2. Major developments and key initiatives in Q3 2014/15
Operational
Sugarcane Brazil:
YTD crushing volumes up 3% YoY to 20.2 million tonnes vs. a 5% drop in the C/S region
Significantly better agricultural results than the average of the C/S region for the 3rd year in a row
YTD own energy sales more than 50% higher at 851 GWh. Major cogen investments completed
Sugarcane Indian Ocean/Africa: YTD crushing in Indian Ocean slightly up on LY. Africa showing
significant recovery YoY (+32%) thanks to improved agricultural practices
Cereals Europe: Improved profitability sequentially and YoY for Starch&Sweeteners despite soft
demand in Europe, but Alcohol&Ethanol profits down in the quarter
Cereals Brazil: Corn starch plant now operating close to nominal capacity. Q3 sales volume increased
2
Cereals Brazil: Corn starch plant now operating close to nominal capacity. Q3 sales volume increased
further compared to Q2 14/15 and doubled vs. Q3 LY
Cereals Asia: Good operational performance at Tieling and Dongguan construction being finalized
Financial
Guarani secured a new 5-year financing with an expanded group of relationship banks
Corporate
Cereals Europe: French FCAVA potato starch cooperative joined the Tereos cooperative. This move
will enable Cereals Europe to double its potato starch production by 2017, processing some 450,000
tonnes of potatoes
Cereals Brazil: Acquisition of 32% stake of Syral Halotek from minority shareholders to now own
100% of the business
3. Sugar:
Although prices have recovered in the beginning of the quarter,
bigger-than-expected cane crop for C/S Brazil and BRL
depreciation vs. USD has pressured prices
In Brazil, the sugar cane crop unlikely to recover significantly and
higher ethanol prices could support prices moving forward,
however the overall surplus is likely to continue to weight on the
market in the coming months / during the 1st half of 15/16
Starch:
Despite good crops, wheat markets rebounded on the back of the
tension between Russia/Ukraine, opening up the spread between
Q3 2014/15 Market Highlights
12
13
14
15
16
17
18
19
20
21
360
400
440
480
520
560
Dec-13 Apr-14 Jul-14 Sep-14 Dec-14
LIFFE #5 NY#11
US$/MT US$ Cts/lb
210
230
250 €/MT
tension between Russia/Ukraine, opening up the spread between
corn-wheat. Devaluation of EUR relative to USD also had a bullish
impact on EU wheat price
Demand for starch and sweeteners remains soft in Europe
Ethanol:
In Brazil, despite comfortable stock levels, ethanol price increased
slightly ahead of intercrop period, likely because of recent
announcements of reintroduction of CIDE tax and anhydrous blend
increase.
In Europe, FOB Rotterdam prices remain low because of
increasing production and to very good beet crop and steady
demand.
3 Source: Bloomberg
400
450
500
550
600
0.70
0.90
1.10
1.30
1.50
1.70
1.90
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14
Brazil ESALQ Europa Rotterdam
R$/m³ €/m³
110
130
150
170
190
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14
Corn MATIF WHEAT MATIF
4. Revenues
Higher volumes in most segments
Net Revenues (R$ MM)
2,015
2,144
2015 2144
+36
+265
(128) (44)
1 1210 127
1,014
1,023
250 337
540 656
Brazil
Africa/Indian Ocean
Starch & Sweeteners
Alcohol & Ethanol Europe
Holding
4
Revenues up 9% on like-for-like basis (ie. adjusting for the end of ethanol trading on behalf of Tereos
Group)
Higher sugar volumes in all sugarcane businesses, increase in ethanol and energy sales in
Brazil as well as starch and sweeteners volumes (mostly Cereals Overseas)
But ethanol trading sales for Tereos Group no longer consolidated at TI level (-R$ 50 million),
lower prices YoY for Starch & Sweeteners and ethanol in Europe, as well as lower own ethanol
sales in Europe
Q3 2013/14 Currency Volume Price & Mix Others Q3 2014/15
1 1210 127
Q3 2013/14 Q3 2014/15
5. 279 290
+20 +2 +11
(18) (4)
0
54
66
60 61
142 162
Brazil
Africa/Indian Ocean
Starch & Sweeteners
Alcohol & Ethanol Europe
Holding
Adjusted EBITDA
Overall profitability improvement in major segments but European A&E down in the quarter
Adjusted EBITDA (R$ MM)
279
290
Q3
2013/14
Brazil Africa/IO S&S A&E
Europe
Holding Q3
2014/15
0
-4
23 5
66
Q3 2013/14 Q3 2014/15
5
Increased contribution from Guarani thanks to higher volumes across all products
Together with higher profits in the Starch and Sweeteners segment, mostly due to cost base
improvements
But lower ethanol volumes & prices and lower convention wheat volume impacted A&E results in
Europe
Margin 13.5%Margin 13.9%
6. Ethanol Sales (‘000 m³)Sugarcane Crushing (MM t) Sugar Sales (‘000 t)
Sugarcane Brazil – Production & Sales
Record crushing in Brazil at 20.2 million tonnes
Energy Sales (‘000 MWh)
Crushing
4.9
4.2
3Q
13/14
3Q
14/15
-14.3% YoY
335 383
3Q
13/14
3Q
14/15
14.3% YoY
132
195
3Q
13/14
3Q
14/15
47.4% YoY
209
286
3Q
13/14
3Q
14/15
36.5% YoY
6
Crushing
Crushing was up +3% for the whole crop at 20.2 Mt vs. -5% for the C/S region.
Drought impacted agro-industrial productivity with 13% lower yields at 82 vs. 94 t/ha in 2013/14 but TRS
increased 6%, to 142 kg/t vs. 134 kg/t LY. Overall TRS/ha in 2014/15 at 11.3 was lower by -10% YoY.
However, investments made and agricultural practices improvements introduced in the last few years led
to significantly better results than the average of the C/S region for the 3rd year in a row
Improvement in production
Overall production (expressed in TRS) up 5% to 2.6 Mt. Sugar Production: 1.45 Mt, -4% YoY; Ethanol
Production: 645 km³, +21% YoY
Mix still more oriented towards sugar at 58%, although down on 63% last crop on better relative
attractiveness of ethanol vs. LY
Progress on cogeneration
Own energy sales doubled in Q3 vs. LY and up more than 50% at 851 GWh YTD
7. Sugarcane Brazil – Financials
Pick-up in volumes and higher energy contribution
Net Revenues (R$ MM)
Sugar Ethanol
Key Figures
In R$ Million
Q3 14/15 Q3 13/14 Change
Revenues 656 540 +21%
Gross Profit 161 92 +75%
Margin 24.5% 17.0%
EBIT 64 24 +171%
Margin 9.8% 4.4%
Adjusted EBITDA 162 142 +14%
540
656
+1
+46
(6)
+77
(2)
Q3 Price & Volume Price & Volume Others Q3*
* includes Cogeneration, Agricultural Products, Hedging and Ethanol Resale
7
(1) Tereos Internacional allocates tilling expenses as cost.
If tilling expenses were allocated as investment, Adjusted
EBITDA for Q3 14/15 would have reached R$239 million.
Sugar: 52% of total net revenues
Volumes up 14% to 383 k tonnes
Average prices up 1% YoY at 894 R$/tonne
Ethanol: 36% of total net revenues
Volume sold up 47% to 195 k m3
Prices down 3% YoY at 1,200 R$/m3
Cogeneration: R$65 million vs. R$30 million, on
average realized prices up more than 50% and
more than doubled own electricity production
Adjusted EBITDA: R$162 million, +14%
Positive impact of higher sales volume in all
products, together with one-off items, more
than compensated for lower industrial
performance in the quarter, partly as a result of
the drought
Adjusted EBITDA Margin1 for Q3 14/15
including tilling as depreciation: 36.5%
Margin 24.7% 26.2%
Q3
2013/14
Price &
Mix
Volume Price &
Mix
Volume Others Q3
2014/15
8. Sugarcane Indian Ocean/Africa – Production and Financials
Higher crushing and sales volumes
Sugarcane Crushing (’000 t) Sugar sales (‘000 t)
Key Figures
In R$ Million
Q3 14/15 Q3 13/14 Change
Revenues 337 250 +35%
Gross Profit 48 58 -17%
Margin 14.3% 23.2%
EBIT 11 22 -48%
Margin 3.4% 8.8%
Adjusted EBITDA 61 60 +3%
Margin 18.2% 24.0%
982 1,102
3Q
13/14
3Q
14/15
12.2% YoY
66
133
3Q
13/14
3Q
14/15
102.6% YoY
8
Revenue Breakdown by Product Sugarcane crushing
Indian Ocean: crushing up 3%, to 1.76 Mt
Africa: Overall crop materially up on LY (+32%), to
622 kt, evidencing progress made on agricultural
practices
Revenues: +35% YoY
Sharp increase in volumes sold for the region,
mostly on 2 delayed shipments in Reunion Island,
but lower export price to Europe
Adjusted EBITDA: +3% YoY
Mozambique results compensated for lower
Adjusted EBITDA in Reunion Island on lower
margins in sugar exports/trading
Sugar Indian
Ocean 50%
Sugar Africa
13%
Trading and
others 37%
9. Cereal Segment - Production and Sales
Overall increased sales volumes, boosted by overseas operations
Cereal Grinding
(‘000 t)
Starch & Sweeteners
Sales (‘000 t)
Alcohol & Ethanol
Sales (‘000 m3)
Co-products Sales
(‘000 t)
418 464
Q3
13/14
Q3
14/15
+11% YoY
288 293
Q3
13/14
Q3
14/15
+1.7% YoY
79 72
25
Q3
13/14
Q3
14/15
-31% YoY
Own Sales Trading
828 882
Q3
13/14
Q3
14/15
+6,6% YoY
9
Grinding in Q3 14/15: +7% to 881 k tonnes
Starch & Sweeteners sales: +11% Ramp-up of Palmital plant in Brazil (close to nominal capacity
in Q3) and positive perimeter effect of Cereals Indonesia.
Volumes in Europe stable YoY
Alcohol & Ethanol sales: -31% Major impact of termination of ethanol trading sales for Tereos
Group last year and slightly lower sales of ethanol in Europe.
Alcohol sales remain firm and volumes increased YoY
Q3
13/14
Q3
14/15
Q3
13/14
Q3
14/15
Own Sales Trading
Q3
13/14
Q3
14/15
10. Starch & Sweeteners – Financials
Lower energy costs and Performance 15 program positively impacted results
Net Revenues (R$ MM)
Key Figures
In R$ Million
Q3 14/15 Q3 13/14 Change
Revenues 1,023 1,014 +1%
Gross Profit 163 160 +2%
Margin 16.0% 15.8%
EBIT 12 3 +322%
Margin 1.2% 0.3%
Adjusted EBITDA 66 54 +21%
1014 1023
+24 +50
(59) (6)
10
Revenues: R$1,023 million, stable YoY
Positive impact of higher volumes in Cereals Brazil and consolidation of Cereals Indonesia
Declining prices for S&S following cereal prices downward trend and falling European sugar
prices impact on isoglucose (renegotiation took place in October)
Adjusted EBITDA: R$66 million, up 21% YoY
Lower energy costs and benefits of P15 efficiency program helped to improve profitability
Negative impact from lower isoglucose prices vs. LY but overall improved margins on raw
materials sequentially
Adjusted EBITDA 66 54 +21%
Margin 6.4% 5.4%
Q3 2013/14 Currency Volume Price & Mix Others Q3 2014/15
11. Alcohol & Ethanol Europe – Financials
Reduced prices and volumes on lower conventional wheat volumes
Net Revenues (R$ MM)
Key Figures
In R$ Million
Q3 14/15 Q3 13/14 Change
Revenues 127 210 -40%
Gross Profit (1) 22 -103%
Margin (0,5%) 10.3%
EBIT (10) 10 -204%
Margin (8.2%) 4.8%
Adjusted EBITDA 5 23 -79%
210
127
+5
(65)
(13) (10)
Revenues: R$127 million, down 40%
Termination of trading activities for Tereos Group (-R$50 million) and lower own volumes of ethanol in
Europe
Lower prices of ethanol (-17% YoY) on soft world oil prices
Adjusted EBITDA: R$5 million, down 79%
Reduced proportion of raw material purchased at convention price
Impact of lower ethanol prices on margin on raw material
11
Margin 3.8% 10.9%Q3 2013/14 Currency Volume Price & Mix Others Q3 2014/15
12. Capital Expenditures
Continuous reduction in capital expenditures, as expected
CAPEX (R$ MM)CAPEX Breakdown
Starch &
Sweeteners
14%
Alcohol &
Ethanol
Europe
0%
Africa/Indian
Ocean
13%
Brazil
73%
170
135
(21)
+3
(15) (2)
12
Brazil: R$98 million
17% drop as expansion program fully
completed
Starch & Sweeteners: R$19 million
Mostly related to maintenance and initiatives
linked to P15 program
Q3 2013/14 Brazil Africa/IO S&S A&E Europe Q3 2014/15
13. Cash Flow Reconciliation & Debt Composition
YoY lower Net Debt and lengthened average maturity
Cash Flow
In R$ Million
9M 14/15
Adjusted EBITDA 735
Working capital variance (729)
Financial interests (158)
Others (76)
Operating Cash Flow (228)
Recurring Capex (284)
Recurring Cash Flow (512)
Debt
In R$ Million
December 31st,
2014
March 31st,
2014
∆
Current 2,327 1,523 +53%
Non-current 3,164 2,734 +16%
Amortized cost (21) (23) -10%
Total Gross Debt 5,470 4,234 +29%
In € 1,611 1,413 +14%
In USD 2,632 1,890 +39%
In R$ 1,241 935 +33%
13
Seasonal working capital for sugarcane division (on higher inventories) and negative forex impact
impacted cash flows
Net Debt lower by R$178 million than as at December 31st, 2013. Net Debt/Adjusted EBITDA:
5.0x vs. 4.9x on December 31st, 2013
Guarani secured a 5-year financing of US$330 million at Libor + 2.30%. This, together with other
refinancing done since September, has enabled TI to substantially lengthen its average debt
maturity
Growth Capex (141)
Dividends paid and
received
11
Others 165
Free Cash Flow (477)
Others (inc. Forex impact) (297)
Net Debt Variation (774)
In R$ 1,241 935 +33%
Other currencies 7 19 -61%
Cash and Cash Equivalent (1,180) (682) +73%
Total Net Debt 4,290 3,551 +21%
Related Parties Net Debt 51 15 +237%
Total Net Debt + Related
Parties
4,341 3,566 +22%
14. Outlook
Sugarcane Brazil:
Progress in co-generation, expected to reach around 1,000 GWh sales until the end of the crop, on a
full consolidation basis
Increase in the ethanol blend ratio (from 25% to 27%) and reintroduction of CIDE tax in gasoline
(R$0.22/l) should be beneficial for the sector in FY 2015/16
Sugarcane Africa/Indian Ocean:
Yields in Africa should be better YoY as a result of improved agricultural performance and rainy
weather in the beginning of the intercrop period
Current lower European sugar prices to impact exports
Cereals:
Europe:
14
Europe:
Soft demand for starch and lower isoglucose prices (tracking lower European sugar prices) should
hinder potential for sharp margin restoration in the near term
Phasing out of wheat conventional price mechanism and expected lower ethanol prices are likely to
continue impacting Alcohol & Ethanol segment’s profitability in the near-term
Focus remain on cost base optimization with P15
International:
Brazil: Reduction of ICMS for corn and related products from 18% to 7% in the State of São Paulo
Asia: Dongguan plant to start operations in Q1 15/16. Tieling product diversification plan to start
ramping up in Q2 15/16 and Cereals Indonesia performance improvement plan progressing
