani now at 57.1%

Indonesia: Results of Redwood fully consolidated from this quarter

Strategy

Tereos Group (TI controlling shareholder): creation of Tereos Commodities, entity responsible for the

trading activity and distribution of white sugar for the entire group

Key initiatives and major developments in Q2 2014/15

Sugar:

During the quarter raw sugar prices dropped to 13.5 USDc/lb on

September 9th, the lowest level since December 2010

Prices rebounded from these low levels on the back of UNICA’s

recent estimates for a lower Brazilian Center-South crop output

(~9%)

Prices remain however at low levels, with March 15 NY#11 around

16 USDc/lb currently

Starch:

Expectations of large crops in the US and in Europe pressured

corn and wheat prices down, which decreased 19% and 17%

respectively during the quarter

Market demand for Starch & Sweeteners suffering from weak

economic conditions in Europe

Ethanol:

In Brazil, anhydrous and hydrous ethanol prices remained

relatively stable around 1.35 and 1.20 R$/liter, respectively. Market

observers continue to await clarifications on various potential

incentive measures

In Europe, FOB Rotterdam prices recovered temporarily by 13% in

the quarter but have since dropped below 500€/T again

3 Source: Bloomberg

Q2 2014/15 Market Highlights

12

13

14

15

16

17

18

19

20

21

360

390

420

450

480

510

540

Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

LIFFE#5 NY#11

US$/MT US$ Cts/lb

110

130

150

170

190

210

230

250


Corn MATIF Wheat MATIF

€/MT

400

450

500

550

600

650

0,7

0,9

1,1

1,3

1,5

1,7

1,9


Brazil ESALQ Europe Rotterdam

R$/m³ €/m³

246 117

1.112 1.066

258 231

591

574

Q2 2013/14 Q2 2014/15

Brazil

Africa/Indian Ocean

Starch & Sweeteners

Alcohol & EthanolEurope

Revenues Lower revenues mostly due to the end of ethanol trading activity and lower S&S prices

4

Net Revenues (R$ MM)

-10%

Lower revenues in the quarter driven by:

Declining cereal prices and soft demand setting the tone for lower S&S and ethanol prices in Europe

Ethanol trading sales for Tereos Group no longer consolidated at TI level (-R$ 88 million)

Slightly lower sugar sales in the quarter leading to increased inventories to be sold in H2

Somehow compensated by:

Higher co-generation revenues in the quarter, due to higher volume and prices

Increased ethanol sales volumes at higher prices

Higher starch and syrups volumes at Syral Halotek with factory ramp-up and customer portfolio expansion

Perimeter effect due to the first time consolidation of Redwood

2,207

1,988

2207 1988

(19) (61) (161)

+21

Q2 2013/14 Currency Volume Price & Mix Others Q2 2014/15

342 273

(77) (18)

+15 +12

(1)

Q22013/14

Brazil Africa/IO S&S A&EEurope

Holding Q22014/15-3 -4

27 39

49 63

81 63

189 112

Q2 2013/14 Q2 2014/15

Brazil

Africa/Indian Ocean

Starch & Sweeteners

Alcohol & EthanolEuropeHolding

Adjusted EBITDA Improved profitability of Cereals; lower Sugarcane performance

5

Adjusted EBITDA down YoY as a consequence of:

Lower sugar volume sold at Guarani, and higher costs, as benefits from “Guarani 2016” were limited by

impact of drought this year

Reduced margins in Indian Ocean and Mozambique, on delayed raw sugar sales

But partially compensated by:

Benefits from “Performance 2015” initiatives in Cereal division

Adjusted EBITDA (R$ MM)

Margin 13.7% Margin 15.5%

342

273

Ethanol Sales (‘000 m³) Sugarcane Crushing (MM t) Sugar Sales (‘000 t)

6

-7.5% YoY + 30.3% YoY

Sugarcane Brazil – Production & Sales YTD crushing remains higher

Energy Sales (‘000 MWh)

+1.5% YoY

Crushing

Crushing slightly down in the quarter, but +5% YoY in H1 at 14 million tonnes (equity consolidation)

Good agricultural performance with tonnes of ATR/ha at 12.6 in H1, +26% above the average of the C/S

region, although yields were 7% lower than LY due to the impact of the drought

Improvement in production

H1 overall production (expressed in TRS) up 10% to 1,992 k tonnes (higher cane crushed and better

sugar content YoY)

Mix more oriented towards ethanol in Q2, ratio up to 41% in H1 14/15 vs. 35% in H1 LY

Sugar Production: 1,129 k tons; slightly up YoY – Inventories : 428 k tons, +7% vs. September 2013

Ethanol Production: 479 k m³; +27% YoY – Inventories : 277 k m³ , +34% vs. September 2013

Progress on cogeneration

Own energy production up 35% at 344 GWh in Q2 14/15 vs. LY

-2.9% YoY

7,7 7,5

Q2

13

/14

Q2

14

/15

470 435

Q2

13

/14

Q2

14

/15

89 116

Q2

13

/14

Q2

14

/15

339 344

Q2

13/1

4

Q2

14

/15

591 574

(4) (33)

+13 +30

(24)

Q22013/14

Price &Mix

Volume Price &Mix

Volume Others Q22014/15

Sugarcane Brazil – Financials Lower sugar revenues on higher costs pressured results

* includes Cogeneration, Agricultural Products, Hedging and Ethanol Resale

7

(1) Tereos Internacional allocates tilling expenses as cost.

If tilling expenses were allocated as investment, Adjusted

EBITDA for Q2 14/15 would have reached R$158 million.


Sugar Ethanol

Sugar: 62% of total net revenues

Volumes reduced 7% to 435 k tonnes

Average prices down 7% YoY at 817 R$/tonne

Ethanol: 25% of total net revenues

Volume sold up 30% to 116 k m3

Prices up 11% YoY at 1,214 R$/m3

Cogeneration: R$64 million vs. R$49 million, on

average realized prices +24% up and higher own

electricity production (+35%)

Adjusted EBITDA: R$112 million, -41%

Lower sugar sales combined with higher

costs (inflation effect, standing cane and

non-recurring expenses) impacted results;

benefits from “Guarani 2016” limited by

impact of drought this year

Adjusted EBITDA Margin1 for Q2 14/15

including tilling as depreciation: 27.6%

Key Figures

In R$ Million Q2 14/15 Q2 13/14 Change

Revenues 574 591 -3%

Gross Profit 103 121 -15%

Margin 17.9% 20.5%

EBIT (3) 37 -109%

Margin (0.6%) 6.3%

Adjusted EBITDA 112 189 -41%

Margin 19.5% 31.9%

75

51

Q2

13

/14

Q2

14

/15

-0.2% YoY

Sugarcane Indian Ocean/Africa – Production and Financials Lower sugar volumes drove results down

8

Sugarcane Crushing (’000 t) Sugar sales (‘000 t)

-32.7% YoY

Revenue Breakdown by Product Sugarcane crushing

Indian Ocean: similar crushing than LY expected

for the whole crop as drought impacts yields

Africa: rainy weather delayed crushing (-21%

YTD), but overall crop expected to be materially

up on LY

Revenues: -11% YoY

Lower sales on delayed shipment in Reunion

Island and reduced sales volumes in Mozambique

Adjusted EBITDA: -22% YoY

Drop in sales/trading margins in Indian Ocean

together with low cost dilution in Mozambique

Key Figures


Revenues 231 258 -11%

Gross Profit 48 66 -27%

Margin 20.8% 25.6%

EBIT 13 30 -56%

Margin 5.8% 11.8%

Adjusted EBITDA 63 81 -22%

Margin 27.2% 31.3%

1.249 1.247

Q2

13

/14

Q2

14

/15

Sugar Indian Ocean 28%

Sugar Africa 16%

Trading and others 56%

69 64

46

Q2

13

/14

Q2

14

/15

Own Sales Trading

Cereal Segment - Production and Sales Softness in Europe volumes, but increased volume contribution from Brazil and Asia

9

Cereal Grinding (‘000 t)

Starch & Sweeteners Sales (‘000 t)

+7.2% YoY +13.7% YoY

Alcohol & Ethanol Sales (‘000 m3)

-44.1% YoY

Grinding in Q2 14/15: +7% to 908 k tonnes

Starch & Sweeteners sales: +14% Increased volumes from Cereal Brazil and Indonesia, but soft market conditions continue in Europe

Alcohol & Ethanol sales: -7% End of ethanol trading sales for Tereos Group last year and soft market for ethanol in Europe

Co-products Sales (‘000 t)

+ 6.1% YoY

293 311

Q2

13

/14

Q2

14

/15

847 908

Q2

13

/14

Q2

14

/15

468 533

Q2

13

/14

Q2

14

/15

Starch & Sweeteners – Financials Benefits from “Performance 2015” despite continuing soft environment

10


Revenues: R$1,066 million, slightly down YoY

Prices lower YoY following cereal prices downward trend (and sugar price trend for isoglucose)

Slightly lower volumes in Europe on soft market environment, positive perimeter effect of

Redwood plant in Indonesia (first time consolidation) and Syral Halotek ramp-up, reaching

nominal capacity in August (corn grinding +32% sequentially)

Adjusted EBITDA: R$63 million, up 30% YoY

YoY, benefits from “Performance 2015” initiatives in Cereals division (notably through optimized

energy consumption and lower energy unitary prices achieved)

Vs. Q1 14/14, margins on raw material costs have gradually benefitted from lower cereal prices

and improved margin management

Key Figures


Revenues 1,066 1,112 -4%

Gross Profit 176 174 +1%

Margin 16.6% 15.7%

EBIT 15 6 +172%

Margin 1.4% 0.5%

Adjusted EBITDA 63 49 +30%

Margin 5.9% 4.4%

1112 1066

(15)

+86

(176)

+59


Alcohol & Ethanol Europe – Financials Benefits from “Performance 2015” but lower ethanol prices and weak market

Revenues: R$117 million, down R$ 129 million

Termination of trading activities for Tereos Group (-R$ 88 million)

Ethanol prices down on Q2 13/14 (-13%) and volumes impacted by weak demand and competition

from imports (-6%)

Adjusted EBITDA: R$39 million, up 46%

Results positively impacted by “Performance 2015”, although benefits lowered by T2 Rotterdam prices

drop vs. Q2 LY

Strong improvement sequentially principally reflects the difference in proportion of wheat purchased at

convention price (from 0% to 90% this quarter)

11


Key Figures


Revenues 117 246 -52%

Gross Profit 36 28 +29%

Margin 30.5% 11.3%

EBIT 28 17 +61%

Margin 23.7% 7.0%

Adjusted EBITDA 39 27 +46%

Margin 33.3% 10.9%

246

117

(3)

(95) (18) (12)


180

118

(29) (2)

(29) (1)

Q2 2013/14 Brazil Africa/IO S&S A&EEurope

Q2 2014/15

Capital Expenditures Substantial reduction in CAPEX levels at major divisions

12

Brazil: R$68 million

Lower plantation and intercrop maintenance

reduced overall segment Capex

97% of the expansion program completed

Starch & Sweeteners: R$29 million

¾ related to maintenance and Performance 2015 initiatives

No major capacity increase projects

CAPEX (R$ MM) CAPEX Breakdown

Starch & Sweeteners

33%

Alcohol & Ethanol Europe

1%

Africa/Indian Ocean 12%

Brazil 54%

13

Cash Flow Reconciliation & Debt Composition Increased working capital needs due to higher inventories

Net Debt/Adjusted EBITDA: 4.8x vs. 4.5x on September 30th, 2013

Mostly on the back of seasonal working capital for sugarcane division (on higher

inventories), negative forex impact, and lower Adjusted EBITDA

Cash Flow

In R$ Million H1 14/15

Adjusted EBITDA 446

Working capital variance (609)

Financial interests (125)

Others (38)

Operating Cash Flow (326)

Recurring Capex (180)

Recurring Cash Flow (506)

Growth Capex (111)

Dividends paid and received

(5)

Others (80)

Free Cash Flow (702)

Others (inc. Forex impact) (117)

Net Debt Variation (819)

Debt

In R$ Million

Pro-forma September 30th,

2014

March 31st,

2014 ∆

Current 2,350 1,523 +54.3%

Non-current 2,496 2,734 -8.7%

Amortized cost (19) (23) -17.4%

Total Gross Debt 4,827 4,234 +14.0%

In € 1,562 1,413 +10.5%

In USD 2,056 1,890 +8.8%

In R$ 1,220 935 +30.5%

Other currencies 8 19 -57.9%

Cash and Cash Equivalent (748) (1) (682) +9.7%

Total Net Debt 4,079 3,551 +14.9%

Related Parties Net Debt 65 15 +333.3%

Total Net Debt + Related Parties

4,144 3,566 +16.2%

(1) Cash and cash equivalent of September 30th 2014 restated to include capital increase of R$240 million from PBio into Guarani.

Sugarcane Brazil:

H2 sales volume to benefit from higher starting inventory (sugar +26kt and ethanol + 71km3 vs.

September 2013)

Progress in co-generation, to reach over 1,000 GWh sales also boosted by efforts to optimize own

energy consumption

Benefits in H2 from Reintegra tax credit (3% of exports revenues) and a recent increase in gasoline

price. Possible increase in the ethanol blend ratio (from 25% to 27.5%) could be a positive

development to support the S&E industry

Sugarcane Africa/Indian Ocean:

Indian Ocean crop volumes expected to be in line with last year despite drier than usual weather

Yields in Africa to be better YoY as a result of improved agricultural performance and favorable rain

Impact of lower European sugar prices to be more pronounced in H2

Cereals:

Europe:

Benefits of “Performance 2015” to continue

Despite lower cereal prices, soft demand for starch and lower isoglucose prices (following

European sugar prices) somewhat hinder potential for margin restoration

Gradual phasing out of raw material conventional price mechanism and current lower ethanol prices

to limit improvements in Alcohol & Ethanol segment’s profits in H2

International:

Brazil: Focus on stability of plant performance at full capacity, and customer portfolio optimization

Asia: In China, Dongguan facility to start production in H1 2015 (500k tons/year grinding capacity).

In Indonesia, capacity expansion and product diversification for Redwood being developed

14

Outlook

2q 14/15 earnings

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