Novak Djokovic Serbia Tennis #1 Cash award 2016: USD 11 MM Estimated revenue 2016: USD 58 MM

Transcription

1 SUZANO DAY 2016

2 LEE Chong Wei Malaysia Badminton #1 Cash award 2016: USD 1 MM Estimated revenue 2016: USD 11 MM Novak Djokovic Serbia Tennis #1 Cash award 2016: USD 11 MM Estimated revenue 2016: USD 58 MM

3 C u r r e n t p u l p p r i c e r e t u r n t o n e w p r o j e c t s i n i n d u s t r y ROIC 4.1% 58 List Price Discount Net Price (USD/t) Financial & Logistics Costs Ex-factory Price Cash Cost SG&A Sustaining Capex Tax OCF* (USD/t) * Operating Cash Flow Source: Average values of the largest pulp and paper companies in Brazil and internal analysis

4 What is the price? New Project CAPEX/ton WACC of Brazilian companies (average of banks) Adequate ROIC/ton 1,400 (USD/t) 10.5% 147 (USD/t) 147 OCF* (USD/t) 49 Tax 105 Sustaining Capex 54 SG&A Cash Cost Ex-factory Price Financial & Logistics Costs Net Price (USD/t) Spread Price to create value * Operating Cash Flow (USD / BRL 3.20)

5 What is Suzano's?

6 is our foundation Structural Competitiveness Adjacent Businesses Reshaping the Industry Higher rate of return Lower volatility

7 Entrepreneurship Innovation Succession Autonomy Boldness Perpetuity Awareness Empowerment Integration Inspiring Leaders Leadership Meritocracy Development

8 SECOND STRAIGHT YEAR OF AND RISING UP IN THE RANKING Evaluation score by Suzano employees

9 INVESTIMENTO EM To ensure the sustainability & perpetuity of results Young Engineers Program 110% more awareness 17,000+ people enrolled Internship Program 50% more awareness 18,000+ people enrolled #SUZANOATCOLLEGE 100+ events carried out in 2016 around Brazil

10 PAPER EBITDA SUZANO MAIS PULP ROIC TISSUE MARGIN PAPER ROIC EUCAFLUFF QUALITY INTEGRATED LOGISTICS MAI IMPROVEMENT WOOD COST PULP EBITDA AVERAGE SUPPLY RADIUS

11 is our foundation Structural Competitiveness Adjacent Businesses Reshaping the Industry Higher rate of return Lower volatility

12 Product portfolio Adjusted EBITDA (R$/ton) T16 2T16 3T16 Pulp Paper Operating Cash Generation (R$/ton) T16 2T16 3T16 Paper margins reinforce segment s

13 Product portfolio Distributor Model Large Medium Small

14 Product portfolio Distributor Large Medium Small

15 Product portfolio Belém Fortaleza Manaus 1 Cuiabá Campo Grande Uberlândia Campinas Ribeirão Preto Londrina Recife Salvador Goiânia Brasília Serra Belo Horizonte Rio de Janeiro São Paulo São José dos Pinhais Porto Alegre o Local DCs & Regional DCs o Better service o Regional sales teams o Tax optimization o Integration of distribution and operating systems (SAP & CRM) o Sales Productivity Predictive dialing tool Defined and disseminated sales routine Sales Technology (Route Planning & SMART)

16 Product portfolio Pre- Portfolios Volume of small and medium clients: 3x larger Average clients/month: 13,000 No. calls/month: 200,000 No. of active clients ( 000) +95% 18 35, (E) Post- Portfolios Optimal Routes

17 Product portfolio BUT WHAT ABOUT MARGINS? 190+ R$/t Contribution Margin Expenses Sale to Large Clients Margin Contribution Margin Expenses Multiple-item sales Margin

18 Product portfolio Productivity o Lower transactional costs o Digital purchase platform (app/mobile) o Best buying experience for our clients Operational Intelligence o Big Data and analytics: o Efficiency gains in prospecting and sales o Enhanced planning of demand and operations o Increased brand strength Suzano building client loyalty

19 Cost discipline Integrated creates logistics value Annual costs of R$1.9 billion 62% Outbound 34% Forest o Wood Loading o Wood Transportation LDCs & RDCs o Internal Handling o Paper Shipping o Paper Storage Transportation & delivery to clients 4% Suppliers Transportation of Chemical Inputs in FOB negotiations Suzano Mills o Wood Deliveries o Internal Handling o Pulp & Paper Shipping o Pulp & Paper Storage o Mill Transportation - Port o Maritime Transportation Transportation to clients Inland freight (Europe & North America)

20 Cost discipline F O R E S T R Y Transformation with higher efficiency Previous model o Operation with traditional carriers o Costs affected by parametrics linked to inflation o Operational department's low knowledge of cost levers Current Model o Most operations supplied by self-employed drivers with Suzano semitrailers o Implementation of light semi-trailers o Better management by Suzano of cost and productivity levers o Use of technology to monitor fleet productivity Future Model o 100% triple logging trucks o 100% self-employed drivers and aggregates o 100% lightweight semi-trailers o Maximization of cargo boxes o Optimal costs for diesel and maintenance

21 Cost discipline F O R E S T R Y Logistics gains neutralize inflationary effects TKU vs. IPCA vs. Diesel (2014 = base 100) % M16 IPCA (Base 100) TKU (Base 100) Diesel (base 100 = Dec/2014) ¹ TKU shows ratio of freight costs, wood volume transported and distance traveled in R$/m³/km

22 Cost discipline Maritime Freight o Pulp: Integrated planning and full vessels o Paper: Higher volume per container Maranhão Exports o Redesigning operations (processes and equipment) o 100% rail Number of full vessels Unit cost of maritime freight (2014 = base 100 USD) Avg. productivity MA (ton/day) 7,598 9,360 13, M M M16 Doing things differently and better every day

23 Cost discipline Forestry Cost increase lagging o Modernization of harvest equipment o Insourcing Logistics o Integrated logistics o Lightweight semi-trailers Industrial o Industrial retrofitting o Energy efficiency

24 Cost discipline...and expressive gains in to be captured Project 5.1 3Q16 R$ 637/ton 2021/2022 R$ /ton Increase in cash generation of ~R$ 630 million ¹ Amounts in 2016

25 is our foundation Structural Competitiveness Adjacent Businesses Reshaping the Industry Higher rate of return Lower volatility

26 Under development since 2010 Suzano s Innovation Production since 2015 Pioneering efforts in hardwood fluff pulp

27 Do you know how? Pulp defibered at mill Pulp and SAP form Pad is converted 1 2 diaper pad 3 into final product

28 W i t h E u c a f l u f f Fluff of long fiber o One sheet is replaced by two sheets Eucafluff o Mill is adjusted and that's it. Afterwards the mill and process remain the same

29 Proven Performance Drier product 30% less rewetting Thinner and softer 20% more compressible pad And more comfortable 10% more flexible Source: IPS Testing and MTS, comparing diapers with 100% long fiber vs. blend of long and short fibers. IPS and MTS are U.S. independent laboratories specializing in testing for major producers, such as Kimberly Clark, Procter & Gamble and retailers, such as Wal*Mart, in addition to the Association of the Nonwoven Fabrics Industry.

30 Product portfolio Easy to use Best product for end consumers Product's technical approval cycle Exports launched in 4Q16 Market with global demand of 5.6 MM tons/year

31 Product portfolio HIGH POTENTIAL FOR DEMAND GROWTH CONSUMPTION [KG/POP] 25 DRIVERS Source: RISI o GDP o Demography and Urbanization BRAZILIAN TISSUE MARKET o Demand: 1,2 MN ton/year o Tissue paper: 75% of demand o Quality tissue paper enjoying stronger growth pace o 5 largest players in Brazil hold ~60% of production o Suzano will be Brazil's 5 th largest Tissue producer and largest in North and Northeast AFRICA North Poland LATIN AMERICA Argentina Colombia Brazil EASTERN EUROPE China GLOBAL TOTAL Turkey Russia MIDDLE EAST & REGION Far East Northeast South Africa Indonesia Central Europe & British Isles Japan Spain Italy Southern Europe OCEANIA United Kingdom South Korea France Canada Germany Taiwan WESTERN EUROPE Northern Europe North America EUA Netherlands GDP/pop 2013 (USD) 12.5

32 Product portfolio C O M P E T I T I V E o Integrated Pulp o Machines with higher productivity o Logistics Costs for distribution in North/Northeast of Brazil o Monetization of ICMS tax credits Suzano has 85% of inputs available at the mill

33 Product portfolio CASH FLOW (R$/ton)¹ TISSUE ADDS INCREMENTAL to Tissue rolls TO PULP Pulp ¹ Current market price and Suzano's expectations Final Product

34 Financial discipline A robust balance sheet prepares Suzano for Risk management Dollarization of 100% of net debt to reduce volatility in cash generation and average debt cost Rating o Company that most received upgrades o Metrics for investment grade already achieved Lower debt cost Higher liquidity o CRA Issue (R$ 1.9 bn in 2016) o 1 st issue of Green CRA Verde in Brazilian market o 1 st issue of Green Bonds in dollars by a Brazilian issuer (USD 500 mn in 2016)

35 Operating Cash Generation¹ (R$ million) Return on Invested Capital (ROIC) is the indicator used to manage Suzano and is its Q15 1Q16 2Q16 3Q of operating cash generation 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% ROIC² (%) 14.7% 15.4% 16.1% 11.7% 15.8% 16.1% 13.4% 14.8% 16.6% 14.5% 13.1% 4Q15 1Q16 2Q16 3Q % 18,0% 16,0% 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% ¹ Adjusted EBITDA - Sustaining Capex ² ROIC = (Adjusted EBITDA Sustaining Capex Cash taxes)/capital Employed

36 Company A R$ billion 2017e 2018e EBITDA Operating Cash Generation Which company is wor th Company B? R$ billion 2017e 2018e EBITDA Operating Cash Generation

37 aligned with shareholders' interests EBITDA Excludes investment, which is relevant in industries of intensive capital Cash Flow Could lead to decisions that prioritize short term results ROIC Compares value generation with the asset base, aligned with shareholders' interests Increased sustainability of financial results

38 Operating Cash Generation is the best to compare value creation for shareholders... Operating Cash Generation/ton (base=100) EV/Operating Cash Generation (x) 22.4x 17.4x 18.0x 13.9x 15.5x 10.7x 12.6x 14.4x 9.5x 17.7x 8.7x 7.0x Dec/13 Dec/14 Dec/15 Sep/16 Dec/13 Dec/14 Dec/15 Sep/16 Suzano Fibria Klabin...and Suzano has posted the best number......but which isn t reflected in the relative value of its stock (SUZB5)

39 Maximizing returns for shareholders is our foundation Structural Competitiveness Adjacent Businesses Reshaping of the Industry o Cost discipline o Integrated logistics o Suzano Mais o Robust balance sheet o Financial and capital discipline o Product portfolio o Margin expansion o Scalability o Focus on ROIC o Lower margin volatility o Consolidation o Verticalization

40 SUZANO DAY 2016 #proudtobesuzano suzano.com.br

41 SUZANO DAY 2016 FORESTRY COMPETITIVENESS

42 Pulp Cash Cost (LTM) RS/ton 658 Cash Cost Composition 48% Wood 22% Chemicals 22% Fixed 7% Fuel 1% Other Freight Harvest R$ 1.4 Bi. Wood directly impacts operating cash flow R$/billion Operating Cash Generation (LTM) 4.2 Adjusted EBITDA (-) 1.1 Sustaining Capex Industrial Cash Cost = 48% Capex = 70% 3.1 Last twelve months ended on 09/30/2016. Forestry R$ 770 Mi.

43 Reduction in average radius impacts wood cash cost Automation competitiveness of silviculture & forestry CAPEX Forest Yields Genetic- Environmental Modeling & Biotechnology

44 Reduction in average supply radius impacts wood cash cost Automation competitiveness of silviculture and forestry CAPEX Forest Yields Genetic- Environmental Modeling & Biotechnology

45 in average supply radius to reach target cash cost of R$475/ton ¹ Forest base management high cost areas vs. low cost areas Wood Cost Base 100 Future forestry base Current forestry base Land with high yields Land availability SP Sugarcane BA Livestock MA Eucalyptus o Potential reduction of 20% in forest cash cost o Yield gains and better planting areas o Land demobilization as from 2023 (R$500 MM) ¹ Target Cash Cost in 2021/2022 based on 2016 figures.

46 Average wood supply distance 98% 98% % 92% 92% 92% % 76% 79% 69% 67% 56% 64% 61% E 2018E 2019E 2020E 2021E 2022E Consolidated Average Radius (km) % Own Wood % Guaranteed Supply in average supply radius & wood cost Region Target (km) Bahia Maranhão Projected year São Paulo Wood cash cost (R$/ton) SP Demobilization Project (2021) BA Forest recovery plan (2020) MA Total impact of assets acquired (2021) E 2018E 2019E 2020E 2021E 2022E

47 Study of blocks 1 Area 1 1 Area More details More details Climate & Soil Road Land 3 5 Key 5 LM Municipality Aselection Radius in KM Aees without restriction, low pressure 2 2 Aees low pressure 1 to 2 Area 3 1,460,000 ha 12% 180,000 ha

48 Reduction in average supply radius impacts wood cash cost Automation competitiveness of silviculture & forestry CAPEX Forest Yields Genetic- Environmental Modeling & Biotechnology

49 Structural Competitiveness Impacts of mechanization on forestry sustaining CAPEX

50 c t u r a l Phase 1 Phase 2 Phase 3 Harvest mechanization Silviculture mechanization Automation of harvest & silviculture Actions Insourcing of harvest ops Activities mechanization Development of independent vehicle Standardization of machinery Fleet control & management Development of new solutions Approximation of agriculture Forest Operations Center Impact Benchmarking in harvest ops Lower CAPEX per hectare Higher operating performance Reduction of ~30% in harvest costs Improvement in forest process management Timetable Cash Cost Capex

51 % Other activities Pest control Wood control Fertilization Planting Soil preparation Nursery Innovative products Realignment of planting Georeferenced planting 5-line fertilizer Nursery Soil preparation Planting & irrigation Fertilization management Weed management Pest management

52 Realignment of soil preparation Fertilization with highyield coverage Georeferenced planting Fleet reduction (from 50 machines to 3) Perfect parallelism +3% lines/ha - R$15 million/year in CAPEX Demobilization of ~15,000 ha¹ (R$150 MM) Reduction of 20% in soil preparation costs Precise location of inputs Eucalyptus planting zone well defined ¹ As from 2023

53 in SP Distance: 90 km Area: 1,400 ha Yield: 56 m 3 /ha/year (with bark) Contract: 14 years Wood cost: lowest 1 st quartile Prior land use: sugarcane

54 Reduction in average supply radius impacts wood cash cost Automation competitiveness of silviculture and forestry CAPEX Forest Yields Genetic- Environmental Modeling & Biotechnology

55 reduces costs with formation, harvesting & planted area 20 m 3 /ha/year 40 m 3 /ha/year 60 m 3 /ha/year

56 Yield and Operations for Yields Potential New Clones Determinant Factors Genotype, temperature, radiation Clone Environment Achievable Protection & Management Limiting Factors Water, nutrients Soils & Management Actual Protection Reducing Factors Weed, pests, disease Protection m 3 / ha/ year

57 Brasil Eucalyptus BA Yield depends on good management and is modulated by precipitation Average precipitation of rotation (mm/year) SP Potential Achievable and Potential Yields can be objectively determined Achievable Actual Areas contemplated by field research Source: Forestry Research and Studies Institute (IPEF) MAI (m³/ha/year)

58 CLONES Source: Forestry Research and Studies Institute (IPEF) Interaction Concept TECHS Phenotype = G + E + G*E locations 1 st Choice Environment 2 nd Choice + Excellent Clone 22 locations Clone-Site Adjustment + 40% Yield

59 MA based on climate zones BA MA: Expected Gain of 50% MAI 30 to 45 m 3 /ha/year MAICel 8.0 to 12.0 adt/ha/year Clone Pipeline P H A S E 1 : SP BA: Expected Gain of 40% MAI 35 to 48 m³/ha/year MAICel 9.1 to 13.0 adt/ha/year SP: Expected Gain of 16% MAI 50 to 58 m³/ha/year MAICel 12.7 to 15.1 adt/ha/year F2 F3 F YEARS

60 Natural Management Units Genetic- Environmental Modeling Assisted Genomic Improvement Growth & Protection via Transgenesis

61 c l i m a t e z o n i n g t o p o g r a p h y BA MA SP Soils MAI Optimization of clonal allocation with gains as from 2022 IMPROVEMENT Efficiency gains via Genotype vs. Environment interaction as from 2019

62 Understanding the Basic Growth Processes of Trees Photosynthesis Respiration Transpiration Carbon Allocation Carbon Leaf Wood Solar Radiaton Carbon Capture & Transpiration via Crowns Root 1. Real Model

63 3. Computational Model Differential Equations 2. Theoretical Model Diagram Spatialization

64 o G2: Genetics - Genomic o M2: Management - Modeling o P2: Protection - Product 7 Parametrization: obtaining environmental & genetic values S U Z A N O G 2 M 2 P 2 14 Experimental Sites 14 Climate Zones 3 4

65 4. Yield Model Clone S 5. Suzano's Genetic- Environmental Yield Model BA Resolution Pixel 1 ha Resolution Pixel 1 km² Inventory Suzano (1:10 ha)

66 Probabilistic distribution of

67 Natural Management Units Genetic- Environmental Modeling Assisted Genomic Improvement Growth & Protection via Transgenesis

68 S u z a n o C l o n e S (SNP) 1 Tr e e SNPs 1 Tr e e SNPs S U A N O S N P c h i p

69 Genomic selection Year 1 Year 6 Pure & hybrid populations Year 2 o Higher Number of Clones being Selected Tests on clones with operating witnesses per Climate Zone Clone Tests: Physiology, Sanity, Yield & Wood Quality 1.400/year to 20x more o Reduction time selection 18 to 6 years (m³/ha/year) SP BA MA Current MAI Conventional Selection Genomic Selection Year 5 Selection in Nursery of clones from thousands obtained in crossbreeding Year 4 Development of Comprehensive Genomic Selection Model for wood yield and quality Year 3 Genotyping of materials tested and genitors

70 Yield Risks Research & Development Commercial Application COVERS THE INDUSTRY'S MAIN ISSUES: ACCELERATES GROWTH & AVOIDS LOSSES Potential Achievable 1-4 years 2-4 years 2-3 years 3 years 3 years GM Eucalyptus with yield gains Actual Phase 0 Viability / Gene search Phase 1 Concept test Phase 2 Initial phases Phase 3 Final phases Phase 4 Regulatory / Pre-launch Product released for commercial use m 3 / ha/ year Yield gains Yield protection

71 as from Average Supply Radius Higher Yields (MAI) Cash Cost Silviculture Higher Yields (MAI) CAPEX Demobilization of Land¹ (R$650 MM) EBITDA¹ + R$ 250 MM/year Forestry CAPEX - R$ 150 MM/year Additional operating cash generation ~R$ 400 MM / year ROIC + 2,1 p.p. ¹ Values incorporated in the target cash cost of ² As from 2023, including taxes

72 SUZANO DAY 2016 #proudtobesuzano suzano.com.br