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Suzano Papel e Celulose Posts 2Q Results

July 19, 2006 (Press Release) - Suzano Papel e Celulose today announces consolidated results for second quarter 2006. This release gives operational and financial information based on consolidated figures in Reais, by the Brazilian Corporate Law accounting method. All comparisons are year-on-year for the quarter -- i.e. between 2Q06 and 2Q05 -- except where otherwise specified.

Highlights

  • Pulp price CIF Northern Europe reached US$660/ton in July.
  • Restructuring of Ripasa was completed: all of the shareholding base migrated to Suzano and VCP on June 30, 2006. Ripasa contributed US$25 million to Suzano's consolidated Ebitda (2Q06 pro-forma).
  • Antonio Maciel Neto takes over as CEO on June 1, 2006.
  • Interest on Equity of R$ 56.8 million.

Summary of the period

In 2Q06 there were renewed increases in the world price of pulp, influenced by low world inventories, increasing demand, and permanent shutdowns among the high-cost producers. At the beginning of July eucalyptus pulp CIF Northern Europe was adjusted to US$660/ton -- this is the highest price Suzano has obtained since February 2001.

Domestic Brazilian market paper sales were 10.6% higher than in 2Q05, and 5.0% higher than 1Q06, showing renewed recovery in this market. Year-to-date, the domestic market has grown 12.9% and our domestic paper sales have grown 16.2%.

The shareholder restructuring in Ripasa was completed, with 96% of the minority shareholders accepting the arrangement under which shareholders in Ripasa migrated to the shareholding bases of Suzano Papel e Celulose and VCP. To reflect this, and present the effect of this transaction on the financial statements of Suzano for the purposes of comparison between 2006 and 2005, a pro-forma was prepared that takes into account Suzano's present shareholding of 50% in Ripasa, as if it had existed since January 1, 2005. The main effect shown by this analysis is the reduction of leverage, as Suzano is now consolidating 50% of Ripasas Ebitda.

Suzano's net sales in 2Q06 was R$ 652.6 million, on volume sales of 208.1 thousand tons of paper and 159.0 thousand tons of pulp. Ebitda was R$ 219.0 million, with Ebitda margin of 33.6%. Non-recurring expenses, arising mainly from the organizational restructuring, affected Ebitda negatively -- totaling R$ 6.3 million and representing 0.9 percentage points on Ebitda margin -- which without these effects would have been 34.5%.

Ebitda 2Q06 vs. 2Q05
(Gross profit less sales, administrative and other expenses, plus depreciation, depletion and amortization of deferred assets)

Our 2Q06 Ebitda was R$ 219.0 million, 3.8% less than in 2Q05. Ebitda margin (on net sales) was 33.6%, vs. 36.8% in the same period of the previous year, mainly attributable to the appreciation of the real in the period. Leaving out of account non-recurring expenses of R$ 6.3 million, Ebitda would be R$ 225.3 million, representing Ebitda margin of 34.5%. Measured in dollars, 2Q06 Ebitda was US$100.5 million, 9.4% higher than in 2Q05.

Analysis of results -- pro-forma consolidation of Suzano Papel e Celulose with 50% of Ripasa

Taking into account the stake in Ripasa, consolidated net sales of Suzano Papel e Celulose in 2Q06 were R$ 816.7 million, resulting in gross profit of R$ 296.5 million (gross margin 36.3%) and net income of R$ 152.2 million.

Consolidated pro-forma Ebitda of Suzano Papel e Celulose was R$ 272.2.4 million, or US$124.6 million, resulting in Ebitda margin on net sales of 33.3%. Ripasa operation contributed with US$ 24.3 million of Ebitda, 50.9% higher than 2Q05. The increase in the Ebitda is due to operational improvements and also the beginning of production of the pulp dryer machine at Ripasa, which increase the market pulp production.

Suzano Papel e Celulose is one of the largest integrated producers of paper and eucalyptus pulp in Latin America, with pulp production capacity of 1.1 million tons/year and paper production capacity of 820 thousand tons/year. It offers a broad range of pulp and paper products to the Brazilian and international markets, and has leadership positions in key segments of the Brazilian markets. It has four principal product lines: (i) eucalyptus pulp; (ii) uncoated woodfree printing and writing paper; (iii) coated woodfree printing and writing paper; and (iv) paperboard. Suzano Papel e Celulose has 50% of the controlling interest in Ripasa S.A Celulose e Papel ("Ripasa"), which produces pulp, printing and writing paper, specialty papers, paperboard and cardboards. Ripasa reported net sales of R$ 1.4 billion in 2004 from sales of 612,000 tons of products. It has four industrial units in Sao Paulo State and forest areas totaling 86,400 hectares.

SOURCE: Suzano Papel e Celulose




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