RISI International Containerboard Conference Flvio Deganutti - PowerPoint PPT Presentation

RISI International Containerboard Conference Flávio Deganutti November, 2018

Flávio Deganutti Commercial Director of Papers • Degree in Chemical Engineering, a MSc in Paper Production, and a MBA in Business Administration • 20 years of experience in the Pulp and Paper sector • Joined Klabin in 2000, mostly dedicated to kraftliner, coated boards and Liquid Packaging

A little bit about KLABI N

integrated business model DI VERSI FI CATI ON AND FLEXI BI LI TY TOTAL LAND FI BERS 4 9 0 k hectares 3 .5 m illion tpy MARKET PULP 0.4mi tpy 1.1mi tpy long fiber & short fiber fluff pulp PAPER 2 .0 m illion tpy CONVERSI ON PLANTED FORESTS COATED BOARDS I NTEGRATED 9 2 0 thousand tpy 7 5 0 k tpy 2 3 0 k hectares FI BERS CORRUGATED I NDUSTRI AL 1 .8 m i tpy PI NUS EUCALYPTUS BOXES BAGS 140k 90k 7 5 0 k tpy 1 7 0 k tpy hectares hectares CONTAI NERBOARDS 1 .2 5 m i tpy RECYCLED FI BERS 2 6 5 THOUSAND tpy * Installed capacity

SUST AINABIL IT Y AT KL ABIN Mo re than 98% o f the mate rials use d by K labin in its pro duc tio n are fro m re ne wable o rigin +200 000 he c tar e s o f pre se rve d fo re sts ( 43% are in native fo re sts: twic e the amo unt Curre ntly, 86% o f re quire d by Brazilian le gislatio n) the e ne rg y matrix is made up o f re ne wable so urc e s 723 spe c ie s o f e ndange re d animals in the ir fo re sts Mo saic 88 spe c ie s Plantatio n o f e ndange re d plants in the ir fo re sts

NE W KL ABIN T E CHNOL OGY CE NT E R 5 re se arc h ro ute s o f the T e c hno lo g y Ce nte r Pape r Pulp Bar r ie r s Quality

Brazilian Macroeconomics

After 3 years of storm GDP 2015: ‐ 3.6% 2016: ‐ 3.5% 2017: 1.0% UNEMPLOYMENT RATE 2015: 8.5% 2016: 11.3% 2017: 12.8% Source: IMF

What is going to happen?

New President Main measures • Privatization • Social programs • Social security reform • Fiscal control • Inflation control Image source: Sérgio Lima/Poder360 ‐ 8.mai.2018

We believe in a better weather GDP 2018: 1.4% 2019: 2.4% 2020: 2.3% UNEMPLOYMENT RATE 2018: 11.8% 2019: 10.7% 2020: 10.2% Source: IMF

Uncertain exchange rate 3.90 3.83 R$/US$ 3.25 3.31 2016 2017 2018 2019 Exchange Rate Source: BCB

What is new?

CNC

MFC

Lignin Characterization of the various lignins EUCA PINUS Green Carbon Fiber PINUS Lignin based barriers EUCA PINUS

Evolution production Wood Plastic ? Fiber 523 459 482 429 2008 recession ? 400 373 335 300 200 200 100 1973 oil crisis Million tonnes 1950 1960 1970 1980 1990 2000 2010 2020 2030 Paper Plastic Source: Klabin

PI NE Forest Productivity Mean annual increment (MAI) m³/ha/year m³/ha/year 3 8 47 46 44 42 42 39 2 2 2 2 35 31 1 0 7 24 4 4 <69 70-89 90-04 05 06-09 10-11 12-15 16-20 21-25 EUCALYPTUS Forest Productivity Mean annual increment (MAI) m³/ha/year m³/ha/year 5 4 4 4 65 61 58 52 50 2 5 41 2 0 35 1 2 1 0 26 6 4 <73 74-85 85-95 95-05 05-11 12-15 16-20 21-25 PR/ BR Source: Ibá e and Klabin

Brazilian Containerboard

Corrugated packaging per capita in the World [m²] Japan 110 ranc e 81 F Spain 107 9.2 mm tpy Ge rmany 122 SA 108 U China 51 taly 108 I 24 mm tpy 46.6 mm tpy 15.5 mm tonne / ye ar ndia 7 Me xic o 28 I 5.8 mm tpy Brazil 30 3.6 mm tpy Chile 37 Arg e ntina 42 So uc e : Inte r national Cor r ugate d Case Assoc iation - ICCA 2017

Brazilian Corrugated Packaging Market Share Division by region 2016 16.8% NOR T HE AST NOR T H Player 1 10% 2.4% 8.0% Player 2* 42.4% 6.5% Other = 63 Player 3 MIDWE ST 5.6% 9.2% SOUT HE AST Player 4 47.7% 0.7% SOUT H e xpor ts 30% So urc e : ABPO *E stimate d

Corrugated packaging shipments in Brazil k tonne 2.2% ‐ 0.1% 3 580 3 506 3 502 2014 2017 2018e ABPO

Corrugated packaging basis weight g/m² ‐ 0.6% 533 530 528 523 521 520 516 513 509 506 502 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: ICCA

Paper consumption in corrugated board (2017 – %) 30% 70% Re c yc le d Vir gin Source: ABPO

Fruit exports Horticulture & Fruits (k tonne) are big potential for corrugated board 835 835 824 824 783 783 • Brazil is the 3 rd largest fruit 2015 2015 2016 2016 2017 2017 producer, but exports 3% of the total production 5 largest destinations Netherlands 323 • Only 10% of the domestic market UK 141 use corrugated board Spain 99 USA 45 Portugal 34

Protein exports (k tonne) Proteins: Brazil is the 555 first exporter and the 6 221 4 304 2015 1 362 second producer of meat 732 6 467 4 384 1 351 2016 and poultry. 4 320 1 486 697 6 503 2017 Po ultry Me at Pig s In 2017 proteins accounted for 22.5% flo c k 215.2 1.3 of the ABPO shipments millio ns billio ns Source: ABPA and MDIC

The Market is demanding better quality and Coated WTL Image source: Tondo Embalagens

E ‐ commerce represents 4.3% of the Brazilian total retail, but growths 3 times faster. Source: eBIT

CONTAINERBOARD BRAZIL k tonne 4.3 % 5 443 4 592 4 855 4 325 2017 2021 Pro duc tio n Appare nt Co nsumptio n Source: Risi Latin America Pulp & Paper Forecast

CONT AINE R BOAR D CAPACIT Y T o tal Capac ity 2017 Brazil T op 5 pr oduc e r s 4.9 million tonnes Kr aftline r + T e stline r + Se mic he mic al Re c yc le d me dium (k to nne s) Kr aftline r Player 1 819 Player 1 276 R e c yc le d Me dium 41% 40% 435 275 Player 2 Player 2 183 180 Player 3 Player 3 1% 87 162 Player 4 Player 4 18% 70 161 Player 5 Player 5 Se mic he minal T e stline r T otal 55 playe r s Source: Risi Capacity Report 2017 and Risi Latin American Pulp & Paper Forecast ‐ 5 ‐ Year

Kraftliner export k tonne 22% 588 267 2017 2021 Pro duc tio n Source: Risi Latin America Pulp & Paper Forecast

Kraftliner From the South Hemisphere • > % Eucalyptus • Light weight • High compression • Low cash cost • Better printing quality

What it comes to… • Better economic perspectives • Paper consumption increasing over plastic worldwide. Brazil well positioned to grow and export paper • Too fragmented corrugated market so far • High potential to expand domestic corrugated box market • Increasing HW content on containerboard • New bio ‐ based materials supporting light weights and barriers