Fibria swings to Q4 net income of 48M reais from loss of 358M reais in year-ago period, net sales up 32.5% to 1.85B reais; results influenced by record production and sales volumes, increased operating efficiency, lowest net debt since company's founding

SAO PAULO , January 30, 2013 (press release) – 4Q12 and 2012 Highlights

  • Conclusion of the Losango sale: receipt of the first payment in the total amount of R$470 million.
  • Net Debt/EBITDA ratio of 3.4x (Sep/12: 4.5x | Dec/11: 4.8x). For covenants purposes, the indicator in dollars was at 3.3x.
  • Gross debt of R$10,768 million, down 2% on Sep/12 and 5% on Dec/11.
  • Cash balance of R$3,023 million, up 26% and 64% on Sep/12 and Dec/11, respectively, representing 2.6x short term debt.
  • Operating stability allowed record pulp production of 1.4 million tons, up 4% and 6% quarter-on-quarter and year-on-year, respectively.
  • Annual production of 5.3 million tons, increasing 2% over 2011.
  • Record pulp sales of 1.5 million tons, up 19% and 7% quarter-on-quarter and year-on-year, respectively. Annual sales of 5.4 million tons, increasing 4% over 2011.
  • Net revenue reached a record R$1,853 million in the quarter, compared to R$1,556 million in 3Q12 and R$1,399 million in 4Q11.
  • Cash cost of R$446/t, down 9% over 3Q12 but up 1% over 4Q11. In the year, cash cost was R$473/t, stable over 2011’s R$471/t, even with inflation of 5.8% according to the Extended Consumer Price Index (IPCA) and the 17% rise in USD/BRL FX average rate.
  • EBITDA of R$753 million, up 32% and 93% over 3Q12 and 4Q11, respectively. In 2012, EBITDA was R$2,253 million, up 15% over 2011.
  • EBITDA margin of 41%, up 4 p.p. quarter-on-quarter and 13 p.p. year-on-year. In 2012, EBITDA margin was at 36%.
  • EBITDA/t of R$499/t (US$243/t), increasing 10% and 80% quarter-on-quarter and year-on-year, respectively.
  • Net income of R$48 million (3Q12: R$(212) million | 4Q11: R$(358) million). In 2012, loss of R$698 million, 20% lower as compared to 2011.
  • Free cash flow of R$836 million in 2012, compared to negative R$333 million in 2011.
  • 2012 CAPEX of R$1,078 million, in line with the guidance while 24% less than in 2011.
  • European pulp list price announced at US$800/t as of January 1, 2013.
  • Fibria was included in the 2013 portfolio of the BM&FBovespa’s Corporate Sustainability Index (ISE).
  • Fibria acquired a stake in Ensyn (biofuel) in the amount of US$20 million.
  • II Fibria Day in New York. 

Executive Summary

Fibria’s 2012 results were directly influenced by the Company’s good performance in 4Q12. Highlights included record production and sales volumes, stable cash cost, free cash flow generation and net debt at its lowest since Fibria's founding. Throughout the year, the world economic scenario was marked by uncertainties that brought challenges to the pulp industry. However, market fundamentals were consistent, with pulp demand from emerging markets driving growth, especially with new tissue paper machines in China that kept inventories balanced. These factors helped the recovery of hardwood pulp prices, which opened the year at US$652/t and closed it at US$776/t (PIX/FOEX BHKP Europe index), up 19%. The dollar’s average appreciation of 17% in 2012 also pushed a greater cash flow due to Fibria's predominantly export-oriented business.

The Company beat its 2011 production record, reaching 5.3 million tons in 2012, with production increasing 2% in the year. This result was influenced by 4Q12 production, which totaled 1.4 million tons, the largest volume produced in a single quarter since Fibria was founded . It should be noted that this performance was derived from increased operating efficiency at practically all production units with the maturity of several initiatives including synergies captured with Fibria’s creation. The increased operating stability, cost control and a lack of maintenance downtime drove cash cost down to R$446/t in 4Q12. In the year, cash cost was stable at R$473/t, compared to R$471/t in 2011, even with inflation of 5.8% according to the Extended Consumer Price Index (IPCA) and the average 17% rise in the dollar on cash cost exposed to this currency. Pulp sales also broke records in 4Q12 and 2012, surpassing production levels in both periods. Fibria sold 1.5 million tons in the quarter for increases of 19% and 7% quarter-on-quarter and year-onyear, respectively, and 5.4 million tons in the year, increasing 4% over 2011. As a result, inventories closed the year down to 46 days.

Adjusted EBITDA rose to R$753 million in 4Q12, up 32% and 93% quarter-on-quarter and year-on-year, respectively. EBITDA margin expanded to 41%. EBITDA per ton reached R$499/t (US$243/t), up 80% over 4Q11. Thus, in 2012, adjusted EBITDA totaled R$2,253 million, increasing 15% over the R$1,964 million posted in 2011.

Solid operating performance offset the negative financial result in 4Q12, both driven by the dollar’s rise against the real. Fibria recorded net income of R$48 million in the quarter, compared to losses of R$212 million and R$358 million 3Q12 and 4Q11, respectively. Foreign exchange impacts from the closing dollar’s 9% appreciation over total dollardenominated debt (93% of total debt) caused losses of R$698 million in 2012, less than the R$868 million losses in 2011. In large part, this was an accounting effect. Free cash flow totaled R$836 million in the year, chiefly due to the higher EBITDA, initiatives to improve working capital and CAPEX control.

At the close of 2012, gross debt stood at R$10,768 million, 5% lower than in 2011, partially absorbed by the closing dollar's 9% appreciation in the year. Including the receipt of the first payment from the Losango sale in the amount of R$470 million in 4Q12, Fibria closed the year with a cash position of R$3,023 million, thereby reducing net debt to R$7,745 million or 18% as compared to 2011 – the lowest it has been since Fibria's founding. In 2012, Fibria generated R$2.9 billion from liquidity events with (i) the sale of non-strategic assets such as lands and forest assets in Bahia and the Losango sale; (ii) an equity offering; and (iii) operating free cash flow generation. These events contributed to the drop in the Net Debt/EBITDA indicator to 3.4x, as compared to 4.8x in 2011, demonstrating Fibria’s efforts to reduce its leverage and achieve investment grade from ratings agencies.

2012 was also marked by significant advances in Fibria’s strategic planning. With the establishment of the alliance with Ensyn Corporation (Ensyn), Fibria moved forward in its mission to leverage its forestry expertise to develop high valueadded alternatives that could complement its global leadership and excellence in pulp production. Ensyn is a U.S. based company that holds the rights of the technology used to produce renewable liquid fuels.

CAPEX 2012 reached R$1,078 million, in line with the target for 2012 and 24% below 2011 investments. For 2013, the Company plans to invest R$1,244 million. The 15% increase over 2012 is explained by the non-recurring effect of greater forest renewal investments at the Aracruz Unit and foreign exchange and inflation impacts. However, Fibria will continue to pursue inflation control targets, in addition to implementing projects to reduce costs and CAPEX through, for example, the Forest of the Future Project and productivity gains expected from long-term sustainability goals (more information on page 18).

In November, Fibria operated its first of 20 ships under the logistics partnership with STX Pan Ocean. The Arborella vessel left Portocel in Aracruz (Espírito Santo State) with a record shipment of 53 thousand tons for the United States. The arrival of this first shipment marks the beginning of Fibria’s partnership with the South Korean company whose main goal is to ensure regular shipments with high quality and ocean freight control.

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