Suzano S.a. · BMFBOVESPA:SUZB3
Suzano — Investor Presentation (2016)
50 slides from Suzano's investor presentation, 2016
Slide 1: Institutional Presentation
Institutional Presentation
Slide 2: Disclaimer
Disclaimer The statements in this presentation 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 includ
Slide 3: Agenda
Agenda 1. Company Overview 2. Strategy 3. Pulp and Paper Market 4. Financial and Operational Highlights 3
Slide 4: Company Overview
Company Overview Suzano is a forestry-based company which operates in the pulp and paper businesses for more than 90 years Itaqui Imperatriz Unit- Maranhão State (MA) Mucuri Unit- Bahia State (BA) Suzano Unit- São Paulo State (SP) Limeira Unit – São Paulo State (SP) Rio Verde Unit – São Paulo State
Slide 5: Product Portfolio
Product Portfolio Production and sales optimization to maximize assets return Market Pulp 2nd eucalyptus market pulp producer 65% Net Revenue Uncoated 70% Exports / 30% Domestic Market R$ 10.8 billion Printing & Writing Paper Coated 35% Paperboard Note: Figures of the last twelve months ended on 03/
Slide 6: Forestry Assets
Forestry Assets Suzano’s forestry competitiveness allows its operation in different regions with adequate yields States of Maranhão, Pará, Tocantins and Piauí: • Total¹: 635 k ha • Planted²: 217 k ha 1,094 k ha • Structural Average of total area Distance: 150km States of Bahia, Espírito Santo and Mi
Slide 7: Industrial Units
Industrial Units Pulp Facility Paper Facility Imperatriz – Maranhão State Rio Verde – São Paulo State Market Pulp: 1,500 k tonnes Printing & Writing Paper: 50 k tonnes Tissue: 60 k tonnes (start up in 3Q17) Pulp and Paper Facilities Mucuri – Bahia State Limeira – São Paulo State Suzano – São Paulo S
Slide 8: Commercial Offices
Commercial Offices Located in the main pulp and paper markets... Suzano Pulp and Sun Paper Suzano Pulp and Paper America (England) Paper Europe (USA) (Switzerland) Stenfar (Argentina) Suzano Pulp and Suzano Pulp and Paper Asia Paper (China) (Headquarter) ...in addition to a strong distribution chann
Slide 9: Shareholder Structure
Shareholder Structure Shareholder base dispersed across the main capital markets in the world BNDES Other Free Float Distribution (%) 7% 35% Asia: Controlling 13.5% Treasury Free Float Shareholders 2% 42% 56% North America: Europe: 17.6% 19.4% Latin America*: 0.6% Brazil: 48.5% Oceania: * Excludes B
Slide 10: Corporate Governance
Corporate Governance Board of Directors and Committees Members of the Board are well-known in the Brazilian Corporate landscape and are supported by the committees on the decision making Board of Directors Sustainability and Management Strategy Audit Committee Committee Committee Eight member, four
Slide 11: Stock Performance
Stock Performance SUZB5 appreciated significantly above the market, in addition to liquidity increase Daily Trade Numbers- SUZB5 Daily Financial Volume - SUZB5 (Trade number) (R$ million) 90 96 14,812 15,114 11,279 8,990 44 37 2013 2014 2015 LTM* 2013 2014 2015 LTM* Note: Last twelve months ended on
Slide 12: Agenda
Agenda 1. Company Overview 2. Strategy 3. Pulp and Paper Market 4. Financial and Operational Highlights 12
Slide 13: Strategy to maximize the return on invested capital
Strategy to maximize the return on invested capital... ... and generate more value to shareholders 13
Slide 14: Costs Discipline
Costs Discipline Cost per tonne significantly below inflation reflects the structural competitiveness efforts that have been implemented COGs +9% (R$/tonne) 1,368 1,393 1,283 2014 2015 UDM* INFLATION: +13% Note: Last twelve months ended on 03/31/2016 14
Slide 15: Project 5.1
Project 5.1 Investment in retrofitting and debottlenecking to reach the optimum structural cost Capacity of 5.1 million tonnes in 2018 Pulp and Paper Capacity (Million tonnes) Industrial investment in Imperatriz and Mucuri mills 5.1 Forest base increase and average distance reduction 4.8 4.9 Cash co
Slide 16: Project 5.1
Project 5.1 Optimum structural cash cost will generate more shareholder value US$172/tonne in 1Q16 US$150/tonne US$125/tonne in 2018 in 2021 - 2022 Note: Exchange rate of R$3.80/US$ used in the analyzes 16
Slide 17: Adjacent Businesses
Adjacent Businesses Investiments in high profitability and escalability projects that innovate and break paradigms FuturaGene Fluff First genetically modified clone First company in the world to use approved by CTNBio for hardwood to produce fluff commercial purposes Up to 70% softwood substitution
Slide 18: Eucafluff
Eucafluff Up to 70% softwood substitution for feminine hygiene and up to 30% for diapers Adds value to the product portfolio of our clients Rewet quality and reduction of energy costs Capacity: up to 100 k tonnes/year Start up: December/2015 Mill: Suzano Flexibility to produce either fluff or printi
Slide 19: Fluff Global Market
Fluff Global Market Demand growth driven by hygiene products consumption in the emerging markets Demand Demand Breakdown (million tonnes) (%) Other Brazil 10% Europe 6.0 6.7 5% 25% 5.4 Other LatAm 9% North China America 2013 2016e 2019e 16% 19% Other Asia 16% Production breakdown Products Breakdown
Slide 20: Tissue Project
Tissue Project Competitiveness on Jumbo Rolls production and logistics adds value to pulp Priority in establishing industrial partnership with our clients Modern and integrated mills in Imperatriz and Mucuri Production capacity of 60k tonnes in each unit Start up: 3Q17 in Imperatriz and 4Q17 in Mucu
Slide 21: Tissue Demand
Tissue Demand 90% of the Brazilian demand for tissue is used for sanitary purposes Global Demand (Million tonnes) 46.1 32.5 36.0 2013 2016e 2023e Brazilian Demand Products Breakdown in Brazil (Million tonnes) (%) 1.8 Paper Towel 1.1 1.2 9% Sanitary Napkin Purpose 3% 2013 2016e 2023e 88% Source: RISI
Slide 22: Lignin
Lignin Replacement of petroleum-based chemicals from renewable source, with higher profitability than energy sale Lignin Production Process Main applications: • Cement Additives Lignin • Phenolic Resins Fiber Energy Lignin • Rubber Components Recovery Boiler Lime Kiln Evaporation Capacity: 20k tonne
Slide 23: Agenda
Agenda 1. Company Overview 2. Strategy 3. Pulp and Paper Market 4. Financial and Operational Highlights 23
Slide 24: Pulp Industry
Pulp Industry Market pulp is about 35% of virgin fiber consumption and 15% of total fiber consumption Fiber Consumption Fiber Consumption Breakdown (million tonnes) (%) Total Fiber 3 BHKP Consumption1 17% 416 62 4 BSKP Virgin Fiber Recycled million tonnes 40% 179 237 2 BEKP Non-wood, Mechanical Pulp
Slide 25: Global Paper Consumption
Global Paper Consumption Pulp Market is driven by paper consumption Consumption by Region Consumption by Segment (%) (%) Europe Asia Other 23% 45% 59% Newsprint 7% Latin America Other 7% Tissue Printing & Writing North America 6% 8% 26% 19% Global Paper Demand (million tonnes) 428 405 401 391 2010 2
Slide 26: Paper Demand by Segment
Paper Demand by Segment Demand for pulp driven by tissue and paperboard consumption Average growth of 1.0% p.a Estimated demand of 490MM/tonne in 2030 4 Estimated demand growth until 2030 3 Tissue Containerboard 2 Paperboard Packaging Uncoated 1 Uncoated (%p.a.) Woodfree Mechanical 0 -1 Coated Other
Slide 27: Tissue Consumption
Tissue Consumption Demand for tissue is impacted by economic growth, urbanization and culture Per-capita Tissue Consumption (Kg/person/year) Suzano has pulp market share relevance in the regions with the Per-capita consumption growth (2013 – 2030) 100% highest growth potential China 80% India 60% Br
Slide 28: Pulp Competitiveness
Pulp Competitiveness The competitiveness of the eucalyptus fiber leads to the growth compared to other fibers Fiber volume (million tonnes) CAGR CAGR BEKP: +7.2% p.a. | Other BHKP: -1.5% p.a. BEKP: +4.1% p.a. | Other BHKP: +0.8% p.a. 25 26 26 24 25 25 23 23 24 24 22 22 21 21 22 24 21 22 23 16 15 16
Slide 29: Pulp Cash Cost
Pulp Cash Cost The new pulp projects are in the low-cost regions, mostly in Brazil Cash Cost CIF / Europe (US$/tonne) Hardwood Softwood 800 400 0 Chile/Urugauy Brazil Iberic Pen. USA USA Other Europe East Canada Indonesia Bel/France Finland Canada China Chile Finland West Canada East Europe East Eur
Slide 30: Pulp Demand
Pulp Demand Demand average annual growth of 1.0 - 1.5 million tonnes Market Pulp Global Demand (million tonnes) 67 60 62 54 Asia 30 31 35 23 Europe North America 20 19 19 19 Latin America 8 8 8 8 3 4 4 4 2010 2015 2016e 2020e CAGR Demanda 2010 – 2015 2016e – 2020e North America 0.0% +0.2% Europe -0.
Slide 31: Pulp Supply
Pulp Supply Softwood Hardwood Start Company Estimated Estimated Estimated Estimated up Capacity Capacity Production in Production Production in Production Announced Announced 2016 in 2017 2016 in 2017 Klabin 1Q16 400 250 150 1,100 500 550 IP 2S16 360 100 245 - - - Domtar 3Q16 315 80 230 - - - Sodra
Slide 32: Commodities Price
Commodities Price Average pulp price in recent years has been flatter when compared to other commodities Commodities Price in USD (100 basis: jan/00 – mar/15) Commodity (%) 1600 Iron Ore 346 Cupper 167 1400 Rubber 133 1200 Soybean 76 Crude Oil 48 1000 NBSK 11 800 BHKP 6 600 Cotton -1 Aluminium -2 40
Slide 33: Brazilian Paper Industry
Brazilian Paper Industry Suzano has leading position in all segments in which it operates Brazilian Paper Demand in LTM* (million tonne) Total 86% 14% 6.3 Printing & Writing 85% 15% 1.8 35% Suzano Market 27% Share Paperboard 92% 0.6 Domestic Sales Imports Source: Forestry Industry Association (Ibá)
Slide 34: Paper Commercial Strategy
Paper Commercial Strategy Direct paper sales in the domestic market is a competitive advantage that improves the profitability of the business Suzano’s Go-To-Market Project in Brazil(1) Suzano brand strengthening Improves service level Greater negotiation power Tax benefits Dilution of the credit ri
Slide 35: Paper Business Competitiveness
Paper Business Competitiveness The paper business has higher contribution margin per tonne than pulp and it is a more stable market in terms of volumes and pricing Integrated Paper Paper Margin Business Margin Inputs and Variables Costs Integrated Pulp Margin Pulp Cost Note: Above representation is
Slide 36: Agenda
Agenda 1. Company Overview 2. Strategy 3. Pulp and Paper Market 4. Financial and Operational Highlights 36
Slide 37: Operating Results: Pulp Business
Operating Results Pulp Business Presence in the main international markets and strategic relationship with clients Pulp Production Pulp Sales Volume (k tonne) (k tonne) 3,489 3,291 3,340 3,373 2,850 2,982 456 421 1,932 1,895 478 415 2,920 2,373 2,835 Domestic Market 1,480 Exports 2013 2014 2015 LTM*
Slide 38: Operating Results: Paper Business
Operating Results Paper Business Operational excellence in paper: product portfolio and revenue management, optimization of assets, and strengthening of distribution channel Paper Production Paper Sales Volume (k tonne) (k tonne) 1,293 1,301 1,209 1,200 1,312 1,322 1,230 1,246 904 934 827 840 Domest
Slide 39: Financial Results
Financial Results Cost and expenses performance bellow inflation Net Revenue Consolidated Pulp Cash Cost* (R$ million) (R$/tonne) 10,224 10,785 Inflation: +19.0% 7,264 3,621 3,765 +14.5% 5,689 642 664 580 536 3,413 3,111 7,021 6,603 2,577 3,851 2013 2014 2015 LTM* 2013 2014 2015 LTM* Average 3,59 2.
Slide 40: Financial Results
Financial Results Continuous focus on increasing operational results Operational Cash Generation1 Adjusted EBITDA (R$/tonne) (R$/tonne) 3,678 1,075 3,485 1,016 1,453 555 588 1,115 2013 2014 2015 LTM* 2013 2014 2015 LTM* Note: (1) Operational cash generation considers adjusted EBITDA less sustaining
Slide 41: Debt
Debt Continuous reduction on leverage allows Suzano to be prepared for the future Net Debt (R$ and US$ billion) and Leverage (x) 4.1x 3.9x 3.3x 3.0x 2.7x 3.7x 2.3x 3.1x 2.9x 2.3x 2.3x 2.3x 12.7 12.5 11.4 11.0 11.2 10.1 3.8 3.6 3.5 3.2 3.2 3.2 Dec/14 Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Net Debt (R$) N
Slide 42: Debt Profile
Debt Profile Adequate debt profile and competitive cost of debt Average Cost of Debt (%) Amortization (R$ billion) 3.9 2.8 2.9 2.4 2.0 1.3 1.2 91.8%of CDI 0.2 Mar/14 4.8% Cash 9M16 2017 2018 2019 2020 2021 2022 Position onward 90.8% of CDI Mar/15 4.7% Gross Debt: R$14.1 billion 64% in foreign curren
Slide 43: Rating
Rating Suzano is on track to achieve Investment Grade Klabin CMPC Arauco Suzano Fibria Standard & Poors BBB- BBB- BBB- BB+ BBB- Moody's - - Baa3 Ba2 Ba1 Fitch Ratings BBB- BBB+ BBB BB BBB- 6.0x 3.2x 3.0x Net Debt / 2.3x 1.9x Adjusted EBITDA LTM1 (US$) Klabin CMPC² Arauco² Suzano Fibria 1Last twelve
Slide 44: Federal Taxes
Federal Taxes Suzano's fiscal situation allows low cash disbursement for income and social contribution taxes Tax Benefits 75% of income tax reduction: • Maranhão unit until 2024 • Bahia unit: Line 1 until 2024 | Line 2 until 2018 DAI¹ in Maranhão Unit of R$1.2 billion to be used Tax Credits Tax los
Slide 45: 2016 CAPEX
2016 CAPEX Estimated CAPEX for 2016: R$ 2.4 billion Sustaining R$ 1.1 billion Structural Competitiveness Projetct 5.1 1 R$ 510 million Effluent Treatment Station Carry Over R$ 45 million (ETS) Others R$ 50 million R$ 100 million Total: R$ 605 million Others R$ 110 million Adjacent Business Tissue 2
Slide 46: Investments according to the plan
Investments according to the plan CAPEX (R$ million) 1Q16 2016e SUSTAIN 367 1,130 STRUCTURAL COMPETITIVENESS 93 605 ADJACENT BUSINESS 35 325 OTHER 126 325 TOTAL 621 2,385 Projects on time and on budget Project 5.1 Tissue Project Lignin Project
Slide 47: Operational Cash Generation
Operatinonal Cash Generation A Suzano has posted the highest operational cash generation in the industry Maximizing operational Operational Cash Generation in LTM* cash generation (R$ millions) 4,931 3,678 ( 1,253 ) Value to Adjusted EBITDA Sustain Capex Operational Cash shareholder Flow Note: * Las
Slide 48: ROIC
ROIC It is the most appropriate metric to measure the industry returns, which is capital intensive UDM* 2015 2014 15.9% 14.4% 6.3% ROIC = (Adjusted EBITDA – Sustaining CAPEX – Tax cash account) /Capital Employed Note: * Last Twelve months ended on 03/31/2016 48
Slide 49: 2016 value levers
2016 value levers Wood cost reduction Progressive and gradual reduction in average distance at Mucuri mill Decrease in harvesting cost (retrofitting of equipments concluded in 2015) Industrial cost reduction Benefits from the retrofitting investments concluded Energy exposure management
Slide 50: Investor Relations
Investor Relations www.suzano.com.br/ir ri@suzano.com.br 50