Pulp and forest Presentation on Altri 2012
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 Market info and data Appendix 3 3
Company profile • Pulp and forest Portuguese listed company • Low exposure to Portugal (90% of pulp exported) • One of the most efficient European pulp producers • Ramp up to produce over 900K tones/year • 3 mills in Portugal • 84K ha of forest under management in Portugal – Full FSC and PEFC Certification – 30% self sufficiency rate • Forest based renewable energy – Power production through the cogen process – #1 biomass player in Portugal: 62 MWh in operation 4
Altri’s overview Business development Growth strategy Market info and data 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
3 pulp mills in Portugal Celbi (acquired in 2006) – Bleached Eucalyptus Kraft Pulp – Learning curve concluded – 600K tones/year operational in 2011 Caima (acquired in 1998) – Bleached Eucalyptus Sulphite Pulp – 110K tones/year of market pulp – DP conversion underway Celtejo (acquired in 2005) – BEKP or NBSK – 140K tone/year of market pulp in 2011 – Concluded the learning curve of bleached eucalyptus kraft pulp process 7
Forest management 84K 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 – Specific consumption below 3m 3 wood/ton of pulp Forest certifications for the whole area under management – FSC – PEFC 8
Pulp sales: main markets World economy exposure Breakdown 2011 – 91% of total production exported Main markets – Strategic focus on Europe Asia; 7% • #1 market in demand • Lower freight cost Portugal; 9% – Small exposure to the Chinese market Main end uses – Tissue – Printing and writing Europe 84% – Specialties Other 6% Increasing exposure to tissue Tissue 40% Specialties – Fastest growing paper market 21% – Extra demand in Portugal Packaging 4% Printing & writing 29% 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 Recovery the public grid at the regular tariff Green Water liquor boiler Economics – 62.9 M € sold in 2011 Superheated steam – 32.0 M € acquired in 2011 Turbine & generator Steam Electrical power Mill Public uses grid 10
Biomass power production 50% joint venture with EDP Cabeceiras – 62 MW in operation Mortágua 1 12.8 MW 8.6 MW – #1 biomass player in Portugal In study In operation – Consolidated on Altri’s accounts Gondomar 27.9 MW through equity method Celtejo In study 12.8 MW Tariff In operation Mortágua 2 – 106 € /MWh updated yearly on 27.9 MW In study recorded inflation – Feed in tariff granted for 25 years Celbi Financial highlights 2011 Caima 27.9 MW 12.8 MW – Turnover: 44,0 M € In operation In operation – EBITDA: 14.5 M € – EBITDA margin of 33% – Net profit: 1,7 M € 11
Altri’s overview Business development Growth strategy Market info and data Appendix 12 12
Increasing cash flow generation Global pulp market – Sustainable BEKP price at high levels – Sustainable demand growth Altri: increasing capacity and efficiency – Over 900K tones per year in 2012E – High EBITDA margin: 29% in 3Q12 – Cost control and efficiency driven projects – Strategic focus on European clients to optimize freight costs 13
Global pulp market Global hardwood demand grew 5% (CAGR) between 1990 – 2011 European hardwood demand grew 3% (CAGR) between 1990 – 2011 – From 4,8 Mton in 1990 to 9,4 Mton in 2011 (+4,5 Mton) – Mkt share decreased from 50% in 1990 to 35% in 2011 Chinese demand grew 18% (CAGR) between 2000 – 2011 – From 1,1 Mton in 2000 to 7,1 Mton in 2011 (+6,0 Mton) – Mkt share grew from 7% in 2000 to 27% em 2011 Organic growth in Europe Strong exogenous growth driven by Chinese demand 14
Global pulp market BEKP list price in Europe (1990 to date) 1000 900 800 700 600 Price 500 400 300 200 100 0 Euro USD Source: Hawkins Wright 15
Global pulp market Global historical hardwood demand growth (% year on year) 12% 10% 8% % 6% 4% 2% 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Hawkins Wright 16
Global pulp market European and Chinese hardwood demand growth (% year on year) Million ton Western Europe China Source: Hawkins Wright 17
Global pulp market Supply increased 3,8% (CAGR) between 2005 – 2011 – Mainly LatAm (10% per year, on average) – Decrease in Northern Hemisphere – From High Cost location to Low Cost location Region 2005 2006 2007 2008 2009 2010 2011 2012E CARG Canada 1.750 1.765 1.770 1.680 1.500 1.270 1.235 1.025 -7,4% USA 2.480 2.245 2.245 2.190 2.230 2.180 2.090 2.150 -2,0% Nordic Europe 1.580 1.755 1.545 1.385 1.055 930 1.025 1.000 -6,3% Western Europe 2.870 2.945 2.950 3.015 2.945 2.880 2.940 3.025 0,8% Eastern Europe 625 695 695 820 820 820 830 830 4,1% LatAm 6.900 7.760 9.550 11.285 12.425 13.065 13.155 13.570 10,1% Oceania 50 50 50 50 50 60 50 50 0,0% Japan 530 530 620 620 620 680 680 680 3,6% Asia/Africa 5.320 4.880 4.780 5.480 6.085 5.635 6.320 6.335 2,5% TOTAL 22.105 22.625 24.205 26.525 27.730 27.520 28.325 28.665 3,8% % change +2,4% +7,0% +9,6% +4,5% -0,8% +2,9% +1,2% Source: Hawkins Wright 18
Global pulp market Price reaction to new hardwood capacity 2005 – 2011 2007: + 1.695K ton 2008: + 2.510K ton 2010: + 280K ton 2011: + 930K ton + 575 euca + 85 euca + 1.785 euca + 1,800 euca - 295 Asian hardwood + 845 Asian hardwood - 90 Asian hardwood + 710 Asian hardwood 2006: + 520K ton 2009: + 1.830K ton + 930 euca + 1.270 euca - 410 Asian hardwood + 560 Asian hardwood 800 700 600 500 Euro 400 300 200 100 0 Source: Hawkins Wright 19
Altri: Increasing capacity & efficiency Optimization underway in Celbi mill – Doubling capacity to 600K ton of BEKP concluded in 2H09 – Debottlenecking projects to increase capacity up to 700K ton with minor CAPEX (below 10 M € /year) – Strong focus on cost management – Reducing wood consumption per ton – Reducing total amount of fixed costs (-3,5M € ) – Reducing cash cost per ton – Absolute decrease in fixed costs – Dilution (per ton) due to extra capacity 20
Altri: Increasing capacity & efficiency BEKP focus in Celtejo mill – 141K ton produced in 2011 (swing between NBSK and BEKP) – Strategic focus on BEKP from 2012 onwards – Capacity increase through debottlenecking projects up to a technical limit of 200K ton – Low annual CAPEX needs (4M € /year) DP project in Caima mill – 107K ton of BEKP produced in 2011 – Chemical cooking process (sulphite) enables an efficient conversion into dissolving pulp – No major technical and process changes. Low CAPEX needs (5M € /year) – 100K ton of low cost/ton DP from 2013 onwards 21
Altri: Increasing capacity & efficiency Evolution of nominal pulp production capacity in Altri Thousand tones 847 787 560 540 599 315 255 141 133 115 140 140 115 115 115 114 107 2005 3ºT05 2007 2010 2011 Caima mill Celtejo mill Celbi mill 22
Altri: Increasing capacity & efficiency Cash costs CIF per ton Q1 2012 estimates USD per ton of pulp Celbi 2013E In line with lowest cost producers USD/ton Var costs Fixed costs Freights and marketing Source: Hawkins Wright & Altri 23
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