Suzano S.A. · BMFBOVESPA:SUZB3
Suzano — Investor Presentation (December 2019)
57 slides from Suzano's investor presentation, December 2019
Slide 1: Corporate Presentation December 2019
Corporate Presentation December, 2019
Slide 2: Disclaimer
Disclaimer This communication contains certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. Some of these forward-looking statements are identified with words like “believe
Slide 3: The New Suzano
The New Suzano
Slide 4: A first class assets base: plantations
An first class assets base Our plantations hectares of planted and certified areas Geographically eucalyptus genetic base equivalent to 200x Manhattan areas m³/ha/year structural harvesting and average productivity average radius inbound logistics 4
Slide 5: A first class assets base: our mills
An first class assets base Our mills MWm average pulp equivalent to supply chain tons of tons of 1.4 mn market pulp paper people town 5
Slide 6: A first class assets base: our logistics
An first class assets base Our logistics mills fully either close to shore export or railway connected pulp served 6
Slide 7: A first class assets base: paper business
An first class assets base Paper business pulp go-to-market Brazilian clients Brazilian integrated model brands market share¹ ¹ Addressable market. 7
Slide 8: Fully integrated
Fully integrated Plantation Mill Railway Port 8
Slide 9: Undisputable leader in the pulp industry
Undisputable in the pulp industry Hardwood | CIF China | USD / ton Softwood | CIF China | USD / ton Top 101 and Production Capacity (M Tons) and Production Capacity (M Tons) . Japan . Japan 600 0.6 (2%) 600 0.2 (1%) Suzano 10.9 Other Asia APP + PE 3.8 0.7 (2%) CMPC 3.7 400 400 Arauco 3.1 West. Europ
Slide 10: Consistently low cash cost
Consistently cash cost R$/ton¹ 709 690 668 622 2015 2016 2017 2018 ¹ Cash production cost ex-downtimes. Pro forma basis of Suzano Papel e Celulose and Fibria Celulose cash production cost (R$/ton). Figures are adjusted by Brazilian inflation (IPCA) which represents R$ 104/t in 2015, R$ 52/t in 2016
Slide 11: Synergies
Synergies
Slide 12: Structural competitiveness boosted by R$800MM synergies
Structural competiti v en ess boosted by Capture Profile1 100% 90% Operational Synergies G&A Supply Chain 40% R$800MM R$900MM Forestry per year¹ Industrial ¹ Total Steady State. Dec / 2019 Dec /2020 Dec / 2021 12
Slide 13: Structural competitiveness: selected synergy examples
Structural competiti v en ess boosted by Selected Logistic / examples Industrial Forestry Commercial Procurement G&A Reduction in Wood supply Routes Contractual Organizational Initiative products (SKUs) optimization Optimization parameters Structure per plant equalization adjustment Lower consumptio
Slide 14: Fair value and goodwill tax effects, total R$ 26.5 bn
Adjusted Balance Average² annual deductible Accounting effect: Sheet to fair value¹ R$ 18.4 bn expenses of R$1.2 bn¹ EBT reduction Preliminary Average3 annual fiscal Tax effect: Goodwill¹ R$ 8.1 bn deduction of R$0.8 bn¹ taxable base reduction Total R$ 26.5 bn ¹ Based on preliminary PPA as disclosed
Slide 15: Resulting Company
Resulting Company
Slide 16: Net revenues mostly from international markets
mostly from international markets 3% 16% Others Specialties Net revenues (US$ billion) 8.7 7.0 Americas 6.1 6.1 5.6 Pulp Europe Asia 61% 20% Tissue P&W 2014 2015 2016 2017 2018 Note: Pro forma figures of Suzano and Fibria historical data. Note: The data represents simple sum out of the sold volumes
Slide 17: Adjusted EBITDA and Operational Cash Generation
Adjusted EBITDA¹ and Margin¹ Operational Cash Generation² R$ and US$ million and (%) R$ and US$ million 1 25,00 60% 20,00 52% 0.9 20,00 47% 50% 0.8 16,361 0.7 15,00 15,00 40% 12,481 0.6 11,809 30% 10,00 0.5 10,00 7,988 0.4 20% 0.3 4,477 5,000 3,415 3,053 0.2 5,000 10% 2,065 0.1 0 0% 0 0 2018 LTM3Q19
Slide 18: USD exposure and hedging policy
Revenue 88% USD Hedging Policy COGS 20% USD Operating Hedge Debt Hedge Target: up to 75% of the Target: Net debt SG&A 27% USD following 18 months 100% denominated Sustaining in USD 11% USD Current: 75% of Capex net exposure² Sensitivity¹ ~ R$ 700 million EBITDA ~ R$ 600 million ¹ Sensitivity at each
Slide 19: Debt profile US$ 15.4 bn
debt profile 3 Pro-forma Amortization Schedule (US$ million)¹ average debt maturity 8,015 2,851 740 2,384 RCF Average Cost (US$)²: 467 7.463 Non-Trade 1,518 1,277 Finance Cash on 2,111 944 703 481 1.917 hand 678 558 80 478 871 310 797 815 552 Trade US$ 15.4 bn 73 367 Finance Liquidity 2019 2020 2021
Slide 20: Funding sources
5% Non Trade Finance 28% Related Bank Local Counterpart Sources 72% International 45% 33% 17% International Capital Markets Trade Finance Local Capital and Related Bank Markets As of November 28, 2019. Funding sources 20
Slide 21: Policies and leverage
Policies Indebtedness Net Debt/EBITDA Ratio (in US$): 1.0x to 3.0x 1.0x to 3.5x Normal Cycle Investment Cycle Dividend The lowest between: 25% of the net income or 10% of the Operational Net Debt (US$ billion) Cash Flow Generation¹ 13.3 10 Leverage US$ (Net Debt / Adj. EBITDA)² 4.3x Sep-19³ Long-Ter
Slide 22: Financial leverage framing plan
Financial Leverage framing plan Capex limited to sustaining and commitments already made Monetization of excess inventory of ~US$ 500 MM Commitment to Financial Policy Synergies capture: 90% in 2020 Non-core assets sale 22
Slide 23: Capital expenditures
Capital Previous New Capex (R$ billion) 2019e 2019e 2020e Sustaining 3.8 3.7 3.6 Modernization and Expansion 0.4 0.3 0.3 Forest and Land 1.3 1.3 0.4 Port Terminals¹ 0.4 0.4 0.1 Total 5.9 5.7 4.4 ¹ States of São Paulo and Maranhão. 23
Slide 24: Bonds
Bonds
Slide 25: One of the lowest G-spreads in Brazil
One of the G-spreads¹ in Brazil 232 237 212 214 193 179 163 135 Investment Grade Rating Outlook BBB- Negative BBB- Negative BRAZIL VALE GERDAU SUZANO PETROBRAS BRF KLABIN BRASKEM ¹ Issuances with no maturity in 2026 interpolated for comparative purposes; G-spread as of December 6, 2019. Source: Bloo
Slide 26: Peers Bonds Mid YTM
Peers Bonds Mid YTM (%) 6.0 5.5 5.0 4.5 4.0 Arauco 27 (BBB-) Suzano 26 (BBB-) 3.5 CMPC 27 (BBB-) 3.0 IP 26 (BBB) 2.5 Source: Bloomberg, as of 12/06/2019
Slide 27: Pulp Market
Pulp Market
Slide 28: Growth in global pulp demand
on global pulp demand Global Market Pulp Demand By Grade in million tons in million tons Softwood +1.4/y +0.2/y +0.2/y +0.4/y +1.3/y 66.0 27.0 21.8 24.3 24.9 +1.2/y 58.9 55.0 42.8 2005 2015 2018 2023E Hardwood +1.0/y +1.0/y +1.1/y 39.0 34.0 30.8 21.1 2005 2015 2018 2023E 2005 2015 2018 2023E Source:
Slide 29: Pulp demand driven by end-uses
Driven by end-uses 58.8 Global Market Pulp Million tons Demand Annual Demand by end use Growth until 2030 Paper and Tissue 38% +2.8% paperboard demand average growth of Printing 26% -0.7% & Writing Specialty 20% +0.6% Fluff 9% +3.3% until Packaging 7% +2.3% 2030 Breakdown Source: PPPC S&D 2019, Poyr
Slide 30: China became the leading consumer of tissue
China became the leading consumer of tissue Tissue Demand by main region in thousand tons 14,100 Western Europe 12,100 North America China 10,100 8,100 6,100 4,100 2,100 100 2017 2018 2019 2020 2021 2022 2023 Source: RISI 30
Slide 31: Pulp demand supported by market dynamics
Supported by market dynamics Chinese Market Pulp Demand Tissue Consumption per Capita Tissue Machine Closures from in million tons in kgs per year Environmental Restrictions in million tons 25.6 1.4 1.4 1.5 +1.1/y 16.0 15.7 25.3 0.6 +1.1/y 0.5 6.7 6.0 19.8 +1.1/y North West Japan Latin China 2015 20
Slide 32: Chinese exposure to hardwood chips sourcing
Chinese exposure to Hardwood chips sourcing 2009-2019YTD US dollars per BDMT, nominal prices CIF Share of pulp capacity based on imported HW chips Imported HW chips by pulp grade Source of HW chips for the Asia-Pacific Markets, 2019YTD Source: RISI 32
Slide 33: No major new capacity in the short term
No major new capacity in the short term 1,200 2.5 Pulp Prices - CIF Europe/China (US$/ton)(2) Europe - BHKP China - HW UPM Capacity Additions (‘000 ton)(2) Uruguay 1,000 Horizonte 2 2 Eldorado 800 MAPA(3) Rizhao APP South Maranhão 1.5 Três Sumatra(1) Montes Lagoas del Plata Guaíba II 600 Fray Bentos
Slide 34: Capacity age drives production planning
drive production planning Hardwood (BHKP) Market Pulp Softwood (BSKP) Market Pulp Domestic Captive Excluded Domestic Captive Excluded PM Capacity, 1000 t/a PM Capacity, 1000 t/a 3500 1600 STRONG STRONG Três Lagoas 1400 3000 1200 2500 1000 Aracruz 2000 Mucuri Imperatriz 800 1500 600 Veracel 1000 Jaca
Slide 35: Pulp has low volatility and low correlation
9 suzano Historical Volatility of Commodities (uss) Low correlation Lowest volatility 28% 28% 33% Lo} 19% 20% 22% 25% 17% > = 7 i BHKP? LME Metals Cattle Copper Soy Iron Ore Nickel Sugar Crude Oil BHKP c 7, -1% 2% -2% 1% 1% 3% -3% 1% orrelation ‘om December 31, 2011 35
Slide 36: ESG for more value and less risk
ESG for more value and less risk
Slide 37: Sustainability governance structure
Board of a directors Sustainability Committee a CEO Reports to Chief Innovation and Sustainability New business Strategy, HR, IT …. Technology Officer • Coordinate the Sustainability Strategy throughout the company Forest Social Environment Development • Integration of sustainability aspects through
Slide 38: Sustainability strategy construction process
Construction process April May June July August September October November December 1. GROUNDING 2 Engagement Benchmarking External Stakeholders: • EUA Community favorability • Europe Stakeholders consultation • Brazil Suzano’s leadership interviews 3. LONG TERM GOALS JANUARY 2020 Development of lon
Slide 39: Wood traceability and sourcing commitments
- 100% of the wood used in the production process is controlled (traceability) - Compliance with the chain of custody management systems Forest Stewardship Council® (FSC®) and Cerflor® / Programme for the Endorsement of Forest Certification (PEFC) - Commitment to prevent sourcing and supply of wood
Slide 40: Committed to CDP and TCFD
Public engagement In the concept of the new economic model, there is no way to exclude the role of the forest regarding climate change Eucalyptus plantation + native forest preservation = carbon capture Greenhouse Gas Sequestration and Emissions 2018 Capture (tCO2e/ton) 1.7 Positive Balance Emission
Slide 41: Sustainable forest management model
Sustainable Forest Management Model Operation takes place in exclusively and already consolidated agricultural and degraded areas Commited to zero deforestation Wood purchase policy and forest management plans Aiming for biodiversity maintenance, soil ~40% of its total area devoted to conser
Slide 42: Water use in pulp and paper production
Water body (rivers) 20% Evaporation Pulp and paper production Pulp and paper – final product Water withdraw 80% 22 – 32m³/adt Recirculation of around 5 times Returns as treated effluent - Suzano returns about 80% of the water withdrawn from the river as treated effluent. - High efficiency in the use
Slide 43: Genetically modified trees and biotechnology
Suzano has no genetically modified trees deployed in commercial operations at this time. Plant biotechnology to improve forest yield and forest protection. FuturaGene undertakes extensive biosafety evaluation of new varieties, including human and animal safety and environmental impact, under n
Slide 44: Community programs and income generation
- Risk and cost reduction: operational and reputational PDRT - Certification demands adherence - Income generation and education improvement as drivers for life quality increase and financial self-sufficiency - Open dialogue and programs jointly developed with traditional communities, NGOs, social m
Slide 45: Well-balanced governance in place
in place Well-balanced Board of Directors Supported by Management Up to 10 members Audit Statutory Committee Eligibility assessment Management and Finance Committee 5 independent members Innovation and Strategy Committee (above min. req. of 20%) Sustainability Committee Talent and Compensation Commi
Slide 46: Our Future
Our Future
Slide 47: Innovation and New Businesses
Innovation and New Businesses Consumer Goods Pulp Paper Fluff Nanocellulose Bio fuel Geographic Organic expansion in Brazil International Expansion Lignin Dissolving Pulp Bio Composites Portfolio expansion M&A 47
Slide 48: Diversify cash flow through a well-defined strategy
9 suzano Diversify cash flow through a well-defined bicatintegy Selected > Identification of > Selection & > Pilot > Agreements with > Commercial Estimated Market Technologies Potential Technology Agreements with Investments Application Partners Investments Potential/year Partners Technology Partner
Slide 49: Backup
Backup
Slide 50: Mill pulp capacity and downtimes
2018 2019 2020 Mill – Pulp capacity 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 Aracruz – Mill A (ES) – 590 kt Aracruz - Mill B (ES) – 830 kt Aracruz - Mill C (ES) – 920 kt Imperatriz (MA)² – 1,650 kt Jacareí (SP) – 1,100 kt Limeira (SP)² – 690 kt Mucuri - Mill 1 (BA)² – 600 kt Mucur
Slide 51: Demand Growth 2018-2030
Demand Growth 2018-2030 in million tons +80 (+1.5%/yr) 487 495 472 479 458 465 438 445 451 426 432 91 90 414 420 92 91 93 93 95 94 97 96 96 P&W 99 98 57 59 54 55 51 52 46 48 49 43 44 45 Tissue & Fluff 41 205 210 215 220 186 191 195 200 169 174 178 182 Containerboard 166 Cartonboard 49 50 51 52 53 54
Slide 52: China's demand of BHKP and share of market pulp
China’s demand of BHKP by Country in million tons YTD 2018 (Sep) YTD 2019 (Sep) 9,705 9,755 5,656 5,626 1,981 1,939 1,733 1,710 97 80 157 254 81 146 BHKP Total Latin America Indonesia Others USA Canada Western Europe China’s Share of Market Pulp in million tons 35% 33% 16 29% 28% 14 30% 26% 24% 25%
Slide 53: Estimated demand growth until 2030
Share on total fiber consumption 4 20 40 60 80 100 Estimated demand growth until 2030 (%p.a.) Tissue Containerboard 3 Paperboard 2 Packaging 1 Uncoated Newsprint Woodfree Other 0 -1 Coated Average growth of -2 Woodfree -3 Emerging Markets: 2.2% p.a. Coated Mature Markets: -0.2% p.a. Source: Poyry Un
Slide 54: 2018 total fiber consumption
65 413 398 Unbleached 59 Non-Wood 175 2 Others Mechanical Fluff 6 Newsprint 34 4 6 23 Tissue 35 Softwood Recycled Integrated P&W 217 20 110 100 BCP 59 Packaging Hardwood 222 Virgin 34 Market Pulp 175 65 2018 Total Fiber Consumption Virgin Pulp Market Pulp Bleached Chemical Paper Pulp (BCP) Productio
Slide 55: Suzano's tax structure
Suzano’s tax structure Description and Amount Maturity (-)Deductible accounting expense Annual deduction: R$ 1.2 bn (based on 10yr average) According to assets maturity (a) EBT As stated in the income statement Annual deduction: R$ 790 mn (based on 10yr average) (-)(b) Goodwill (Fibria acquisition)
Slide 56: Forest base monitoring and firefighting
and monitoring of its forest base and efficient firefighting mechanism Forest monitoring towers, communication network, fire brigades, video monitoring Fire awareness and environmental education awareness activities Community workers and stakeholders involvement Commitment to native forest c
Slide 57: Investor Relations
Investor Relations www.suzano.com.br/ir ir@suzano.com.br