Fitch currently rates Fibria and Fibria Overseas as follows:
--Long-term foreign currency Issuer Default Rating (IDR) 'BBB-';
--Long-term local currency IDR 'BBB-';
--Long-term national scale rating 'AA+(bra)'.
--Long-term foreign currency IDR 'BBB-';
The Rating Outlooks for Fibria and Fibria Overseas is Stable.
Fibria's ratings reflect the company's excellent business position as the world's leading producer of market pulp, with 5.3 million tons of bleached eucalyptus kraft market pulp capacity. The company's sales volumes are more stable than most companies within the industry, as more than 50% are directed toward the tissue paper market.
The ratings also incorporate Fibria's disciplined approach to reducing debt during the past two years despite relatively weak market conditions. During this time period, the company generated more than
Fibria's ratings also build in an expectation that the company will likely go ahead with the expansion of its Tres Lagoas mill. Capex for this mill should be around
KEY RATING DRIVERS
Excellent Business Position
Fibria's ratings continue to reflect the company's excellent business position. Fibria is the world's leading producer of market pulp with 5.3 million tons of bleached eucalyptus kraft (BEKP) market pulp capacity. The company's leading position is viewed to be sustainable due to its ownership of 962 thousand hectares of forest assets in
Declining Leverage and Absolute Debt Levels
Fibria's 2013 EBITDA generation benefited from higher pulp prices and depreciation of the Brazilian real against the U.S. dollar. The company generated
Challenging Market Conditions
2014 and 2015 are projected to be difficult for the pulp market and pricing pressure could intensify following the pipeline of new projects. Combined, these mills will expand supply by about 9% in a market where demand is struggling to grow by more than 2%. In 2013, pulp prices were better than forecasted due to some delays in the scheduled startups of new mills and closure of about 1 million tons of market capacity, along with increased demand for pulp from
Credit Metrics to Remain Strong in 2014
Fitch projects that Fibria will generate about
Fibria will decide during 2014 if it will build a new pulp mill, Tres Lagoas II. Fitch's base case projection is that the company will proceed with the project given its cost structure, which should be among the lowest cost in the world due to the high quality forestry assets around the potential mill and the favorable logistics system. Fibria had previously postponed this project, as well as an expansion of Veracel, as it sought to be a leader in the consolidation of the industry. Investments of about
The 'BBB-' IDR of
Any change in management's philosophy toward maintaining a stronger capital structure would be viewed negatively and could lead to a negative rating action. A significant increase in leverage ratios, above the levels projected by Fitch, and/or a sharp deterioration of market conditions could also pressure the classification. A debt financed acquisition could also lead to a downgrade. A positive rating action is not expected in the medium term.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology' (
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - Sala 401 B -
Source: Fitch Ratings
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