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São Paulo, December 9, 2010
Apimec 2010Presentation
1
Disclaimer
Certain statements in this presentation may 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.
Agenda
Corporate Overview and Growth Cycle
Forestry Business Unit
Pulp Business Unit
Paper Business Unit
Results
04
14
20
27
34
4
Acquisition of Suzano mill
Acquisition of Indústrias de Papel Rio Verde’s control
Beginning of paper exports to Europe
Launch of Report
Acquisition of Ripasa (50%)
Start up of the first paper mill
Suzano 2024
1939
1955
1956
1960
1975
19822005
2004
Consolidation as one of the largest Brazilian Groups
Growth and diversification in the pulp and paper businesses
Beginning of operations in the
paper industry
First investment in the pulp sector
2010
Adoption of Bovespa’sLevel I corporate governance standards and Professional Management
Start up of Bahia Sul
1992
Start up of Line 2at Mucuri
2007
Pioneerism in eucalyptus plantation
2008
New Growth Cycle
Suzano Renewable Energy
Merger with Bahia Sul
1924
Acquisition of FuturaGene,
PLC.
Corporate OverviewTimeline
1924 until 1940 1950 1960 until 1990 2000 2024
Leon Feffer starts paper trading activities
4
Growth CycleSuzano’s Strategy
Constant increases in forestry productivity guarantees competitiveness in the pulp business and enables new business opportunities in Biotechnology and Renewable Energy
Operational excellence in paper
ForestryCompetency
Wood pelletsOrganic growth in pulp
Biotechnology
5
Suzano reviewed its strategy and presents innovative growth plans supported by its competencies and forestry know-how
BiotecnologiaInvestimento emEnergia Renovável
Biotechnology
Organic Growth in Pulp
Investment in Renewable Energy
Growth CycleGrowth Strategy
6
Suzano’s production capacity has increased by 130% in the last 5 years. The Company is prepared for a new growth cycle that will increase its capacity to 5.6 MM ton/year of pulp and paper by 2014
Mucuri Unit and new pulp line: analysis of the global economy and pulp market outlook for definition of the implementation schedule and start up.
Growth CycleOrganic Growth in Pulp
1,720
2,850
5,650
4,250
1,4851,240
Piauí Unit
Maranhão
Unit
1,920
2,750 2,850 2,850 2,850
7
Projects:
• Market pulp production capacity: 1.5 MM ton/year per unit
• Estimated industrial capex: US$ 2.3 billion per unit
• Forestry capex already invested:US$ 407 million
• Funding: ~ 80% debt and remainder cash flow generation
• BNDES and ECA’s1
• Competitive costs, long term and grace period
Competitive Advantages:
• 100 MW energy surplus per unit for sale
• Logistics guaranteed by long term contracts
• Projects’ updates with better returns
• Tax incentives
Growth CycleNew Units in Maranhão and Piauí
Maranhão Piauí
Required planted area 154 tsd ha 170 tsd ha
Forestry capex(total estimated)
US$ 575 million
US$ 710 million
Start up (estimative) 2013 2014
Wood supply68% own land
32% third parties
70% own land 30% third
parties
8
Draft of Piauí’s nursery Draft of the MA / PI mill
1 Export Credit Agency
• Acquisition concluded in July/2010
• Pioneer in biotechnology research and development
• Sustainable technologies
• Environmentally oriented to meet growing demand for fiber and
biomass
• Techniques for higher forestry productivity
• R&D forestry synergies: competitive main factor in the pulp and
paper markets
Biotechnology is on the right
side of Sustainability
Innovation
• Less land utilization
• Less water consumption
• Less chemical expenditure
• Higher carbon sequestration
Growth CycleFuturaGene
9
• Analysis of the clones portfolio: special clone selection
• Dedicated plantation (more plants per hectare)
• Higher yield
• Harvest in 2 to 3 years
• High lignin content – high calorific value
• Unuseful for pulp production
• Experimental “energetic” stewardship in Northeast
Experiments with
“Energetic Forests”
since 2008
Suzano Renewable Energy– 1st fase
• 3 units: 1 MM ton/year each
• Capex: US$ 800 million
• World leader
• Initial focus on the European market
Wood pellets for energy, produced from
renewable energy-oriented forests
Growth CycleSuzano Renewable Energy
10
Growth CycleRenewable Energy Business Rationale
Internal View
• Competencies linked to the forestry business
• Successful experiments with energetic forest
• Excellence in industrial projects’ management and
relations with suppliers (i.e: equipments, logistics,
etc)
Market View
• Global focus in energy from renewable sources and
emission reduction
• European challenges linked with future supply and
202020 targets
• Need for structured pellets suppliers and long-term
contracts (big utilities)
Transfer of Suzano’s pulp competitivity to the renewable energy market
Know HowHigh productivity based on forestry R&D
Time-to-market“Energetic” stewardship - harvest in 2 to 3 years: start up in 2013
RelianceIntegrated forests, scale and strong cash generation
Environmental and social “Footprint”Pellets: 100% from planted forests, with high environmental management standards
Operations in the Brazilian Northeast, with relevant contributions to social development
11
Growth CycleProject Update
• Conceptual engineer
• Technology definition
with suppliers
• Chemical properties
aligned with the European market
• Forestry Base: harvesting tests
• Dedicated team
• Commercial agreements: negotiation
of final contracts with clients
- MoUs for 3.1 mm/ton/year
• Search and negotiation of lands
• Understandings with State governments
• Discussions with ship-owners and
logistics providers
• Funding: definition of the capital structure (1Q11)
Concluded Steps Ongoing Steps
12
Agenda
Corporate View and Growth Cycle
Forestry Business Unit
Pulp Business Unit
Paper Business Unit
Results
14
20
27
34
04
Forestry Business UnitForestry Assets
Forests average distance:246 Km
Forests average distance:75 Km
The Forestry Business Unit (FBU) guarantees to Suzano100% eucalyptus wood supply from renewable planted forests
Suzano has developed forestry stewardship expertise and a complete genetic base for various scenarios due to its presence in different places with temperature, climate, precipitation, soil, and relief variations.
FBU in Numbers 2010
Total area (tsd ha) 663
Planted area (tsd ha) 290
Anual planting (tsd ha) 97
Planted saplings / day (tsd) 398
Harvested trees / day (tsd) 125
Anual harvest (million m³) 11.1
Loaded trucks / year (tsd units)
201
Preserved Area (tsd ha) 254Total: 143 tsd ha
Planted: 87 tsd ha
Total: 220 tsd ha
Planted:
126 tsd ha
Total: 300 tsd ha
Planted: 77 tsd ha
SP
BA, ES and MG
MA, PI and TO
2010 Areas’ Chart
14
Forestry Business UnitForestry Competitivity in Brazil
Brazil presents competitive advantages to support continuous increase of its global forestry standing
• Availability of productive land
• Excellent soil and climate conditions
• Short harvesting cycle for planted forests
• Regenaration potential of degraded areas
• Formation and maintenance low costs
• Continuously growing consumer market
• Logistics
• Tax Structure
• Cost of Capital
• Education Level
• Exchange Rate
Challenges
Competitive Advantages
Source: ABRAF, BRACELPA, Adapted by STCP Consulting
45.0 41.0
25.020.0
13.06.0 4.0
Leafy Productivity (m³/ha/year)
Suzano’sEucalyptus
Brazil Australia SouthAfrica
Portugal USA Finland
15
Suzano’s pioneerism and innovation enabled the development of stewardship techniques’ improvements and formation of a genetic base
Competitive Advantages
• Genetic portfolio
• Forestry technology
• Management abilities
• Nutrition and soil research: potential to increase productivity
• Operational development: precision forestry (↑ efficiency)
• Forestry innovative concepts: “Night Planting” and “Energetic Forest”
—Total clones: 14,729
—Field experiments: 614
— Total experimented area: 3,913 ha
Pulp Productivity
5,5 admt1/ha/year 11 admt1/ha/year
Biotechnology
1980 2010
• More wood / hectare
• More pulp / m³
• Superior quality
• Smaller area
• Decreasing costs / m³
New Businesses
+100%
Source: Suzano
Forestry Business UnitSuzano’s Forestry Competitivity
1Admt: air dried metric ton16
Forrestry Business UnitSustainability, Innovation and Governance
Sustainability Directive Plan considers a refined concept of theTriple Bottom Line comprising Innovation and Governance
• Global competitiveness and scale
• Consistent margins and returns
• Capital discipline
Economic financial
Environment
• Forest management and certified chain of custody
• Member of CCX1 and WBCSD2
• ECOFUTURO (Parque das Neblinas)
Governance
Application of
sustainability principles
in the decision-making
process
Innovation• Processes, products
and clean technologies
• Stakeholders’ knowledge valorization
Social
• 57 public libraries
• Renovation of 35 public schools in 3 states
• ECOFUTURO: 92 thousand benefited students
1 Chicago Climatic Exchange2 World Business Council for Sustainable Development
17
Forestry Business UnitStrategy
Consolidation ofoperations in the Northeast:Maranhão and Piauí
Guarantee of excellencein new businesses linked to forestry competencies
Operational excellence:focus on forestrymanagement and wood logistics
Long-term view research and development for forestry technologies
18
Agenda
Corporate View and Growth Cycle
Forestry Business Unit
Pulp Business Unit
Paper Business Unit
Results
14
20
27
34
04
25
Minerals
51%
49%
72%
28%
(13% of total fibers)
8%
8%
44%
50%
64%
10%
BHKP2
6%
Source: Poyry and Suzano
BEKP3
16
2010e
401
BSKP1
Others
22
3
Integratedpulp
Market pulp
131
50Virgin fiber
Recycled
188
181
Global production of paper and paperboard
Total fiberconsumption
369
401
1.6
Suzano’s 2014 estimated production of 4,6 mm ton (26% of global production)
1 Bleached Softwood Kraft Pulp2 Bleached Hardwood Kraft Pulp3 Bleached Eucalyptus Kraft Pulp
20
Pulp Business UnitOverview
Pulp and Paper Production Chain – 2010e
2010e Production (MM ton)
Market pulp still represents the smaller part of the fiber used for paper production.
New paper capacities are being installed near to consumer markets, while cash costs drives implementation of new pulp capacities.
Mill
ions o
f to
ns
Printing and Writing
Tissue
Paperboard
CorrugatedNewsprintOthers
Pulp Business UnitPulp demand growth driven by eucalyptus and by European and Chinese markets
7,420
7,785
8,185
8,4858,655
10e 11e 12e 13e 14e
2,945
3,9304,355
4,9505,385
10e 11e 12e 13e 14e
15,71517,405 18,580 19,710 20,560
10e 11e 12e 13e 14e
49,085
51,61053,215
54,55555,755
10e 11e 12e 13e 14e
CAGR ’03 -’09: +2.2%
Source: PPPC
Demand: Market Pulp (K ton) Demand: Eucalyptus Pulp (K ton)
CAGR ’03 -’09: +11.3%
Eucalyptus Pulp – China (K ton)
CAGR ’03 -’09: +26.9%
Eucalyptus Pulp – Europe (K ton)
CAGR ’03 -’09: +7.4%
21
2010e 2011e 2012e 2013e 2014e 2010e 2011e 2012e 2013e 2014e
2010e 2011e 2012e 2013e 2014e2010e 2011e 2012e 2013e 2014e
Pulp Business Unit Supply increase driven by eucalyptusshows Suzano as a relevant player
17,530 18,905 19,61021,170 22,415
10e 11e 12e 13e 14e
55,045
57,670 58,33060,140
61,535
10e 11e 12e 13e 14e
3,000
4,315
4,990
6,385
Suzano
Brazil
Latin America
Global
New Eucalyptus Pulp Capacities Forecast2010 – 2014 (K ton)
Market Pulp Supply (K ton)
CAGR’03 -’09:
+2.7%
Eucalyptus Pulp Supply (K ton)
CAGR’03 -’09:
+11.3%
Eucalyptus’ Supply and Demand Balance (%)
100%
78%
68%
47%
90%
92%
95%
93%92%
10e 11e 12e 13e 14e
Source: PPPC, Suzano22
2010e 2011e 2012e 2013e 2014e 2010e 2011e 2012e 2013e 2014e
2010e 2011e 2012e 2013e 2014e
Pulp Business Unit Brazilian Pulp Cash Cost: Structurally Low
Source: Hawkins Wright, jul/ 10 - Volumes do not include production of unbleached pulp and high yield pulp.
Hardwood Softwood
US$ / ton (CIF/ North Europe)
Ch
ile
Fin
land
Can
ada (E
ast)
Can
ada (B
ritish C
olu
mb
ia)
Ch
ile
Ind
on
esia
Can
ada
Iberia, N
orw
ay
Brazil
Sw
eden
US
A300
US$ 300 – 401 / ton
US$ 441 - 651 / ton
US$ 511 - 696 / ton
US
A
Sw
eden
Can
ada (B
ritish C
olu
mb
ia Co
ast)
400
500
600
700
Fin
land
Fran
ce, Au
stria and
Belg
ium
Japan
US$ 367-398 / ton
Ch
ina
Fran
ce and
Belg
ium
So
uth
Ko
rea
Ru
ssia
23
2007 2008 2009 LTM 9M10
Domestic Market Exports
1,195
799
1,608
1,320
1,780
80%
82%
85% 82%
82%
20% 18% 15% 18% 18%
41%
28%
19%
12%
33%
39%
9%1%
18%Asia
Europe
North America
South/Central Am.
Brazil
Note: LTM = last 12 months
Pulp Business Unit Highlights
• Technical support in each international office: China, Switzerland and USA
• 80% of total sales with long term contracts
• More than 150 active clients
• Strategic long-term partnerships with clients:
• Logistics
• Technology
• Pre and post sale technical assistance
• Strategic focus on high value added segments
Pulp Sales Volume (K ton)
Sales per Segment – 9M10
Pulp Sales Destinations – 9M10
Printing and Writing
Tissue
Special
Others
24
25
Pulp Business Unit Strategy
Focus on sustainable growth strategy
Presence in main international markets
Strategic relationship with clients
Agenda
Corporate View and Growth Cycle
Forestry Business Unit
Pulp Business Unit
Paper Business Unit
Results
14
20
27
34
04
CAGR 1.8% p.a.
2015e2010e
27
Paper Business Unit Global Paper Demand
Growth Premises
Global Paper Demand (MM ton)
Suzano’sFocus
Others
Tissue
Paperboard1
Printing and Writing
1 Paperboard + liquid packaging boardSource: Poyry – 2009
210 232
29334652
116121
1 2
438
401
• Global paper demand growth (2010-2015) of 1.8% p.a.• Printing and Writing: +0.9% p.a.• Paperboard: +2.5 % p.a.
• Industry is still considered fragmented, but with significant regional concentration
• Emerging markets lead supply and demand growth
Paper Business Unit Demand Growth Drivers
Historically there is a high correlation between GDP per capita and paper consumption. In Brazil, the positive economic growth forecasts represent an important driver for the domestic paper demand.
• Education
• Digital printing
• Electronic Media
• Plastics
Source: Poyry, 2008
Latin Am. and Brazil = 41kg USA = 300kg
Paper Consumption x GDP per Capita
Co
nsu
mp
tio
n (
kg p
er c
apit
a)
GDP per Capita (US$)
Taiwan
Korea Rep.
China.
Brazil
Spain
UK
Japan
Sweden
USA
28
Paper Business UnitBrazil and Latin America are the main Markets
1 Paperboard + liquid packaging board; 2 Uncoated + CoatedSource: RISI Latin America Forecast –Nov/10
• Economic growth, higher GDP and increased industrial activity
• Education level improvement and access to new technologies
• Latin America (ex-Brazil): net importing market
• Suzano’s competitive advantage:
- Geographic proximity and lower logistic costs
- Brand recognition
- Portfolio: wide range of products
Latin Amercica ex-Brazil Demand (MM ton)Brazilian Demand (MM ton)
2,9553,412
1,533
1,875
2010 2015
4,488
5,2873.3% p.a.
4.1% p.a.
2.9% p.a.
2,788
3,4344.3% p.a.
4.2% p.a.
4.3% p.a.
1,8932,335
895
1,099
2010 20152010e 2015e 2010e 2015e
Printing & Writing2
Paperboard1
Printing & Writing2
Paperboard1
29
2007 2008 2009 LTM 9M10
Domestic Market Exports
Paper Business Unit Highlights
• Leadership in printing & writing and white paperboard in South America
• More than 90% integrated production (pulp + paper)
• Fx hedge: approximately 60% of paper revenue in local currency
• 2 own paper merchants – SPP NEMO (2nd largest in Brazil) and Stenfar (Argentina)
• Premium pricing in the segments where we act
• Lower price volatility in the domestic market
Sales Destination – 9M10Sales Volume (k ton)
OthersEurope
North America
South/ Central Am.
Brazil
56%
43% 47%41% 44%
44%
59% 57% 53% 56%
839
1,125 1,162 1,116 1,146
Note: LTM = last 12 months
56%
19%
11%
11%3%
30
134
113
60
80
100
120
140
Paper Business UnitPrice Recovery to Pre-Crisis Levels
Pap
erb
oar
dP
rin
tin
g &
Wri
tin
g
102
111
60
80
100
120
140
Sep10
Jan 10
Jul 09
Jan 09
Jan08
Average Net Prices
Note: Prices of domestic market in R$; prices of exports in US$
Paperboard
Domestic Market
• Market dominance in high value added segments
• Low level presence of imports
• Growth of the consumer industry
Printing & Writing
Domestic Market
• Imports: high concentration of coated
• Exchange rate’s effects
• Fiscal control of Immune paper operations
Jul08
Jan 10
Jul 09
Jan 09
Jan08
Jul08
Jul10
Jul10
Sep10
31
ExportsDomestic Market
Paper Business UnitStrategy
Revenue Management
Strengtheningof DistributionChannels
AssetOptimization
ProductsPortfolioManagement
32
Agenda
Corporate Overview and Growth Cycle
Forestry Business Unit
Pulp Business Unit
Paper Business Unit
Results
14
20
27
34
04
33
33.5%30.3%
36.2%
25.8%
37.3% 39.9%
2006 2007 2008 2009 LTM 9M10
1,071 1,125 1,162 1,116 1,146
839
2006 2007 2008 2009 LTM 9M10
Domestic Market Exports Volume
615 7991,320
1,780 1,6081,195
2006 2007 2008 2009 LTM 9M10Domestic Market Exports Volume
1,686 1,9242,482 2,896 2,754
2,034
2006 2007 2008 2009 LTM 9M10
Domestic Marlet Exports Volume
3,319
4,338
3,0993,410
4,064
58%42% 47%54%
58%57%
3,953
1,5171,6091,539
934737
1,928
86%86%
83%
80%81%
83%
42%58% 53% 46% 42% 43%
1,3251,617
1,040 1,034
1,469
1,021
2.18 1.95 1.83 2.00 1.77 1.78R$/US$ avg.
2.18 1.95 1.83 2.00 1.77 1.78R$/US$ avg.
ResultsNet Revenue and EBITDA
Net Revenue (R$ million) and Volume (K ton) EBITDA (R$ million) and EBITDA Margin (%)
Paper: Revenue (R$ million) and Volume (K ton) Pulp: Revenue (R$ million) and Volume (K ton)
Note: The amounts of 2010 include the adjustments introduced by the IFRS standardsLTM = last 12 months
1,8012,344
2,5252,458 2,4112,336
39%
63%
37%
63%
37%61%63%66%
31%
69%
34% 37%
34
4Q10 2011 2012 2013 2014 2015 2016onwards
Local Currency Foreign Currency
ResultsAdequate Debt Amortization Schedule and Liquidity Profile
• Cash: R$ 3.6 billion on 09/30/2010
• Liquidity horizon: low rollover risk even under stress scenarios
• Competitive cost of debt and duration of 3.7 years
• Debt breakdown on 09/30/2010: 51% in foreign currency and 49% in local currency (R$)
• Moody’s: Baa3 (stable) Investment Grade; S&P: BB+ (stable)
417
9661,006
1,3901,230
516
1,951
Amortization schedule (R$ million) Debt - Sep/ 2010
R$ million Amount Leverage
BNDES 2,406 1.5x
Nordic Investment Bank 80 0.0x
FINIMP 311 0.2x
Projetcs Debt 2,797 1.7x
Trade Finance 2,258 1.4x
Debentures 784 0.5x
Others 1,310 0.8x
Gross Debt 7,476 4.4x
Cash and Cash Equivalents 3,617 2.2x
Net Debt 3,850 2.4x
3535
1,6162,475
3,919 4,2855,459
3,966 3,850
1,039 913 1,040 1,146 1,469 1,021 1,617
1.6x2.7x
3.8x 3.7x 3.7x 3.9x2.4x
-3.0
2.0
01,0002,0003,0004,0005,0006,0007,000
2004 2005 2006 2007 2008 2009 LTM
Net Debt (R$ MM) EBITDA (R$ MM) Net Debt/EBITDA (x)
Acquisitionof Ripasa
Implementation ofMucuri Project
(line 2)Start up of line
2 at Mucuri
World economic
crisis
Note: The amounts of 2010 include the adjustments introduced by the IFRS standardsLTM = last 12 months
ResultsConservative Financial Policy
• Benchmark: investment grade status
• Net Debt/ EBITDA ratios may increase temporarily due to growth projects
• Amortization in line with the projects’ cash flow
• Capex discipline
• Hedging for cash flow, not for accounting results
• No use of complex, illiquid or exotic derivatives
36
ResultsWhy to Invest in Suzano?
+ Revenue+ EBITDA+ Earnings+ Market Appreciation
BiotechnologyWood PelletsOrganic Growth in PulpOperational Excellence in Paper
1924
2024
ProfessionalManagement
CapitalMarkets
2010
Defined ControllingGroup
37
Investor Relations Team
Investor Relationswww.suzano.com.br/ri
Antonio Maciel (CEO and IR Director) +55 (11) 3503-9061 [email protected]
Andrea Fernandes (IR Executive Manager) +55 (11) 3503-9062 [email protected]
Fernanda Nardy (Analyst) +55 (11) 3503-9066 [email protected]
Michelle Corda (Analyst) +55 (11) 3503-9359 [email protected]
Rosely Onizuca (Analyst) +55 (11) 3503-9355 [email protected]
Áurea Portugal (Assistant) +55 (11) 3503-9061 [email protected]
Eduardo Oliveira (Intern) +55 (11) 3503-9306 [email protected]
38