Fibria Celulose : reports record sales, EBITDA growth, deleveraging and lower cash cost in the second quarter

• Pulp sales volume was 1.534 million tons, an all-time record for the second quarter;
• Net revenue was R$2.775 billion in 2Q17, growing 34% from 1Q17;
• EBITDA came to R$1.071 billion, up 66% from 1Q17;
• Net Debt/EBITDA ratio fell to 3.75, marking the start of deleveraging;
• Production cash cost of R$660/ton, down 12% from 1Q17;
• Production of 1.330 million tons, increasing 11% from 1Q17;
• Capacity-expansion project at the Três Lagoas Unit reached 96% completion and 69% financial execution.

São Paulo - Fibria, a Brazilian company and the world's leading producer of eucalyptus pulp from planted forests, posted net revenue of R$2.775 billion in the second quarter of 2017, representing growth of 34% on the first quarter of the year. Compared to the second quarter of 2016, net revenue grew by 16%.

The performance reflects the stronger pulp sales volume in the period, which set a new record for the second quarter of the year, of 1.534 million tons, or 17% higher than in the first quarter of the year. Other factors contributing to the result were the 12% increase in the average net price in U.S. dollar and the 2% appreciation in the average U.S. dollar/Brazilian real exchange rate in the quarter.

In the second quarter, Fibria produced 1.330 million tons of pulp, for growth of 11% sequentially and 3% year-over-year. Supported by operating efficiency gains, better results from cogeneration sales and lower consumption of chemicals and energetics, the company ended the second quarter with production cash cost of R$660 per ton, 12% lower than in the first quarter of the year.

"Conditions in the second quarter remained very positive for pulp producers. Demand strengthened in all regions, which, combined with the supply restrictions due to delays in the startup of new capacities and the unscheduled production shutdowns, resulted in low inventories and supported higher prices. Furthermore, Fibria's exporter profile benefited from the stronger appreciation in the U.S. dollar. Internally, we remain focused on operational excellence and reducing our production cash cost," said Fibria CEO Marcelo Castelli.

EBITDA (earnings before interest, taxes, depreciation and amortization) in the second quarter came to R$1.071 billion, advancing 66% from the first quarter of the year. Compared to the second quarter of 2016, EBITDA grew 16%. EBITDA margin in the quarter, excluding pulp sales from the contract with Klabin, stood at 45%, expanding 8 percentage points from 1Q17.

The second quarter of 2017 was marked by the start of Fibria's deleveraging process. The leverage ratio (Net Debt/EBITDA) in U.S. dollar fell to 3.75 at the end of the second quarter, compared to 3.79 at the end of the first quarter.

"The lower leverage ratio shows an important reversal in trend. The ratio peaked in 1Q17, but we already have managed to begin deleveraging in this second quarter, even before the startup of the new plant, creating more value for shareholders. We also maintained a strong liquidity position, of R$8.060 billion, or US$2.436 billion, which, adding the financing facilities for the Horizonte 2 Project that haven't even been tapped, is more than sufficient to conclude the capacity expansion project at the Três Lagoas Unit and means that we will not have to rollover debt until 2019. And that doesn't take into account our cash generation capacity," said Fibria's Chief Financial and Investor Relations Officer, Guilherme Cavalcanti.

Since Fibria is an exporter by nature and has 66% of its debt pegged to the U.S. dollar, any depreciation in the Brazilian real benefits the company's financial condition by increasing its free cash flow. On the other hand, local-currency depreciation generates a non-cash increase primarily in the balance of dollar-denominated debt when translated into Brazilian real. As a result, the stronger U.S. dollar in the quarter had a non-cash impact on the company's net income, which ended the period with a non-cash net loss of R$259 million in the second quarter of 2017, compared to net income of R$329 million in the first quarter. Net income in the first six months of the year came to R$70 million.

Expansion of the Três Lagoas Unit - Horizonte 2 Project

At the end of the second quarter of 2017, construction on the Horizonte 2 Project reached 96% completion. As a result, Fibria is maintaining its scheduled startup date of early September for the new pulp production line at the Três Lagoas Unit in the state of Mato Grosso do Sul. With total investment of R$7.5 billion, the project's financial execution reached 69% in the second quarter.

In the forestry area, the planting program to form the forests that will supply the new pulp production line in Mato Grosso do Sul remains on schedule. In the second quarter, the wood harvesting operations and formation of inventory for the commissioning of the new plant advanced ahead of schedule. Another highlight was the startup of the automated nursery, which is the world's first for eucalyptus clones. In the industrial area, the second quarter was marked by the completion of assembly operations and the testing of equipment.

On the logistics front, construction continued to advance on the Intermodal Terminal in Aparecida do Taboado, Mato Grosso do Sul, from where the pulp produced by Fibria at the Três Lagoas Unit will be shipped by rail to the Port of Santos in São Paulo, from where it will be exported to the company's international clients.