SAP for Forestry Business Improving Efficiency and Controls at Suzano 01 | Corporate Overview 02 | Strategy and Industry 03 | Suzano IT 04 | Forestry BU Control Corporate Overview Suzano is a forestry-based company, publicly traded, controlled by Suzano Holding. Suzano operates in the pulp and paper businesses. Itaqui Port Competitive Advantages Maranhão Forestry Biotechnology Eucalyptus cycle: 7 years Mucuri Forests Pulp Limeira Ports Portocel Low production costs Suzano Mills Embu Vitória Certified products Rio Verde Santos Energy self-sufficient Diversified markets Commercial strategy Paper Capital Structure (June/15) Regional leader 42% Free Float Vertically integrated operations 56% Distribution Controlling Group 2% Treasury Market Value: R$ 18.3 billion 4 Diversified and Complementing Product Portfolio Suzano’s products portfolio consists of market pulp, paperboard, uncoated paper and coated paper. Net Revenues 64% Exports / 36% Domestic Market R$ 8.7 billion Market Pulp Paper 2nd eucalyptus market pulp producer 60% 40% Paperboard Printing and Writing Uncoated Coated Note: Figures of last 12 months ending on 6/30/2015. Other paper represented 1% of net revenue on the period. 6 Positioning on Pulp Segment In 2015, the market pulp capacity¹ totalizes 63 million tons. The top 20 biggest producers represent 74% of the market. Pulp Production Capacity – Top 20¹ Eucalyptus Pulp Production Capacity (million ton) (million ton) Fibria 5,6 Fibria 5,6 Arauco 3,9 Suzano 3,5 CMPC² 3,6 APRIL 3,6 CMPC ² 2,9 Suzano 3,5 Eldorado 1,7 UPM-Kymmene 2,5 Arauco 1,5 Stora Enso 2,4 Georgia Pacific 2,3 Cenibra 1,3 Ilim 2,0 Stora Enso 1,2 Metsa Group 1,8 UPM-Kymmene 1,2 Weyerhaeuser 1,8 IP 1,8 Altri 1,0 Paper Excelence 1,7 Ence 0,9 Eldorado 1,7 Mondi 0,3 Mercer 1,6 Domtar 1,5 Total: 46 million Portucel 0,3 Total: 22 million tons¹ tons Sodra 1,4 Lwarcel 0,3 Resolute FP 1,3 IP 0,2 Cenibra 1,3 Canfor 1,1 Grupo Orsa 0,1 1Includes Sotfwood, Hardwood, Unbleached and Sulphite; excludes mechanical pulp / ² Guaiba 2 total capacity Source: Hawkins Wright (Jul/15) and Suzano 7 01 | Corporate Overview 02 | Strategy and Industry 03 | Suzano IT 04 | Forestry BU Control Suzano’s strategy Structural Competitiveness Maximize the return of our assets and cash flow generation Benchmark in operational efficiency Adjacent Business Increase profitability through innovative businesses that innovate and break paradigms Reshaping of the Industry Reduce the variability of the industry’s returns 11 Structural Competitiveness Forestry Industrial Average distance reduction Retrofitting investments Wood swap Energy efficiency Standardization and insourcing harvesting Operational efficiency Precision Forestry Remove structural bottlenecks Productivity increase Commercial Logistics Customer focus Integrated logistics with synergy gains Price discipline New logistics modes Expansion of client base Service level improvement 12 Adjacent Businesses FuturaGene innovation Fluff First genetically modified clone First company in the world to use approved by CTNBio for hardwood to produce fluff commercial purposes Capacity to replace up to 70% of Potential to increase fluff to produce sanitary pads productivity by nearly 20% and up to 30% for diapers Lignin Replacement of petrochemicals with renewable source Can be used in several high value- added applications 13 World Market Pulp Supply and Demand Expectations of a scenario marked by supply and demand in balance. The growth in market pulp demand is driven by pulp consumption in Asia, which has invested in non-integrated paper mills. Supply growth is driven by Latin America, the most competitive region for pulp production Market Pulp Global Demand Market Pulp Global Supply (million tons) 67 (million tons) 67 58 60 6 59 60 52 16 North America 50 6 6 18 16 16 Europe 7 18 15 18 5 15 15 18 4 14 Latin America 4 14 3 23 Asia 35 18 19 27 29 15 20 Others* 8 9 9 12 2 3 3 4 1 1 1 1 2010 2014 2015e 2020e 2010 2014 2015e 2020e CAGR Demand 2009 – 2014 2015e – 2020e CAGR Supply 2009 – 2013 2014 - 2019e North America -2.6% -1.8% North America +1.0% +0.1% Europe +0.2% +0.0% Europe +1.7% +1.2% Asia +8.2% +4.1% Asia +4.2% +4.7% Latin America +4.4% +2.7% Latin America +5.7% +3.4% Others* +5.8% +2.9% Others* +1.5% +0.3% Total +3.8% +2.2% Total +3.0% +2.2% Note: *Others includes Middle East, Oceania and Africa Source: Poyry (2013) 19 Cash Cost in Pulp Production New pulp projects are located in low-cost regions, most of them in South America 800 Cash Cost CIF / Europa (US$/ton) 400 0 USA USA Chile Brazil Iberia Africa China Japan Japan Russia Finland Finland Canada Sweden BC BC Coast Indonesia Other Asia Other Bel/Fra Other WorldOther East Canada East Other Europe Other West Canada West Chile/Uruguay Eastern Europe Eastern Sweden Hardwood Softwood 18.9 Mt 13.8 Mt 12.4 Mt 13.7 Mt Low Cost High Cost Low Cost High Cost 11 *Others includes New Zeland, Argentina, China and South Africa Source: Hawkins Wright (Jul/15) 22 Forestry Competitiveness in Brazil Brazil presents competitive advantages to support continuous increase of its global forestry standing Hardwood Productivity (m3/ha/year) Competitive Advantages - Brazil 38 31 • Availability of productive land 25 22 20 19 • Excellent soil and climate conditions 18 15 12 • Short harvesting cycle for planted forests 6 6 • Opportunity to recover degraded areas Brazil China Indonesia Australia Chile New South USA Portugal Finland Sweden Zealand Africa • Low establishments and maintenance costs Source: ABRAF – 2014. Pulp Productivity • More wood / hectare Biotechnology • More pulp / m³ 10.5 adtm1/ha/year 5.5 adtm/ha/year • Superior quality +100% • Smaller area 1980 2014 • Decreasing costs / m³ Source: Suzano 23 Stock Performance Daily Trade Number - SUZB5 Daily Financial Volume – SUZB5 (Trade number) (R$ million) 12.486 11.279 62 8.990 44 37 6.574 25 2012 2013 2014 LTM* 2012 2013 2014 LTM* *Last twelve months ending on 6/30/2015. Stock Performance - SUZB5 (100 basis: Jun/14 – Jun/15) 220 SUZB5 200 +99% 180 160 140 120 IBrX-50 100 +1% 80 Ibovespa 60 +0% Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Source: Bloomberg 35 01 | Corporate Overview 02 | Strategy and Industry 03 | Suzano IT 04 | Forestry BU Control Corporate IT Overview Suzano has an SAP-based implementation dating back to 1998, but only recently merged all BUs into one integrated ECC suite on HANA. SAP CRM 7 SAP HANA SAP BW 4 01 | Corporate Overview 02 | Strategy and Industry 03 | Suzano IT 04 | Forestry BU Control Simplify Forestry Project Objectives 1 2 3 Understand business needs in Identification in opportunities Nursery/Plantation, Harvesting, Propose solutions on SAP, leveraging for added value and increased Forestry Development, standard features and existing simplicity (operational). Procurement, Wood Purchasing processes. and Overall Mobility in the field. Simplify Forestry Project Methodology Operational Needs Economically Available Viable Technology Project Drivers: • Simplify System Interaction • Automation and Information Made Available • Standardization and Security • Improve Information Management • Boost productivity • Improve planning tasks "Simply Innovate" Simplify Forestry UNF - Maranhão Overview UNF - Bahia UNF - Sao Paulo Manufacturing demand Technological package Production plan informed Recommendation for clones, by industry. nutrition and chemical control. Productivity and Cost Management Operational KPIs Planning and Budgeting Industry Setting harvesting plans, Wood receipt and industrial production. purchasing and collection Promotion & Wood Purchasing needs Inventory Management Promotion and purchase Demand management, management for timber purchasing and goods harvesting. receipt. Maintenance Control of events, Harvest & Exhaustion preventive and corrective Planning and execution maintenance. Nursery management of logging orders Logistics Seedlings planning and Wood transport for production management Forestry Plantation industry. based on Forestry Planning and execution of Demand. deployment orders, renovation, drive and maintenance. Quality control S-Flor Simplify Forest - Case Details Requirements by Type Process Optimizations Mobility FORESTRY & NURSERY Reports Interfaces Workflows User interface: Focusing on mobility solutions for forestry 19 2 confirmations. Budget calculation, tactical planning using 1 2 59 simulation (SAP BPC). Among the main proposed solutions: • Creating simulator, using SAP BPC for generating budget, YP and Rolling Forecast. Proposed solution: Continue the use of PP module in a • Use of a single production order by stage to perform operations and simplified way to control forestry and real cost of management. consumption of materials and quality control. • Monitor planned and actual costs (and variances) directly in the production order. • Records of Production Areas in installation locations with integration of master data and processes with Zenith. Involved systems: SAP / GIS / Zenith / Mobility (SAP SMP) • Nursery: Seedling quality control and notes for the operator to control productivity. Involved SAP modules: SAP ERP-PP, ERP-PM, ERP-QM, SAP-BPC, SAP SMP S-Flor Simplify Forest - Case Details Requirements by Type Process Reports Optimizations Mobility HARVEST Interfaces Workflows User interface: Focusing on mobility solutions for confirmation; 13 1 Simplification of wood movements and asset exhaustion in SAP 1 5 52 ECC. Among the main proposed solutions: • Solution deployment for mobility, adding better validation controls and integrated