bank of america merrill lynch - calgems conference
TRANSCRIPT
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Bank of America Merrill Lynch CalGEMS ConferenceJun 2013
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The information contained in this presentation may include statements which
constitute 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 other
forecasts, and are based on assumptions, data or methods that, although considered
reasonable by the company at the time, may turn out to be incorrect or imprecise, or
may not be possible to realize. The company gives no assurance that expectationsdisclosed in this presentation will be confirmed. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of future performance
and involve risks and uncertainties, and that actual results may differ materially from
those in the forward-looking statements, due to a variety of factors, including, but not
limited to, the risks of international business and other risks referred to in thecompanys filings with the CVM and SEC. The company does not undertake, and
specifically disclaims any obligation to update any forward-looking statements, which
speak only for the date on which they are made.
Disclaimer
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Agenda
Financial Highlights
1Pulp and Paper Market2
Questions & Answers3
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Financial Highlights
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30%
41% 39%
377
753
565
1Q12 4Q12 1Q13
1Q13 Results
5
EBITDA (R$ million) and EBITDA Margin (%)Cash Cost (R$/t)
Pulp Production and Sales (000 t) Net Revenue (R$ million)
1,274
1,853
1,449
1Q12 4Q12 1Q13
- Cash cost ex-
downtimes: +4%
- LTM inflation:
+6.6%
+9 p.p
+14%
1,332 1,3701,2631,313
1,510
1,186
1Q12 4Q12 1Q13
Production Sales
444 446 463455 446507
1Q12 4Q12 1Q13
Cash cost ex-maintenance downtimes Cash cost
+4%
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Debt
Debt Amortization Schedule (R$ million)
671
1,068725 677
994807
648
2,871
1,437
2013 2014 2015 2016 2017 2018 2019 2020 2021
Bond Pre-payment BNDES ECN Export Credit/Others
Net Debt (R$ million) and Leverage (x)
Gross Debt (R$ million)
Closing FX
(R$/US$)
11,03110,768
9,898
1Q12 4Q12 1Q13
-19%
Aprox R$ 2 billion
gross debt
reduction since1Q12.
5.24.7
4.5
3.43.1
4.8
4.2 4.2
3.3
3.1
Net Debt/EBITDA (R$) (x)
Net Debt/EBITDA (US$) (x)
8,965
8,462 8,557
7,7457,516
1Q12 2Q12 3Q12 4Q12 1Q13
2.042.02 2.031.82 2.01
6
After Cash
Tender
US$486 mm
After Cash Tender US$486 mm
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Positive Free Cash Flow and High Single Digit Yields
836
782
2012 1Q13 LTM
FCF Yield
7
7% 6%
As announced in our quarterly reports, Fibria resumed part of its receivable discount operations in May/13. It
will positively impact the 2Q13 results.
FCF (R$ million)
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1,153
421
156
(623)(109)
(201)(97)
44
(10)
Net
Revenues
COGS/Freight SG&A EBITDA CAPEX Interest Working
Capital
Taxes/Others 2012
(1) On a cash basis, does not include depreciation, amortization and depletion (2) Includes advance to forest partner program | (3) IR/CS and other
(2)
8
Free Cash Flow
per ton
Cash Cost:
R$ 473/ton
Fibria delivers one of the highest EBITDA/t and FCF/t of the industry
(1) (3)
2012 Results (R$/ton)
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562
844 810751 773
FX and Pulp Price explain 80% of Fibrias EBITDA Margin(1)
9
Average Price
FOEX (US$/t)
Exchange Rate
Average (R$/US$) (1)
EBITDA Margin
EBITDA (R$ million)
2.00
1.61 1.671.95 2.01
28%
40%
34%
36%38%
1,697
2,526
1,9642,253
2,440
2009 2010 2011 2012 1Q13 LTM
(1) R multiple regression of 80%
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0%
5%
10%
15%
20%
25%
30%
5% 10% 15% 20% 25%
Return(%
p.a.)
Volatility (% a.a.)
Efficient Frontier (1) with and without BHKP
Com Minrio de Ferro Com BHKP e Minrio de Ferro(1) Source: Bloomberg and Fibrias estimates | Since 2009
(2) Considering the expected return of a portfolio comprised of: DJ, Ibovespa Index , Oil, Copper, Niquel, Libor 3M in US Dollar and BHKP.
Without Pulp With pulp and others
Pulp vs Other Commodities
10%
0% -2%
14%
0%
2%
-3%-6% -5%
-20%
-10%
0%
10%
20%
30%
40%
50%
Ibovespa LME
Metals
WTI
Crude Oil
Iron Ore Sugar Soy Cattle CPI Brazil CPI US
38%
32%30%
26% 25%
21%16%
8%
0%
5%
10%
15%
20%25%
30%
35%
40%
45%
50%
Sugar Iron Ore WTI Crude
Oil
Soy LME
Metals
Ibovespa Cattle FOEX PIX
BHKP
Pulp price has the lowest historical volatility among all
commodities (1).
Considering pulp price in US$, a low correlation with
hard commodities and traditional assets is observed.
With a low correlation the inclusion of BHKP in the
portfolio expands the efficient frontier of a commodities
portfolio(2).
Commodities Historical Volatility(1) BHKP Pulp Price (US$) Correlation(2)
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Fibria delivered the most significant leverage reduction in the LTM
Net Debt/EBITDA (x)
5.6
4.7
3.9 3.6
2.9
3.2
4.2
4.8
5.2
4.7
4.5
3.4
3.1 2.7(1)
5.7
5.06.0(1)
2.21.9(1)
3.4 3.4(1)
4.3 4.6(1)(2)
Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Jun/11 Sep/11 Dec/11 Mar/12 Jun/12 Sep/12 Dec/12 Mar/13 2013E
Fibria Arauco CMPC Klabin Suzano
S&P BB+/Stable BBB-/Stable BBB/Negative BBB-/Stable BB/Negative
Moodys Ba1/Stable Baa3/Negative Baa3/Negative - Ba2/Stable
Fitch BB+/Positive BBB/Stable BBB+/Stable BBB-/Stable BB-/Stable
(1) 2013 year end market consensus
(2) 2013 projection by Citibank.
Ratings
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PULP
- Growth with discipline
- Best portfolio of projects
BIO-ENERGY
- Complementary to pulp
- Ensyn
INDUSTRY
CONSOLIDATION ?
OTHER OPPORTUNITIES
- Portocel
- Land and forest
Potential
GrowthProspects
12
Fibria is seeking value creation for its shareholders with capital discipline
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Consolidation is needed, however, challenges are large
Global Market Pulp Capacity(2) (000t)
0 1000 2000 3000 4000 5000 6000
Canfor
ENCE
West FraserEldorado
Metsa Fibre
Mercer
IP
Ilim
Domtar
Stora Enso
Weyerhaeuser
Paper Excellence
Suzano
Sodra
UPM-Kymmene
CMPCGeorgia Pacific
Arauco
APRIL
Fibria
Bleached Softwood Kraft Pulp (BSKP)
Bleached Hardwood Kraft Pulp (BHKP)
Unbleached Kraft Pulp (UKP)
Mechanical
5,300
Challenges for Consolidation
Dependent upon strategic motivation andtiming of parties
Relative valuations
Governance issues, level of control, etc
Culture/ management challenges
Indebtedness level of industry players
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Fibria has the best portfolio of brownfield projects
Trs Lagoas II:
Decision: 2014
Start-up: 2016
Capacity: 1.5 million tons
Forest base: 40k hectares of surplus
Veracel II
Aracruzs Expansion
Port Terminal Pulp Unit
Trs Lagoas
Santos
AracruzPortocel
Caravelas
Belmonte
Veracel
Jacare
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Additional Source of Growth
Portocel I Portocel II
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Opportunities to Enhance Returns
16
New alternatives for biomass residues / lignin
Biofuels and Bioproducts
New Forest
Model
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Pulp and Paper Market
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Pulp projects, net of closures, will add less than 10% of global capacity
between 2013 and 2015, less than in other basic materials sectors
(1) Source: PPPC Special Research Note Feb 2013 does not include Sulphite and UKP
(2) Projects included:Ilim Group (490kt) | Closures: Resolute Forest (75kt) ; Domtar (125kt) ; Rayonier (280kt); Birla (350kt)
(3) Projects included: Eldorado (1.5 mt); Montes del Plata (1.3 mt); Maranho (1.5 mt); Guaba II (1.5 mt) | Closures: Jari (410kt); Sappi Cloquet (270kt); Double A (85kt); Sodra Tofte (180kt); Ilim Group (100kt);April Rizhao (130kt)
SOFTWOOD(1)
25.0 MT
HARDWOOD(1)
30.1 MT
MARKET PULP(1)
55.1 MT
+ =
2013-2015(3):
New capacities: 5.8 mt
Announced Closures: (1.2) mt
Net: 4.6 mt
2013-2015(2):
New capacities: 0.5 mt
Announced Closures: (0.8) mt
Net: (0.3) mt
2013-2015:
New capacities: 6.3 mt
Announced Closures: (2.0) mt
Net: 4.3 mt
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Technical Age and Scale in the Market Pulp IndustryFurther closures are expected due to lack of adequate investments in the industry
North American Pulp Mills Other Pulp Pulp Mills
Hardwood (BHKP) Market Pulp Softwood (BSKP) Market Pulp
North American Pulp Mills Other Pulp Pulp Mills
Source: Pory
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Fibria: Competitive Position on the Cost Curve
Total Cash Costof BHKP
delivered to
Europe
(US$/t)
432
498
421459 439
382
328 320 314
271254
11942
86 45 36
36
47 65 52
6970
Cash Cost (US$/t) Delivery (US$/t)
Source: Hawkins Wright (Outlook for Market Pulp, May 2013) | Fibrias 1Q13 cash cost divided by FX considered in the report R$/US$2.0096
551
324
20
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21
Source: Fibria and Independent Consultants
Paper Capacity Expansion in China
New capacities in China will generate additional demand for market pulp
Ktons 2012 2013E 2014E Total
P&W (woodfree) 900 - 460 1,360
Tissue 1,540 1,120 1,164 3,824
Cartonboard 2,000 2,500 1,750 6,250
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Strong internal consumption will drive tissue demand in China
24.3
14.8 14.6
11.1
6.3 6.14.4
2.20.8 0.6
N.America
W.Europe
Japan
Oceania
E.Europe
L.America
China
N&M
East
AsiaFarEast
Africa
Kg/capita
Per Capita Consumption of Tissue by Region, 2012(1)
Growth
Potential
Growth
Potential
0
5
10
15
20
25
30
35
1991 1996 2001 2006 2009 2010 2011 2012
N.America W.Europe E.Europe L.America Middle East
Japan China Asia FE Oceania Africa
Average
Growth Rate
+3.5%a.a.
Average
Growth Rate
+3.5%a.a.
Million tons
World Tissue Consumption, 1991-2012(1)
22
(1) Source: RISI
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Different from other commodities, China accounts for 26% of
hardwood demand compared to 60%-75% in other basic materials sectors
12%15%
17%
19%
26%
20%
26% 25%
14%15%
16%
18%
25%
21%
26%26%
0
2.000
4.000
6.000
8.000
2005 2006 2007 2008 2009 2010 2011 2012
Eucaplyptus ('000 t) Hardwood ('000 t)
Latin America isthe main
supplier of pulp
to China
(1) Source: PPPC Global 100 Report 2012
Chinas Market Share of Market Pulp Shipments (%)(1)
23
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Fibrias Commercial Strategy
24
51%
28%
21%
Fibrias Pulp End Use 2012 Fibrias Historical Sales Distribution - % of sales volume
Europe
94%
4%
2%
22%
46%
32%
North America
Asia
SpecialtiesTissue Printing & Writing
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13
North America Europe Asia Others
Fibria is exposed to the least volatile consumermarkets (tissue) which brings stability to sales
volume.
Fibria has a low dependence on China (less than
20% of total sales volume).
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Inventories
25
Hardwood Market Pulp Producers Inventories (days of supply) Hardwood Market Pulp Producers Inventories (000 tons)
Hardwood European Pulp Consumers Inventories (days of supply) Hardwood European Pulp Consumers Inventories (000 tons)
Mar/13: 41 days
Apr/12: 34 daysApr/13 x Mar/13: -2% or -40kt
Apr13:
20 days
Apr/13:
38 days
Source: PPPC World 20 March 2013 Source: Fibrias estimates based on PPPCs methodology
Source: Utipulp Source: Utipulp
15
25
35
45
55
65
05 06 07 08 09 10 11 12 13
0
500
1000
1500
2000
2500
3000
05 06 07 08 09 10 11 12 13
0
100
200
300
400
500
600
05 06 07 08 09 10 11 12 13
BHKP': Apr/13 x Mar/13: + 2% or + 8.4kt
0
5
10
15
20
25
30
05 06 07 08 09 10 11 12 13
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5857 56
55
58
Dec-12 Jan-13 Feb-13 Mar-13 Apr-13
35
41 41 4138
Inventories(1)
(1) Source: PPPC Global World 20 March Report and (2) Fibrias estimates.
Closing Stocks (k tons)
26
1998
2297 2290
22292189
Dec-12 Jan-13 Feb-13 Mar-13 Apr-13
1993
1488 15961827
1713
Dec-12 Jan-13 Feb-13 Mar-13 Apr-13
-402)
Inventories (days)
Inventories Calculation = closing stocks
average daily shipments in the last 3 months
Total Shipments (k tons) 3-month daily average (k tons)
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Questions & Answers
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THANK YOU
Investor Relations
E-mail: [email protected]
Phone: +55 11 2138-4565
Website: www.fibria.com.br/ir
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Back up
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Global Paper Consumption
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Developed Markets Emerging Markets
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Developed Markets Emerging Markets
CAGR 1996 2006Developed Markets: + 1.7%
Emerging Markets : + 6.0%
85,291
117,611
15,548
37,474
P&W
Consumption
(000 tons)(1)
Tissue
Consumption
(000 tons)(1)
114,507
CAGR 2007 2016Developed Markets: - 4.0%
Emerging Markets : + 4.1%
CAGR 1996 2006
Developed Markets: + 2.4%
Emerging Markets : + 6.9%
CAGR 2007 2016Developed Markets: + 1.4%
Emerging Markets : + 6.7%
26,877
30
Source: RISI
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Global Market Pulp Demand
000 ton 1996 2006 2016Growth1996-2006
Growth2007-2016
Hardwood 14.3 22.4 29.9 56% 27%
Eucalyptus 5.4 11.1 21.4 106% 67%
Softwood 16.4 22.0 24.1 35% 7%
Market Pulp 30.8 44.4 54.0
Demand growth rateHardwood (BHKP) vs. Softwood (BSKP) (000 ton)
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Hardwood Softwood
Hardwood demand will continue to increase at a faster pace than Softwood
2011 - 2016 CAGR:
Hardwood: +2.3%
Softwood: +1.0%
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Source: PPPC
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Gross capacity addition should not be counted as the only factor
influencing pulp price volatility
Source: Hawkins Wright
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
BHKPprices
-cifEurope(US$/
ton)
Greenfieldcapacity(000ton)
Valdivia
APP
Hainan
VeracelNueva Aldea
Santa F
Mucuri
Fray
Bentos
Kerinci
PL3
Trs
Lagoas
Rizhao
APP Guangxi
Chenming
Zhanjiang
Eldorado
Montes delPlata
MaranhoGuaba II
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