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Fibria captures productivity gains in execution of expansion project at its Três Lagoas pulp mill in Brazil; project reaches 54% completion

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Fibria captures productivity gains in execution of expansion project at its Três Lagoas pulp mill in Brazil; project reaches 54% completion

September 23, 2016 - 05:35

ARACRUZ, Brazil, Sept. 21, 2016 (Press Release) -Fibria, a Brazilian forestry company and the world’s leading eucalyptus pulp producer, announced today that it captured more productivity gains in the execution of the expansion project at its unit in Três Lagoas, Mato Grosso do Sul. Due to the excellent progress being made on construction and the favorable conditions secured in its negotiations with suppliers, Fibria’s total investment in the Horizonte 2 Project decreased from US$2.5 billion to US$2.3 billion, representing savings of US$200 million. Fibria made the announcement during its 5th Investor Tour, which is an annual meeting with market analysts and investors that was held at the company’s unit in Aracruz, Espírito Santo.

“With the capture of efficiency and productivity gains and our highly competent negotiations, we were able to reduce the amount of our investment while maintaining the same annual production capacity on our new pulp line in Três Lagoas of 1,950 million tons, which further strengthens our global leadership in the industry,” said Fibria CEO Marcelo Castelli.

According to Castelli, work on the project to expand Fibria’s unit in Mato Grosso do Sul is advancing on schedule and has reached 54% completion. The conclusion of the Horizonte 2 Project is still slated for early in the fourth quarter of 2017.

Fibria’s Chief Financial and Investor Relations Officer, Guilherme Cavalcanti, noted that the entire financing structure of the Horizonte 2 Project has already been secured. He also said that the company currently enjoys a comfortable capital structure.

“Fibria’s cash position of around US$870 million, the financing facilities already secured plus its own free cash flow are sufficient to complete the Horizonte 2 Project, pay the minimum mandatory dividend and amortize our debt liabilities through 2018, without taking out new debt, which we will do only if we identify good market opportunities and demand for our credit,” said Cavalcanti.

Fibria’s CFO and IRO recalled that, in the first seven months of the year, pulp demand from China grew by 23%, or 836,000 tons, on the prior-year period, according to a report from the Pulp and Paper Products Council (PPPC). World pulp demand, considering all regions, amounted to 922,000 tons in the first seven months. On the supply side, according to consulting firms specializing in the industry, such as RISI, the expectation is for a reduction in the next 12 months of around 600,000 to 1 million tons, mainly due to the conversion of plants producing hardwood pulp to soluble pulp, which does not compete with Fibria’s product.

In addition to the update on progress on the Horizonte 2 Project, participants in the Investor Tour will also tour the pilot plant at Fibria’s Technology Center, which has been under construction at its Aracruz Unit since May and is expected to be concluded by December this year, with startup slated for the first quarter of 2017. The center will accelerate the research and projects currently under development and has three pilot units: a refining plant, a paper production plant and a nanocellulose production plant. All pilot plants are non-commercial units.

“The main purpose of the pilot plants is to test the technologies being developed by the Technology Center to identify the specific challenges and anticipate the results of industrial applications. The investment is consistent with Fibria’s commitment to innovation and to diversifying its forestry businesses,” said Fibria’s Innovation and Technology Officer, Fernando Bertolucci.

To Vinicius Nonino, Fibria’s Business Development Officer, there is a global trend of incorporating nanocellulose into a variety of applications in industries such as paper, cement and pharmaceuticals. These applications, once confirmed, could represent an important route for diversifying Fibria’s businesses and with significant value accretion.

Fibria recently figured first in the “Best Analyst Day” ranking sponsored by the magazine Institutional Investor. The Investor Tour is one of the main events contributing to Fibria’s recognition among Brazil’s publicly traded corporations in the industry.

About Fibria

The world leader in eucalyptus pulp production, Fibria strives to meet the growing global demand for forestry products in a sustainable manner. With annual production capacity of 5.3 million tons of pulp, it has industrial units in Aracruz (Espírito Santo), Jacareí (São Paulo) and Três Lagoas (Mato Grosso do Sul), as well as in Eunápolis (Bahia), where it operates Veracel in a joint operation with Stora Enso. Fibria has 969,000 hectares of forests, with 568,000 hectares of planted forests, 338,000 hectares of environmental preservation and conservation areas and 63,000 hectares destined for other uses. The pulp produced by Fibria is exported to more than 40 countries. In May 2015, Fibria announced the expansion of its Três Lagoas unit, which will receive a new line with annual pulp production capacity of 1.95 million tons and is slated for startup in the fourth quarter of 2017.