Pulp and forest Presentation on Altri 2010
Disclaimer All data contained in this presentation may contain confidential and/or privileged information, and it is exclusively intended for its addressees. Unauthorized copy, reproduction or distribution is strictly prohibited. This presentation is provided “as is” without any express or implied warranty. The information here in is provided for general purposes only and do not constitute professional advice. This presentation may contain forward-looking information and statements that could, ultimately, prove inaccurate, due to unexpected risks and uncertainties. All data referred in this document must be reported to the document’s date. Although every reasonable effort is made to present current and accurate information, Altri makes no guarantees of any kind. The company declines any responsibility to update, revise or correct any of the information hereby contained. 2
Altri’s overview Business development Growth strategy Appendix 3 3
Company profile • Pulp and forest Portuguese listed company – Export 95% of production • One of the most efficient pulp producers worldwide – 2Q10: 35.6% EBITDA margin • Expansion program to produce around 900K tones/year in 2010 – 3 hardwood mills in Portugal • 82K ha of forest under management in Portugal – Full FSC and PEFC Certification – 30% self sufficiency rate in 2010 • Forest based renewable energy – Power production through the cogen process – #1 biomass player in Portugal: over 120MW under concession 4
Altri’s overview Business development Growth strategy Appendix 5 5
Strategic approach: forest integration Pulp production process Biomass power production Bark, leafs & Wood fibres forest residues Cooked and Burned to produce bleached for pulp electrical power Lignin Burned to produce electrical energy from cogeneration 6
Forest management 82K ha under management in Portugal – 30% self sufficiency rate in 2010 – Mainly focused on eucalyptus globulus Strategic location – High yield locations – 10/12 years growing age – 10 m 3 per ha per year Focus on R&D – Over 40 years of experience – Genetic improvements obtained through traditional breeding – Specif consuption below 3m 3 wood/ton of pulp Forest certifications for the whole area under management – FSC – PEFC 7
3 pulp mills in Portugal Celbi – Bleached Eucalyptus Kaft Pulp – Learning curve concluded – 600K tones/year operational in YE10 Caima – Bleached Eucalyptus Sulphite Pulp – 120K tones/year of market pulp – TCF pulp suitable for tissue production Celtejo – Bleached Eucalyptus Kaft Pulp – 150K tone/year of market pulp in 2010 – Concluded the learning curve of bleached eucalyptus kraft pulp process 8
Pulp sales: main markets Breakdown 2009 World economy exposure Main markets – 91% of total production exported – Strategic focus on the European Other 6% Portugal 3% market Asia – Small exposure to the Chinese market 6% Main end uses – Tissue Europe – Printing and writing 86% – Specialties Other 12% Increasing exposure to tissue Packaging 5% – Fastest growing paper market Tissue 36% – Extra demand in Portugal Specialties (new tissue mills in operation in 2010) 12% Printing and writing 36% 9
Cogen in the pulp mills Cogen scheme Pulp mills are self sufficient in power Wood Cogen involves burning the black liquor at the recovery boiler, generating electrical power Digester Pulp – Sold to the grid in their entirely at a “green” tariff Energy needs Black liquor – all the power needed is acquired from the public grid at the regular tariff Recovery Green Water liquor boiler Economics – 465 GW expected to be sold in 2010 Superheated steam – 420 GW expected to be acquired in 2010 Turbine & generator – Increasing net gains in 2010 and 2011 Steam Electrical power Mill Public uses grid 10
Biomass power production 50% joint venture with EDP Cabeceiras – Over 120 MW under concession Mortágua 1 12.8 MW 8.6 MW Jul 2011E – #1 biomass player in Portugal In operation – Equity accounting Gondomar 27.9 MW Celtejo Tariff Jul 2011E 12.8 MW In operation – 106€/MWh updated yearly on Mortágua 2 recorded inflation 27.9 MW Jul 2011E* – Feed in tariff granted for 25 years Economics Celbi Caima – Capex per MW around 2.5 M€ 27.9 MW 12.8 MW In operation – Load factors above 80% In operation – Biomass per MW around 1.6x – EBITDA margins around 45% * Under negotiations to replace Mortágua 1 11
Altri’s overview Business development Growth strategy Appendix 12 12
Increasing cash flow generation Global pulp market – BEKP list price at high levels (870 USD/ton in Europe) Altri Increased its pulp production capacity – Around 900K tones per year in 2010 – Top 10 BEKP worldwide in 2010 Altri is Increasing operating efficiency – Reduce cash cost per ton with the undergoing expansion plans Altri main focus is the European market – Largest BEKP market – Logistics advantage: lower freight costs 13
BEKP list price in Europe (€) Aug 10 685€/ton Jun 09 352€/ton 800,00 700,00 600,00 Price (Euros) 500,00 400,00 300,00 200,00 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-1 0 Jul-1 0 Source: www.foex.fi 14
Inventories in European ports Inventories sistematically below 700K tons vs historical avg of 1.3 million tons – Maximum reached in Feb 2009: 1.76 million tones – Average 2004/09: 1.334 million tones of inventories – November 2009: 0.651 million tones – historical min – July 2010: 0.686 million tones 2.000.000 1 .500.000 1 .000.000 500.000 0 2004 2005 2006 2007 2008 Jan- Fev- M ar- A br- M ai- Jun- Jul- A go - Set- Out- N o v- D ez- Jan- Fev- M ar- A br- M ai- Jun- Jul- 09 09 09 09 09 09 09 09 09 09 09 09 1 0 1 0 1 0 1 0 1 0 1 0 1 0 Source: www.europulp.net 15
Increasing pulp production capacity Doubling capacity in Celbi – Doubling capacity to 600K ton of BEKP – Total investment of 350M€ – Start operation in 2H09 – Reduce cash cast per ton with the undergoing expansion plans – New cogen turbine with 75MW – Fixed cost dilution Increasing capacity in Celtejo – 150K ton in 2010 – 190 K ton in 2011 – TCF market pulp – Ability to produce either BEKP or NBSK 16
Increasing pulp production capacity Evolution of nominal pulp production capacity in Altri Thousand tones 930 870 620 560 600 315 255 190 150 115 140 140 115 115 115 120 120 2005 3ºT05 2007 2010 2011 Caima mill Celtejo mill Celbi mill 17
Increasing pulp production efficiency Cash costs CIF per ton 2009 (Hawkins Wright April 2010) Euro per ton of pulp (EUR/USD exchange rate of 1.33) 500 450 400 350 300 250 200 150 100 50 0 Brazil Chile Indonesia World Iberia & China Sweden Finland USA France / Japan Canada weighted Norway Belgium average Fixed costs Freight & marketing costs Variable costs Altri 2010E The most efficient European player 18
Conclusion Pulp market in a very tight situation – Inventories at very low levels in Europe – Significant new demand from China • 2009/11 will be open 6 million tones of new paper mills – Material new capacity only foreseeable from 2013/2014 Altri is fully prepared to take the full advantage – Expansion projects concluded and learning curve finalized – Expansion CAPEX finalized – One of the most efficient players worldwide – Location in Portugal but strong exposure to global economy Strategic focus on cash flow generation and net debt reduction 19
Altri’s overview Business development Growth strategy Appendix 20 20
Business structure and shareholders 100% 99.58% 100% 50%* EDP Celbi Celtejo Caima Bioeléctrica Pulp mill Pulp mill Pulp mill Biomass * Joint venture with EDP Free-Float Major shareholders 58% 102.566 million shares Management 42% 21
Global pulp industry overview Global pulp demand 1997/2009 Var % 1999 2006 2007 2008 2009 08/09 20 240 Bleached softwood 18 472 21 540 21 985 21 225 - 9% 24 435 Bleached hardwood 15 808 21 840 22 873 23 625 + 3% 15 480 BEKP 7 001 10 300 11 945 13 195 + 17% 8 955 Other hardwood 8 807 11 540 10 928 10 430 - 14% Sulphite 1 260 795 780 780 725 - 7% 45 920 TOTAL WHITE PULP 35 540 44 165 45 638 45 630 + 0.3% Global pulp demand by region 1997/2009 Va% 1999 2006 2007 2008 2009 08/09 North America 7 879 8 465 8 688 7 970 7 080 - 11% Nordic 1 269 1 625 1 705 1 765 1 610 - 9% West Europe 14 293 15 435 15 718 15 225 13 555 - 11% East Europe 339 1 125 1 204 1 210 1 260 + 4% LatAm 1 877 2 145 2 354 2 435 2 795 + 15% Oceania 270 300 360 320 285 - 11% Japan 2 660 2 495 2 330 2 240 1 875 - 16% China n/a 6 130 6 595 7 990 11 180 + 40% Asia/Africa 6 953 6 455 6 689 6 475 6 115 - 6% TOTAL 35 540 44 175 45 643 45 630 45 755 + 0.3% Source: Hawkins Wright 22
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