Fibria Third Quarter Loss Narrows on Lower Inventories, Uptick in Demand

Oct. 29, 2012 (Press Release) - The seasonality seen in the months of July and August weakened demand in the Northern Hemisphere and increased world producers' inventories as compared to 2Q12. However, inventories were lower as compared to 3Q11 and by the end of 3Q12, we had seen demand pick up, especially in Asia. This confirmed the positive market fundamentals, also demonstrated by the marginal rise in sales volume as compared to 2Q12 despite world economic uncertainty. The average dollar appreciated 3% against the real, contributing to the increases in net operating revenue of 4% and 7% quarter-on-quarter and year-on-year, respectively.

The Company accepted a binding offer from CMPC Celulose Riograndense S.A. for the purchase of forestry assets and lands located in State of Rio Grande do Sul (Losango), consisting approximately 100 thousand hectares of owned areas and nearly 39 thousand hectares of forestland of eucalyptus in these owned areas and in third parties leased areas, for the total amount of R$615 million to be paid, in currency, in three installments:

  • (i) R$488 million by the approval of the transaction by the Administrative Council for Economic Defense (CADE);
  • (ii) R$122 million to be deposited by the time of CADEís approval, on an escrow account to be opened before a leading financial institution, which will be released upon other applicable governmental approvals and other condition precedent and
  • (iii) R$5 million by the effective assignment of the existing agreements related to the assets and applicable government approvals. The agreement between the parties sets the term for National Defense Councilís approval.

The transaction does not include forest partnership contracts developed in the Losango areas, which will be maintained and honored by Fibria. The Company will analyze opportunities for the use of wood volumes derived from these contracts. The proceeds of this operation will be used to reduce leverage ratios.

In October, Fibria established a strategic alliance with Ensyn Corporation. This alliance includes a US$ 20 million equity investment in Enysn by Fibria and the establishment of an equally-owned joint venture to be incorporated in Delaware for future investments in the production of cellulosic liquid fuels and chemicals from biomass in Brazil with exclusive use of Ensyn technology (for certain applications). With this alliance, Fibria made a strategic move that creates an option for a new business based on exclusive access to promising renewable energy technology that will complement the pulp business.

Pulp production in 3Q12 increased due to...

Fibria's full 3Q 2012 report can be found at: fibria.infoinvest.com.br (407k pdf file)

SOURCE: Fibria