Tereos InternacionalThird Quarter 2013/14 Results
São Paulo – February 14th, 2014
Q3 2013/14 Highlights
2
Operational
Guarani:
Record crushing this crop of 19.7 million tonnes (full consolidation) driven by strong yields (92 t/ha or +11% above the average in the State of São Paulo) on slightly lower TRS (-1%)
Increased ethanol production in the quarter on better margins (40% of TRS vs. 36% last year)
Cogeneration sales continue to perform well on a YTD basis (+48% over 9M 12/13)
First benefits of Guarani 2016 efficency program
Cruz Alta and Severinia mills were granted the Bonsucro certification, which allows them to be in accordance with the European Directive for biofuels and renewable energy
Africa/Indian Ocean:
Climate conditions impacted crushing volumes but solid perfomance from Indian Ocean operations
Cereals Europe:
Higher grinding in the quarter compared to last year due to continuous improvement of Lillebonne operational performance
A&E margin improving versus last year and S&S contribution increasing sequentially
Cost and efficiency improvement programme “Performance 2015” progressing
Cereals Brazil:
Improved starch sales volumes while glucose sales ramping up; customers’ certification process ongoing
Strategic
Cereals Asia: Acquisition of 50% of Redwood Indonesia establishing presence in Indonesia, Asia’s third largest market for sweeteners. Closing pending regulatory approvals
Sugar:
Raw sugar prices rallied above 20.0 USD cents/lb in October, before dropping to 16.4 USD cents/lb at the end of December mainly due to higher production worldwide and comfortable stock-to-use ratios in major importing countries. Prices currently hovering around 16 USD cents/lb.
BRL/USD devaluation during the quarter (-7%) helped to offset the drop of raw sugar prices for Brazilian producers
Starch:
Mar, 2014 wheat future prices appreciated around 7% from Oct 1st to Dec 31st
The drop in wheat prices since beginning of January has lowered significantly the wheat to corn spread
Ethanol:
In Brazil, ethanol prices benefited from the 4% increase in gasoline prices at the refinery. Both hydrous and anhydrous prices were on average 9% and 7% higher quarter-on-quarter
In Europe, FOB Rotterdam prices continued to erode, declining during the quarter from €543/m3 to €492/m3, on weaker seasonal demand and ample stocks in Europe
3 Source: Bloomberg
Market Highlights
Jan-13 Apr-13 Jul-13 Oct-13
400
430
460
490
520
550
580
14
15
16
17
18
19
20
21
LIFFE#5 NY#11
US$/MT
Jan-13 Apr-13 Jul-13 Oct-13
150
170
190
210
230
250
270
Corn MATIF Wheat MATIF
€/MT
Jan-13 Apr-13 Jul-13 Oct-13
700
900
1100
1300
1500
1700
1900
400
450
500
550
600
650
700
Brazil ESALQ Europe Rotterdam
R$/m³ €/m³
Q32012/13
Currency Volume Price & Mix Others Q32013/14
1,903 2,015
+217
(35) (46) (25)
Q3 2012/13 Q3 2013/14
219 210
847 1,014
281250
557540
Starch Europe
Ethanol Europe
Holding
Series1
1,9032,015
Q3 2013/14 – RevenuesPositive Effect of BRL Devaluation and Improvement in Lillebonne Volumes
4
Net Revenues (R$ MM)
+5.9% +5.9%
Revenue was positively impacted by:
Higher ethanol prices and improved energy sales volumes in Brazil
Better performance of Lillebonne on higher volumes of ethanol and gluten
Positive currency impact of the weaker Real vs. Euro (-17% Y-o-Y)
But partially offset by:
Lower sugar volumes & prices in Brazil and reduced crop volumes in Africa/Indian Ocean
Slightly lower volumes of sweeteeners combined with overall lower prices
Lower ethanol trading volumes for Tereos Group (end of trading activities)
Net Revenues Evolution by Product
5
December 2012 – 3 Months
Sugar27%
Starch & Sweet-eners30%
Co-products
13%
Alcohol & Ethanol
17%
Others (incl.
Energy)13%
Sugar22%
Starch & Sweet-eners30%
Co-products
17%
Alcohol & Ethanol
18%
Others (incl.
Energy)14%
December 2013 – 3 Months
Well-diversified portfolio with relatively stable breakdown compared to Q3 12/13
Reduction in sugar volumes & prices in Brazil led to reduced share of sugar in total revenues
Co-products increased their share year-on-year on a combination of higher prices and volumes for gluten
Q32012/13
Brazil Africa / Indian Ocean
StarchEurope
EthanolEurope
Holding Q32013/14
264
+4
(25)
+4+31 +2
279
Q3 2012/13 Q3 2013/14
-2-8 2351
54
85 60
138 142Brazil
Africa / Indian Ocean
Starch Europe
Ethanol Europe
Holding
264279
Q3 2013/14 - Adjusted EBITDAIncreased Contribution of All Businesses, Except for Africa
6
Adjusted EBITDA improved year-on-year as a consequence of:
Improvement in profitability at Guarani, despite slightly lower sales (volume & prices) thanks notably to first benefits from Guarani 2016 (both at agricultural and industrial level)
Recovery in profitability at A&E Europe segment on higher volumes and lower input prices, despite reduced ethanol prices
Starch & sweeteners profitability benefiting from lower cereal input costs; however fixed cost increase, due to recent investments, not fully covered yet by higher volumes due to weak economic environment
Africa/Indian Ocean operations impacted by adverse climate conditions although Indian Ocean business continued to deliver a solid performance
Positive FX conversion effect linked to Real depreciation vs. the Euro year-on-year
Adjusted EBITDA (R$ MM)
Margin 13.9%Margin 13.9%
+5.8%+5.8%
Ethanol Sales (‘000 m³)Sugarcane Crushing (MM t) Sugar Sales (‘000 t)
7
-8.7% YoY -2.5% YoY
Sugarcane Brazil – Production & SalesRecord Sugarcane Crushing at 19.7 million tonnes
Energy Sales (‘000 MWh)
+44.2 YoY
Crushing
Higher crushing in 2013/14: 19.7 million tonnes or +8% y-o-y (full consolidation) and 18.3 million tonnes or +11% y-o-y (equity consolidation)
Better-than-expected agricultural yields at 92 t/ha vs. 84 t/ha in 2012/13
Mechanical harvesting at 93% for own sugarcane
Improvement in production
Overall production up 10% to 2.5 Mt (expressed in TRS)
Mix: 63% sugar, 37% ethanol vs. 64% / 36% last year
Sugar: 1.5 Mt +9% YoY
Ethanol: 535 Km³ +13% YoY
Progress on cogeneration
YTD energy sales (including trading) up 48% to 695 GWh
0.0% YoY
Q3
12/
13
Q3
13/
14
4,9 4,9
Q3
12/
13
Q3
13/
14
367 335
Q3
12/
13
Q3
13/
14
135 132
Q3
12/
13
Q3
13/
14
116 139
29
70
Own Sales Trading
Q3 2012/13
Price & Mix
Volume Price & Mix
Volume Others Q3 2013/14
556.8 540.4
(12)(32)
+21
(4)
+10
Sugarcane Brazil – FinancialsImproved EBITDA Despite Lower Volumes and Prices
Key Figures
In R$ Million
Q3
2013/14
Q3
2012/13 Change
Revenues 540 557 -3%
Gross Profit 92 84 +9%
Gross Margin 17.0% 15.1%
EBIT 24 6 +282%
EBIT Margin 4.4% 1.1%
Adjusted EBITDA 142 138 +3%
Adjusted EBITDA Margin 26.2% 24.8%
8
(1) Tereos Internacional allocates tilling expenses as cost. If tilling expenses were allocated as investment, Adjusted EBITDA for Q3 13/14 would have reached R$183 million.
Net Revenues (R$ MM)
-3.0%
Sugar Ethanol
Sugar: 55% of total net revenues
Volumes reduced -9% to 335 Kt
Average selling price: -4% Y-o-Y at 956 R$/t (ex-hedging), partly on negative mix effect
Ethanol: 30% of total net revenues
Volume sold down -3% to 132 Km3
Average price up 15% Y-o-Y at 1,232 R$/m3
Cogeneration (ex-trading): R$20.1 million vs. R$18.1 million in Q3 12/13
Stable volume crushed Y-o-Y, but production down 5% (expressed in TRS) on lower sugar content
Adjusted EBITDA: R$142 million
Improvement in profitability thanks notably to first benefits from Guarani 2016
Adjusted EBITDA Margin1 for Q3 13/14 including tilling as depreciation: 34%
-27.8% YoY
Sugarcane Africa/Indian Ocean – Production and Financials Climate Conditions Impacted Crushing Volumes
9
Sugarcane Crushing (’000 t) Sugar sales (‘000 t)
-23.3% YoY
Key Figures
In R$ Million
Q3
2013/14
Q3
2012/13 Change
Revenues 250 281 -11%
Gross Profit 58 100 -42%
Gross Margin 23.2% 35.7%
EBIT 22 49 -55%
EBIT Margin 8.8% 17.4%
Adjusted EBITDA 60 85 -30%
Adjusted EBITDA Margin 24.0% 30.3%
Revenue Breakdown by Product Sugarcane crushing
Indian Ocean: total crushing at 1.7 Mt (-6% vs. LY), impacted by the severe drought in Q3 13/14
Africa: sharp reduction in crushing (-35%) this crop on irrigation problems
Sugar production: down 12% this crop at 249 kt
Revenues: -11% Y-o-Y Lower crops in Indian Ocean and Africa
impacting revenues
Adjusted EBITDA: -30% Y-o-Y Solid performance in Indian Ocean, more than
offset by the impact of reduced crop volumes in Africa
Sugar In-dian Ocean
56%
Sugar Africa 19%
Trading and others
25%
Q3
12/
13
Q3
13/
14
1,176
849
Q3
12/
13
Q3
13/
14
86
66
Cereal Segment - Production and SalesHigher Grinding on Recovery of Lillebonne Production and Palmital Ramp-up
10
Cereal Grinding (‘000 t)
Starch & Sweeteners Sales (‘000 t)
+9.3% YoY -1.9% YoY
Co-products Sales (‘000 t)
+5.4% YoY
Alcohol & Ethanol Sales (‘000 m3)
-3.7% YoY
Grinding in Q3 13/14: +9% mostly driven by better performance at Lillebonne and ramp-up of Palmital corn factory
Starch & Sweeteners sales: -2% Reduction in sales of functional sweeteners and specialties, but some growth in starch thanks to prior year investment at Marckolsheim
Alcohol & Ethanol sales: -4% Significant recovery in own volume sold thanks to improved performance at Lillebonne. Lower ethanol trading sales for Tereos Group (end of trading activity)
Q3
1...
Q3
1...
742 811
Q3
12/1
3
Q3
13/1
4
412 404
Q3
12/1
3
Q3
13/1
4
5079
5825
Own Sales Trading
+58.0% YoY
Q3
12/1
3
Q3
13/1
4
276 291
Q3 2012/13
Volume Price & Mix
Cur-rency
Others Q3 2013/14
846.91,014
+47
(28)
+140 +8
Starch & Sweeteners – FinancialsPositive Volume and Currency Effect Led to Higher Revenues and EBITDA
11
Net Revenues (R$ MM)
+19.7%
Revenues: R$1,014 million, up 20%
Positive effect of Real devaluation vs. Euro (-17% on average Y-o-Y)
Higher starch and co-products sales, particularly gluten, more than compensated for lower sweeteners volumes and led to a positive +6% volume effect
Prices for S&S reflected the decrease of cereal and sugar prices (isoglucose); gluten prices were up year-on-year
Adjusted EBITDA: R$54 million, up 7% Y-o-Y
Improvement year-on-year due to currency effect, although EBITDA increased sequentially, thanks to lower input prices, but yet to fully benefit from recent investments in Europe and Brazil
Key Figures
In R$ Million
Q3
2013/14
Q3
2012/13 Change
Revenues 1,014 847 +20%
Gross Profit 160 139 +16%
Gross Margin 15.8% 16.4%
EBIT 3 10 -71%
EBIT Margin 0.3% 1.2%
Adjusted EBITDA 54 51 +7%
Adjusted EBITDA Margin 5.4% 6.0%
Q32012/13
Volume Price & Mix Currency Others Q3 2013/14
219 210.1
(32) (7)
+38
(7)
Alcohol & Ethanol Europe – FinancialsLower Wheat Prices and Better Industrial Performance at Lillebonne
Revenues: R$210 million, down 4%
Better industrial performance led to higher ethanol volumes
Lower volumes traded on behalf of Tereos and lower FOB Rotterdam prices
Adjusted EBITDA: R$23 million, up Y-o-Y
Benefit from lower wheat prices and fixed cost dilution on better capacity utilization
12
Net Revenues (R$ MM)
Revenue Breakdown by Product
Key Figures
In R$ Million
Q3
2013/14
Q3
2012/13 Change
Revenues 210 219 -4%
Gross Profit 22 -2 -979%
Gross Margin 10.3% -1.1%
EBIT 10 -19 -154%
EBIT Margin 4.8% -8.5%
Adjusted EBITDA 23 -8 -380%
Adjusted EBITDA Margin 10.9% 3.7%
- 4.0%
Ethanol own sales
69%
Ethanol traded 24%
Co-products
and other 7%
Q3 2012/13 Brazil Africa / In-dian Ocean
Starch Eu-rope
Ethanol Eu-rope
Q3 2013/14
203170
+34 +1
(58)(10)
Q3 2013/14 - Capital ExpendituresNear completion of CAPEX Programs Leading to Lower Investments Y-o-Y
13
Brazil: R$119 million
• Mostly related to maintenance, including replanting, and the cogeneration and capacity expansion of Guarani’s factories
• 80% of the expansion program completed Africa/Indian Ocean: R$15 million
• Primarily maintenance and plantation in Mozambique
Starch & Sweeteners: R$34 million
• Finalization of 1st phase of investments in Brazil corn starch facility
Alcohol & Ethanol Europe: R$3 million
• Factory maintenance at Lillebonne and DVO
-16.2%
CAPEX (R$ MM)CAPEX (R$ MM)
Brazil70%
Africa / Indian Ocean
8%
Starch Europe
20%
Ethanol Europe
2%
14
Cash Flow Reconciliation & Debt Composition
Working Capital: Peak level of inventories due to intercrop sales commitments in Brazil
Currency Effect on Debt: Devaluation of the Real against Euro and USD
Net Debt/Adjusted EBITDA: 4.9x vs. 4.2x on March 31st, 2013
Cash FlowIn R$ Million
9M 13/14
Adjusted EBITDA 830
Working capital variance (736)
Others (84)
Operating Cash Flow 10
Financial interests (151)
Dividends paid and received 3
Capex (590)
Others 135
Free Cash Flow (593)
Forex impact (603)
Others (1)
Net Debt Variation (1,197)
DebtIn R$ Million
Dec 31st, 2013March 31st,
2013 (Restated)∆
Current 1,932 1,829 103
Non-current 2,968 2,399 569
Amortized cost (27) (26) (1)
Total Gross Debt 4,873 4,202 671
In € 1,889 1,596 293
In USD 1,918 1,688 230
In R$ 1,047 882 165
Other currencies 46 62 (16)
Cash and Cash Equivalent (585) (892) 308
Total Net Debt 4,288 3,310 979
Related Parties Net Debt 229 13 217
Total Net Debt + Related Parties 4,519 3,322 1,197
Sugarcane
Brazil
Multi-year investment program in Brazil nearing completion to reduce investments level next year
First benefits of Guarani 2016 efficiency program
Impact of dry weather effect since December in Brazil on sugarcane crop volumes next year is being monitored closely. Guarani should benefit from 1 million tonnes of standing cane and the excess cane sold to other mills during the 2013/14 crop
Africa/Indian Ocean
Drought in the Reunion Island should lead to slight decrease in volumes next crop, while sugarcane crushing in Mozambique should start to recover
Cereals Europe
Continuous benefit of lower cereal prices with better utilization rates at Lillebonne to dilute fixed costs
Focus on “Performance 2015” plan to improve margins
Brazil
Ramping up of corn processing and glucose sales
Asia
Dongguan construction and Tieling diversification plan in China
Closing of the acquisition of Redwood Indonesia15
Outlook
IR Contact
Marcus ThiemeInvestor Relations Officer
Felipe MendesInvestor Relations Manager
Phone: +55 (11) 3544 4900Email: [email protected] www.tereosinternacional.com