Investor Presentaiton
30 STRATEGY AND PERFORMANCE
SECTORIAL CONTEXT
ELDORADO BRASIL 2016 SUSTAINABILITY REPORT 31
Adopting competitiveness,
innovation, sustainability and
valuing people as drivers, Eldorado
pursues its strategy of consolidating
the company as a benchmark in the
global pulp market
In 2016, the pulp sector was
subject to a steady drop in market
prices, due to the start up of new
production and projections of
increased supply. The reduction
in prices was partially offset by
increased demand. The global pulp
market grew by 7.7% compared
with 2015, which represented an
additional volume of 1.6 mil-
lion metric tons, according to
the World Chemical Market Pulp
Global 100 Report.
The pulp sector continued contrib-
uting to the Brazilian trade balance,
accounting for 4.2% of all Brazilian
exports in value. According to the
industry association Ibá (Indústria
Brasileira de Árvores), the country
exported 12.9 million metric tons
of pulp, an increase of 11.9% over
the previous year. At US$ 5.6 bil-
lion, export revenues were 0.5%
down on 2015. The main destina-
tion continues to be China, with a
16.3% increase in exports in 2016,
reaching US$ 2.2 billion.
For the coming years, the ex-
pectation is that the global pulp
market will continue its growth,
even with the projected start-up of
new plants. The emerging markets
demand sustain these positive
projections, in particular China, as
well as in Brazil and other Latin
America countries, depending on
the positive economic outlook in
these countries. The best prospects
are in the tissue segment (comfort
and personal hygiene), driven by
higher incomes and consumption in
the developing countries, and the
higher added value special papers
segment.
In view of these projections, El-
dorado is pursuing its Vanguarda
2.0 expansion project, with work
scheduled to begin on its new
industrial unit by the end of 2020.
With this project, the company's
production capacity will increase
by 2.5 million metric tons of pulp
per year. The goal is to achieve the
lowest investment cost per metric
ton and the lowest cash produc-
tion cost in the global industry. In
2016, the land grading and basic
infrastructure works were final-
ized. The new timber patio was
also concluded, providing storage
capacity for 120,000 m³ of wood.
The company is currently focused
on selecting partners for construc-
tion of the new unit.
7.7%
was the growth in the
global eucalyptus pulp
market. Eldorado pursues
its expansion project.
Strategic directives
With the challenge of consolidating
Eldorado as a global benchmark in
the pulp industry, in addition to its
expansion project the company is
working on boosting efficiency in
the industrial, forestry, commercial
and logistics areas to drive a more
competitive cost structure while
maintaining its commitment to
quality and to environmentally and
socially responsible practices.
Company strategy bases on four
major drivers: competitiveness, sus-
tainability, innovation and valuing
people. These pillars orientate Eldo-
rado's activities at every stage of the
business, focused on the future and
on generating value for sharehold-
ers, employees, surrounding commu-
nities and partners.
Since the company foundation,
productivity in the forestry area
has grown from 20m3 of timber per
hectare/year in 2010 to 45m3/hect-
are/year in 2014, besides around
19% reduction in forest formation
costs. The gains are a reflection of
constant investment in technology
and innovation, such as the use of
genetic material better adapted
to the region, enhancement of the
fertilization process and the forest
monitoring system, which allows
more effective and faster tracking
of forest fires and pests, among
others. Eldorado's performance in
terms of mechanization of the plant-
ing and harvest processes is also
outstanding. In planting, mechaniza-
tion stands at 80%, well above the
industry average. In addition to the
economic benefits for the company,
mechanization ensures greater
safety and comfort for employees
and guarantees conscious use of the
planting areas. Another advance has
been the reduction in the average
distance between the planted areas
and the Três Lagoas industrial plant.
In 2016, the average forest radius
reduced by 55 kilometers over
2015, decreasing timber transporta-
tion costs and the environmental
impacts caused by transportation.
In the industrial area, Eldorado
makes use of a management model
that prioritizes permanent engage-
ment and an owner mindset in its
team, generating greater operational
stability, driving production volume
and enhancing efficiency in the use
of natural resources, such as water
and energy. The result is the low-
est cash cost of production in the
sector, an indicator that measures
operational efficiency, which cor-
responded to R$ 619.21 per metric
ton in 2016.
Working with optimized stock levels
and maintaining a diversified cus-
tomer base, thus enabling operations
on a global scale and reducing the
risks of concentration on one par-
ticular region or group of companies
is part of the company's commercial
strategy. Aimed at strengthen-
ing partnerships with customers,
Eldorado prioritizes close relations
and differentiated performance. In
logistics, the focus is also on excel-
lence and competiveness. In 2016,
Eldorado consolidated its flexibility
in transportation to the overseas
market, combining bulk and contain-
er shipments, driving faster deliver-
ies to customers at a lower cost.View entire presentation