View
214
Download
1
Embed Size (px)
Citation preview
2
Focus on two main businesses: Market Pulp and Paper (P&W and Specialty)
Integrated Businesses: Overview
850
655
1150(1)
655
1400
2002 2003 2005
Eucalyptus Pulp P&W and Specialty Papers
Production Capacities (per product) ( x1000 tons)
Paper production capacityIQ05(x1000 tons)
3%
(1) Learning curve
1400
610
2004
635Coated
16%100kt
Specialty Papers
3%20kt
Chemical11%70kt
Uncoated70%445kt
* Not including 75kt off-machine coater
3
Integrated Businesses: Overview
Product Mix (Sales Volume) Value Mix (Revenue)
2004 (1,459k tons)
IQ05 - (350k tons) IQ05 - (US$251M)
Uncoated Paper - Domestic
Coated/chemical paper - Domestic
Uncoated / coated paper - Exports
Pulp - Exports
Pulp - Domestic
2004 - (US$1,010M)
54%
5%
14%
14%
13%
17%
27%
15%
37%
3%
53%
12%
14%
5%
16%
20%
28%
14%
35%
3%
4
Vertically-integrated operations
Integrated Businesses: Overview
Forestry Data (Dec 04)Total Area: 258,000haPlanted: 134,000ha
Wood
Wood
Luiz Antonio Mogi
Specialty Papers20k tpa
Chemical Papers 70k tpaCoated Papers 100k tpa
Pulp
Pulp
Piracicaba
Jacareí
Uncoated Papers 340k tpa
Uncoated Papers 105k tpa
Market Pulp900k tpa
KSR DistributionDirect Sales
Branches
Warehouse
Sales Office
Private Terminal Santos Port
5
• Global scale production - 1.4 million tons
• Sales volume grew 81% in 2003 and another 39% in 2004
• Average pulp prices increased 1% in 2004 vs. 2003 and 11% in IQ05 vs. 1Q04
• Production cost competitiveness
• Growth opportunities, both organically and through M&A
• 2020 Outlook: 4 million tons of market pulp over the next 15 years (CAGR 11% p.a.)
Pulp Business: Global Player
Source: VCP
Pulp price and sales evolution
316 341 343 334 607 844 826*
$489
$650
$495 $457$507 $518
$550
1999 2000 2001 2002 2003 2004 IQ05
Pulp sales ktons Pulp list price BEKP (CIF Europe) US$/ton
* Annualized
6
• Exporter profile (lower exposure to macroeconomic fluctuations)
• Commercial alliances with strategic customers
• Approximately 95% of sales volume is linked to long-term contracts at market prices
• China accounts for 2/3 of sales to Asia and is expected to continue to be a an important pulp purchaser
Pulp Business: Global Player
9%
91%
Pulp Sales Volume (IQ05 – 206,4 ktons)
Source: VCPPrices BEKP list US$/ton in April 2005
Domestic Market
9%
Exports 91%
Pulp Sales Volume (IQ05 - 206,4 ktons)
Asia30%
US$570
Europe59%
US$600
North America11%
US$635
7
Breakdown of pulp cash cost (VCP IQ05)• Natural and technological wood cost advantages
• Global scale
• Low energy costs
Pulp production cash cost - VCP
Pulp Business: Cost Competitiveness
Cash production cost - IQ05US$/ton fob mill (BHKP)
171 181 185310 357 390 393 394 399 409
Labor7%
Maintenance6%
Wood40%
Raw materials33%
Packaging/Other4%
Energy/Fuel oil6%
Other4%
137166
134 127154 157 171
1999 2000 2001 2002 2003 2004 IQ05
8
Market in recovery - 2004/2005
• Pulp price increases in April/05 to US$600 in Europe, US$635 N. America and US$570 in Asia
• Paper demand, inventory rebuilding and capacity shutdowns reinforce the positive momentum
• Price gap between NBSK and BEKP at US$100/t sustained by greater hardwood supply and by higher production costs for softwood (Canada), partially offset by the effect of substitution
• Weak US$ increases costs in US$ for Europeans and Canadians, raising minimum price levels
Price vs. operating costs BEKP x NBSK
Pulp Business: Market trends
Source: VCP, Hawkings Wright
$650
$550
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
$750
$800
$850
$900
$950
$1.000
jan/
95ab
r/95
jul/9
5ou
t/95
jan/
96ab
r/96
jul/9
6ou
t/96
jan/
97ab
r/97
jul/9
7ou
t/97
jan/
98ab
r/98
jul/9
8ou
t/98
jan/
99ab
r/99
jul/9
9ou
t/99
jan/
00ab
r/00
jul/0
0ou
t/00
jan/
01ab
r/01
jul/0
1ou
t/01
jan/
02ab
r/02
jul/0
2ou
t/02
jan/
03ab
r/03
jul/0
3ou
t/03
jan/
04ab
r/04
jul/0
4ou
t/04
jan/
05
NBSK
BEKP
Supply Cost curve Softwood
Supply Cost curveHardwood
Supply costs del W. Europe
9
• Strong regional market share
• Efficient distribution and integrated logistics
• Value added product mix
• “Client Focus” – Relationship and loyalty program for strategic local and international customers
• Growth in cut-size exports
• Operating margin stability
• Cost competitiveness with paper / pulp integration
• 2020 Outlook: 2 million tons over the next 15 years (CAGR 8% p.a.)
Paper Business: Regional and Global Presence
Source: VCP
Paper prices and sales evolution
519 530 569 571 568 615 574*
R$ 1.281R$ 1.563
R$ 1.802
R$ 2.206R$ 2.402 R$ 2.363 R$ 2.254
R$ 1.834R$ 2.103 R$ 2.251
R$ 2.587
R$ 3.255 R$ 3.287R$ 3.091
1999 2000 2001 2002 2003 2004 IQ05
Paper sales ktons Avg. export price - R$/tAvg domestic price - R$/t
Value added
* Annualized
10
Domestic Market
• 1Q05 X 4Q04: 11% reduction in sales volume due to decrease in demand
• 1Q05 X 4Q04: average paper prices declined 4% due to increase in ten rates
Source: VCP
Paper Business: Regional and Global Presence
Paper sales - local vs. exports
0
50.000
100.000
150.000
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
Ton
s
0%
10%
20%
30%
40%
Paper Domestic sales Paper Exports % Export / Total
Paper Volume - IQ05
Export Market
32%
Domestic Market
68%
Paper RevenueDomestic
Market74%
Export Market26%
11
Market Share Brazil – 2004
Paper Business: Regional and Global Presence
Cut Size
Coated paper Chemical (carbonless/thermal)
International Paper33%
Ripasa22%
VCP
22%Suzano Bahia
Sul23%
VCP
77%
Imports
5%
Others
18%
Source: Bracelpa
Imports20%
VCP33%
Ripasa21% Suzano
21%
Others
5%
VCP19%
International Paper21%
Suzano Bahia Sul34%
Ripasa14%
Others12%
Uncoated Paper (rolls/sheets)
12
Forestry objective: Produce and supply wood for pulp and energy needs with quality adjusted to usage, competitive costs in a socially and environmentally responsible manner.
Wood
197,000 ha in SP
61,000 ha in RS
Brazil
Amazon Rainforest 3,500km
New Forestry Base
Capão Bonito-SP
Bauru-SP
Altinopolis-SP
Uberlândia-MG
Paraíso-MG
Luiz Antônio-SP
Piracicaba-SP
Jacareí-SP
Mogi das Cruzes-SP
Private Terminal in Santos Port - SP
Luiz Antônio-SP
São Paulo-SP
Forestry Area
Pulp and Paper Plant
Paper Plant
13
Strategic goal to guarantee wood supply and ensure VCP’s long-term growth
ongoing investments in land purchases and development of planted Eucalyptus areas in the state of São Paulo
creation of a new forest area in the state of Rio Grande do Sul with 62,000 ha currently. Growth in this region is driven by the following factors:
Availability of land at attractive costs (land substitution for cattle raising)
Proximity to Northern Uruguay (wood availability)
Proximity to Rio Grande port (export platform)
Forestry productivity similar to São Paulo forests
Inter-modal transportation options (ex. Wood transport by railway)
Qualified labor force
Politically, socially and environmentally favorable (ex. Agro-silviculture, supply program, 35% preserved areas versus 20% required by law)
Planting the Future
14
• Favorable climate and soil conditions, mechanized forest operations and investments in technology have yielded among the highest productivity levels in the world
• Eucalyptus genome mapping projects are expected to continue to improve productivity
Source: VCP
High productivity and a combination of technology and natural advantages
Brazil 745-50
Argentina 7-1225
Chile 10-1220
Indonesia 720-25
Australia 720-25
Iberia 12-1510-12
Sweden 35-405,5
Finland 35-404
USA 2510
Canada 457
Country HarvestYield
(yrs) (m3/ha/yr)
Yield20m3/ha/year
Yield50m3/ha/year
1970s Today
Wood
Wood costs and % of third-party wood purchases
40
45
50
55
60
65
70
4Q03 1Q04 2Q04 3Q04 4Q04
US
$/to
n
25%
27%
29%
31%
33%
35%
37%
39%
41%
Wood cost (US$ ton) % Third-party wood
15
Genetic Improvements
R&D / Technology: Forestry
1970Species/Origin Selection
1980Population Selection
1990Tree and Family SelectionVegetative Propagation
1995Clone plantingSelection as per end use
2000 and beyondMolecular MarkersGenome Project: Trees with specific traits tailored to end use
16Source: VCP
Integrated Logistics
Wood38%
Pulp34%
Paper25%
Raw materials3%
Breakdown of logistic costs
VCP’s logistics expenses - US$/ton
68
58
5454
5355
55 57 50
30 2933
36 37
50
44
2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05
Logistic expenses Crude Oil US$/barrel
17
Initiatives to reduce logistics costs in the forestry, pulp and paper areas are offsetting higher freight costs associated with exports to keep VCP’s logistics costs under control
• Contract 2 logistics operators (Wilson Sons and TNT) to assume all of the operational activities associated with material flow from the raw materials receiving up to delivery to end customers. The benefits have translated into lower costs, scale gains, lower asset, asset divesting, and specialization of customer services
• MRS – Pulp shipping from the plant to Santos port by train – A 25% reduction in logistics costs with the substitution of truck shipping to rail transport
• Rail shipping for wood eliminates direct relationship between cost and average radius
• Break Bulk: paper loading on boats outside of containers. The objective is to reduce logistics costs related to paper exports, which increased drastically with the competition for containers that came about with the increase in Brazilian exports
• With this new form of loading, VCP frees itself of its dependence on container ships and avoids problems associated with partial loading of shipments on time, which results in loss of sales abroad.
• For this project, VCP is loading its paper directly on top of its pulp, taking advantage of pre-established pulp transport contracts (competitive market advantage).
Integrated Logistics
18
Solid Financial Position
Consistent earnings growth and strong cash generation
• Net profit has grown at an average of 25% p.a. over past 5 years• Stable EBITDA margin of over 40% (significantly higher than European peers) and net margin of approximately 30% in the same period
EBITDA (US$m) and EBITDA Margin (%)
20%
Source: VCP, Company Reports
20%
26%
22%20%
18%
14% 14%
41%
49%
41%38%
41%38%
42%
239 229
414
269
376
340382*
0%
10%
20%
30%
40%
50%
60%
1999 2000 2001 2002 2003 2004 2005
0
50
100
150
200
250
300
350
400
450
EBITDA margin Europe (%) VCP EBITDA (%) EBITDA US$ million
Earnings per ADR (US$) and Net Margin (%)
$0,53
$1,31$1,01 $0,83
$1,27$1,58
$1,27
17%
32%29%
26%30% 30%
25%
1999 2000 2001 2002 2003 2004 2005
* Annualized
19
Consistent value creation and return for shareholders
• VCP applies GVA (value added management) and has created value even during cycle troughs
Source: VCP
Solid Financial Position
15%
28%
16%
13%
19% 19%
16%
11% 11% 11%9%
10%9% 10%
5%
8%
10%
13%
15%
18%
20%
23%
25%
28%
30%
1999 2000 2001 2002* 2003 2004 IQ05
ROIC
w acc
RoEV
20
Consistent value creation and return for shareholders
• New dividend policy offers greater transparency and yield visibility• Considered a combination of 3 factors: cash returns for shareholders, future growth opportunities and requirements for “investment grade” status• Dividends will be calculated from a base of 60% free cash flow as per the following formula:
FCF = EBITDA – Working capital variation – Taxes – Investments
Source: VCP / Note: (1) Based on average shareholders’ equity for period / (2) Based on stock price at end of period / (3) Proposed dividend distribution based on FX rate of R$2.70/USD
Solid Financial Position
Dividends (US$m) and yield (2) %
ROE (1) %
8%
23%
17% 17%
25%23%
18%
1999 2000 2001 2002* 2003 2004 IQ05ROE %
(1) Based on average shareholders' equity for period
Dividends US$m and yield (2) %
$23
$45$32
$38
$85
$107
1,5%4,2%
2,4% 2,8% 3,5% 3,4%
1999 2000 2001 2002* 2003 2004
21
133
465536
469
713
84 125
679
317
165218
-22
502 531E*
1999 2000 2001 2002 2003 2004 IQ05
Net Debt (USGAAP) Capex
*
Strong balance sheet, competitive financing costs
Source: VCP
Solid Financial Position
13%
42%
70%
42%31%
46%
-2%5,9% 5,5% 5,5%
6,6%5,5%
9,8%8,7%
1999 2000 2001 2002 2003 2004 IQ05
Net Debt/Shareholders' Equity Average cost gross debt
* Includes Ripasa acquisition
22
1Q2005 Highlights
CAPEX IQ05 Expected for 2005(US$ Million)
Expansion Projects 3 68Modernization 6 24Forestry 20 106Maintenance, IT, Others 7 58
Total 36 256
Debt Debt Dec 31,2004 Mar 31,2005 %
(US$ Million) Cost(%) Total
- Short term 376 326 27 %In Reais TJLP* + 3% 30 29 2 %In Dollars US$ + 3.2% 346 296 25 %
- Long Term 569 868 73 %In Reais TJLP* + 3% 102 96 8 %In Dollars US$ + 5.5% 467 773 65 %
Total Debt 945 1194 100 %(-) Cash (476) (481)Net Debt 469 713
*TJLP = 9.75% p.a. in Mar, 2005
23
Acquisition of Ripasa
Transaction (50/50 VCP/Suzano Bahia Sul) Acquisition of 66.67% of the common shares and 17.68% of the preferred shares
US$ 480 million, up to march 31, 2005
Acquisition of 33.33% of the common shares and of 8.57% of the preferred shares US$ 240 million, up to 6 years
Total transaction - 59.5% of total capital US$ 720 million
Transaction Schedule
Purchase agreement - November 10, 2004
Step I - Up to the conclusion of the transaction - Keep Ripasa running “as is”. Step II – After conclusion of the transaction
Stockholding restructuring De-list Ripasa from Bovespa Transform Ripasa into a production unit Capture of potential synergiesIndependently commercialize each company’s share of the production
24
Acquisition of Ripasa
• Foundation October 22, 1959
• 2,822 employees• 4 production units• Annual capacity:
– Total pulp 455,000 ton– Paper 525,000 ton
• Forest – 86,400 ha(76% for plantation)
Ripasa adds 24% to VCP’s capacity
573Net debt
1,041Equity
2,087 Total Assets
9143Export (paper)
20176Paper
3434Pulp
235110Domestic Market
326153Sales volume
14%EBITDA margin
46EBITDA
R$ (000)Tons Description
Consolidated figures 3M05
25
Shareholder Structure
% of Total Capital Stock March 31, 2005
VCP Trading100%
Aracruz12.4%
VCPListed on
Bovespa and NYSE
Preferred Shares
BNDESPar8%
Local
Investors14%
Bovespa
15%
Foreign Investors
78%
ADRs63%
BNDESPAR4%
Votorantim Group55%
Free Float41%
26
VCP – Evolution of Best Practices Results
3.8%
3.0%
3.6%
8.8%
7.7%
3.2%
4.2%
R$ 0
R$ 25
R$ 50
R$ 75
R$ 100
R$ 125
R$ 150
R$ 175
R$ 200
R$ 225
R$ 250
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
1999
OrganizationalRestructuringIncorporation of
Celpav
Sale of PapelSalto
2000
ADR IIINYSE
USGAAP And BRGAAP
QuarterlyReporting
2001
Level I Corporate
GovernanceBovespa
2002
IBF Project
Audit Committee
CVM 358/02
Edgar Filing (electronic info)
2003
Eurobond US$125m 2a
5.85%aa
New dividend policy
SecondaryShare offeringUS$285 mln
Sarbanes-Oxley
2004
Ethics Committee
Continuous revision
Of ethics policies
Apr 2004 IssueUS$350m
7 years
Libor + 2%
Debt cost linked to Libor