fibria’s biostrategy how a global leader in pulp ... · votorantim s.a.(1) 29.42% bndes...
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Copyright © 2017 Fibria, all rights reserved
Mike Rushton, Fibria Innovations
RBI Meeting – Atlanta - March 7, 2018
Fibria’s Biostrategy – How a Global Leader in Pulp Production is Diversifying into the Bioeconomy
FIBRIA IN A NUTSHELL
FSC & PEFC certification /
Dow Jones
Sustainability Index
1 MM hectares of forest
0.8% of revenue
invested in innovation
+17 thousand people
35% land set aside for
conservation purposes
as natural habitat
7,000+ families participating
in our social projects
90% of final
product exported from
Brazil
World leader in eucalyptus market pulp production from
planted forests
+7.25 MM tons/year of
pulp produced
FIBRIA.COM.BR 4
Fibria Highlights
(1) Controlling group (2) Free Float 41.36% + Treasury 0.14%
Votorantim S.A. (1)
29.42%
BNDESParticipações (1)
29.08%
FreeFloat (2)
41.36%
► 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
► SEC Registered ADR Level III program
Listed on Novo Mercado, highest level at B3:
Policies approved by the Board of Directors:
Fiscal Council
Board of Directors
20% independent members
Role of CEO andchairman is split
Personnel and Remuneration
Committee
Statutory Audit
Committee
Finance Committee
Sustainability Committee
Innovation Committee
30% independent
members
100% independent
members
50% independent members
45% independent members
-
General Meeting
► Indebtedness and Liquidity
► Market Risk Management
► Risk Management
► Corporate Governance
► Related Parties Transactions
► Anti-Corruption
► Information Disclosure
► Securities Trading
► Antitrust
► Genetically Modified Eucalyptus
► Dividend Policy
► Sustainability
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A Winning Player
Port Terminal Pulp Unit
Três Lagoas I and II
Santos
AracruzPortocel
Caravelas
BelmonteVeracel
Jacareí
Superior Asset Combination Main Figures – 2017
Pulp capacity(1) million tons 7.250
Net revenues US$ billion 3.677
Total Forest Base(2) thousand hectares 1,056
Planted area(2) thousand hectares 633
Net Debt US$ billion 3.728
Net Debt/EBITDA (in Dollars)(3) X 2.41
Source: Fibria(1) Includes Horizonte 2 pulp capacity.(2) Including 50% of Veracel, excluding forest partnership areas and forest bases linked to the sales of Losango and forest assets in Southern Bahia State; As of December 31, 2017. (3) For covenants purposes, the Net Debt/EBITDA ratio is calculated in Dollars.
Two Products:
• Bleached Hardwood Kraft Pulp• Electric Power
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Fibria´s Industrial Units
(1) Veracel is a joint operation between Fibria (50%) and Stora Enso (50%) and the total capacity is 1,120 thousand ton/year
(1)
Três Lagoas– Mato Grosso do Sul – 3,250 thousand t/year
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Sustainable Land Use Model
Neighbours – other uses
Fibria’s preserved native forest
Fibria’s Eucalyptus plantation
Eu
ca
lyp
tus
in
Bra
zil
:
Sh
ort
cycle
s
6 trees
planted per
second
+86 miseedlings
produced
6 – 7
year cycles
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Fibria Feedstock – Eucalyptus 6-7 years
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Brazilian Land Use
Native vegetation: 554 M ha (65%)
Planted areas: 64 M ha (7,5%) Planted Wood Forests: 7,8 M ha (0,9%)
Urban: 38 M ha (4,5%)
Pasture: 198 M ha (23%)
Huge potential for new wood forests and biomass planted areas
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Fibria´s Commercial Activity
Source: Fibria
Worldwide presence
Strong global customer base
Long-term relationships
Focus on customers with stable business
Customized pulp products and services
Sound forestry and industrial R&D
Focus on less volatile end-use markets such as tissue
Lower dependence on volatile markets such as China
Efficient logistics set up
Low counterparty credit risk
100% certified pulp (FSC and PEFC/Cerflor)
Revenues by Region and by End Use - Fibria Highlights
Net Revenues by Region - Fibria
Region – 4Q17 End Use – 4Q17
39% 41% 43%36% 32%
28% 24% 24%
22%20%
24% 25% 24%32% 39%
9% 10% 9% 10% 9%
2013 2014 2015 2016 2017
Europe North America Asia LatAm
51%
33%
16%
TissuePrinting
& Writing
Specialties
28%
20%
43%
9%
Europe
North America
Asia
LatinAmerica
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Horizonte II Project (Três Lagoas 2)
Game-changing project for Fibria
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Project improved our leadership position even further
(1)The volumes in 2018 will depend on the learning curve of the plants. The agreement with Klabin may be renewed by mutual consent.* Including KlabinSources: RISI, Hawkins Wright, PPPC and Fibria (Nov 2016)
ESTIMATED BHKP CAPACITY RANKING 2017
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Domtar
Soedra
Klabin
International Paper
Lwarcel
Resolute
Verso
Georgia Pacific
Woodland
Navigator
Metsä
Oji
Nippon
Ilim
Marubeni
Mondi
Altri
Ence
Cenibra
Stora Enso
Arauco
Eldorado
UPM
CMPC
April
Suzano
APP
Fibria H2
(000T)
OKIKlabin 21%*
15%9%
8%
8%
5%
4%4%
4%
3%3%
2%1%
1%
1%
1%
1%1%
1%1%
1%
1%1%
1%
1%1%
0%0%
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Actively and preferably pursue consolidation aiming at a healthier industry.
Continue the promotion of growth through expansions and partnerships in a disciplined way.
Maintain active forest formation to be ready for growth opportunities.
Consolidate our position in the 10% lowest cash cost players in the industry by:
• Achieving MAICEL of15,0 tons/ha/year of pulp by 2025 for new planted forests.
• Pursuing a minimum of 10% of differentiated pulp volume priced at a premium.
Diversify its cash flow through focused investments in non pulp businesses, leveraging Fibria´s key assets and competencies.
Achieve a sizable free cash flow from new businesses in comparison with pulp business.
Key Aspirations
PROFITABILITY GROWTH DIVERSIFICATION
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Complementaryto our
value chain
Leverage our competencies
Partnering with winning technology providers
Appliedinnovation as ultimate goal
“Stage & Gate”
Process
Creation ofStrategicFlexibility
FOCUSED DIVERSIFICATION
Principles of our Focused Diversification
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Biostrategy technology paths prioritized
PYROLISIS
LIGNIN
NANOCELLULOSE
BIOCOMPOSITES
Prioritized Paths
Source: Fibria Bio-Strategy Project
Tech
no
logi
cal M
atu
rity
Economic Attractivness
Priority 1
Priority 2
RelativeMarket Size
Technology A
Technology B
Technology E
Technology F
Technology C
Technology D
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How Fibria is preparing for the challenges of diversification in the bioeconomy (1/3)
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How Fibria is preparing for the challenges of diversification in the bioeconomy (2/3)
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BUSINESS SCOUTING
How Fibria is preparing for the challenges of diversification in the bioeconomy (3/3)
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AMBITIOUSLONG TERM VIEW
PRUDENT, FOCUSED AND DISCIPLINED ACTION
PLAN UNDER EXECUTION
Key attributes of Fibria’s Biostrategy
Complementaryto our
value chain
Leverage on ourcompetencies
Partneringwith winnertechnologyproviders
Appliedinnovation as ultimate goal
“Stage & Gate”
Process
Creation ofStrategicFlexibility
FOCUSED DIVERSIFICATION
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Development status of several biostrategy technology paths
Roadmap defined in 2012
Updated and executed in a disciplined way
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Pyrolysis
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Flexibility in the useof raw materials
Commercially proven technology
RenewableProduct
Pyrolysis Business is based on proven Ensyn technology platform
Biomass delivered
to facility
Biomass converted to biocrude
in RTP facility
Biocrude delivered
to customers
RAW MATERIAL RTP PROCESS REPLACEMENT FUEL OIL
Consumer market flexibility
CONSUMER MARKETS
Heating & Cooling
Refinery Co-processing
Food Ingredients &
Renewable Chemicals
Alreadycommercial
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Co-processing is one of few compliance options for Refiners to comply with regulatory obligations
Co-processing is the lowest cost compliance solution for refiners, saving them millions of dollars in compliance annually
• Sale of biocrude to refinery – based on its performance relative to crude oil based feedstocks
• Monetization of credits under the RFS2 Program
• Credit prices move inversely with the price of oil
• Monetization of credits generated by Californian refineries under the LCFS Program
• Monetization of credits generated by Californian refineries under the Carbon Cap and Trade program
BIOCRUDE REVENUE RIN REVENUE LCFS REVENUECAP AND TRADE
REVENUE
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97% 3%
VGO Biocrude
The U.S. Refinery FCC Market is 5.6 million bpd and untapped
The U.S. refining market presents a significant market demand opportunity
Current U.S. FCC capacity is 5.6M barrels per day
A conservative 3% blend rate would require 170,000 bpd or 2.6B gpy of biocrude
No existing competitors commercially supplying biocrude to the refinery FCC market
RFO Capacity to Supply 3% U.S. FCC Market
U.S. Refinery FCC Capacity
5.6M bpd
85.8B gpy
170,000 bpd
2.6B gpySources: Oil and Gas Journal, RFA130 RTP units
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RTP Project Highlights
COMMERCIAL FLEXIBILITY
Base Scenario: exports to US for co-processing
Alternative Scenario: exports to US for heating
Downside Scenario: internal usage –fossil fuels substitute
FAVORABLE POTENTIAL LOCATIONS
Synergies with the Fibria’s sites‣ Operational integration‣ Use of available forest residues‣ Logistics alternatives identified
STRONGFINANCIALS
TIME-TO-MARKET
Implementation in 24 months from approval date
Solid financials even in unfavorable FX scenarios
Low volatility with negative correlation: oil prices and regulatory benefits
Availability of low cost funding
STATUS
Basic Engineering completed
Offtake contracts in negotiation with US
refineries
Approval required at Fibria and Ensyn Boards
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Nanocellulose
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Fibria’s positioning in Nanocellulose
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Partnership with Spinnova opens new strategic avenue for Fibria
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Lignin
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Currently lignin is burned as fuel
Potential to apply lignin to other value-added uses
25%-30% TYPICAL LIGNIN CONTENT IN EUCALYPTUS TREES
BURNED FOR ENERGY
VALUE ADDED PRODUCTS
Adding value with Lignin Business Development
LIGNIN
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Fully equipped labs
Applications development
Pilot plant for Organosolv processes
20 existing patent families
85 patents
More than 10 years ofresearch data
17 full time personnel
Full integration withTechnology Center in Brazil(Kraft + Organosolv lignins)
Human Resources Patent and Research Portfolio Equipment
Fibria InnovationsBritish Columbia, Canada
Acquisition of Lignol in 2015 will shorten time to market
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Petrochemicalsubstitution
Friction
ReinforcingRubber Filler
Insulation
FoundryMoldingCompounds
WoodProducts
Adhesives
CompositeMaterials
Films
CoatingsCarbonFiber
Fibria’s lignin portfolio allows the development of different applications
Development of Potential ApplicationsFibria Innovations + Partners
Kraft Lignin Organosolv Lignin
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Industry Lignin Commercialization Status
Lignosulfonates
• Long term businesses, well established products
• Markets in concrete and dispersants
• Dominated by Borregaard, also SAPPI and Rayonier (Tembec)
Kraft lignin
• Long term market presence of MeadWestvaco, now Ingevity, producing mainly sulfonated kraft lignin for dispersants market (~60kT/y).
• Recent entrants:
• Domtar – softwood kraft using LignoBoost process (20 kT/y); “BioChoice™”
• West Fraser – softwood kraft using LignoForce process (15kT/y) – mainly internal use in board products; developing outside sales
• Stora Enso – softwood kraft using LignoBoost process (50kT/y)
• Fibria planning eucalyptus kraft lignin plant for start-up late 2019
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Directions in Lignin Development
Many companies, institutes and universities are working on lignin – three main approaches:
Lignin as an ingredient, as-is
Replacing a petrochemical component in a product formulation
Modified lignin as an ingredient or as the product
Physical and/or chemical modification
Lignin as a feedstock or precursor for a non-lignin product
Chemical and/or physical transformation
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It’s all about chemistry
• You can make almost anything (organic) from lignin - it’s just a matter of:
– Thermal energy
– Chemical energy
• Cost of the process energy, catalysts and chemicals (and their recovery)
• Cost of down processing (separating, purifying, washing, drying, conditioning)
• Capital cost of the facility; where to locate it
• Yield of the target derivative
• Cost of disposal of the unwanted by-products
• The more work we do, the higher the value, but the higher the cost of manufacture
• Ultimately we have to make a profit!
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Lignin Business development
Fibria favours partnership approach
• Build relationships with early adopters of lignin in a diverse range of applications with different levels of maturity
• Joint development activities with customers:
• Information exchange under NDA
• Focus on repeatable lignin quality to meet customer needs
• Specification development
• Jointly solve challenges
• Consider mutual exclusivity for high potential customers
• Deliver large scale samples for trials
• Prepare for commercial relationship
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The way ahead – so much more than technology
Diversification into new businesses
Products
Supply chains
Customers
Regulatory
Logistics
Industries
• Sales force• Tech service• Quality assurance• Business
processes• Partnerships
Processes
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