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Institutional presentation march 2010

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Page 1: Institutional presentation march 2010
Page 2: Institutional presentation march 2010

Certain statements in this presentation may constitute forward-looking

statements. Such statements are subject to known and unknown risks and

uncertainties that could cause the Company’s actual results to differ materially

from those set forth in the forward-looking statements. These risks include

changes in customer demand for the Company’s products, changes in raw

material costs, seasonal fluctuations in customer orders, pricing actions by

competitors, significant changes in the applicable rates of exchange of the

Brazilian real against the US dollar, and general changes in the economic

environment in Brazil, emerging markets or internationally.

Disclaimer

2

Page 3: Institutional presentation march 2010

Agenda

Corporate Overview

Forestry Business Unit

Pulp Business Unit

Paper Business Unit

Results

New Growth Cycle

4

12

19

27

35

42

3

Page 4: Institutional presentation march 2010

Corporate Overview

Page 5: Institutional presentation march 2010

Suzano Pulp and Paper

Capital markets• Management performance

assessment• Transparency• Funding for growth

• Second largest eucalyptus pulp

producer in the world and one of

the top 10 market pulp producers.

• Leader in the regional paper

market

• Certified plantations and products.

• New growth cycle: from 2.8 to 7.2 million tons per year of paper and

pulp.

• Pulp production costs: one of the

lowest in the world.

• Solid business structure abroad.

• Capital markets presence: free

float of 45%.

Defined controlling group• Reputation• Long term vision

5

Ownership and Management

Professionalmanagement• Capital discipline• Rapid decision-making

process

Page 6: Institutional presentation march 2010

Balanced and complementary portfolio

Market pulp(41% of net rev.)

Papers (59% of net revenue)

Printing and Writing (46% of net revenue) Paperboard

(13% of net rev.)Uncoated (39% of net rev.)

Coated(7% of net rev.)

2nd largest

eucalyptus pulp producer in the world

2nd in Brazil

Market share: 27%1st in Brazil

Market share: 20%1st in Brazil

Market share: 26%

R$ 4.0 billion in net revenue

58% in exports / 42% in domestic market

Diversified products and markets

Note: Market share figures include paper imports.

2009 data 6

Page 7: Institutional presentation march 2010

Note: The effective capacities will depend on the learning curves.

1,7201,4851,2401,200

1,920

2,750 2,850

7,150

Piauí Unit

Maranhão Unit

New unit and Mucuri expansion

Sustainable growth

Suzano’s production capacity has increased by 130%in the last five years. The Company is prepared for a

new growth cycle that will increase its capacity to 7.2 million tons per year of pulp and paper.

7

Page 8: Institutional presentation march 2010

Corporate structure

BU: Business Unit

SP: Service Providers

Board of Directors (BD)9 members (4 independent)

BD committees

CEO

Objectives:• Greater focus on customers

• Improved accountability• Development of leaders

The Business Units model provides performance and returns assessments in each business

Management

Sustainability and Strategy

Audit

SP Operations

SP Finance

SP Human Resources

SP Strategy, Corporate Dev. and IR

Forestry BU Paper BUPulp BU

8

Page 9: Institutional presentation march 2010

Management model

Operational Excellence• Six Sigma

• Routine management

• Matrix budgeting

Awards and Certifications

Corporate Risk Management• COSO1 methodology

• Corporate governance structure

based on committees – direct report

to the directors and Board.

Strategic Planning• Focused on Value Based

Management (VBM)

• Innovation and R&D

• Sustainability

Alignment of Interests• Executives compensation based on

EVA metrics

• Higher variable portion in total

compensation

9¹Internal control methodology of the Committee of Sponsoring Organizations of the Treadway Commission

.

Page 10: Institutional presentation march 2010

Sustainability

FSC – Forest Stewardship Council

CCX – Chicago Climate Exchange WBCSD - World Business Council for Sustainable Development

Triple Bottom Line – GRI approach

Social• Focus on education:

– Public libraries– Public schools remodeling – Educational programs

(with ECOFUTURO)

Environment• FSC – forest management and custody

chain management• CCX e WBCSD member• ECOFUTURO (Parque das Neblinas)

Financial and Economic• Growing scale and revenues • Improving margins and returns• Solid cash flow generation

10

Page 11: Institutional presentation march 2010

Growth platform

Competitive assets with global scale

Consolidated presence in the

main pulp markets and leader in the

regional paper market

New growth cycle with

competitive projects

Consolidated management structure and

model

11

Qualified team that combines diversity and focus on execution

Page 12: Institutional presentation march 2010

Forestry Business Unit

Page 13: Institutional presentation march 2010

Forestry competitiveness

Brazil: high productivity, forestry technology, low production costs and available areas for expansion

Forest Planted Planted Planted Native

Harvest cycle (years)

7 8 12 80

Main producers Brazil

Indonesia, Malaysia

and Vietnam

Spain, Portugal, Chile and Uruguay

Canada, Finland

and Sweden

13

Page 14: Institutional presentation march 2010

100%

1980 2008

5.511

Biotechnology

Classic improvement

Evolution with state-of-the-art technology

Technology innovation• More wood/ ha• More pulp/ m3

• Higher quality• Less planting areas• Lower costs

Productivity (admt¹/ha/year)

29 31

44

21

Biotechnology

Classic improvement

ClonesMonoprogeny planting

Soils and nutrition

Forest yield evolution (m³/ha/year)

14

1960 1970 1991 1998 2008

¹admt: air dried metric ton

Page 15: Institutional presentation march 2010

¹ Conpacel: corresponds to 50% of former Ripasa’s areas.

² Does not include infrastructure and available land for planting. ³ Does not include new sites announced, except for land acquired from Vale.

Total preservation area:

239 tsd ha2

Lands and forests

Forests average distance: 211 Km

Forests average distance: 74 Km

StateOwn land (tsd ha)

Total Planted

São Paulo 89 49

BA and ES 216 125

Minas Gerais 47 22

Maranhão and Piauí 194 38

Conpacel¹ (SP) 51 36

Total SPC³ 597 270

Independent farmers3 - 92

Suzano’s production is based on 100% renewable eucalyptus planted forests. Preserved native

forest area of approximately 40% of own land.

15

Plants

Ports

Forests

Page 16: Institutional presentation march 2010

Soil and climate conditions similar to Australia’s facilitated the development of superior clones in Brazil (innovation and R&D)

DNA Suzano: pioneering and innovation

1980 1990 2000

16

Page 17: Institutional presentation march 2010

Source: BRACELPA / FAO / FBU

1980’s and 90’s: ES and South BA

Last frontier: Semiarid (2010’s and 20’s): North and Northeast region

2000’s: Middle-west and farthest South

Growth cycles

New forest frontiers

5.6 6.6 8.1

Pla

nte

d a

reas

(M

M h

a)

1960’s and 70’s: South and Southeast regions

North and Northeast: new expansion frontiers in eucalyptus’ plantations in Brazil. Suzano presents technological and positioning advantage.

Source: IBGE,2007

Planted forests still represent a small part of the available area in Brazil.

17

Page 18: Institutional presentation march 2010

Forestry Business Unit priorities

Consolidate operations in the Northeast region: states of Maranhão

and Piauí

Explore new business

opportunities related to the forestry base and Suzano’s competences

Focus on cost reductions, wood

logistics and operational

excellence

Long term view in research and

development and forestry

technology

18

Page 19: Institutional presentation march 2010

Pulp Business Unit

Page 20: Institutional presentation march 2010

Minerals

391

Production 2008 (MM ton)

51%

49%

72%28%

(13% of total fibers)

Mill

ion T

ons

Printing and Writing

Tissue

Paperboard

CorrugatedNewsprintOthers

Source: Poyry, 2008

Market pulp still represents the smaller part of the fiber used for paper production.

New paper capacities are being installed near to consumer markets, while cash cost drives implementation of new pulp capacities.

Overview of the pulp and paper production chain

Global production of paper and paperboard

8%

Total fiber needed

3628%

Recycled

185

Virgin fiber

177

Market pulp

50

Integrated pulp

127391

20

8%

Page 21: Institutional presentation march 2010

Global paper demand growth (2008-15) of 2.2% per year: Chinese and Latin American markets, including Brazil, outperform global growth rate.

Pulp demand growth drivers

Annual growth per paper segment

P&W 1.8%

Tissue 3.2%

Mill

ion T

ons

Printing and Writing

Tissue

Paperboard

CorrugatedNewsprintOthers

Source: Poyry, 2008

391

21

P&W: printing and writing

Paper demand growth (2008-15)

Page 22: Institutional presentation march 2010

11.8 21.22.5

1Includes world total production of market pulp, not only the highlighted countries.

Source: Hawkins Wright, July/ 09 - Volumes do not include production of unbleached pulp and high yield pulp.

US$ / ton (CIF/ North Europe)

Hardwood Softwood

High Cost

15.2

Low Cost High Cost

Ch

ile

West E

uro

pe

Fin

land

Can

ada (E

ast)

Sw

eden

Can

ada (B

ritish C

olu

mb

ia)

Ch

ile

Ind

on

esia

Can

ada

Fran

ce and

Belg

ium

Iberia, N

orw

ay e Sw

eden

Brazil

Fin

land

US

A

550

300

US$ 300 – 310 / t

US$ 450 - 540 / t

US$ 490 - 630 / t

SUZ

650

450

Low Cost

MM ton1

Brazilian pulp cash cost: structurally low

US

A

22

Page 23: Institutional presentation march 2010

549 615799

1,320

1,780

84% 81% 78%

80%

86%

16% 19% 22% 20% 14%

23

• Total production capacity of 2.6 million tons per year. Market pulp represents 1.8 million

tons.

• Sales of 1,780 Kton in 2009

• Net revenue of R$ 1,609 million in 2009

• 86% of total sales destined to exports: more than 40 countries, China being the main

destination

• Production cash cost: one of the lowest worldwide

• Organic growth projects increasing capacity by 4.3 million tons per year in the next years

Pulp Business Unit highlights

Page 24: Institutional presentation march 2010

Commercial approach

• Local presence in international markets: Asia, Europe and North America

• Technical support in each international office.

• Strong presence in China, with close market relationships and long term contracts

• FSC certified pulp

• More than 150 active clients

24P&W: printing and writing

Page 25: Institutional presentation march 2010

Pulp Business Unit priorities

Focus on operations: cost and logistics

efficiency

Local presence in main global

markets

Start up of the MA and PI

projects – new growth frontier

in Brazil

25

Page 26: Institutional presentation march 2010

Paper Business Unit

Page 27: Institutional presentation march 2010

• Global paper demand growth (2008-2015) of 2.2% per year: – P&W: +1.8% p.y.– Paperboard: +2.3 % p.y.

• Industry is still considered fragmented, but with significant regional concentration

• Emerging markets lead the supply and demand growth

P&W – Printing and writing / Paperboard includes Liquid paperboard

Source: Poyry – March, 2009

Suzano’s focus

456398391

Global paper demand

27

Page 28: Institutional presentation march 2010

Paper consumption x GDP per capita

Historically, there is a high correlation between GDP per capita and paper consumption. In Brazil, the positive economic growth forecasts represent an important driver for the domestic paper demand.

� Education

� Digital printing

� Customized

media

� Smart

packaging

� Electronic

media

� Plastics

Source: Poyry, 2008

0

50

100

150

200

250

300

350

0 5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 45.000

GDP per capita, US$

Consumption, kg per capita

Japan

China

USA

Sweden

Spain

Korea, Rep.

UK

Taiwan

Brazil

India = 7kg USA = 300kg

28

Demand growth drivers

Page 29: Institutional presentation march 2010

¹P&W: printing and writing / PB: paperboard and liquid paperboard

Source: RISI Latin America Forecast – August/09

Brazil and Latin America: Suzano’s main markets

• Economic growth and increase in the

industrial activity

• Education level improvement and

access to new technologies

• The P&W and PB demand is

expected to grow at a rate of 4.1%,

from 2010 to 2014: outperforming

the capacity increase in the region

• Latin America: net importing region

• Competitive advantage: geographic

proximity, lower logistic costs and

shorter lead times

29

Page 30: Institutional presentation march 2010

The markets in which Suzano

operates correspond to 31%of total consumption, or

2.6 million tons.

Main seasonal factors in the domestic paper demand:

• Government purchases for textbooks• Notebook exports• Back to school season• Year end holidays (packaging)

Paperboard does not include liquid paperboardSource: Bracelpa – 2009

Paper in Brazil

30

Page 31: Institutional presentation march 2010

More than 90% integrated production (pulp + paper)

Paper Business in Suzano

• Fx hedge: approximately 60% of paper

revenue in local currency

• Hedge against the cyclicality of pulp prices• Operational synergies: drying / repulping,

transport, taxes, environmental

infrastructure synergies

• Production capacity of 1.1 million ton

per year

• Approximately 400 clients, 300 in Brazil

• 5 productive plants

• 10 paper machines

• Strong brands: Report, Reciclato, Paperfect and others

• 2 paper merchants

31

Page 32: Institutional presentation march 2010

Paper Business Unit highlights

38%

37% 41% 43%

42%53%

62% 58%63% 59% 57% 47%

794916

1,071 1,098 1,162 1,116

• Net revenue of R$ 2.3 billion in 2009

• Brazil and Latin America represent approximately 70% of total sales

• Profitability and risks define sales distribution in different regions

• Leadership in Printing & Writing and white paperboard in South America

• 2 own paper merchants – SPP NEMO (2nd largest in Brazil) and Stenfar (Argentina)

• Complementary graphic and consumption portfolio

32

Page 33: Institutional presentation march 2010

Paper Business Unit priorities

Portfolio management,

sales and regional mix, focusing on

operational margin and return

Regional leadership in the main white paper

segments

Logistics and commercial approach

excellence

Discipline in growth

opportunities assessments

33

Page 34: Institutional presentation march 2010

Results

Page 35: Institutional presentation march 2010

Results 2009 2008 2009/2008

Sales volume (Kton) 2,896 2,482 16.7%

Paper sales – domestic market (Kton) 591 658 -10.1%

Pulp sales – exports (Kton) 1,519 1,089 39.6%

Net revenue - R$ Million 3,953 4,064 -2.7%

Net income - R$ Million 878 (451) n.a.

EBITDA - R$ Million 1,021 1,469 -30.5%

EBITDA - US$ Million 511 800 -36.2%

EBITDA margin 25.8% 36.2% -10.3 p.p.

Average exchange rate (R$/US$) 2.00 1.84 8.9%

Net debt 3,966 5,459 -27.4%

Net debt / EBITDA (LTM) 3.9 3.7 n.a.

Note: Since 2008, contemplates the adjustments of Law 11.638/07

Results 2009

35

Page 36: Institutional presentation march 2010

2,640 2,7873,099

3,410

4,064

49% 47%42% 47%

54%

51% 53% 58% 53% 46%

58%

42%

3,953

Note: the adjustments of Law 11.638/07 are contemplated since 2008.

Net revenue and EBITDA

36

Page 37: Institutional presentation march 2010

Implementation of Mucuri project

(Line 2)

Debt profile

Note: the adjustments of Law 11.638/07 are contemplated since 2008.

Acquisition of Ripasa

Start up of line 2 at Mucuri

37

Page 38: Institutional presentation march 2010

Adequate debt amortization schedule and liquidity profile:

• R$ 2.5 billion in cash (2009)

• Competitive debt costs

• Fitch affirms Suzano’s rating: AA- (bra) in May/09

Debt amortization schedule

38

Page 39: Institutional presentation march 2010

Capital markets

Increasing daily number of trades and recovery of higher average daily volumes

39

Page 40: Institutional presentation march 2010

Stock performance

40

70%

90%

110%

130%

150%

170%

190%

210%

Stock Performance(2009)

176.3 (SUZB5)182.7 (IBOV)

172.4 (IBrX50)

Page 41: Institutional presentation march 2010

New Growth Cycle

Page 42: Institutional presentation march 2010

2,850 2,850 2,850 2,850

4,150

5,450

7,150

PiauíUnitMaranhão

Unit

New unit and Mucuri

expansion

Mucuri Unit and new pulp line: analysis of the global economy and pulp market outlook� Definition on the new implementation schedule and start up dates until the end of 2009

New growth cycle

Considering the new projects, pulp annual

capacity will increase 4.3 million tons and the

total installed capacity will reach 7.2 million

tons per year.

421 The effective capacity will depend on the learning curves

Page 43: Institutional presentation march 2010

Wood supply (2013-2028)

• Acquisition of Vale’s forestry assets in Maranhão: 84,5 thousand ha of land (34,5 thousand ha already planted)

• Acquisition of eucalyptus timber from the Vale Florestar Program, starting in 2014 until 2028

• Technology cooperation agreement

• Railroad transportation for the pulp output to the port region of São Luiz until 2043.

• Start up in 2013 ensured with Vale’s forestry assets (planted forest) – on a competitive basis

Necessary planted area: 133 tsd ha

US$ 1,8 Billion

2009 to 2015

Forestry Capex Industrial CapexUS$ 200 Million

2011 to 2014

Maranhão Unit

Final agreements with Vale in July 2009:

43

Page 44: Institutional presentation march 2010

Wood supply(2015 onwards)

• Final agreement with Transnordestina in July 2009:

• Railroad transportation for the pulp output from Piauí to the port region of São Luiz until 2028

• Planting already started in MA licensed area

• Start up of Piauí unit scheduled for 2014, ensured with 5.5 years old forest

US$ 1,8 Billion

2009 to 2015

Forestry Capex Industrial CapexUS$ 370 Million

2012 to 2015

Necessary planted area: 160 tsd ha

Piauí Unit

44

Page 45: Institutional presentation march 2010

Maranhão Unit Piauí Unit

Maranhão and Piauí units

45

Page 46: Institutional presentation march 2010

Leadership

Competitiveness

Vision

Management

Capital structure

Key messages

Leading player in the regional paper market and one of the top 10 market pulp producers

One of the lowest cash costs in the world

Solid organic growth strategy

Consolidated management structure/model and alignment with shareholders

Disciplined capital structure management

46

Page 47: Institutional presentation march 2010

Investor Relations

www.suzano.com.br/ri+55 (11) [email protected]

47

Page 48: Institutional presentation march 2010

Experience of 35 years in the pulp and paper industry. CEO of Suzano Holding S/A and Chairman of the Board of Directors of Suzano Pulp and Paper S/A. CEO of IPLF Holding. CEO and Vice President of the Board of Directors of Polpar S/A. Vice President of Premesa S/A and Vocal.

Experience of 34 years in the pulp and paper industry. Vice President FIESP. Member of ABRINQ and EMBRAER’s Board of Directors. Member of BRACELPA’s Advisory Board. Former member of the Association Committee of Foreign Trade of Brazil and Chairperson of the Advisory Committee on Paper and Wood Products of Food and Agriculture UN organization in Rome.

Coordinator of Sustainability and Strategy Committee and member of Audit Committee and member of the Compensation Commission of the Board of Directors; Former president of the board and CEO of Hoechst of Brazil and senior executive of HoechstAG, Frankfurt. Member of RBS Group’s Board of Directors, of Cyrela Brazil Realty, of OGX, of Chemical Group DSM/Holanda, President of Renner Stores’ Board of Directors.

Experience of 31 years in the pulp and paper industry. Member of Sustainability and Strategy Committee, Chairman of Polpar’s Board of Directors, President of Premesa, Corporate VP of Suzano Holding, the IPLF Holding, President of Vocal, Chairman of Lazam-MDS Insurance Brokers and Administrator’s Board of Directors, Chairman of Ecofuturo Institute’s Board of Directors.

Experience of 30 years in the pulp and paper industry. Member of the Board and the Committee of Sustainability and Strategy; Director of Premesa, Corporate VP of Suzano Holding, a member of Lazam MDS Insurance Brokers and Administrator’s Board of Directors and VP and Director of the Council of Ecofuturo Institute.

Senior partner of Machado, Meyer, and Sendacz Opice Lawyers and Director of OAB, Brazil. President of CESA.Former Legal Adviser and Chairman of the Legislative Committee of the American Chamber of Commerce and Director of ABRASCA’s Legislative Committee. Former Justice Secretary for the State of São Paulo. (Independent)

Senior partner of Integra Associates. Member of Gerdau SA’s Board of Directors, Gerdau Metallurgical, Satipel Industrial SA, RBSGroup, Sao Paulo Alpargatas, Locates, Delphi Corporation (USA) and Johnson Electric (Hong Kong); Board Member of Brazil's Bunge, Brazil and Alcoa Veirano Assoc. Oscar was President of Bunge International and managing partner in Booz-Allen & Hamilton. (Independent)

Coordinator of Suzano Pulp and Paper’s Audit Committee. Former General Manager of WTORRE and President of TAM Airlines. Member of TAM and Daycoval Bank Board of Directors. (Independent)

Chairman of Board of Directors of Perdigão. Board member of WEG SA, Ultrapar Participações SA and Iochpe-Maxion SA. Former Director of the National Bank for Economic and Social Development - BNDES, and General Director of Corporate Group Iochpe-Maxion Industrial Holding. (Independent)

Experienced and active Board of Directors

DAVID FEFFER, 53Chairman

DANIEL FEFFER, 50Vice Chairman

BORIS TABACOF, 81Vice Chairman

CLÁUDIO SONDER, 67

ANTONIO MEYER, 63

OSCAR BERNARDES, 63

MARCO BOLOGNA, 54

NILDEMAR SECCHES, 61

JORGE FEFFER, 49

48

Page 49: Institutional presentation march 2010

Chief Executive Officer, 3 years at Suzano. Board of Directors’ Member of Archer Daniels Midland Company – ADM and of Marfrig.BRACELPA’s VP. Former Board of Directors’ member of SEBRAE, Gradiente, Crecisa and Amcham. Former chaiman of Ford Brasiland Ford Latin America, Itamarati Group, Ferronorte and Cecrisa and Executive of Petrobrás and of the Federal Government.Mechanical Engineer graduated at UFRJ.

Strategy, Corporate Development and Investor Relations Executive Officer, 6 years at Suzano. Former Paper Business UnitExecutive Officer (2005-08). Former Executive of JPMorgan in Brazil and NY (Investment Banking Global and Latin America),Chase Manhattan and Banco Patrimônio/Salomon Brothers. Graduated in Business Administration at FGV.

Chief Operation Officer, 5 years at Suzano. Has worked as Expansion Project Director of Mucuri Unit. Former executive of DowChemical Company, in Brazil, USA and Europe. Post-Graduated in Business Administration at FIA/USP.

Chief Financial Officer, responsible for Legal, 14 years at Suzano. Has worked at pulp and paper sector for 29 years. FormerDirector, Executive Vice-President and member of the Board of Directors of Vale. PhD in Business Administration graduated atUniversity of California, Berkeley.

Forest Business Unit Executive Officer, 2 years at Suzano. Former executive of Champion Pulp and Paper and International Paperin Brazil and USA. Post graduated in Forest Science and Wood Technology at USP – Piracicaba.

Paper Business Unit Executive Officer, 6 years at Suzano. Former Executive Manager of Suzano’s Pulp Business Unit and SalesGeneral Manager for Latin America at General Electric, at the Industrial Systems Division. MBA degree at Ibmec São Paulo.

Human Resources Area Executive Officer, joined Suzano in 2008. Former Human Resources Manager of Operations in GeneralElectric in Brazil and abroad, Global HR Director for Information Technology in the United States and HR Director for Mexico andLatin America. Former Executive of Carioca Engenharia, CR Almeida, and Bureau Veritas. Post Graduated in BusinessAdministration at COPPEAD.

Pulp Business Unit Executive Officer, joined Suzano in 2009. Former CEO of European operations of RGM Group andcommercial director of Aracruz. Graduated in Business Administration at Fundação Getúlio Vargas.

ANTONIO MACIEL NETO, 52

BERNARDOSZPIGEL, 64

ANDRÉ DORF, 36

ERNESTOPOUSADA, 42

JOÃO COMÉRIO, 44

CARLOS ANIBAL, 40

CARLOS GRINER, 46

ALEXANDRE YAMBANIS, 58

49

Distinguished management team