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October 27th, 2016 The Navigator Company 9M 2016 Results Presentation
23

20161027 - Apresentação Resultados 9M 2016 Final

Jan 07, 2017

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Page 1: 20161027 - Apresentação Resultados 9M 2016 Final

October 27th, 2016

The Navigator Company

9M 2016 Results Presentation

Page 2: 20161027 - Apresentação Resultados 9M 2016 Final

Diogo da Silveira – CEO

Fernando Araújo– CFO

Joana Appleton - IR

Speakers

1

Page 3: 20161027 - Apresentação Resultados 9M 2016 Final

2

Significant turnover growth and diversification over the last years

9M 2016– Growth in a difficult environment

• EBITDA increased by 2.6% to € 301.5million,with margin EBITDA / Sales up to 26.1 %

+ Another record in paper sales volume and turnover

+ Good volumes for pulp and tissue

+ Cost efficiency measure continue

• Energy continues to impact negatively on turnover and EBITDA

• Free cash flow improves to € 101 million

• Significant reduction in financial costs

• Start-up of pellets mill in South Carolina, USA

• Navigator # 1 brand of European Consumers

2

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UWF: market deteriorating during Q3 2016

Sales to other markets include Africa, Latin America, Middle East, Turkey, Asia, mainly in USD

• Market conditions in Europe worsened during Q3 2016, withestimated apparent consumption for UWF declining 6.1% and falling4% YTD Jan-Sep 2016

• Imports into Europe increased up to 25%, essentially in officepapers (+30%), with imports from Asia doubling over the period,triggering overall downwards adjustments in prices

• In the US, apparent consumption decreased 3.3% YoY, with importsdeclining significantly (-20%) and operating rates remained at 93%

• After a slow start of the for BEKP purchases, demand for pulppicked-up, and global demand for BEKP increased 7.4% until end ofAugust; global capacity utilization rate in BEKP also edged up to91% over the first 9 months of 2016

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4

European Market Prices Evolution

Source: FOEX

Benchmark price evolution for pulp and paper

• The industry benchmark for paper gained 1.4% YoY (820€ vs 818€/ton), but declined 3% since the beginning of the year.

• Industry benchmark for pulp lost 9% YoY for both euros and USD; theindex lost 15% since the beginning of the year in Euros and 18% inUSD

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Paper, pulp and tissue business performance

• Highest volume sold in a 9 month period - 1 156 thousand tons ofUWF (+2.2% YoY) and highest paper turnover (€ 890 million)

• Record sales to international markets (+2,3% YoY)

• Average sales price negatively affected by sales geography andproduct mix (size and quality)

• Pulp sales increased 9% in volume, declining 3% in value; 93% ofpulp sales were directed to Europe, and 64% for Décor andSpecial papers segments

• Volume of Tissue sold improved 27% YoY sustained by theincrease in capacity realized in 2015; sales increased to € 50million (vs €42 million); average sales price decreased 6% due tochange in mix (increase percentage of reels sales)

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EBITDA of 390 M€ : highest EBITDA in the last 5 yearsStrong EBITDA and EBITDA / Sales margin in Q2 and Q3

EBITDA in Q3 2016 increased 4.4% versus Q2 2016, with improvement in EBITDA/Sales margin

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

30%

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

EBITDA EBITDA / Sales

Va

lue

s in

mil

lio

n E

uro

s

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YoY growth in EBITDA sustained by higher volumes and cost improvements

7

(Mais info nos anexos)

7

Excluding non recurrent positive impact of the revaluation of biological assets, higher volume and lower costs have compensated for the reduction in prices, yielding a recurrent EBITDA in line with EBITDA for 9M2015

294,0M€

301,5M€

Prices

Volumes

Cost Evolution

Other

Bio Assets

EBITDA9M16

EBITDA9M2015

Page 9: 20161027 - Apresentação Resultados 9M 2016 Final

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EBITDA of 390 M€ : highest EBITDA in the last 5 yearsNavigator continues to generate strong operating cash flow

Va

lue

s in

mil

lio

n E

uro

s

Strong operating cash flow YTD 2016 of €258 million, comparing favorably to € 228 million YTD 2015

7276 78

101

6770 71

84

69

86

7375

82

91

85

0

10

20

30

40

50

60

70

80

90

100

110

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

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Good operating performance but limited free cash flow

In spite of higher inventories, working capital improved significantlyduring Q3 and FCF grew to € 69 million. Accumulated 9 months FCFtotaled € 101 million

Cash Flow

CAPEX Change in inventories

Change in accounts

receivable

OtherChanges

Free Cash Flow

258 - 101

- 29-2 -24

101

Valu

es in

millio

n E

uro

s

Maintenance26 M€

Development75 M€

-1

Significant improvement in Free Cash Flow

Change in accountspayable

Page 11: 20161027 - Apresentação Resultados 9M 2016 Final

Net debt increased mainly due to capital expenditure plan started in 2015and dividend payment; Net Debt/Ebitda remains within conservative levels

Valu

es in

millio

n E

uro

s

Balance sheet remains strong

10

700

687

463

364307 274

654723

3.1

1.7

1.20.9 0.9 0.8

1.7 1.8

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8

3.2

3.6

0

100

200

300

400

500

600

700

800

2009 2010 2011 2012 2013 2014 2015 9M2016

Net Debt Net Debt / Ebitda

Dividend Payment 2012 2013 2014 2015 2016

Total amount paid (€ million)

164.4 201.4 200.8 440.5 170.0

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New credit facilities and extension of maturity reduce cost of debt9M 2016 - Significant improvement in

financial results

Improved financial results mainly dueto a significant reduction in interestcosts following debt restructuring:

� repayment of the € 350 mln PortucelSenior Notes 5.375%

� new debt issued with betterconditions and longer maturity;

Forex – € 4.3 mln improvement YoYdue to EUR/USD in 2015

€ 2.4 mln provision reversion in taxcompensatory interests

Q3 2016 financial results include € 6mln related to the premium paid for thebond redemption (vs € 14.6 mlnnonrecurring charges in 2015)

Financial Results

Significant reduction in borrowing costs

€-44.9 mln

€-16.6 mln

9M 2015 9M 2016

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New credit facilities and extension of maturity reduce cost of debt

• € 25 mln line from EIB with final maturity in 2028

• Additional € 215 mln financing, with 5 year maturity and all-in costs between1.50% and 1.65%, through two new bond issues of € 100 mln and € 45 mln, anda new Commercial Paper Program of € 70 mln.

• Estimated cost of debt at the end of September of 1,7%, with 4.8 years averagematurity

Maturity profile

Va

lue

s in

mil

lio

n E

uro

s 9M 2016: New debt issued

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M2 Project - Enlarged scope and increased estimated impact

95 projects under development, with a revised estimated impact onEBITDA in 2016 of approximately € 15 million; projects under wayinclude:

+ Improve efficiency in paper machines in Setubal and Figueira

+ Road and maritime transports negotiation contracts and operational efficiencies measures

“Navigator Lean System” Programme

First cycle of Lean Management Programme coming to a end:

+ 29 new areas for improvement identified; example: packaging materials in Setubal paper mill

+ Expansion of the programme to new pilot areas such as Tissue plant at Vila Velha Rodão

Continuing cost reducing measures – M2 and Lean System

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Current share price - Strong upside ?

NavigatorShares

%Change

9M 2016 -29%

YTD 2016* -26%

*Updated 31/12/2015; closing price of 3,596 €/share; source : Reuters *YTD October 25 2016

Shares lost 29% YTD Sep2016, negatively pressured by Portuguese market performance and sector sentiment; improvement in average liquidity and sustainable dividend yield of 9%

14

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

jan fev mar abr mai jun jul ago set out nov dez jan fev mar abr mai jun jul ago set

EUR/ShareShares (M) Average price & volume of traded Navigator shares

from January 2015 to September 2016

Average daily volume EUR/Share

DividendYield

9%

Page 16: 20161027 - Apresentação Resultados 9M 2016 Final

• Turbogenerators repair

• Photovoltaic Central (Setubal paper mill)

• Recurrent capex

• Plantations & Social development plan (+ € 5.5 million in biological assets)

• Construction of electrical and control facilities; conclusion of mechanical installations

Future business

Pulp, paper and tissue:

26 M€

Mozambique:7 M€

Pellets plant:

€ 68 M€

Capex of € 101 million (vs.€ 154 million YoY)

Current business

15

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Increase efficiency and cost reduction iniciatives

Start-up of Pellets Plant in the USA

• Colombo Energy Inc project in Greenwood, South Carolina, concludedand continuous operations started; first shipload to Europe during Q42016

• Initial tests point to a premium product with high calorific value

• 40% of the mills output secured for 10 years; sales efforts proceedingboth in the industrial market (Europe and Japan/Korea) and residentialmarket (Europe and US)

16

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Increase efficiency and cost reduction iniciatives

Update on Mozambique project

• Political and economic situation remains unstable, slowing thepace of operations

• Planting work continued during the first 9 months of 2016:around 4,400 ha planted in Zambézia, using sapplings suppliedby the Forestry Nurseries in Luá, the largest facility of its kind inAfrica; total planted area of 10.800 hectares

• The Group renewed its local management team and hascurrently a local headcount of 279

• First year of Social Development Plan sucessfully completed,with the launching of several actions to support families andlocal communities: funding of private agricultural extensions,with the participation of 4,500 households and distribution ofseeds for different crops (corn, sesame, sweet potato)

• Work started on an experimental operation to export woodchipsfrom Zambézia via the port of Nacala

17

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Increase efficiency and cost reduction iniciatives

Update on Tissue & other growth projects

• Cacia´s project to build new line for tissue paper and convertingcapacity, with 70 thousand tons per year, involving 120 millioncapex, still under revision

• Navigator intends to continue developing its existing tissuebusiness:

− two new processing lines at the Vila Velha de Ródãoplant, increasing its finished product capacity byapproximately 9 thousand tons,

− total investment of around € 5 million.

• Other growth projects include the increase in pulp capacityannounced in the 2016 first-half report:

− Total investment estimated at € 82 million and work isdue to start during the final quarter of 2016.

− Goal to increase annual capacity by 70 thousand tons,to a total of 650 thousand tons of BEKP pulp;

− Expanded capacity is planned to come online in March2018.

− Decision still pending

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Outlook for 2016

• Pulp market remains under pressure with significant growth insupply expected for 2016, 2017 and 2018; some positive effectsmay come:

- delays in the coming of short and long fibre capacity in themarket;

- widening price differential between short fibre pulp and longfibre pulp;

- strong pulp purchases in China and ongoing closures of obsoletecapacity by the Chinese authorities.

• In paper, pressure from increase in imports into Europe from Asianproducers continues and prices have adjusted downwards:

- Navigator has also revised prices for its products, the effects ofwhich will be felt essentially as from the 4th quarter.

Outlook

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Outlook for 2016

• Operating results for the first 9M2016 were solid, supported by:

+ strong sales effort

+ focus on cost cutting measures

• In this adverse context, the Groupcontinues to work on the variables itis able to influence:

+ Pursue further cost reduction programs

+ diversifying and expanding its sales base

+ promoting diverse multi-channels campaigns to strengthen its mill brands.

Summary

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Disclaimer

This presentation does not constitute or form part of and should not be construed as any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any

securities in any jurisdiction nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract commitment or investment decision in

relation thereto nor does it constitute a recommendation regarding the securities analysed herein. No action has been made that would permit a public offering of any securities

mentioned in this presentation in any jurisdiction. No offers, sales, re-sales or delivery of any securities mentioned I this presentation or distribution of any offering material relating to any

such securities may be made in or from any jurisdiction.

Any decision to subscribe for or purchase ordinary shares in any offering should be made solely on the basis of information contained in any offer document that may be published by the

relevant issuer in final form in relation to such offering and securities.

This presentation is intended to provide a general overview of Portucel, S.A. business and does not purport to deal with all aspects and details regarding Portucel. Accordingly, no

representation, undertaking or warranty, express or implied, is given by Portucel or any of its subsidiary undertakings, affiliates, directors, officers, employees or advisors or any other

person as to the fairness, accuracy, completeness or correctness of the information or opinions contained in this presentation or of the views given or implied or any other material discussion in connection with this presentation. This presentation has been prepared by Portucel solely for information purposes. Portucel any of its affiliates, directors, officers, employees or advisers or any other person shall not have any liability whatsoever (in negligence or otherwise) for any

loss, errors or omissions howsoever arising, directly or indirectly, from any use of this presentation or its contents or otherwise arising in connection therewith.

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