CMPC INVESTOR DAY GUAÍBA MILL - BRAZIL
JUNE 23RD, 2015 LUIS LLANOS – CFO CMPC
Luis Llanos was born in 1962
Holds a civil engineering degree from the Universidad de Chile and an MBA from MIT
Began working at CMPC in 1986
Has served in several positions at CMPC linked to business development, planning and strategy
In 2004 he became CFO of Empresas CMPC
2
WELCOME / PULP PRODUCTION PROCESS
LUIS LLANOS CFO EMPRESAS CMPC
INVESTOR DAY AGENDA
9:00 AM – Welcome & Opening remarks 9:15 AM – Pulp production process – Luis Llanos (CFO CMPC) 9:30 AM – Guaíba Site Visit 12:00 PM – Lunch “Churrasco Gaúcho” 1:00 PM – Company presentations: – Maximizing the value of our biological assets – Francisco Ruiz-Tagle (CEO CMPC Forestry) – Rio Grande do Sul footprint & the “on-time and on-budget” goal – Walter Lidio Nunez (CEO CMPC Celulose Riograndense) – 2015: a commercial challenge for CMPC Pulp – Washington Williamson (CEO CMPC Pulp) – Beyond Guaíba: CMPC's next steps – Hernán Rodríguez (CEO CMPC) 3:00 PM – Q&A 3:45 PM – Closing remarks 5:00 PM - Arrival to Porto Alegre / Porto Alegre Airport
4
OUR PULP MILLS
Market Pulp Capacity Top 20 Producers (end 2014)
BHKP BSKP Others
Fibria 5.3 April 3.9 Suzano 3.4 Arauco 0.8 1.9 0.5 CMPC 2.4 0.7 UPM 1.4 1.0 Pacífico - Chile Laja - Chile GP 0.1 2.2 (Pine) (Pine) PE 0.2 1.6 0.4 500 Th. tons/y 340 Th. tons/y Metsa 0.2 1.6 0.3 Ilim 0.3 1.4 0.2 Stora Enso 0.8 1.1 WY 1.8 Eldorado 1.7 Mercer 1.6 Domtar 0.1 1.4 IP 0.3 1.1 0.1 Sodra 0.2 1.2 RFP 0.2 1.1 Canfor 0.9 0.4 Guaíba - Brazil Santa Fe - Chile WF 0.6 0.6 (Eucalyptus) (Eucalyptus) 1,750 Th. tons/y 1,500 Th. tons/y Source: CMPC and Hawkins Wright as of April 2015 (million tons) 5
PULP PRODUCTION PROCESS
1 3 2 DIGESTER DEBARKER WOOD YARD 7 5 6 CHIP WOOD SIEVE PRE-HEATER 4 CHIPPER 2
WHITE LIQUOR 1 RECOVERY BOILER THERMOELECTRICAL 10 9 PLANT 12 14 13 11 8 PRESS FORMING CUT SHEET TABLE PRE-WASH AND CLASSIFICATION WASHING BLEACHING
DRYER
FORMING PRESS SHEET TABLE CUT INPUT 12 DRAWER DRYER 9 11 10
6 CMPC INVESTOR DAY GUAÍBA MILL - BRAZIL
JUNE 23RD, 2015 FRANCISCO RUIZ TAGLE – CEO CMPC FORESTRY
Francisco Ruiz-Tagle was born in 1963
Holds a commercial engineering degree from the Universidad de Chile and an MBA from UCLA
Began working at CMPC in 1991
Has served as General Manager of Celulosa del Pacífico, Deputy CFO of CMPC, General Manager of Papelera del Plata and CEO of the former CMPC Paper Products division, now merged with CMPC Papers
In 2011 he became CEO of CMPC Forestry
8
MAXIMIZING THE VALUE OF OUR BIOLOGICAL ASSETS
FRANCISCO RUIZ-TAGLE CEO CMPC FORESTRY
CMPC FORESTRY: WHO WE ARE?
CMPC Forestry, who manages the Company’s forests and manufactures wood products, is organized in the following subsidiaries:
FORESTAL MININCO BOSQUES DEL BOSQUES BRASIL CMPC MADERAS Forestry operations in PLATA Forestry operations in Sawmills, Chile (Pine and Forestry operations in Brazil (Eucalyptus) Remanufactured Wood Eucalyptus) Argentina (Pine) & Plywood (Pine)
10 CMPC FORESTRY: WHO WE ARE?
CMPC FORESTRY Chile Brazil PORTO ALEGRE CHILE • 733 Th. has. • 500 Th. has. planted • 40 Th. has. to be planted PELOTAS BRAZIL* • 220 Th. has. Concepción • 120 Th. has. planted • 6 Th. Has. to be planted ARGENTINA • 94 Th. has. • 56 Th. has. planted TEMUCO • 11 Th. has to be planted
CMPC’s Forestry base Argentina Posadas is 177 times the size MISIONES of Manhattan Island
*There is an agreement to acquire from Fibria aprox. 100 Th. hectares of which 39 Th. are planted. CMPC is waiting the approval 11 of Brazilian authorities to consolidate this land Source: CMPC. 11 CMPC FORESTRY: WHO WE ARE?
Some facts about our operations
In 2015 we will plant We harvest about Annually we build and 37,400 hectares 114 hectares a day maintain about equivalent to 1,300 km. of 130,000 trees per roads day equivalent to 36% of New York’s Central Park
We have more than Annually we pay direct US$350 million 2,600 Only supplying Guaíba workers and more than for harvesting and requires 48 hectares transport services in 250 contractors a day Chile, Brazil and (almost 12,000 Argentina indirect workers) The volume produced of solid wood products is 1.7 M m3
12 CMPC FORESTRY MISSION
Produce a forestry base in order to: 1. Secure the supply to CMPC’s industrial mills,
2. maximizing the return per hectare,
3. in a socially and environmentally sustainable way
13 1. SECURE THE SUPPLY TO INDUSTRIAL ASSETS IN THE SHORT, MEDIUM AND LONG TERM
CMPC Forestry owns and manage planning systems designed to deliver the required log output (volume and quality) that satisfies projected future demand
Long Term Planning (25 years)
Secure the supply to Medium Term Planning (5 years) current and futures Short Term Planning (1Y) mills through a linear 5 years planning for programing model that harvesting, maximizes profits transportation and road Secure the annual construction through a budgeted supply to mills linear programing monthly model
14 CMPC FORESTRY MISSION
Produce a forestry base in order to:
1. Secure the supply to CMPC’s industrial mills, 2. maximizing the return per hectare,
3. in a socially and environmentally sustainable way
15 2. MAXIMIZE BIOLOGICAL ASSET VALUE WAYS TO IMPROVE FOREST PRODUCTIVITY
Establishment + Weather -Plant production + Base land -Soil preparation seeds -Weed Control -Fertilization
Genetic Improvement Intensive Silviculture (Provides potential) (Realizes potential)
Maximize Productivity and Quality
Maximize return per hectare 16 2. MAXIMIZE BIOLOGICAL ASSET VALUE
INCREASING LOG VALUE: PLANTATION MANAGEMENT – RADIATA PINE
OBJECTIVE Maximize the return of the forest by producing high volume of quality logs at minimum cost to satisfy industrial needs
17 2. MAXIMIZE BIOLOGICAL ASSET VALUE
PRUNING: ADDED VALUE TO PLANTATIONS
18 2. MAXIMIZING BIOLOGICAL ASSET VALUE: PRUNNED LOG VALUE Sweep and branch size 5 Prunning age (DOS) Small end diameter 4 PLI = 3 PLI = 5 Clear wood 3
2
Knotty 1 Core
(m)
(cm)
30 0 30 19 2. MAXIMIZE BIOLOGICAL ASSET VALUE INCREASING PRODUCTIVITY THROUGH ACTIVE SILVICULTURE
Weed Control Soil Preparation and habilitation Type and quality of plants Genetics Fertilization Type of silvicultural management and harvesting age
This factors explains gains between 15% and 40%
. 20
2. MAXIMIZE BIOLOGICAL ASSET VALUE
IMPORTANCE OF WEED CONTROL
Line without weed control
21 2. MAXIMIZE BIOLOGICAL ASSET VALUE SOIL PREPARATION
22 2. MAXIMIZE BIOLOGICAL ASSET VALUE SOIL PREPARATION
Soil with trench prepared with Digger
Soil with trench prepared without Digger
23 23 2. MAXIMIZE BIOLOGICAL ASSET VALUE
FAST GROWING PLANTATIONS
A forestry base with fast growth cycles optimizes capital invested in land, reduces average distance to mills and increases gains due to genetic and silvicultural practices
Radiata Pine Eucalyptus Improvement in Forestry Yields ** Average softwood growth rate Average hardwood growth rate 32% (m3ssc*/ha/year) (m3ssc*/ha/year) 43 43 23%
14% 23 19 20 9% 11 11 3% 5 0% 2 4
1975 1980 1990 2000 2010 2020P
USA
Chile
Chile
Acacia Russia
Brazil
Iberian
Canada
Mangium
Eucalyptus
E.Globulus E.Globulus Scandinavia Source: CMPC. E.Nitens Chile * m 3ssc: solid m3 without bark 24 ** Evolution of the weighted increase of volume per hectare excepted for eucalyptus and pine plantations established in Chile in the respective year
2. MAXIMIZE BIOLOGICAL ASSET VALUE MINIMIZE COSTS AND EXPENSES
Mechanization/automation of operations adapted to different topographies present in our forests Competitive operational costs obtained by a competitive tender process Scale Economies: 1,000,000 hectares of land managed Introduction of new technologies (forest chipping) Increasing the fiber recovering from forest Quality controls along the productive process New business developments: biomass Safety Projects Developing local contractors Training employees
Our mills are close to the forest Logistic cost can represent up to Less logistical costs 50% of logs cash cost
25 2. MAXIMIZE BIOLOGICAL ASSET VALUE
CMPC MADERAS
Maximize Asset Value through the optimization of an integrated logistic process with the forest, developing together products and markets for solid wood and plywood products generating a high margin and scalable mix.
Ways to maximize return:
Client Segmentation in order to give them a personalized value proposal Simplification and automation of the operations seeks to improve productivity per worker Development of value added products (e.g: beaded plywood) Production agreement with third parties to optimize the mix without capital expenditure
26 2. MAXIMIZE BIOLOGICAL ASSET VALUE CMPC MADERAS: SAWN WOOD TYPE AND USES CENTRAL LUMBER
SIDE BOARDS • Packaging - Japan /Corea • Furniture – China Vietnam • Structural - Chile • Remanufactured – USA (Chile)
PREMIUM SAWNWOOD
• Solid Mouldings - USA
27 2. MAXIMIZE BIOLOGICAL ASSET VALUE CMPC MADERAS: PLYWOOD USES
FURNITURE
Clear/Decorative DECORATIVE
CONSTRUCTION
Knotty 28 2. MAXIMIZE BIOLOGICAL ASSET VALUE
CMPC MADERAS: MOULDING AND BOARD USES Ceiling
Door Frame
29 CMPC FORESTRY MISSION
Produce a forestry base in order to:
1. Secure the supply to CMPC’s industrial mills,
2. maximizing the return per hectare, 3. in a socially and environmentally sustainable way
30 3. BE SOCIALLY AND ENVIRONMENTALLY RESPONSIBLE
CMPC Forestal is a world class leader in social and environmental sustainability
Since 2012 has FSC Forest Management Certification in the majority of it forests (FSC- C006246) • In May 2015 was honoree with the Sustainable Setter award by Rainforest Alliance in New York CMPC Forestal and UPM co-chair 26 forestry companies in the World Business Council for Sustainable Development (WBCSD) in the Forestry Solutions area CMPC is part of WWF’s New Generation Plantation initiative FAO has recognized forested areas belonging to CMPC Forestry as an exemplary case of sustainable development
31 3. BE SOCIALLY AND ENVIRONMENTALLY RESPONSIBLE
Since 2007 CMPC Forestal has the PEFC-Certfor Certification in Chile
32 3. BE SOCIALLY AND ENVIRONMENTALLY RESPONSIBLE CMPC FORESTRY SUSTAINABLE MODEL
33 3. BE SOCIALLY AND ENVIRONMENTALLY RESPONSIBLE WORK WITH COMMUNITIES: + 160 Th. neighbors in Chile, including 358 Mapuche communities + 900 Th. neighbors in Brazil, including 2 Guaraníes communities
I.Creating II.Improvement of III.Giving support to IV.Support mapuche employment for our education small entrepreneurs communities through neighbors cultural projects and patrimonial sites:
In 2014 CMPC The Good Neighbor Development of 30 sites marked as Forestry created Plan Co-finance agricultural projects, relevant for mapuche ~600 employment the education for small nurseries, culture, nursery for spots for neighbors vulnerable small landowners, traditional basketry in the Mapuche families, in rural training courses crafts, plants for wool communities, as areas located close dyeing part of the program to the Company's to incorporate local operations labor in forestry sites 34 3. BE SOCIALLY AND ENVIRONMENTALLY RESPONSIBLE ENVIRONMENT
The relation with the environment is increasingly important: FSC® Certification in Chile and Brazil Promote the use of biomass More than 10 million tons C02 capture in Chile and Brazil 11 high value conservation forests (9,500 hectares) in Chile 315 water catchments for communities in Chile
35 CONCLUDING REMARKS
Access to high-quality, strategic forests helps lower CMPC’s cash cost
CMPC’s expertise in silviculture leads to ever-higher productivity
Continue to produce higher-margin solid wood products to serve range of industries
Environmental and social responsibility fundamental to all aspects of the operation
36 WALTER LÍDIO NUNES – CEO CMPC CELULOSE RIOGRANDENSE
Walter was born in 1948 in Porto Alegre
Holds a degree in mechanical engineering from the Pontificia Universidad Catolica do Rio Grande do Sul, and a major in Management Development attended in UK. Besides, also attended courses at Fundação Getúlio Vargas, having specialized in Cellulose Technology
Began working at CMPC in 2010
He worked at Riocell, and in 1977, started working at Aracruz Celulose as Engineer. There, he served as Operations Director, reflecting its vast experience and 25-year career
At this time, serves as the President of the Movimento Espírito Santo em Ação, as well as Director of Centro das Indústrias do Rio Grande do Sul, Vice-President of Federação das Associações Comerciais do Rio Grande do Sul and Vice- President of Associação Gaúcha das Empresas Florestais 37
RIO GRANDE DO SUL FOOTPRINT & THE “ON-TIME AND ON-BUDGET” GOAL WALTER LÍDIO NUNES CEO CMPC CELULOSE RIOGRANDENSE I. RIO GRANDE DO SUL STATE & CELULOSE RIOGRANDENSE
THE STATE OF RIO GRANDE DO SUL HAS A STRONG HISTORY MARKED BY ITS LOCATION IN BRAZIL Location of Rio Grande do Sul State Independent Republic Main economic of Riograndense activities: grain during 10 years agriculture, ranching (1835-1845). (food and leather), forestry, metalurgy and chemicals.
One of the most Strong immigration culturally rich states of Portuguese, of Brazil. Largely Spanish, Italian and influenced by the German. old Gaúchos.
9th largest state with 5th most populous 4th biggest 7th in terms of GDP 281,748 km2 state with 11.2 contributor to per capita with aprox. million (2014) national GDP with US$12 mil (2012) US$130 billion (2012)
40 GUAÍBA: BUILDING ON 47 YEARS OF HISTORY
1968 1975 2000 OCTOBER, 2009 DECEMBER, The Norwegian group Klabin buys 100% of CMPC acquires the 2012 The plant’s control Borregaard set up its the Company’s stock. Guaíba Unit from Approval of the passed to first eucalyptus The corporate name Aracruz for US$1.37 Guaíba II Project for Sulbrasileiro/ plantation is changed to Klabin billion US$2.1 billion Montepio da Familia Riocell S.A. Militar and renamed New updates in plant Rio Grande
Companhia de Celulose do Sul – Riocell
1972 1982 2003 DECEMBER, MAY, 2015 Start up of the Riocell S.A. is Aracruz Celulose 2009 Startup of Guaíba II Guaíba industrial acquired by the bought the plant, Celulose Line plant holding KIV changing the mill’s Riograndense took Participações, formed name to Guaíba Unit control of the plant by private groups Klabin, Iochpe and Votorantim. Important updates in the plant
41 II. GUAÍBA II PROJECT: THE “ON-TIME AND ON-BUDGET” GOAL
Guaíba 2 Project –September, 2014. GUAÍBA 2: PROJECT OVERVIEW
1.3 million tons/year High Yield Forestry BRAZIL Production capacity of eucalyptus Base market pulp
30MW 100% Excess Energy Wood self-sufficiency
US$2.1 billion Over 120,000 Estimated Capex Hectares planted
Strategic Location Economies of Scale
208 km Brownfield project
Average distance from forests Synergies with Chilean 260 km operations Distance to Rio Grande Port by barges
43
GUAÍBA II PROJECT
MAIN HIGHLIGHTS MAIN QUANTITIES
Project on-time and on- Description Unit Quantity budget Concrete (including pre casted) m³ 183,000 Piles Unit 4,893 24 months Construction Period Equipment Ton 20,556 (including commissioning and Steel Structure Ton 13,588 water running tests) Tanks Ton 7,425 More than 26 million Pipes Ton 7,426 hours worked in the Electrical Motors Unit 2,118 project Electrical Cables km 1,098 Accidents per 1 million Electrical Equipment Unit 1,265 worked hours of 2.05 Instrumentation cables km 1,224 (below US Gov. Safety Council Standards (5.5) and below Instruments Unit 8,263 other recent projects average ) Thermal Insulation m² 118,937
44 THE “ON-TIME AND ON-BUDGET” CHALLENGE
1. CMPC’s expertise in large scale projects
2. Good relations between CMPC and its vendors and contractors
3. Supportive relationship with workers
4. Relationship with local community
45 1. CMPC’S EXPERTISE IN LARGE SCALE PROJECTS
CMPC’S TEAM CMPC’S PRIOR PULP PROJECTS
Project Team with large experience in similar projects 1959 Laja Mill Integration of Chilean and Brazilian cultures and experiences 1991 Pacífico Mill Common objectives – Align Meetings
Permanent and Dynamic 2006 follow-up, strong commitment Santa Fe II Mill of all members of the Team
46 2. GOOD RELATIONS BETWEEN CMPC AND ITS VENDORS AND CONTRACTORS
47 3. SUPPORTIVE RELATIONSHIP WITH WORKERS
MAIN FIGURES MAIN INICIATIVES 774 30,383 ~35% of workers from Rio Grande do Sul State Companies Total workers Celebration of festive dates Monthly premiums for work attendance and security Health Center and Workers Social Center inside the construction site 9,648 19,786 Union office inside the construction center and Workers at peak Health Support participation in all events (26/11/2014) Special control for the workers conditions regarding lodgment, transportation, food, social, legal payments, labor law, complaints, among others 430 6,214 Internal relationship control Lodgment sites Lodgments No strikes
Strong respect of Centralized 3,726,417 408 Brazilian law in order Certified Buses control and Food services to ensure good services to conditions and a good workers climate of workers 48 3. SUPPORTIVE RELATIONSHIP WITH WORKERS: TRAINING PROCESS
CONSTRUCTION MILL OPERATION FOREST OPERATION Training courses for civil Technical course for mill Training for harvesters, construction, mechanical and operators drivers, and forest operators instruments Technical courses for 7,045 workers maintenance and mill support
49 4. RELATIONSHIP WITH LOCAL COMMUNITY
MAIN INICIATIVES
Community Council and Social Patrol 24-hour/day hotline for complaints Various social programs, including education programs and concerts at mill site (Musica na Fábrica) Active partnering with municipality to support local services: street cleaning, police force , among others 7.out.2013 R$ 12.5 million in social projects (BNDES) Established fund to compensate for any environmental damage; low number of complaints
Satisfaction survey during construction period, over 90% viewed project favorably
50 4. RELATIONSHIP WITH LOCAL COMMUNITY
“DESENVOLVE RS” PROCESS
Local Suppliers engagement process concept elaborated by CMPC CRG Created a NGO of local entities: Abimaq Entities, Abinee, Sinduscon, RS Oil and Gas, Simetal, RS Network Petro, Sebrae, FIERGS System) More than 1,000 participating companies in the bidding process Rio Grande do Sul to adopt bidding process for future projects More than R $ 2.3 billion in local purchases (172 companies from RS)
Rio Grande do Sul Government and Local Society recognitions:
51 CONCLUDING REMARKS
GuaÍba II completion is the culmination of 6 years of preparation
Demonstrates success of “CMPC way”, based on four pillars: 1. Technical expertise 2. Vendor relations 3. Labor relations 4. Community relations
CMPC seeking to maintain success in ramp- up period
CMPC aims to be a good neighbor in Rio Grande do Sul for decades to come
52 WASHINGTON WILLIAMSON – CEO CMPC PULP
Washington Williamson was born in 1950
Holds a civil engineering degree from the Universidad Católica de Chile
Began working at CMPC in 1981
Has served as Commercial Manager of CMPC Tissue, Head of the Sanitary Products business, CEO of CMPC Tissue Argentina, CEO of the boxboard business and CEO of CMPC Papers
In 2011 he became CEO of CMPC Pulp
53 2015: MEETING THE COMMERCIAL CHALLENGE FOR CMPC PULP
WASHINGTON WILLIAMSON CEO CMPC PULP
CMPC PULP WITHIN EMPRESAS CMPC
+2,100 +300 +40 US$1.8 B in sales Professionals and Customers Countries supplied (2014) technicians US$0.5 B in EBITDA (2014)
4.1 BEKP and BSKP 100% certified Operations in the Pacific and the Atlantic million tons capacity production pulp in 4 mills providing logistic flexibility
55 MARKET PULP OUTLOOK THE 4OO+ MILLION TONS FIBER MARKET
Fiber World Consumption to produce 403 million tons of Paper&Board Virgin Fiber used to produce Paper&Board million tons Market Pulp consumed to manufacture Paper&Board 2013 million tons
Integrated Recovered Virgin Pulp Market Pulp BSKP 124 BHKP Paper 183 million 59 million million tons 24 234 million tons tons 28 tons (44%) (68%) (32%) (56%)
Mec 5 UKP 2 Sulphite
417 million tons of total fibers 59 million tons of 28 million tons of [Containerboard: 146 million tons] market pulp BHKP [P&W: 109 million tons] [Other P&B: 86 million tons] [Tissue: 32 million tons] [BEKP: 16.8 million tons] [Newsprint: 31 million tons]
57 Source: RISI 5-year Forecast (2013-2018) - December 2013 THE PAPER INDUSTRY HAS GROWN, SPECIALLY IN THE PACKAGING SEGMENT
Since 1992 paper production has grown 61%, mainly explained by: 106 million additional tons of packaging paper 33 million additional tons of P&W papers 18 million additional tons of tissue papers
Newsprint P&W Packaging Tissue Other P&B 450
400 15 16 17 16 16 15 15 27 14 29 30 31 32 15 14 26 28 350 25 28 14 15 24 15 15 23 300 16 21 23 16 15 20 22 15 16 19 19 15 17 18 194 250 14 16 186 196 206 210 214 219 15 171 177 190 15 16 161 148 148 156 200 138 138 144 123 127 131 114 115 Million Tons Million 150
100 112 113 117 119 116 93 94 98 104 99 102 105 106 111 110 108 106 74 76 83 85 85 50 32 33 34 35 35 36 36 38 39 38 37 37 39 38 38 38 37 32 32 31 30 28 -
Source: RISI
Since 2007, Packaging and Tissue have continued to grow, while P&W has declined
58 BKP DEMAND GROWTH DRIVEN BY CHINA & EMERGING MARKETS
Mature Other Emerging China Forecast 35
30
25
20
15 MillionTons 10
5
-
Source: HW Outlook for Market Pulp – April 2015
59 EUCALYPTUS PULP GROWTH HAS OUTPACED OTHER HARDWOOD FIBERS BECAUSE OF ITS COST AND QUALITY ADVANTAGES
Higher pulp production yield than other species Fast growing trees: shorter rotation, less land required and better performance Superior structural properties for several paper & paperboard applications Paper manufacturers looking for BEKP to premium tissue products BEKP replacing other fibers
BHKP Birch BEKP ABHKP NMHKP SMHKP CAGR: 35
30 BHKP: +4.4%
25
20 BEKP: +7.7%
15 MillionTons
10
5 ABHKP: +9.5% NMHKP: -1.7% SMHKP: -5.5% - Birch: -3.4% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: HW Outlook for Market Pulp – April 2015 60 HARDWOOD CAPACITY ADDITIONS EVOLUTION
Average capacity additions 2000 – 2015: 1,085 Th. tons/year Average capacity additions 2016 – 2019: 908 Th. tons/year
Forecast
3,000
2,500
2,000 1,500
1,000
500
ThousandTons -
(500)
(1,000)
(1,500)
Source: HW Outlook for Market Pulp – April 2015 Projects considered in forecast: CMPC Guaiba, Klabin Puma, APP Oki, and other debottlenecking projects
61 HARDWOOD MARKET PULP BALANCE
Supply Demand % Util. Rate
40.0 100% Forecast 38.0 98% 36.0 96% 34.0 94% 32.0 92% 30.0 90%
28.0 88%
MillionTons UtilizationRate 26.0 86% 24.0 84% 22.0 82% 20.0 80% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Supply 22.5 22.9 24.8 27.5 28.4 27.5 29.1 29.4 30.9 31.3 33.0 34.2 36.1 36.6 36.6 Demand 21.0 22.3 23.3 24.4 24.9 25.2 27.0 27.2 28.1 29.1 29.7 30.2 31.3 32.2 32.8 % Util. Rate 93% 98% 94% 89% 88% 92% 93% 93% 91% 93% 90% 88% 87% 88% 90%
Source: HW Outlook for Market Pulp – April 2015 *These figures do not consider mill closures due to cost efficiency nor market related downtimes
62 HARDWOOD PRICE EVOLUTION AND FORECAST TO 2019
BEKP List Price (CIF) Northern Europe (US$/Ton)
Forecast 900
850 805 800
750 736
700 715
650
600
550
500
History (FOEX) Hawkings Wright RISI Brian McClay
5 months average price as of May 2015
Sources: - Hawkings Wright: Outlook - April 2015 - RISI: World Pulp & Recovered Paper Forecast - 5-Year – May 2015 - Brian McClay: Brian McClay & Associates Inc. - May 2015 - History: FOEX prices
63 THE PRICE IS SET BY THE MARKET, HOWEVER…
There are some adjustment mechanisms that work when price fluctuates: Reconversion (to Dissolving Pulp, Fluff Pulp, etc) or temporal/permanent closure for higher cost lines Substitution between the +400 million fibers
250 Market pulp
Recycled fibre 2014 vs 2013: 200 Integrated pulp +1.0% (+2.0 Mt)
150
2014 vs 2013: -0.6% (-0.6 Mt)
100 million tonnesmillion
Million Tons Million 2014 vs 2013: +1.4% (+0.8 Mt) 50
0
Source: Hawkins Wright – the Outlook for market pulp demand, supply and prices Note: bleached kraft grades only 64 CURRENT SITUATION
WorldWorld 20-20 BSKP BSKP and and BEKP BHKP Production production (3 (3 monthsmonth moving moving average) average)
2,000
1,900
1,800
(000s t) (000s Th. TonsTh. 1,700
1,600 3month average BSKP production 3 month average BHKP production 1,500 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Source: PPPC, Hawkins Wright
Global BKP Production has fallen in 1Q15 due to the concentration of maintenance periods
65 CURRENT SITUATION
NBSKNBSK v– BHKP BHKP list List price Price differential Differential EuropeanEuropean PIX PIX
250
200
150
100 US$/t
50
0
-50 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Source: FOEX, Hawkins Wright
In the long run, the average price gap between BHKP and BSKP has increased, although it has shown some cyclical behavior
66 CURRENT SITUATION
Index of selected currencies against the US Dollar
Euro Canada Brazil Chile Russia 120
110
100
90
80
70
60
50
40
Source: Bloomberg In general, local currencies have depreciated against the US Dollar
This situation has improved the competitive scenario for all non-US producers, especially for Russian and Brazilians 67 CMPC PULP: MEETING THE COMMERCIAL CHALLENGE MEETING THE COMMERCIAL CHALLENGE: GUAÍBA II WILL BOOST CMPC’S BEKP CAPACITY BY 67%
Since 2012 we have been preparing the ground for the sale of this new capacity
Re-boosting the brand & the value proposition
Adding value through services & expertise
Creating a robust technical team and developing specialized knowledge
Enhancing systems and processes for client management
Strengthening our sales network
69 THE CMPC PULP BRAND: OUR COMMITMENT
A team
of professionals
committed to
our customers’ success
70 THE CMPC PULP VALUE PROPOSITION
VALUE PROPOSITION
1. Wide range of fibers 2. Logistics & Services •BEKP •Logistics •BSKP •Commercial network •Customer assistance •Technical assistance
71 THE CMPC PULP VALUE PROPOSITION: WIDE RANGE OF FIBERS
An attractive fibre basket for most of paper manufacturers:
Radiata Eucalyptus BSKP Pine BEKP Hardwood 100% Eucalyptus Radiata pine wood, from Chilean planted Which guarantees high quality products in and sustainable forests most of the paper productions Uniformity Strength Of its properties such as fibre length, Superior among hardwood pulps coarseness and fibre population Price / Quality Outstanding Great ratio Structural properties
72 THE CMPC PULP VALUE PROPOSITION: LOGISTICS & SERVICES
Adding new New freight More flexibility Review / destination ports contracts and quick response Redefinition of with specialized Stock policies +transhipments shipping in Europe, Asia and companies & Hub Americas definitions
73 THE CMPC PULP VALUE PROPOSITION: LOGISTICS & SERVICES
We have made the most of our comprehensive and committed commercial network, setting a new collaboration approach, providing them new commercial tools and enhancing our team work.
74 ADDING VALUE THROUGH SERVICES & EXPERTISE: TECHNICAL TEAM
Specialized team of Engineers based in Chile, Europe & Asia serving our customers
We have set a dedicated team of specialists in pulp & paper production and technology
We work hand in hand with our customers, generating new knowledge and delivering new services to them
2014 figures:
52 11 27 Technical Specific Real cases of visits to projects refining clients developed with optimization customers analyses done
75 ADDING VALUE THROUGH SERVICES & EXPERTISE: R&D
R&D Focus
We have developed an ambitious R&D program, adding new equipment, software and technology:
We have implemented a modelling software, which can predict the result of several combination of fibers and even calculate the optimized furnish given the required quality parameters
We have installed new equipment in our R&D facilities such as a Voith pilot refiner, which make us possible to better replicate industrial operational conditions
We are developing several study cases for specific paper manufacturing conditions that can be applied to our customers processes
76 OUR COMMERCIAL STRATEGY
CMPC PULP’s commercial strategy is based in 4 principles:
1. Keep a balanced worldwide presence
2. Prioritize growing paper grades
3. Avoid customer concentration
4. Sell to established end-customers
77 CMPC BEKP SALES DISTRIBUTION BY END USE
Other P&B Other P&B and P&W and spec. specialties 34% Other 25% 34% P&B and spec. 24%
P&W 58% Tissue Containerbo Tissue 9% ard P&W 16% Contain. 66% 1% 1% Contain. Tissue 1% 31%
2007 2010 2016F
CMPC is increasing its exposure to Tissue and Specialty papers
78 CMPC BEKP SALES DISTRIBUTION BY REGION
Others 8% China Others 26% 7% China Americas Americas 23% 17% 24%
Rest Of Asia 16% Europe Rest Of Asia 37% 15% Europe 27%
2014 2016F
CMPC holds a geographically diversified customer base
79 SUMMARY: COMPETITIVE PRODUCTION, INTELLIGENT COMMERCIALIZATION
The market demands efficiency
Our mills are among the most modern and efficient in the world, with low cash costs
We have been able to build a quality customer portfolio, drawing on more than 50 years of exporting wood pulp
Our professionalism, expertise and in-depth customer relationships differentiate us from the competition
Our strategic vision, our value proposition and our customer orientation, together with our professional team set us in a winning position.
80 HERNÁN RODRIGUEZ – CEO CMPC
Hernán Rodríguez was born in 1963
Holds a civil engineering degree from the Universidad Católica de Chile and an MBA from UCLA
Began working at CMPC in 1987
Has served as CFO of CMPC and CEO of CMPC Forestry, among other positions
In 2011 he became CEO of Empresas CMPC
81
BEYOND GUAIBA: CMPC’s NEXT STEPS
HERNÁN RODRÍGUEZ CEO CMPC In 2009 CMPC entered Brazil (Guaíba in Pulp and Melhoramentos in Tissue) initiating the largest Capex program in its history
Between 2009 and 2015 CMPC has spent US$7.3 billion in its investment program. Today, the Company is concluding a new pulp line in Guaíba, a new tissue paper machine in Mexico and 3 cogeneration facilities, among other projects
This expansion period will increase CMPC’s presence outside Chile, consolidating a trend that began in 1991 and accelerated in the late 2000s
83 TODAY CMPC FOCUSES IN:
1. Conclude its capex program and continue investments in high growth potential businesses
2. Deleverage balance sheet
3. Implement cost control programs and projects, including energy
4. Expand CMPC’s culture among all business divisions and countries
5. Operate according to CMPC’s Sustainability Policy, strengthening the Company’s relationships with its stakeholders 84 CMPC IS FOCUSED ON COMPLETING ITS INVESTMENT CAPEX PROGRAM…
Delivering “on time-on budget” projects has been an important challenge
Guaíba II Project New Tissue Paper Machine 2 New Cogeneration Mills in US$2.1 billion Mexico Chile 2Q15 US$160 million US$104 million 3Q15 4Q15
100% Complete 72% Complete 72% Complete
85 … AS WELL CONTINUING INVESTMENTS IN OUR GROWING TISSUE BUSINESS
Latam per capita tissue consumption is still very low compared to developed regions: Latam: 6.1 kg Western Europe: 15.4 kg North America: 24.2 kg
25 USA Canada 20 Sweden Finland Austria Germany UK Belgium Israel Iceland New Zealand 15 Malta Japan Greece Spain Australia France Costa Rica Portugal Italy ChileHungary Czech Republic 10 Panama Poland Mexico Uruguay El Salvador Venezuela 5 Guatemala Brazil
TíssuePaper App. Consumption (k/hab.) Honduras Ecuador, Peru, China, Colombia, South Africa
Indonesia 0 India 0 10 20 30 40 50 60 GNI p/c (thousand US$ at ppp) Source: RISI and World Bank (2013) 86 TISSUE PAPER LATAM INDUSTRY IN BRIEF
CMPC needs to expand and consolidate its “southern” tissue model into the north of Latam CMPC aims to be one of the top 3 leaders in each one of the countries were it operates
CMPC’s 1960 1991 1994 1996 2006 2007 2009 2009 Entrance
Size of the 190 230 25 130 1,027 200 65 1,100 market Th. Tons Th. Tons Th. Tons Th. Tons Th. Tons Th. Tons Th. Tons Th. Tons
CMPC’s 166 99 35 71 84 27 Only 135 Capacity Th. Tons Th. Tons Th. Tons Th. Tons Th. Tons Th. Tons conversion Th. Tons
Market Share 75% 43% 80% 56% 6% 11% 23% 7%
Per capita consumption 10.9 kg 5.5 kg 7.4 kg 4.3 kg 9.2 kg 4.3 kg 4.5 kg 5.3 kg
Source: CMPC, RISI
87 BABY DIAPERS LATAM INDUSTRY IN BRIEF
CMPC is expanding its knowledge into the diapers industry, which is a developing category in Latam that complements CMPC’s tissue paper business
Annual 250 Th. 884 Th. 48 Th. 650 Th. 2.2 M 826 Th. 330 Th. 4.2 M Births children children children children children children children children
Size of the 1,300 M 3,200 M 180 M 1,500 M 6,300 M 1,800 M 770 M 9,500 M market Units Units Units Units Units Units Units Units
10% to 10% to 10% to Close to Close to Market Share 20% 20% <10% <10% 20% <10% 30% 60% range range range Category Penetration 88% 81% 85% 53% 64% 48% 50% 50%
Source: CMPC
88 SINCE 2009 CMPC HAS SHOWED A CONSISTENT GROWTH AND EMERGING ECONOMIES OF SCALE
CAGR + 5 new tissue paper machines Tissue Paper + M&A transaction in Brazil capacity: = 280 thousand tons of additional tissue paper (82% growth in 13% capacity )
+ 11 new baby diapers machines CAGR + 2 new incontinence machines = 1,580 million units of additional Diapers diapers capacity (80% growth in capacity: capacity ) 12%
+ 6 new feminine towels machines = 780 million units of additional feminine towels capacity
89 CMPC IS FOCUS IN DELEVERAGING ITS BALANCE SHEET
Net Debt / EBITDA evolution:
CMPC should reach the comfort zone during 2H16 (2.0x-2.5x Net Debt / EBITDA)
90
Challenge definition Project implementation
CMPC IS IMPLEMENTING COST CONTROL PROGRAMS AND PROJECTS, INCLUDING ENERGY Ideation Cost control Programs and Initiatives: . Oxygen reactor replacement in Pacífico . Tissue packaging automation Proposalinvestments Evaluation . andWorking top capital management optimization initiatives . i-Cel pulpapproval innovation initiative
CMPC should reach electric energy self CMPC supplies a high percentage of its sufficiency by the end of 2015 energy needs with biomass
Electric Energy Balance in Chile (GWh) CMPC’s 2014 Energy Consumption (TJ) Ideas selection Proposal Coal Natural 6% Others selection for Gas 1% Oil 7% further study 6%
Electricity 7% Proposal Idea evaluation and development Biomass people74% recognition 91
CMPC IS FOCUS IN EXPANDING ITS CULTURE AMONG ALL BUSINESS DIVISIONS AND COUNTRIES CMPC’s foreign subsidiaries have increased its participation significantly during the last decades CMPC Sales (MUS$) 6,000
5,000
4,000
3,000
2,000
1,000
0
Local Sales Chile Export Sales Local Sales Foreign Subsidiaries Labor Force Breakdown
2005 30% 70% 8,801 employees
2014 45% 55% 16,602 employees
Outside Chile Chile 92 CMPC IS COMMITED TO ITS SUSTAIBILITY POLICY
CMPC contributes to the development of the countries where it operates: providing safe jobs + training programs + close relationship with suppliers, clients and workers + continuing flow of interaction with investors
Productive activities CMPC has an open should be harmonized doors policy, with the legitimate right of Stakeholders intended to create future generations to live development in a suitable environment: opportunities for renewable forest the communities plantations where it operates: + replacement of fossil CMPC Foundation fuels with biomass + Good + efficient use of energy, Neighborhood Plan water and raw materials + comply with local
+ certified industrial laws processes
+ paper recycling 93
CONCLUDING REMARKS
Guaíba ramp up will provide cash flow to deleverage balance sheet
Increasing capacity and economies of scale will drive EBITDA growth in pulp and tissue businesses
Consistently improving efficiency in current assets, with focus on achieving energy neutrality by end of 2015
Commitment to CMPC’s Sustainability Policy, enhancing relationships with all stakeholders
Implementing CMPC culture across business, providing multiple opportunities ahead
94
Q&A CMPC INVESTOR DAY 2015 GUAÍBA MILL - BRAZIL
95 Q&A
Disclaimer: This document provides information about Empresas CMPC SA. In any case this constitutes a comprehensive analysis of the financial, production and sales situation of the company, so to evaluate whether to purchase or sell securities of the company, the investor must conduct its own independent analysis. In compliance with the applicable rules, Empresas CMPC SA. publishes this document in its web site (www.cmpc.cl) and sends to the Superintendencia de Valores y Seguros, the financial statements of the company and its corresponding notes, which are available for consultation and review. 96