apimec | 2011apimec | 2011 2 agenda 01 | strategy 02 | forestry 03 | paper 04 | pulp 05 | maranhão...

APIMEC | 2011

3

Strategy – Suzano 2024 Plan

Forestry competency consolidates the pulp business and enables new business opportunities in Biotechnology and Renewable Energy

Operational

excellence in

paper

Wood pellets

Organic

growth

in pulp

Biotechnology

Forestry

Competency

Mission

Suzano’s mission is the base for its strategy

Mission

To offer renewable forestry-based, pulp

and paper products, while being globally

recognized for developing innovative

solutions and continually seeking excellence

and sustainability in our operations.

4

2011

Sustainability

Management and stewardship techniques as well as human resources qualifications of own employees and third-parties led us to achieve many awards

First Brazilian company and first pulp and paper company to achieve the ISSO 14001 certification

First national industry to receive the National Quality Award

Carbon Footprint - 2nd consecutive year in pulp and paper (PAS2050 methodology)

Mucuri Unit: Millennium Business Award for Environmental Achievements, awarded by the United Nations

FSC – Forest Stewardship Council

Cerflor certification

Corporate Sustainability Index (ISE) – 7th consecutive year

5

2010 2008 2004 2001 2000 1996

Forestry Assets

Suzano’s forestry expertise, developed over years of consistent investments in R&D, allows the Company to expand its forestry assets to a new frontier: the northeast region of Brazil

2011

Total area (tsd ha)1 800

Total planted area (tsd ha) 2 446

Own planted area (tsd ha) 1 343

Forest Partnership Program (tsd ha) 103

Own Preserved Area (tsd ha) 1 299

Average Distance in Bahia (km) 75

Average Distance in São Paulo (km) 246

Base 9/30/2011 1 Own and leased areas 2 Figures consider own, leased and third-parties areas

2011

Annual planting (tsd ha) 90

Planted seedlings / day (tsd) 368

Total: 188 tsd ha

Planted: 118 tsd ha

Total: 226 tsd ha

Planted:

131 tsd ha

Total: 385 tsd ha

Planted: 94 tsd ha

SP

BA, ES and MG

MA, PI and TO

SP

MG

BA

ES

TO

PI

MA

7 Note: Both own and leased land may suffer variation up to 5% quarter over quarter.

The total amount can differ due to rounding.

Forestry Competitiveness

Suzano’s innovation present in its DNA, responsible forest management and operational excellence enabled the leverage of competitiveness

Investments in technology guarantee a highly

diversified genetic portfolio, which is suitable for

different regions

+ 14 thousand clones developed | 800 field trials | 4 thousand hectares

Genetic enhancement

Biotechnology

Forestry management

Sustainability

Operational excellence

Productivity + +

8

Evolution of Maranhão forests

80’s 90’s 00’s 10’s

Precise Silviculture

Technology allows for better-quality, lower-cost planting, reinforcing the commitment to competitiveness and sustainability

New techniques for weed control

New chemicals and fertilizers

Adoption of biodegradable products

Other initiatives

Precision in chemicals and fertilizers

application

Mechanization

Planting Irrigation Better usage of chemicals and fertilizers due to the

adoption of new equipment and dereferenced data

9

Forest Management

Top technology initiatives for forest monitoring supply high quality information for better operation management

Aerial Monitoring

To identify areas with leafy

trees

Planted area stratifications

and qualitative census

Land relief representation

Good

Coverage

Medium

Coverage

Low

Coverage

10

Forestry Technology

Nurseries with high technology standards garantees production efficiency

Suzano’a pioneering and innovation

enable the development of extensive

genetic base and improvement of

stewardship techniques

Highly qualified forestry technology

team(42 researchers: 2 PhDs and 8

Masters Degrees)

Suzano/Futuragene technology center

Technology Center

Nurseries (85mm total seedling capacity)

Suzano

Seedling

capacity of

12mm

Limeira

Seedling

capacity of

8mm

Mucuri

Seedling

capacity of

20mm

Maranhão

Seedling

capacity of

15mm

Piauí

Seedling

capacity of

30mm

Brazil’s most

modern nursery

11

Paperboard 2nd in Brazil

Paper Assets Operational excellence in paper: revenue and products portfolio management,

asset optimization, and strengthening of distribution channels

658 591 643 733

504 524 513 518

1,162 1,115 1,156 1,251

2008 2009 2010 LTM

Sales Volume (tsd ton) Sales Destination – LTM1

Others

Europe North Am.

South/Central Am. Brazil 59%

3%

17%

9% 12%

Domestic Market Exports

Leadership in printing & writing and white paperboard in South America

More than 90% integrated production (pulp + paper)

Fx hedge: approximately 65% of paper revenue in local currency

Lower price volatility in the domestic market

Paper merchants: KSR e SPP NEMO: largest in Latin America Stenfar: top 5 in Argentina

26%

Paper

Printing & Writing

Coated 1st in Brazil

Uncoated 2nd in Brazil

30%

19%

13 1 LTM - last 12 months ending on 9/30/2011

Suzano Market Share in the Domestic Market – LTM1

Focus in the Domestic Market Lower price volatility, better margins and important cash flow generator

Pap

erb

oard

P

rin

tin

g &

Wri

tin

g

Average Net Price (base 100 in Oct/2008)

Paperboard

Domestic Market

Market dominance in high value added segments

Low level presence of imports

Growth of the consumer industry

Printing & Writing

Domestic Market

Imports: high concentration of coated

Exchange rate’s effects

Fiscal control of Immune paper operations

60

80

100

120

140

Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11

Domestic

Market

92

Exports

106

60

80

100

120

140

Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11

Domestic

Market

103

Exports

115

14 Note: Prices of domestic market in R$; prices of exports in US$

Average Net Price (base 100 in Oct/2008)

Paper Market Growth

Economic growth in emerging markets favours paper consumption

1 Woodfree Printing & Writing paper I 2 Latin America excluding Brazil I 3 Paperboard + liquid packaging board

Source: RISI and Poyry (nov/2011)

Global

2011e Paper Demand (tsd ton)

2,989

Uncoated

Paperboard3

Coated

972 1.837

2.366 54.180

2,017 { 652

1,365

Printing &

Writing1

Brazil

4,994

1,816

812

2,366

Latin America2

3,178 { 2.366

128,601

46,948

27,473

54,180

{ 81,653

CAGR 2011e – 2016e Brazil Latin America2 Global

Paperboard3 +3.3% +3.8% +3.0%

Printing & Writing1 +3.4% +3.2% +1.0%

Coated +3.2% +3.3% +1.0%

Uncoated +3.5% +3.2% +1.1%

15

Paper Demand Growth Drivers

Historically there is a high correlation between GDP and paper consumption

1 Excluding China and Japan

Source: 2010 paper consumption data from Poyry (nov/2011) and 2010 GDP per capita information from World Bank (sep/2011)

China

68 kg/ha/year

GDP per capita:

US$ 4 tsd

EUA

233 kg/ha/year

GDP per capita: US$ 47 tsd

India

9 kg/ha/year


Brazil

47 kg/ha/year


16

North America

226 kg/ha/year

Latin America

44 kg/ha/year

Asia1

19 kg/ha/year

Europe

Western: 185 kg/ha/year

Eastern: 47 kg/ha/year

Coated Paper

The share of coated paper imports is high as Brazilian production does not completely meet demand

Coated Paper Production and Demand (tsd ton)

Imports share in the Brazilian Market (%)

Measures adopted by the

Brazilian authorities to reduce

deviation use for tax exempt

paper and BRL depreciation

helped decreasing imports

market share

317 304 285 294

182

450 525

486

632

432

2007 2008 2009 2010 9M11

Production Demand

40% 44% 47%

57%

70% 69% 72% 66%

56% 60%

55% 56% 53%

2007 2008 2009 2010 jan-11 fev-11 mar-11 abr-11 mai-11 jun-11 jul-11 ago-11 set-11

2.00 1.95 1.84 Average

R$/US$ 1.76 1.68 1.69 1.66 1.59 1.61 1.59 1.56 1.60 1.74

RECOPI1

Licença não

automática Fees

17

1 Brazilian Government Program to control tax exempt paper imports

Source: Bracelpa

Pulp Assets

Sustainable and organic growth: presence in main international markets and strategic relationship with clients

Technical support in each international office:

China, Switzerland and USA

80% of total sales with long term contracts

More than 150 active clients

Strategic long-term partnerships with clients:

Logistics

Technology

Pre and post sale technical assistance

Strategic focus on high value added segments

Sales Volume (tsd ton)

Printing &

Writing

Tissue

Special

Others

Sales per Segment – LTM1

Europe

Asia

North Am.

South/Central Am.

Brazil

Pulp Sales Destinations – LTM1

20%

34%

34%

1%

11%

32%

37%

23%

8%

232 261 297 346

1,089

1,519 1,310 1,366

1,321

1,780 1,607

1,712

2008 2009 2010 LTM

Domestic Market Exports

19 1 Note: LTM - last 12 months ending on 9/30/2011

22

3

9

16

2011e

207

29 45

114

2011e

Pulp Organic Growth Fundamentals

Market pulp accounts for 13% of total fibers for paper production

20 20

1 Bleached Eucalyptus Kraft Pulp | 2 Bleached Hardwood Kraft Pulp | 3 Bleached Softwood Kraft Pulp

Source: Poyry (nov/2011) and Suzano

Mill

ion t

on

Printing &

Writing

Tissue

Paperboard

Corrugated

Newsprint

Others

395

Production (MM ton)

Minerals

51%

49%

72%

28%

8%

8%

128

50

Virgin fiber

Recycled

185

178

Global

production of

paper

Total fiber

consumption

363

395

BSKP3

50

Others

BHKP2

BEKP1

Pulp and Paper Production Chain – 2011e

Integrated

pulp

Market pulp

Market Pulp Demand opportunities:

1% reduction in recycled paper =

+1,9 MM ton/year of market pulp

1% reduction in integrated capacity =


2% growth in paper consumption =



Demand for paper and paperboard is forecasted to grow 42 million tonnes (2010-2015e)

21 21 21

Paper and paperboard demand forecast until 2015e

0

50

100

150

200

250

300

350

400

450

1995 2000 2005 2010 2015e

Others1

Mill

ion t

on

Latin America1

Others Asia1

China1

Japan

Eastern Europe1

Western Europe

North America

CAGR: 2.1% p.a. Emerging economies: +4.3% p.a.

CAGR: 2.2% p.a. Emerging economies: +5.7% p.a.

1 Emerging economies includes Latin America, Asia (except for Japan), Middle East, Oceania, Africa and Eastern Europe

Source: Poyry (nov/2011)

Sack

20% 40% 100% 60% 80%


Paper demand forecast is growing for grades that are Eucalyptus fiber users over the next years

22 22 22

Main BEKP end-users

1.5

0.0

-1.5

3.0

4.5

-3.0

Uncoated

mechanical

News-

print

Coated

woodfree

Other

Grades1

Tissue Carton

board

Container board

CA

GR

20

11e –

20

16

e

(% p

.a.)

Uncoated

woodfree

Coated

mechanical

Paper demand forecast: CAGR (2011e – 2016e) 2.0% p.a.

1 Other grades includes special paper segment

Source: Poyry (nov/2011)

43 44 45 47 47 47 48 50 51 52 53 54

9 10

11

13 14

16 16 17

18 19

20 21

12 11

11 10 9 9 10 9 9 9 9

21 22 22 23

22 22 23

24 24 24 24 24

0

10

20

30

40

50

60

0

5

10

15

20

25

30

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Market BEKP Other BHKP BSKP


Eucalyptus pulp has replaced other short fibers and the actual price spread between hardwood and softwood should continue to favor this replacement

23 23 23

Vo

lum

e b

y fib

er

typ

e

(mill

ion

to

nn

es)

CAGR BEKP: +9.7%a.a | Other BHKP: -3.8%a.a.

.

CAGR BEKP: +5.5% a.a. | Other BHKP: -1.1%a.a.

Market Pulp Demand Projections (2011e – 2015e)

To

tal M

ark

et V

olu

me

(millio

n to

nn

es)

1 Bleached Eucalyptus Kraft Pulp | 2 Bleached Hardwood Kraft Pulp | 3 Bleached Softwood Kraft Pulp

Source: Suzano and data from Poyry (nov/2011) and PPPC (sep/2011)

1 2 3

Brazilian Competitiviness Suzano is in the lowest cash cost region

BC

625

Eastern

Canada

619

678

France

601 533

Sweden

592

Japan Finland

577

700

Russia

379

Japan

646

China

581

Canada

567

France

527

USA USA BC

Coast

444

Chile

519

Sweden

508

Finland

484

Iberia

443

Indonesia

417

Chile

368

Brazil

330

15,8 million tonnes 8,5 million tonnes 15,4 million tonnes

Low Cost High Cost High Cost Low Cost

2,9 MM ton

Hardwood Softwood

24

Source: Hawkins Wright (Oct/ 2011)

Cash Cost CIF / Europe (US$/tonne)

Industry Balance

The cyclic dynamic is driven by supply and demand imbalances with adjustments in the chain

25 25 25

Pulp

price

increase

New

capacity

Supply

increase

Supply

decrease

High cost

capacity

closings

Favorable

scenario

Followed by demand

Supply Demand

Not followed by demand

Maranhão Unit

State of the art facility technology and top tier suppliers contracted

27 27 27

8

1. Fiber lines

2. Dryer

3. Evaporation

4. Boilers

5. Lime kiln

6. Wood yard

7. Cooking

10. Water treatment

11. Effluent treatment

8. Turbo generators

9. Energy distribution and substation

Conceptual engineering

Basic engineering

Detailed engineering:

BOP1 and infrastructure

Management of BOP1

implementation and

infrastructure

9

1 Balance of Plant

Fonte: Poyry and Suzano

11

2

1

7 3

4

6

5

10

Maranhão Unit Schedule

Track record of successfully executing projects on schedule, implementing business plans and meeting budgets

28 28 28

Market study

Preliminary feasibility

study

Conceptual engineering

General planning

Purchases

Construction and

assembly

Commissioning

Phase IV

Start up

4Q13

Forestry

Purchase of land, licenses, permissions and

plantations

Industrial, port, railway

Environmental licenses

Conceptual and basic engineering

Phase I

BEGINNING

Concluded

Phase II

PLANNING

Ongoing

Phase III

EXECUTION

Ongoing

2011 2012 2013

Infrastructure

Civil work

Erection

Commissioning

Start up

Mar-12

Mar-13

4Q13

Aug-13

Sep - 13

Maranhão Project Construction Status 70% of suppliers already contracted

29 29 29

Earth moving complete

Infrastructure work has started

Stacking in evaporation area (100% complete)

Stacking in boiler area (95% complete)

Construction of Water Treatment Facility and provisional Sewage Treatment

Facility (90% complete)

Construction of temporary sites (40% complete)

Approximately 1,800 people working on the construction of the Maranhão unit

Approximately 1,400 people working on the forestry base formation

The Secretary of the Environment of Maranhão State has issued:

Pre-Operational License

Planting License, which was renewed in October 2011

0% 20% 40% 60% 80% 100%

Industrial

Forest formation(planted area)

Completed Pending

Suppliers contracted

154,000 ha

Positive Social Impact

Important for the socio-economic development of the region, with job creation, personnel qualification, all in line with environment preservation

30 30 30

Region 85%

Other Areas 15%

Job Creation Job Creation1

Mill Construction:

7 thousand direct (own employees + third-party)

Forest and Industrial Operation:

3,5 thousand direct and 15 thousand indirect2

Nursery: 530 direct

1 Total estimated for mill construction and forest and industrial operations I 2 Source: FGV – 4.3 factor I 3 Forest and Industrial Operation

Qualified Personnel

Civil work: ~ 6 thousand people to be trained

Operation3: ~ 1 thousand people to be trained

Service: ~ 900 people to be trained

Capacitar Program estimated capex: ~ R$ 10 million

Logistic Solution

Railway transportation from the plant to the port and strategic located to export to the main pulp markets

31 31 31

Port in the São Luís1 region

500 Km through

Carajás railway

100 Km through

Norte-Sul railway

Capacity: 10 production

days

The train will go through the

warehouse, allowing for

loading from both sides

Transit time: around 4 days shorter

to main destinations compared to

ports in the South East of Brazil

Maranhão Unit Model

Warehouse

1 Drawing

Capex Long term financing, grace period and competitive cost

32

Maranhão Unit

Estimated Forest Capex US$ 575 million

Estimated Industrial Capex1 US$ 2,3 billion

1 Considers exchange rate of R$ 1,80/US$

Maranhão Unit

2011 2012 2013

Estimated Industrial Capex

20% 60% 20%

Funding:

BNDES: R$2.7 billion, 12 years to pay and 3-year grace period

Mandatory convertible debentures: R$1.2 bilion

Funding for the imported equipment supported by foreign credit agencies (ECA’s among others)

Cash flow generation

34 34 34

FuturaGene Biotechnology is on the right side of Sustainability

Base Case: Suzano Pulp and Paper

907

tsd ha

Less land utilization

Lower forest formation cost

Innovation

Less land utilization

Less water consumption

Less chemical expenditure

Higher carbon sequestration

2015e Planted Area

Necessidade de terras (ha)

Pro

du

tiv

ida

de

Yield Increase

1% 5% 10% 15% 20% 30% 50%

-9 tsd ha -45 tsd ha -90 tsd ha -136 tsd ha -181 tsd ha -272 tsd ha -454 tsd ha

Lan

d

uti

liza

tio

n

35 35 35

FuturaGene is present in 60% of the eucalyptus market

Well positioned to be world leader in forest biotechnology

India

3.9 MM ha

Brazil

3.7 MM ha

China

2.6 MM ha

South Africa

0.6 MM ha

Tailand

0.5 MM ha

Global Eucalyptus Forest Map

Source: GIT Forestry Consulting, http://git-forestry-blog.blogspot.com

FuturaGene Biotechnology is on the right side of Sustainability

Upside: new business

36 36 36

FuturaGene Most modern labs located in strategic regions

China lab launch on December 2nd, 2011

FuturaGene Lab in Itapetininga

FuturaGene lab in Israel FuturaGene Lab

in Itapetininga

Project update

Protocol signed with Maranhão government

Ongoing activities:

Forest: Specific clones selected, dedicated plantation (Energy Forests)

Engineering with Promon and Stolberg (Canadian)

Commercial: Advanced negotiation of final contracts with clients

Dedicated team

Suzano Renewable Energy

Forestry competency enables new business opportunities

38 38 38

3 units: 1 MM ton/year each

Estimated start-up: 2014

Funding: definition of the capital structure

World leader

Initial focus on the European market

Wood pellets for energy, produced from renewable energy-oriented forests

40 40 40

Results Net Revenue and EBITDA

757 1,277 1,377

1,663 1,619 933

1,539 1,609 2,018 2,006

2007 2008 2009 2010 LTM

799

1,320

1,780 1,607 1,712

1,034

1,469 1,161

1,703 1,265

2007 2008 2009 2010 LTM

1,814 1,850 1,657 1,915 2,138

1,596 2,214 2,295

2,599 2,569 3,410

4,064 3,952 4,514 4,707

2007 2008 2009 2010 LTM

1,924

2,482 2,896 2,763

2,963

1,621 1,587 1,426 1,560 1,751

837 937 918 936 950

2,458 2,524 2,344 2,496 2,701

2007 2008 2009 2010 LTM

1,125 1,162

1,116 1,156

1,251

Net Revenue (R$ million) and Volume (tsd tonnes) EBITDA (R$ million) and EBITDA Margin (%)

Paper: Revenue (R$ million) and Volume (tsd tonnes) Pulp: Revenue (R$ million) and Volume (tsd tonnes)

1.65 1.95 1.84 2.00 1.76 Average

R$/US$

Domestic Market Exports Volume

1.65 1.95 1.84 2.00 1.76 Average

R$/US$

30.3%

36.2%

29.4%

37.7%

26.9%

Note: The amounts of 2009, 2010 and LTM include the adjustments introduced by the IFRS standards

LTM - last 12 months ending on 9/30/2011

Domestic Market Exports Volume Domestic Market Exports Volume

41 41 41

Produtivity Project Focus on high return projects with mesurable results

A. Increase productivity/ reduce costs

A1. Matrix budget: fixed costs and SG&A

Specific target review in all levels and departments

Define internal and external benchmark parameters

Gradus Consulting

A2. Daily activities management

PDCA¹ / SDCA²

Six Sigma

INDG Consulting

A3. Multiplicar Project

Important restructure in the Company’s processes and systems

B. Suzano 2024 Plan Implementation

Maranhão Unit

Suzano Renewable Energy

FuturaGene

Piauí Unit

2012 Challenges

Plan

Do

Check

Act

PDCA¹ Cycle

¹ Plan, Do, Check, Act I ² Standardization, Do, Check, Act

42 42 42

Debt Conservative financial policy

42

Gross Debt (R$ million)

Short Term Long Term

1,492 1,864

5,707

310 34 699 8

6,386

Gross Debt(Jun/11)

Funding /Amortizations

Interest ForeignExchangeVariation

Others Gross Debt(Sep/11)

Debt increased, primarily due to the impact of the

exchange rate variation, with NO cash effect

Robust cash position: R$3.0 billion (Sep./11)

No short-term leverage difficulties: liquidity horizon

of approximately 28 months

The Company has been working on initiatives to

reduce leverage

7,199

8,250

Amortization Schedule (R$ million)

3.610

1.113

455 456

2.616

2011- 2013 2014 2015 2016 2017 onwards

Long-term debt profile

Funding: grace period and lengthier amortization, in

line with cash flow from the projects

Hedge for cash flow, but not for debt

No use of complex or exotic derivatives

43 43

Debt

Leverage can imcrease temporaly due to the growth projects capex, but amortizations are in line with cash flows from these projects

1.6x 1.6x

2.7x

3.8x 3.7x 3.7x 3.5x

2.0x

4.2x

Ripasa

Acquisition

Implementation

of

Mucuri Project

Start up of

line 2 at

Mucuri

World

economic

crisis

1,647 1,616

2,475

3,919 4,285

5,459

4,111

3,421

5,291

1,000 1,039 913 1,040 1,146 1,469

1,161 1,703

1,265

2003 2004 2005 2006 2007 2008 2009 2010 sep/11

Net Debt (R$ million) EBITDA (R$ million) Net Debt/EBITDA (x)

*

Conpacel

Acquisition

Note: The amounts of 2009, 2010 and LTM include the adjustments introduced by the IFRS standards

* EBITDA of the last 12 months ending on 9/30/2011

Primary

Offer

Bahia Sul

Incorporation

44

Investiment Plan

Growth projects will be developed with discipline, respecting Company’s financial solidity

0.5 0.5 0.5

3.0 3.5

1.7

3.5 4.0

2.2

2011e 2012e 2013e

Estimated Capex (R$ billion)

Sustain Growth

Note: figures do not include investments that may be outsourced

Divestment of Capim Branco (81 MW of installed capacity and 51 MW of assured energy)

Divestment of non-strategic lands

Strategic partnership for Suzano Renewable Energy

Em

Es

tud

o Energy pre-sale

Possibility of outsourcing activities

Sale of certain assets in the paper segment

Sale of interest in new projects in the pulp segment

Equity

Un

de

r S

tud

y

On

go

ing

Actions to reduce leverage

Why to invest in Suzano?

45 45 45 45

High Level of Own

Energy Production

Low production

costs

Extensive

know-how and

high planted

forest

productivity

Balanced mix

of products

Experienced

Management

Team

Strong

operating

cash flow

SUZANO PAPEL E CELULOSE S.A.

apimec | 2011apimec | 2011 2 agenda 01 | strategy 02 | forestry 03 | paper 04 | pulp 05 | maranhão...

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