global emerging markets conference -deutsche bank
TRANSCRIPT
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Global Emerging Markets Conference - Deutsche BankSeptember 2014
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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 Exchange
Act 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 expectations
disclosed 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 the
companys 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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Company Overview1Pulp and Paper Market2
Financial and Operational Highlights3
Agenda
Final Remarks
4
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Company Overview
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Fibrias Units Industrial Capacity
* Veracel is a joint venture between Fibria (50%) and Stora Enso (50%) and the total capacity is 1,120 thousand ton/year
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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
Sales Mix by Region - Fibria
Europe
42%
N.
America
22%
Asia
27%
Other9%
Region - 2Q14
Tissue
49%Printing &
Writing
33%
Specialty
18%
End Use - 2Q14
Highlights
30%20%
29% 29% 24%18%
26% 26% 30% 22%28% 31% 30%
19% 22%
37%46%
46% 41%
35% 44%
43% 41% 36%42%
43% 35% 36%46% 42%
22% 25%14% 20%
31% 28%20% 23% 25% 26%
21% 26% 26% 26% 27%
11% 9% 11% 10% 10% 10% 11% 10% 9% 10% 8% 8% 8% 9% 9%
4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14
North America Europe Asia Other
Fibrias Commercial Strategy
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(1) Controlling group
(2) Free Float 40.14% + Treasury 0.06%
VotorantimIndustrial S.A.
(1)
29.42%
BNDESParticipaes
(1)
30.38%
FreeFloat (2)
40.20%
Only 1 class of shares 100% voting rights
100% tag along rights (Brazilian corporate law establishes 80%)
Board of Directors with minimum 20% independent members
Financial Statements in International StandardsIFRS
Adoption of Arbitration Chamber
SEC Registered ADR Level III program
Indebtedness and Liquidity
Market Risk Management
Risk Management
Corporate Governance
Related Parties Transactions
Anti-Corruption
Information Disclosure
Securities Trading
Fiscal
Council
Board of
Directors
20% independentmembers
Role of CEO andchairman is split
Innovation
Committee
StatutoryAudit
Committee
Finance
Committee
Sustainability
Committee
Personnel andRemuneration
Committee
General
Meeting
Listed on Novo Mercado, highest CG level at BM&FBovespa: Policies approved by the Board of Directors:
Shareholder Structure and Corporate Governance
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Fibria was elected as 1st place in thepulp & paper sector in the corporategovernance and future's vision
categories
Fibria is one of the 5 Brazilian companiesnominees to the Best Corporate
GovernanceAward from London.
Company of the year,among all industries,according to ValorEconmico.
Valor 1000
XVII ANEFAC-FIPECAFI - SERASAEXPERIAN Prize
Fibria is among the mosttransparent public companiesin Brazil, recognized for the
quality of its 2012 financialstatements.
Fibria was ranked for the fifthconsecutive year (2010, 2011, 2012,
2013 and 2014).
2014 Institutional Investor Latam Ranking -P&P Sector
Fibria was selected as one of the 10 bestcompanies in transparency.The only one in the pulp &
paper sector.
CDP Brasil 100Climate Change 2013Reportpoca Negcios 360
International Recognition by CorporateGovernance Report
Fibria was elected as 2nd place.The prize highlights thebusiness profitability,
share profitability,liquidity, corporategovernance and sustainability.
The Best Companies to the ShareholdersPrize of Capital Aberto Magazine
Fibria is the only Latin America companyselected by RobecoSAM (responsible forDJSI) as one of the 10 worldwide leaders inSRI magazines The 10 Game Changers
Changing the industry throughsustainability.
RobecoSAM - Sustainability InvestingMagazine
Selected to Dow Jones World andEmerging Markets Sustainability
Indices for 2013/14 as the industryleader of Forestry Resources and
Paper sector.
DJSI World and DJSI Emerging Markets
Acknowledgments: Governance, Transparency, Profitability & Sustainability
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Today, according to public information, there will be a 10% increase of the
pulp market capacity between 2014 and 2016
SOFTWOOD(1)
25.5 MT
HARDWOOD(1)
31.1 MT
MARKET PULP(1)
56.6 MT+ =
2014-2016(3):
New capacities: 6.0 mt
Announced Closures: (0.6) mt
Net: 5.4 mt
2014-2016(2):
New capacities: 0.7 mt
Announced Closures: (0.4) mt
Net: 0.4 mt
2014-2016:
New capacities: 6.7 mt
Announced Closures: (1.0) mt
Net: 5.7 mt
(1) Source: PPPC Special Research Note May 2014 does not include Sulphite and UKP
(2) Projects included: Paper Excellence (70kt); UPM Kymi (170kt); Klabin (200kt); Sodra Vr (275kt)| Closures: Birla AV Terrace Bay (350kt)
(3) Projects included: Maranho (1.5mt); Montes del Plata (1.3 mt); Oji Nantong (700kt); Eldorado (200kt); CMPC Guaba II (1.3 mt); Klabin Ortigueira (1.0mt) | Closures: April Rizhao
(130kt); Arauco Valdivia (300kt); Old Town (200kt).
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Global Market Pulp Demand
Demand growth rate
Hardwood (BHKP) vs. Softwood (BSKP) (000 ton)
Hardwood demand will continue to increase at a faster pace than Softwood
Source: PPPC
Source: PPPC. Excludes Sulphite and UKP market pulp.
NBSK vs. BHKP - Prices(1)
(1) Source: FOEX |Average spread in the last 5 years.
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Hardwood Softwood
2013 - 2018 CAGR:
Hardwood: +2.8%
Softwood: +0.7%
000 ton 1998 2008 2018Growth1998-2008
Growth2008-2018
Hardwood 15.0 24.5 32.8 63% 34%
Eucalyptus 6.0 14.2 23.4 137% 63%
Softwood 17.6 21.6 24.8 23% 15%
Market Pulp 32.6 46.1 57.1
400
500
600
700800
900
1000
1100
0
50
100
150
200
250
Spread Avg. Spread BHKP NBSK
Avg. Spread:
US$ 103
Spread Aug/14:
US$ 200
Paper Production Runnability with BHKP
Source: RISI conference, August 2014.
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(1) Source: Hawkins Wright , Poyry and Fibria Analysis(2) Average forecast according to Hawkins Wright and Brian McClay.
BHKPprices-
cifEurope(US$/ton)
Greenfieldcapacity(000ton)
785 (2)
0,0
0,5
1,0
1,5
2,0
2,5
0
100
200
300
400
500
600
700
800
900
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Montesdel Plata
Valdivia
APP
Hainan
VeracelNueva
Aldea
Santa
F
Mucuri
Fray
Bentos
Kerinci
PL3
TrsLagoas
Rizhao
APP Guangxi
Chenming
Zhanjiang
EldoradoMaranho
Guaba II
Oji
Nantong
APP Soulth
Sumatra
Klabin
Gross capacity addition should not be counted as the only factor
influencing pulp price volatility.(1)
List Price bottoming at US$650/t in 2011 and US$726/t in 2014
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Technical Age and Scale in the Market Pulp IndustryFurther closures are expected due to lack of adequate investments in the industry
Hardwood (BHKP) Market Pulp Softwood (BSKP) Market Pulp
STRONG
2013/IQ
Weighted average
technical age 14.2 years
Weighted average
capacity 1184 000 t/a
Aracruz
Trs La go as
Veracel
Jacare
0
500
1.000
1.500
2.000
2.500
3.000
051015202530
PM Capacity, 1000 t/a
Technical Age, years
WEAK
STRONGWeighted average
technical age 21.2 years
Weighted average
capacity 503 000 t/a
2013/IQ
North American Pulp Mills Other Pulp Mills Closures Grade Switch On & Off
WEAK0
500
1.000
1.500
2.000
2.500
3.000
0102030
PM Capacity, 1000 t/a
Technical Age, years
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-910
-85
-1.260
-1.180
-540-500
-105
-1.085
-630
2006 2007 2008 2009 2010 2011 2012 2013 2014-2016 E
as of Aug14
Source: PPPC and Fibria
Closures of Hardwood Capacity Worldwide
000 ton
Capacity closures DO happen
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Total Cash Cost of BHKP delivered to Europe (US$/t)
528 502 493 453 479 464388 406 426
316 304 306 286 258 251
4871 40
70
47 42112 36 42
50 41 45 56 113 7050
141
20
Cash Cost (US$/t) Delivery (US$/t)
Source: Hawkins Wright (Outlook for Market Pulp, March2014) | Fibrias 2Q14 considering a FX of R$/US$2.23.
Gray bar include cash expenses as Interest, CAPEX, SG&A and Taxes.
Capacity
(k tons):660 595 1,775 585 565 355 1,005 2,410 1,960 1,095 7,450 = 31,930330 3,680 4,165
August FOEX BHKP (CIF Europe):
US$ 726/t
Net price: US$
559/t
Positive Working
Capital: US$44/t
Interest
5,300
SG&A
Capex
Interest
and when other expenses are plugged, we see no one but Fibria is
generating positive free cash flow in the industry
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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 15
12
7 65
1
0
5
10
15
20
25
30
N.
America
West
Europe
Japan Oceania East
Europe
LatAm China Africa
9 11 1316
26
1721 20
23
79 10
12
22
1620 19
2110
1012
14
21
17
2223
23
0
2.000
4.000
6.000
8.000
10.000
12.000
2005 2006 2007 2008 2009 2010 2011 2012 2013
Eucaplyptus Hardwood Total
3.816
1.852
1.142928
128 92 28
4.060
1.498
1.039 1.030
108 19 12
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
BHKP Total Latin
America
Other* Indonesia USA Canada Western
Europe
6M2013 6M2014
Latin America is the
leading exporter of BHKP
to China, accounting toapproximately 46% of
China's total imports in
6M2014.
(Kg/capita/year)
(million t)(000s t) (kg/person/year)
Between 2005 and 2013,
the Chinese market share
of eucalyptus shipments
increased by 14 p.p.
(total market pulp: + p.p.)
* includes Russia, China, Thailand and New Zealand
0
5
10
15
20
2530
35
1991 1996 2001 2006 2009 2010 2011 2012 2013
N.America W.Europe E.Europe L.America
Middle East Japan China Asia FE
Oceania Africa
LTM Growth
Rate +4.2%
Benefiting From Chinas Growth
Chinas Hardwood Imports of BHKP by Country (1)
(1) PPPC Pulp China
(2) PPPC W20. Coverage for chemical market pulp is 80% of world capacity(3) RISI
(In percentage)
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Internal Consumption and Urbanization
Chinas private consumption vs. exports
(CNY trillion and annual % change) (1)Chinese Urbanization Driver of Long-Term Growth
(UN Population Projections, Millions)(2)
Sources: (1) The Economist. (2) RISI China Pulp Market Study.
Shift from exports to private consumption;
Positive effects on households income and rising standards of living.
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593 593 605 584648 645
900826 766 678 699
2009* 2010* 2011 2012 2013 2Q14 LTM
4,600
5,0545,184
5,299 5,271 5.253
2009* 2010* 2011 2012 2013 2Q14 LTM
The maturity of synergies captured since Fibrias creation improved its
operating indicators
+14%
PRODUCTION VOLUME (000 t)BEST PRACTICES AND OPERATING STABILITY
Historical Value Inflation Effect**
-21%
CASH COST (R$/ton)
Historical Value Inflation Effect**
-28%
SG&A (R$ million)STRUCTURE AND PROCESS SIMPLIFICATION
1,522
2,526
1,9642,253
2,796 2.857
2009* 2010* 2011 2012 2013 2Q14 LTM
29%
40%34% 36%
40% 40%
EBITDA (R$ million) - EBITDA MARGIN (%)
* Excludes Conpacel | ** IPCA index considered to calculate the inflation effect
432 448 471 473505 519
656 624 596549 545
2009* 2010* 2011 2012 2013 2Q14 LTM
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39% 41%
35%
647679
594
2Q13 1Q14 2Q14
2Q14 Results
2
Cash Production Cost (R$/t)
1,669 1,6421,694
2Q13 1Q14 2Q14
1,291 1,277 1,2711,269 1,1881,334
2Q13 1Q14 2Q14
Production Sales
488524
486546 549 559
2Q13 1Q14 2Q14
Cash cost ex-maintenance downtimes Cash Cost
Pulp Production and Sales (000 t) Net Revenue (R$ million)
EBITDA (R$ million) and EBITDA Margin (%)
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Indebtedness
Net Debt (Million)
3.3
2.4
2.3
3.02.4
2.4
9.9368.445 8.457
4.485 3.732 3.840
Jun/13 Mar/14 Jun/14
R$ US$
Total Debt and Interest Expenses (Million)
8.253
6.970 6.681
3.7253.080 3.033
Jun/13 Mar/14 Jun/14
R$ US$
Net Debt/EBITDA (US$)Net Debt/EBITDA (R$)
Debt Amortization Schedule (R$ million) Average Tenor (months) and Cost of US$ Debt (%p.a.)
4.7
4.1
3.8
140 137109
Interest (R$)
1,776
1,467
3,243
1,068773 769
1,3551,215
923
545 453
48 6
1,302
Liquidity 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Pre-payment BNDES ECN ACC/ACE Voto IV Bonds
(cash)
(revolver)
5747 52
Jun/13 Mar/14 Jun/14
C it l St t Fib i hi d th l t l ti
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Net Debt/EBITDA (x)(1)
Fibria Arauco CMPC Klabin Suzano
S&P BB+/Positive BBB-/Stable BBB-/Stable BBB-/Stable BB/Negative
Moodys Ba1/Positive Baa3/Negative Baa3/Negative - Ba2/Stable
Fitch BBB-/Stable BBB/Stable BBB+/Stable BBB-/Stable BB-/Positive
(1) Fibrias historical data in BRL. | (2) Market consensus.
2.4 2.3 2.4
4.8
4.5
4.0
1.7 1.7
2.6
2.9 3.1
3.83.6 3.7
3.2
14.8
13.211.7
4T11 1T12 2T12 3T12 4T12 1T13 2T13 3T13 4T13 1T14 2T14 2014
Fibria Suzano Klabin CMPC Arauco Eldorado
2
Capital Structure: Fibria achieved the lowest leverage ratio among
Latin American peers
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Interest expense and cost on foreign currency debt
Fonte: Fibria e Bloomberg
143
126133 137
123 125 123 122126
120
134
120 117109
94 9387 85
57
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14
6.3
6.8
6.0 6.0 5.9
6.3
5.85.5 5.5 5.5 5.4
5.2 5.2 5.2
4.7 4.5 4.6
4.13.8
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14
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Fibria 2024 New Bond Issuance
Principal: US$ 600 millon
Issuance Date: May/2014
Coupon: 5.25% a.a.
Bookbuilding: 11.5x
Spread over T10Y: 275.0 bps
Issuance
US$ 600 million
Highlights
- SEC registered;
- IG document;
- Stretch Debt maturities;
- Fibria 2021 early redemption of US$430 million (78%
of the total). Remaining outstanding : US$118 million.
Fibria 2024
- For liability management purposes only;
- Savings of US$ 5.5 MM in interest per year.
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2,857
1,125(1,409)
(386)
111
(20) (28)
Adjusted EBITDA Capex Interest
(paid/received)
Working Capital Taxes Others Free Cash Flow
Fibria delivers one of the highest EBITDA/t and FCF/t of the industry
Does not include asset sales, expenses on bonds repurchase, expenses related to the REFIS on subsidiaries profits abroad and tax credits from the BEFIEX program.
Free cash flow generation(1) - 2Q14 LTM (R$ Million)
Free Cash Flow per ton - 2Q14 LTM (R$/ton)
543
214
(268)(73)
21
(4)(5)
Adjusted EBITDA Capex Interest
(paid/received)
Working Capital Taxes Others Free Cash Flow
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2.001.76 1.67
1.952.16
2.30
562
844 810751 791
777
FX and Pulp Price explain 80% of Fibrias EBITDA Margin
Average Price
FOEX (US$/t)
Exchange Rate
Average (R$/US$)
EBITDA Margin
EBITDA (R$ million)
29%
40%
34% 36%40%
40%
1,522
2,526
1,9642,253
2,796 2,857
2009 (1) 2010 (1) 2011 (1) 2012 2013 2Q14 LTM
(1) Excludes Conpacel
Cash Production Cost saw a compounded average growth rate
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Fibria Cash Production Cost (1) (R$/ton)
432 448471 473
505554
2009 2010 2011 2012 2013 2014 YTD
CAGR: + 4%
Consistently
controlling the
production cashcost at a level
below the
inflation pace
30
Cash Production Cost saw a compounded average growth rate
of 4% since 2009
(1) Excludes Conpacel.
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Cash Production Cost (R$/t) 2Q14
Utilities results boosted by energy sales.
(2Q14: R$ 36/t I 1Q14: R$ 18/t I 2Q13: R$ 14/t)
546
559
14
13
54
(27) 4
2Q13 Maintenance
downtimes
Wood FX Maintenance Utilities Others 2Q14
+ 2.2%
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Maintenance CAPEX (R$ Million)
1,416
1,078
1,287
1,520
2011 2012 2013 Land Deal:Forestry
Partnership
Non recurringwood
purchase
Inflation FX Rate Modernization Others 2014E
Approx.
18% increase
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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
PotentialGrowth
Prospects
Fibria is seeking value creation for its shareholders with capital discipline
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Key Highlights
Sound credit profile, with decreasing leverage ratios
Market leader with a highly profitable operation and cash cost
below industry average
Highly experienced and qualified management team
Highly recognized and awarded by industry specialists
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36Back up
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Hedge
Hedging Strategy
Debt Hedge:
- Swap operations (currency and rate)- Maturity aligned with original debt
- No margin call
Operating Hedge:
- Net FX exposure protection in US$ in up to 18 months
- Current strategy: Zero Cost Collar
- No leverage
- No margin call
- 06/30/2014 data:
- Notional: US$ 925 million
- 41% of protected net exposure
- Maturity: up to 10 months
All Fibria operations are registered at CETIP
Governance
Hedging Policy approved by the Board of Directors and available at
the Investor Relations website.
Periodical follow up of the hedge portfolio by the Finance Committee
Maximum % of exposed operational flow is defined according to the
FX risk management policy.
Governance, Risk and Compliance (GRC) Team:
- Report to CEO
- Responsible for monitoring policies compliance
- Independent from Treasury
ZeroCostCollar x NDF Payoff
BRL depreciation is a market consensus that can be confirmed
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p
through the broader spread between FX call/put options
1,50
2,00
2,50
3,00
3,50
4,00
jan/12 mar/12 mai/12 jul/12 set/12 nov/12 jan/13 mar/13 mai/13 jul/13 set/13 nov/13 jan/14 mar/14 mai/14 jul/14
Put x Call x Spot
Put option Call Option BRL spot
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i idi d li d i d
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Liquidity Events: delivered as promised
1,361
5,715
1,045
850
836
1,403
1,268
1,851
1,625
EQUITY OFFERING FOREST SALE 2012 (1) FCF 2012 LAND DEAL FCF 2013 TOTAL
4.8 5.2 4.7 4.53.4 3.1 3.3 3.0 2.8 2.4 2.3
Dec/11 Mar/12 Jun/12 Sep/12 Dec/12 Mar/13 Jun/13 Sep/13 Dec/13 Mar/14 Jun/14
Net Debt/EBITDA (x) R$
(1) Losango and forestry assets and land in the south of Bahia State
2012 Bond
prepayment
2013 Bond
prepayment
Available
Sources (R$ Million) Uses (R$ Million)
2014 Bond
prepayment
REFIS
Due to productivity gains in its forests, Fibria had the opportunity to
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p y g , pp y
explore this new ownership model
MAI* Pulp:(adt/ha/year)
10.6 10.9
12.1
15.0 15.0 15.0 15.0 15.0
2010 2015 2020 2025 2030 2035 2040 2045
FIBRIAS GAINS IN IMACEL DUE TO INVESTMENTS IN BIOTECHNOLOGY (TONS OF PULP/HA/YEAR)
2012 field trials = 11.9
Conservative assumption
*MAI: Mean annual increment
Actions: Genetic improvement
Excellence in forestry management
Superior industrial efficiency
L d hi iti
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43
Leadership position
(1) Fiber Consumption, Recycled Fiber and Pulp: RISI | Market Pulp, Hardwood and Eucalyptus: PPPC Special Research Note - May 2014
Recycled Fiber
234 million t
49% 51%
60%
18% 82%
58% 42%
40%
35% 65%
29%71%
Fiber Consumption
403 million t
Pulp
169 million t
Chemical
139 million t
Mechanical
31 million t
Integrated Mills
84 million t
Market Pulp
56 million t
Hardwood
29 million t
Other Eucalyptus
Pulp producers:
13 million t
Softwood/Other
27 million t
Acacia/Other
10 million t
Eucalyptus
19 million t
Industry Outlook(1)
Gl b l P C ti
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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 2006
Developed 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 2016
Developed Markets: - 4.0%
Emerging Markets : + 4.1%
CAGR 1996 2006
Developed Markets: + 2.4%
Emerging Markets : + 6.9%
CAGR 2007 2016
Developed Markets: + 1.4%
Emerging Markets : + 6.7%
26,877