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Merril Lynch - Meeting with Investors April 2014
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 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 company’s 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
2
Agenda
Financial Highlights 1 Pulp and Paper Market 2 Final Remarks 3
Financial Highlights
5
A Winning Player
Pulp capacity million tons 5.300
Net revenues (LTM) R$ billion 7.1
Total area (1) thousand hectares 962
Planted area(1) thousand hectares 557
Net Debt R$ billion 7.0
Net Debt/EBITDA (in Dollars)(2) X 2.4
Net Debt/EBITDA (in Reais) X 2.4
Source: Fibria (1) Including 50% of Veracel, excluding forest partnership areas and excluding the forest base linked to the sale of forest assets in Southern Bahia State and Losango. (2) For covenants purposes, the Net Debt/EBITDA ratio is calculated in Dollars.
Port Terminal Pulp Unit
Três Lagoas
Santos
Aracruz Portocel
Caravelas
Belmonte Veracel
Jacareí
Superior Asset Combination Main Figures – 1Q14
1,263 1,358 1,277
1,186
1,441
1,188
1Q13 4Q13 1Q14
Production Sales
1Q14 Results
6
EBITDA (R$ million) and EBITDA Margin (%) Cash Production Cost (R$/t)
Pulp Production and Sales (‘000 t) Net Revenue (R$ million)
1,449
1,958
1,642
1Q13 4Q13 1Q14
463 466 524 507
466
549
1Q13 4Q13 1Q14
39% 42% 41%
565
823
679
1Q13 4Q13 1Q14
1,475
1,484
2,959
1,288
777 773
1,386 1,230
943 650
1,367
26 5
Liquidity 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Pre-payment BNDES NCE ACC/ACE/Other Voto IV Bond
(cash)
(revolving)
Indebtness
7
Net Debt (Million)
3.1 2.8 2.4
3.1 2.6 2.4
9,898 9,773 8,445
4,915 4,172 3,732
Mar/13 Dec/13 Mar/14
R$ US$
Gross Debt (Million)
7,516 7,849 6,970
3,732 3,351 3,080
Mar/13 Dec/13 Mar/14
R$ US$
Net Debt/EBITDA (US$) Net Debt/EBITDA (R$)
- 24%
Debt Amortization Schedule (R$ million) Debt Cost in US$ (%a.a.)
5.2
4.6
4.1
Mar/13 Dec/13 Mar/14
- 11%
Fibria delivered the most significant leverage reduction in the LTM
Net Debt/EBITDA (x)(1)
7.2
6.3
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
3.3 3
2.8 2.4
2.5
2.0
3.3 3.0
4.2
4.8
4.8
5.7
4.7 5.0 5.0 5.1 5.1 5.2
2.2
2.2 2.1 2.0
2.4
2.5
2.3 2.5
2.3 2.4 2.2
2.4 2.4 2.6
1.7
1.1
1.9 1.8 1.9
2.0 2.3 2.5
2.8 2.9 3.3
3.4
2.9 3.0 2.8
1.7
1.4 1.6 1.8
2.7
2.2
2.7
3.4 4.1
4.6 4.3
3.7 3.1
3.8
Sep/09 Dec/09 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 Jun/13 Sep/13 Dec/13 Mar/14
Fibria Arauco¹ CMPC Klabin Suzano
S&P BB+/Positive BBB-/Stable BBB-/Stable BBB-/Stable BB/Negative
Moody’s Ba1/Positive Baa3/Negative Baa3/Negative - Ba2/Stable
Fitch BBB-/Stable BBB/Stable BBB+/Stable BBB-/Stable BB-/Positive
(1) Fibria’s historical data in BRL.
Ratings
8
679
19
30 (111) (303)
(412)
(64) (117)
317
Adjusted EBITDA Debt Exchange Variation /
MtM hedge debt
MtM Operational
Hedge
Net Interest 2020 Bond Redemption
Depreciation, amortization and
depletion
IR/CS Other Net Profit (Loss)
Net Results (R$ million) – 1Q14
9
Non-recurring impact
(1) Concluded transaction with 111,3% premium over the face value (US$ 690.2 milhões), without additional broker fees.
(2)
∆
∆
Debt Hedge
Debt Exchange Variation
(1)
(2) Includes : other expenses/non-recurring incomes, other debt exchange variation and other financial incomes/expenses.
538
244
(248) (-88)
56
(6) (8)
Adjusted EBITDA Capex Net Interest Working Capital
IR/CS Other Free Cash Flow
10
Free Cash Flow per ton
Fibria delivers one of the highest EBITDA/t and FCF/t of the industry
2013 Results (R$/ton)
2.00 1.76 1.67
1.95 2.16
2.25
562
844 810 751 791
787
FX and Pulp Price explain 80% of Fibria’s EBITDA Margin
11
Average Price FOEX (US$/t)
Exchange Rate Average (R$/US$)
EBITDA Margin
EBITDA (R$ million)
29%
40%
34% 36% 40%
41%
1,522
2,526
1,964 2,253
2,796 2,910
2009 (1) 2010 (1) 2011 (1) 2012 2013 1Q14 LTM
(1) Excludes Conpacel
Maintenance CAPEX (R$ Million)
1,416
1,078
1,287
1,520
2011 2012 2013 Land Deal:
Rural
Partnership
Non recurring
wood
purchase
Inflation FX Rate Modernization Others 2014E
Approx.
18% increase
12
Cash Production Cost saw an increase of 17% over the past 5 years
Cash Production Cost (1) (R$/ton)
432 448
471 473
505
2009 (2) 2010 (2) 2011 2012 2013
CAGR: + 17%
Inflation in the period : IPCA: +31%
Fibria’s Cash Cost: +17%
2014 Cash Production Cost:
• Wood costs will represent the main impact
• Non recurring increase mainly due to third party wood
• Operating excellence actions focused on keeping cash cost below inflation
• In 2015 the wood impact will be structurally eliminated
(1) Constant Currency (2) Excludes Conpacel
Target to have the cash cost increase below inflation
13
Cash Production Cost – 1Q14
14
507 466
549
1Q13 4Q13 1Q14
Cash Production Cost (R$/t)
463 466
524
1Q13 4Q13 1Q14
Cash Production Cost ex-downtimes
(R$/t)
1Q14 vs. 1Q13:
- Higher transportation costs
- Exchange rate
- Higher fixed costs
- Higher input consumption
- Third party wood (1Q13: 9% I 1Q13: 11%)
Management initiatives seeking to maintain the cash cost increase below the inflation.
Fibria’s tax structure
Tax benefits (R$)
Fiscal - annual adjustment
Benefit Amount Maturity
Goodwill
(Aracruz
acquisition)
Annual tax deduction:
~R$85 million
Remaining Balance Dec./13:
R$1,35 billion (base)
2018
Forestry Capex in
Mato Grosso do
Sul state
2013’s tax deduction related
to depletion: R$29 million Undefined
Tax loss carry forward and tax credits
Benefit Amount
Tax loss
carryforward Balance up to Dec./13:
R$507 million (base)
Accumulated tax
credits
Balance Dec./2013:
-PIS/COFINS: R$542 million
- withholding tax (IR and
CSLL): R$226 million
Actual tax payment (cash basis)
15
2009 2010 2011 2012 2013
R$7 million R$16 million R$4 million R$15 million R$31 million
PULP
- Growth with discipline
- Best portfolio of projects
BIO-ENERGY
- Complementary to pulp
- Ensyn
INDUSTRY
CONSOLIDATION ?
OTHER OPPORTUNITIES
- Portocel
- Land and forest
Potential Growth
Prospects
16
Fibria is seeking value creation for its shareholders with capital discipline
Pulp and Paper Market
Today, according to public information, there will be a 9% increase
of the market pulp capacity between 2013 and 2015
(1) Source: PPPC Special Research Note November 2013 – does not include Sulphite and UKP (2) Projects included: Ilim Group (490kt)| Closures: Resolute Forest (75kt) ; Domtar (125kt) ; Rayonier (280kt); Sodra Tofte (240kt) (3) Projects included: Eldorado (1.5 mt); UPM Fray Bentos (100kt); Maranhão (1.5mt); Montes del Plata (1.3 mt); Oji Nantong (700kt); Guaíba II (1.3 mt) | Closures: Jari (410kt); Cellulose du
Maroc (140kt); Ilim Group (100kt); Double A (85kt); Sappi Cloquet (270kt); Sodra Tofte (180kt); April Rizhao (130kt)
SOFTWOOD(1)
25.0 MT
HARDWOOD(1)
30.3 MT
MARKET PULP(1)
55.3 MT + =
2013-2015(3):
• New capacities: 6.4 mt • Announced Closures: (1.3) mt
Net: 5.1 mt
2013-2015(2): • New capacities: 0.5 mt
• Announced Closures: (0.7) mt
Net: (0.2) mt
2013-2015:
• New capacities: 6.9 mt • Announced Closures: (2.0) mt
Net: 4.9 mt
18
400
500
600
700
800
900
1,000
1,100
0
50
100
150
200
250
jul-
08
no
v-0
8
mar
-09
jul-
09
no
v-0
9
mar
-10
jul-
10
no
v-1
0
mar
-11
jul-
11
no
v-1
1
mar
-12
jul-
12
no
v-1
2
mar
-13
jul-
13
no
v-1
3
mar
-14
Spread Average Spread BHKP NBSK
20
30
40
50
60
05 06 07 08 09 10 11 12 13 14
Pulp Market
Shipments of Eucalyptus Pulp (1)
(1) Source: PPPC World 20 – March/2014
Sales Distribuition 1Q14 - Fibria
Producer Stocks – Hardwood(1)
(1) Source: PPPC World 20 – March/2014
NBSK vs. BHKP - Prices(1)
Europe 46%
North America
19%
Asia 26%
Others 9%
Per region
Tissue 46%
Printing & Writing
29%
Specialty 18%
Daily production
48 days
Feb/14: 45 days | Mar/13: 41 days
Per end use Spread Apr/14: US$ 166
(1) Source: FOEX | (2) Average Spread over the last 5 years
Average² Spread: US$ 88
19
2.10%
-3.60%
2.60%
5.60%
Total North America Western Europe China
+78kt +41kt
+44kt
3M2014 vs. 3M2013
-13kt
Supply structural changes puts pressure on the industry
20
MARKET PULP CAPACITY RANKING 2013 (000T) MAIN PROJECTS
Project Country Capacity Timing Fiber Status
Arauco / Stora Uruguay 1.3Mt 1Q2014 BEKP Confirmed
CMPC Guaíba II Brazil 1.3 Mt 2Q2015 BEKP Confirmed
Klabin Paraná Brazil 1.5 Mt 2Q2016 BEKP/
BSKP/Fluff Confirmed
Fibria Três Lagoas II Brazil 1.75 Mt - BEKP Unconfirmed
APP South Sumatra Indonesia 1.5 Mt -2.0
Mt - BHKP Unconfirmed
COST CURVE EVOLUTION
USD
/Ad
t, 2
01
3 c
ost
leve
l
Cumulative Capacity Million t/a
Cost position of marginal
producer
Source: Hawkins Wright , Poyry and Fibria Analysis
0 2000 4000 6000
Canfor
ENCE
Eldorado
Resolute Forest
Domtar
Mercer
Ilim
IP
Weyerhaeuser
Sodra
Stora Enso
Suzano
Metsa Group
Paper Excellence
UPM-Kymmene
Georgia Pacific
CMPC
Arauco
APRIL
Fibria
Bleached Softwood Kraft Pulp (BSKP)
Bleached Hardwood Kraft Pulp (BHKP)
Unbleached Kraft Pulp (UKP)
Mechanical
-910
-85
-1260
-1180
-540 -500
-105
-1200
-1400
-1200
-1000
-800
-600
-400
-200
0
2006 2007 2008 2009 2010 2011 2012 2013-2015E
Capacity closures DO happen…
21
Source: PPPC and Fibria
Closures of Hardwood Capacity Worldwide 000 ton
Gross capacity addition should not be counted as the only factor influencing pulp price volatility
Source: Hawkins Wright
BH
KP
pri
ces
- ci
f Eu
rop
e (U
S$/t
on
)
Gre
enfi
eld
cap
acit
y (0
00
to
n)
22
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
0
100
200
300
400
500
600
700
800
900
1,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Valdivia
APP Hainan
Veracel Nueva Aldea
Santa Fé
Mucuri
Fray Bentos
Kerinci PL3
Três Lagoas
Rizhao
APP Guangxi
Chenming Zhanjiang
Eldorado Montes del
Plata
Maranhão
Guaíba II
Technical Age and Scale in the Market Pulp Industry Further closures are expected due to lack of adequate investments in the industry…
Hardwood (BHKP) Market Pulp Softwood (BSKP) Market Pulp
Source: Poÿry & Fibria
23
0
500
1,000
1,500
2,000
2,500
3,000
0 5 10 15 20 25 30
PM Capacity, 1000 t/a
Technical Age, years
STRONG
2013/IQ
Weighted average
technical age 14.2 years
Weighted average
capacity 1184 000 t/a
Aracruz
Três Lagoas
Veracel
Jacareí
0
500
1,000
1,500
2,000
2,500
3,000
0 5 10 15 20 25 30
PM Capacity, 1000 t/a
Technical Age, years
WEAK
STRONG Weighted average
technical age 21.2 years
Weighted average
capacity 503 000 t/a
2013/IQ
North American Pulp Mills Other Pulp Mills Closures Grade Switch On & Off
528 502 493 479
453 426
464 388 406
316 306 304
286 261
229
58 76 55 58 79 97 52 124
42
59 59 52 67 89
68
57 8
113
44 11
Cash Cost (US$/t) Delivery (US$/t)
Total delivered cash cost will also have an influence on bottom prices
24
Total Cash Cost of BHKP
delivered to Europe
(US$/t)
Source: Hawkins Wright (Outlook for Market Pulp March 2014) | Fibria’s 1Q14 LTM considering a FX of R$/US$2.25.
586 530
SG&A
Others
CAPEX
Interest Working Capital
Capacity (k tons): 1,125 660 1,700 570 355 565 690 2,045 2,430 3,625 11,385 = 30,300 365 945 3,755
25
China: Paper capacities expansion continues to go on
China corresponds to 2/3 of global tissue capacity expansion
Ktons 2012 2013 2014E 2015E Total
P&W (woodfree) 720 -25 0 550 1,245
Tissue 1,540 1,184 1,518 903 5,145
Cartonboard 2,210 2,428 1,300 300 6,238
Total 4,470 3,587 2,818 1,753 12,628
Source: Fibria and Independent Consultants
24
15 15
12
7 6
5
1
0
5
10
15
20
25
30
Strong internal consumption will drive tissue demand in China
Kg/capita
Per Capita Consumption of Tissue by Region, 2013(1)
Growth Potential
0
5
10
15
20
25
30
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%
Million tons
World Tissue Consumption, 1991-2013(1)
26
(1) Source: RISI
Internal Consumption and Urbanization
China’s private consumption vs. exports (CNY trillion and annual % change) (1)
Chinese Urbanization Driver of Long-Term Growth
(UN Population Projections, Millions)(2)
27
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.
Different from other commodities, China accounts for 29% of hardwood demand compared to around 60% in other basic materials sectors
12% 15%
17%
19%
26%
20%
26% 25%
29%
14% 15%
16%
18%
25%
21%
26% 26%
29%
0
2,000
4,000
6,000
8,000
10,000
2005 2006 2007 2008 2009 2010 2011 2012 2013
Eucalyptus ('000 t) Hardwood ('000 t)
Latin America is the main
supplier of pulp to China
(1) Source: PPPC Global 100 Report December 2013
China’s Market Share of Market Pulp Shipments (%)(1)
28
Fibria’s Commercial Strategy
29
45%
39%
16%
Fibria’s Pulp End Use – 1Q14 Fibria’s Historical Sales Distribution - % of sales volume
Europe
89%
9%
2%
20%
40%
40%
North America
Asia
Specialties Tissue Printing & Writing
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
North America Europe Asia Others
Fibria’s sales delivered to the least volatile consumer markets (tissue) which brings stability to sales volume.
Fibria has a low dependence on China (less than 30% of total sales volume).
Final Remarks
Fibria was elected as 1st place in
the pulp & paper sector in the
corporate governance and future's vision categories
Fibria is one of the 5 Brazilian
companies nominees to the Best
Corporate Governance
Award from London.
Acknowledgments in Governance, Transparency and Profitability
31
Company of the year,
among all industries,
according to Valor
Econômico.
Valor 1000
XVII ANEFAC-FIPECAFI - SERASA
EXPERIAN Prize
Fibria is among the most
transparent public
companies in Brazil,
recognized for the
quality of its 2012
financial statements.
Fibria was ranked for the forth
consecutive year (2010, 2011,
2012 and 2013).
In 2013 Fibria was ranked in four
categories: CEO, CFO, IR Team
and IR Professional
2013 Institutional Investor Latam
Ranking - P&P Sector
Fibria was selected as one of
the 10 best companies in
transparency.
The only one in
the pulp & paper
sector.
CDP Brasil 100 – Climate
Change 2013 Report
Época Negócios 360º
International Recognition by
Corporate Governance Report
Fibria was elected as 2nd place.
The prize highlights the
business profitability,
share profitability,
liquidity, corporate
governance and sustainability.
The Best Companies to the Shareholders
Prize of Capital Aberto Magazine
32
Fibria is the only Latin America company selected by RobecoSAM (responsible for DJSI) as one of the 10 worldwide leaders in SRI magazine’s “The 10
Game Changers – Changing the industry through sustainability”.
RobecoSAM - Sustainability Investing Magazine
Selected to Dow Jones World and Emerging Markets Sustainability Indices for 2013/14 as the industry leader of Forestry Resources and Paper sector.
DJSI World and DJSI Emerging Markets
Acknowledgments in Sustainability
Fibria was selected again to ISE, the corporate sustainability Index of BM&F Bovespa.
ISE – Corporate Sustainability Index (Bovespa)
THANK YOU
Investor Relations
E-mail: [email protected]
Phone: +55 11 2138-4565
Website: www.fibria.com.br/ir
Back up
35
Leadership Position
(1) Fiber Consumption, Recycled Fiber and Pulp: RISI | Market Pulp, Hardwood and Eucalyptus: PPPC Special Research Note - November 2013 (2) Hawkins Wright – Outlook for Market Pulp, December 2013
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 55 million t
Hardwood 28 million t
Other Eucalyptus Pulp producers:
13 million t
Softwood/Other 27 million t
Acacia/Other 10 million t
Eucalyptus 18 million t
Industry Outlook(1)
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
36
Source: RISI
Global Market Pulp Demand
000 ton 1996 2006 2016
Growth
1996-
2006
Growth
2007-
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 rate Hardwood (BHKP) vs. Softwood (BSKP) (000 ton)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Hardwood Softwood
Hardwood demand will continue to increase at a faster pace than Softwood
2011 - 2016 CAGR: Hardwood: +2.3% Softwood: +1.0%
37
Source: PPPC