Fibria s Biostrategy How a Global Leader in Pulp Production is Diversifying into the Bioeconomy

Transcription

1 Fibria s Biostrategy How a Global Leader in Pulp Production is Diversifying into the Bioeconomy Mike Rushton, Fibria Innovations Copyright 2017 Fibria, all rights reserved RBI Meeting Atlanta - March 7, 2018

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3 FIBRIA IN A NUTSHELL World leader in eucalyptus market pulp production from planted forests MM tons/year of pulp produced 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

4 Fibria Highlights Votorantim S.A. (1) 29.42% BNDES Participações (1) 29.08% Free Float (2) 41.36% Fiscal Council General Meeting Board of Directors 20% independent members Role of CEO and chairman is split Finance Committee Statutory Audit Committee Personnel and Remuneration Committee Sustainability Committee Innovation Committee 30% independent members 100% independent members 50% independent members 45% independent members - Listed on Novo Mercado, highest level at B3: 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 (1) Controlling group (2) Free Float 41.36% + Treasury 0.14% Policies approved by the Board of Directors: 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 4

5 A Winning Player Superior Asset Combination Main Figures 2017 Pulp capacity (1) million tons Net revenues US$ billion Total Forest Base (2) thousand hectares 1,056 Belmonte Veracel Caravelas Portocel Aracruz Planted area (2) thousand hectares 633 Net Debt US$ billion Net Debt/EBITDA (in Dollars) (3) X 2.41 Três Lagoas I and II Jacareí Santos Two Products: Port Terminal Pulp Unit Bleached Hardwood Kraft Pulp Electric Power 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, (3) For covenants purposes, the Net Debt/EBITDA ratio is calculated in Dollars. 5

6 Fibria s Industrial Units Três Lagoas Mato Grosso do Sul 3,250 thousand t/year (1) (1) Veracel is a joint operation between Fibria (50%) and Stora Enso (50%) and the total capacity is 1,120 thousand ton/year 6

7 Sustainable Land Use Model Fibria s Eucalyptus plantation Fibria s preserved native forest Neighbours other uses 7

8 Eucalyptus in Brazil: Short cycles +86 mi seedlings produced 6 trees planted per second 6 7 year cycles

9 Fibria Feedstock Eucalyptus 6-7 years 9

10 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 10

11 Fibria s Commercial Activity Revenues by Region and by End Use - Fibria Highlights Region 4Q17 North America 20% Europe 28% Latin America 9% Asia 43% End Use 4Q17 Tissue 51% Specialties 16% Printing & Writing 33% 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 Net Revenues by Region - Fibria 9% 10% 9% 10% 9% 24% 25% 24% 32% 39% 28% 24% 24% 22% 20% 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) 39% 41% 43% 36% 32% Source: Fibria Europe North America Asia LatAm 11

12 Horizonte II Project (Três Lagoas 2) Game-changing project for Fibria 12

13 Project improved our leadership position even further ESTIMATED BHKP CAPACITY RANKING 2017 Fibria APP Suzano April CMPC UPM Eldorado Arauco Stora Enso Cenibra Ence Altri Mondi Marubeni Ilim Nippon Oji Metsä Navigator Woodland Georgia Pacific Verso Resolute Lwarcel International Paper Klabin Soedra Domtar 5% 4% 4% 4% 3% 3% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 0% 0% 9% 8% 8% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 (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 Klabin Sources: RISI, Hawkins Wright, PPPC and Fibria (Nov 2016) 13 OKI H2 15% Klabin 21%* (000T)

14 Key Aspirations PROFITABILITY GROWTH DIVERSIFICATION Consolidate our position in the 10% lowest cash cost players in the industry by: Achieving MAICEL of 15,0 tons/ha/year of pulp by 2025 for new planted forests. Pursuing a minimum of 10% of differentiated pulp volume priced at a premium. 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. 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. 14

15 Principles of our Focused Diversification Leverage our competencies Complementary to our value chain Partnering with winning technology providers FOCUSED DIVERSIFICATION Applied innovation as ultimate goal Creation of Strategic Flexibility Stage & Gate Process 15

16 Technological Maturity Biostrategy technology paths prioritized Priority 1 Prioritized Paths PYROLISIS LIGNIN Priority 2 NANOCELLULOSE BIOCOMPOSITES Economic Attractivness Technology A Technology B Technology C Technology D Technology E Technology F Relative Market Size Source: Fibria Bio-Strategy Project 16

17 How Fibria is preparing for the challenges of diversification in the bioeconomy (1/3) 17

18 How Fibria is preparing for the challenges of diversification in the bioeconomy (2/3) 18

19 How Fibria is preparing for the challenges of diversification in the bioeconomy (3/3) BUSINESS SCOUTING 19

20 Key attributes of Fibria s Biostrategy Partnering with winner technology providers Leverage on our competencies FOCUSED DIVERSIFICATION Complementary to our value chain Applied innovation as ultimate goal PRUDENT, FOCUSED AND DISCIPLINED ACTION PLAN UNDER EXECUTION AMBITIOUS LONG TERM VIEW Creation of Strategic Flexibility Stage & Gate Process 20

21 Development status of several biostrategy technology paths Roadmap defined in 2012 Updated and executed in a disciplined way 21

22 Pyrolysis 22

23 Pyrolysis Business is based on proven Ensyn technology platform Refinery Co-processing Biomass delivered to facility Biomass converted to biocrude in RTP facility Biocrude delivered to customers Heating & Cooling Already commercial Food Ingredients & Renewable Chemicals RAW MATERIAL RTP PROCESS REPLACEMENT FUEL OIL CONSUMER MARKETS Flexibility in the use of raw materials Commercially proven technology Renewable Product Consumer market flexibility 23

24 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 BIOCRUDE REVENUE RIN REVENUE LCFS REVENUE 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 CAP AND TRADE REVENUE Monetization of credits generated by Californian refineries under the Carbon Cap and Trade program 24

25 The U.S. Refinery FCC Market is 5.6 million bpd and untapped 97% 3% VGO Biocrude U.S. Refinery FCC Capacity RFO Capacity to Supply 3% U.S. FCC Market 5.6M bpd 85.8B gpy Sources: Oil and Gas Journal, RFA 170,000 bpd 2.6B gpy 130 RTP units 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 25

26 RTP Project Highlights STATUS Basic Engineering completed Offtake contracts in negotiation with US refineries Approval required at Fibria and Ensyn Boards TIME-TO- MARKET Implementation in 24 months from approval date FAVORABLE POTENTIAL LOCATIONS Synergies with the Fibria s sites Operational integration Use of available forest residues Logistics alternatives identified COMMERCIAL FLEXIBILITY Base Scenario: exports to US for coprocessing Alternative Scenario: exports to US for heating Downside Scenario: internal usage fossil fuels substitute STRONG FINANCIALS Solid financials even in unfavorable FX scenarios Low volatility with negative correlation: oil prices and regulatory benefits Availability of low cost funding 26

27 Nanocellulose 27

28 Fibria s positioning in Nanocellulose 28

29 Partnership with Spinnova opens new strategic avenue for Fibria 29

30 Lignin 30

31 Adding value with Lignin Business Development 25%-30% TYPICAL LIGNIN CONTENT IN EUCALYPTUS TREES LIGNIN BURNED FOR ENERGY Currently lignin is burned as fuel VALUE ADDED PRODUCTS Potential to apply lignin to other value-added uses 31

32 Acquisition of Lignol in 2015 will shorten time to market Fibria Innovations British Columbia, Canada Human Resources Patent and Research Portfolio Equipment 17 full time personnel Full integration with Technology Center in Brazil (Kraft + Organosolv lignins) 20 existing patent families 85 patents More than 10 years of research data Fully equipped labs Applications development Pilot plant for Organosolv processes 32

33 Fibria s lignin portfolio allows the development of different applications Kraft Lignin Organosolv Lignin Development of Potential Applications Fibria Innovations + Partners Petrochemical substitution Friction Wood Products Adhesives Reinforcing Rubber Filler Insulation Composite Materials Films Foundry Molding Compounds Coatings Carbon Fiber 33

34 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

35 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 Physical and/or chemical modification Modified lignin as an ingredient or as the product Chemical and/or physical transformation Lignin as a feedstock or precursor for a non-lignin product 35

36 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 byproducts The more work we do, the higher the value, but the higher the cost of manufacture Ultimately we have to make a profit! 36

37 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 37

38 The way ahead so much more than technology Diversification into new businesses Supply chains Products Industries Logistics Processes Regulatory Customers Sales force Tech service Quality assurance Business processes Partnerships 38

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