santander brazil credit conference 2016
TRANSCRIPT
2
The information contained in this presentation may include statements whichconstitute forward-looking statements, within the meaning of Section 27A of the U.S.Securities Act of 1933, as amended, and Section 21E of the U.S. Securities ExchangeAct of 1934, as amended. Such forward-looking statements involve a certain degree ofrisk and uncertainty with respect to business, financial, trend, strategy and otherforecasts, and are based on assumptions, data or methods that, although consideredreasonable by the company at the time, may turn out to be incorrect or imprecise, ormay not be possible to realize. The company gives no assurance that expectationsdisclosed in this presentation will be confirmed. Prospective investors are cautionedthat any such forward-looking statements are not guarantees of future performanceand involve risks and uncertainties, and that actual results may differ materially fromthose in the forward-looking statements, due to a variety of factors, including, but notlimited to, the risks of international business and other risks referred to in thecompany’s filings with the CVM and SEC. The company does not undertake, andspecifically disclaims any obligation to update any forward-looking statements, whichspeak only for the date on which they are made.
Disclaimer
3
Pulp and Paper Market2Financial and Operational Highlights3
Agenda
Company Overview1
Expansion Project – Horizonte 24Dividends5Cost reduction initiatives and industry statistics 6
5
A Winning Player
Port Terminal Pulp Unit
Três Lagoas
Santos
AracruzPortocel
Caravelas
BelmonteVeracel
Jacareí
Superior Asset Combination Main Figures – 2015
Pulp capacity million tons 5.300
Net revenues US$ billion 3.021
Total Forest Base(1) thousand hectares 969
Planted area(1) thousand hectares 568
Net Debt US$ billion 2.821
Net Debt/EBITDA (in Dollars)(2) X 1.78
Source: Fibria(1) Including 50% of Veracel, excluding forest partnership areas and forest bases linked to the sales of Losango and forest assets in Southern Bahia State. (2) For covenants purposes, the Net Debt/EBITDA ratio is calculated in Dollars.
6
Fibria’s Units Industrial Capacity
* Veracel is a joint venture between Fibria (50%) and Stora Enso (50%) and the total capacity is 1,120 thousand ton/year
7
Worldwide presence
Strong global customer base
Long-term relationships
Focus on customers with stable business
Customized pulp products and services
Sound forestry and industrial R&D
Focus on less volatile end-use markets such as tissue
Efficient logistics set up
Low dependence on volatile markets such as China
Low credit risk
100% certified pulp (FSC and PEFC/Cerflor)
Sales Mix by End Use - Fibria Highlights
Fibria’s Commercial Strategy
Net Revenues by Region - Fibria
Region - 4Q15 End Use - 4Q15
42% 37%43% 43%
35% 36%46% 42% 39% 40%
47% 42% 42% 42%
26%30% 22%
29%31% 31%
19% 23% 27% 27% 17% 24% 25% 29%
22% 25% 26%21%
25% 26% 26% 27% 24% 23% 26% 26% 25% 20%
10% 9% 10% 8% 9% 8% 10% 9% 10% 10% 10% 9% 8% 9%
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Europe North America Asia Other
50%
35%
15%
Printing & Writing
Specialties
TissueEurope
42%
N. America
29%
Asia20%LatAm
9%
8
Pulp Supply Agreement: Puma Project
► Pulp volumes:
► Minimum of 900 kt of hardwood for the first 4 years
► 75% of 900 kt for the fifth year (phase out 1)
► 50% of 900 kt for the sixth year (phase out 2)
► Selling price based on the average net price charged by Fibria at the Port of Paranaguá (FOB Paranaguá)
► Sales destination: Globally, except for South America
► Operational startup: Mar/2016
► Agreement benefits:
Puma Project
Mutual value creation, with better servicing for both Companies customer’s base
Logistics and commercial structure synergies;
Ensure sales volumes;
Ensure pulp market access with Klabin brand.
Logistics and commercial optimization and synergies;
Support customers’ growth and enhance customers’ needs;
Potential development of new customers.
10
The “better than expected scenario” has become a reality again in 2015…
BHKP CAPACITY CHANGES
EXPECTED SCENARIO FOR 2015 IN DEC’14 REALIZED SCENARIO IN 2015
1,095
-315
-65
115
85
30
200
750
265
750
400
BEKP demand growth**
Net
Possible closures*
Ence Huelva
April Rizhao
Sappi Cloquet
Old Town (Expera)
Portucel Cacia
Eldorado
CMPC Guaiba II
Oji Nantong
Montes del Plata
Suzano Maranhão
-400 to -800
1,415 to 1,815
*Based on annual closures average (400,000 to 800,000 t/yr)
**Source: PPPC Outlook for Eucalyptus Market Pulp December 2014
1,232
1,450
-400
-315
-190
115
40
40
30
200
500
265
750
400
BEKP demand growth**
Net
Unexpected Downtimes
Ence Huelva
April Rizhao
Sappi Cloquet
Ence Navia
Old Town (Expera)
Portucel Cacia
Eldorado
CMPC Guaiba II
Oji Nantong
Montes del Plata
Suzano Maranhão
Indonesia, China,
Uruguay and Brazil
**Source: PPPC Market Pulp World 20
11
… and so has been the price scenario
BHKP Delivered to Europe (USD/t)
735
721
709
738
726
750
781
804802
784
1Q15 2Q15 3Q15 4Q15 Annual 2015
Consultants average at the end previous year Realized PIX/FOEX price
Consultants: Hawkins Wright, RISI and Brian McClay (published in the end 2014 for 2015 prices)
12
Better worldwide macroeconomics are the key drivers… But the special focus is on Europe
Real GDP % Annual Growth
Source: International Monetary Fund, World Economic Outlook Database, January 2016
3.4
-0.8
2.2
7.7
3.3
-0,3
1.5
7.7
3.4
0.9
2.4
7.3
3.1
1.5
2.4
6.9
3.5
1.7
2.4
6.3
World Euro Area USA China
2012 2013 2014 2015 2016
13
But the special focus is on Europe
Hardwood and Eucalyptus Shipments (000 t and % annual growth)
Source: PPPC World 20
-0.3%
-0.8%
3.3%
3.8%
-0.8% -0.6%
6.0%
5.0%
-200
0
200
400
2012 2013 2014 2015
BHKP BEKP
14
So, what can we expect for 2016?
BHKP CAPACITY CHANGES
EXPECTED SCENARIO FOR 2016 IN NOV’15 FIBRIA’S EXPECTED SCENARIO FOR 2016
930
-120
-55
-90
-40
30
660
800
BEKP demand growth**
Net
Possible closures*
APRIL Kerinci
Verso Wickliffe
Woodland
Old Town (Expera)
Altri Celbi
Klabin
CMPC Guaiba II
-400 to -800
385 to 785
1,200
*Based on annual closures average (400,000 to 800,000 t/yr)
**Source: PPPC Outlook for Eucalyptus Market Pulp May 2015 (930kt) and
Fibria’s estimates
1,200
1,165
-200
-120
-55
-90
-40
180
30
660
800
BEKP demand growth**
Net
Possible closures*
APRIL Kerinci
Verso Wickliffe
Woodland
Old Town (Expera)
APP South Sumatra
Altri Celbi
Klabin
CMPC Guaiba II
Positive Supply/Demand Balance!
15
1,232 kt
90 kt330 kt
611 kt201 kt
7%
5%5%
14%
4%
Total NorthAmerica
WesternEurope
China Others
Shipments of Eucalyptus Pulp
(1) Source: PPPC World 20 – January/2015
Global Market BEKP Demand
Paper Capacity increase in China
2014 2015 2016
FORECAST REALIZEDPREVIOUS FORECAST
LATEST FORECAST
LATEST FORECAST
Woodfree 256 256 760 980 1,000
Tissue 1,390 1,278 1,365 965 568
Cartonboard 2,100 1,326 730 900 630
Total 3,746 2,860 2,855 2,845 2,198
Source: Fibria and Independent Consultants
2015 vs. 2014(2)
(1) Source: PPPC World 20 – December/2014 (2) Source: PPPC World 20 – December/2015
1,734 kt
92 kt
386 kt717 kt
537 kt
11%
5%
6%
20%13%
Total NorthAmerica
WesternEurope
China Others
2014 vs. 2013(1)
16
Technical Age and Scale in the Pulp IndustryFurther closures are expected due to lack of adequate investments in the industry…
Hardwood (BHKP) Producers – Integrated and Market Pulp Mills
Softwood (BSKP) Producers – Integrated and Market Pulp Mills
STRONG
Weighted average
technical age 12.3 years
Weighted average
capacity 1,350,000 t/a
Aracruz
Três Lagoas
Veracel
Jacareí
WEAK
STRONGWeighted average
technical age 21 years
Weighted average
capacity 534,000 t/a
North American Pulp Mills Other Pulp Mills
WEAK
More than 6.6 million tons of capacity above 25 years and with annual capacity below 500,000 t/y.
PM Capacity, 1000 t/a
0
500
1000
1500
2000
051015202530
Technical age, years
PM Capacity, 1000 t/a
0
100
200
300
400
500
600
700
800
900
1000
051015202530
Technical age, years
17
Source: PPPC and Fibria
Closures of Hardwood Capacity Worldwide(000 ton)
Capacity closures DO happen
-910
-85
-1,260
-1,180
-540-500
-105
-1,085
-445
-315
-580
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-2017 E (1)
(1) As of January 2016 | 2016: -40kt Old Town (USA), -90kt Woodland (USA), -55kt Verso Wickliffe (USA), -120 April Kerinci (Indonesia) | 2017: -275kt Arauco Valdivia (Chile)
18
Even more competitive cash production cost w/ H2 BHKP (US$/t)
Source: Hawkins Wright (Price Forecast January 2016) and Fibria’s 4Q15 Earnings Release - FX considered by the consultant at R$/US$3.80. H2 cash cost
was estimated according to weighted average cost, after mill balance, converted at R$3.80. Includes energy sales.
468414
321 348295 265
179 163 144
70
87
97 2449
50
49 47
538501
418
372344
315
228364
83
2126
379
China USA Canada Iberia Indonesia Chile/Uruguay Brazil Fibria 2015 Fibria w/ H2
Cash Cost (US$/t) Delivery CIF Europe
BHKP (US$/t)
Interest
Capex
SG&AIncome Tax
2,075 1,170 1,035 2,290 3,700 4,795 15,270 Total: 30,335BHKP
capacity
(000’ t)
Working Capital
19
Gross capacity addition should not be counted as the only factorinfluencing pulp price volatility….(1)
List Price bottoming at US$650/t in 2011 and US$724/t in 2014
Cap
acit
y (0
00
to
n)
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
1,8
2,0
0
100
200
300
400
500
600
700
800
900
1.000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Valdivia
APP Hainan
Veracel Nueva Aldea
Santa Fé
Mucuri
FrayBentos
KerinciPL3
Três Lagoas
Rizhao
APP Guangxi
ChenmingZhanjiang
EldoradoMontes del Plata
Maranhão
Guaíba II
APP South Sumatra(2)
Klabin
OjiNantong
Horizonte II
BH
KP
pri
ces
-C
IF E
uro
pe
(U
S$/t
on
)
(1) Source: Hawkins Wright , Poyry and Fibria Analysis. Pulp price estimates according to Hawkins Wright (Dec/15), Brian McClay (Feb/16) and RISI (Feb/16)(2) Partially integrated production.
In the last 15 years, pulp volatility has been just 8%...why?
20
► Market price closer to producer’s marginal cost
► The marginal cost producers are based in Europe and North America
► Flattish industry cost curve
► Higher flexibility to adjust supply side during imbalanced market
► Lower dependency on Asian market (~25%) compared to hard commodities (70%+)
► Market end users are linked to consumer goods, such as tissue
► Incipient pulp price futures market and low liquidity
Source: Bloomberg – March 22th, 2016
0
40
80
120
160
De
c-9
9
May
-00
Oct
-00
Mar
-01
Au
g-0
1
Jan
-02
Jun
-02
No
v-0
2
Ap
r-0
3
Sep
-03
Feb
-04
Jul-
04
De
c-0
4
May
-05
Oct
-05
Mar
-06
Au
g-0
6
Jan
-07
Jun
-07
No
v-0
7
Ap
r-0
8
Sep
-08
Feb
-09
Jul-
09
De
c-0
9
May
-10
Oct
-10
Mar
-11
Au
g-1
1
Jan
-12
Jun
-12
No
v-1
2
Ap
r-1
3
Sep
-13
Feb
-14
Jul-
14
De
c-1
4
May
-15
Oct
-15
Mar
-16
BHKP - FOEX Europe (base 100) CPI (base 100)
21
Lowest volatility among commodities
Source: Bloomberg – March 31, 2016
Low volatility of hardwood pulp price, even though
new capacities have come on stream during the period.
2535455565758595
105115125135145155165175185195205215225
Jan
-12
Ma
r-1
2
Ma
y-1
2
Jul-1
2
Se
p-1
2
No
v-1
2
Jan
-13
Ma
r-1
3
Ma
y-1
3
Jul-1
3
Se
p-1
3
No
v-1
3
Jan
-14
Ma
r-1
4
Ma
y-1
4
Jul-1
4
Se
p-1
4
No
v-1
4
Jan
-15
Ma
r-1
5
Ma
y-1
5
Jul-1
5
Se
p-1
5
No
v-1
5
Jan
-16
Ma
r-1
6
Iron Ore Soy Bean Crude Oil Sugar BHKP - FOEX Europe Exchange Rate (R$/US$)
113
190
76
66
3939
100 = January 1, 2012
The only commodity with lower volatility than FX
Historical Volatility of Commodities (US$)
Since 2009
22
37%35% 34%
27%25% 26% 25% 24%
16%14%
6%
WTI
Crude Oil
Sugar Nickel Copper Soy Iron Ore Ibovespa LME
Metals
Cattle FX FOEX PIX
BHKP
24
Each 5% depreciation of the Real increases EBITDA by aroundR$420m and FCF by R$550m
815
1,488
1,173 1,1531,295 1,185
1,560
2009 2010 2011 2012 2013 2014 2015
Exchange Rate Average (R$/US$)
EBITDA Margin
EBITDA (US$ million)
Fibria net pulp price(US$/t)
Fibria net pulp price(R$/t)
2.00 1.76 1.67 1.95 2.16 2.35 3.33 3.83(1)
456
670 639 581 610 572 582
544(2)
29%
40%34% 36%
40% 39%
53%
912 1,179 1,067 1,133 1,311 1,3441,951
2,084
(1) According to Focus Report (Brazilian Central Bank – April 1, 2016) I (2) 2016 market consensus
2016 E
25
Cash Production Cost (US$/t) – 4Q15
186171
148
11
(56) 610
113
(14)(10)
4Q14 Inflation FX Lowerenergy price
Maintenancedowntime
Non recurringwood
Non recurringenergy
consumption
Cash cost4Q15
Total nonrecurring
Maintenancedowntime
4Q15 recurringcash cost
ex-downtime
Management initiatives gains partially offset the inflation impact
Fibria Cash Production Cost(1) (US$/ton)
Consistently controlling the
cash production
cost
26
Cash Production Cost in dollars saw a decrease over the past 7 years
231
264281
242234
220
186
2009 (2) 2010 (2) 2011 2012 2013 2014 2015
(1) Constant Currency (2) Excludes Conpacel
27
Net Results (US$ million) – 2015
1,600
107
(909)
(249)(101)
-0,227
155
-
(567)
178
AdjustedEBITDA
FX Debt MtMHedge
Net Interest Deprec., amortiz.and
depletion
Taxes Others Net Income
Non-recurringeffects
(1) Includes other exchange rate/monetary variations, other financial income/expenses and other operating income/expenses.
∆∆ (1)
Dividend proposal of US$90 million, representing 84% of net income.
Free Cash Flow
28(1) Before expansion capex
US$ million
EBITDA Margin
Average FX
-256
-77
-7
125
2977
194
84113
53
329
4
11151
103130
112
317
225
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
34% 33% 28% 30% 37% 37% 41% 39% 39% 41% 42% 41% 35% 35% 45% 50% 50% 56%
1.60 1.63 1.80 1.77 1.96 2.03 2.06 2.00 2.07 2.29 2.27 2.37 2.23 2.27 2.55 2.87 3.07 3.54
54%
3.84
29
Free Cash Flow(1) – 2015
US$ million
1,600
859
636
(484) (89)(151) (23) 6
( 223 )
AdjustedEBITDA
Capex(ex-H2 project &
land deal)
NetInterest
WorkingCapital
Taxes Others FCF(ex-H2 project &
land deal)
CapexH2 &
land deal
FCF
(3)
(1) Not considering dividend payments, capex related to the Horizonte 2 Project and the land acquisition in December 2015.(2) Not considering dividend payments.(3) Includes other financial results.
30
ROE and ROIC (US$)
30
ROE = Adjusted EBIT(1)/ Equity before IAS 41(2)
4.8%3.4%
5.7% 6.2%
25.1%
32.0%
2011 2012 2013 2014 2015 Annualized4Q15 US$
ROIC = Adjusted EBIT(3)/ Invested Capital before IAS 41(2)
(1) Adjusted EBITDA – CAPEX – Net Interest – Taxes (2) International accounting standards for biological assets.(3) Adjusted EBITDA – CAPEX – Taxes
3.9%
6.9%9.2%
8.0%
22.8%
29.2%
2011 2012 2013 2014 2015 Annualized4Q15 US$
1.67 1.95 2.16 2.35 3.34 3.84 1.67 1.95 2.16 2.35 3.34AverageFX
3.84AverageFX
31
Capital Structure: Fibria has achieved the lowest leverage ratio among its Latin American peers
Net Debt/EBITDA (x)(1)
Fibria Arauco CMPC Klabin Suzano
S&P BBB-/Stable BBB-/Stable BBB-/Stable BBB-/Negative BB+/Stable
Moody’s Ba1/Negative Baa3/Stable Baa3/Stable - Ba2/Positive
Fitch BBB-/Stable BBB/Stable BBB+/Stable BBB-/Stable BB/Positive
(1) Fibria’s historical data in BRL.
2.12.7
6.3
3.23.0
4.2
4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Fibria Suzano Klabin CMPC Arauco Eldorado
32
One of the best performances among Brazilian corporate issuers(1)
(1) G-spread on March 31, 2016
370396 401
438 452 454
517561
645
791823
Brazil BRF Fibria Suzano Klabin Globopar Embraer Braskem Vale Gerdau Petrobras
33
200
400
600
800
1.000
1.200
1.400
2010 2011 2012 2013 2014 2015
Fibria 2020 Fibria 2021 Fibria 2024
Interest expense, leverage and average cost of debt in US$ Historical G-spread (bps)
Strong credit quality
7.29
4.11 4.25
3.32
2.602.41
1.78
Leverage(x)
6.3 5.95.5
5.24.6
3.4 3.3(1)
6.3 5.95.5
5.24.6
3.4 3.3(1)
Cost of debt
473414 408
350
268200
141
2009 2010 2011 2012 2013 2014 2015
Interest Expense
(US$ million)Cost of debt (%)
BBB- BBB- Ba1
34
Fibria is able to create value for its shareholders with capital discipline
INDUSTRY
CONSOLIDATION ?
PULP
Growth with discipline
Best portfolio of projects
DIVIDENDS
BIO-ENERGY AND
OTHER OPPORTUNITIES
Complementary to pulp
Portocel
Land and forest
FREE CASH FLOW
WITHOUT JEOPARDIZING CREDIT METRICS
37
• Follow the growth of strategic customers
• Developing new customers
• Distribution to new geographic markets
• Efficiency and competitiveness gains in logistics
• Higher quality in customer service
• Greater ability to capture new expansion market windows
• Strong M&A position
Competitiveness
Commercial
positioning
Long-term growth
potential
What is the importance of growth for Fibria?
• Wider fixed costs dilution
• Cost curve position improvement
• Greater bargaining power with suppliers
38
Why expand Três Lagoas?
• Brownfield Project, synergies with current operations
• Modern plant, prepared for potential expansion
• Availability of wood and low average distance from forest to mill
• Forest based on the optionality concept and prioritizing lease and partnership models
• Additional energy surplus of 120 MWh
Start-up: 4Q2017
Capacity: 1.85 million tons
ESTIMATED BHKP CAPACITY RANKING 2017 (000T)
Source: Poyry and Fibria Analysis (as of May 2015)
0 2000 4000 6000 8000
Others
Klabin
Domtar
Pulp Mill Holding
Lwart
Portucel Soporcel
Georgia-Pacific
Resolute
Verso
Nippon Paper
Mondi
Oji
Mitsubishi
Marubeni
IP
Altri
ENCE
Cenibra
Arauco
Stora Enso
UPM
Eldorado
APP
Suzano
RGE/APRIL
CMPC
Fibria 7,950
Current Capacity
New Capacity
New Capacity – Klabin Agreement
New Capacity – Horizonte II Project
39
Pulp sales destination: Fibria growing where the market grows
(1) Considers 4Q15 last twelve months. | (2) Includes Klabin’s sales volume
37%
36%
43%
24%
19%25%
8%8%
Total sales volume distribution
after H2 start up(2)
Current net revenue distribution(1)
40
Schedule
Startup
Utilities clearance and commissioningL1 interconnections
during maintenancedowntime
Initial hiring of harvest workers
Hiring of operational team
Negotiations with concession holders and
Port of Santos tendering
2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
2015 2016 2017
Beginning of infrastructure and
purchase of the TGs
Purchase of theindustrial plants
Beginning ofconstruction
Beginning ofassembly
Beginning of forest machinery deliveries
Beginning of harvest
Definition of outbound logistics formats
Updated video
41
H2 Project will have the forest base ready for the start-up
Forestry base required:
H1: 120,000 ha
H2: 174,000 ha
Total: 294,000 ha
42
Forestry LogisticsLow average distance from forest to mill
FOREST MILL
95 km
H1 + H2 consolidated
43
Outbound logisticsFibria has logistical alternatives on a competitive basis
Ports
Highways
Railroads
Waterways
Data Collection / Preliminary Analysis
Logistics Costs
Opex - Rates
Capex
Qualitative
Modal conditions
Analysis
Mato Grosso
Mato Grosso do
Sul
Goiás
Brasilia
44
Expansion CAPEX updateFrom US$2.5 bi to US$2.2 bi
0.65
0.32
0.05
0.20
2.5
2.2
Original Revised
BRL EUR USD and others
72%
26%
2%
72%
19%
9%
FX and inflation partially offset by the negotiation with suppliers
CAPEX (US$ billion)
3%
60%
33%
3%1%
2015 2016 2017 2018 2019 and
thereafter
Timetable
45
Funding
Amortization Schedule – 4Q15 Proforma with TLS II – US$ million
Cost and maturity:
4Q15 4Q15 + H2
Average Cost (US$ p.a)
Average Maturity (years)
3.3%
4.3
2.8%
5.0
H2
2.0%
6.3
(1) Considering swap transactions. | (2) Debt FX 3Q15: 3.9729 / FX considering new funding for the TLS II Project: 3.90
275 274
581
1.113
482
668
140 126
721
115 10345 13
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
BNDES Bond PPE NCE ACC/ACE CRA ECA Outros FDCO Total
Capex H2: 1,350 668
46
Funding – Sources(1)(2)
(1) Cash on hand above minimum cash balance at end of Dec-2015
(2) Working capital to be released in 2016 and 2017 in commercial deal with Klabin
Even with expansion capex at current levels of FX, leverage ratios cancontinue to decrease
R$ 8.7 billion
BNDES CRA FDCO ECAs Banks WK release Total
47
Rating agencies understand that the Project will not jeopardize Fibria’s credit metrics
“We expect Fibria to continue benefiting from higher operating cash flows which
would allow it to enlarge its Três Lagoas industrial complex while keeping its debt at
reasonable levels for a low investment-grade rating”
“Fitch’s base case, which assumes that the company builds a new pulp mill (Três
Lagoas II) starting in 2015 and uses net pulp prices of between USD575 and USD675
per ton during the construction period, results in net leverage reaching 3.5x(1). Net
leverage would quickly decline to around 2.5x(1) once the mill becomes operationalin the second half of 2017”
(1) According to rating agency methodology
48
Project financials at a glance
UNIT R$ US$
Pulp production/year k tons 1,850 1,850
Expansion capex(1) $ billion 8.7 2.2
Expansion capex(1) $/t 4,702 1,204
Sustaining capex(2) $/t 193 49
Cash cost(3) $/t 341 87
Energy surplus MWh 120 120
(1) Includes chemical leasing and investments in order to increase capacity to 1,850 kt/year.
(2) Estimated sustaining capex in perpetuity considering capacity of 1,850 kt/year.
(3) Estimated weighted average cost, after mill balance. Includes energy sales.
Although some potential brownfields are listed,
there are significant challenges.
We don’t think that such competitiveness is easily replicable, since the scenario is becoming more complex…
Land
Infrastructure/Logistics
Certified wood availability
Environmental requirements
Public funding constraints
Governance standards
Cost of capital
Credit rating
51
►Indebtedness and Liquidity ►Market Risk Management►Risk Management►Corporate Governance►Related Parties Transactions►Anti-Corruption►Information Disclosure►Securities Trading►Antitrust►Genetically Modified Eucalyptus►Dividend Policy►Sustainability
Policies approved by the Board of Directors
52
Approval of Dividend Policy
►Proposed dividends based on cash generation, taking into considerationthe company’s strategic planning and in line with its policies, notably the
Indebtness and Risk Management policies.
►Preserving Investment Grade.
Commitment to Corporate Governance best practices.
Extraordinary dividend if Policy criteria are met.
53
Dividends
Dividend yield as of Dec, 31, 2015 = 7.5% (R$) | 8.3% (US$)Dividend yield as of Dec, 31, 2014 = 11.6% (R$) | 8.7% (US$)
OGM: Dividenddistribution approval: minimum compulsory + additional
April 28, 2015 May 14, 2015
Dividend Payment ofUS$49 million
EGM: Interim DividendPayment Approval
Nov. 30, 2015 Dec. 9, 2015
Dividend Payment ofUS$532 million
Oct. 22, 2015
Dividend PolicyApproval
April 27, 2016
Dec. 17, 2015
Dividenddistribution proposal of US$78 million(2)
approved by the Board of Directors
OGM to approvedividend distributionof US$80 million(1)
(1.1% of dividend yieldas of Dec, 31, 2015).
Mid-May, 2016
Dividend payment ofUS$80 million.
2015
2016
Mid-November, 2016
Extraordinarydividendappraisal
Mid-December, 2016
Extraordinarydividend payment(if approved)
(1) Considering March 7, 2016 FX – R$/US$3.7714
54
Dividends vs. Leverage
0
148
0
2.000
2,30
1,95
1,58
1,78
0,00
0,50
1,00
1,50
2,00
2,50
1T15 2T15 3T15 4T15
0,0
500,0
1.000,0
1.500,0
2.000,0
2.500,0
Dividends (R$ million) Leverage (x)
55
Historical Dividend Yield(1)
(1) Source: Bloomberg – Financial Analysis - Multiples
ConsideringMarket Capas ofDecember, 31st, 2015
56
Best dividend yields of 2015 among Brazilian corporate issuers
Source: Economática – the dividend yield calculation considers share price at the beginning of 2015
Dividends per share (R$)
Dividend Yield(%)
Cesp 4.85 20.78
Fibria 3.88 11.60
Santander BR 0.46 9.81
Qualicorp 1.89 7.02
MRV 0.39 5.55
BBSeguridade 1.68 5.53
TelefBrasil 2.73 5.32
Natura 1.48 4.67
Braskem 0.61 4.64
CSN 0.41 4.48
58
Structural Competitiveness
1. Third-party wood reduction
2. Forestry operations productivity
3. Industrial
NPV: US$0.4 billion
NPV: US$0.6 billion
NPV: US$0.1 billion
Total : US$1.1 billion
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
1. Third-party wood reduction
Wood supply recovering to normal condition
► Peaking in 2016;
► Returning to 2012’s levels by the end of 2017;
► NPV of R$1.4 billion from peak to normalized level.
Estimated level for 2015
Third-party wood decrease will benefitopex and capex
10
► Most part of the standing wood was already paid
► Despite the higher forest to mill distance, the wood from Losango is less expensive than the
available wood from around Espírito Santo and Bahia States
► Positive impact over industrial costs due to better productivity
11
1. Third-party wood reduction
Losango
The distribution costs by classes help us to apply resources in order to optimize wood production
10%
20%
40%
20%
10%10%
36%33%
15%
6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
01 - Diamond 02 - Gold 03 - Silver 04 - Bronze 05 - Lead
Current effective area Future effective area
2. Forestry operations productivity
CLASSIFYING THE FOREST BASE BY CATEGORIES
12
Structural change improving competitiveness
Possible Restrictions
Declivity
0: Higher than 35°
1: Btw 24°and 35°
2: Btw 0° and 24°
ConservationAreas
0: Within CAs(1)
1: Within EPA(2) andEBZ(3)
2: Out of EPAs andEBZ
Municipal Restrictions
0: Total restrictions1: Partial restrictions2: No restrictions
EPA Altitude
0: Higher than1800m1: Lower than1800m
Urban Zones
0: Urban Zones1: Outside urbanareas
Remnants ofnativevegetation
0: Remnants areas1: Outside remnantsareas
Possible Impediments
Possible combinations
X 0, 1 and 2, removed;
4 e 8, high potential(1) Conservation Areas(2) Envionmental Protection Areas(3) Environmental Buffer Zones
13
2. Forestry operations productivity
Identifying opportunities based on these combinations
Roads
Transportation
SilvicultureHarvest
14
2. Forestry operations productivity
Cost and Capex KPIs were also included in this geo-model
Mixed Harvest Mechanization (Hilly areas)
2. Forestry operations productivity
► Mixed cutting operation with high demand for MO and high risk to safety;
► Harvest limitations in areas above 24 degrees;
► Increase annual capacity to harvest in areas up to 35 degrees , previously "locked up" by harvesting capacity of manual staff;
► NPV: R$71 million
► Capex: R$5 million
► Operational since Aug 2015
PROJECT DESCRIPTION (JACAREÍ UNIT)
15
Harvest
PIFF
► Freight cost reduction;
► Increased load box for timber/woodchip transport
► Use of lightweight steel;
► Operational risk reduction (flipping);
► Investment: R$33 million
► NPV: R$139 million
► Startup: 2015 / 2016
PROJECT DESCRIPTION (ARACRUZ, JACAREÍ AND TRÊS LAGOAS UNITS)
Timber transportation Woodchip transportation
16
2. Forestry operations productivity
Transportation
Maritime Wood Shipping Project
► Capex and Opex reduction;
► Increase in cargo handling due to increase in
stack height volume
► Reduction in heavy truck road traffic
► Capex: R$38 million
► NPV: R$95 million
► Startup: Jan/2017
PROJECT DESCRIPTION (ARACRUZ UNIT)
17
2. Forestry operations productivity
Transportation
10%
30%
50%
70%
90%
100%
0%
20%
40%
60%
80%
100%
2015 2016 2017 2018 2019 2020
2. Structural change in forestry operations productivity
• Structural cost reduction of R$170 million per year (Capex + Opex) in 2020;
• NPV of approximately R$2 billion
• Seek opportunities for purchase / lease of more attractive areas, divest from unattractive land/forest, as well as the implementation of
technologies that will lead us to the structural cost
NPV Expected Curve
18
3. Industrial: maintenance downtimes schedule change
► Regulatory Standard 13 (Boiler and Pressure Vessel Inspection) extended the maximum period between recovery boiler inspections from 12 to 15 months.
► Fibria was the first company to use the extended period benefit
► NPV: R$385 million
19
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Mills
Aracruz A
Aracruz B
Aracruz C
Jacareí
Três Lagoas
Veracel
12 months 15 months
No maintenance downtime
No maintenance downtime
No maintenance downtime
No maintenance downtime
No maintenance downtime
2014 2015 2016 2017 2018
Biological Sludge Dryness Process
3. Industrial: Biological Sludge Dryer
► Variable cost reduction associated
with the disposal of sludge operations
in external landfill
► Capex: R$18 million
► NPV: R$100 million
► Startup: Dec./2016
PROJECT DESCRIPTION (JACAREÍ UNIT)
Operational Flow – Conditioning and biological sludge burn
•00Effluent+Sludge
Aeration Tank
Biological
Sludge Tank
•00Biomass Pile
Sludge Dryer
Biomass
Boiler
Sludge drying and burn in biomass boiler
20
70
Fibria’s tax structure
Fiscal - annual adjustment
Benefit Amount Maturity
Goodwill
(Aracruz
acquisition)
Annual tax deduction:
US$23 million (tax)
Remaining Balance Dec/15:
US$ 0.213 billion (base)
2018
Forestry Capex
in Mato Grosso
do Sul state
2015 tax deduction related
to depletion: US$9.4 millionUndefined
Tax loss carryforward and tax credits
Benefit Amount
Tax loss
carryforward
Balance up to Dec./15: US$33
million (base)
Accumulated tax
credits
Balance Dec./15:
- PIS/COFINS: US$186 million
- Withholding tax (IR and CSLL):
R$195 million
- Befiex: US$91 million
- Reintegra: US$23 million
2010 2011 2012 2013 2014 2015
US$ 9 million US$ 2 million US$ 8 million US$ 14 million US$ 12 million US$ 23 million
TAX BENEFITS
TAX PAYMENT (cash basis)
(1)
(2)
(1) Considering FX 3.9048 | (2) Considering average FX for the period.
71
Leadership Position
(1) Fiber Consumption, Recycled Fiber and Pulp: RISI | Market Pulp, Hardwood and Eucalyptus: PPPC Global 100 Report December 2015
Recycled Fiber 242 million t
46% 54%
59%
18% 82%
59% 41%
41%
30% 70%
25%75%
Fiber Consumption412 million t
Pulp 169 million t
Chemical140 million t
Mechanical30 million t
Integrated Mills 83 million t
Market Pulp 57 million t
Hardwood31 million t
Other Eucalyptus Pulp producers:
16 million t
Softwood/Other 26 million t
Acacia/Other 9 million t
Eucalyptus21 million t
Industry Outlook(1)
72
Global Market Pulp Demand
Demand growth rateHardwood (BHKP) vs. Softwood (BSKP) (000 ton)
Hardwood demand will continue to increase at a faster pace than Softwood
Source: PPPC report (Sept. 2015) Source: PPPC reports. Excludes Sulphite and UKP market pulp (Sept./15)
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
Hardwood Softwood
2014 - 2019 CAGR:Hardwood: +2.5%Softwood: +0.8%
000 ton 1999 2009 2019
Growth
1999-
2009
Growth
2009-
2019
Hardwood 16.3 24.8 33.8 52% 36%
Eucalyptus 6.0 15.9 24.1 165% 52%
Softwood 19.0 21.4 24.9 13% 16%
Market Pulp 35.3 46.2 58.7 30% 27%
Paper Production – Runnability with BHKP
Source: RISI conference, August 2014.
73
World Tissue Consumption, 1991-2013 (3)
Per Capita Consumption of Tissue by World Region (3)China's Share of Market Pulp (2)
24
15 15
12
7 65
1
N.America
WestEurope
Japan Oceania EastEurope
LatAm China Africa
10% 10%12% 14%
21%
17%
22%23% 23% 24%
25%
0
2
4
6
8
10
12
14
0%
5%
10%
15%
20%
25%
30%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Eucalyptus Hardwood Total % Compared to the global Market Pulp
(Kg/capita/year)
(million t) (kg/person/year)
Between 2005 and 2015, the Chinese market share of eucalyptus shipments increased by 20 p.p. (total market pulp: + p.p.)
0
5
10
15
20
25
30
35
1991 1996 2001 2006 2009 2010 2011 2012 2013N.America W.Europe E.Europe L.AmericaMiddle East Japan China Asia FEOceania Africa
LTM Growth Rate +4.2%
Benefiting From China’s Growth
(1) PPPC – Pulp China – Flash Report – December 2015(2) PPPC – W20. Coverage for chemical market pulp is 80% of world capacity (3) RISI
(million t)
8.724
4.301
2.154 2.029
166 59 15
9.185
4.898
2.041 1.849
201 189 8
BHKP Total LatinAmerica (1)
Indonesia Others(2) USA Canada WesternEurope
2014 2015
Latin America is the leading exporter of BHKP to China, accounting to approximately 53% of China's total imports in 2015.
(‘000s t)
(1) includes South Africa and New Zealand. | (2) Includes China, Japan, Malaysia, Russia, Thailand and Vietnam.
China’s Hardwood Imports of BHKP by Country (1)
74
Growth rate Chinese GDP vs. Eucalyptus Shipments to China (Sept-09 = base 100)
Source: Bloomberg and PPPC.
180
-
50
100
150
200
250
China GDP Eucalyptus Shipments
76
75
Commodities Differentiation
China GDP breakdown
China commodity demand - basis 100
49% 49% 48% 49% 49% 50% 50% 52% 51% 53% 53%
44% 47% 48% 48% 48% 48% 48% 46% 47% 45% 45%
8% 4% 4% 3% 3% 2% 2% 2% 2% 2% 2%
2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E
Consumption Investment Net Exports
2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E
Corn Soybeans Wheat Crude oil Iron ore Sugar BHKP
100
248
201194172
152
124115
Source: Itaú Macroeconomic Department and PPPC – Oct/15
76
Global Paper Consumption
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Developed Markets Emerging Markets
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Developed Markets Emerging Markets
CAGR 1996 – 2006Developed Markets: + 1.7%Emerging Markets : + 6.0%
85,291
117,611
15,548
37,474
P&W Consumption (000 tons)(1)
Tissue Consumption (000 tons)(1)
114,507
CAGR 2007 – 2016Developed Markets: - 4.0%Emerging Markets : + 4.1%
CAGR 1996 – 2006Developed Markets: + 2.4%Emerging Markets : + 6.9%
CAGR 2007 – 2016Developed Markets: + 1.4%Emerging Markets : + 6.7%
26,877
Source: RISI