Professional Documents
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The information contained in this presentation may include statements which constitute 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 Exchange Act of 1934, as amended. Such forward-looking statements involve a certain degree of risk and uncertainty with respect to business, financial, trend, strategy and other forecasts, and are based on assumptions, data or methods that, although considered reasonable by the company at the time, may turn out to be incorrect or imprecise, or may not be possible to realize. The company gives no assurance that expectations disclosed in this presentation will be confirmed. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements, due to a variety of factors, including, but not limited to, the risks of international business and other risks referred to in the companys filings with the CVM and SEC. The company does not undertake, and specifically disclaims any obligation to update any forward-looking statements, which speak only for the date on which they are made.
AGENDA
1 2
Competitive Strategy
Marcelo Castelli
Chief Executive Officer
3 4
2014 Outlook
Guilherme Cavalcanti
Chief Financial Officer
Competitive Strategy
Marcelo Castelli Chief Executive Officer
A winning player
Superior Asset Combination Main Figures 3Q13 Pulp capacity Net revenues Total area (1) Planted area(1) Net Debt Net Debt/EBITDA (2) 3Q13 LTM FCF million tons R$ billion thousand hectares thousand hectares R$ billion X R$ billion 5.3 1.8 966 559 8.2 2.9 0.9
Source: Fibria (1) Including 50% of Veracel, excluding forest partnership areas as well as the forest base linked to the sale of forest assets in Southern Bahia State and Losango. (2) Net Debt/EBITDA ratio in dollars. For covenants purposes, the Net Debt/EBITDA ratio is calculated in Dollars.
OPERATING EXCELLENCE
LIABILITY MANAGEMENT
Cost control
Liquidity events
Ready for organic growth (licenses and basic engineering) Continuous investment in forest for capacity growth Industrial project at the right moment for value creation
The maturity of synergies captured since Fibrias creation improved its operating indicators
BEST PRACTICES AND OPERATING STABILITY
+15%
578 5,184 5,299 5,271 432 448 471 556
5,054 4,600
499
2009*
2010*
2011
2012
3Q13 LTM
2009*
2010*
Historical Value
2011
2012
Inflation Effect**
3Q13 LTM
687
605
626
34%
40%
593
584
1,964
2,253
2,726
2009*
2010*
Historical Value
2011
2012
3Q13 LTM
2009*
2010*
2011
2012
3Q13 LTM
Inflation Effect**
MAIN PROJECTS
Project Suzano Arauco / Stora CMPC Guaba II Klabin Paran Country Brazil Uruguay Brazil Brazil Capacity 1.5 Mt 1.3Mt 1.3 Mt 1.5 Mt Timing 4Q2013 1Q2014 2S2015 2Q2016 Fiber BEKP BEKP BEKP BEKP/ BSKP/Fluff BEKP BHKP Status Confirmed Confirmed Confirmed Confirmed Unconfirmed Unconfirmed
5,300
INCAF
200
IPCA
100 Brazilian inflation
2000 2003 2006 2009 2012
Source: Pyry
10
11
The Technology Center (CT) operates within all company units and is directly involved in Fibrias main operations, from the production of seedlings to the development of new products and services. The product portfolio is fully aligned with Fibrias strategy and is managed by a system based on the Stage and Gate methodology.
12
Innovation focus
Redirecting the innovation focus
P&D investments 6% 13% 52% 23% 36% 18% 35% 41% 47%
Pulp application engineering Fiber differentiation (Eucastrong)
34%
Main Actions
Genetic transformation Process improvements
29%
2011
2012
2013
13
14
The Partner
SweTree Technologies AB (STT) is a world leading forest biotechnology company based in Sweden. Focus on developing innovative new technology to improve the value and productivity of trees globally.
The Project
Conduct joint studies and experiments to develop new improved Eucalyptus clones with regard to growth, fiber morphology, wood density and other traits, through genetic transformation technology.
15
Financial Discipline Solid Governance Sustainability Transparence Talent Retention, Professional Development and Succession Good Organizational Climate
CONTINUOUS IMPROVEMENT
Operational Excellence Asset light Biotechnology
Immediate
Short Term
Medium Term
Long Terms
GROWTH
Options
16
Growth initiatives
Strategy for potential organic expansion
1. Maintain forest formation through:
Implementation of new areas Renting Partnership with TIMOs Reinvestment of resources from assets divestments
2. 3.
Obtain licensing for all potential expansions Continuous investigation of new low cost areas
17
Electric Power Export tripled with Line II Low CO2 Emission Matrix
LINE I + IP PM1 90 MW
Export 50 MW
Export 100 MW
Total LI + LII
Export
150 MW
18
CHALLENGES
Strategic motivation and timing of the other party
BENEFITS
Huge potential synergies Market and client portfolio consolidation Rationalization of pipeline for new projects
Relative valuation
Governance, control issues Debt level of players
19
Land
Other Businesses
Charcoal
Forestry
What is the best final use for investments in land?
Furniture Ind.
Lease land
Power
Biofuels
Bio-Products
Wind power
Pulp
Paper
20
21
Following this concept, Fibria signed an agreement for the sale of lands and the creation of a forestry partnership with a group of investors
Contract 1: Purchase and Sale of Land
~ R$ 1.4 Bi cash
PARKIA
Contract 2: Forestry Partnership
~ R$ 0.25 Bi earnout
210 kha
FIBRIA
FIBRIA
Fibria has expertise, existing wood inventory and capital to invest in future rotations; no longer owns the land
PARKIA
Partner Forestry Production Newcos sell wood to Fibria (put-call)
FIBRIA
~ 40% of wood produced belongs to the partner (Parkia)
Parkia is a wholly-owned subsidiary of a Brazilian joint venture comprised of controlling interests of local investors and additional funding from qualified participants through a FIP
22
Fibria prioritized areas with lower economic value for its operations
Areas Outside of Scope (Veracel) Areas with High Alternative Value (Real estate, Mining rights)
Negotiable Base
655 kha
530 kha
Areas with Low Cash Cost (reduced distance and low Harvesting costs)
400 kha
23
Participation
74.683
36%
Espirito Santo
52.070
25%
57.247
27%
So Paulo
25.954
12%
TOTAL
209.954
100%
24
Strategic Alignment
Operational Gains
No impact on the cash cost. Wood purchases allocated as capex Partnership transforms capital charge over land in deductible expenses Usage of 2013 fiscal losses eliminating capital gains payments Possibility of repurchase (non-mandatory) generates potential opportunities
Deleveraging
- Investment grade rating anticipation: considering 3Q13 results, ND/EBITDA with the transaction would already be very close to 2.5x - Pre-payment of most expansive debt: 2020 and 2021 bonds
25
4.2%
Yield with receipt of 100% of earnout
5.0%
Yield with receipt of 0% of earnout
7.6%
Fibrias Cost of Capital
10.2%
Fibrias Cost of Equity
Note: Cost of Capital and Cost of Equity in real terms in USD. Values take into consideration Fibrias internal references.
26
Builds one of the strongest balance sheets in the industry Action dependent on opportunities and negotiations
Fibrias Board has authorized the execution of a detailed viability study Projections indicate leverage ratios within Fibrias policy limits Approval and start-up subject to market conditions
27
Technology Pyrolysis
Fibria Effective participation: Ensyn investment On going studies Little attractive under current conditions On going studies On going studies On going studies Pilot equipment Strategic partnership
Technological Maturity
P-Oil
Gasification Pelletization
Priority 2
Cellulosic Ethanol Economic Attractiveness Economic Attractiveness Bio-chemicals Bio-polymers Lignoboost Carbon Fiber
Technology A Technology B
Pyrolysis Technology D
Relative Market Size
Technology E Technology F
28
29
29.42%
30.38%
40.20%(1)
29%
71%
BM&FBOVESPA
NYSE
HIGHLIGHTS
Listed on Novo Mercado, highest level of Corporate Governance at BM&FBovespa:
Only 1 class of shares 100% voting rights 100% tag along rights (Brazilian corporate law establishes 80%) Board of Directors with minimum 20% independent members Financial Statements in International Standards IFRS Adoption of Arbitration Chamber
Policies approved by the Board of Directors Indebtedness and liquidity Market risk management Risk management Corporate governance Information disclosure
Stock trading
31
General Meeting
Fiscal Council
Board of Directors
Finance Committee
Innovation Committee
Sustainability Committee
32
2013 Highlights
Net debt/EBITDA ratio in US$ of 2.9x (Sept. 2012: 4.2x) Cost of debt in US$ reduced to 4.5% p.y. (Sept. 2012: 5.2% p.y) Free cash flow in the LTM totaled R$922 million, 7% FCF yield Liquidity Event: Land Deal R$1.65 billion (R$ 1.4 billion + R$ 250 million of earnout) Working Capital Improvements Hedging Strategy All rating agencies at one notch below Investment Grade Outlook upgraded to positive by Fitch (Feb. 2013) and Moodys (Sept. 2013).
Debt Management
Net Debt/EBITDA (x) US$ (1)
4.8 4.2 3.4 3.3 3.1 3.1 3.3 3.0 3.0 2.9
3.6
7.5
1Q13
8.3
8.2
3Q13
2Q13
FX RATE (R$/US$)
Average End of Period 2.00 1.76 1.67 1,95 2.00 2.07 2.28
1.74
1.67
1.88
2,04
2.01
2.22
2.23
(1) Since June 30, 2012, net debt/EBITDA ratio for covenant purposes is calculated in US Dollars and the limit is 4.5x
34
4.8
5.2
4.7
4.5
3.4
3.1
3.3
3.0
Dec/11
Mar/12
Jun/12
Sep/12
Dec/12
Mar/13
Jun/13
Sep/13
1,812
1,045
(1) Losango and forestry assets and land in the south of Bahia State | (2) Land Deal expected to have cash impact by the end of the 4Q13
35
Debt Profile
4.061
Land Deal
1.400
Revolver
1.208
Cash
942
1.366 725
26
Liquidity*
2013
2014
2015
2016
2017
BNDES - 19%
2018
2019
2020
2021
2022
2023
Bond - 34%
ECN - 10%
ECAs - 4%
* Cash position and Revolver as of 3Q13. Land Deal expected to have cash impact by the end of the 4Q13
7,1%
6,3%
4,5%
@ Risk Analysis considering : (i) R$ 1.4 bi of cash impact of the land sale, (ii) Refis tax payment, (iii) Avg FX Rate: 2,27 with 11% of volatility (iv) Avg pulp price: US$ 720 with 9% of volatility.
(1)
36
5.2
5.0
5.1
5.1
Sep/10
Dec/10
Mar/11
Jun/11
Sep/11
Dec/11
Mar/12
Jun/12
Sep/12
Dec/12
Mar/13
Jun/13
Sep/13
Ratings
FIBRIA S&P Moodys Fitch BB+/Stable Ba1/Positive BB+/Positive ARAUCO BBB-/Stable Baa3/Negative BBB/Stable CMPC BBB/Negative Baa3/Negative BBB+/Stable KLABIN BBB-/Stable BBB-/Stable SUZANO BB/Negative Ba2/Stable BB-/Positive
37
2.00
1,76
1.67
1.95
2.10
2,29
844
Average Price FOEX (US$/t)
810
751
789
740
1,124
EBITDA Margin
29%
40%
34%
36%
40%
2,526 1,964
2,726 2,253
2009 (1)
2010 (1)
2011
2012
3Q13 LTM
2014 E (2)
38
Hedge
Hedging Strategy
Debt Hedge:
- Swap operations (currency and rate) - Maturity aligned with original debt (until 2020) - No margin call - No threshold
Governance
- Hedging Policy approved by the Board of Directors and available at the Investor Relations website
- Periodical follow up of the hedge portfolio by the Finance Committee - Maximum % of exposed operational flow is defined according to the FX risk management policy - Governance, Risk and Compliance (GRC) Department: - Independent report to CEO and to the Statutory Auditing Committee - Responsible for monitoring policies compliance - Independent from Treasury Department
Operating Hedge:
- Net FX exposure protection in US$ up to 18 months - No leverage - No margin call - No threshold - Current strategy: Zero Cost Collar (protecting a minimum EBITDA margin) - All Fibria operations are registered at CETIP
39
Fibria delivers one of the highest EBITDA/t and FCF/t of the industry
LTM 3Q13 Results (R$/ton)
1,294
(1)
SG&A
Others
EBITDA
CAPEX
(2)
Interest
Working Capital
Taxes/Others
LTM 3Q2013
(1) On a cash basis, does not include depreciation, amortization and depletion (2) Includes advance to forest partner program | (3) IR/CS and other
40
399
157
167
234
283 122
2Q11
FX RATE (R$/US$)
Average 1.59
3Q11
1.64
4Q11
1.80
1Q12
1.77
2Q12
1.96
3Q12
2.03
4Q12
2.06
1Q13
2.00
2Q13
2.07
3Q13
2.28
41
Normus Tax Assessment - Refis Total amount: R$ 1,627 million (R$ 587 million of principal + R$ 423 million of fines + R$ 617 million of interest) Fibria opted to pay in cash the debits due by December 31, 2012, related to Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) related to income earned abroad. The total amount to be paid, with 100% reduction in fines and interest is R$560,453 thousand. From this amount, the Company will use R$168,136 thousand from tax-loss carry forwards, equivalent to 30% of the principal, resulting in an effective cash disbursement of R$392,317 thousand.
42
Balance from Jan.13 to Sept.13: R$ 581 million Balance Sept. 2013: Short Term: R$ 165 million Long Term: R$ 605 million Mainly: - PIS/COFINS - withholding tax (IR and CSLL)
Federal taxes
2010 R$ 16 million
2011 R$ 4 million
2012 R$ 15 million
43
Valor 1000 Company of the year, among all industries according to Valor Econmico.
Fibria was ranked for the fourth consecutive year (2010, 2011, 2012 and 2013).
In 2013 Fibria was ranked in four categories: CEO, CFO, IR Team and IR Professional CDP Brasil 100 Climate Change 2013 Report Fibria was selected as one of the 10 best companies in transparency. The only one in the pulp & paper sector.
XVII ANEFAC-FIPECAFI - SERASA EXPERIAN Prize Fibria is among the most transparent public companies in Brazil, recognized for the quality of its 2012 financial statements. poca Negcios 360 Fibria was elected as 1st place in the pulp & paper sector in the Corporate Governance and Future's Vision categories
The Best Companies to the Shareholders Prize of Capital Aberto Magazine Fibria was elected as 2nd place. The prize highlights the business profitability, share profitability, liquidity, corporate governance and sustainability.
44
Acknowledgments in Sustainability
DJSI World and DSJI Emerging Markets
Selected to Dow Jones World and Emerging Markets Sustainability Indices for 2013/14 as the industry leader of Forestry Resources and Paper sector.
45
Financial Reports
Fibria joined the Pilot Program, a group that has contributed to the development of the framework and demonstrated global leadership in shaping the future of corporate reporting. 46
Share Performance
+128%
+108%
+32% +2%
FIBR3 R$
Ibovespa
FBR US$
DJI
47
2014 Outlook
Guilherme Cavalcanti CFO
The wood impact should take 2-2.5 years when then it will become again to normal levels
Aracruz Unit:
Non recurring increase in third party wood due to:
1) Clonal decrease in Southern Bahia (controlled impact)
Veracel Unit:
Increase of third party wood due to carryover effect of contracts (FSC certification schedule).
Jacare Unit:
2-year increase in partnership program in So Paulo.
49
1,416
1,208 1,078
2011
2012
3Q13 LTM
Inflation
FX Rate
Modernization
Others
2014E
50
Cash Production Cost saw an annual increase of 4% over the past 5 years
Cash Production Cost (1) (R$/ton)
CAGR: + 4%
Target to have the cash cost increase below inflation Wood costs will represent the main impact Non recurring increase mainly due to third party wood Operating excellence actions focused on keeping cash cost below inflation
432
2009 (2)
2010 (2)
2011
2012
3Q13 LTM
51
Today, according to public information, there will be a 9% increase of the market pulp capacity between 2013 and 2015
SOFTWOOD(1)
25.0 MT
HARDWOOD(1) 30.3 MT
Net: (0.2) mt
Net: 5.1 mt
Net: 4.9 mt
(1) Source: PPPC Special Research Note November 2013 does not include Sulphite and UKP (2) Projects included: Ilim Group (490kt)| Closures: Resolute Forest (75kt) ; Domtar (125kt) ; Rayonier (280kt); Sodra Tofte (240kt) (3) Projects included: Eldorado (1.5 mt); UPM Fray Bentos (100kt); Maranho (1.5mt); Montes del Plata (1.3 mt); Oji Nantong (700kt); Guaba II (1.3 mt) | Closures: Jari (410kt); Cellulose du Maroc (140kt); Ilim Group (100kt); Double A (85kt); Sappi Cloquet (270kt); Sodra Tofte (180kt); April Rizhao (130kt)
53
-270
-410 3620 4000
54
Jari
Net -500
55
Technical age and scale in the market pulp industry For sure, further closures will happen
Hardwood (BHKP) Market Pulp
3.000
PM Capacity, 1000 t/a
Weighted average technical age 14.2 years
2013/IQ
STRONG
2013/IQ
STRONG
2.500
Aracruz
2.000
1.500
1.000
500
30
Closures
WEAK
25
Grade Switch
56
BHKP Net Capacity Changes (1) and PIX/FOEX BHKP in Europe (2)
3000
2835
2500
1945 1790 1740 1730 1600
2000
1575 1630 1035
600 500
1500 1000 500 0 -500 2000* 2001 2002 2003 2004 2005 2006 2007 2010 2011 2012 2013
500 45 -50 -165 175 -80 850 905 890 515
-910
-1085
2012
2006
2007
2008
2009
Closures
New capacity
PIX/FOEX Europe
2013*
2008
2009
2010
2011
-1615
* 2000: average price starts on 02/May/2000 | 2013: average price until 19/11/2013 Source: (1) Fibria and independent consultants | (2) FOEX
57
Total delivered cash cost will also have an influence on bottom prices
595
124 471 42 492 39 479 46 37 426 467 397 61 303 45 325 69 270
529
86
1 47 109 13 53
Working Capital Interest CAPEX Others SG&A
68 238
Delivery (US$/t)
Source: Hawkins Wright (Outlook for Market Pulp, September 2013) | Fibrias LTM 3Q13 considering a FX of R$/US$2.10.
58
Total
4,470
3,587
2,818
1,753
12,628
59
Internal/private consumption will take more and more the lead on exports
Chinas private consumption vs. exports
(CNY trillion and annual % change)
(1)
Hukou requirements for access to social welfare and affordable housing will be eased. Restrictions on the sale of rural construction land will be lifted which will shift more income to rural households and give a leg up to urbanization. Further relaxing of one-child policy. Prices of natural resources will be more market-determined, creating a better competitive environment.
Sources: (1) The Economist (2) RISI China Pulp Market Study
60
Indeed, Chinese private consumption has still a lot of potential for growth
China is a larger driver of various global indicators
(China as % of global))
100% 80% 60% 57%
46%
China has #1 share of global total China does not have #1 share of global total China share of nominal global GDP
38% 30% 29% 27% 24% 23% 21% 19% 17%
40% 20% 0%
11%
11% 10%
8%
7%
3% 0,4% 0%
61
Total
-513
-165
-623
-1,301
62
8.4%18.7%
0.3% -0.2% Western Europe Eucalyptus China
1.8% 3.1%
Hardwood
63
Source: (1) OECD November 2013 and (2) Thomson Datastream, Capital Economics
64
Paper capacities in Europe are neither decreasing nor increasing (considering all segments)
2015E 0 35 0
Total
-668
491
261
35
119
65
1,6%
-0,6%
2011
2012
2013
2014
2015
66
Will eucalyptus supply/demand scenario be a disaster in the coming years? We dont think so...
Ktons
Capacity
2012
19.550
3,8%
2013
20.445
4,6%
2014
23.102
13,0%
2015
24.445
5,8%
...
2016
25.938
6,1%
2017
27.785
7,1%
Change 12-17
8.235
Demand
17.530
2,3%
18.508
5,6%
20.255
9,4%
21.568
6,5%
23.015
6,7%
24.252
5,4%
6.722
D/C Ratio
89,7%
90,5%
87,7%
88,2%
88,7%
87,3%
What will be the extent of Long Fiber substitution ? How many production switch to non paper grades ? How many capacity closures ? If any M&A, what will be the impact on existing capacities and future expansions ? Last but not least, what if increase in demand is much higher than expected due to better economics ?
67
Investor Relations
E-mail: ir@fibria.com.br Phone: +55 11 2138 4565 Website: www.fibria.com.br/ir