4q 13/14 earnings
TRANSCRIPT
Tereos Internacional2013/14 Year End Results
São Paulo – June 11th, 2014
Key initiatives and major developments in FY 2013/14
Progress in Operational performance
� Brazil: Already reaping the benefits of the multi-year investment and efficiency program (Guarani2016):
� Agriculture: +8% in volumes at 19.7 million tonnes (full consolidation) driven by strong yields (92 t/ha or+10% above the average in the Center South region)
� Co-generation: +38% in energy sales to 711 GWh, due to the ramp up of cogeneration, particularly atSão Jose and Mandu mills
� Cereals Europe: ”Performance 2015 “ cost & efficiency program progressing
Major headways in International development and product portfolio diversification
� Cereals Europe: Lillebonne at normalized utilization rates with more diversified mix of products(protein/sweeteners)
2
� Cereals Brazil: Sweeteners sales ramping up at Palmital corn-based starch facility and client portfoliodeveloping
� Cereals Asia: Dongguan construction and Tieling improvement and diversification plan in China advancing.Establishing presence in Indonesia with closing of 50% acquisition of Redwood on May 28th, 2014
Strengthening of financial situation
� Capital injection from PBio at Guarani in October 2013: R$225 million (TI at 60.4% stake)
� Refinancing:
� Guarani: improvement in debt maturity profile with close to USD 300 million of refinancing in the last 12months, including USD190 million of export notes in October 2013 (duration of 5 years at lower rates)
� Deleverage process under way as multi-year investment program is largely completed: netdebt/EBITDA ratio down to 3.7x in March 2014 vs. 4.2x in March 2013
Sugar:� Since January’s low, raw sugar prices have increased 21% to 17.8
USD cents/lb in March 31st, mainly on the back of the severedrought that affected sugarcane fields in Center-South of Brazil.Since then prices hovering around 18.0-18.5 USD cents/lb
� BRL/USD devaluation during the quarter (-5%) improved Brazilianproducers’ remuneration
Starch:� Tensions in Ukraine pushed Matif cereal prices up in Feb/Mar
Q4 2013/14 Market Highlights
14
15
16
17
18
19
20
21
380
410
440
470
500
530
560
590
Apr-13 Jul-13 Oct-13 Jan-14
LIFFE#5 NY#11
US$/MT USD Cts/lb
230
250
270 €/MT
� Market demand for both starch and liquid sweeteners slightly betterlast quarter but competition in Europe remains fierce
� High volatility of cereal prices maintained margins under pressureduring the period
Ethanol:� In Brazil, anhydrous and hydrous ethanol prices increased 10%
and 8% in the quarter on tighter stock as the Center-South regionentered into the intercrop period. Concerns over the 2014/15crop also contributed to sustain prices
� In Europe, FOB Rotterdam prices rebounded 9% during Marchfrom EUR460/m3 to EUR502/m3, on increasing US ethanolprices, higher feedstock costs and stronger demand
3Source: Bloomberg
150
170
190
210
230
Apr-13 Jul-13 Oct-13 Jan-14
Corn MATIF Wheat MATIF
400
450
500
550
600
650
700
700
900
1100
1300
1500
1700
1900
Apr-13 Jul-13 Oct-13 Jan-14
Brazil ESALQ Europe Rotterdam
R$/m³ €/m³
941
1.063
1.957
2.115
2.008
2.217
7,402
Net Revenues Evolution
5,688
5,011
6,876
R$ MM
+10%
+13%
Y-o-Y growth8,339
752 678 779 1.056 848
2.7012.511
3.1563.396
4.211
239 540
826
941
1.3191.957
2009/10 2010/11 2011/12 2012/13(1) 2013/14(1)
Alcohol & Ethanol Europe Starch & Sweeteners Africa/Indian Ocean Brazil
Note: (1) Figures are in accordance with IFRS 11 (JV contribution) and Group's new segmentation4
+24%
-20%
281 428
424
373
518
959
850786
Adjusted EBITDA Evolution
771
R$ MM
+39%
Y-o-Y growth962
81 51 9428
75
395
292302
205193
13
93
158
190184
373
-14 -19 -9 -9
2009/10 2010/11 2011/12 2012/13(1) 2013/14(1)
Alcohol & Ethanol Europe Starch & Sweeteners Africa/Indian Ocean Brazil Other
5
-3%
-6%
+173%
Note: (1) Figures are in accordance with IFRS 11 (JV contribution) and Group's new segmentation
0 01.056
3.396 4.211
9411.063
2.008
2.217 Brazil
Africa/Indian Ocean
Starch & Sweeteners
Alcohol & Ethanol Europe
Holding
RevenuesBetter volumes and positive FX effect supporting revenues growth
Net Revenues (R$ MM)
7,402
8,339
74028339
+874 +227
(131) (32)
0 01.056 848
2012/13 2013/14
Holding
6
� Revenue growth supported by:
� Higher sales volumes for all segments, except for A&E Europe, with particularly strong growth in the year in Brazil ethanol volumes (+18%). Ethanol trading sales for Tereos Group are no longer consolidated in this segment since October 2013
� Better ethanol prices in Brazil and positive mix effect with increased volumes of protein in S&S
� Positive currency translation effect due to Real depreciation vs. Euro
� But partially offset by:
� Negative year-on-year price evolution in sugar, as well as in S&S and ethanol in Europe (following declining cereal prices and weak demand in EU)
2012/13 Currency Volume Price & Mix Others 2013/14
Net Revenues Evolution by Product
March 2013 – 12 Months March 2014 – 12 Months
Sugar24%
Starch & Co-products
Alcohol & Ethanol
20%
Energy2%
Others11%
Sugar22%
Starch & SweetenersCo-products
Alcohol & Ethanol
18%
Energy2%
Others10%
7
� Well-diversified portfolio with relatively stable breakdown
� Sugar and Sweeteners remain the major source of revenues for Tereos Internacional
� Alcohol & Ethanol remains as the second major activity backed by increased volumes & prices in Brazil
� Co-products revenues had a higher contribution in 2013/14 mainly on the back of positive mix effect with the diversification of production at Lillebonne and the development of protein sales
� Energy sales increasing due to the higher co-generation in Brazil
Starch & Sweeteners
31%
Co-products12%
Sweeteners32%
Co-products16%
786962
+146
(5) (12)
+48
(0)
28 75
205193
190 184
373
518
Brazil
Africa/Indian Ocean
Starch & Sweeteners
Alcohol & Ethanol Europe
Holding
Adjusted EBITDASugarcane Brazil and improvement in A&E Europe setting the tone for higher profitability
Adjusted EBITDA (R$ MM)
786
962
2012/13 Brazil Africa/IO S&S A&E Europe
Holding 2013/14-9 -928 75
2012/13 2013/14
8
� Adjusted EBITDA up year-on-year as a consequence of:
� Cost dilution in Sugarcane Brazil on higher volumes crushed and benefits from the efficiency plan
� Positive contribution of A&E Europe on normalization of production and lower input costs, duenotably to ramp up of protein volumes and improved operational performance, compensating forthe drop in ethanol prices
� Positive Forex impact on steady Indian Ocean performance
� But partially offset by:
� Tough market conditions in Europe allowing only for a partial pass-through of costs to clients
� Lower production in Mozambique
Margin 11.5%Margin 10.6%
43
514
16
711
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
143
477
208
563
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
363
1.357
374
1.482
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
4,9
16.5
0
18.3
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
Ethanol Sales (‘000 m³)Sugarcane Crushing (MM t) Sugar Sales (‘000 t)
+9.2% YoY +18.1% YoY
Sugarcane Brazil – Production & SalesRecord Sugarcane Crushing at 19.7 million tonnes
Energy Sales (‘000 MWh)
+38.3% YoY
� Crushing
+10.6% YoY
9
� Crushing
� Higher crushing in 2013/14: 19.7 million tonnes or +8% y-o-y (full consolidation) and 18.3 million tonnes or +11% y-o-y (without Vertente, on equity consolidation)
� Better-than-expected agricultural yields at 92 t/ha vs. 84 t/ha in 2012/13
� Improvement in production
� Overall production up 10% to 2.5 Mt (expressed in TRS)
� Mix: 63% sugar, 37% ethanol vs. 64% / 36% last year
� Sugar: 1.5 Mt +9% YoY
� Ethanol: 535 k m³ +13% YoY
� Progress on cogeneration
� Energy sales (including trading) up 38% to 711 GWh, due to the ramp up of cogeneration, particularly at São Jose and Mandu mills
2008 2217
(59)
+121 +73 +97(23)
2012/13 Price & Volume Price & Volume Others 2013/14
Sugarcane Brazil – FinancialsPositive volume impact and ethanol price effect together with higher cogeneration revenues
Net Revenues (R$ MM)
Sugar Ethanol
Key Figures
In R$ Million2013/14 2012/13 Change
Revenues 2,217 2,008 +10%
Gross Profit 429 304 +41%
Margin 19.4% 15.1%
EBIT 132 35 +275%
Margin 5.9% 1.7%
Adjusted EBITDA 518 373 +39%
2012/13 Price & Mix
Volume Price & Mix
Volume Others 2013/14
* includes Cogeneration, Agricultural Products, Hedging and Ethanol Resale
10
(1) Tereos Internacional allocates tilling expenses as cost.If tilling expenses were allocated as investment, AdjustedEBITDA for fiscal year 2013/14 would have reachedR$623 million.
� Sugar: 58% of total net revenues
� Volumes increased 9% to 1.482 million tonnes
� Prices down 5% Y-o-Y at 873 R$/tonne
� Ethanol: 32% of total net revenues
� Volume sold up 18% to 563,000 m3
� Prices up 12% Y-o-Y at 1,251 R$/m3
� Cogeneration: R$101 million vs. R$80 million
� Adjusted EBITDA: R$518 million, +39%
• Lower unitary costs coupled with betterethanol prices and first benefits of Guarani2016 program
• Adjusted EBITDA margin up nearly 5ppts
• Adjusted EBITDA Margin1 for fiscal year2013/14 including tilling as depreciation:28.1%
Margin 23.4% 18.5%
63
290
68
286
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
6
2.566
0
2.188
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
-14.7% YoY
Sugarcane Indian Ocean/Africa – Production and Financials Indian Ocean operations continue to deliver steady performance
Sugarcane Crushing (’000 t) Sugar sales (‘000 t)
-1.4% YoY
Key Figures
In R$ Million2013/14 2012/13 Change
Revenues 1,063 941 +13%
Gross Profit 197 222 -11%
Margin 18.5% 23.6%
EBIT 66 84 -22%
Margin 6.2% 8.9%
Adjusted EBITDA 184 190 -3%
Margin 17.3% 20.1%
11
2013/14 Revenue Breakdown by Product � Sugarcane crushing
� Indian Ocean: slight reduction (-7% in sugarcane crushing to 1.72 million tonnes)
� Africa: unfavorable weather conditions and technical issues with irrigation resulted in a 36% reduction in sugarcane crushing to 470,000 tonnes
� Revenues: +13% Y-o-Y
� Positive volume and FX impact in Indian Ocean more than offset the negative price effect for the segment and volume drop in Mozambique
� Adjusted EBITDA: -3% Y-o-Y
� Positive Forex impact on steady Indian Ocean performance did not fully compensate the drop in results for Mozambique
Sugar Indian Ocean 44%
Sugar Africa 8%
Trading and others 48%
129
535
79
423
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
432
1.738
451
1.772
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
764
3.151
839
3.298
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
Cereal Segment - Production and SalesHigher Grinding on Recovery of Lillebonne Production and Palmital Ramp-up
Cereal Grinding (‘000 t)
Starch & Sweeteners Sales (‘000 t)
+4.7% YoY +2.0% YoY
Alcohol & Ethanol Sales (‘000 m3)
-20.9% YoY
289
1.166
282
1.162
4T
12/1
3
12M
12/1
3
4T
13/1
4
12M
13/1
4
Co-products Sales (‘000 t)
-0.3% YoY
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
Q4
12/1
3
FY
12/1
3
Q4
13/1
4
FY
13/1
4
12
� Grinding in 2013/14: +5% to 3.3 million tonnes, mostly driven by better capacity utilization at Lillebonne, investments in Marckolsheim and ramp-up of Palmital corn factory in Brazil
� Starch & Sweeteners sales: +2% Slight increase in the volume of starch products sold in a sluggish EU market with strong pressure on prices forsome segments
� Alcohol & Ethanol sales: -21% Mostly end of ethanol trading sales for Tereos Group in the 2nd half
4T
12/1
3
12M
12/1
3
4T
13/1
4
12M
13/1
4
33964211
+567+282
(70)
+36
Starch & Sweeteners – FinancialsRevenue increase, although profitability remains pressured by cost pass-through
Net Revenues (R$ MM)
Key Figures
In R$ Million2013/14 2012/13 Change
Revenues 4,211 3,396 +24%
Gross Profit 664 611 +9%
Margin 15.8% 18.0%
EBIT 14 75 -81%
Margin 0.3% 2.2%
Adjusted EBITDA 193 205 -6%
2012/13 Currency Volume Price & Mix Others 2013/14
13
� Revenues: R$4,211 million, up 24%
� Positive volume impact mainly on the back of higher protein sales
� Better prices for co-products (mix effect of protein) were offset by lower prices forstarches and sweeteners
� Adjusted EBITDA: R$193 million, down 6%
� Tough market conditions in Europe maintained pressure on margins year-on-year
� Benefit of recent investments expanding product portfolio not yet fully obtained
Adjusted EBITDA 193 205 -6%
Margin 4.6% 6.0%
Alcohol & Ethanol Europe – FinancialsPositive performance in the 2nd half led to better results y-o-y. End of trading activity
Net Revenues (R$ MM)Key Figures
In R$ Million2013/14 2012/13 Change
Revenues 848 1,056 -20%
Gross Profit 69 51 +36%
Margin 8.1% 4.8%
EBIT 31 (17) -282%
Margin 3.7% (1.6%)
Adjusted EBITDA 75 28 +173%
1056848
+161
(311) (38) (20)
� Revenues: R$848 million, down 20%
� Prices: -3.6% for the segment
� Lower ethanol trading sales y-o-y
� Adjusted EBITDA: R$75 million, up 173%
� Lower input prices, due notably to ramp up of gluten volumes and improved operational performance, more than offsetting the lower Rotterdam prices
14
2013/14 Revenue Breakdown by Product
Margin 8.9% 2.6%
Alcohol & ethanol own sales 66%
Trading of ethanol 29%
Others 5%
2012/13 Currency Volume Price & Mix Others 2013/14
Capital ExpendituresSignificant CAPEX reduction with the finalization of several investment programs
CAPEX (R$ MM)2013/14 CAPEX Breakdown
Starch & Sweeteners
21%
Alcohol & Ethanol Europe
4%
Africa/Indian
Brazil63%
1111885
+24 +8
(149)(109)
15
� Brazil: R$561 million
• Combination of plantation, intercrop costs, and multi-year investment plan in capacity and cogeneration (Tanabi)
• 86% of the expansion program completed
� Africa/Indian Ocean: R$110 million
• Primarily maintenance for the segment and plantation in Mozambique
� Starch & Sweeteners: R$182 million
• Focused on maintenance of European facilities and finalization of 1st phase of investments of Palmital starch facility
� Alcohol & Ethanol Europe: R$31 million
• Maintenance of current operations
Africa/Indian Ocean12% 2012/13 Brazil Africa/IO S&S A&E
Europe2013/14
Cash Flow Reconciliation & Debt Composition Strong deleverage: 3.7x in March 2014 vs. 4.9x in December 2013
Cash Flow
In R$ Million2013/14
Adjusted EBITDA 962
Working capital variance 288
Financial interests (197)
Others (119)
Operating Cash Flow 934
Recurring Capex (530)
Recurring Cash Flow 404
Debt
In R$ Million
March 31st,
2014
March 31st,
2013∆
Current 1,522 1,829 -16.8%
Non-current 2,734 2,399 +14.0%
Amortized cost (23) (26)
Total Gross Debt 4,233 4,202 +0.7%
In € 1,413 1,596 -11.5%
In USD 1,890 1,688 +12.0%
In R$ 935 882 +6.0%
16
� Net Debt/Adjusted EBITDA: 3.7x vs. 4.2x on March 31st, 2013 and 4.9x sequentially
� Refinancing of USD190 million notes at Guarani
� Working capital efforts
� Currency Effect on Debt: Devaluation of the Real against Euro and USD
Growth Capex (360)
Dividends paid and received
9
Capital increase 225
Others (78)
Free Cash Flow 200
Others (inc. Forex impact) (444)
Net Debt Variation (244)
In R$ 935 882 +6.0%
Other currencies 19 62 -69.3%
Cash and Cash Equivalent (682) (892) -23.5%
Total Net Debt 3,551 3,310 +7.3%
Related Parties Net Debt 15 13 -
Total Net Debt + Related Parties
3,566 3,322 +7.3%
� Sugarcane Brazil:
� Crushing volumes in the next crop expected to be up again, by some 4%, to c. 20.5 million tonnes (fullconsolidation basis) to further increase industrial utilization rates, in contrast to Center-South region which isexpected to crush less than last year (current estimates hovering around a 5-10% drop)
� Electricity volume to further grow next year, with Tanabi coming on stream
� Further unitary cost reduction expected due to the “Guarani 2016” efficiency program and higher crushing
� Multi-year investment program in Brazil nearing completion to further reduce Capex level next year
� Sugarcane Africa/Indian Ocean:
� Sugarcane crushing in Mozambique to recover on the back of higher replanted area in irrigated fields
� Cereals:
Outlook
� Cereals:
� Europe:
� “Performance 2015”: progress to continue on the multi-year performance improvement program; economicconditions expected to remain challenging in the EU and cereal prices to remain volatile
� Major development projects completed in Europe, Capex reduced and oriented to energy saving programs/sustaining activity
� Alcohol & Ethanol segment operational performance stabilized at Lillebonne. Normalization of margins with theend of trading sales activity for Tereos Group. Negative impact of lower ethanol price to remain
� International:
� Brazil: full year-consolidation of Palmital as sweeteners sales ramp up to improve the product mix, helping aswell to dilute fixed costs
� China: Dongguan facility to start ramping up in the second semester
� Indonesia: Operational performance improvement and product diversification plan at Redwood to be finalized,and implementation to begin in the year
17
18