institutional presentation · institutional presentation 3q17. disclaimer the statements in this...

1

Inst i tut ional

Presentation3Q17

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 include changes in customer demand for the Company’s

products, changes in raw material costs, seasonal fluctuations in customer orders, pricing

actions by competitors, significant changes in the applicable rates of exchange of the

Brazilian real against the US dollar, and general changes in the economic environment in

Brazil, emerging markets or internationally.

1. Overview

2. Industry

3. Competitiveness

4. Strategy

5. Operating and Financial Highlights

Agenda

3

1. Overview

4

Suzano

Data from 09/30/2017

¹ SUZB5: R$18.31 | 2 Excluding Fluff | 3 Last twelve months ended on 09/30/2017

With over 90 years of operations, the Company produces pulp, paper and tissue

Pulp

Market Pulp

Eucafluff

Market Cap¹ R$ 20.2 billion

Total Forest Base 1.2 million ha

Market Pulp Capacity² 3.6 million tonnes

Paper Capacity 1.3 million tonnes

Adjusted EBITDA³ R$ 4,091 million

Net Debt R$ 9,283 million

Net Debt/EBITDA 2.3x

68%32%

64%36%

Exports

Domestic

Pulp

Paper

Net

Revenues

R$ 9.9bn³

Consumer Goods

Tissue

Paper

Printing & Writing(Coated and Uncoated)

Paperboard

¹ Flexibility to produce either Fluff or Printing and Writing paper | ² Tissue start up: Imperatriz in 4Q17 | ³Lignin start up in 2018

Production CapacitySuzano is the second largest eucalyptus pulp producer and the fourth largest

market pulp producer in the world.

Suzano has also a leading position in the Paperboard and Printing & Writing

segments in Brazil.

Pulp Paper

IntegratedMarket

PulpFluff

Printing &

WritingPaperboard Tissue

Imperatriz

Mucuri

Limeira

Suzano

Rio Verde

-

200

300

460

-

1,650

1,540

350

70

-

-

-

-

100

-

-

250

390

360

50

-

-

-

200

-

60²

60

-

-

-

Unit Capacity

(‘000 ton)

Lignin

Adjacent

Business

-

-

20³

-

-

Total 960 3,610 100¹ 1,050¹ 200 120 20

Consumer

Goods

Robust Asset Base Competitiveness

Commercial Presence

Suzano’s forestry competitiveness allows its operation in different regions with adequate yields

Total Area1: 734k ha

Planted Area2: 256k ha

Average Structural Distance: 184 km

States of Maranhão, Pará, Tocantins and Piauí

Forest Assets

Port

Distribution Center

Commercial Office




States of Bahia, Espírito Santo and Minas Gerais




State of São Paulo

Forest Areas

¹ Consider own and leased area

² Consider own, leased and third-parties areas

15 states in Brazil:• 8 Regional Commercial Offices• 4 Regional Distribution Centers• 16 Local Distribution CentersPlus commercial offices in USA, China, UK, Switzerland and Argentina.

Cerflor

Imperatriz (State of Maranhão)

Mucuri (State of Bahia)

Rio Verde (State of São Paulo)

Suzano (State of São Paulo)

Limeira (State of São Paulo)

1

2

3

4

5

1,197 k ha

of total area

579 k ha

of planted area

Production Plants

1

2

3

54

Corporate GovernanceMembers 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 Strategy

Committee

Audit CommitteeManagement

Committee

Nine members,

five

independent

David Feffer President Dependent

Claudio Thomaz Lobo Sonder Vice President Dependent

Daniel Feffer Vice President Dependent

Jorge Feffer Board Member Dependent

Antonio de Souza Corrêa Meyer Board Member Independent

Marco Antonio Bologna Board Member Independent

Maria Priscilla Rodini Vanzetti Machado Board Member Independent

Nildemar Secches Board Member Independent

Rodrigo Kede de Freitas Lima Board Member Independent

Novo MercadoLiquidity gains contribute even more to position Suzano as protagonist in the reshaping of

the industry in the long term

Materialization of

the commitment to

cultivate the highest

governance

standards Note: Novo Mercado is the highest corporate governance

segment of the Brazilian Stock Exchange (B3).

Equal political and

economic rights:

1 share = 1 vote

and 100% tag along

Non-premium

migration reinforces

the commitment of

controlling

shareholders to the

capital market and

other stakeholders

Liquidity gains

contribute even more to

position Suzano as

protagonist in the

reshaping of the

industry in the long

term

Creates conditions to

continue improving and

innovating

Shareholder Structure and

Stock PerformanceBNDES

7%

Treasury

1%

Controlling

Shareholders

57%

Free Float

42%Daily Financial Volume

SUZB5 (R$ million)

Daily Trade Numbers

SUZB5

Source: Bloomberg

As of November, the Company's shares became part of the

Novo Mercado, the highest level of corporate governance

of Brazilian Stock Exchange (B3)

65% Foreign / 35% National

Other

28%

Mondrian

7%

Stock Performance- SUZB5

Base 100: (Sep/16 – Sep/17)

Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17

Ibovespa

+ 27%

IBrX-50

+27%

SUZB5

+75%

11,812 12,296 9,840

3Q16 2Q17 3Q17

52 59 62

3Q16 2Q17 3Q17

2. Industry

11

12

Pulp IndustryPulp Market is driven by paper consumption

Total Fiber

Consumption1

RecycledVirgin Fiber

Non-wood,

Mechanical Pulp

and Integrated

Pulp

Market Pulp

421

241181

119 62

Fiber Consumption(million tonnes)

Paper Consumption by Region(%)

North

America

19%

Europe

23%

Asia

45%

Latin

America

7%Other

6%

1 Excludes Dissolving Pulp and Fluff

Source: Poyry (2015), Hawkins Wright (Apr/2017) and internal analysis

Paper Demand

4

0

2

1

3

-3

-1

-2

20 40 60 80 100

Share on total fiber consumption in 2014 (%)

Newsprint

Uncoated

Mechanical

Coated

Mechanical

Uncoated

Woodfree

Coated

Woodfree

Tissue

Containerboard

Paperboard

Packaging

Other

Est

imate

d d

em

an

d g

row

th u

nti

l 2

03

0

(%p

.a.)

Average

growth of

1.0% p.a.

Estimated

paper demand:

490MM/ton in

2030

Demand for pulp driven by tissue and

paperboard consumption

Source: Poyry (2015)

3. Competitiveness

14

Cash Cost CIF / Europe(US$/tonne)

FX of R$3.12/US$

Source: Hawkins Wright (Aug/17)

Pulp CompetitivenessSeven year cycle of the eucalyptus forest in Brazil and higher productivity ensures

lower costs

Hardwood Softwood

0

800

400

East

Can

ada

East

Eu

rop

e

Oth

er W

orl

d

Co

asta

l BC

East

Eu

rop

e

Ch

ile

Swed

en

Jap

an

Fin

lan

d

Oth

er E

uro

pe

Jap

anUS

Int.

Wes

t C

anad

a

US

Can

ada

Bra

zil

Ind

on

esia

Swed

enFi

nla

nd

Oth

er A

sia

Iber

ia

Bel

/Fra

nce

Ch

ile/U

rugu

ay

Ch

ina

Pulp Competitiveness

Fiber volume(million tonnes)

Source: Hawkins Wright (Aug/17)

1 Bleached Eucalyptus Kraft Pulp | 2 Bleached Hardwood Kraft Pulp | 3 Bleached Softwood Kraft Pulp

The competitiveness of the eucalyptus fiber leads to the growth

compared to other fibers

1213

16 15 16 1617

19 2021 22 22 23 24

24

11 119 10

11 11 11 10 10 10 10 10 11 11 11

22 21 21 22 23 23 24 24 24 25 26 26 26 26 27

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e

BEKP¹ Other BHKP² BSKP³

CAGRBEKP: +6.5% p.a. | Other BHKP: -1.6% p.a.

CAGRBEKP: +2.6% p.a. | Other BHKP: +2.0% p.a.

Paper Competitiveness

Suzano is an integrated paper

producer, which leads to a higher

contribution margin per ton

Leadership

position in

Printing &

Writing Segment

in Brazil

Leadership

position in

Paperboard

Segment

Paper Margin

Inputs and

Variable Costs

Integrated Pulp

Margin

Pulp Cost

Paper Market is less volatile

Federal Taxes CompetitivenessSuzano's assets leads to a fiscal situation which 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

Tax Credits

Tax loss carry forward: R$2.4 billion

Total of federal tax credits to be used: R$212 million

Data accumulated up to 09/30/2017.

4. Strategy

19

Strategy to maximize the return on invested capital

Structural Competitiveness

Adjacent Business

Reshaping of the Industry

o Anticipated return

improvement as result of

cost reduction initiatives

coupled with disciplined

investments to achieve

optimal cost

o Investment in retrofitting

and debottlenecking should

reduce cash costs per ton by

19% by 2022

o Investments in adjacent

businesses such as

FuturaGene (biotech), Fluff,

Lignin and Tissue, leveraging

on Company’s current

capabilities, to improve

margins by offering high-

value added products

o Transformational changes in

the industry should lead to

higher returns

o Suzano uniquely positioned

to have an active role with

its vertically integrated

operation, stablished

commercial relationships

and consolidation capacity,

among other opportunities

ForestryAverage distance

reduction and

standardization

and insourcing

harvesting

Industry

Structural efficiency

through retrofitting

and

debottlenecking

Logistics

Integrated

logistics with

synergy gains



Maximize the

return on

assets and cash

generation

Commercial

Price discipline

and expansion of

client base

(Suzano Mais)

Debottlenecking and Average Forest Distance Reduction

Cash Cost (R$/ton)

Target

¹ LTM: Last Twelve Months ending on 09/30/2017 | ² 2016 nominal value

588570

475

LTM¹ 2018² 2021-2022²

o Integrated production

o Production of jumbo

rolls and final products

o First genetically

modified clone

approved by CTNBio

for commercial

purposes

o Potential to increase

productivity by nearly

20%

o Replacement of

petroleum-based

chemicals

Tissue

Adjacent

Businesses

Fluff FuturaGene

o First company in the

world to produce fluff

from hardwood

o Flexibility to produce

either fluff or printing

and writing paper

AdjacentBusiness

Lignin

Tissue

Modern and integrated mills in Imperatriz and Mucuri

Production capacity of 60k tonnes in each unit

Start up: Sep/17 in Mucuri and 4Q17 in Imperatriz

Production of jumbo rolls (2017) and final products (from 2018)

34.9 36.1 49.2

2015 2016e 2025e

Global Demand(million tonnes)

1.2 1.2

1.9

2015 2016e 2025e

Brazilian Demand(million tonnes)

Competitiveness on production and logistics adds value to pulp

Integrated production and

control of more than 90% of cash cost

Operational

Production close to the North and

Northeast markets in Brazil

Logistic

Fastest growing

segment in Brazil,

5% p.a. in 2015

(RISI)

Market

Potential

Structural solution for monetization of ICMS credits

Tax Strategy

AdjacentBusiness

Source: RISI

Demand(million tonnes)

5.8 6.0

6.9

2015 2016e 2020e

Diapers

38%Incontinence

Products

26%

Femine Hygiene

Products

24%

Other

12%

Products Breakdown (%)

Suzano is the first Company in the world to produce fluff from hardwood

AdjacentBusiness

Eucafluff

Source: RISI

o Up to 70% softwood substitution for feminine

hygiene products and up to 30% for diapers

o Rewet quality and reduction of energy costs

o Capacity: up to 100 k tonnes/year

Replacement of petroleum-based chemicals from

renewable source

Main applications:

• Cement Additives

• Phenolic Resins

• Rubber Components

Lignin

AdjacentBusiness

Capacity: 20k tonnes per year

Capex: R$100 million

Start Up: 2018

Mill: Limeira

Lignin Production Process

Fiber

Lignin

Wood Wood

ChipsBleaching

Pulp/

Paper

Digester

Evaporation

Recovery

BoilerLime Kiln

Lignin

Chemicals

Energy

Black Liquor

AdjacentBusiness

FuturaGeneFirst 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

Reshaping of theIndustry

Transformation changes in the industry should lead to higher returns

Suzano is

strengthening its

balance sheet to be

an active player in

the reshaping of the

industry

Consolidation

Verticalization

Internationalization

5. Operational and Financial Highlights

28

Pulp Production (‘000 tonnes) Pulp Sales (‘000 tonnes)

Pulp Revenue Breakdown3Q17

Pulp Sales Volume per Segment3Q17

Pulp Segment

LTM: Last Twelve Months ending on 09/30/2017.

809 931 851

3,473 3,592

3Q16 2Q17 3Q17 2016 LTM

756 917 830

3,530 3,619

3Q16 2Q17 3Q17 2016 LTM

Other

2%

Printing & Writing

13%Packaging

7%

Specialty

15%

Tissue

63%

Brazil

10%

Asia

42%

Europe

32%

North America

16%

Central/South

America

1%

Cash Cost (R$/ton)

Pulp Segment

¹ 2016’ nominal value. | ²LTM: Last Twelve Months ending on 09/30/2017.

Pulp EBITDA (R$/ton) Operational Cash Flow (R$/ton)

642623

588570

475

2015 2016 LTM 3Q17 2018¹ 2021-2022¹

627

1,033 1,088

778873

3Q16 2Q17 3Q17 2016 LTM²

350

806 809

506638

3Q16 2Q17 3Q17 2016 LTM²

Cash Cost Target

Paper Sales (‘000 tonnes)

Paper Segment

Paper Production (‘000 tonnes)


Brazil

70%

North America

8%

Central/South

America

15%

Other

5%

292 283 301

1,182 1,154

3Q16 2Q17 3Q17 2016 LTM

228 180 208

831 795 81 92 102

362 368

310 272 310

1,193 1,163

3Q16 2Q17 3Q17 2016 LTM

Brazil Export

Paper Revenue Breakdown3Q17

32

Paper Segment

Paper EBITDA (R$/ton)

Operational Cash Flow (R$/ton)


949

709

915970

786

3Q16 2Q17 3Q17 2016 LTM

782

568

756803

625

3Q16 2Q17 3Q17 2016 LTM

Operating Cash Flow¹ (R$ million)

ROIC (%)

¹ Operating Cash Flow = Adjusted EBITDA – Sustaining Capex | LTM: Last Twelve Months

Adjusted EBITDA (R$ million)

Avg R$/US$

Avg Europe FOEX

Avg China FOEX

Consolidated Results

768

1,157 1,186

3,906 4,091

3Q16 2Q17 3Q17 2016 LTM

35.3%45.7% 45.7%

39.5% 41.4%

3.493.16 3.203.21

517655 590629

3.25

498

696873 748783671

507910 906

2,7483,053

3Q16 2Q17 3Q17 2016 LTM

13.1%11.3%

13.0%

LTM 3Q16 LTM 2Q17 LTM 3Q17

Net Debt (R$ and US$ billion) and Leverage (x)

Net Debt (R$) Net Debt (US$)

Net Debt/Adjusted EBITDA (R$) Net Debt/Adjusted EBITDA (US$)

DebtLeverage at an

adequate level

3.7x3.1x 2.9x

2.3x 2.3x 2.3x

2.4x 2.7x 2.9x 2.9x 2.7x2.3x

4.1x 3.9x3.3x 3.0x 2.7x

2.3x

2.1x 2.4x 2.6x 2.8x 2.7x2.3x

10.1 11.4 11.0

12.7 12.5 11.2

10.2 10.0 10.3 9.7 10.0 9.3

3.8 3.6 3.5 3.2 3.2 3.2 3.2 3.1 3.2 3.1 3.0 2.9

Dec/14 Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Sep/17

Debt ProfileCompetitive debt profile and

cost of debt

Amortization (R$ million)

Gross Debt: R$13.1 billion

Net Debt / Adjusted EBITDA: 2.3x

Average debt maturity of 80 months

Average Cost of Debt: 4.4% p.a. (in USD)(considering market swap curve)

Data from 09/30/2017.

Bond

41%

Certificates of

Agribusiness

Receivables

20%

BNDES

5% Import Financing

7%

Other

2%

Export

Financing

24%

Type Exposure

994 1,421 1,146 748 2,078 3,882

2,856

545 910 1,749149

189

3,850

316

1,966 2,0552,497

2,227

4,071

Caixa 4Q17 2018 2019 2020 2021 2022

em

diante

Foreign Currency Local Currency

Klabin Arauco Fibria CMPC Suzano

Standard & Poors BB+ BBB- BBB- BBB- BB+

Moody's - Baa3 Ba1 Baa3 Ba1

Fitch Ratings BB+ BBB BBB- BBB BB+

Net Debt /

Adjusted

EBITDA LTM

1 Last twelve months ending on 09/30/2017 in R$.

² Last twelve months ending on 09/30/2017 in US$.

³ Last twelve months ending on 06/30/2017 in US$.

BB+BB/ BB-

BB+/BB

BB+/BB+BBB-/BBB-BBB/BBB

BB+/BB+

BB /BB

2010 2012 2015 2017

Sovereign

S&P / Fitch

Suzano´s Ratings Evolution

Suzano is on track to achieve Investment Grade

Rating

4.4x3.3x 3.2x 3.1x

2.3x

Klabin¹ Arauco³ Fibria¹ CMPC² Suzano¹

1. Capex 2017/2018

Capital discipline

and capex

flexibility

Capex (R$ billion)

Major Projects in 2017:

Debottlenecking of Imperatriz

Tissue production

9M17 2017e

Sustain


e Adjacent Businesses0.5

0,.8

1.3

0.7

1.1

1.8Total

2018e

0.6

1.2

1.8

1. Perspectivas 2017

Suzano in a better shapeCost Discipline

38

Financial Discipline

Products Portfolio

Industrial Cost Reduction: Retrofitting and

Debottlenecking

Wood Cost Reduction: Optimization of

forest base and average distance reduction

Robust Balance Sheet

Competitive cost of debt

Healthy level of leverage

Tax Incentive

Portfolio of products allows less

volatility

High value added products

Suzano Mais

Capital Discipline

Capex Flexibility

Projects on time on budget

Investor Relations

2017

www.suzano.com.br/[email protected]

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