2009 apimec presentation
DESCRIPTION
TRANSCRIPT
Certain statements in this presentation may constitute forward-looking
statements. Such statements are subject to known and unknown risks and
uncertainties that could cause the Company’s actual results to differ materially
from those set forth in the forward-looking statements. These risks include
changes in customer demand for the Company’s products, changes in raw
material costs, seasonal fluctuations in customer orders, pricing actions by
competitors, significant changes in the applicable rates of exchange of the
Brazilian real against the US dollar, and general changes in the economic
environment in Brazil, emerging markets or internationally.
Disclaimer
2
Agenda
Corporate Overview
Forestry Business Unit
Pulp Business Unit
Paper Business Unit
Results
New Growth Cycle
4
12
19
27
35
42
3
Corporate Overview
Suzano Pulp and Paper
Capital markets• Management performance
assessment• Transparency• Funding for growth
• Second largest eucalyptus pulp
producer in the world and one of
the top 10 market pulp producers.
• Leader in the regional paper
market
• World largest FSC certified planted
area.
• New growth cycle: from 2.8 to 7.2 million tons per year of paper and
pulp.
• Pulp production costs: one of the
lowest in the world.
• Solid business structure abroad.
• Capital markets presence: free
float of 46%.
Defined controlling group• Reputation• Long term vision
5
Ownership and Management
Professionalmanagement• Capital discipline• Rapid decision-making
process
Balanced and complementary portfolio
Market pulp(38% of net rev.)
Papers (62% of net revenue)
Printing and Writing (49% of net revenue) Paperboard
(13% of net rev.)Uncoated (41% of net rev.)
Coated(8% of net rev.)
2nd largest
eucalyptus pulp producer in the world
2nd in Brazil
Market share: 27%1st in Brazil
Market share: 24%1st in Brazil
Market share: 28%
R$ 4.1 billion in net revenue
57% in exports / 43% in domestic market
Diversified products and markets
Note: Market share figures include paper imports. Last twelve months until June, 2009.
6
Note: The effective capacities will depend on the learning curves.
1,7201,4851,2401,200
1,920
2,750 2,850
7,150
Piauí Unit
Maranhão Unit
New unit and Mucuri expansion
Sustainable growth
Suzano’s production capacity has increased by 130%in the last five years. The Company is prepared for a
new growth cycle that will increase its capacity to 7.2 million tons per year of pulp and paper.
7
Corporate structure
BU: Business Unit
SP: Service Providers
Board of Directors (BD)9 members (4 independent)
BD committees
CEO
Objectives:• Greater focus on customers
• Improved accountability• Development of leaders
The Business Units model provides performance and returns assessments in each business
Management
Sustainability and Strategy
Audit
SP Operations
SP Finance
SP Human Resources
SP Strategy, Corporate Dev. and IR
Forestry BU Paper BUPulp BU
8
Management model
Operational Excellence• Six Sigma
• Routine management
• Matrix budgeting
Awards and Certifications
Corporate Risk Management• COSO1 methodology
• Corporate governance structure
based on committees – direct report
to the directors and Board.
Strategic Planning• Focused on Value Based
Management (VBM)
• Innovation and R&D
• Sustainability
Alignment of Interests• Executives compensation based on
EVA metrics
• Higher variable portion in total
compensation
9¹Internal control methodology of the Committee of Sponsoring Organizations of the Treadway Commission
.
Sustainability
FSC – Forest Stewardship Council
CCX – Chicago Climate Exchange WBCSD - World Business Council for Sustainable Development
Triple Bottom Line – GRI approach
Social• Focus on education:
– Public libraries– Public schools remodeling – Educational programs
(with ECOFUTURO)
Environment• FSC – forest management and custody
chain management• CCX e WBCSD member• ECOFUTURO (Parque das Neblinas)
Financial and Economic• Growing scale and revenues • Improving margins and returns• Solid cash flow generation
10
Growth platform
Competitive assets with global scale
Consolidated presence in the
main pulp markets and leader in the
regional paper market
New growth cycle with
competitive projects
Consolidated management structure and
model
11
Qualified team that combines diversity and focus on execution
Forestry Business Unit
Forestry competitiveness
Brazil: high productivity, forestry technology, low production costs and available areas for expansion
Forest Planted Planted Planted Native
Harvest cycle (years)
7 8 12 80
Main producers Brazil
Indonesia, Malaysia
and Vietnam
Spain, Portugal, Chile and Uruguay
Canada, Finland
and Sweden
13
100%
1980 2008
5.511
Biotechnology
Classic improvement
Evolution with state-of-the-art technology
Technology innovation• More wood/ ha• More pulp/ m3
• Higher quality• Less planting areas• Lower costs
Productivity (admt¹/ha/year)
29 31
44
21
Biotechnology
Classic improvement
ClonesMonoprogeny planting
Soils and nutrition
Forest yield evolution (m³/ha/year)
14
1960 1970 1991 1998 2008
¹admt: air dried metric ton
¹ Conpacel: corresponds to 50% of former Ripasa’s areas.
² Does not include infrastructure and available land for planting.
³ Does not include new sites announced, except for land acquired from Vale.
Total preservation area:
252 tsd ha2
Lands and forests
Forests average distance: 211 Km
Forests average distance: 74 Km
StateOwn land (tsd ha)
Total Planted
São Paulo 89 49
BA and ES 216 125
Minas Gerais 57 22
Maranhão 197 40
Conpacel¹ (SP) 51 36
Total SPC³ 610 272
Independent farmers3 - 92
Suzano’s production is based on 100% renewable eucalyptus planted forests. Preserved native
forest area of approximately 40% of own land.
15
Plants
Ports
Forests
Soil and climate conditions similar to Australia’s facilitated the development of superior clones in Brazil (innovation and R&D)
DNA Suzano: pioneering and innovation
1980 1990 2000
16
Source: BRACELPA / FAO / FBU
1980’s and 90’s: ES and South BA
Last frontier: Semiarid (2010’s and 20’s): North and Northeast region
2000’s: Middle-west and farthest South
Growth cycles
New forest frontiers
5.6 6.6 8.1
Pla
nte
d a
reas
(M
M h
a)
1960’s and 70’s: South and Southeast regions
North and Northeast: new expansion frontiers in eucalyptus’ plantations in Brazil. Suzano presents technological and positioning advantage.
Source: IBGE,2007
Planted forests still represent a small part of the available area in Brazil.
17
Forestry Business Unit priorities
Consolidate operations in the Northeast region: states of Maranhão
and Piauí
Explore new business
opportunities related to the forestry base and Suzano’s competences
Focus on cost reductions,
wood logistics and operational
excellence
Long term view in research and
development and forestry
technology
18
Pulp Business Unit
Minerals
391
Production 2008 (MM ton)
51%
49%
72%28%
(13% of total fibers)
Mill
ion T
ons
Printing and Writing
Tissue
Paperboard
CorrugatedNewsprintOthers
Source: Poyry, 2008
Market pulp still represents the smaller part of the fiber used for paper production.
New paper capacities are being installed near to consumer markets, while cash cost drives implementation of new pulp capacities.
Overview of the pulp and paper production chain
Global production of paper and
paperboard
8%
Total fiber needed
3628%
Recycled
185
Virgin fiber
177
Market pulp
50
Integrated pulp
127391
20
8%
Global paper demand growth (2008-15) of 2.2% per year: Chinese and Latin American markets, including Brazil, outperform global growth rate.
Pulp demand growth drivers
Annual growth per paper segment
P&W 1.8%
Tissue 3.2%
Mill
ion T
ons
Printing and Writing
Tissue
Paperboard
CorrugatedNewsprintOthers
Source: Poyry, 2008
391
21
P&W: printing and writing
Paper demand growth (2008-15)
Global pulp demand
MM tonActual Forecast % p.y.
2008-13
Var. Kton
2008-132008 2009 2010 2011 2012 2013
Total BKP
softwood21,250 19,640 19,930 20,195 20,195 20,220 -1.0% -1,030
Total BKP
hardwood23,673 22,475 23,825 24,710 25,135 25,375 1.4% 1,702
Eucalyptus 13,241 14,095 14,795 15,090 15,430 15,805 3.6% 2,564
Sulphite 780 655 550 525 525 525 -7.6% -255
Total bleached
pulp45,703 42,770 44,305 45,430 45,855 46,120 0.2% 417
22
Increase in global production capacity in the period is limited due to projects’ cancellations and suspensions.
Eucalyptus pulp demand increases 3.6% per year (2008-13), or 2.6 million tons in the period
Source: Hawkins Wright, July/ 09
11.8 21.22.5
1Includes world total production of market pulp, not only the highlighted countries.
Source: Hawkins Wright, July/ 09 - Volumes do not include production of unbleached pulp and high yield pulp.
US$ / ton (CIF/ North Europe)
Hardwood Softwood
High Cost
15.2
Low Cost High Cost
Ch
ile
West E
uro
pe
Fin
land
Can
ada (E
ast)
Sw
eden
Can
ada (B
ritish C
olu
mb
ia)
Ch
ile
Ind
on
esia
Can
ada
Fran
ce and
Belg
ium
Iberia, N
orw
ay e Sw
eden
Brazil
Fin
land
US
A
550
300
US$ 300 – 310 / t
US$ 450 - 540 / t
US$ 490 - 630 / t
SUZ
650
450
Low Cost
MM ton1
Brazilian pulp cash cost: structurally low
US
A
23
549 615799
1,320
969
84% 81%78% 80% 88%
16% 19% 22% 20% 12%
24
• Total production capacity of 2.6 million tons per year. Market pulp represents 1.8 million
tons.
• Sales of 969 Kton in the 1H09
• Net revenue of R$ 851 million in the 1H09
• 88% of total sales destined to exports: more than 40 countries, China being the main
destination
• Production cash cost: one of the lowest worldwide
• Organic growth projects increasing capacity by 4.3 million tons per year in the next years
Pulp Business Unit highlights
Commercial approach
• Local presence in international markets: Asia, Europe and North America
• Technical support in each international office.
• Strong presence in China, with close market relationships and long term contracts
• FSC certified pulp
• More than 150 active clients
25P&W: printing and writing
Pulp Business Unit priorities
Focus on operations:
cost and logistics
efficiency
Local presence in main global
markets
Start up of the MA and PI
projects – new growth frontier
in Brazil
26
Paper Business Unit
• Global paper demand growth (2008-2015) of 2.2% per year: – P&W: +1.8% p.y.– Paperboard: +2.3 % p.y.
• Industry is still considered fragmented, but with significant regional concentration
• Emerging markets lead the supply and demand growth
P&W – Printing and writing / Paperboard includes Liquid paperboard
Source: Poyry – March, 2009
Suzano’s focus
456398391
Global paper demand
28
Paper consumption x GDP per capita
Historically, there is a high correlation between GDP per capita and paper consumption. In Brazil, the positive economic growth forecasts represent an important driver for the domestic paper demand.
� Education
� Digital printing
� Customized
media
� Smart
packaging
� Electronic
media
� Plastics
Source: Poyry, 2008
0
50
100
150
200
250
300
350
0 5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 45.000
GDP per capita, US$
Consumption, kg per capita
Japan
China
USA
Sweden
Spain
Korea, Rep.
UK
Taiwan
Brazil
India = 7kg USA = 300kg
29
Demand growth drivers
¹P&W: printing and writing / PB: paperboard and liquid paperboard
Source: RISI Latin America Forecast – August/09
Brazil and Latin America: Suzano’s main markets
• Economic growth and increase in the
industrial activity
• Education level improvement and
access to new technologies
• The P&W and PB demand is
expected to grow at a rate of 4.1%,
from 2010 to 2014: outperforming
the capacity increase in the region
• Latin America: net importing region
• Competitive advantage: geographic
proximity, lower logistic costs and
shorter lead times
30
The markets in which Suzano
operates correspond to 31%of total consumption, or
2.7 million tons.
Main seasonal factors in the domestic paper demand:
• Government purchases for textbooks• Notebook exports• Back to school season• Year end holidays (packaging)
Paperboard does not include liquid paperboardSource: Bracelpa – 2008
Paper in Brazil
31
More than 90% integrated production (pulp + paper)
Paper Business in Suzano
• Fx hedge: approximately 60% of paper
revenue in local currency
• Hedge against the cyclicality of pulp prices• Operational synergies: drying / repulping,
transport, taxes, environmental
infrastructure synergies
• Production capacity of 1.1 million ton
per year
• Approximately 400 clients, 300 in Brazil
• 5 productive plants
• 10 paper machines
• Strong brands: Report, Reciclato, Paperfect and others
• 2 paper merchants
32
Paper Business Unit highlights
38%37% 41% 43%
42%
51%62% 58% 63% 59% 57%
49%
794916
1,071 1,098 1,140
547
• Net revenue of R$ 1.2 billion in 1H09
• Brazil and Latin America represent approximately 70%¹ of total sales
• Profitability and risks define sales distribution in different regions
• Leadership in Printing & Writing and white paperboard in South America
• 2 own paper merchants – SPP NEMO (2nd largest in Brazil) and Stenfar (Argentina)
• Complementary graphic and consumption portfolio
¹Last 12 months until June/0933
Paper Business Unit priorities
Portfolio management,
sales and regional mix, focusing on
operational margin and return
Regional leadership in the main white paper
segments
Logistics and commercial approach
excellence
Discipline in growth
opportunities assessments
34
Results
Results 1H09 1H08 1H09/1H08
Sales volume (Kton) 1,515 1,254 20.8%
Paper sales – domestic market (Kton) 268 306 -12.5%
Pulp sales – exports (Kton) 850 581 46.3%
Net revenue - R$ Million 2,042 1,974 3.5%
Net income - R$ Million 529 325 62.9%
EBITDA - R$ Million 548 713 -23.2%
EBITDA - US$ Million 256 427 -40.2%
EBITDA margin 26.8% 36.1% -9.3 p.p.
Average exchange rate (R$/US$) 2.14 1.67 28.5%
Net debt 4,495 4,236 6.1%
Net debt / EBITDA (LTM) 3.5 3.3 n.a.
Note: Since 2008, contemplates the adjustments of Law 11.638/07LTM – last twelve months
Results 1H09
36
2,640 2,7873,099
3,410
4,064
49% 47%42% 47%
54%
51% 53% 58% 53% 46%
61%
39%
2,042
Note: the adjustments of Law 11.638/07 are contemplated since 2008.
Net revenue and EBITDA
37
Implementation of Mucuri project
(Line 2)
Debt profile
Note: the adjustments of Law 11.638/07 are contemplated since 2008.
¹ Debt 31/06/09 and EBITDA of the last twelve months until June/2009
Acquisition of Ripasa
Start up of line 2 at Mucuri
38
Adequate debt amortization schedule and liquidity profile:
• R$ 2.4 billion in cash (jun/09)
• Competitive debt costs
• Fitch affirms Suzano’s rating: AA- (bra) in May/09
Debt amortization schedule
638
195
Short term debt with renewal already agreed (R$195 million)
39
Capital markets
Increasing daily number of trades and recovery of higher average daily volumes
40
70%
80%
90%
100%
110%
120%
130%
140%
150%
160%
30-D
ec-0
813
-Jan-
0927
-Jan-
0910
-Feb
-09
24-F
eb-0
910
-Mar
-09
24-M
ar-0
97-
Apr-09
21-A
pr-0
95-
May-
0919
-May
-09
2-Ju
n-09
16-J
un-09
30-J
un-09
14-J
ul-09
28-J
ul-09
11-A
ug-0
925
-Aug
-09
Suzano Ibovespa IBrX-50
Stock performance
147150
143
41
New Growth Cycle
2,850 2,850 2,850 2,850
4,150
5,450
7,150
PiauíUnitMaranhão
Unit
New unit and Mucuri
expansion
Mucuri Unit and new pulp line: analysis of the global economy and pulp market outlook� Definition on the new implementation schedule and start up dates until the end of 2009
New growth cycle
Considering the new projects, pulp annual
capacity will increase 4.3 million tons and the
total installed capacity will reach 7.2 million
tons per year.
431 The effective capacity will depend on the learning curves
Wood supply (2013-2028)
• Acquisition of Vale’s forestry assets in Maranhão: 84,5 thousand ha of land (34,5 thousand ha already planted)
• Acquisition of eucalyptus timber from the Vale Florestar Program, starting in 2014 until 2028
• Technology cooperation agreement
• Railroad transportation for the pulp output to the port region of São Luiz until 2043.
• Start up in 2013 ensured with Vale’s forestry assets (planted forest) – on a competitive basis
Necessary planted area: 133 tsd ha
US$ 1,8 Billion
2009 to 2015
Forestry Capex Industrial CapexUS$ 200 Million
2011 to 2014
Maranhão Unit
Final agreements with Vale in July 2009:
44
Wood supply(2015 onwards)
• Final agreement with Transnordestina in July 2009:
• Railroad transportation for the pulp output from Piauí to the port region of São Luiz until 2028
• Planting already started in MA licensed area
• Start up of Piauí unit scheduled for 2014, ensured with 5.5 years old forest
US$ 1,8 Billion
2009 to 2015
Forestry Capex Industrial CapexUS$ 370 Million
2012 to 2015
Necessary planted area: 160 tsd ha
Piauí Unit
45
Maranhão Unit Piauí Unit
Maranhão and Piauí units
46
Leadership
Competitiveness
Vision
Management
Capital structure
Key messages
Leading player in the regional paper market and one of the top 10 market pulp producers
One of the lowest cash costs in the world
Solid organic growth strategy
Consolidated management structure/model and alignment with shareholders
Disciplined capital structure management
47
Experience of 35 years in the pulp and paper industry. CEO of Suzano Holding S/A and Chairman of the Board of Directors of Suzano Pulp and Paper S/A. CEO of IPLF Holding. CEO and Vice President of the Board of Directors of Polpar S/A. Vice President of Premesa S/A and Vocal.
Experience of 34 years in the pulp and paper industry. Vice President FIESP. Member of ABRINQ and EMBRAER’s Board of Directors. Member of BRACELPA’s Advisory Board. Former member of the Association Committee of Foreign Trade of Brazil and Chairperson of the Advisory Committee on Paper and Wood Products of Food and Agriculture UN organization in Rome.
Coordinator of Sustainability and Strategy Committee and member of Audit Committee and member of the Compensation Commission of the Board of Directors; Former president of the board and CEO of Hoechst of Brazil and senior executive of HoechstAG, Frankfurt. Member of RBS Group’s Board of Directors, of Cyrela Brazil Realty, of OGX, of Chemical Group DSM/Holanda, President of Renner Stores’ Board of Directors. (Independent)
Experience of 31 years in the pulp and paper industry. Member of Sustainability and Strategy Committee, Chairman of Polpar’s Board of Directors, President of Premesa, Corporate VP of Suzano Holding, the IPLF Holding, President of Vocal, Chairman of Lazam-MDS Insurance Brokers and Administrator’s Board of Directors, Chairman of Ecofuturo Institute’s Board of Directors.
Experience of 30 years in the pulp and paper industry. Member of the Board and the Committee of Sustainability and Strategy; Director of Premesa, Corporate VP of Suzano Holding, a member of Lazam MDS Insurance Brokers and Administrator’s Board of Directors and VP and Director of the Council of Ecofuturo Institute.
Senior partner of Machado, Meyer, and Sendacz Opice Lawyers and Director of OAB, Brazil. President of CESA.Former Legal Adviser and Chairman of the Legislative Committee of the American Chamber of Commerce and Director of ABRASCA’s Legislative Committee. Former Justice Secretary for the State of São Paulo.
Senior partner of Integra Associates. Member of Gerdau SA’s Board of Directors, Gerdau Metallurgical, Satipel Industrial SA, RBSGroup, Sao Paulo Alpargatas, Locates, Delphi Corporation (USA) and Johnson Electric (Hong Kong); Board Member of Brazil's Bunge, Brazil and Alcoa Veirano Assoc. Oscar was President of Bunge International and managing partner in Booz-Allen & Hamilton. (Independent)
Coordinator of Suzano Pulp and Paper’s Audit Committee. Former General Manager of WTORRE and President of TAM Airlines. Member of TAM and Daycoval Bank Board of Directors. (Independent)
Chairman of Board of Directors of Perdigão. Board member of WEG SA, Ultrapar Participações SA and Iochpe-Maxion SA. Former Director of the National Bank for Economic and Social Development - BNDES, and General Director of Corporate Group Iochpe-Maxion Industrial Holding. (Independent)
Experienced and active Board of Directors
DAVID FEFFER, 52Chairman
DANIEL FEFFER, 49Vice Chairman
BORIS TABACOF, 81Vice Chairman
CLÁUDIO SONDER, 67
ANTONIO MEYER, 63
OSCAR BERNARDES, 63
MARCO BOLOGNA, 54
NILDEMAR SECCHES, 60
JORGE FEFFER, 48
49
Chief Executive Officer, 3 years at Suzano. Board of Directors’ Member of Archer Daniels Midland Company – ADM and of Marfrig.BRACELPA’s VP. Former Board of Directors’ member of SEBRAE, Gradiente, Crecisa and Amcham. Former chaiman of Ford Brasiland Ford Latin America, Itamarati Group, Ferronorte and Cecrisa and Executive of Petrobrás and of the Federal Government.Mechanical Engineer graduated at UFRJ.
Strategy, Corporate Development and Investor Relations Executive Officer, 6 years at Suzano. Former Paper Business UnitExecutive Officer (2005-08). Former Executive of JPMorgan in Brazil and NY (Investment Banking Global and Latin America),Chase Manhattan and Banco Patrimônio/Salomon Brothers. Graduated in Business Administration at FGV.
Chief Operation Officer, 5 years at Suzano. Has worked as Expansion Project Director of Mucuri Unit. Former executive of DowChemical Company, in Brazil, USA and Europe. Post-Graduated in Business Administration at FIA/USP.
Chief Financial Officer, responsible for Legal, 14 years at Suzano. Has worked at pulp and paper sector for 29 years. FormerDirector, Executive Vice-President and member of the Board of Directors of Vale. PhD in Business Administration graduated atUniversity of California, Berkeley.
Forest Business Unit Executive Officer, 2 years at Suzano. Former executive of Champion Pulp and Paper and International Paperin Brazil and USA. Post graduated in Forest Science and Wood Technology at USP – Piracicaba.
Paper Business Unit Executive Officer, 6 years at Suzano. Former Executive Manager of Suzano’s Pulp Business Unit and SalesGeneral Manager for Latin America at General Electric, at the Industrial Systems Division. MBA degree at Ibmec São Paulo.
Human Resources Area Executive Officer, joined Suzano in 2008. Former Human Resources Manager of Operations in GeneralElectric in Brazil and abroad, Global HR Director for Information Technology in the United States and HR Director for Mexico andLatin America. Former Executive of Carioca Engenharia, CR Almeida, and Bureau Veritas. Post Graduated in BusinessAdministration at COPPEAD.
Pulp Business Unit Executive Officer, joined Suzano in 2009. Former CEO of European operations of RGM Group andcommercial director of Aracruz. Graduated in Business Administration at Fundação Getúlio Vargas.
ANTONIO MACIEL NETO, 51
BERNARDOSZPIGEL, 63
ANDRÉ DORF, 36
ERNESTOPOUSADA, 41
JOÃO COMÉRIO, 44
CARLOS ANIBAL, 39
CARLOS GRINER, 45
ALEXANDRE YAMBANIS, 57
50
Distinguished management team