Production of cellulose prepares a new jump

Project Horizonte 2 fromFíbria, located inTrêsLagoas, Mato Grosso do Sul, enters in its final phase and indicates market recovering

While the Brazilian industrial area is living difficult moments due to the reduction of sales and exportations and to the lack of investments, the industry of paper and cellulose is preparing its expansion.TheProject Horizonte 2, which will be concluded in the fourth quarter of 2017 will turn the unit of Fibria located in Três Lagoas (MS) into one of the largest places of cellulose production in the world.Announced in May, 2015, the investment considered a window of opportunityin 2018to plan this increase ofcellulose production capacity in the market.

The new line of production will have a capacity of 1.95 million tons of cellulose per year. Added to the plant currently in production, the unit of Três Lagoas willreach a total capacity of 3.25 million tons per year. Fibria’s total capacity of production—including all its units—will jump from the current 5.3 million tons of cellulose per year to more than 7 million tons per year.

The total investment from Fibria had a significant reduction, coming from US$ 2.5 billion to US$ 2.3 billion, saving US$ 200 million. According to the company, this was possible due to the smooth pace of the works and to favorable conditions got in the negotiations with suppliers.

According to the president ofFibria, Marcelo Castelli, the works of enlargement of Fibria’s unit located inMato Grosso do Sulis meeting the scheduling, with more than 54 percent of the total physical execution already concluded. The director of Finances and Relations with Investors fromFibria, GuilhermeCavalcanti, points out that all the financing structure of the Project Horizonte 2 is already contracted. In addition, he points out that the company has currently a very comfortable structure of capital.

"The cash position of Fibria—around US$ 870 million—plus the financing already contracted and the generation of cash from the company itself are enough to carry out the Project Horizonte 2, to distribute minimum dividends and even to pay debts till 2018 with no need of contracting new debts, that only will be contracted if they would be good opportunities of market andof demand per our credit ", saysCavalcanti.

The director of Finances and IR from Fibria remembers that the demandof cellulose in China increased 23 percent (836,000 tons) in the first seven months of this year, compared to the same period of the previous year, according to a report published by the PPPC (Pulp and Paper Products Council). The global increase of the market considering all regions was of 922,000 tons of cellulose in the same seven months. According to specialized consultants such as RISI, the expectation of a supply reduction of 600,000 to one million tons in the next twelve months already exists, mainly due to the conversion of plants that were producing bleached short-fiber woodpulp to water-soluble cellulose, but this is another market that does not compete with the product from Fibria.

In addition to the Project Horizonte 2, the company started in May the construction of the pilot plantof the Center of Technology from Fibria in its unit ofAracruz (ES), whose conclusion is scheduled for December and which will start to produce in the first quarter of 2017. The structure was developed to accelerate ongoing research and design, and includes three pilot units: refining plant, paper production plant and nanocellulose production plant. All pilot plants are non-commercial units.

"Pilot plants were designed for testing technologies that are being developed in the Center of Technology, pointing challenges and anticipating results of industrial applications. This investment strengthens the commitment of Fibria with innovation and with the diversification of forestry-based business of the company ", ends the director of Innovation and Technology fromFibria, Fernando Bertolucci.