Fibria closes 4Q17 with EBITDA of R$1.981 billion, record-high sales, higher production, lower cash cost and continued deleveraging
- Adjusted EBITDA came to R$1.981 billion in 4Q17 and R$4.952 billion in 2017;
- EBITDA margin stood at 57% in 4Q17 and 49% in 2017;
- Pulp sales amounted to 1.897 million tons in 4Q17 and 6.212 million tons in 2017;
- Pulp production was 1.659 million tons in 4Q17, up 36% on the same quarter of 2016;
- Pulp production cash cost was R$556/ton in 4Q17, the lowest level since 2014;
- The second production line at the Três Lagoas Unit in Mato Grosso do Sul produced 435,000 tons of pulp in the fourth quarter, exceeding initial expectations;
- The ratio of net debt to EBITDA in U.S. dollar ended the year at 2.41 times;
- Net income amounted to R$280 million in 4Q17 and R$1.093 billion in 2017.
São Paulo, January 29, 2018 – Fibria, a Brazilian company that is the world’s leading producer of eucalyptus pulp from planted forests, closed the fourth quarter of 2017 with record-high sales and lower production costs, which supported strong financial results for the period. In the last three months of the year, the company sold 1.897 million tons of pulp, 20% more than in the same period of 2016 and the highest volume ever sold by the company in a single quarter. This quarterly performance led sales in the whole of 2017 to set another new record, with 6.212 million tons of pulp sold in the period, 13% more than in 2016.
Fibria’s record sales were driven by strong pulp demand and the new volumes produced by the second line in Três Lagoas, Mato Grosso do Sul, which was inaugurated last August ahead of schedule and below budget. The new line’s performance exceeded initial expectations in the fourth quarter of the year, which explains the strong growth of 36% in pulp production in the period, to 1.659 million tons. In 2017, Fibria produced 5.642 million tons of pulp, up 12% from 2016. The company’s new line produced 559,000 tons of pulp in 2017, 17% above the initial estimate.
The pulp industry was marked by an imbalance in supply and demand in 2017. On the supply side, there was a reduction in product supply due to unscheduled technical production shutdowns and unexpected mill conversions. Meanwhile, demand remained strong over the year in the main regions, supported by the good performance of paper manufacturers, which increased production volume to meet the strong demand for their products, and by the low pulp and paper inventories held by producers. This scenario ensured a favorable environment for implementing the pulp price increases over the course of the year. Fibria alone adjusted its prices 11 times during 2017.
“The year 2017 marks one of Fibria’s strongest results ever. We delivered a project with excellence that has made us a reference in the global industry. Our second production line at the Três Lagoas Unit, which was started up ahead of schedule and with the lowest investment of any project of this scale, effectively expanded our structural cost competitiveness as well as our footprint in the global hardwood pulp industry. The financial results for the last quarter of the year already have begun to reflect the new line’s contribution to the company’s cash generation, which will become even more significant in 2018 with the evolution in the new line’s learning curve,” said Fibria CEO Marcelo Castelli.
Fibria’s production cash cost in the fourth quarter of 2017 was R$556 per ton, 24% lower than in the same period of 2016 and 9% lower than in the third quarter of 2017. This is the lowest cash cost obtained by the company since 2014. In 2017, the reduction in cash cost was due to the lower impact from scheduled maintenance shutdowns, the shorter average wood supply radius, the higher sales of surplus power and the dilution of fixed costs due to primarily the evolution in the production curve at the new line in Três Lagoas. The new line at the Três Lagoas Unit alone accounted for the sale of 80 MWh of the surplus power generated in the fourth quarter of 2017.
The combination of record sales, high pulp prices, an exchange rate favorable for exports and the sharp drop in production cost took Fibria’s cash generation to a whole new level. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came to R$1.981 billion in 4Q17, growing 146% compared to 4Q16. EBITDA margin in the quarter, excluding pulp sales from the agreement with Klabin, stood at 57%. In the same period of 2016, EBITDA margin was 36%.
Fibria’s posted net income of R$280 million in the last quarter of 2017, reversing the net loss of R$92 million in the same period of 2016. In 2017, net income amounted to R$1.093 billion with free cash flow of R$2.025 billion. In view of the positive result, management will propose the distribution to shareholders of a minimum mandatory dividend of R$258 million. The decision will be taken at the Annual Shareholders’ Meeting to be held in April.
In 2017, Fibria continued to take advantage of market opportunities to further improve its debt quality and to reduce its debt cost. The Company’s leverage, expressed by the ratio of net debt to EBITDA in U.S. dollar, declined from 3.30 times in 4Q16 to 2.41 times in 4Q17. The Company closed 2017 with a cash position of R$6.968 billion.
“Fibria maintained its investment grade credit rating throughout the entire investment cycle of the Horizonte 2 project, thanks to its financial discipline. We continue to hold sufficient liquidity to settle all outstanding amounts related to the expansion project at the Três Lagoas Unit as well as all liabilities coming due in the new few years, without even considering our cash generation, which will benefit from the ramp-up in production at the new line in Três Lagoas”, said Fibria’s Chief Financial and Investor Relations Officer, Guilherme Cavalcanti.
In November, the risk rating agency Standard & Poor’s confirmed Fibria’s investment grade rating, while upgrading its rating outlook from negative to stable. The following month, Fitch, which also assigns Fibria an investment grade credit rating, upgraded its rating outlook from stable to positive. Also, for the 13th straight time, Fibria’s stock was included in the Corporate Sustainability Index (ISE) of the São Paulo Exchange (B3). The company also is a component of the Dow Jones Sustainability Index Emerging Markets (DJSI Emerging Markets) of the New York Stock Exchange (NYSE).
The world leader in eucalyptus pulp production, Fibria strives to meet, in a sustainable manner, the growing global demand for products from planted forests. With annual pulp production capacity of 7.25 million tons, the company 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 venture with Stora Enso. Fibria has 1,056,000 hectares of forests, which include 633,000 hectares of planted forests, 364,000 hectares earmarked for environmental preservation and conservation, and 59,000 hectares destined for other uses. The pulp produced by Fibria is exported to more than 35 countries and is the raw material for educational, health, hygiene and cleaning products. Learn more at www.fibria.com.br
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