Institutional Presentation
Disclaimer 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. 2
01 | Corporate Overview 02 | Strategy 03 | Maranhão Project 04 | Pulp & Paper Industry 05 | Results
Corporate Overview Suzano is a forestry-based company, publicly traded, controlled by Suzano Holding. Suzano operates in the pulp and paper businesses Itaqui Port “Carajás” • Structural competitive advantages Railroad • Pulp production costs: one of the lowest in the world Maranhão Piauí “Norte e Sul” • Leader in the regional paper market Railroad Mucuri • Certified plantations and products Forests Limeira Portocel Ports • Organic growth in pulp Suzano Mills Embu Vitória Rio Verde • New business: biotechnology Railroad Santos • Market cap: R$9.7 billion on 09/30/13 Capital Structure (September/13) Free Float 56% 42% Controlling Group 2% Treasury 4
Production Capacity Suzano’s production capacity has increased by 70% in the last 6 years. The start up of Maranhão Unit will increase its capacity to 4.7 MM ton/year of pulp and paper Maranhão Unit Production Capacity (‘000 tons) 4.710 3.210 3.210 2.850 2.850 2.750 3.420 1.920 1.920 1.920 1.720 1.750 1.750 1.650 1.485 1.240 820 640 570 456 1.290 1.290 1.290 1.080 1.100 1.100 1.100 1.100 915 784 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e Paper Pulp (‘000 ton) Pulp Paper Unit Integrated Market Pulp Uncoated Coated Paperboard Maranhão* - 1,500 - - - Mucuri 200 1,540 250 - - Suzano 460 40 270 90 200 Limeira 310 340 280 100 - Rio Verde - - 50 - - Embu - - - - 50 Total 970 3,420 850 190 250 Note: * Maranhão Unit is scheduled to start up in December 2013 5
Diversified and Complementing Product Portfolio Suzano’s products portfolio is made of market pulp, paperboard, uncoated paper and coated paper Net Revenues 52% Exports / 48% Domestic Market R$ 5.5 billion Market Pulp Paper 2 nd eucalyptus market pulp producer 45% 55% Paperboard Printing and Writing 1 st in Brazil with 27% market share 41% 12% Uncoated Coated 2 nd in Brazil with 35% market share 1 st in Brazil with 35% market share 32% 9% Note: Figures of last 12 months ending on 09/30/2013. Other paper represented 2% of net revenue on the period. The market share data includes paper imports. 6
Timeline Suzano has over 80 years of operation. 1924 to 1940 1950 1960 to 1990 2000 2013 Beginning of First investment in Growth and diversification in the Consolidation as one of the operations in the the pulp sector pulp and paper businesses largest Brazilian Groups New Growth Cycle paper industry Start up of the first Acquisition of Suzano Acquisition of Ripasa (50%) Start up of Start up of Bahia Sul paper mill mill Maranhão Unit Beginning of paper exports to Europe 1982 1960 2004 2007 2010 2012 1924 1955 1975 1992 2005 2008 2013 1939 1956 Leon Feffer starts Merger with Acquisition of paper trading FINANCIAL SHIELDS Start up of Line 2 FuturaGene, Bahia Sul activities at Mucuri PLC. Equity Offering Acquisition of Indústrias de Papel Launch of Report Rio Verde’s control paper Pioneerism in eucalyptus plantation Adoption of Bovespa’s Level I Acquisition of corporate governance 50% of Conpacel standards and Professional and KSR. 7 Management
Forestry Assets Suzano’s investment in R&D over many years allows the Company to expand its forestry assets to the northeast region of Brazil 2013 MA, PI and TO Total area (k ha) 1 854 Total: 405 k ha Total planted area (k ha) 2 447 Planted: 119 k ha Own planted area (k ha) 1 360 MA Forest Partnership Program (k ha) 86 Own Preserved Area (k ha) 1 339 PI TO Average Distance in Bahia (km) 2 73 Average Distance in São Paulo (km) 2 237 BA BA, ES and MG Total: 262 k ha Base 09/30/2013 1 Own and leased areas Planted: MG 2 Figures consider own, leased and third-parties areas ES 190 k ha SP SP 2013 Total: 187 k ha Annual planting (k ha) 53 Planted: 138 k ha Planted seedlings / day (k) 217 Note: Both own and leased land can suffer variation up to 5% quarter over quarter. The total amount can differ due to rounding. 8
Forestry Competitiveness in Brazil Brazil presents competitive advantages to support continuous increase of its global forestry standing Hardwood Productivity (m 3 /ha/year ) Competitive Advantages - Brazil 40 • Availability of productive land • Excellent soil and climate conditions 22 20 18 15 12 • Short harvesting cycle for planted forests 6 • Opportunity to recover degraded areas Brazil Australia Chile South USA Portugal Finland Africa • Low establishments and maintenance costs Source: ABRAF, BRACELPA, Poyry, Adapted by STCP Consulting Pulp Productivity • More wood / hectare Biotechnology • More pulp / m³ 10.5 adtm 1 /ha/year 5.5 adtm 1 /ha/year • Superior quality +100% • Smaller area 1980 2013 • Decreasing costs / m³ Source: Suzano 9 1 Admt: air dried metric ton
01 | Corporate Overview 02 | Strategy 03 | Maranhão Project 04 | Pulp & Paper Industry 05 | Results
2013 Focus on profitability Maximize return Maranhão Unit start Deleveraging on assets up in December/13 11
Maranhão Assets Deleveraging Project Profitability Focus 2013 Short-Term Actions Long-Term Actions Price discipline FuturaGene: biotechnology boosts Suzano’s competitiveness Optimization of region and client mix Increase in direct sales Reduction in average distance Expansion of client base Retrofitting of mills Reduction of costs and expenses Standardization and modernization of harvesting fleet Integrated logistics with synergy gains Investments to increase productivity 12
Maranhão Assets Deleveraging Project Profitability Focus 2013 • EBITDA growth • Debt management: longer terms and lower cost • Optimization of working capital: management of inventories, prepayment of receivables and lengthening of supplier payment terms • Maranhão Project capex Management • Maranhão Unit cash generation Average Cost of Debt (% ) Average Debt Maturity (years ) Amortization (R$ million ) 5.064 9,1% Sep/12 Sep/12 4,5 5,2% 3.605 7,9% Jun/13 Jun/13 1.897 1.839 4,7 4,7% 1.229 876 724 321 8,6% Sep/13 Sep/13 4,6 4,7% Cash 4Q13 2014 2015 2016 2017 2018 2019 onward R$ US$ Debt Profile September / 2012 September / 2013 Long Term Short Term Long Term Short |Term 88% 12% 93% 7% 13
01 | Corporate Overview 02 | Strategy 03 | Maranhão Project 04 | Pulp & Paper Industry 05 | Results
Assets Maranhão Deleveraging Profitability Project Focus Foresty 2013 • 25 year research history in the region • Annual production capacity of 15 million of seedlings • Competitive cost of land • ~ 70% of own wood supply in the long term Industrial • Start up scheduled for December/13 • 1.5 million ton/year eucalyptus market pulp • 100MW surplus of energy production • State-of-the-art technology and top tier equipment suppliers contracted • Capacitar Project Logistics • Outbound logistics based on railways • Export through a port located in the region of São Luís • Strategically located for pulp distribution to the North Norte Sul Railway Ferro Carajás Railway American and European markets Maranhão Unit- Imperatriz 15
Assets Maranhão Deleveraging Profitability Project Competitive Advantages of the Maranhão Project The Maranhão Unit is in the commissioning phase with its startup estimated for December/13 Structural advantages Operational Reliability Logistics Two dryers and two lime kilns 100% via railways Exports via Itaqui Port Senior team on critical positions (internal recruitment) Ease of training local labor Metso service center Competitive Tax incentives On-site technical support from Metso Reduction of 75% in income tax rate Learning curve guaranteed in contract Advantages Incentive in the form of accelerated with Metso from start-up for a period of depreciation 18 months 16
Assets Maranhão Deleveraging Profitability Project Investment in Maranhão Project is on budget April 2011 April 2012 November 2012 January 2012 September 2013 Maranhão Unit CAPEX 2009 2010 2011 2012 9M13 Total (R$ million) 193 162 841 2,123 1,378 4,697 T otal Investment Sources of Funds (US$ million ) 2,400 • BNDES: R$2.7 billion funding, 12 years to pay and 3-year grace period • Mandatory convertible debentures: R$1.2 billion • Foreign funding for imported equipment (ECAs among others) 575 • Cash flow generation Forest Industrial 17
Assets Maranhão Deleveraging Profitability Project Maranhão Project status Overall physical civil works: 94% Construction: 98% Electro-mechanical assembly: 84% Commissioning: 33% 18
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