Suzano S.a. · BMFBOVESPA:SUZB3
Suzano — Suzano Papel e Celulose — Investor Presentation (October 2018)
44 slides from Suzano's investor presentation, Oct 25, 2018
Slide 1: Disclaimer
Disclaimer This communication contains certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Some of these forward-looking statements are identified with words like
Slide 2: Agenda
Company Overview 4 Industry Outlook 10 Competitiveness 16 Strategy 21 Operational and Financial Highlights 33 Agenda 3
Slide 3: Agenda
Agenda 1. Company Overview 2. Industry Outlook 3. Competitiveness 4. Strategy
Slide 4: Suzano
Suzano Data from 09/30/2018 ¹ SUZB3: R$48.08 ² Flexibility to produce either Fluff or Printing and Writing paper 3 Last twelve months ended on 09/30/2018 4 In local currency With over 90 years of operations, the Company produces pulp, paper and tissue Pulp Market Pulp Eucafluff Market Cap¹ R$ 52.6 b
Slide 5: Corporate Governance
Corporate Governance Members of the Board are well-known in the Brazilian Corporate landscape and supported by the committees on the decision making process Board of Directors Sustainability and Strategy Committee Audit Committee Management Committee Eight members, four independent David Feffer Pres
Slide 6: Shareholder Structure and Stock Performance
Shareholder Structure and Stock Performance BNDES 7% Other 29% Free Float 43% Treasury 1% Mondrian 7% Average Daily Financial Volume SUZB3 (R$ million) Average Daily Trades SUZB3 Source: Bloomberg. As of November 2017, the Company's shares became part of the Novo Mercado, the highest corporate gover
Slide 7: Production Capacity
¹ Flexibility to produce either Fluff or Printing and Writing paper ² Lignin start up in 2019 Production Capacity Suzano is the 2nd largest eucalyptus pulp producer and the 5th largest market pulp producer in the world. Suzano has also a leading position in the Paperboard and Printing & Writing segm
Slide 8: Strong Forest and Industrial Competitiveness
Strong Forest and Industrial Competitiveness Commercial Presence Total Area1: 726k ha Planted Area2: 301k ha Average Structural Distance: 184 km States of Maranhão, Pará, Tocantins and Piauí Forest Assets Port Distribution Center Commercial Office Total Area1: 286k ha Planted Area2: 205k ha Average
Slide 9: Forest Areas
Forest Areas States of Maranho, Paré, Tocantins and Piaul States of Bahia, Espirito Santo and Minas Gerais State of S40 Paulo Forest Assets Production Plants ‘ : 3 ‘ {1 Imperatriz (State of Maranhao) ‘Commercial Presence 15 states in Brazil + 8 Regional Commercial Offices + 3 Regional Distribution C
Slide 10: Pulp Industry Total Fiber Consumption
Pulp Industry Total Fiber Consumption1 Recycled Virgin Fiber Non-wood, Mechanical Pulp and Integrated Pulp Market Pulp 427 245 182 118 64 Fiber Consumption (million tons) 1 Excludes Dissolving Pulp and Fluff. Source: Poyry (2017), Hawkins Wright (Dec/2017) and internal analysis ² Pulp and Paper Prod
Slide 11: Pulp Demand Growth
+0.2/y +0.8/y +0.6/y 2006 2015 2016 2017 2006 2017 2016 2015 +1.0/y +1.5/y +1.7/y ¹ Pulp and Paper Products Council (PPPC) – Special Research Note Chemical Market Pulp Demand Forecast 2018 – 2022 as of September 2018 ² Data from June/2018 (PPPC). BEKP: Bleached Eucaliptus Kraft Pulp Hardwood Pulp¹ (
Slide 12: Pulp Production Capacity of Brazilian Companies
(million tons) Brazilian Companies ¹ Considers the total installed capacity as reported in the Companies’ public filings and investor relations, including of operations to be initiated Pulp Production Capacity¹ 13 7.3 3.9 3.8 3.7 3.6 2.8 2.8 2.8 2.8 2.6 2.5 2.0 1.9 1.8 1.8 1.7 1.5 1.5 1.4 1.3
Slide 13: Paper Demand
Paper Demand 4 0 2 1 3 -3 -1 -2 20 40 60 80 100 Average growth of 1.3% p.a. Estimanted global demand 486MM/ton in 2030 Demand for pulp driven by tissue and paperboard consumption Share on total fiber consumption in 2016 (%) 14 Paper Consumption by Region (%) Estimated demand growth until 2030 (%p.a.
Slide 14: Brazilian Paper Demand
¹Source: Forestry Industry Association (IBA). Printing & Writing¹ Paperboard¹ (thousand tons) Brazilian Paper Demand (thousand tons) 15 1,543 1,498 292 350 1,835 1,848 2016 2017 Domestic Sales Imports 505 526 35 45 540 571 2016 2017 Domestic Sales Imports
Slide 15: Brazilian Paper Demand
Brazilian Paper Demand Printing & Writing thousand tons) 1,835 1,848 292 350 1,498 2016 2017 ‘™ Domestic Sales Imports ion MBA), Paperboard? (thousand tons) 540 2016 ™ Domestic Sales
Slide 16: Pulp Competitiveness
Cash Cost CIF / Europe (US$/ton) Câmbio de R$ 3.41/US$ Fonte: Hawkins Wright (Apr/18). Pulp Competitiveness Brazil has the fastest tree growth rates in the world, the highest productivity and biggest scale positioning Brazilian producers as the lowest cost players in the world 0 800 400 US Int. West
Slide 17: Pulp Competitiveness
CAGR BEKP: +5.7% p.a. Other BHKP: -0.8% p.a. CAGR BEKP: +2.4% p.a. Other BHKP: +1.5% p.a. Pulp Competitiveness The competitiveness of the eucalyptus tree in Brazil leads to the growth compared to other fibers Fiber volume (million tons) Source: Hawkins Wright (Apr/18). 1 Bleached Eucalyptus Kraft Pu
Slide 18: Paper Competitiveness
Paper Competitiveness Suzano is an integrated paper producer leading to higher contribution margin per ton Leadership position in Printing & Writing Segment in Brazil Leadership position in Paperboard Segment Paper Market is less volatile 19 Costumer base expansion (Suzano Mais)
Slide 19: Tax Credits
Tax Credits Tax loss carry forward: R$1.5 billion Total of federal tax credits to be used: R$157 million As of 09/30/2018. Federal Taxes Competitiveness Suzano's assets leads to a fiscal situation which allows low cash disbursement for income and social contribution taxes Tax Benefits 75% of income
Slide 20: Tax Benefits and Tax Credits
Tax Benefits 75% of income tax reduction: + Maranhéo unit until 2024 + Bahia unit: Line 1 until 2024 | Line 2 until 2018 Tax Credits Tax loss carry forward: R$1.5 billion Total of federal tax credits to be used: R$157 million
Slide 21: Pillars to Maximize Returns and Reduce Volatility of Results
22 3 Pillars to Maximize Returns and Reduce Volatility of Results Structural Competitiveness Adjacent Business Reshaping of the Industry Anticipated return improvement as result of cost reduction initiatives coupled with disciplined investments to achieve optimal cost Investments in adjacent busines
Slide 22: Structural Competitiveness
Forestry Average distance reduction and standardization and insourcing harvesting Industry Structural efficiency through retrofitting and debottlenecking Logistics Integrated logistics with synergy gains Structural Competitiveness Structural Competitiveness Maximize the return on assets and cash gen
Slide 23: Adjacent Businesses
Integrated production Production of jumbo rolls and final products First genetically modified clone approved by CTNBio for commercial purposes Potential to increase productivity by nearly 20% Replacement of petroleum-based chemicals Tissue Adjacent Businesses Fluff FuturaGene First company in the wo
Slide 24: Consumer Goods Tissue
Consumer Goods Modern and integrated mills in Imperatriz and Mucuri Acquisiton of Facepa – Fábrica de Papel da Amazônia S.A. Production capacity of 170k tonnes Brands launched: Max Pure and Mimmo Complementarity of product portfolio for the categories of paper towel, napkin and diaper. Suzano reache
Slide 25: High Growth Potential Tissue Consumption
Forecast 2025 9 High Growth Potential Tissue Consumption (million tons) Per capita consumption in Brazil lower than Latin America Demand +700 thousand ton 26 Adjacent Business 25 13 9 6 Today
Slide 26: Tissue Market in Brazil
Tissue Market in Brazil 27 Fonte: Nielsen Julho/Agosto 2018 Santher Kimberly Clark Sepac Milli CMPC Own Brand Carta Fabril Canoinhas Copapa Suzano Ondunorte Outros Adjacent Business High Fragmentation 4 top players 42% market share 3% 4% 4% 5% 7% 7% 8% 10% 10% 11% 12% 20%
Slide 27: Consumer Goods Product Quality
Product Use in Plies Price/Roll Cost per use Single Ply 10 (1.0m) 100 3.3 Two-Ply 6 (1.2m) 150 3.0 Three-Ply 4 (1.2m) 200 2.6 Consumer Goods Better quality products offer more benefits to consumers. Better quality at lower cost per use. Single Ply Two-Ply Higher margin and competitiveness for Suzano
Slide 28: Tissue Next Steps
Consumer Goods Tissue Next Steps Geographic expansion in Brazil Portfolio expansion 29 Goal: Speed to market and brand investment Adjacent Business
Slide 29: Eucafluff
Up to 50% softwood substitution for diapers and feminine hygiene products and 100% for underpads and petpads. Demand¹ (million tons) CAGR: 4% p.y. Products Breakdown¹ (%) Eucafluff Fonte: ¹RISI Absorbs more liquid and reduces the chances of leakage. Improves the rewet, keeping the product much drier
Slide 30: Lignin
Replacement of petroleum-based chemicals from renewable source Main applications: Cement Additives Phenolic Resins Rubber Components Lignin Adjacent Business Capacity: 20k tonnes per year Capex: R$100 million Start Up: 2018 Mill: Limeira Lignin Production Process Fiber Lignin Wood Wood Chips Bleachi
Slide 31: FuturaGene
Adjacent Business FuturaGene First genetically modified clone approved by CTNBio for commercial purposes Less Land Utilization Lower Forest Formation Cost Biotechnology is on the right side of Sustainability Less chemical expenditure Higher carbon sequestration 32
Slide 32: Operational and Financial Highlights
5. Operational and Financial Highlights 33
Slide 33: Pulp Segment
Pulp Segment Pulp Production (‘000 tons) Pulp Sales (‘000 tons) Pulp Revenue Breakdown 3Q18 Pulp Sales Volume per Segment 3Q18 34 851 821 941 3,592 3,566 3Q17 2Q18 3Q18 LTM 3Q17 LTM 3Q18 830 802 903 3,619 3,533 3Q17 2Q18 3Q18 LTM 3Q17 LTM 3Q18 Brazil 7% Asia 47% Europe 32% North America 13% Other 1%
Slide 34: Pulp Segment
Cash Cost (R$/ton) EBITDA (R$/ton) Operational Cash Flow² (R$/ton) ROIC¹ Pulp Segment 35 ¹ ROIC = (Adjusted EBITDA – Sustaining CAPEX – Tax cash account) / Capital Employed ² Operational Cash Flow = Adjusted EBITDA – Sustaining Capex LTM: Last Twelve Month 1,088 1,646 1,895 873 1,551 3Q17 2Q18 3Q18
Slide 35: Paper Segment
Paper Revenue Breakdown 3Q18 Paper Segment Paper Sales (‘000 tons) Paper Production (‘000 tons) 36 301 313 350 1,154 1,257 3Q17 2Q18 3Q18 LTM 3Q17 LTM 3Q18 208 196 246 795 869 102 87 90 368 369 310 284 336 1,163 1,238 3Q17 2Q18 3Q18 LTM 3Q17 LTM 3Q18 Brazil Exports Brazil 73% North America 5% Centra
Slide 36: Paper Segment
EBITDA (R$/ton) Operational Cash Flow² (R$/ton) ROIC¹ Paper Segment 37 ¹ ROIC = (Adjusted EBITDA – Sustaining CAPEX – Tax cash account) /Capital Employed ² Operational Cash Flow = Adjusted EBITDA – Sustaining Capex LTM: Last Twelve Months 915 892 1,212 786 940 3Q17 2Q18 3Q18 LTM 3Q17 LTM 3Q18 756 72
Slide 37: Consolidated Results
ROIC¹ (%) Consolidated Results Operational Cash Flow² (R$ million) Adjusted EBITDA (R$ million) Avg Europe FOEX 38 ¹ ROIC = (Adjusted EBITDA – Sustaining CAPEX – Tax cash account) / Capital Employed ² Operational Cash Flow = Adjusted EBITDA – Sustaining Capex LTM: Last Twelve Months Avg R$/US$ 3.20
Slide 38: Debt Leverage at an Adequate Level
Debt Leverage at an adequate level Net Debt (R$ and US$ billion) and Leverage (x) Net Debt (R$) Net Debt (US$) Net Debt/Adjusted EBITDA (R$) Net Debt/Adjusted EBITDA (US$) 39 10.0 10.3 9.7 10.0 9.3 9.5 9.3 9.9 10.8 3.1 3.2 3.1 3.0 2.9 2.9 2.8 2.5 2.7 Sep/16 Dec/16 Mar/17 Jun/17 Sep/17 Dec/17 Mar/18
Slide 39: Debt Profile
Gross Debt: R$24 billion Net Debt / Adjusted EBITDA: 1.6x Average debt maturity of 93 months Average Cost of Debt : 5.2% p.a. (in USD) (considering market swap curve) As of 09/30/2018 Debt Profile Competitive debt profile and cost of debt Amortization (R$ million) 40 Bond 40% Certificates of Agribus
Slide 40: Capital Discipline
2017 0.7 1.1 1.8 0.5 0.9 2.1 Capex (R$ billion) Total 2018e 0.6 1.2 2.8 0.7 0.5 - - 9M18 Capital Discipline Sustaining Structural Competitiveness and Adjacent Businesses Acquisition of land and forests Acquisition of Facepa 41 0.3 0.3
Slide 41: Suzano's Ratings Evolution
Net Debt / Adjusted EBITDA LTM 1 Last twelve months ending on 09/30/2018 in R$. ² Last twelve months ending on 06/30/2018 in US$. ³ Last twelve months ending on 06/30/2018 in R$. Rating Klabin CMPC Arauco Suzano Fibria Standard & Poors BB+ BBB- BBB- BBB- BBB- Moody's - Baa3 Baa3 Ba1 Ba1 Fitch Rating
Slide 42: Bonds
Bonds sep/17 Jun/18 Sep/18 2021 Price (USD) 108.02 103.47 103.57 Yield 3.30% 4.42% 4.23% 2026 Price (USD) 107.70 101.12 101.01 Yield 4.67% 5.58% 5.53% 2029 Price (USD) - - 100.37 Yield - - 5.95% 2047 Price (USD) 109.20 102.71 104.21 Yield 6.31% 6.78% 6.67% 2021 Principal Amount: US$ 189,630,000 (ori
Slide 43: Investor Relations
Investor Relations 2018 www.suzano.com.br/ir ri@suzano.com.br 44
Slide 44: Investor Relations
Suzano Papel e Celulose — Investor Presentation (October 2018) on 6ix