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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 20-F**

 

| **x** | **ANNUAL REPORT PURSUANT TO   SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the fiscal year ended****DECEMBER 31, 2013** |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Commission file number 1-15018

 
| **Fibria Celulose S.A.**                                                                                                                                                               |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (Exact name of Registrant as specified in its charter)                                                                                                                                 |
|                                                                                                                                                                                   |
| **N/A**                                                                                                                                                                                |
| (Translation of Registrant’s name into English)                                                                                                                                   |
|                                                                                                                                                                                   |
| **Federative Republic of Brazil**                                                                                                                                                      |
| (Jurisdiction of incorporation or organization)                                                                                                                                        |
|                                                                                                                                                                                   |
| **Alameda Santos, 1357, 6****th**** floor**

**01419-908, São Paulo, SP, Brazil**                                                                                            |
| (Address of principal executive offices)                                                                                                                                               |
|                                                                                                                                                                                   |
| **Guilherme Perboyre Cavalcanti**

**Chief Financial Officer and Investor Relations   Officer**

**Phone: (55 11) 2138-4565**

**Fax: (55 11) 2138-4065**

**Email: ir@fibria.com.br** |
| (Name, Telephone, E-mail and/or Facsimile number and Address of   Company Contact Person)                                                                                              |

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

| Title of each   class:                                                                                                       |   | Name of each   exchange on which registered: |
|------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|
| **Common Shares, without par value**                                                                                         |   | **New York Stock Exchange***                 |
| **American Depositary Shares (as evidenced by   American Depositary Receipts), each representing one share of Common Stock** |   | **New York Stock Exchange**                  |

 

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*                                         Not for trading purposes but only in connection with the registration on the New York Stock Exchange of American Depositary Shares representing those common shares.

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: **None**

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: **None**

 

The number of outstanding shares of each class of stock of Fibria Celulose S.A. as of **December 31, 2013:**

 

**553,934,646 Shares of Common Stock**

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

x Yes   o No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes   x No

 

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

o Yes   x No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer x |   | Accelerated filer o |   | Non-accelerated filer o |
|---------------------------|--------|---------------------|--------|-------------------------|

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

| U.S. GAAP o |   | International Financial Reporting Standards as issued   by the International Accounting Standards Board x |   | Other o |
|-------------|--------|-----------------------------------------------------------------------------------------------------------|--------|---------|

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

 

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**TABLE OF CONTENTS**

 
| ** **                                                                              | ** ** | **Page**   |
|-----------------------------------------------------------------------------------------|------------|------------|
| ** **                                                                              | ** ** | ** ** |
| ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND   ADVISERS                         |       | 5          |
|                                                                                    |       |       |
| ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                         |       | 5          |
|                                                                                    |       |       |
| ITEM   3. KEY INFORMATION                                                               |       | 5          |
|                                                                                    |       |       |
| ITEM 4. INFORMATION ON FIBRIA                                                           |       | 26         |
|                                                                                    |       |       |
| ITEM 4A. UNRESOLVED STAFF COMMENTS                                                      |       | 62         |
|                                                                                    |       |       |
| ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                    |       | 62         |
|                                                                                    |       |       |
| ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                      |       | 91         |
|                                                                                    |       |       |
| ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY   TRANSACTIONS                             |       | 101        |
|                                                                                    |       |       |
| ITEM 8. FINANCIAL INFORMATION                                                           |       | 103        |
|                                                                                    |       |       |
| ITEM   9. THE OFFER AND LISTING                                                         |       | 109        |
|                                                                                    |       |       |
| ITEM 10. ADDITIONAL INFORMATION                                                         |       | 111        |
|                                                                                    |       |       |
| ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES   ABOUT MARKET RISK                   |       | 122        |
|                                                                                    |       |       |
| ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY   SECURITIES                       |       | 126        |
|                                                                                    |       |       |
| ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND   DELINQUENCIES                              |       | 127        |
|                                                                                    |       |       |
| ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF   SECURITY HOLDERS AND USE OF PROCEEDS |       | 127        |
|                                                                                    |       |       |
| ITEM 15. CONTROLS AND PROCEDURES                                                        |       | 127        |
|                                                                                    |       |       |
| ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                              |       | 128        |
|                                                                                    |       |       |
| ITEM   16B. CODE OF ETHICS                                                              |       | 128        |
|                                                                                    |       |       |
| ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                        |       | 128        |
|                                                                                    |       |       |
| ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR   AUDIT COMMITTEES                  |       | 129        |
|                                                                                    |       |       |
| ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER   AND AFFILIATED PURCHASERS      |       | 129        |
|                                                                                    |       |       |
| ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING   ACCOUNTANT                          |       | 129        |
|                                                                                    |       |       |
| ITEM 16G. CORPORATE GOVERNANCE                                                          |       | 129        |
|                                                                                    |       |       |
| ITEM 16H. MINE SAFETY DISCLOSURE                                                        |       | 131        |
|                                                                                    |       |       |
| ITEM 17. FINANCIAL STATEMENTS                                                           |       | 132        |
|                                                                                    |       |       |
| ITEM 18. FINANCIAL STATEMENTS                                                           |       | 132        |
|                                                                                    |       |       |
| ITEM   19. EXHIBITS                                                                     |       | 132        |

 

2

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**INTRODUCTION**

 

All references in this annual report to:

 

·                  “Fibria”, “we”, “our”, “us” and the “Company” are to Fibria Celulose S.A. (formerly Votorantim Celulose e Papel S.A.) and its consolidated subsidiaries (unless the context otherwise requires);

 

·                  “Votorantim Group” are to the group of companies, controlled by the Ermírio de Moraes family;

 

·                  “Votorantim Participações S.A.” or “VPar” are to the holding company which controls two areas of the Group’s business: Votorantim Industrial and Votorantim Finance, each of them containing one or more business units;

 

·                  “Votorantim Industrial S.A.”, or “VID,” are to one of our controlling shareholders and is a subsidiary of VPar;

 

·                  “Aracruz” are to Aracruz Celulose S.A. and its subsidiaries;

 

·                  “Aracruz Acquisition” are to our acquisition of 100% equity interest in Aracruz as a result of (1) Fibria’s acquisition in the first half of 2009 of (a) Arapar S.A., or Arapar, and São Teófilo Representações e Participações S.A., or São Teófilo, whose sole assets consisted of 12.35% of the total share capital, including 28.0% of the voting share capital, of Aracruz and (b) 12.35% of the total share capital, including 28.0% of the voting share capital, of Aracruz from Mr. Joseph Yacoub Safra and Mr. Moises Yacoub Safra, or the Safra Family, (2) the acquisition of 13,828,307 common shares of Aracruz, representing 3.04% of the outstanding common shares of Aracruz and 1.34% of the total share capital of Aracruz, in the mandatory tender offer launched by Fibria that took place on July 1, 2009, (3) the acquisition of 56,880,857 common share of Aracruz from BNDES on May 27, 2009, and (4) the Stock Swap Merger as described in Item 4. Information on Fibria — A. History and Development of Fibria;

 

·                  “BNDES” are to the Brazilian National Bank for Social and Economic Development owned by the Brazilian federal government;

 

·                  “BNDESPar” are to BNDES Participações S.A., a wholly owned subsidiary of BNDES, the Brazilian economic and social development bank owned by the Brazilian federal government;

 

·                  the “Ermírio de Moraes family” are to the families of Antônio Ermírio de Moraes, Ermírio Pereira de Moraes, Maria Helena de Moraes Scripilliti and José Ermírio de Moraes (in memoriam);

 

·                  the “Brazilian government” are to the federal government of the Federative Republic of Brazil and its agencies ;

 

·                  “*Real*,” “*Reais*” or “R$” are to Brazilian *Reais*, the official currency of Brazil;

 

·                  “U.S.$”, “Dollars” or “U.S. Dollars” are to United States Dollars;

 

·                  “ton” and “MT” are to one metric ton (1,000 kilograms). One kilogram equals approximately 2.2 pounds;

 

·                  “kiloton” are to one thousand metric tons (1,000 tons);

 

·                  “BEKP” are to bleached eucalyptus kraft pulp;

 

·                  “ADSs” are to our American Depositary Shares, each representing one of our common shares;

 

·                  “CVM” are to the Comissão de Valores Mobiliários, the Brazilian securities commission;

 

·                  “Central Bank” are to the Brazilian Central Bank, the monetary authority of Brazil;

 

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·                  “VCP” are to Votorantim Celulose e Papel S.A. or Fibria before the merger of Aracruz;

 

·                  “Fibria Trading” are to Fibria Trading International KFT (formerly known as Aracruz Trading International Ltd);

 

·                  “Fibria — MS” are to Fibria — MS Celulose Sul Matogrossence;

 

·                  “Portocel” are to a port facility in the State of Espírito Santo, which is operated by Portocel — Terminal Especializado de Barra do Riacho S.A., a joint venture between Fibria and Celulose Nipo-Brasileira S.A. — CENIBRA;

 

·                “Parkia” are to Parkia Participações S.A.

 

·                  “Commission” are to the Securities and Exchange Commission;

 

·                  “U.S. GAAP” are to generally accepted accounting principles in the United States;

 

·                  “IFRS” are to International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB);

 

·                  “NYSE” are to the New York Stock Exchange; and

 

·                  “BM&FBOVESPA” are to Bolsa de Valores, Mercadorias e Futuros S.A., the Brazilian Stock Exchange.

 

As used in this annual report, one hectare equals approximately 2.471 acres and one kilometer equals approximately 0.621 miles. References in this annual report to nominal production capacity or production capacity mean annual projected capacity for which the facility was designed, with the facility operating under optimal conditions, 24 hours a day, for 365 days a year and subject to reductions in rates of production for scheduled maintenance only. Actual production capacity may vary depending on operating conditions, the grades of pulp produced and other factors.

 

**PRESENTATION OF FINANCIAL AND OTHER DATA**

 

We have prepared our consolidated financial statements as of and for the years ended December 31, 2013, 2012 and 2011 included herein in compliance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The selected financial information should be read together with our consolidated financial statements, including the notes thereto, included elsewhere in this annual report. Aracruz has been consolidated since January 1, 2009.

 

The Brazilian *Real* is our functional currency and all our subsidiaries, and is also the currency used for the preparation and presentation of the consolidated financial statements.

 

We make statements in this annual report about our competitive position and market share in, and the market size of, the market pulp industry. We have made these statements on the basis of statistics and other information from third-party sources that we believe are reliable. We derive this third-party information principally from monthly reports published by Bracelpa — Associação Brasileira de Celulose e Papel (the Brazilian Association of Pulp and Paper), RISI (Resource Information Systems Inc.), PPPC (Pulp and Paper Product Council), Brian McClay, Poyry and Hawkins Wright, all of them specialized consultants in the pulp market. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share, market size or market growth data provided by third parties or by industry or general publications.

 

**FORWARD-LOOKING STATEMENTS**

 

This annual report includes forward-looking statements, principally in “Item 3. Key Information — D. Risk Factors”, “Item 4. Information on Fibria — B. Business Overview” and “Item 5. Operating and Financial Review and Prospects”. We have based these forward-looking statements largely on our current expectations about future events and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions, including among other things:

 

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·                  our direction and future operation;

 

·                  the implementation of our principal operating strategies; including our potential participation in acquisition or joint venture transactions or other investment opportunities;

 

·                  general economic, political and business conditions, both in Brazil and in our principal export markets;

 

·                  industry trends and the general level of demand for, and change in the market prices of our products;

 

·                  existing and future governmental regulation, including tax, labor, pension and environmental laws and regulations and import tariffs in Brazil and in other markets in which we operate or to which we export our products;

 

·                  the competitive nature of the industries in which we operate;

 

·                  our level of capitalization, including the levels of our indebtedness and overall leverage;

 

·                  the cost and availability of financing;

 

·                  our compliance with the covenants contained in the instruments governing our indebtedness;

 

·                  the implementation of our financing strategy and capital expenditure plans;

 

·                  inflation and fluctuations in currency exchange rates, including the Brazilian *Real* and the U.S. Dollar;

 

·                  legal and administrative proceedings to which we are or may become a party;

 

·                  the volatility of the prices of the raw materials we sell or purchase to use in our business;

 

·                  other statements included in this annual report that are not historical; and

 

·      other factors or trends affecting our financial condition or results of operations, including those factors identified or discussed in “Item 3. Key Information — D. Risk Factors.”

 

The words “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “hope”, “intend”, “may”, “might”, “should”, “would”, “will”, “understand” and similar words are intended to identify forward looking statements. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not occur and are not guarantees of future performance. Our actual results and performance could differ substantially.

 

**PART I**

 

**ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**

 

Not applicable.

 

**ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE**

 

Not applicable.

 

**ITEM 3.  KEY INFORMATION**

 

**A.            Selected Financial Data**

 

IFRS Summary Financial and Operating Data

 

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The following table presents a summary of our selected financial and operating data at the dates and for each of the periods indicated. The following information should be read together with our consolidated financial statements, including the notes thereto, included elsewhere in this annual report, “Presentation of Financial and Other Data” and “Item 5. Operating and Financial Review and Prospects”.

 

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| ** **                                                                                     | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** |
|------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| **CONSOLIDATED STATEMENT OF PROFIT OR**                                    | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| **LOSS **                                                                                 | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** | **2010**              | ** ** | **2009**              | ** ** |
| **(in thousands of Reais, unless otherwise indicated)**          | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** |
| ** **                                                                                     |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| **Revenues**                                                                                   |       | 6,917,406             |       | 6,174,373             |       | 5,854,300             |       | 6,283,387             |       | 5,292,972             |       |
| Cost of sales                                                                                  |       | (5,382,688            | )          | (5,237,258            | )          | (5,124,269            | )          | (4,694,659            | )          | (4,555,729            | )          |
| **Gross profit**                                                                               |       | 1,534,718             |       | 937,115               |       | 730,031               |       | 1,588,728             |       | 737,243               |       |
| **Operating income (expenses):**                                                               |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Selling, general and administrative                                                            |       | (647,669              | )          | (584,054              | )          | (605,353              | )          | (593,744              | )          | (593,097              | )          |
| Equity in losses of associate                                                             |       | —                |       | (592                  | )          | (414                  | )          | (7,328                | )          | (1,133                | )          |
| Gain on remeasurement of 12.35% equity interest held prior to   Aracruz acquisition       |       | —                |       | —                |       | —                |       | —                |       | 1,378,924             |       |
| Other operating income (expenses), net                                                         |       | 823,398               |       | 354,026               |       | 253,395               |       | (7,499                | )          | 230,092               |       |
|                                                                                           |       | 175,729               |       | (230,620              | )          | (352,372              | )          | (608,571              | )          | 1,014,786             |       |
| **Income before financial income and expenses**                                                |       | 1,710,447             |       | 706,495               |       | 377,659               |       | 980,157               |       | 1,752,029             |       |
| Financial income                                                                               |       | 110,723               |       | 167,646               |       | 217,000               |       | 374,426               |       | 454,335               |       |
| Financial expenses                                                                             |       | (1,016,526            | )          | (944,405              | )          | (873,005              | )          | (1,192,532            | )          | (1,318,851            | )          |
| Result of derivative financial instruments                                                     |       | (215,313              | )          | (184,465              | )          | (276,877              | )          | 152,284               |       | 210,086               |       |
| Foreign exchange (loss) gain and indexation                                                    |       | (932,907              | )          | (735,001              | )          | (935,789              | )          | 301,604               |       | 2,225,965             |       |
|                                                                                           |       | (2,054,023            | )          | (1,696,225            | )          | (1,868,671            | )          | (364,218              | )          | 1,571,535             |       |
| **(Losses) income from continuing operations before   income taxes**                           |       | (343,576              | )          | (989,730              | )          | (1,491,012            | )          | 615,939               |       | 3,323,564             |       |
| Current (expense) income tax                                                                   |       | (619,606              | )          | (42,167               | )          | 67,835                |       | 59,627                |       | (30,660               | )          |
| Deferred income (expense) tax                                                                  |       | 265,600               |       | 333,927               |       | 314,408               |       | (146,924              | )          | (796,529              | )          |
| **Net (losses) income from continuing operations**                                             |       | (697,582              | )          | (697,970              | )          | (1,108,769            | )          | 528,642               |       | 2,496,375             |       |
| ** **                                                                                     | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** |
| **Discontinued operations**                                                                    | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** |
| Income from discontinued operations                                                            |       | —                |       | —                |       | 364,629               |       | 112,897               |       | 141,053               |       |
| Income tax expense, net                                                                        |       | —                |       | —                |       | (123,974              | )          | (38,385               | )          | (47,958               | )          |
| Net income from discontinued operations                                                        |       | —                |       | —                |       | 240,655               |       | 74,512                |       | 93,095                |       |
| **Net (losses) income**                                                                        |       | (697,582              | )          | (697,970              | )          | (868,114              | )          | 603,154               |       | 2,589,470             |       |
|                                                                                           |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Net (losses) income attributable to shareholders of the Company —   continuing operations |       | (706,422              | )          | (704,706              | )          | (1,113,277            | )          | 524,134               |       | 1,836,130             |       |
| Net income attributable to shareholders of the Company — discontinued   operations        |       | —                |       | —                |       | 240,655               |       | 74,512                |       | 93,095                |       |
| Net income attributable to non-controlling interest                                            |       | 8,840                 |       | 6,736                 |       | 4,508                 |       | 4,508                 |       | 660,245               |       |
| **Net (losses) income**                                                                        |       | (697,582              | )          | (697,970              | )          | (868,114              | )          | 603,154               |       | 2,589,470             |       |
| **Basic and diluted (losses) earnings per share or   ADSs (in Brazilian *Reais*):**(1)    |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Continuing operations                                                                          |       | (1.28                 | )          | (1.34                 | )          | (2.38                 | )          | 1.12                  |       | 7.17                  |       |
| Discontinued operations                                                                        |       | —                |       | —                |       | 0.51                  |       | 0.15                  |       | 0.39                  |       |
| **Weighted average number of shares outstanding   (in thousands):**                       |       | 553,592               |       | 524,925               |       | 467,592               |       | 467,721               |       | 241,086               |       |
| **Dividends and interest attributable to capital per   share (in Brazilian *Reais*:**          |       | —                |       | —                |       | —                |       | 0.30                  |       | 0.26                  |       |
| **Dividends and interest attributable to capital per   share (in U.S. Dollars)**(2):           |       | —                |       | —                |       | —                |       | 0.17                  |       | 0.13                  |       |

 

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(1)                 Based on the weighted average number of shares outstanding for each year.

(2)                 Amount translated at the average rate of each year into U.S. Dollars for convenience. You should not construe this translation as representations that the *Real* amount actually represents these U.S. Dollar amounts or could be converted into U.S. Dollar at the rates indicated or at any other rate.

 

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**CONSOLIDATED BALANCE SHEET**

**(in thousands of Reais)**

 
| ** **                                     | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** |
|------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                     | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                     | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** | **2010**              | ** ** | **2009**              | ** ** |
| ** **                                     | ** ** | ** **            | ** ** | **(restated)**        | ** ** | **(restated)**        | ** ** | **(restated)**        | ** ** | **(restated)**        | ** ** |
| Assets                                         | ** ** | ** **            |       |                  |       |                  |       |                  |       |                  |       |
| Current                                        |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Cash and cash   equivalents                    |       | 1,271,752             |       | 943,856               |       | 381,915               |       | 431,463               |       | 645,479               |       |
| Marketable securities                          |       | 1,068,182             |       | 2,351,986             |       | 1,677,926             |       | 1,640,935             |       | 3,251,903             |       |
| Derivative instruments                         |       | 22,537                |       | 18,344                |       | 31,638                |       | 80,502                |       | 5,122                 |       |
| Trade accounts   receivable, net               |       | 382,087               |       | 754,768               |       | 945,362               |       | 1,138,176             |       | 1,167,151             |       |
| Accounts receivable -   land and building sold |       | 902,584               |       |                  |       |                  |       |                  |       |                  |       |
| Inventory                                      |       | 1,265,730             |       | 1,183,142             |       | 1,178,707             |       | 1,013,841             |       | 834,371               |       |
| Recoverable taxes                              |       | 201,052               |       | 209,462               |       | 327,787               |       | 282,423               |       | 231,294               |       |
| Assets held for sale                           |       | 589,849               |       | 589,849               |       | 644,166               |       | 1,196,149             |       | —                |       |
| Other assets                                   |       | 103,228               |       | 194,526               |       | 108,062               |       | 115,165               |       | 254,222               |       |
|                                           |       |                  |       |                  |       |                  |       |                  |       |                  |       |
|                                           |       | 5,807,001             |       | 6,245,933             |       | 5,295,563             |       | 5,898,654             |       | 6,389,542             |       |
|                                           |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Non-current                                    |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Marketable securities                          |       | 48,183                |       | —                |       | —                |       | —                |       | 65,439                |       |
| Derivative instruments                         |       | 71,017                |       | 26,475                |       | 43,446                |       | 52,470                |       | —                |       |
| Related parties   receivables                  |       | 7,142                 |       | 6,245                 |       | 5,469                 |       | 5,307                 |       | —                |       |
| Deferred taxes                                 |       | 968,116               |       | 879,606               |       | 995,368               |       | 1,330,614             |       | 1,280,909             |       |
| Recoverable taxes                              |       | 743,883               |       | 657,830               |       | 677,232               |       | 590,967               |       | 372,509               |       |
| Advances to suppliers                          |       | 726,064               |       | 740,310               |       | 760,611               |       | 693,490               |       | 720,127               |       |
| Judicial deposits                              |       | 197,506               |       | 157,567               |       | 137,060               |       | 110,364               |       | —                |       |
| Other assets                                   |       | 252,135               |       | 172,612               |       | 95,060                |       | 145,768               |       | 120,644               |       |
| Investments                                    |       | 46,922                |       | 40,674                |       | 7,506                 |       | 8,301                 |       | 15,430                |       |
| Biological assets                              |       | 3,423,434             |       | 3,325,604             |       | 3,264,210             |       | 3,550,636             |       | 3,791,084             |       |
| Property, plant and   equipment                |       | 9,824,504             |       | 11,174,561            |       | 11,841,247            |       | 12,979,431            |       | 14,037,031            |       |
| Intangible assets                              |       | 4,634,265             |       | 4,717,163             |       | 4,809,448             |       | 4,906,443             |       | 5,443,354             |       |
|                                           |       |                  |       |                  |       |                  |       |                  |       |                  |       |
|                                           |       | 20,943,171            |       | 21,898,647            |       | 22,636,657            |       | 24,373,791            |       | 25,846,527            |       |
|                                           |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Total assets                                   |       | 26,750,172            |       | 28,144,580            |       | 27,932,220            |       | 30,272,445            |       | 32,236,069            |       |

 

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| ** **                                        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                        | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                        | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** | **2010**              | ** ** | **2009**              | ** ** |
| Liabilities and   shareholders’ equity       |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Current                                           |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Loans and financing                               |       | 2,972,361             |       | 1,138,005             |       | 1,092,108             |       | 623,684               |       | 1,790,256             |       |
| Trade payable                                     |       | 586,541               |       | 435,939               |       | 373,692               |       | 424,488               |       | 384,282               |       |
| Payroll, profit sharing   and related charges     |       | 129,386               |       | 128,782               |       | 134,024               |       | 121,691               |       | 123,326               |       |
| Taxes payable                                     |       | 55,819                |       | 41,368                |       | 53,463                |       | 63,436                |       | 39,400                |       |
| Derivative instruments                            |       | 106,793               |       | 54,252                |       | 163,534               |       | —                |       | —                |       |
| Payable - Aracruz   acquisition                   |       | —                |       | —                |       | —                |       | 1,440,676             |       | 2,430,289             |       |
| Liabilities related to   the assets held for sale |       | 470,000               |       | 470,000               |       | —                |       | 95,926                |       | —                |       |
| Dividends payables                                |       | 2,374                 |       | 2,076                 |       | 1,520                 |       | 266,300               |       | —                |       |
| Other payables                                    |       | 125,081               |       | 204,833               |       | 142,367               |       | 156,135               |       | 53,664                |       |
|                                              |       |                  |       |                  |       |                  |       |                  |       |                  |       |
|                                              |       | 4,448,355             |       | 2,475,255             |       | 1,960,708             |       | 3,192,336             |       | 4,821,217             |       |

 
| ** **                                           | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                           | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** | **2010**              | ** ** | **2009**              | ** ** |
| Non-current                                          |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Loans and financing                                  |       | 6,800,736             |       | 9,629,950             |       | 10,232,309            |       | 9,957,773             |       | 9,511,141             |       |
| Derivative instruments                               |       | 451,087               |       | 263,646               |       | 125,437               |       | —                |       | —                |       |
| Taxes payable                                        |       | 159                   |       | 77,665                |       | 76,510                |       | 75,365                |       | 72,631                |       |
| Deferred taxes                                       |       | 235,896               |       | 227,923               |       | 739,878               |       | 1,222,360             |       | 975,420               |       |
| Related parties payable                              |       | —                |       | —                |       | —                |       | —                |       | —                |       |
| Provision for   contingencies                        |       | 128,838               |       | 104,813               |       | 101,594               |       | 265,392               |       | 340,934               |       |
| Payable - Aracruz   acquisition                      |       | —                |       | —                |       | —                |       | —                |       | 1,253,890             |       |
| Other payables                                       |       | 193,847               |       | 194,521               |       | 163,096               |       | 151,634               |       | 180,301               |       |
|                                                 |       |                  |       |                  |       |                  |       |                  |       |                  |       |
|                                                 |       | 7,810,563             |       | 10,498,518            |       | 11,438,824            |       | 11,672,524            |       | 12,334,317            |       |
|                                                 |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Total liabilities                                    |       | 12,258,918            |       | 12,973,773            |       | 13,399,532            |       | 14,864,860            |       | 17,155,534            |       |
|                                                 |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Shareholders’ equity                            |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Share capital                                        |       | 9,729,006             |       | 9,729,006             |       | 8,379,397             |       | 8,379,397             |       | 8,379,397             |       |
| Share capital reserve                                |       | 2,688                 |       | 2,688                 |       | 2,688                 |       | 2,688                 |       | 2,688                 |       |
| Treasury shares                                      |       | (10,346               | )          | (10,346               | )          | (10,346               | )          | (10,346               | )          | (756                  | )          |
| Statutory reserves                                   |       | 3,109,281             |       | 3,815,584             |       | 4,520,290             |       | 5,381,771             |       | 5,046,067             |       |
| Other reserves                                       |       | 1,614,270             |       | 1,596,666             |       | 1,611,837             |       | 1,630,642             |       | 1,634,214             |       |
|                                                 |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Equity attributable to   shareholders of the Company |       | 14,444,899            |       | 15,133,598            |       | 14,503,866            |       | 15,384,152            |       | 15,061,610            |       |
| Equity attributable to   non-controlling interest    |       | 46,355                |       | 37,209                |       | 28,822                |       | 23,433                |       | 18,925                |       |
|                                                 |       |                  |       |                  |       |                  |       |                  |       |                  |       |
|                                                 |       | 14,491,254            |       | 15,170,807            |       | 14,532,688            |       | 15,407,585            |       | 15,080,535            |       |
|                                                 |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Total liabilities and shareholders’ equity      |       | 26,750,172            |       | 28,144,580            |       | 27,932,220            |       | 30,272,445            |       | 32,236,069            |       |

 

Note:        The Consolidated Balance Sheet as at December 31, 2012, 2011, 2010 and 2009 are being restated due to the retrospective impact of the adoption of IAS 19 (R), as mentioned in Note 2.26 to our 2013 consolidated financial statements.

 

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**OTHER FINANCIAL DATA**

 
| ** **                                                                            | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                            | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| **(in thousands of Reais, unless otherwise indicated)** | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** | **2010**              | ** ** | **2009**              | ** ** |
|                                                                                  |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Gross margin                                                                          |       | 22.2                  | %          | 15.2                  | %          | 12.5                  | %          | 25.3                  | %          | 13.9                  | %          |
| Operating margin                                                                      |       | 24.7                  | %          | 11.4                  | %          | 6.5                   | %          | 15.6                  | %          | 33.1                  | %          |
| Capital expenditures(3)                                                               |       | 1,286,684             |       | 1,078,267             |       | 1,416,668             |       | 1,066,129             |       | 1,612,676             |       |
| Depreciation, amortization and depletion                                              |       | 1,751,947             |       | 1,720,067             |       | 1,838,827             |       | 1,616,705             |       | 1,650,820             |       |
| Cash flow provided by (used in):                                                      |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Operating activities                                                                  |       | 2,163,530             |       | 1,914,333             |       | 1,348,200             |       | 1,696,086             |       | 789,791               |       |
| Investing activities                                                                  |       | 433,849               |       | (1,160,803            | )          | (727,666              | )          | (1,818,251            | )          | (3,410,300            | )          |
| Financing activities                                                                  |       | (2,275,991            | )          | (258,250              | )          | (649,133              | )          | (60,561               | )          | 3,232,052             |       |

 

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(3)                  Excludes the capital expenditures related to Conpacel for 2010, as Conpacel was sold in 2011 and its operations were classified as discontinued operations.

 

**OPERATIONAL DATA**

 
| ** **                                         | ** ** | **As at and for** | ** ** | **As at and for** | ** ** | **As at and for** | ** ** | **As at and for** | ** ** | **As at and for** | ** ** |
|----------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                         | ** ** | **the year ended**     | ** ** | **the year ended**     | ** ** | **the year ended**     | ** ** | **the year ended**     | ** ** | **the year ended**     | ** ** |
| ** **                                         | ** ** | **December 31,**            | ** ** | **December 31,**            | ** ** | **December 31,**            | ** ** | **December 31,**            | ** ** | **December 31,**            | ** ** |
| ** **                                         | ** ** | **2013**                         | ** ** | **2012**                         | ** ** | **2011**                         | ** ** | **2010**                         | ** ** | **2009**                         | ** ** |
|                                               |       |                             |       |                             |       |                             |       |                             |       |                             |       |
| Number of employees(4)                             |       | 4,192                            |       | 4,136                            |       | 4,301                            |       | 5,028                            |       | 4,816                            |       |
| Nominal production capacity (thousand metric tons) |       |                             |       |                             |       |                             |       |                             |       |                             |       |
| Pulp                                               |       | 5,300                            |       | 5,250                            |       | 5,250                            |       | 5,250                            |       | 5,400                            |       |
| Paper(5)                                           |       | —                           |       | —                           |       | —                           |       | 190                              |       | 385                              |       |
| Sales volumes (thousand metric tons):              |       |                             |       |                             |       |                             |       |                             |       |                             |       |
| Domestic market pulp                               |       | 447                              |       | 531                              |       | 509                              |       | 424                              |       | 382                              |       |
| Export market pulp                                 |       | 4,751                            |       | 4,826                            |       | 4,632                            |       | 4,485                            |       | 4,704                            |       |
| Total market pulp                                  |       | 5,198                            |       | 5,357                            |       | 5,141                            |       | 4,909                            |       | 5,086                            |       |
|                                               |       |                             |       |                             |       |                             |       |                             |       |                             |       |
| Domestic market paper                              |       | —                           |       | —                           |       | 88                               |       | 113                              |       | 166                              |       |
| Export market paper                                |       | —                           |       | —                           |       | 12                               |       | 8                                |       | 2                                |       |
| Total paper(5)                                     |       | —                           |       | —                           |       | 100                              |       | 121                              |       | 168                              |       |

 

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(4)                 The decrease in the number of employees from 2010 to 2011 reflects the sale of Piracicaba in September 2011 as in 2010 Piracicaba’s employees were included in the total.

(5)                 The decrease in the paper production and sales volume reflects the sale of Piracicaba in 2011. See “Item 4. Information on Fibria — A. History and Development of Fibria — Strategic Business Agreement (SBA) with Oji Paper”. Information of production capacity is measured as of December 31 of each year.

 

**Exchange Rates**

 

Since 1999, the Brazilian Central Bank (Central Bank) has allowed the U.S. Dollar-*Real* exchange rate to float freely, and since then, the exchange rate has fluctuated considerably. The Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict the Central Bank’s behavior related to the exchange rate market. The *Real* may depreciate or appreciate against the U.S. Dollar substantially in the future.

 

The following tables set forth the exchange rate, expressed in *Reais* per U.S. Dollar (R$/U.S.$) for the periods indicated, as reported by the Central Bank.

 

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| ** **                                 | ** ** | **Exchange Rate of Reais per U.S.$ 1.00** | ** ** |
|--------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| **Year Ended December 31,** | ** ** | **Low**                                                                 | ** ** | **High** | ** ** | **Average(1)** | ** ** | **Period-end** | ** ** |
|                                       |       |                                                                    |       |   |   |   |   |   |   |
| 2009                                       |       | 1.7024                                                                  |       | 2.4218 |   | 1.9935 |   | 1.7412 |   |
| 2010                                       |       | 1.6554                                                                  |       | 1.8811 |   | 1.7593 |   | 1.6662 |   |
| 2011                                       |       | 1.5345                                                                  |       | 1.9016 |   | 1.6746 |   | 1.8758 |   |
| 2012                                       |       | 1.7024                                                                  |       | 2.1121 |   | 1.9550 |   | 2.0435 |   |
| 2013                                       |       | 1.9528                                                                  |       | 2.4457 |   | 2.1605 |   | 2.3426 |   |

 
| **Month Ended**      | ** ** | **Low** | ** ** | **High** | ** ** | **Average(1)** | ** ** | **Period-end** | ** ** |
|---------------------------|------------|---------|------------|----------|------------|----------------|------------|----------------|------------|
|                      |       |    |       |     |       |           |       |           |       |
| September 30,   2013 |       | 2.2031  |       | 2.3897   |       | 2.2705         |       | 2.2300         |       |
| October 31,   2013   |       | 2.1611  |       | 2.2123   |       | 2.1886         |       | 2.2026         |       |
| November 30,   2013  |       | 2.2426  |       | 2.3362   |       | 2.2954         |       | 2.3249         |       |
| December 31,   2013  |       | 2.3102  |       | 2.3817   |       | 2.3455         |       | 2.3426         |       |
| January 31,   2014   |       | 2.3335  |       | 2.4397   |       | 2.3822         |       | 2.4263         |       |
| February 24,   2014  |       | 2.3391  |       | 2.4238   |       | 2.3947         |       | 2.3391         |       |

 

----

Source: Brazilian Central Bank.

(1)                                 Represents the daily average exchange rate during each of the relevant periods.

 

**B.****                                   ****Capitalization and Indebtedness**

 

Not applicable.

 

**C.****                                   ****Reasons for the Offer and Use of Proceeds**

 

Not applicable.

 

**D.****                                   ****Risk Factors**

 

We are subject to various risks resulting from changing competitive, economic, political and social conditions that could harm our business, results of operations or financial condition. The risks described below, although not being the only ones we face, are the most important ones.

 

**Risks Relating to our Business**

 

***The market prices for our******pulp******products are cyclical***.

 

The prices we are able to obtain for our products depend on prevailing world prices for market pulp. World pulp prices have historically been cyclical and subject to significant fluctuations over short periods of time depending on a number of factors, including:

 

·                  global demand for pulp products;

 

·                  global pulp production capacity and inventories;

 

·                  strategies adopted by major pulp producers; and

 

·                  availability of substitutes for our pulp products.

 

All of these factors are beyond our control.

 

Price fluctuations occur not only from year to year but also within a given year as a result of global and regional economic conditions, capacity constraints, mill openings and closures, supply of and demand for both raw materials and

 

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finished products, among other factors. In 2009, the global economic slowdown affected pulp prices globally with the Asian market registering the most significant decline in prices, falling to U.S.$395 per ton as of March 31, 2009, and recovering to U.S.$658 per ton as of December 31, 2009. In 2009, BEKP average market prices were U.S.$623 per ton in North America, U.S.$562 per ton in Europe and U.S.$497 per ton in Asia. Through 2010, the global economy continued its recovery and provided improved conditions for the pulp and paper markets leading BEKP average prices to reach U.S.$879 per ton in North America, U.S.$844 per ton in Europe and U.S.$777 per ton in Asia. Through 2011, the global economy again impacted the pulp market, which had an uptrend in the first half of the year, but ended the year in a lower level than it started with BEKP average prices at U.S.$865 per ton, U.S.$810 per ton and U.S.$699 per ton in North America, Europe and Asia, respectively. In 2012, the uncertainties surrounding the economic recession in Europe provided an unstable BEKP price environment. After following an upward trend in the first half of 2012, prices presented consecutive weekly decreases during the third quarter, but regained strength in the last three months of the year, leading BEKP prices to an annual average of U.S.$815 per ton in North America, U.S.$751 per ton in Europe and U.S.$635 per ton in Asia. In 2013, prices continued to climb during the most part of the first half of the year, due to relatively stable supply levels and strong demand. However, as the summer in the Northern Hemisphere approached, slower seasonal demand introduced prices to a new cycle of decline that lasted until November, when prices started to show signs of recovery, ending the year at an annual average of U.S.$870 per ton in North America, U.S.$791 per ton in Europe and U.S.$673 per ton in Asia.

 

Discounts from list prices are frequently granted by sellers to significant purchasers. Although we have long-term relationships with many of our customers, no assurance can be given that the prices for pulp will stabilize or not decline further in the future, or that demand for our products will not decline in the future. As a result, no assurance can be given that we will be able to operate our production facilities in a profitable manner in the future. A significant decline in the price of one or more of our products could have a material adverse effect on our net operating revenues, operating income and net income.

 

***China’s importance in the global pulp markets has increased in recent years. Any negative economic development in China could rapidly impact exports, adversely affecting our revenues, cash flow and profitability.***

 

According to market statistics (PPPC), Chinese demand represented 28% of the global market pulp demand in 2013, and this consumption has increased at an annual average growth rate of 11% since 2004, above the global average of 2%. The recent investments in paper and board machines in China have been boosting pulp demand in China; however, the volatility of Chinese demand due to speculative buying movement is a key risk for any short-term demand forecast.

 

***Global crises and subsequent economic slowdowns like those that occurred during 2008 and 2009 may adversely affect global pulp demand. As a result, our financial condition and results of operations may be adversely affected.***

 

Demand for our pulp products is directly linked to overall economic activity within those international markets in which we sell our products. After a steady period of growth between 2003 and 2007, the marked drop in demand resulting from the global economic crisis of 2008-2009 once again demonstrated the vulnerability of the pulp market to international volatility. From mid 2009 through 2010, the global economy recovered and provided improved conditions for the pulp market. In 2011, the market pulp industry had two distinct phases. During the first half of the year, the global market pulp demand increased by 7.7% over 2010, mostly due to strong Chinese demand. Beginning in July, the European crisis and its effects on the global economy negatively impacted world pulp demand. In 2012, the unstable economic environment continued pressuring pulp demand; however, positive results in emerging regions offset the losses in mature markets, leading to higher pulp demand compared to the previous year. Despite the persistant tepid economic climate in 2013, pulp demand grew by 3.2% with improvements seen in almost all major regions of the globe, especially due to higher investments in new paper capacity. A continued decline in the level of activity in either the domestic or the international markets within which we operate could adversely affect both the demand for and the price of our products and have a material adverse effect on us.

 

The deterioration of global economic conditions could, among other things:

 

·                  further negatively impact global demand for pulp, or further lower market prices for our products, which could result in a continued reduction of our sales, operating income and cash flows;

 

·                  make it more difficult or costly for us to obtain financing for our operations or investments or to refinance our debt in the future;

 

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·                  impair the financial condition of some of our customers, suppliers or counterparties to our derivative instruments, thereby increasing customer bad debts or non-performance by suppliers or counterparties;

 

·                  decrease the value of certain of our investments; and

 

·                  impair the financial viability of our insurers.

 

***New expansion projects that have started up and others that are expected to reach the market in the next years may adversely affect our competitiveness.***

 

From 2013 up to 2016, a number of players in the industry are expected to install new pulp production capacity in South America and Asia. This new capacity, as completed, could result in a possible loss of market share, reduction of prices and shortage of raw materials with the resulting increase in their prices. Therefore, our results of operations and financial condition could be adversely affected.

 

***We may not be able to adjust production volume in a timely or cost-efficient manner in response to changes in demand.***

 

If we have to operate at significant idle capacity during periods of weak demand, we may be exposed to higher unit production costs since a significant portion of our cost structure is fixed in the short-term due to the high capital intensity of pulp operations. In addition, efforts to reduce costs during periods of weak demand could be limited by labor regulations or previous labor or government agreements. Conversely, during periods of high demand, our ability to rapidly increase production capacity is limited, which could render us unable to satisfy demand for our products. If we are unable to satisfy excess customer demand, we may lose market share.

 

***Our consolidated indebtedness will require that a significant portion of our cash flow be used to pay the principal and interest with respect to that indebtedness.***

 

As of December 31, 2013, our total consolidated indebtedness amounted to R$9,773 million, of which 69.6% represented long-term indebtedness.

 

It has been our strategy since 2009 and will continue over the next few years, to use a substantial portion of our consolidated cash flow to pay principal and interest with respect to this indebtedness.

 

The level of our indebtedness could have important consequences to the holders of our ADSs, including the following:

 

·                  the debt service requirements of our indebtedness could make it more difficult for us to make payments of dividends and other distributions to our shareholders, including the holders of our ADSs;

 

·                  Investment in pulp production requires a substantial amount of funds in order to form forests, expand production capacity, build infrastructure and preserve the environment. This need for significant capital is an important source of financial risk for the pulp industry. Our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements or other purposes could be limited;

 

·                  a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness and may not be available for other purposes;

 

·                  our level of indebtedness could limit our flexibility in planning for, or reacting to changes in, our business; and

 

·                  our level of indebtedness could make us more vulnerable in the event of a downturn in our business.

 

***Our exports expose us to political and economic risks in foreign countries.***

 

Our sales outside Brazil accounted for 92%, 91% and 85% of our total consolidated net revenues during the years ended December 31, 2013, 2012 and 2011, respectively. Our exports, primarily to Europe, North America and Asia, expose

 

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us to risks not faced by companies operating solely in Brazil or any other single country. For example, our exports may be affected by import restrictions and tariffs, other trade protection measures and import or export licensing requirements.

 

Additionally, the international pulp industry is highly competitive. Certain of our competitors may have greater financial strength and access to cheaper sources of capital, and consequently have the ability to support strategic expenditures directed to increase their market share.

 

Our future financial performance will depend significantly on economic conditions in our principal export markets. Other risks associated with our international activities include:

 

·                  significant fluctuations in global demand for pulp products, which could impact our sales, operating income and cash flows;

 

·                  the entrance of new pulp producers or mergers and acquisitions between existing producers, which could limit our competitiveness in the market;

 

·                  the inability to successfully continue to expand our production capacity at the same pace as our competitors could negatively affect our market share;

 

·                  the deterioration of global economic conditions could impair the financial condition of some of our customers, suppliers or counterparties to our derivative instruments, thereby increasing customer bad debts or non-performance by suppliers or counterparties;

 

·                  the downward pressure on pulp prices may affect our profitability;

 

·                  changes in foreign currency exchange rates (against U.S. Dollar) and inflation in the foreign countries in which we operate;

 

·                  exchange and international trade controls;

 

·                  changes in a specific country’s or regions economic conditions;

 

·                  crisis in financial markets and the threat of a global economic slowdown;

 

·                  cultural differences; such business practices;

 

·                  adverse consequences deriving from changes in regulatory requirements, including environmental rules, regulations and Certification requirements;

 

·                  difficulties and costs associated with complying with, and enforcing remedies under, a wide variety of complex international laws, treaties, and regulations;

 

·                  adverse consequences from changes in tax laws; and

 

·                  logistics costs, disruptions in shipping or reduced availability of freight transportation.

 

While we attempt to manage certain of these risks through the use of risk management programs, it cannot and does not fully eliminate these risks. An occurrence of any of these events may negatively impact our ability to transact business in certain existing or developing markets and have a material adverse effect on our business.

 

***We are subject to regulatory risk associated with our international operations.***

 

Fibria is subject to local, regional and global laws and regulations in such diverse areas as product safety, product claims, trademarks, competition, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes.

 

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Failure to comply with laws and regulations could expose Fibria to civil and/or criminal actions leading to damages, fines and criminal sanctions against us and/ our employees with possible consequences for our corporate reputation.

 

***Exchange rate instability may adversely affect our financial condition and results of operations and the market price of our shares and ADSs.***

 

Our production costs and operating expenses are substantially denominated in Brazilian *Reais* and most of our revenue and some assets are denominated in U.S. Dollars. As a result, exchange rate instability may adversely affect our financial condition and results of operations. It may also affect the amount of dividends we can distribute to our shareholders, including the holders of our ADSs and the market price of our shares and ADSs.

 

The Brazilian *Real*in 2010, as a result of an increase in foreign direct investments in Brazil, appreciated by 4.5% against the U.S. Dollar. Through August 2011, the *Real* maintained this appreciation trend. However, in September 2011, the worsening crisis in the Eurozone caused the sudden depreciation of the *Real*against the U.S. Dollar. As a result, the *Real* depreciated by 11.2% against the U.S Dollar in 2011. In 2012, the Brazilian Central Bank intervened several times to protect the *Real* from overvaluation. As a result, in 2012 the *Real* depreciated by 8.2% against the U.S. Dollar. In 2013, the positive outlook of a recovering economy in the US and in the Eurozone caused a rapid depreciation of several Emerging Markets currencies, including the *Real*. As a result, in 2013 the *Real* depreciated by 11% against the U.S. Dollar.

 

See item 11. Quantitative and qualitative Disclosures about market risk.

 

***Our business may be adversely impacted by risks related to hedging activities.***

 

We regularly enter into currency hedging transactions using financial derivatives instruments, in accordance with our Market Risk Management Policy. Hedging transactions aim to (1) protect our revenue (which is primarily denominated in U.S. Dollars) when converted to Brazilian *Reais*(our functional currency) and (2) convert part of our debt which is denominated in Brazilian *Reais* into U.S. Dollars.

 

We account for our derivative instruments at fair value, in accordance with IFRS. The fair value of such instruments may increase or decrease due to fluctuations in currency exchange rates prior to their settlement date. As a result we may incur unrealized losses due to these market risks factors. These fluctuations may also result from changes in economic conditions, investor sentiment, monetary and fiscal policies, the liquidity of global markets, international and regional political events, and acts of war or terrorism.

 

***We may be adversely affected by the imposition and enforcement of more stringent environmental regulations that would******require us to spend additional funds***.

 

Brazilian environmental requirements and regulations applicable to forests are complex and may vary between federal, state and local regulations. Requirements and restrictions vary among governmental entities. In addition, noncompliance with these laws, regulations and permits could result in criminal sanctions for us and for our employees. We could also be responsible for related environmental remediation costs, which could be substantial.

 

In addition, environmental laws and regulations in certain countries may be more stringent than the ones we are subject to in Brazil, which may lead to such countries imposing trade related sanctions against Brazil or our industry. Furthermore, our limited ability to comply with more stringent foreign environmental laws and regulations may prevent us from seeking lower financing cost from foreign governmental related or multilateral development organizations, which may condition future financing on our compliance with more stringent environmental laws and regulations.

 

***Actions by federal or state legislatures or public enforcement authorities may adversely affect our operations.***

 

In the past, the State of Espírito Santo, where our Aracruz mill is located, has enacted laws to restrict the planting of eucalyptus forests for purposes of pulp production. Although injunctive relief against those state laws has been obtained, and new state legislation has revoked them, there can be no assurance that similar laws will not be enacted in the future which would impose limitations or restrictions on planting eucalyptus in the region where we operate.

 

***We may be materially adversely affected if operations at the transportation, storage, distribution and port facilities we own or utilize were to experience significant interruptions.***

 

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Our operations are dependent upon the uninterrupted operation of transportation, storage, distribution and port facilities that we own or utilize. Operations at these facilities could be partially or completely shut down, temporarily or permanently, as a result of any number of circumstances that are not under our control, such as:

 

·                  catastrophic events;

 

·                  strikes or other labor difficulties;

 

·                  other disruptions in means of transportation; and

 

·                  suspension or termination of concessions granted to us or to our commercial partners or independent contractors relating to the right to provide a specific service.

 

Any significant interruption at these facilities or inability to transport products to or from these facilities (including through exports) or to or from our customers for any reason may materially adversely affect us.

 

***Our insurance coverage may be insufficient to cover our losses.***

 

Our insurance may be insufficient to cover losses that we might incur. We have comprehensive insurance with leading insurers to cover damages to our facilities caused by fire, general third-party liability for accidents and operational risks, and international and domestic transportation. We do not maintain insurance coverage against any risks related to our forests. The occurrence of losses or other damages not covered by insurance or that exceed our insurance limits could result in unexpected additional costs. “See Item 4. Information on Fibria — B. Business Overview — Insurance.”

 

***We face significant competition in some of our lines of business, which may adversely affect our market share and******profitability***.

 

The pulp industry is highly competitive. In the international pulp market, certain of our competitors may have greater financial strength and access to cheaper sources of capital, and consequently have the ability to support strategic expenditures directed to increase their market share. Our market share may be adversely affected if we are unable to successfully continue to expand our production capacity at the same pace as our competitors.

 

In addition, most markets for pulp are served by several suppliers, often from different countries. Many factors influence our competitive position, including mill efficiency and operating rates and the availability, quality and cost of wood, energy, water, chemicals, logistics and labor, and exchange rate fluctuations. Some of our competitors may have greater financial and marketing resources, and greater breadth of product offerings than we do. If we are unable to remain competitive with these producers in the future, our market share may be adversely affected.

 

In addition, downward pressure on the prices of pulp by our competitors may affect our profitability.

 

***Delays in the expansion of our facilities or in building new facilities may affect our costs and results of operations.***

 

As part of our strategy to increase our international market share and improve our competitiveness through greater economies of scale, we may expand our existing production facilities or build one or more production facilities. The expansion or construction of a production facility involves various risks. These risks include engineering, construction, regulatory and other significant challenges that may delay or prevent the successful operation of the project or significantly increase our costs. Our ability to complete successfully any expansion or new construction project on time is also subject to financing and other risks.

 

We may be adversely affected because:

 

·                  we may either not be able to complete any expansion or new construction project on time or within budget or be required by market conditions or other factors to delay the initiation of construction or the timetable to complete new projects or expansions;

 

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·                  our new or modified facilities may not operate at designed capacity or may cost more to operate than we expect;

 

·                  we may not be able to sell our additional production at attractive prices; and

 

·                  we may not have the cash or be able to acquire financing to implement our growth plans.

 

***Any downgrade in our credit ratings could adversely affect the availability of new financing and increase our cost of capital.***

 

In 2006 and 2007, the rating agencies, Fitch Ratings Inc., or Fitch, Moody’s Investor Service, Inc., or Moody’s, and Standard & Poor’s Ratings Group, or S&P, assigned an investment-grade rating to our foreign currency debt under foreign law, thus reducing our average cost of capital. However, in late 2008 and early 2009 Fitch, Moody’s and S&P reduced our rating to BB+/Negative, Ba1/Negative and BB/Negative, respectively. On October 13, 2009, Fitch further reduced our rating to BB/Stable. After the announcement of the sale of Conpacel and KSR in December 2010 (See Item 4. Information on Fibria — A. History and Development of Fibria) our rating outlook was changed from Stable to Positive by both Fitch and Moody’s. In March 2011, Fitch raised our rating to BB+/Stable. In November and December 2011, respectively, S&P and Moody’s both revised the outlook from positive to stable due to a slower deleverage path. In February 2012, Fitch affirmed Fibria’s rating at BB+/Stable based on the expectation that we will lower debt and leverage during 2012. In February 2013 Fitch changed the rating outlook for Fibria to positive from stable. In March 2013 S&P upgraded Fibria’s rating from BB/positive to BB+/stable. In September 2013 Moody’s changed our outlook from stable to positive. In February 2014 Fitch Ratings upgraded our credit rating to BBB- with a stable outlook, achieving so the Investment Grade status for this agency. All three agencies’ positive movement was mainly due to our pursuit of deleveraging despite market conditions, free cash flow generation along with our appropriate and conservative approach to liquidity and the headroom under our financial covenants.

 

The ratings currently assigned to our foreign currency debt under foreign law are BBB-/Stable by Fitch, Bal/Positive by Moody’s and BB+/Stable by S&P. If our ratings were to be downgraded by the rating agencies due to any external factor, our own operating performance and/or increased debt levels, our cost of capital may increase. Any downgrade could also negatively affect our operating and financial results and the availability of future financing.

 

***Our financing agreements include important covenants. Any default arising from a breach of such covenants could have a material adverse effect on us. In addition, our Bonds contain incurrence tests which if not met could also result in several relevant restrictions to us.***

 

We are party to several financing agreements that require us to maintain certain financial ratios or to comply with other specific covenants. Additionally, we are required under our bonds to satisfy incurrence tests which if not satisfied could trigger restrictions. These covenants and restrictions, some of which are subject to certain important exceptions, include among others:

 

·                  limitations on incurrence of additional indebtedness;

 

·                  limitations on making certain restricted payments;

 

·                  limitations on entering into certain transactions with affiliates;

 

·                  limitations as to mergers or consolidations with any other person or selling or otherwise disposing of all or substantially all of our assets;

 

·                  the maintenance of maximum net debt to Adjusted EBITDA ratios; and

 

·                  the maintenance of minimum debt service coverage ratios.

 

Any default under the terms of our financing agreements that is not waived by the affected creditors may result in a decision by such creditors to accelerate the outstanding balance of the relevant debt. This may also result in the foreclosure on collateral and accelerate the maturity of debts under other financing agreements due to cross acceleration provisions. Our assets and cash flow may be insufficient to pay the full outstanding balance under such financing agreements, either upon

 

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their scheduled maturity dates or upon any acceleration of payments following an event of default. If such events were to occur, our financial condition would be adversely affected.

 

***Unfavorable outcomes in litigation may negatively affect our results of operations, cash flows and financial******condition.***

 

We are involved in numerous tax, civil and labor disputes involving significant monetary claims.

 

Two tax assessments in the total amount of R$1.7 billion (see Note 24 to our consolidated financial statements) were issued by the Brazilian Federal Tax Authority (*Receita Federal do Brasil* or RFB), against us, with respect to Corporate Income Taxes (*Imposto de Renda Pessoa Jurídica*), or IRPJ, and Social Contribution on Net Income (*Contribuição Social Sobre o Lucro Líquido*), or CSLL, on the income from an equity adjustment  in the investment in foreign controlled companies during the period from 2002 to 2007. We consider the loss under this assessment to be possible and, as such, have recorded no provision with respect thereto. A new tax assessment charging Income Tax and Social Contribution for 2008 in the amount of R$279 million up to November, 2013 was issued in March 2013 (see note Tax Proceedings).

 

In December 2012, a tax assessment in the amount of R$1.7 billion (see Note 24 to our consolidated financial statements) was issued by the Brazilian Federal Tax Authority, or RFB, against us, with respect to IRPJ and CSLL taxes as a result of an agreement signed between Fibria (on that occasion VCP) and International Paper. The subject matter of which was the exchange of industrial and forestry assets between the two companies. On January 9, 2013 we filed an appeal with the Brazilian Federal Revenue Service. Based on the opinion of our internal and external legal counsels, the probability of loss is possible and, as such, no provision has been recorded with respect thereto.

 

In November 13, 2013 we were notified about the decision that invalidated the assessment notice, accepting our appeal. The Brazilian Federal Tax Authority will be notified to file a mandatory appeal. The claim is pending a final decision from the Tax Federal Administrative Court (*Conselho Administrativo de Recursos Fiscais*) (see note Tax Proceedings).

 

Additionally, we are currently being audited by the Brazilian Federal Tax Authority with regard to our international structure, merger and acquisition transactions and the use of tax credits related to our raw materials.

 

If unfavorable decisions are rendered in one or more of these lawsuits, we could be required to pay substantial amounts, which could materially adversely affect our results of operations, cash flows and financial condition.

 

***Competition for land for use as eucalyptus forests for purposes of pulp production or for other crops, such as soy beans, sugar cane and other commodities, may affect any eventual expansion.***

 

Greater global demand for certain commodities, especially for grains and bio-fuel, may impact our forestry operations in two ways:

 

·                  greater competition for land could impact its price. Grain and bio-fuel production generally are economically superior to forestry activities, and as a result, prospective increases in land values may inhibit expansion of new forests.

 

·                  for the same reason, we may face difficulties in convincing third-party partners to begin or to expand eucalyptus production for use in the pulp industry.

 

***We conduct certain of our operations through joint ventures that we do not solely****** ******control.***

 

In October 2000, Aracruz acquired a 45% stake in Veracel, a joint venture that operates a pulp plant and forests in the south of the State of Bahia. In January 2003, Aracruz increased its equity interest in Veracel to 50%. Stora Enso OYJ, or Stora Enso, owns the remaining 50% of the equity interests in Veracel. We, as legal successor by the merger with Aracruz, and Stora Enso are party to a shareholders’ agreement with respect to Veracel, pursuant to which the parties have the right to nominate an equal number of board members. Under this shareholders’ agreement, each shareholder may be required to make capital contributions and, if any of the parties fails to comply with any of its obligations regarding Veracel’s funding needs in

 

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connection with a pre-agreed investment and capital contribution plan, the other shareholder shall have the right to require the defaulting shareholder to transfer all of its equity interests in Veracel to the other shareholder at a discounted market value.

 

In view of our shared control of Veracel as described above, we may not unilaterally make major decisions with respect to this entity. In addition, the existing contractual arrangement with respect to Veracel may constrain our ability to take actions that would be in our best interests, and may prevent us from refraining them from taking actions that would be adverse to our interests.

 

***If we are unable to manage potential problems and risks related to acquisitions and alliances, our business and growth******prospects may suffer.******Some of our competitors may be better positioned to acquire other pulp business.***

 

We may, as part of our business strategy, acquire other businesses in Brazil or elsewhere or enter into alliances. Our management is unable to predict whether or when any prospective acquisitions or alliances will occur, or the likelihood of a material transaction being completed on favorable terms and conditions. Our ability to continue to expand successfully through acquisitions or alliances depends on many factors, including our ability to identify acquisitions and negotiate, finance and close transactions. Even if we complete future acquisitions, we could fail to successfully integrate the operations, services and products of any acquired company. If we attempt to engage in future acquisitions, we would be subject to certain risks, including that:

 

·                  we could fail to select the best partners or fail to effectively plan and manage any alliance strategy;

 

·                  the acquisitions could increase our costs;

 

·                  our management’s attention could be diverted from other business concerns; and

 

·                  we could lose key employees of the acquired company.

 

Our failure to integrate new businesses or manage new alliances successfully could adversely affect our business and financial performance. Furthermore, the global pulp and paper industry is undergoing consolidation, and many companies compete for acquisition and alliance opportunities in our industry. Some of our competitors have greater financial and other resources than we do. This may reduce the likelihood that we will be successful in completing acquisitions and alliances necessary for the expansion of our business. In addition, any major acquisition we consider may be subject to regulatory approval. We may not be successful in obtaining required regulatory approvals on a timely basis or at all.

 

***The loss of certain of our customers could cause a significant impact on our results of operations, cash flows and financial condition.***

 

During 2013, our twenty largest customers accounted for approximately 88% of our pulp sales volume. If we were unable to replace the sales volumes represented by any of these important customers, the loss of any of these customers could have a material adverse effect on our results of operations, cash flows and financial condition.

 

***We may be subject to labor disputes from time to time that may adversely affect us.***

 

Most of our employees are represented by unions or equivalent bodies and are covered by collective bargaining or similar agreements which are subject to periodic renegotiation. In addition, we may not successfully conclude our labor negotiations on satisfactory terms, which may result in a significant increase in the cost of labor or may result in work stoppages or labor disturbances that disrupt our operations. Any such cost increases, work stoppages or disturbances could materially adversely affect us.

 

***Social movements and the possibility of expropriation may affect the normal use of, damage, or deprive us of the use of or fair value of, our properties.***

 

Activist groups in Brazil advocate land reform and property redistribution by invading and occupying rural areas. Fibria has been working alongside the Landless Workers’ Movement (or MST), the Federal Land Reform Agency (INCRA) and the government of the State of Bahia, and have agreed to design and implement an agroforestry production and settlement model project in 2011. In 2012, the project was launched, benefiting hundreds of families in areas occupied by the

 

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MST. We cannot assure that our properties will not be subject to invasion or occupation by these groups. A land invasion or occupation could materially impair the normal use of our lands or have a material adverse effect on our results of operations, financial condition or the value of our common shares.

 

In addition, our land may be subject to expropriation by the Brazilian government. Under Brazilian law, the federal government may expropriate land that is not in compliance with mandated local “social functions”, including rational and adequate exploitation of land, adequate use of available natural resources, preservation of the environment, compliance with labor laws, etc. If the Brazilian government expropriates any of our properties, our results of operations may be adversely affected to the extent that the government’s compensation proves inadequate. Moreover, we may be forced to accept public debt bonds, which have limited liquidity, instead of cash as compensation for expropriated land.

 

***Our controlling shareholders have entered into a Shareholders ́Agreement which regulates their power to control us.***

 

We are jointly controlled by VID and BNDESPar. Our controlling shareholders have entered into a Shareholders Agreement that regulates their power, including the power to:

 

·                  name our directors; and

 

·                  determine the outcome of any action requiring shareholder approval, including transactions with related parties, corporate reorganizations and dispositions and the timing and payment of any future dividends.

 

VID and BNDESPar have entered into a shareholders’ agreement under which the approval of certain matters will depend on the affirmative vote of BNDESPar. See “Item 10. Additional Information — C. Material Contracts — Shareholders’ Agreement of Fibria”.

 

In addition, BNDES was the creditor with respect to approximately 18% of our consolidated indebtedness as of December 31, 2013 and we expect to continue to obtain loans from BNDES. As one of our significant shareholders and the subsidiary of one of our important creditors, BNDESPar may exercise a significant influence over our business and corporate decisions, and its actions may be influenced by the policies of the Brazilian federal government, which may conflict with the interest of our shareholders and holders of our ADSs.

 

We currently engage in, and expect in the future to engage in, commercial and financial transactions, from time to time, with our controlling shareholders or their affiliates. Commercial and financial transactions between our affiliates and us create the potential for, or could result in, conflicts of interests. For a discussion of certain related party transactions, see “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions.”

 

***An impairment of goodwill or other intangible assets would adversely affect our financial condition and results of operations.***

 

As a result of the Aracruz Acquisition, we have recognized R$4,231 million of goodwill and have recorded several intangible assets from the Aracruz business (including database, patents, chemical supplier and other supplier relationships) with a fair value of R$779 million at the acquisition date (R$367 million as of December 31, 2013 and R$447 million as of December 31, 2012). Under IFRS, goodwill and intangible assets with indefinite lives are not amortized but are tested for impairment annually or more often if an event or circumstance indicates that an impairment loss may have been incurred. Other intangible assets with a finite life are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment whenever there is an indication of impairment. As of December 31, 2013, according to the accounting policy described in Note 37 to our 2013 consolidated financial statements, we performed our annual impairment test of the Cash Generating Units (CGU) to which goodwill is allocated (Aracruz). In addition, as required by IAS 36, when the book value of the net assets of the Company exceeds its market capitalization, an impairment analysis of long-lived assets must be performed. As a result, we performed an impairment analysis of the long lived assets of the CGUs Jacareí - SP and Três Lagoas - MS. The recoverability test did not result in the need to recognize any impairment of goodwill and fixed assets. See “Item 5. Operating and Financial Review and Prospects — B. Discussion of Critical Accounting Policies” and Note 37 to our 2013 consolidated financial statements.

 

Any change in the value of the key assumptions used in the impairment tests could result in impairment charges in the future that could be significant and that could have an adverse effect on our results of operations and financial condition.

 

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***New laws and regulations relating to climate change and changes in existing regulation, as well as the physical effects of climate change, may result in increased liabilities and increased capital expenditures, which could have a material adverse effect on us.***

 

In 1997, an international conference on global warming concluded with an agreement known as the Kyoto Protocol, which called for reductions of certain emissions that may contribute to increases in atmospheric greenhouse gas concentrations.  While Brazil did sign the Kyoto Protocol, many other countries did not ratify the Protocol which expired in 2012.  Nonetheless, is has formed the basis for a range of international, national and sub-national proposals and regulations focusing on greenhouse gas reduction. A successor protocol is under negotiation at the international level, and Brazil among other countries has indicated its intention to participate in an extended Kyoto process. For example, Brazil has committed to cut its emissions below projected levels in 2020 and to set domestic targets for curbs on deforestation in its Amazon and Cerrado regions.

 

We cannot predict whether future climate control legislation or regulatory initiatives, whether international or local, will be adopted or when.  We expect, however, that there will be increased regulation related to greenhouse gases and climate change that may materially affect us, directly through increased capital expenditures and investment to comply with such laws, and indirectly, by affecting prices for transportation, energy and other inputs.  In addition, the physical effects of climate change also may materially and adversely affect our operations, for example by changing air temperature and water levels, and subjecting us to unusual or different weather-related risks.  Both the new laws and regulations related to climate change, changes in existing regulations and the physical effects of climate change could result in increased liabilities and capital expenditures, all of which could have a material adverse effect on our business and results of operations.

 

***Various other risks could have a material adverse effect on our operational and financial results.***

 

Our operations are subject to various other risks affecting our forests and manufacturing processes, including fire, drought, disease, strikes, port closings, shipping costs, electrical failures and factory explosions, any of which could have a material adverse effect on our operational and financial results.

 

**Risks Relating to Brazil**

 

***Brazilian economic and political conditions and perceptions of these conditions in the international market have a direct impact on our business and our access to international capital and debt markets, and could adversely affect our results of operations and financial condition***.

 

Our operations are conducted in Brazil but our pulp is mainly sold to international customers. Accordingly, our financial condition and results of operations are in some ways dependent upon economic conditions in Brazil. Brazil’s gross domestic product, or GDP, in real terms, grew by  2.7% in 2011 and 0.9% in 2012, according to *Instituto Brasileiro de Geografia e Estatística* — IBGE, Brazil’s official statistics agency. In 2013, GDP grew 2.3%, according to the Central Bank estimates. The general cost of human capital, the cost of land (renting or buying) and the other general local supplies are points of concern. Nonetheless, future developments in the Brazilian economy may affect Brazil’s growth rates and, consequently, such supplies. As a result, these developments could impair our business strategies, results of operations or financial condition. The Brazilian government tries to limit unusual market conditions, like supply prices, abnormal speculation and the foreign exchange-rates, frequently intervening in the Brazilian economy and occasionally makes material changes in policies and regulations. Our business, financial condition and results of operations may be adversely affected by changes in government policies as well as general economic factors, including:

 

·                  currency fluctuations;

 

·                  interest rates;

 

·                  liquidity of domestic capital and lending markets;

 

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·                  availability of experienced labor;

 

·                  policies impacting Brazil’s logistical infrastructure;

 

·                  tax policy;

 

·                  exchange control policies;

 

·                  other political, diplomatic, social and economic developments in or affecting Brazil; and

 

·                  inflation

 

Brazil has historically experienced high rates of inflation. Inflation, as well as government efforts to combat inflation, had significant negative effects on the Brazilian economy, particularly prior to 1995. Inflation rates were, 6.5% in 2011, 5.8% in 2012 and 5.9% in 2013, according to the Brazilian National Consumer Inflation Index (Índice Nacional de Preços ao Consumidor Amplo) or IPCA. Our cash production costs and operating expenses are substantially denominated in Brazilian *Reais* and tend to increase with Brazilian inflation because our suppliers and providers generally increase prices to reflect the depreciation of the currency. If the rate of Brazilian inflation increases more rapidly than any rate of appreciation of the U.S. Dollar, then, as expressed in U.S. Dollars, our operating expenses may increase. Inflation, actions to combat inflation and public speculation about possible additional actions also may contribute materially to economic uncertainty in Brazil and accordingly weaken investor confidence in Brazil, thus impacting our ability to access the international capital markets.

 

Historically, Brazil’s political scenario has influenced the performance of the Brazilian economy and political crises have affected the confidence of investors and the general public, which resulted in economic slowdown and heightened volatility in the securities issued abroad by Brazilian companies. Future developments in policies of the Brazilian government and/or the uncertainty of whether and when such policies and regulations may be implemented, all of which are beyond our control, could have a material adverse effect on us.

 

***Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to our business.***

 

The Brazilian government frequently implements changes to tax regimes that may affect us and our customers. These include changes in prevailing tax rates and, occasionally, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental purposes.

 

Some of these changes may result in increases in our tax payments, which could adversely affect industry profitability and increase the prices of our products, restrict our ability to do business in our existing and target markets and cause our financial results to suffer. There can be no assurance that we will be able to maintain our projected cash flow and profitability following any increases in Brazilian taxes applicable to us and our operations.

 

***We may be impacted by governmental actions affecting the Brazilian markets and economy.***

 

The Brazilian government has exercised and continues to exercise substantial influence over many aspects of the private sector. The Brazilian government, for example, could impose some restrictions for the export market, by creating export duties for any product, including our main source of revenues (market pulp), affecting the margins and the profitability of exporting companies. In addition, the Brazilian government through BNDES owns or controls many companies, including some of the largest in Brazil. For example, the BNDES, through its wholly-owned subsidiary company, BNDESPar, is a joint controlling shareholder of our Company together with VID, as per shareholder agreement terms, and so has historically been one of our important creditors.

 

***Fluctuations in interest rates could increase the cost of servicing our debt and negatively affect our overall financial performance.***

 

Our financial results are affected by changes in interest rates, such as the London Interbank Offered Rate (LIBOR), the Brazilian Interbank Deposit Certificate (*Certificado de Depósito Interbancário*) or CDI and the Brazilian Long Term

 

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Interest Rate (*Taxa de Juros de Longo Prazo)* or TJLP. The CDI rate has fluctuated significantly in the past in response to the expansion or contraction of the Brazilian economy, inflation control purpose, Brazilian government policies and other factors. The CDI rate was 9.77% p.a., 6.90% p.a. and 10.87% p.a. as of December 31, 2013, 2012 and 2011, respectively. The TJLP was reduced from 6.0% p.a. to 5.5% p.a. on June 27, 2012 and then to 5.0% p.a. on December 31, 2012. A significant increase in interest rates, particularly TJLP or LIBOR, would have a material adverse effect on our financial expenses as a significant part of our debt (BNDES loans and Export Prepayment Facilities) is linked to these rates. On the other hand, a significant reduction in the CDI rate could adversely impact the financial revenues derived from our investment activities since a relevant part of our cash is invested Brazilian money market, linked to CDI. In order to mitigate these risks and benefit from the abnormal lower interest rates, we have contracted several swaps from LIBOR and TJLP to Pre Fixed rates. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk.

 

***Economic and market conditions in other countries, including in developing countries, may materially and adversely affect the Brazilian economy and, therefore, the market value of our ADSs.***

 

The market for securities issued by Brazilian companies is influenced by economic and market conditions in Brazil, and, to varying degrees, market conditions in other countries, including Latin American and developing countries. Although economic conditions are different in each country, the reaction of investors to developments in one country may cause the capital markets in other countries to fluctuate. Developments or conditions in other countries, including developing countries, have at times significantly affected the availability of credit in the Brazilian economy and resulted in considerable outflows of funds and declines in the amount of foreign currency invested in Brazil. It has also limited access to international capital markets, all of which may materially and adversely affect our ability to borrow funds at an acceptable interest rate or to raise equity capital when and if there should be a need for us to do so. The volatility in market prices for Brazilian securities has increased from time to time, and investors’ perception of increased risk due to crises in other countries, including developing countries, may also lead to a reduction in the market price of our ADSs.

 

***An electricity shortage and related electricity rationing may adversely affect our business and results of operations.***

 

Hydroelectric power is a major source of energy for Brazilian industry. Low levels of investment and below average rainfall have in the past resulted in low reservoir levels of critical hydroelectric capacity in Brazil’s southeast, central west and northeast regions.  Alternative sources of power generation have often been delayed due to regulatory and other issues. During the period of 2000 and 2001, for example, the Brazilian government instituted a rationing and consumption reduction program to reduce electricity consumption from mid-2001 to early 2002.  This program established limits on energy consumption by industrial, commercial and residential users.

 

In 2013, we generated internally approximately 115% of the electric energy requirements for our pulp production process.  Of the total amount of thermal and electrical energy we self-generated, 91% was from renewable fuels, such as biomass and black liquor that are byproducts of the pulp production process, and 9% was from non-renewable fuels that we purchased, such as fuel oil and natural gas.  Nonetheless, if Brazil experiences shortages in available electricity (whether due to hydrological conditions, infrastructure limitations or otherwise), similar or other policies may be put into place to limit or ration electrical power utilization.  Although we believe we are adequately prepared with respect to energy since we are self-sufficient and even sell the overflow electric energy to the Brazilian grid, our sales may be adversely affected by the negative effect the energy shortage may have on the macroeconomic environment.  In addition, we may also be adversely affected by the impact of the energy shortage on the activities of our main suppliers of raw materials. Any such shortage and related electricity rationing could have a material adverse effect on our business and results of operations.

 

**Risks Relating to Our Shares and ADSs**

 

***Exchange controls and restrictions on remittances abroad may adversely affect holders of our ADSs.***

 

One may be adversely affected if the Brazilian government imposes restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil and, as it has done in the past, on the conversion of the *Real* into foreign currencies. These restrictions could hinder or prevent the conversion of dividends, distributions or the proceeds from any sale of shares or ADSs, as the case may be, into U.S. Dollars and the remittance of U.S. Dollars abroad. We cannot assure that the government will not take this type of or similar measures in the future. Holders of our ADSs could be adversely affected by delays in, or a refusal to grant, any required governmental approval for conversion of *Real* payments 

 

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and remittances abroad in respect of the shares, including the shares underlying the ADSs. In such a case, our ADS depositary will distribute *Reais* or hold the *Reais* it cannot convert for the account of the ADS holders who have not been paid.

 

***Holders of our ADSs may face difficulties in serving process on or enforcing judgments against us and other persons.***

 

We are organized under and are subject to the laws of Brazil and all our directors and executive officers and our independent registered public accounting firm resides or is based in Brazil. Substantially all of our assets and those of these other persons are located in Brazil. As a result, it may not be possible for holders of the ADSs to effect service of process upon us or these other persons within the United States or other jurisdictions outside Brazil or to enforce against us or these other persons judgments obtained in the United States or other jurisdictions outside Brazil. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, our ADS holders may face greater difficulties in protecting their interests due to actions by us, our directors or executive officers than would shareholders of a U.S. corporation.

 

***The relative volatility and illiquidity of the Brazilian securities markets may adversely affect holders of our ADSs.***

 

Investments in securities, such as our common shares or ADSs, of issuers from emerging market countries, including Brazil, involves a higher degree of risk than investments in securities of issuers from more developed countries. The Brazilian securities market is substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States. There is also significantly greater concentration in the Brazilian securities market than in major securities markets in the United States. These features may substantially limit the ability to sell the common shares underlying the ADSs at a price and time at which holders wish to do so. The São Paulo Stock Exchange Index (Ibovespa) had a market capitalization of U.S.$807 billion as of December 31, 2013. In comparison, the S&P 500 had a market capitalization of U.S.$16.5 trillion as of December 31, 2013. A liquid and active market may never develop for our common shares or ADSs, and as a result, the ability of our ADS holders to sell at the desired price or time may be significantly hindered.

 

***Holders of our ADSs may face difficulties in protecting their interests because we are subject to different corporate rules and regulations as a Brazilian company and our shareholders may have fewer and less well-defined rights.***

 

Holders of ADSs are not direct shareholders of our Company and are unable to enforce the rights of shareholders under our Bylaws and the Brazilian law. Our corporate affairs are governed by our Bylaws and the Brazilian law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, or elsewhere outside Brazil. Under Brazilian law, the rights of a holder of our common shares to protect its interests with respect to actions by us, our directors or executive officers may be fewer and less well-defined than under the laws of other jurisdictions.

 

Although insider trading and price manipulation are crimes under Brazilian law, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or the markets in some other jurisdictions. In addition, rules and policies against self-dealing or for preserving shareholder interests may be less well-defined and enforced in Brazil than in the United States and certain other countries, which may put holders of our common shares or ADSs at a potential disadvantage. In addition, the disclosure required of public companies in Brazil may be less complete or informative than that required of publicly-held companies in the United States or in certain other countries.

 

***Holders of our ADSs may not be able to exercise their voting rights.***

 

Holders of our ADSs may only exercise voting rights with respect to their underlying common shares in accordance with the provisions of the deposit agreement for our ADS program, or the Fibria Deposit Agreement. Under this Agreement, ADS holders may only vote by giving voting instructions to our Depositary. Because our Depositary appears on our share register and not the ADS holders, such holders are unable to exercise their right to vote without the representation of our Depositary unless they surrender their ADSs for cancellation in exchange for our common shares. In addition, pursuant to the Fibria Deposit Agreement, our Depositary will only notify our ADS holders of an upcoming vote and arrange to mail proxy cards to those holders if we request our Depositary to do so. Pursuant to our bylaws, the first call for a shareholders’ meeting must be published at least 15 days in advance of the relevant meeting, and the second call must be published at least eight days in advance of the meeting, in the case of insufficient quorum to approve the matters included in the first meeting. As a result, there may not be enough time for ADS holders to surrender their ADSs and withdraw underlying common shares, or 

 

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for them to receive a proxy card in time to ensure that they can provide our Depositary with voting instructions. Our Depositary and its agents are not liable for failure to mail proxy cards in time for ADS holders to vote the common shares underlying their ADSs or to carry out voting instructions in the manner as instructed or at all. As a result, holders of ADSs may not be able to exercise the voting rights attached to the common shares underlying their ADSs.

 

***An exchange of ADSs for shares risks the loss of certain foreign currency remittance and Brazilian tax advantages.***

 

The ADSs benefit from the certificate of foreign capital registration, which permits our Depositary to convert dividends and other distributions with respect to common shares into foreign currency, and to remit the proceeds abroad. Holders of ADSs who exchange their ADSs for common shares will then be entitled to rely on the depositary’s certificate of foreign capital registration for five business days from the date of exchange. Thereafter, they will not be able to remit non-Brazilian currency abroad unless they obtain their own certificate of foreign capital registration, or unless they qualify under Resolution No. 2,689/00 of the CMN, which entitles certain investors to buy and sell shares on Brazilian stock exchanges without obtaining separate certificates of registration. If holders of ADSs do not qualify under Resolution No. 2,689/00, they will generally be subject to less favorable tax treatment on distributions with respect to our common shares. There can be no assurance that the certificate of registration of our Depositary, or any certificate of foreign capital registration obtained by holders of ADSs, will not be affected by future legislative or regulatory changes, or that additional Brazilian law restrictions applicable to their investment in the ADSs may not be imposed in the future.

 

***Holders of our shares will be subject to, and holders of our ADSs could be subject to, Brazilian income tax on capital gains from sales of shares or ADSs.***

 

Brazilian Law No. 10,833/03 provides that gains on the disposition of assets located in Brazil by non-residents of Brazil, whether to other non-residents or to Brazilian residents, will be subject to Brazilian taxation. The common shares are expected to be treated as assets located in Brazil for purposes of the law, and gains on the disposition of common shares, even by non-residents of Brazil, are expected to be subject to Brazilian taxation. In addition, the ADSs may be treated as assets located in Brazil for purposes of the law, and therefore gains on the disposition of ADSs by non-residents of Brazil may also be subject to Brazilian taxation. Although the holders of ADSs outside Brazil may have grounds to assert that Law No. 10,833/00 does not apply to sales or other dispositions of ADSs, it is not possible to predict whether that understanding will ultimately prevail in the courts of Brazil given the general and unclear scope of Law No. 10,833/03 and the absence of judicial court rulings in respect thereto.

 

***Holders of our ADSs may not be able to exercise the preemptive rights relating to the shares.***

 

Holders of our ADSs may not be able to exercise the preemptive rights relating to the common shares underlying their ADSs unless a registration statement under the U.S. Securities Act of 1933, as amended (the “Securities Act”) is effective with respect to the rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares or other securities relating to these preemptive rights and we cannot assure holders of our ADSs that we will file any such registration statement. Unless we file a registration statement or an exemption from registration applies, holders of our ADSs may receive only the net proceeds from the sale of their preemptive rights by the depositary or, if the preemptive rights cannot be sold, the rights will be allowed to lapse.

 

***Judgments of Brazilian courts with respect to our shares will be payable only in Reais.***

 

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the common shares, we will not be required to discharge our obligations in a currency other than *Reais*. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other than *Reais*may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the common shares or the ADSs.

 

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**ITEM 4.  INFORMATION ON FIBRIA**

 

**A.****                                   ****History and Development of Fibria**

 

We are incorporated under the laws of the Federative Republic of Brazil under the name Fibria Celulose S.A., as a publicly-held company with unlimited duration. We have the legal status of a stock corporation, operating under the Brazilian corporate law. Our headquarters and principal executive offices are located at Alameda Santos, 1357, 6th floor, 01419 908, São Paulo, SP, Brazil (telephone: 55 11 2138-4565). Our website address is www.fibria.com.br/ir. Information contained on our website is, however, not incorporated by reference in, and should not be considered as part of this annual report.

 

Our operations began in 1988 when the Votorantim Group, one of the largest privately held group of companies in Latin America, acquired Celpav Celulose e Papel Ltda., or Celpav, a pulp and paper producer based in the State of São Paulo. We began production in 1991 after expanding and modernizing our facilities. In September 1992, the Votorantim Group purchased Indústrias de Papel Simão S.A., or Papel Simão, which was listed on the BM&FBOVESPA. Celpav and Papel Simão subsequently merged and, in 1999, Papel Simão was renamed Votorantim Celulose e Papel S.A. On November 5, 2009 we adopted the corporate name Fibria Celulose S.A. and on December 31, 2009, we and Aracruz were merged into Fibria (the surviving entity). See “Item 4. Information on Fibria — A. History and Development — The Aracruz Acquisition”.

 

On April 19, 2000, we completed a registered offering of 7,920,000 ADSs. Each ADS represented 500 preferred shares, and the ADSs were listed on NYSE, under the symbol “VCP.” Of the 7,920,000 ADSs being offered at that time, we sold 2,047,648 ADSs and certain of our shareholders sold the remaining 5,872,352 ADSs. Concurrently, 440,000,000 preferred shares were sold in Brazil.

 

Because VCP changed its name to Fibria on November 5, 2009, with the Aracruz Acquisition, the last trading day of VCP shares on the NYSE under the ticker symbol VCP was November 17, 2009. From November 18, 2009 on, the ticker symbol has changed to “FBR”.

 

We have grown, expanded and streamlined our operations through the organic expansion of our pulp mills and paper production facilities, the disposition of assets and lines of business we deemed not a part of our core business, and selective acquisition of equity interests in other pulp and paper companies.

 

***Bahia Produtos de Madeira***

 

In 1998, as part of a strategy of diversification into other forest product businesses, Aracruz acquired Tecflor Industrial S.A or Tecflor, for the production of solid wood products. Tecflor was then renamed Aracruz Produtos de Madeira or APM. In 2001, APM sought to expand the presence of its Lyptus® brand of high-quality sawn wood in domestic and international markets and established a commercial partnership with the U.S. based Weyerhaeuser Co., or Weyco, one of the largest forestry companies in the world, for the exclusive distribution of Lyptus® in the North American markets. In October 2004, Aracruz sold two thirds of its shares in APM to Weyerhaeuser do Brasil Participações Ltda., a subsidiary of Weyco, for a total purchase price of U.S.$18.6 million. After the Aracruz Acquisition, APM was renamed Bahia Produtos de Madeira or BPM. We currently own 33.33% of the shares in BPM and have certain voting rights as set forth in the APM shareholders’ agreement.

 

***Acquisition of Interest in Ripasa***

 

In 2005, we purchased through a 50% joint venture with Suzano Bahia Sul Papel e Celulose S.A., or Suzano, the common and preferred shares of Ripasa S.A. Celulose e Papel or Ripasa. On March 31, 2005, we finalized the acquisition, through a 50% joint venture, of 77.59% (our interest — 38.80%) indirect interest in the voting capital and 46.06% (our interest — 23.03%) indirect interest in the total capital of Ripasa, for U.S.$275 million. In addition, a purchase option was executed for the option to purchase within six years common shares and preferred shares, totaling 22.41% of the voting stock and 13.45% of the total stock of Ripasa. We acquired our stake in these additional shares for R$298 million. At the time of this acquisition, Ripasa’s principal assets were the Americana pulp and paper mill and three other paper mills located in Embu, Cubatão and Limeira in the State of São Paulo.

 

In April 2006, Ripar, the joint venture between us and Suzano, was liquidated by dissolution and its only assets, the shares in Ripasa, were distributed equally to both us and Suzano.

 

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In May 2006, the shareholders of Ripasa approved a corporate restructuring transaction in which the shareholders (other than us and Suzano) received shares of our Company, shares of Suzano and cash in exchange for their shares of Ripasa. In this transaction we issued 12,532,009 preferred shares to the former Ripasa shareholders. Following this transaction, we owned 50% of the share capital of Ripasa.

 

In March 2007, we sold our 50% interest in the paper mill located in Embu to Suzano for R$41.1 million. The Embu paper mill had an annual production capacity of 48 kilotons of cardboard.

 

In November 2007, we and Suzano sold our interests in the paper mills located in Cubatão and Limeira to MD Papéis for a total of R$122 million. The Cubatão paper mill had a production capacity of approximately 61 kilotons per year of graphic, editorial and special printing & writing papers. The Limeira paper mill had a production capacity of approximately 58 kilotons per year of cardboard.

 

***The Losango Project***

 

In 2005, we announced the beginning of the environmental licensing process for the implementation of a bleached eucalyptus pulp mill with an overall nominal capacity of 1.5 million tons of pulp per year to be built in the State of Rio Grande do Sul (named “The Losango Project”). As a result of the Aracruz Acquisition in 2009, we had a different portfolio of possible expansion projects, including two former Aracruz Units (Veracel II and a fourth pulp production line at the Aracruz Unit) and this together with the Três Lagoas Unit which started up in March 2009, were all brownfield projects. In view of that, we considered several alternatives for the Losango Project, including a full divestiture of the lands and forest. On June 30, 2011, Management approved the divestiture of the Losango project assets, and established a specific program to identify a potential buyer. As from June 30, 2011, we had classified the assets of the Losango Project as held for sale.

 

On September 10, 2012, we received and accepted a binding offer from CMPC Celulose Riograndense S.A. for the purchase of forestry assets and lands of Losango, consisting of approximately 100 thousand hectares of owned areas and nearly 39 thousand hectares of forestland of eucalyptus in these owned areas and in third parties leased areas, for a total amount of R$615 million. The transaction did not include the partnership program agreements developed in Losango areas, which will be maintained and honored by Fibria. On December 28, 2012 we announced the conclusion of the Purchase and Sale Agreement and the approval of the operation by the Economic Defense Council, the receipt of the first installment in the amount of R$470 million and the deposit of the second installment in the amount of R$140 million in an escrow account to be disbursed after the remaining applicable government approvals and other conditions precedent have been fulfilled. The remaining installment of R$5 million will be paid to us upon the effective transfer of existing contracts related to the asset and applicable government approvals.

 

***Asset Exchange with International Paper***

 

In February 2007, we transferred our Luiz Antonio pulp and paper mill and approximately 60,000 hectares of forest located in the State of São Paulo to International Paper Investments (Holland) B.V., a wholly owned subsidiary of International Paper, in exchange for the Três Lagoas pulp mill, which was then under construction, and approximately 100,000 hectares of surrounding forest. At the time that we received the Três Lagoas pulp mill, International Paper had fully funded the construction of this mill under a turn-key contract.

 

The Luiz Antonio mill had an annual production capacity of 410 kilotons of pulp and 355 kilotons of uncoated paper. As part of this transaction, we agreed to purchase 100 kilotons of BEKP per year on competitive terms for our use in other facilities under a long-term supply agreement.

 

In March 2009, we started operating our Três Lagoas mill located in the State of Mato Grosso do Sul. This mill successfully achieved its predicted capacity increasing our annual capacity by 1.3 million tons of market pulp. The total amount invested in this project was R$3,991 million. This amount includes disbursements made directly from Fibria, and the assets we received through our Asset Swap Agreement with International Paper.

 

As part of this transaction, we granted International Paper the right to construct, at its cost, up to two paper machines adjacent to, and integrated with, the Três Lagoas pulp mill. International Paper exercised this option with respect to one of the paper mills and has constructed a paper mill with annual production capacity of 200 to 250 kilotons of printing & writing paper adjacent to the Três Lagoas pulp mill. This paper mill commenced production in the first quarter of 2009. In connection 

 

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with the exercise of this option, International Paper has entered into a long-term supply agreement under which we will provide International Paper with pulp and utilities and other services at rates based on our actual operating costs.

 

If International Paper exercises its right to build the second paper mill adjacent to the Três Lagoas pulp mill, the contract conditions follow the ones established for the first paper mill:

 

·                 we will be obligated to transfer certain parcels of real property to International Paper upon which the paper machine and ancillary facilities will be constructed; and

 

·                 International Paper will enter into a long-term supply agreement under which we will provide International Paper with pulp and utilities and other services at rates based on our actual operating costs.

 

In 2012, Fibria and International Paper agreed to extend International Paper’s option to build a new paper machine at the Três Lagoas unit. The new agreement gives International Paper the option to start-up the second paper machine between 2016 and 2018.

 

***Disposition of Mogi das Cruzes Paper Mill***

 

In May 2007, we sold our specialty paper mill located in the city of Mogi das Cruzes in the State of São Paulo to the controlling shareholder of Comércio e Indústria Multiformas Ltda. for R$57 million. The Mogi das Cruzes paper mill had an annual production capacity of 20 kilotons of industrial and specialty papers.

 

***Joint-venture with Ahlstrom***

 

In May 2007, we announced an intended joint venture agreement with the Finnish company Ahlstrom for the paper production in our facility located in Jacareí, State of São Paulo. The agreement was concluded in September 2007 and Ahlstrom acquired a 60% interest of this new joint venture for the paper assets in Jacareí mill, denominated Ahlstrom VCP Indústria de Papéis Especiais S.A. (“Ahlstrom VCP”), with an option to purchase the remaining 40% within two years.

 

In September 2008, pursuant to a series of options which were part of the agreement with Ahlstrom, we sold to Ahlstrom our remaining 40% equity interest in the joint-venture company for U.S.$42 million.

 

The parties also signed a long-term agreement whereby Fibria will supply eucalyptus pulp, utilities and other services to Ahlstrom VCP at the Jacareí mill at competitive prices, in order to partly support an annual production capacity of approximately 105,000 tons per year of uncoated wood-free papers.

 

***Strategic Business Agreement (SBA) with Oji Paper***

 

In August 2007 we announced the execution of a long term SBA with Oji Paper Co. Ltd or Oji Paper. The agreement allowed us to further our offering of thermal paper technologies in Brazil and the region of Latin America, while allowing Oji Paper to expand its worldwide presence as a market leader in thermal technology. Through the execution of the SBA, we were able to draw on the technologies of Oji Paper as well as its global subsidiaries including the technology of Kanzaki Specialty Papers, Inc (KSP), Kanzan Spezialpapiere GmbH (Kanzan) and Oji Paper Thailand Ltd. (OPT). The SBA agreement coupled with the completion in 2008 of our Piracicaba mill expansion permitted the continuation of enhanced quality products and improved value to our customers.

 

On August 11, 2011, we signed a term sheet granting exclusivity to Oji Paper to negotiate the sale of the assets comprising the industrial plant and building, which constituted the complex known as the Piracicaba Unit. The closing of the sale was accomplished on September 29, 2011 for the agreed amount of U.S.$313 million. After the sale of Piracicaba, Fibria concentrates its operations on pulp production.

 

Due to the sale of Piracicaba to Oji Paper in September 2011, the SBA has been terminated and all royalties were duly paid by Fibria to Oji Paper.

 

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***Formation of Conpacel***

 

In August 2008, Ripasa contributed its assets, other than the Americana pulp and paper mill, to Asapir Produção Florestal e Comércio Ltda., a newly formed company in which we and Suzano each owned 50% of the share capital.

 

In September 2008, Ripasa was transformed into Conpacel, a cost and production sharing unit, or consortium, in which we had an undivided 50% interest in the assets, liabilities and operations.

 

On December 21, 2010, we entered into a binding agreement with Suzano regarding the sale of our 50% interest in Conpacel, consisting of (1) a pulp and paper mill located in the city of Americana, State of São Paulo and (2) land totaling approximately 76 thousand hectares associated with the mill, and approximately 71 thousand hectares of forestland (of which 53 thousand hectares were owned and 18 thousand hectares were leased), for an aggregate purchase price of R$1,450 million. We consummated the sale on January 31, 2011. The Conpacel pulp and paper mill consisted of a pulp mill with an annual production capacity of 650 thousand tons and a paper mill with an annual production capacity of 390 thousand tons.

 

On December 21, 2010, we also entered into a binding agreement with Suzano for the sale of KSR, our paper distribution business unit, for an aggregate purchase price of R$50 million. The closing of the KSR sale occurred on February 28, 2011.

 

***Disposition of Guaíba Unit***

 

On October 7, 2009, we entered into a purchase and sale agreement with Empresas CMPC S.A. (CMPC) for the sale of (1) our pulp and paper mill located in the city of Guaíba, in the State of Rio Grande do Sul, (2) land totaling an area of approximately 212 thousand hectares of forestland associated with this mill (of which 32 thousand hectares were leased, under partnerships), (3) licenses and authorizations for a project to expand the pulp mill’s production capacity to approximately 1.75 million tons a year and (4) all of the share capital of Aracruz Riograndense, which we refer to collectively as the Guaíba Unit, for an aggregate purchase price of R$2,416 million, which generated a capital gain of R$33 million.

 

The Guaíba pulp and paper mill consisted of a pulp mill with an annual capacity of 450 kilotons and a paper mill with an annual capacity of 60 kilotons of printing & writing paper.

 

***Primary Public Offering of Common Shares***

 

On March 8, 2012, Fibria announced a primary public offering of common Company-issued shares. On April 30, 2012, 86,000,000 shares were issued at a unit price of R$15.83/share (U.S.$8.43/share) totaling R$1,361 million (without placement of a supplementary lot). The Public Offering was in accordance with the strategy to strengthen the our capital structure.

 

***Disposition of forestry assets and land***

 

On March 8, 2012, as part of our strategy to strengthen our capital structure, we entered into a binding agreement with Fundo Florestas do Brasil (the “Fund”), through its subsidiary Caravelas Florestal S.A., for the sale of certain forests and land located in the south of Bahia, consisting of 16,152 thousand hectares of forests of eucalyptus for timber and pulp with an average annual production of 660 cubic meters of wood.

 

On June 29, 2012, Fibria signed a purchase and sale agreement for these assets in the total amount of R$235 million. A cash payment of R$200 million was received as an advance at the same date. As result of the due diligence process conducted by the purchaser, the sale price was adjusted to R$200 million. On December 7, 2012, the transaction was completed upon receipt of an acceptance notice signed by the buyer. See note 1 (d) (iii) to our 2013 consolidated financial statements.

 

On November 15, 2013, we entered into a Share Purchase Agreement and Other Covenants with Parkia, for the sale of certain land located in the states of São Paulo, Mato Grosso do Sul, Bahia and Espírito Santo, for a total of approximately 210 thousand hectares. On December 30, 2013, after obtaining the mandatory regulatory approvals as well as the completion of an audit by Parkia, the First Amendment to the Share Purchase Agreement and Other Covenants was concluded and signed, under which the total area subject to the transaction was adjusted to approximately 206 thousand hectares of lands, for the total amount of R$1,402,584 thousand, of which R$500,000 thousand was received by us upon signing the agreement. In January 2014, we received R$710,702 thousand. The remaining balance of R$191,882 thousand will be 

 

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received no later than the end of the first quarter of 2014 after the fulfillment of certain obligations and legal requirements, to be performed by us.

 

We may be entitled to an additional amount, limited to R$247,515 thousand, in three separated payments, each payment being up to one third of theamount, on the 7th, 14th and 21st anniversaries of the agreement. The entitlement to this amount is contingent on the appreciation of the land at each of such anniversaries, measured according to predefined measurement assumptions established in the agreement and adjusted by the variation of the IGP-M index through the actual payment dates.

 

We concurrently entered into forestry partnership agreements with Parkia for a period of up to 24 years, during which we will continue to manage our forests in the land sold. In exchange for the right to use the land by us for our forestry activities, the forestry partnership agreement grants to Parkia the right to receive 40% of the volume of wood (in cubic meters — m3), produced by us on the land during each harvesting cycle, limited to a “cap” contractually established. The transaction is in line with our strategy to strengthen our capital structure through debt prepayment. See Note No.1 (e) and No. 38 of our 2013 consolidated financial statements.

 

***Equity Investment - Ensyn***

 

With an initial investment of U.S.$20 million, Fibria acquired approximately 6% of Ensyn voting shares and agreed to set up an equally-owned joint venture to be incorporated in Delaware for future investments in the production of liquid fuels and chemicals from biomass in Brazil

 

**Aracruz Acquisition and Related Transactions**

 

***Overview of Aracruz***

 

Prior to its acquisition, Aracruz was the world’s largest producer of market pulp according to Hawkins Wright, with an annual pulp production capacity of approximately 2.9 million tons as of December 31, 2008, including 50% of the annual pulp production capacity of Veracel. As of that date, Aracruz’s forestry base consisted of total forests of approximately 403.7 thousand hectares located in three Brazilian states, including 50% of the forestry area of Veracel, consisting of approximately 258.5 thousand hectares of planted areas and approximately 145.2 thousand hectares of preserved areas.

 

Aracruz produced BEKP at its Aracruz and Guaíba pulp mills, and owned a 50% interest in Veracel, which owns and operates a pulp mill with an annual production capacity of 1.1 million tons as well as the related forestry assets. Aracruz produced uncoated paper at its Guaíba paper mill, which had an annual production capacity of 60 kilotons.

 

In 2008, Aracruz produced 3,106 kilotons of eucalyptus pulp, recorded consolidated net revenues from pulp sales of R$3,539 million, produced 56 kilotons of paper products and recorded consolidated net revenues from paper sales of R$115 million.

 

***Aracruz Acquisition***

 

In October 2001, we purchased 127,506,457 common shares of Aracruz, representing 28.0% of the voting share capital and 12.35% of the then total share capital interest in Aracruz in order to increase our exposure to the international pulp market, and we accounted for this investment under the equity method.

 

In January 2009, we acquired Arapar and São Teófilo, whose sole assets consisted of an aggregate of 12.35% of the total share capital, including 28.0% of the voting share capital, of Aracruz, for R$2,710 million. Under the purchase agreement, the purchase price was payable in six semi-annual installments without interest as follows: (1) R$500 million was paid in January 2009; (2) R$500 million was paid during the period of April, May and July 2009; (3) R$500 million was paid in January 2010; (4) R$500 million was paid in June 2010; (5) R$410 million was paid in January 2011; and (6) R$300 million was paid in July 2011.

 

In April 2009, we purchased 12.35% of the total share capital, including 28.0% of the voting share capital, of Aracruz from the Safra Family for R$2,710 million. Under the purchase agreement for these shares, the purchase price was 

 

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payable in six semi-annual installments without interest, except as noted below, as follows: (1) R$600 million was paid in cash in April 2009; (2) R$500 million was paid in January 2010; (3) R$500 million was paid in June 2010; (4) R$400 million was paid in October 2010, together with interest from July 2009 at the rate of 105% of CDI per annum; (5) R$410 million was paid in January 2011; and (6) R$300 million was paid in July 2011.

 

Following the Aracruz Acquisition, we owned 37.05% of the total share capital, including 84.00% of the voting share capital, of Aracruz. As a result of these purchases, in accordance with IFRS, we have fully consolidated the assets, liabilities and results of operations of Aracruz and its consolidated subsidiaries in our consolidated financial statements as from January 1, 2009.

 

***Capital Increase***

 

In April and May 2009, we issued and sold (1) 62.1 million common shares to our controlling shareholder, VID, for R$1,180 million, which was paid through the application of R$1,000 million of previously issued advances for capital increases and R$180 million in cash, (2) 43.6 million preferred shares to BNDESPar in exchange for 56.9 million common shares of Aracruz, representing 12.49% of the total share capital, including 5.51% of the voting share capital, of Aracruz, (3) 95.8 million preferred shares to BNDESPar for R$1,820 million in cash and (4) an aggregate of 9.3 million preferred shares to the Lorentzen, Moreira Salles, Almeida Braga and Safra families for an aggregate of R$180 million.

 

In connection with this capital increase, BNDESPar subscribed to debentures issued by VID that were convertible into common shares of our Company held by VID. Under these debentures, VID was obliged to invest the net proceeds it received from BNDESPar to purchase shares of our Company. On September 3, 2009, BNDESPar exercised its option to convert the VID Debentures. As a result of this conversion, VID transferred 30,526,316 common shares of our Company to BNDESPar, following which VID owned 35.2% and BNDESPar owned 41.8% of our total share capital, as of September 30, 2009.

 

***Conversion of VCP Preferred Shares to Common Shares***

 

In connection with the Aracruz Acquisition, we began to implement a corporate reorganization to simplify our capital structure. On May 30, 2009, in order to prepare our Company for the eventual migration of our common shares to the *Novo Mercado* listing segment of the BM&FBOVESPA, our shareholders approved the conversion of all of our outstanding preferred shares into common shares at the exchange ratio of 0.91 common shares for one preferred share. This conversion became effective on August 12, 2009, as a result of which we now have a single class of stock comprised solely of common shares. As a result of this conversion, the interests of VID and BNDESPar in the total share capital of our Company changed from 40.7% and 35.4%, respectively, to 35.2% and 40.8%, respectively.

 

***Mandatory Tender Offer***

 

On June 1, 2009, we announced the commencement of a mandatory tender offer for any and all outstanding common shares of Aracruz. The auction with respect to this tender offer took place on the BM&FBOVESPA on July 1, 2009. In the auction, we acquired 13,828,307 common shares of Aracruz, representing 3.04% of the outstanding common shares of Aracruz and 1.34% of the outstanding share capital of Aracruz, for an aggregate purchase price of R$236.6 million, payable according to the same payment schedule agreed to by the Safra family and the former shareholders of Arapar and São Teófilo in connection with the Aracruz Acquisition. Following this transaction, we owned 43.89% of the total share capital, including 99.53% of the voting share capital, of Aracruz.

 

***Stock Swap Merger***

 

As part of our corporate reorganization, on August 24, 2009, Fibria and Aracruz each held extraordinary shareholders’ meetings at which the Stock Swap Merger was approved. Pursuant to Stock Swap Merger (1) each issued and outstanding common share of Aracruz (other than common shares held directly or indirectly by Fibria or with respect to which the holder exercises withdrawal rights) was exchanged for 0.1347 Fibria common shares; (2) each issued and outstanding preferred share of Aracruz (other than preferred shares held by Fibria) was exchanged for 0.1347 Fibria common shares; and (3) Aracruz became a wholly-owned subsidiary of Fibria. The settlement of the Stock Swap Merger occurred on November 17, 2009, through the facilities of the BM&FBOVESPA.

 

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Under the Brazilian Corporation Law, holders of common shares and class A preferred shares of Aracruz who did not vote in favor of the Stock Swap Merger, including those who abstained from voting or did not attend the Aracruz Extraordinary Shareholders’ Meeting, were entitled to withdraw their capital from Aracruz during a withdrawal period that was scheduled to expire on September 28, 2009. On September 28, 2009, we and Aracruz announced that the deadline for the exercise of withdrawal rights was extended until November 12, 2009. On October 28, 2009, we filed an F-4 registration statement with the SEC, which was declared effective by the SEC on November 12, 2009, to register the issuance of our shares to holders of Aracruz’s class B preferred shares (including the class B preferred shares of Aracruz that were represented by ADRs) that were residents of the United States.

 

Following the Stock Swap Merger, VID owned 29.3%, and BNDESPar owned 33.6% of our total share capital. The last trading day for one Aracruz ADR was November 17, 2009 and its final market price was U.S.$21.25. As of December 31, 2008 the market price for one Aracruz ADR was U.S.$11.28.

 

***Merger of Arapar and São Teófilo into Fibria***

 

As part of the corporate reorganization, the general shareholders’ meetings of each of Fibria, Arapar and São Teófilo approved on December 21, 2009, the merger of Arapar and São Teófilo with and into Fibria, with Fibria as the surviving entity. This merger was effective as of December 31, 2009.

 

***Merger of Aracruz into Fibria***

 

As part of the corporate reorganization and in order to maximize the synergies from the Aracruz Acquisition, effective as of December 31, 2009, Aracruz merged with and into Fibria, with Fibria as the surviving entity.

 

**Our Ownership Structure**

 

We are jointly controlled by VID, a wholly-owned subsidiary of VPar (the holding company of the Votorantim Group) and BNDESPar, a subsidiary of BNDES. VPar in turn is controlled by Hejoassu Administração S.A. or Hejoassu, which is controlled by the Ermírio de Moraes family. As a result of the purchase of an additional equity interest in Aracruz and corporate re-organization of Fibria, both of which occurred during the first semester of 2009, our exchange offer for outstanding Aracruz shares and the merger of Aracruz into us, our ownership structure and principal subsidiaries as of December 31, 2013 is presented in the following chart.

 

 

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As of December 31, 2013, our total shares amounted to 553,934,646 common shares.

 

**Capital Expenditures**

 

Our capital expenditures (Capex) totaled R$1,287 million in 2013 and R$1,078 million in 2012.

The increase over 2012 is explained by the non-recurring investment of greater forest renewal at the Aracruz Unit and the several sustaining projects.

 

The table below sets forth a breakdown of our most significant capital expenditures for the periods indicated:

 
| ** **                                      | ** **   | **2013**                                  | ** **   | **2012**    | ** **   | **2011**    | ** **   |
|-------------------------------------------------|--------------|-------------------------------------------|--------------|-------------|--------------|-------------|--------------|
| ** **                                      | ** **   | **(in millions of Reais)** | ** **   |
| Industrial Expansion                            |         | 8                                         |         | 4           |         | 26          |         |
| Forest Expansion                                |         | 65                                        |         | 66          |         | 128         |         |
| ***Subtotal Expansion*****                      | *** *** | ***73***                                  |         | 70          | *** *** | ***154***   | *** *** |
| Safety/ Environment                             |         | 31                                        |         | 47          |         | 62          |         |
| Forestry Renewal                                |         | 752                                       |         | 653         |         | 624         |         |
| Advance for Wood Purchase (partnership program) |         | 97                                        |         | 77          |         | 176         |         |
| Maintenance, IT, R&D, Modernization    |         | 253                                       |         | 166         |         | 310         |         |
| ***Subtotal Maintenance*****                    | *** *** | ***1,133***                               | *** *** | ***943***   | *** *** | ***1,172*** | *** *** |
| 50% Veracel                                     |         | 81                                        |         | 65          |         | 90          |         |
| ***Total*****                                   | *** *** | ***1,287***                               | *** *** | ***1,078*** | *** *** | ***1,416*** | *** *** |

 

For 2014 Management has approved a capital expenditure budget of R$1,520 million. The 18% increase over 2013 is explained by the forestry partnership agreement signed as a result of the land sale in December of 2013 and a one-off impact of wood purchases, which is expected to continue for 2 to 2.5 years before returning to normal levels.

 

**B.            Business Overview**

 

***Pulp Industry Overview***

 

The world pulp industry is mainly divided in two groups of grades: mechanical, which is the pulp produced only through the use of mechanical energy processes, and chemical, which is the pulp produced after the wood chips have been chemically treated with caustic soda. In the whole world, 169 million metric tons are produced every year, from which 82% is chemical pulp, according to market statistics.

 

Both grades are sub-divided in: integrated pulp, which is the pulp produced for captive paper production in the same company or group, and market pulp, which is pulp produced to be sold in the market. Market pulp production sums up to 55 million metric tons, which represents 40% of all chemical pulp.

 

Chemical market pulp can be broken down in many different grades, depending on the wood species. The two main groups are Hardwood, which assembles the species composed by short cellulose fibers, and Softwood, assembling the other species, composed by long cellulose fibers. Short fiber pulp is more prone to be produced in tropical areas, while long fiber pulp is only produced in temperate areas. Hardwood represents 28 million metric tons.

 

Fibria produces pulp from Eucalyptus, which is a species originally from Australia, but extremely well adapted to the Brazilian climate. Actually, it is in Brazil where Eucalyptus trees develop the highest yield in the whole world. Eucalyptus pulp is 65% of the whole Hardwood market, with a demand of 18 million metric tons in 2013.

 

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Source: Paper&Board, Recycled Fiber and Pulp: RISI | Market Pulp, Hardwood and Eucalyptus: PPPC Global 100 - December 2013 — considers 2013 demand.

 

**Market Pulp Capacity**

 

We are the world’s largest producer of market pulp, according to Hawkins Wright, with an aggregate pulp production capacity of approximately 5.3 million metric tons of eucalyptus per year, as shown in the chart below.

 

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**Market Pulp Capacity Ranking *(000 tons)***

 

 

Source: Hawkins Wright — December 2013

 

Eucalyptus pulp capacity has outgrown all other market pulp grades, having grown 80% between 2006 and 2013, to a total of more than 20 million metric tons, with most of this growth taking place in Latin America. Increased volumes by Latin American producers, who hold much larger buffer and in-transit stocks (as new mills in the region are further inland), bigger vessel space, Supplier Managed Owned Inventories where invoicing is made upon pulp consumption rather than delivery, and the increase in both distance and reach of the pulp geographical distribution with the increasing importance of China in the market in recent years, have increased the minimum inventory necessary for eucalyptus distribution. According to the Special Research Note released by the Pulp and Paper Products Council (PPPC) recently, the global balanced level of the hardwood pulp producers inventories is currently 39 days, an increase of 10 days since 2000. However, for Latin American producers the average inventory stands at 43 days as almost 90% of Latin America’s hardwood production is exported outside the region compared to only 38% of North American and Nordic regions.

 

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**Evolution of Bleached Hardwood Pulp producer’s inventory**

***(days of supply)***

 

 

Source: PPPC (World-20)

 

**Market Pulp Demand**

 

Market pulp is used basically to produce three types of papers: Printing & Writing, Tissue and Specialty. Printing & Writing papers are used for newspapers, magazines, catalogs, books, commercial printing, business forms, stationeries, copying and digital printing. Tissue paper is a lightweight paper basically used for personal hygiene. Types of tissue paper are hygienic tissue, facial tissues, paper towels, wrapping tissue, toilet tissue and table napkins. While specialty papers are papers that are made with specific qualification for a very unique purpose. Types of specialty papers are carbon less paper, decorative paper, security paper, self - adhesive papers, and cigarette papers.

 

In 2008, market pulp demand registered a negative growth of 0.9% or 470 thousand metric tons while in 2009 the growth was flat. It is important to note that market pulp demand was directly affected by the credit crunch crisis through this period. As the global economy started to recover from the crisis in 2010 a growth of 2.3% or 1.0 million metric ton took place.

 

In 2011, despite all the uncertainties with the European and American economy, global market pulp demand reached a total volume of 52.5 million tons which represents an increase of 4.7% or 2.4 million tons over 2010. The same unstable economic environment remained in 2012, but stocking movement, especially in China, led market pulp demand to post approximately 1.2% of growth during the year. The European region was the major market pulp consuming region totaling 17.8 million metric tons followed by China with 14.4 million metric tons in 2012.

 

Pulp demand continued to grow in 2013 driven mainly by new paper capacity that entered the market during the year. The  3.2% increase (or 1.3 million extra tons)  was supported mainly by hardwood sales to China (due to a strong growth in the tissue and woodfree paper sectors) and a surprising rebound in North America (resulting from new tissue capacities, an improvement in consumer spending and the replacement of integrated pulp by market pulp).

 

Eucalyptus demand was flat in 2010, increased by 7.8% in 2011, and 2.3% in 2012 and 7.8% in 2013. PPPC projections for Eucalyptus global demand show an average growth of 7.9% between 2014 and 2015 much higher than the global market pulp demand average of 2.0% for the same period. The growth in the tissue paper grades and Printing & Writing expansions in Asia is expected to support this growth.

 

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**Total Market Pulp Demand & Eucalyptus Market Share**

 

 

Source: PPPC

 

**Pulp Price Dynamics**

 

As a global commodity, market pulp prices are impacted by macroeconomic dynamics, as are the prices of any other commodity. The graph below is a comparison of the trend of softwood market pulp prices against the Economist Commodity Index since 1980.

 

 

Source: Hawkins Wright and The Economist, November 2013

 

The main variable that is responsible in the formation of market pulp prices is the balance between supply and demand. This is the relationship between the availability of the pulp in the market for sale against the real demand for pulp in the market. This relation may be analyzed in the short term, medium term, and long term.

 

Short term for the pulp industry is normally defined as the next 12 months, through this period the variables that will impact the balance are: the operating rates of the pulp mills installed, the performance of the installed paper machines that

 

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will result in pulp consumption and the pulp inventory level in the whole supply chain. The most recent event that restricted pulp mills supply was the earthquake in Chile in 2010. Because of the earthquake, production in Chile had to stop, constraining supply and impacting directly the prices. Also, the paper machines can affect the pulp demand as they adjust their productivity output to variations on the economic scenario and market seasonality. Printing & Writing papers demands are more affected by economic changes and seasonality than the demand for tissue paper, because tissue papers are part of human hygiene. As demand weakens and supply continues constant inventories can increase and result in a negative impact in prices.

 

In the pulp industry we may consider medium term between 1 year and 5 years ahead. The result between the supply and demand in the medium term will be a reflection basically of the paper mills and pulp mills project announcements. The short term scenario and on the expected relative growth rate between the supply and demand, impact the pulp price projected to that period. This medium price expectation is of great importance, since companies use this value to decide about new mill projects.

 

The long term for the pulp industry is defined as above 5 years. Although production cost structure is something that must be watched in the short and medium term, its major impact will be in the formation of pulp prices in the long term. Cost structure of the pulp industry will define pulp equilibrium price, suggesting the minimum value which is still worth for the highest cost producer to continue its activities. The graph below shows pulp cash production cost according to production capacity tonnage, which impacts the pulp price:

 

**BHKP Supply Curve CIF Europe (2013)**

 

***(cash production cost in U.S.$/t and BHKP capacity in 000 t)***

 

 

Source: Hawkins Wright ( December 2013)

 

Pulp prices are quoted by region and depending on its “Incoterms”. Regions have their own dynamics but the price that is used as a reference in the pulp industry continues to be the European prices as it continues to be the major consuming market pulp region. The graph below shows hardwood prices in the European market since 2006 and its historical volatility, resulted by the factors described above.

 

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**Hardwood FOEX Europe**

***(U.S.$/t)***

 

 

Source: FOEX

 

***Fibria’s Profile***

 

We are the world’s largest producer of market pulp, according to Hawkins Wright and PPPC, with an aggregate pulp production capacity of approximately 5.3 million metric tons of eucalyptus pulp per year. We believe that we are one of the lowest-cost producers of BEKP in the world, primarily due to our economies of scale, state-of-the-art and strategically located production facilities, the short harvest cycle of our trees and our use of high-end technology in our operations. During the first half of 2009, we acquired control of Aracruz and have fully consolidated the results of operations of Aracruz into our consolidated financial statements as from January 1, 2009. In September 2009, we adopted the trademark “Fibria” for our pulp and paper operations.

 

Our forest base is broad and diversified. As of December 31, 2013, it was comprised of approximately 962 thousand hectares (owned and leased, excluding the forestry partnership program areas, the forest base linked to the sale of forest assets in Southern Bahia State and Losango) located in six Brazilian states. Approximately 557 thousand hectares of our total forestry land consisted of planted areas and approximately 346 thousand hectares of conservation areas with native vegetation, or preserved areas.

 

We produce bleached eucalyptus kraft pulp at the following three pulp mills, 100% owned by us:

 

·                  the Aracruz mill, located in the State of Espírito Santo with an annual production capacity of 2.3 million metric tons and which we acquired as part of the Aracruz Acquisition;

 

·                  the Três Lagoas pulp mill, located in the State of Mato Grosso do Sul with an annual production capacity of 1.3 million metric tons and whose operations started on March 30, 2009; and

 

·                  the Jacareí pulp mill, located in the State of São Paulo with an annual production capacity of 1.1 million metric tons.

 

In addition, we have a 50.0% interest in Veracel, which owns and operates a pulp mill in the municipality of Eunápolis, State of Bahia, with an annual production capacity of 1.12 million metric tons. Under IFRS, we include our proportionate share of the results of operations of Veracel in our consolidated results of operations.

 

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In 2013, we produced 5,259 kilotons of pulp (including 50.0% of the pulp production of Veracel) and recorded consolidated net revenues of R$6,917 million.   In 2012, we produced 5,299 kilotons of pulp (including 50.0% of the pulp production of Veracel) and recorded consolidated net revenues of R$6,174 million.

 

In 2013, our pulp production had the following destination: Tissue 53%, Printing & Writing 30% and Specialities 17%. Our breakdown exposes us to the tissue segment with low dependence on the Printing & Writing segment, bringing more stability through the economic cycle.

 

Export sales accounted for 91% of our pulp sales volume in both 2013 and 2012. We export pulp products from a terminal and warehouse that we operate at the port of Santos, in the State of São Paulo, and from Portocel, a specialized port terminal that is operated by our subsidiary, Portocel Terminal Especializado de Barra do Riacho S.A., or Portocel, which is located approximately 3 kilometers from our Aracruz mill, in the State of Espírito Santo. We also operate a port terminal located in the city of Caravelas in the State of Bahia, from which we transport wood to our Aracruz mill, and a port terminal in the city of Belmonte, in the south of the State of Bahia, from which we transport pulp produced by Veracel to Portocel.

 

The following map sets forth the location of the production facilities and the port terminals we operate:

 

 

**Our Strengths**

 

***Global leadership in market pulp***

 

We are the world’s largest producer of market pulp according to Hawkins Wright and PPPC, with a total pulp production capacity of approximately 5.3 million metric tons as of December 31, 2013 and a focus on the international markets. We estimate that in 2013 we accounted for approximately 28% of the world demand of BEKP, approximately 18% of the world demand of bleached hardwood kraft market pulp and approximately 10% of the world demand of chemical market pulp. Our leadership is based on the sustainability of our forest operations (as a result of the shorter harvest cycle in Brazil as compared to other relevant countries), our state-of-the-art technology (including modern facilities and advanced cloning methods), our high productivity, our strong customer base and our long-term relationships with our customers.

 

***Low production costs***

 

Our efficiently structured operations in Brazil result in relatively low cash production costs. We believe that we are one of the lowest-cost producers of BEKP in the world. Our low production costs relative to many of our competitors are due to a number of factors, including:

 

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·                  our significant economies of scale;

 

·                  our advanced forestry techniques in managing the planting, maintenance and harvesting of our forests;

 

·                  our modern industrial plants;

 

·                  the comparatively short harvest cycle of our trees; and

 

·                  relatively low energy and chemical costs.

 

Climate and soil conditions in Brazil enable us to harvest our eucalyptus trees in approximately 6 years (on average) after planting, while harvesting cycles of other forest species in the southern United States, Canada and Scandinavia can last from 25 to 70 years. Harvesting cycles of our main non-Brazilian competitors in the BEKP market (Spain, Portugal and Chile) are approximately 8 to 10 years.

 

***State-of-the-art production facilities***

 

Our mills have adopted the latest designs, technologies and production processes as a result of significant investments we have made. The advanced technology and production processes used in our mills allow us to use a lower level of raw materials, mainly chemicals, which consequently reduces our production costs. In addition, our mills have advantages over older mills, particularly with respect to reduced emissions and solid waste disposal, providing for a more streamlined, efficient and environmental-friendly pulp production process. The Três Lagoas and Veracel mills, have one of the lowest production costs of market pulp per ton in the world. This is the result of state-of-the-art technology, including modern processes and equipment associated with efficiency in forests and industrial operations, as well as short distances between forests and mills.

 

***State-of-the-art research and technology***

 

Fibria started its eucalyptus plantations at the end of the 1960s using seeds from the Rio Claro Forest Nursery (SP). At that time, four species were considered appropriate: *Eucalyptus grandis, Eucalyptus saligna, Eucalyptus urophylla,*and*Eucalyptus alba*. During the 1970s specific provenances of *E. grandis* and *E. urophylla* proved to be the most suited to our environmental conditions and to the pulping process. Since then, many superior trees were developed both as a result of the breeding program and the use of commercial cloning. Cloned forests presented significant gains in productivity, uniformity, and wood quality, giving us an outstanding position on the world market. Fibria currently uses a group of selected clones in its plantations and these clones are frequently replaced by new ones to ensure productivity evolution as well as sufficient of genetic diversity, at landscape level. State-of-the-art breeding technologies are being used for developing advanced generations of Eucalyptus clones. Those techniques involve the selection of superior plants  and the  crossing among them for successive generations. In addition, Fibria is constantly working on alternative silvicutural methods to boost plantations productivity. The combination of silviculture and genetic improvement are essential to ensure sustainable production and the health of the ecosystems in the long term,  which represents an extra challenge due to climate and economic uncertainties. The development of adapted genotypes along with the improvement obtained via silvicultural practices,  are critical for the sustaining of the environmental services provided by the forests for the generations to come**.**Thanks to continuous progress, the land currently used to supply our pulp mills is half the area required 40 years ago when forest productivity levels were much lower.

 

Product development has kept pace through the study of new processes intended to enable the design of new products and enhance our existing ones, including alternatives to improve customers processes and/or product performance, specially with regard to softness and strength. This has permitted us to continuously offer differentiated products notwithstanding that we operate in a commodity market.  Our collaborations with other world-class companies has led to efforts to develop different products from our biomass and by-products, that may represent new business opportunities in future

 

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***Integrated operations***

 

Our operations are vertically integrated. The process starts with the production of eucalyptus seedlings at our nurseries from where they are taken to our extensive forests. In the forests, seedlings are planted and after that harvested and transported to our production facilities where pulp is produced. After that, pulp is transported to port terminals that we own and operate for distribution to our clients.

 

Our transportation and logistics activities are efficient and diversified. The strategic location of our forests and production facilities allow us to have lower transportation costs. The average distance from our forests to our mills is less than that of many of our domestic and international competitors, resulting in logistical efficiencies (for example, certain of our competitors in China meet their raw material needs with wood imported from Russia). Portocel, the port terminal we operate in the State of Espírito Santo, is located approximately 3 kilometers from our Aracruz mill. This allows us to efficiently export pulp produced at that mill and to receive pulp from Veracel. In addition, we export pulp from a terminal and warehouse that we operate at the port of Santos, in the State of São Paulo.

 

***Customer base***

 

We have long-term relationships with leading global paper manufacturers, particularly in the tissue segment.We have traditionally focused on paper producers who value pulp quality and reliable supply, some of which have been our customers for decades.

 

***Conducting our operations in a sustainable way***

 

We are committed to operating our businesses and resources in a sustainable manner in accordance with world-class sustainability standards. In 2013, Fibria was included in the 2013/2014 portfolios of the Dow Jones World and Dow Jones Emerging Markets sustainability indexes, which comprise the best companies, in terms of sustainability, in the world (DJSI World) and in the emerging markets (DJSI Emerging Markets), respectively. Fibria was highlighted by DJSI World as the leading forest and paper products company. Additionally, Fibria was once again listed in the Corporate Sustainability Index (ISE) — a list of companies whose shares are listed at the BM&FBOVESPA, the Brazilian stock exchange, and that demonstrate a high level of commitment to best practices in the areas of sustainability and corporate governance.

 

We consider sustainability as an essential dimension of our corporate strategy and has implemented a corporate governance for sustainability to ensure that sustainability is considered throughout our processes. We have a Sustainability Committee that plays a consultative role to the Board of Directors and is coordinated by our Chairman. The Sustainability Committee meets three times a year to assess our sustainability strategy and its implementation. Linked to the Executive Officers, the Internal Sustainability Commission, comprised of managers from our various departments, seeks to operationalize the strategy defined by the Sustainability Committee and embed sustainability into our organizational culture. Finally, at each Unit, we have Local Relationship Commissions, that evaluate demands from local stakeholders.

 

***Long-term sustainability targets***

 

In 2011, upon the recommendation of the Sustainability Committee, Fibria reinforced its commitment to this issue by introducing a set of Long-Term Targets that signal our path to 2025. The definition of these targets was based on a systems thinking methodology, carried out through a series of workshops over three months involving 40 executives from our 12 different departments with the coordination of experts from the Universidade do Vale dos Sinos (UNISINOS).

 

The discussions, took into consideration priority issues outlined in Fibria’s Materiality Matrix and social and environmental risks identified in the Enterprise Risk Management (ERM) tool, and identified a set of 90 variables that directly or indirectly affect the management of forests and the production and sale of pulp. These variables have been grouped and form six key themes that will guide Fibria’s activities towards 2025: market and return to shareholder; ecoefficiency; forest management model; relationship and communication with stakeholders; social acceptance and legitimacy; management of personnel and organizational culture.

 

The intersection of these issues led us to establish Long-Term Targets for 2025. These targets are not exhaustive or static and can evolve or include new commitments, as the market, we or society demand it. Additionally, the Long-Term Targets do not replace the conventional tools of management, including Short-Term Targets, which will be aligned with the Long Term.

 

The 2025 Long-Term Targets are the following:

 

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**Optimize the use of natural resources**

 

Our target is to reduce by one-third the amount of land required for the production of pulp, by increasing productivity from 10 tonnes of pulp per hectare per year, in 2011, to 15 tonnes of pulp per hectare per year in 2025, through:

 

·                                          traditional genetic improvement

·                                          improvement in forest management

·                                          increase in industrial productivity

 

Benefits:

 

·                                          lower concentration of land

·                                          greater availability of land for other purposes

·                                          increased competitiveness and greater return to shareholders

 

The graph below shows the expected productivity gains until 2025:

 

**Mean Annual Increment**

**(adt/ton/year)**

 

****

 

**Contribute to the mitigation of the greenhouse effect**

 

Our target is to double the carbon absorption from the atmosphere, by increasing net capture from 5.5 million tCO2eq, in 2011, to 11.1 million tCO2eq, in 2025, through:

 

·                                          increase in forest areas (eucalyptus plantations and native reserves)

·                                          restoration with native species of degraded pasture areas

 

Benefits:

 

·                                          reducing atmospheric concentrations of greenhouse effect gases

 

Note: net annual capture is defined by the difference between the total capture by planted and native forests and the direct and indirect carbon emissions from forestry, industrial and logistics operations throughout the cycle of production of pulp, from the nursery to the customer.

 

**Protect biodiversity**

 

Our target is to promote environmental restoration in 40 thousand hectares of own land, between 2012 and 2025 through:

 

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·                                          plantation of native species

·                                          stimulate the natural regeneration of native species

 

Benefits:

 

·                                          enrichment of fauna and flora, including endangered species, in the Atlantic Rainforest and the Cerrado biomes

·                                          expansion of environmental services - carbon capture and water availability and quality, among others - areas whose original features have been altered due to human activity

 

Note: target does not consider Fibria’s support in restoration projects in third party land, developed in partnerships with other organizations.

 

**Increase ecoefficiency**

 

Our target is to reduce by 91% the amount of industrial solid waste disposed at landfills through:

 

Decrease from 60 kg per tonne of pulp in 2011 to 5 kg per tonne of pulp in 2025:

 

·                                          reduction in the generation of waste by the mills

·                                          reuse of waste in the soil

 

Benefits:

 

·                                          reduction of the impacts and risks caused by industrial landfills

·                                          increase in ecoefficiency of our production processes

·                                          reduction in costs for the disposal of waste and substitution of supplies

 

**Strengthen the interaction between business and society**

 

Our target is to reach 80% of approval rate in neighboring communities through:

 

Elevation of the approval rate in neighboring communities from 50%, in 2011, to 80%, in 2025, through:

 

·                                          improvement in the quality of relationship with the communities

·                                          support for local development projects

·                                          inclusion of the community in our value chain

 

Benefits:

 

·                                          harmonious coexistence with the neighboring communities

·                                          enabling environment for local development

 

Note: approval rate measured through research.

 

**Strengthen the interaction between business and society**

 

Our target is to help the community make self-sustaining 70% of income generation projects supported by Fibria per:

 

Increase of self-sustaining projects from 5% in 2011 to 70% in 2025, through:

 

·                                          expansion of the Rural Territory Development Program (PDRT)

·                                          promotion of technical and management training, through partnerships and support of consultants

 

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·                                          attraction of other partners

 

Benefits:

 

·                                          social inclusion of communities, reducing their socioeconomic vulnerability

·                                          protagonism of the community in its development

·                                          increased managerial and technical skills of community members

·                                          autonomy of the communities in relation to the private and public sectors

·                                          stimulation of the construction of social capital

·                                          reduction of conflicts and maintenance of good relations with neighboring communities

 

Complementing Fibria’s long-term targets are short-term sustainability goals and targets which have, since 2009, been informed and reported on annually. There are nine wide-ranging objectives as outlined below:

 

1)             Improve relations with local communities, through engagement and measures that stimulate their economic and social development.

2)             Develop activities linked to the process of climate change.

3)             Revise the forest partnership models, adapting them to the new guidelines.

4)             Restore areas of natural vegetation.

5)             Promote the development, awareness and engagement of our supply chain.

6)             Increase our ecological efficiency.

7)             Certify our forest areas.

8)             Strengthen our relationship with our community.

9)             Consolidate sustainability within the corporate governance structure.

 

**Our Strategies**

 

***Increase our market share in the international pulp market***

 

We intend to take advantage of our competitive strengths to further increase our market share in the international pulp market. We have focused our marketing efforts on the sale of BEKP to tissue manufacturers, a market segment that, in addition to being more stable than other market segments, has experienced global consumption growth at a cumulative aggregate annual growth rate of approximately 3.3% for the period from 2008 to 2013.

 

According to a recent survey by RISI, global tissue consumption growth is expected to accelerate at a 4.5% annual rate from 2013 to 2018, with China accounting for roughly 45% of the total tissue consumption increase during this period.

 

We believe that we can further increase our market share by leveraging our long-term customer relationships and focusing on customer service and product customization. We continue to strive to meet our customers’ needs by supplying customized pulp products with specifications that facilitate their manufacture of specific paper products. We strive for a high degree of customer satisfaction and are working to further improve the management of our inventory, which we believe will allow us to reduce the timing of our deliveries and better service our customers.

 

***Enhance our financial strength and corporate governance***

 

Our total consolidated indebtedness as of December 31, 2013 and 2012 amounted to R$9,773 million and R$10,768 million and 69.6% and 89.4% of which represented long-term indebtedness, respectively. We are working to further reduce our leverage levels and we are attempting to improve our debt profile in order to reduce our cost of debt. Since the fourth quarter of 2009, we have been conducting a Liability Management Plan which included (1) the issuance of Fibria 2019, 2020 and 2021 Notes totaling U.S.$2.5 billion, (2) the sale of the Guaíba Unit for U.S.$1.430 billion in December 2009, (3) the sale of our interest in Conpacel and KSR for R$1.5 billion in December 2010 (proceeds from the sale were received in January and February 2011, respectively), (4) the sale of the Piracicaba Unit for U.S.$313 million in September 2011, (5) an equity offering which totaled R$1,361 million in April 2012, (6) the sale of non-strategic assets such as lands and forest assets in Bahia and the Losango sale for R$470 million in December 2012, and (7) the prepayment of  more expensive debt mainly through the Notes 2020 and 2021 repurchase of R$855 million. In 2013, Fibria also generated R$1.65 billion with the sale of non-strategic land assets, being R$500 million received in December 2013. In January 2014, we received R$710,702

 

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thousand. The remaining balance of R$191,882 thousand will be received no later than the end of the first quarter of 2014 after the fulfillment of certain obligations and legal requirements, to be performed by us. We may be entitled to an additional amount, limited to R$247,515 thousand contingent on the appreciation of the land. For a more detailed description of our Liability Management Plan, see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Liability Management Plan.”

 

In addition, in order to improve our access to capital sources, in 2010 we upgraded the listing of our shares to the *Novo Mercado*(New Market) listing segment of the BM&FBOVESPA. The *Novo Mercado* listing segment imposes the most stringent corporate governance rules of any listing segment of the BM&FBOVESPA. In achieving this objective, we have implemented all of the administrative adjustments required to comply with the listing segment’s rules, including the appointment of independent members to our Board of Directors and making required changes to our bylaws.

 

In 2013 we strengthened our corporate governance through the launch of specific policies related to third-party transactions and anti-corruption, both formally approved by our Board of Directors. See “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions” and “Item 16B — Code of Ethics”.

 

***Increase operating efficiencies***

 

We intend to maintain the focus on our low-cost operations through greater operating efficiencies and economies of scale. To this end, we intend to continue to:

 

·                  focus on reducing our wood costs through increased eucalyptus yields by continuing to invest in the genetic improvement of our trees;

 

·                  take advantage of climate and soil conditions in Brazil and the short harvest cycle of eucalyptus trees; and

 

·                  improve the efficiency of our operations through further investment in harvesting equipment, production facilities and advanced information technology.

 

***Continue to develop state-of-the-art technology in the forestry area***

 

Technological research and development has made it possible to improve our productivity while reducing the impact of our operations on the environment. In the forestry area, an intense research program and the adoption of modern forestry practices have significantly increased our competitiveness. The genetic improvement of eucalyptus trees has allowed us to plant clones of selected trees, resulting in higher productivity. We currently perform 100% of our planting with cloned seedlings. We have achieved higher speed and better seedling use and quality as a result of a pioneering procedure for the multiplication of clones. We believe that we use the most advanced technology for planting and harvesting trees and storing and transporting wood with a completely mechanized system. In the decade ending 2010, the average annual amount of pulp produced was 11.3 metric tons per hectare per year, compared to 6.4 metric tons during the 1970s. Referring to this, one of the long-term targets is to reduce by one-third the amount of land required for the pulp production, through increasing productivity, reaching 15 tonnes of pulp per hectare per year in 2025, based on genetic improvement, forest management improvement and industrial productivity increase.

 

By continuing to focus on cutting-edge technological research and development, we aim to strengthen our position as one of the leading developers of technology in the forestry area, maintain our record as a low cost producer while meeting our standards of high quality production, increase the range of products that we offer to our customers and maintain our reputation as an environmentally friendly and socially responsible manufacturer. Altogether, this positioning has led to a deep analysis on increasing the value from our forestry biomass where biofuels is one of the most prominent. In 2012 Fibria and Ensyn created a strategic alliance which includes the establishment of an equally-owned joint venture for the production of cellulosic liquid fuels and chemicals in Brazil, as well as a U.S.$20 million equity investment in Ensyn Corporation by Fibria. The goal of the Ensyn-Fibria joint venture is to combine the strengths of each party in creating a producer of renewable liquid fuels from cellulosic feedstocks.

 

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**Sustainability**

 

For Fibria sustainability includes: reducing waste, developing a skilled and engaged workforce, supporting projects that promote the growth and welfare of neighboring communities, preserving and recovering native forests, sustainable pest control, managing with transparency, and strengthening communication channels with civil society, the government and media. In essence, we believe that the practice of sustainable actions is part and parcel of our business. Sustainability embodies the recognition of public opinion, customer loyalty, employee pride and trust of partners and neighbors. Furthermore, it increases profitability and makes us stronger to meet the needs of an increasingly demanding market that is mindful of the planet’s delicate environmental balance.

 

***Community Relations***

 

We operate in seven Brazilian states, where it owns mills, eucalyptus plantations and conservation areas. Neighboring our areas, there are independent wood suppliers with whom we hold long-term contracts for the supply of raw material for pulp. We have forged a wide range of relationships with diverse communities (traditional or not), which are primarily impacted by its forestry activities.Therefore, quality relations with communities in the vicinity of our operations are crucial to our performance. We have continuously investing in community engagement processes and socio-environmental projects designed to foster social inclusion and improve the quality of life of neighboring populations. These are programs that help to strengthen its social capital, generate jobs and income, improve the locals’ quality of life, and above all establish a constructive dialogue in search of common solutions. Fibria seeks to ensure social legitimacy for its business by encouraging the integration of these communities into its forestry business, while seeking to establish planning and monitoring mechanisms aimed at identifying, preventing and mitigating the impacts of its activities.

 

Fibria’s Strategy for Community Relations and Social Investment includes five levels: survey and diagnosis of impacted communities, Relationship Prioritization Matrix, dialogue enhancement, relationship methods and tools, and monitoring. In 2013, the implementation of this strategy was completed in all Fibria Units across Brazil and achieved important advances in the social arena.

 

As a result of these activities, we are aware of the different perceptions of our management and seek to incorporate these views when directing our socioenvironmental programs and projects.

 

***Sustainability Report***

 

Fibria adheres to the Global Reporting Initiative G3.1 guidelines for Sustainability Reports at an A+ application level. Through this process we seeks to annually show how we are addressing challenges and achieving results, with regard to its sustainability strategy and its vision for the future. It includes details of commitments and performance on the governance, economic, financial, social and environmental aspects of the business following the principles of Materiality, Stakeholder Inclusiveness, Sustainability Context, Completeness, Balance, Comparability, Accuracy, Timeliness, Clarity and Reliability. The Sustainability Report is widely distributed to all of Fibria’s stakeholder groups, from community leaders to ESG and long-term investors and analysts.

 

***Relationship with specific communities***

 

Fibria enjoys a friendly relationship with most of its neighboring communities. However, there are ongoing conflicts with some communities located in the poorest regions of northern Espírito Santo State and southern Bahia State. The reasons are not always attributable to us, as it endeavors to reach a solution; so far unsuccessfully in many cases.

 

Despite the complexity of the challenge, tackling these conflicts is among our priorities. We have served the communities either directly or through engagement with other players who can also contribute to finding solutions, such as the government, in its various echelons, NGOs and other companies. Some communities have received special attention from us, which has been developing specific social inclusion projects, often with input from government agencies and independent socioenvironmental agencies. This is the case of Black communities known as quilombolas (descended from former runaway slaves) and Indigenous communities of the Tupiniquim and Guarani ethnicities. Members of the Landless Workers’ Movement (MST) and families of local fishermen are yet other cases in point.

 

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***Engagement with Landless Movements***

 

An area of 11 thousand hectares in the municipality of Prado (BA), occupied by members of the Landless Workers’ Movement (MST) since 2000, ceased to be a point of tension to become a pioneering experience in sustainable rural production. In a partnership with the government of Bahia and the Luiz de Queiroz School of Agriculture of the University of São Paulo (ESALQ/USP).

 

Fibria has developed a project that provides for the production of various agroforestry crops in batches while maximizing land use.The Alvorecer Program, represents a sustainable settlement that is coordinated by 12 agricultural engineers and technicians hired by Fibria, residing locally. In 2013, the project gained new momentum with the construction of an agricultural school with a capacity to serve 300 students per period.

 

**Our Products**

 

***Pulp***

 

In 2013, we produced 5,259 kilotons of pulp representing 41% of total Brazilian hardwood pulp production. In 2012, we produced 5,299 kilotons of pulp representing 45% of total Brazilian hardwood pulp production.

 

The following table sets forth our production volume of eucalyptus pulp and a breakdown of our BEKP sales volume by market for the periods indicated.

 
| ** **        | ** ** | **2013**                          | ** ** | **2012**   | ** ** | **2011**                          | ** ** |
|-------------------|------------|-----------------------------------|------------|------------|------------|-----------------------------------|------------|
| ** **        | ** ** | **(thousand   metric tons)** | ** ** | ** ** | ** ** | **(thousand   metric tons)** | ** ** | ** ** | ** ** | **(thousand   metric tons)** | ** ** | ** ** | ** ** |
|              |       |                              |       |       |       |                              |       |   |   |   |   |   |   |
| Production volume |       | 5,259                             |       |       |       | 5,299                             |       |   |   | 5,184 |   |   |   |
| Sales volume      |       |                              |       |       |       |                              |       |   |   |   |   |   |   |
| Europe            |       | 2,016                             |       | 38.8       | %          | 2,188                             |       | 40.8 | % | 2,159 |   | 42.0 | % |
| North America     |       | 1,451                             |       | 27.9       | %          | 1,338                             |       | 25.0 | % | 1,302 |   | 25.3 | % |
| Asia              |       | 1,284                             |       | 24.7       | %          | 1,300                             |       | 24.3 | % | 1,171 |   | 22.8 | % |
| Brazil/Others     |       | 447                               |       | 8.6        | %          | 531                               |       | 9.9 | % | 509 |   | 9.9 | % |
|              |       | 5,198                             |       | 100        | %          | 5,357                             |       | 100 | % | 5,141 |   | 100.0 | % |

 

***Pulp Production Process***

 

The pulp production process can be summarized in the outline below, and is comprised of three main activities: Forestry, Industrial and Logistics:

 

 

***Forestry***

 

We only produce bleached eucalyptus kraft pulp from planted eucalyptus trees. Bleached eucalyptus kraft pulp is a high-quality variety of hardwood pulp. Eucalyptus is a hardwood tree, and its pulp has short fibers and is generally better suited to manufacturing tissue, coated and uncoated printing & writing paper and coated packaging boards. Short fibers are optimal for manufacturing wood-free paper with good printability, smoothness, brightness and uniformity.

 

Our pulp production is solely from wood extracted from eucalyptus trees grown in sustainable forest plantations. Eucalyptus trees are among the fastest-growing trees in the world given that climate and soil conditions in Brazil allow for eucalyptus tree harvest rotations of approximately 6 years, as compared to harvest rotations of approximately 10 to 12 years in Chile, and up to 25 years in the southern United States.

 

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Our forestry operations are composed of four major activities: nurseries, silviculture, harvesting and transportation of wood from the forestry to the mills.

 

The process begins in the nurseries, where the seedlings are cultivated. We operate four nurseries located in the states of São Paulo (Jacareí and Capão Bonito), Mato Grosso do Sul and Espírito Santo with an aggregate annual production capacity of approximately 89 million seedlings. We are building a new nursery in Bahia which is expected to start its operations in the first quarter of 2014. The nursery located in the municipality of Jacareí was closed in 2013. This investment is part of our strategy to increase our current production capacity and is in line with our sustainability commitments. Our seedlings are 100% produced with cloning technology, one of the most advanced genetic processes for the formation eucalyptus trees in the world. Seedlings take between 70 to 120 days to be completely developed and set for planting in the forests when the silviculture process starts.

 

Eucalyptus planting is made respecting the most advanced technology related to soil cultivation combining the best practices of natural resources conservation and high productivity planting. As a result, it is possible to implement our forest base with minimum soil interference maintaining micro-organisms and protection against erosion. Silviculture is responsible for the planting and maintenance of the forests until the harvesting process starts.

 

After approximately 6 years, the eucalyptus trees are harvested. We use advanced and automated harvesting equipment in our forests. After harvested, the wood logs are transported either by truck, rail or barge (or a combination of these) from the forests to our production facilities. During harvesting all barks, tree tops and other biomass sources remain on the ground to preserve soil fertility. The logs are then transported to our production facilities where they are unloaded and then taken by conveyor belt to be debarked and chipped as will be described below.

 

Our forestry base is broad and diversified, comprised of total forestry area of approximately 962 thousand hectares as of December 31, 2013 located in 6 Brazilian states, consisting of approximately 557 thousand hectares of planted areas and approximately 346 thousand hectares of preserved areas (excluding the forest base linked to the sale of forest assets in Southern Bahia State and Losango).

 

The following table describes the location and the area of our forest base as of December 31, 2013:
| ** **          | ** ** | ** **             | ** ** | ** **       | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------|------------|------------------------|------------|------------------|------------|------------|------------|------------|------------|
| **State**           | ** ** | **Forested**           | ** ** | **Conservation** | ** ** | **Other**  | ** ** | **Total**  | ** ** |
| ** **          | ** ** | **(in hectares)** | ** ** |
|                |       |                   |       |             |       |       |       |       |       |
| São Paulo      |       | 78.117                 |       | 57.317           |       | 9.518      |       | 144.952    |       |
| Minas Gerais        |       | 13.009                 |       | 13.068           |       | 1.272      |       | 27.349     |       |
| Rio de Janeiro      |       | 1.638                  |       | 1.519            |       | 212        |       | 3.368      |       |
| Mato Grosso do Sul  |       | 224.911                |       | 99.628           |       | 17.365     |       | 341.904    |       |
| Bahia(1)            |       | 134.583                |       | 112.775          |       | 16.643     |       | 264.001    |       |
| Espírito Santo |       | 104.537                |       | 61.895           |       | 13.665     |       | 180.097    |       |
| Total(2)            |       | 556.795                |       | 346.203          |       | 58.674     |       | 961.672    |       |

 

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(1)         Includes the forests associated with the production facility of Veracel. Excludes forest base linked to the sale of forest assets in Southern Bahia State and Losango.

(2)         Excludes forestry partnership program areas (135 thousand hectares with 91 thousand forested hectares).

 

***Forest Preservation and Natural Resources***

 

All of our wood comes from tree plantations rather than from native forests. Since the 1980s, we have been harvesting eucalyptus through uniform propagated seedlings from carefully selected trees, planted in already degraded pasture lands. The characteristics of the seedlings we select are matched to different regions. This method allows us to (1) greatly increase forestry productivity, reducing the demand for new lands, (2) comply with environmental regulations, and (3) contribute to carbon reduction in the atmosphere.

 

Pursuant to the Brazilian Forestry Code (Law No. 12,727/ 2012), we are required to set aside 20% of our areas for preservation, conservation and environmental recovery. In 2013, we maintained 36% equivalent to 346 thousand hectares of

 

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our forest base for conservation purposes. These areas consist of either native forests or riparian buffer zones, or are maintained to satisfy specific ecological interests. In addition, we maintain a reforestation program, to recover degraded areas and endangered flora species.

 

We also invest in environmental studies and continuous monitoring, together with domestic and international universities, research centers and consultants, in order to improve the environmental conditions of our plantations, and ensure that we protect the native ecosystem and availability of natural resources in the areas in which we operate. This is done by imposing environmental conditions on the plans for the forestry areas, before harvesting and transportation activities start.

 

In 2013, we conducted approximately 38 projects related to biodiversity and forestry management improvement. Projects include different types of studies and monitoring (including biodiversity and water), endangered species protection, environmental education, biodiversity focused landscape planning and others.

 

***Forestry Certification System***

 

We constantly seek alternatives and tools for the responsible production through voluntary certification and socio-environmental commitments. Certification systems are initiatives for continuous improvement of processes, environmental conservation and responsible development practices that benefit our relationship with society, government agencies, customers, suppliers, employees and other stakeholders.

 

Fibria has internationally recognized certifications in its operations, such as ISO 9001, ISO 14001, OHSAS 18001 and forest certification as FSC® and Cerflor/PEFC certifying sustainable practices.

 

The main certifications for the forest industry are: the Forest Stewardship Council® (FSC®), given by an independent, non governmental, not-for-profit organization and Cerflor created by the Brazilian program of forest certification, recognized internationally by the Programme for the Endorsement of Forest Certification Schemes - PEFC. The forestry certification system is divided in two categories: Forest Management, which verifies whether the wood is produced according to high standards that protect the environment, and Custody Chain, which verifies that the Company uses only certified wood as raw material.

 

All our areas have at least one certification as shown on the table below:

 
| **Unit**         | ** ** | **FSC®** | ** ** | **Cerflor/PEFC** |
|------------------|------------|---------------|------------|------------------|
|             |       |          |       |             |
| Três Lagoas |       | Certified     |       | Certified        |
| Jacareí     |       | Certified     |       | Certified        |
| Aracruz          |       | Certified     |       | Certified        |
| Veracel          |       | Certified     |       | Certified        |

 

Under the strategy of achieving forestry certification for all Units, in January of 2011 Fibria signed a contract with the Institute for Agricultural and Forest Management and Certification (Imaflora) to adapt productive processes at the Aracruz Unit to FSC® Principles and Criteria. This adaptation program, known as SmartStep, was created by the Rainforest Alliance, an international organization represented in Brazil by Imaflora. In the evaluation, some gaps with regards to the Principles and Critera were identified and action plans involving approximately 500 measures in the environmental, social, operational and labor rights areas were developed. These measures were monitored by the certifier via audits in 2011 and were considered fully implemented. Thus, Fibria was able to accelerate the main certification process for 2012. On October 1, 2012, the certifier issued FSC® certification for the Aracruz Unit.

 

In October 2013 the Jacarei unit obtained certification Cerflor/PEFC. All Fibria units have FSC® and Cerflor / PEFC certifications, being audited by a third party, according to the table above.

 

***Industrial***

 

We highlight the following aspects of our industrial operations:

 

·                  Eco design and eco-efficiency

 

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·      Water footprint program

·      Controlled emission of carbon dioxide

·      Focus on operational stability

 

In the industrial operation the pulp is extracted from the wood by a process known as the Kraft Process. Among the innumerous advantages from an environmental standpoint, it is self-sufficient in thermal and electrical energy, since biomass is the main input used to produce them.

 

The main flow consists of a wood cooking process, a bleaching stage, and a final extraction stage. Once the logs are transported to our production facilities, they are unloaded and then taken by conveyor belt to be debarked and chipped. After that, wood chips are sent to digesters, where they are mixed with chemicals and cooked under temperature and pressure. During this process, lignin and resins are removed from the wood. Once removed, the lignin is used as fuel to produce thermal (steam) and electrical energy for our pulp mills. The used chemicals are removed at various stages of the production process and recycled within our pulp mills.

 

The unbleached pulp is then sent through the oxygen delignification process and the chemical bleaching process, traditionally using chlorine dioxide, ozone and hydrogen peroxide (at our Jacareí mill) or chlorine dioxide, oxygen and hydrogen peroxide (at our Três Lagoas and Aracruz mills). The cellulose fibers are screened, pressed and dried. The dried pulp is cut into sheets and packed into bales, resulting in market pulp.

 

The kraft pulp production process traditionally involved the use of elementary chlorine for bleaching. In recent years, demand for pulp that is bleached using little or no chlorine has grown significantly because of concerns over possible carcinogenic effects of chlorinated organic compounds released in water. We only produce elemental chlorine free pulp, or ECF pulp, that is produced without using elementary chlorine in its bleaching process.

 

We use energy and chemicals in the pulp process, and although we recover a high percentage of them, as we have significant dependence on many of this inputs, we entered into long-term “take-or-pay” contracts with suppliers of chemical products, diesel and natural gas for periods ranging from one to ten years, in order to mitigate this dependence. See “Item 8. A. Consolidated Statements and Other Financial Information - Commitments”.

 

The following table provides certain information regarding our production facilities and production for the years indicated:

 
| ** **        | ** ** | ** **          | ** ** | **Annual Production**   | ** ** | ** ** | ** ** | **Production for the Year Ended   December 31,** | ** ** |
|-------------------|------------|---------------------|------------|------------------------------|------------|------------|------------|---------------------------------------------------------------------------|------------|
| **Facility**      | ** ** | **Location**        | ** ** | **Capacity**                 | ** ** | ** ** | ** ** | **2013**                                                                  | ** ** | **2012** | ** ** | **2011** | ** ** |
| ** **        | ** ** | ** **          | ** ** | **(in thousand**        | ** ** | ** ** | ** ** | **(in thousand tons)**                                          | ** ** |
| ** **        | ** ** | ** **          | ** ** | **tons per year)** | ** ** | ** ** | ** ** | ** **                                                                | ** ** | ** ** | ** ** | ** ** | ** ** |
|              |       |                |       |                         |       |       |       |                                                                      |       |   |   |   |   |
| **Pulp   Units**: |       |                |       |                         |       |       |       |                                                                      |       |   |   |   |   |
| Aracruz           |       | Espírito Santo |       | 2,340                        |       |       |       | 2,346                                                                     |       | 2,387 |   | 2,323 |   |
| Três Lagoas  |       | Mato Grosso do Sul  |       | 1,300                        |       |       |       | 1,272                                                                     |       | 1,275 |   | 1,230 |   |
| Jacareí      |       | São Paulo      |       | 1,100                        |       |       |       | 1,080                                                                     |       | 1,076 |   | 1,103 |   |
| Veracel (1)       |       | Bahia               |       | 560                          |       |       |       | 561                                                                       |       | 562 |   | 528 |   |
| Total             |       |                |       | 5,300                        |       |       |       | 5,258                                                                     |       | 5,299 |   | 5,184 |   |

 

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(1)       Represents 50% of the annual production capacity and production of Veracel’s pulp mill.

 

***Eco design and eco-efficiency***

 

As an eco-efficient company, we pursue the balance of the five essential elements for life in all our operations (water, air, energy, earth and people) with the strategic aim of producing less carbon intensive products. Our recent projects are based on “Eco Design” and all of our industrial operations are managed according to the “4R” eco-efficiency principles

 

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(reduce, recycle, re-think and re-use). We are also part of the cleaner production program from United Nations Environmental Program.

 

***Energy***

 

Of the total amount of thermal and electrical energy we self-generated, 91% was from renewable fuels, such as biomass and black liquor that are byproducts of the pulp production process, and 9% was from non-renewable fuels that we purchased, such as fuel oil and natural gas. In 2013, we generated internally approximately 115% of our electric energy requirements for our pulp production process including the amount of exportation.

 

***Chemicals***

 

We use several chemicals in the pulp bleaching process. As we have significant dependence on certain chemicals, we entered into long-term “take-or-pay” contracts with suppliers of chemical products, fuel oil , diesel and natural gas for periods ranging from one to ten years, in order to mitigate this dependence. See “Item 8. A. Consolidated Statements and Other Financial Information — Commitments”.

 

***Water***

 

While not a significant cost component of our raw materials, water is essential to the production of pulp. In 2013, we used 31.1 cubic meters of water per ton of pulp (as compared with a consumption rate of 30 to 50 cubic meters per ton, as recommended under the EU IPPC Directive — Integrated Pollution Prevention Control — which sets out environmental protection best practice guidelines for paper and pulp mills and is widely adopted across the world as a recognized standard in production). We believe that our water usage rates are among the lowest within the pulp and paper industry and we are continually introducing new technology and implementing improvements in our industrial processes and methods to further decrease these rates. We believe that our water supplies are currently adequate.

 

The water used at the Três Lagoas and Jacareí units is obtained from the Paraná and Paraíba do Sul rivers, which are adjacent to our mills. Each river system is within a separate hydrological river basin, thereby reducing the overall risk of unavailability of water due to adverse atmospheric or hydrological conditions. In the Aracruz Unit water is provided by several rivers and a public interest project developed by us and the municipal governments of Aracruz and the neighboring city of Linhares, under which we may obtain water from the Rio Doce River through an existing system of canals and rivers. The project provides water for the local communities and for the industrial and chemical districts of the municipality of Aracruz, as well as for irrigation of agricultural activities in the northern region of the State of Espírito Santo. The water from these sources flows into a 35 million cubic meter reservoir on the mill site. We estimate that the reservoir in the Aracruz unit holds enough water to supply the mill’s needs for a five-month period in the event of a drought.

 

In the Aracruz Unit, wastewater undergoes a two-stage purification treatment process before it flows into the ocean. The Jacareí and Três Lagoas mills use a active sludge double stage wastewater treatment process, which guarantees at least 95% of BOD (Biological Organic Demand) removal.

 

The Brazilian government imposes tariffs on the industrial usage of river water. These tariffs have not had a significant impact on our costs.

 

After the water has been used in the manufacturing process, we pass the resultant effluents through mechanical and biological treatments before returning them to the rivers. We also have emergency lagoons and tanks that enable us to avoid releasing untreated effluents into the natural environment in the event of a problem with our effluent process and we have spill control systems to avoid leaks from our pulp production plants. We constantly monitor the characteristics of our liquid effluents through chemical, physical and biological analyses to ensure that they are acceptable for release into the environment.

 

***Effluents***

 

Effluents generated during the production process are treated in our units by a two-stage process. During the first stage, solids such as fibers, clay and carbonates are removed. In the second stage, these solids are biologically treated and broken down by microorganisms. We continuously evaluate the composition of the liquid effluents generated during the

 

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production process and with the results of these analyses, we can minimize the generation of effluents and maximize the quantity of effluents that may be recycled in our production processes.

 

***Solid Wastes***

 

Solid wastes generated in the production process are collected, treated and disposed by an efficient waste management program, which has recently been improved by the adoption of new, environmentally friendly composting techniques. Whenever possible, we have also identified how solid waste materials generated during our pulp production processes may be put to alternative use.

 

The remainder of solid waste is processed by recycling systems into organic and inorganic material for use in our forests or disposed of in licensed landfill sites. We collect, treat and dispose of the small amount of hazardous waste generated by our facilities in accordance with Brazilian law.

 

***Controlled emission of carbon dioxide***

 

Climate change may affect the results of our business, which is based on the use of natural resources. We therefore consider climate-change-related physical and regulatory risks, as well as risks to our reputation, in our business strategy.

 

Physical risks are associated with changes in weather conditions and the availability of water that may jeopardize environmental services, such as regional climate regulation and water production, directly impacting our activities and, at times, those of our suppliers and customers. For this reason, we have assessed our vulnerability to climate change from the point of view of the entire value chain and adopts a precautionary approach to the management and operation of its industrial and forestry activities.

 

Our main physical risk prevention measures are listed below:

 

·                  the control and monitoring of production;

 

·                  studies into the genetic improvement of eucalyptus production in order to identify those species most adaptable to different climate conditions;

 

·                  the monitoring of water consumption in forest areas;

 

·                  projects related to improving energy efficiency and the stability of the industrial process;

 

·                  the exploration of different means of transport;

 

·                  waste reduction and reuse; and

 

·                  the compilation of an inventory of greenhouse gas (GHG) emissions from our activities, with a focus on the pulp carbon footprint and the CDP Supply Chain.

 

In 2013, we completed its fourth GHG emission inventory, using 2012 as a base, which considered the industrial and forestry activities of the Aracruz (ES), Três Lagoas (MS) and Jacareí (SP) units, as well as their pulp export logistics operations.

 

The result of these studies showed a positive emissions balance, with 0.8 tons of CO2 equivalent sequestered per ton of pulp produced. We received our Carbon Footprint certificate from PricewaterhouseCoopers.

 

Our 2012 GHG emission inventory was based on various calculation protocols, including those of the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), adapted by the International Council of Forest & Paper Associations (ICFPA) for the pulp and paper sectors.

 

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In 2010, BM&FBOVESPA launched a new Index — Índice Carbono Eficiente (ICO2) — to improve the adoption of environmental practices towards climate change by Brazilian companies and since then we have been selected as part of the Index. In 2012, an Exchange Traded Fund (ETF) was launched based on ICO2 index.

 

***Operational Stability***

 

The challenge of this concept consists of engaging the industrial and forest’s operations teams in a new one “Operational Strategy” in which the production rhythm would be modulated up and down, respecting the instantaneous limits of capacity of each process sector. To reach larger stability it was necessary also to reduce the frequency and duration of the occurrences that generated stops and/or reduction of production rhythm. In 2013, the operating stability was again above 90%, evidencing the operational excellence as one of the main competitive strength and value creation driver of our company.

 

***Logistics***

 

***Delivery of Wood to Our Pulp Mills***

 

Our forests are located an average distance of 165 kilometers from our pulp mills. We transport wood to our mills by truck, rail and sea barge. The trucks and sea barges are owned and operated by independent contractors who transport wood from our forests to our production facilities. In 2013, we transported approximately 18,36 million cubic meters of wood to our mills, approximately 88% by truck, 11% by sea barge and 2% by rail. Although the percentage of wood transported by sea barge and rail was relatively low, by using these transportation methods, we were able to reduce the logistics costs of our Aracruz and Jacareí mills. Transportation of wood to the mills represents a large portion of our pulp production costs, and reductions in our transportation logistics and costs are priorities for us.

 

At the end of 2002, we improved our rail infrastructure at our Aracruz unit and launched a diversified transportation system that combined sea, road and rail transport to further integrate the forest-to-mill-to-port logistics at this unit. Furthermore, in 2003, a four kilometer-long rail spur used for unloading wood shipments directly at the Aracruz mill’s yard was completed. This improvement was important to optimize the receiving process of the wood that comes from the northern part of the State of Minas Gerais and other areas within the State of Espírito Santo. Our integrated, coastal wood shipment project involves an integrated tug and barge system and two port terminals. This sea transportation system links the far south of Bahia to the mills in the State of Espírito Santo. The port complex of Portocel, adjacent to the mills at Aracruz, receives wood from plantations in southern Bahia via barge.

 

In September 2002, we executed an agreement with MRS Logística S.A., or MRS, to transport wood to our Jacareí pulp mill and also approved an investment to construct a railway terminal to unload the wood at the Jacareí pulp mill. The new wood terminal has been operational since October 2005 and has significantly reduced our wood transportation costs.

 

Due to its location in the State of Mato Grosso do Sul, which is landlocked and lacks any rail infrastructure, the Três Lagoas unit relies entirely on transportation by truck of its wood to the plant. On September 17, 2010, we entered into an agreement with Wilson & Sons, to load and unload wood to our Três Lagoas mill through September 2016.

 

***Distribution Planning***

 

As a result of our commercial strategy to reinforce our position in the global pulp market and focus on long term relationship with our customers, we invest in technology and develop best practices regarding our logistics. Our distribution planning is based on the concept of integrated systems. Therefore our pulp mills, commercial offices and third party logistics worldwide have access to the most accurate real-time information allowing the planning team to manage Fibria’s supply chain with high standards and provide reliable logistics services to our customers, maintaining inventories in several distribution centers located in North America, Europe and Asia.

 

***Delivery of Pulp from our Mills to the Ports***

 

The pulp produced in our mills is handled and carried according to the strictest standards of quality and stored in warehouses designed especially for pulp — all operated by first-class logistic companies.

 

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Pulp production enters into a tracking system right after the bailing lines. Tracking is done by barcodes reading along the whole supply chain from the end of the bailing line up to the final customer (paper maker). Pulp traceability is guaranteed all the way up to the customers’ mills fulfilling all the requirements in any certification system.

 

***Três Lagoas mill***

 

Most of Três Lagoas’ pulp production is exported overseas. Pulp is transferred from the mill to the port of Santos by a reliable multi-modal (truck and rail) system on a daily basis. Part of the production is sold to International Paper, a paper mill close to Três Lagoas. In this case, pulp is pumped directly into the paper mill. The remaining part of the production is distributed into domestic market by trucks.

 

***Aracruz mill***

 

Aracruz’s pulp production is destined to exports mainly. It has one of the most optimized pulp logistic setup between mill and port in the world as this mill is 3 kilometers far from the port of Portocel which provides operating reliability and competitive logistic costs. The pulp transportation between pulp mill and port is made by special trucks to optimize costs and guarantee bales quality.

 

***Jacareí mill***

 

Jacareí’s production is destined to domestic market and overseas. The pulp expedition to domestic market is done by trucks, regularly supplying our customers located in the Southern region and guaranteeing the delivery with quality and on time. The export pulp is transferred from the mill to the port of Santos by rail on a daily basis through a reliable rail system.

 

***Veracel mill***

 

Veracel’s production is also exported. A multi-modal (truck and barge) transportation system connects the mill to the domestic port of Portocel. Firstly the pulp is taken by truck, through a dedicated road, from the mill to Belmonte maritime terminal. From this terminal, pulp is carried up to Portocel by barge.

 

***Port Operations***

 

The pulp produced for export is delivered to our customers by means of sea vessels on the basis of long-term contracts with the carriers of these vessels. We operate in two ports, Santos and Barra do Riacho.

 

In October 2010, four long-term contracts were signed with the South Korean Pan Ocean Co. Ltd. (former STX Pan Ocean), valid for a period of 25 years for the construction of 20 sea vessels. Five have been already delivered, of which, four are already dedicated to the transportation of pulp and the remaining one is expected to enter into service in the first quarter of 2014.

 

Due the recent Pan Ocean’s financial difficulties, the long-term contracts are in process of renegotiation between the parties involved (Fibria, banks and Pan Ocean).

 

Due to the renegotiation in progress, we expect that the exports of pulp and the related logistics costs will not be impacted, since we have freight contracts with other carrier companies, which will be able to fully meet the export demand, with guaranteed of service quality and cost efficiency.

 

**Port of Santos**

 

The port of Santos is located on the coast of the State of São Paulo. From this port we export pulp produced at the Jacareí and Três Lagoas mills which are located approximately 150 and 750 kilometers far from Santos port, respectively. We have a concession from the government of the State of São Paulo to operate a terminal and a warehouse at this port. The concession was granted under a operational lease agreement with Companhia Docas do Estado de São Paulo—CODESP that expires in September 2017. This particular warehouse has a storage capacity of 38 thousand metric tons of pulp and supports exports from the Jacareí mill. The operation of the port has facilitated the growth of our exports because it allows us to load vessels with pulp directly from our terminal, thereby significantly reducing freight and handling costs.

 

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To facilitate exports out of our Três Lagoas mill, we have also signed a long term contract with a terminal operator at Santos (Gearbulk Terminals) for additional storage capacity of 50 thousand metric tons of pulp at a new specialized terminal where rail connection and vessel berth priority were also considered.

 

In order to maintain our export capacity in the long term, we intend to participate in the new concession processes of the port of Santos, and will continue to look for competitive alternative means for shipping our pulp.

 

**Portocel**

 

The pulp produced for export at the Aracruz and Veracel pulp mills is shipped out of the Port of Barra do Riacho (Portocel), which is located approximately 3 kilometers from Aracruz and 260 nautical miles from Veracel’s barge terminal. This port is a modern facility that has the capacity to handle approximately 10 million metric tons of pulp and wood per year. Warehouse facilities at Portocel are capable of storing approximately 220 thousand metric tons of pulp (static storage).

 

We own 51% of Portocel, the company that operates the port terminal of Aracruz. The remaining 49% of Portocel is owned by Cenibra, another pulp manufacturer and one of our competitors.

 

***Delivery of Pulp from the Port to our Customers***

 

The major part of our sales to the final customer is delivered out of our overseas terminals in the United States, Europe, Mediterranean and East Asia. Again at this point, Fibria is very committed to customers requirements, cost advantage and environmental impacts when choosing the right option among the different modals of transportation: rail, truck, barges and coasters.

 

**Environmental policies**

 

The Brazilian Constitution grants the federal government, state and municipalities the power to enact environmental protection laws and issue regulations under such laws. While the federal government has the power to promulgate environmental regulations setting forth minimum standards of environmental protection, state governments have the power to enact more stringent environmental regulations. The municipalities may only issue regulations with respect to matters of local interest or to supplement federal or state laws. Most of the environmental regulations in Brazil are thus at the federal and state levels rather than at the local level, with environmental standards established in the operating permits issued to each plant rather than through regulations of general applicability. Applications for the renewal of operating permits are reviewed periodically.

 

The procedure to obtain an environmental license includes the following:

 

·                  the preliminary or provisional license — granted during the preliminary stage of the planning of the facility. This license provides an approval for the location and concept of the facility based on its environmental impact and establishes the basic requirements to be met during the subsequent stages of the project implementation;

 

·                  the installation license — authorizes the construction of the facility in accordance with the specifications set forth in the plans, programs and projects approved by the authorities; and

 

·                  the operating license — authorizes the operation of the facility after receipt of the preliminary and the installation licenses, and provides confirmation by the authorities that the environmental control measures and conditions required for the operation of the facility have been taken.

 

Environmental licenses are valid for a specified term but may be cancelled if any of the conditions or requirements imposed by the licensing authority for maintenance of the relevant license is not fulfilled.

 

Occasionally, jurisdictional conflicts among environmental licensing authorities occur when the proposed exploratory activity is in a location that is regulated by more than one municipality or state, or is under the jurisdiction of both the state and federal governments. In addition, depending on the level of the environmental impact that is caused by the

 

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exploratory activity, the environmental licensing procedure may require assessments of environmental impact and the holding of public hearings, which may increase the complexity and the duration of the licensing procedure considerably, and expose the exploratory activity to potential legal claims.

 

All of Brazil states require licenses for the installation and operation of our industrial plants. These regulations were introduced in the last ten to twenty years. We are subject to the regulation of state environmental agencies of São Paulo, Espírito Santo, Bahia, Rio Grande do Sul and Mato Grosso do Sul, respectively known as *Companhia Ambiental do Estado de São Paulo* (CETESB), *Instituto Estadual do Meio Ambiente* (IEMA), *Instituto Estadual de Meio Ambiente (INEMA), Fundação Estadual de Proteção Ambiental Henrique Luiz Roessler* (FEPAM) and *Instituto de Meio ambiente do Mato Grosso do Sul* (IMASUL). Pursuant to these state regulations, state authorities are empowered to regulate a company’s operations by providing company-specific environmental standards in such company’s operating permit.

 

Our forestry activities are jointly regulated by the Brazilian federal environmental agencies and the state environmental agencies of the States of São Paulo, Espírito Santo, Minas Gerais (*Fundação Estadual do Meio Ambiente* (FEAM)), Bahia (*Secretaria Estadual do Meio Ambiente* (SEMA) and Rio Grande do Sul (FEPAM). The planting and cutting of trees is subject to prior approval by the relevant state or federal environmental agency. Brazilian law requires that at least 20% of the landholdings of a forestry company be registered and maintained with native species.

 

In addition, our operations are subject to various environmental laws and regulations issued by governmental authorities relating to air emissions, element discharges, solid waste and odor.

 

Pursuant to Brazilian law, individuals or legal entities that violate environmental laws can be punished by criminal and administrative sanctions. Criminal sanctions range from fines to imprisonment, in case of individuals, including directors, officers and managers of legal entities, or dissolution, in the case of legal entities. Administrative sanctions include fines, partial or total suspension of activities, forfeiture or restriction of tax incentives or benefits, and cancellation or suspension of financings from governmental agencies. In addition to criminal and administrative sanctions, pursuant to Brazilian environmental laws, the violator must also recover or indemnify the damage that was caused to the environment and third parties. Because Brazilian environmental law uses a standard of strict liability in determining the obligation to remediate damages caused to the environment and to indemnify affected third parties, the imposition of any such obligation is made regardless of whether the polluter is found to have been negligent. In addition, the corporate structure of a polluting company may be disregarded if the structure is deemed to be an obstacle to the complete recovery of the environmental damages.

 

We make periodic modifications to plants relating to environmental technology and equipment, and for the implementation of new procedures to minimize environmental risks associated with spills and potential releases.

 

Despite we promote control over compliance with the requirements of the legal standards applicable to our activity, it does not accrue costs related to your care, for lack of specific policy toward the environmental area.

 

***Insurance***

 

We maintain fully comprehensive insurance with leading insurers to cover property damage and business interruption risk, as well as in respect of international and domestic transportation. Our property insurance policy has maximum risk coverage of R$5,000 million, which we believe offers more than sufficient coverage for our current assets.

 

We do not maintain insurance coverage against fire, disease and other risks to our forests. There is a fire and disease risk associated with our forestry activities, however, we believe the total damage would be mitigated by our risk management procedures and the fact that our individual forests are not close to each other, thereby eliminating any risk that a fire or disease could spread easily to any other of our forests. We have taken various steps to prevent fires from occurring in our forests, including the maintenance of fire observation towers, a fleet of fire engines and teams of fire-fighting personnel, which we believe are safe and cost-effective methods of fire prevention. In each of the past three years, the forest fires we have experienced have not resulted in material damage to our total planted area. Given the natural protection afforded by the spread out locations of our forests, we do not believe that insuring our forests would be cost-effective.

 

We do not make provisions for risks of loss from fire and disease, and all losses and damages that occur are charged to expenses when incurred. We have not suffered a material loss from either fire or disease in our forests.

 

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**Jointly Controlled Company**

 

***Veracel***

 

Veracel, is a company (*sociedade anônima de capital fechado*) organized under the laws of Brazil, in which each of Fibria and Stora Enso owns 50% of the equity interests (it had been a joint-venture between Aracruz and Stora Enso). Veracel grows and manages eucalyptus plantations and operates a pulp mill in the city of Eunápolis, in the State of Bahia. Veracel produces BEKP and has an annual production capacity of 1.12 million metric tons.

 

Fibria and Stora Enso have entered into a shareholders’ agreement defining their respective rights and obligations as shareholders of Veracel. This shareholders agreement expires in January 2023 and can be automatically extended for successive 20-year terms unless notice to the contrary is given by either party.

 

The Veracel shareholders’ agreement provides that:

 

·                  each of Fibria and Stora Enso has the right to nominate three members of Veracel’s six-member board of directors;

 

·                  under certain circumstances, Fibria and Stora Enso may be required to make capital contributions to Veracel, on a pro rata basis;

 

·                  if either shareholder fails to comply with any of its obligations regarding Veracel’s funding needs in connection with Veracel’s investment plan and capital contributions, the other shareholder shall have the right to require the defaulting shareholder to transfer all (but not less than all) of its shares to the other shareholder at a discounted market value calculated according to the provisions of the Veracel shareholders’ agreement;

 

·                  so long as either Fibria or any of its subsidiaries is a shareholder of Veracel, Fibria will not acquire (or cause to be acquired) any interest in real property in the core area of Veracel; and

 

·                  so long as either Fibria or any of its subsidiaries is a shareholder of Veracel, Veracel will not acquire (or cause to be acquired) any interest in real property in the core area of Fibria.

 

In March 2005, Aracruz entered into a Pulp Supply and Purchase Agreement with Veracel pursuant to which Aracruz has agreed to buy 50% of the annual output of pulp from the Veracel mill. This agreement entered into force in May 2005, and will be in effect for as long as the Veracel Shareholders’ Agreement is effective.

 

**C.****                                   ****Organizational Structure**

 

The chart below shows our organizational structure as of December 31, 2013 (% of total capital).

 

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Our operations are conducted by Fibria Celulose S.A. as the controlling and principal operating company. Although being a stand-alone company, we are a jointly controlled entity of the Votorantim Group, which has other interests in Brazil and abroad, principally in cement, metallurgy, agribusiness, chemicals and financial services. See “Item 4. Information on Fibria — A. History and Development of Fibria — Our Ownership Structure.”

 

Among the subsidiaries presented in the chart above we highlight:

 

·                  Fibria-MS Celulose Sul Mato Grossense Ltda: a wholly-owned subsidiary established for Três Lagoas mill operations.

 

·                  Portocel Term. Esp BR S.A.: a port terminal from where we export Aracruz and Veracel pulp production. It is a joint venture between Fibria Celulose S.A. (51%) and Cenibra - Celulose Nipo-Brasileira (49%).

 

·                  Veracel Celulose S.A.: a joint venture between Fibria Celulose S.A. (50%) and Stora Enso (50%) where we have the Veracel Unit operations.

 

·                  Fibria Overseas Holding KFT (located in Hungary) and Fibria International Celulose GmbH (located in Austria), are the companies established to hold the participation in its subsidiaries Fibria Trading International KFT (Hungary) and Fibria International Trade GmbH (Austria), respectively, as described below.

 

·                  Fibria Trading International Commercial and Servicing Limited Liability Company or Fibria Trading International KFT in its abbreviated form (located in Hungary and its subsidiary — Fibria Europe S.A. — located in Switzerland) and Fibria Celulose (USA) Inc (located in Delaware): subsidiaries established for the management, sale, operation, logistics, control and accounting of products in Europe, Asia and North America.

 

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·                  Fibria International Celulose GmbH (located in Austria) and its subsidiary, Fibria International Trade GmbH (located in Austria and its branch located in Hong Kong and its subsidiary — Green Parrot B.V. — located in Netherlands): subsidiaries established for the management, sale, operation, logistics, control and accounting of products in Europe, Asia and North America.

 

·                  Fibria Overseas Finance Ltd (Cayman Islands) and Voto IV (Cayman Islands): established in order to facilitate access to the international financial markets. Fibria Overseas was the issuer of Fibria Notes 2019, 2020 and 2021 and Voto IV was the issuer of Voto IV notes in 2005.

 

·                  As final part of the process to simplify our organizational structure, Newark Financial Inc., in British Virgin Islands, was dissolved on June 14, 2012 and Normus Empreendimentos e Participações Ltda., in Brazil, was merged into Fibria Celulose S.A. on September 30, 2013.

 

·                  With an initial investment of U.S.$20 million, Fibria acquired approximately 6% of Ensyn voting shares and agreed to set up an equally-owned joint venture to be incorporated in Delaware for future investments in the production of liquid fuels and chemicals from biomass in Brazil.

 

**D.****           ****Property, Plant and Equipment**

 

***Overview***

 

Our principal executive offices are located in the State of São Paulo, where we concentrate our financial, administrative and trading functions.

 

***Aracruz Unit***

 

The Aracruz Unit is our principal pulp mill. This is located in the State of Espírito Santo and is the largest bleached hardwood kraft market pulp production facility in the world. We acquired it as part of the Aracruz Acquisition. It has three production lines: Fiberline A, Fiberline B and Fiberline C. Its nominal production capacity is approximately 2.30 million metric tons of market pulp. Its area totaled 346,000 hectares at the end of 2013, of which 194,662 hectares was eucalyptus plantation, 126,189  hectares was covered with natural preserved ecosystems (preservation area), and 25,148 hectares had other uses. The Aracruz Unit is located approximately three kilometers from the port facilities at Aracruz (Portocel), of which we own 51%.

 

***Jacareí Unit***

 

The Jacareí Unit is located in the State of São Paulo and has a nominal production capacity of approximately 1.1 million metric tons of market pulp. Its area totaled 158,378 hectares at the end of 2013, of which 85,228  hectares was eucalyptus plantation, 62,968 hectares was covered with natural preserved ecosystems (preservation area), and 10,122 hectares had other uses. The pulp produced at the Jacareí Unit is transported by rail to the port of Santos which is 150 km distant from the unit.

 

***Três Lagoas Unit***

 

The Três Lagoas Unit began commercial operations in March 2009  with a production capacity of 1.3 million metric tons of market pulp. This unit is located in the State of Mato Grosso do Sul. At year end 2013, the Três Lagoas unit’s area totaled 341,904  hectares of which 224,911 was eucalyptus plantation, 99,628  hectares was covered with natural preserved ecosystems (preservation area), and 17,365  hectares had other uses. Três Lagoas’ pulp production is transported from the mill by a reliable multi-modal (truck and rail) system on a daily basis to the port of Santos which is 920 km distant from the unit by rail and 788 km by truck.

 

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***Veracel Unit***

 

We have a 50% interest in Veracel, which owns and operates a pulp mill in the municipality of Eunápolis, State of Bahia, with an annual production capacity of 1.12 million metric tons market pulp. The pulp produced in the Veracel unit is transported to Portocel, located an average distance of 541 km from Portocel.

 

The following table sets forth the distance between our forests (including the transport of pulpwood purchased in the market) and our mills, the distance of these mills to the port of embarkation, and the nominal capacity of each mill at December 31, 2013:

 
| **Facility**     | ** ** | **Distance   from   forest   or pulp mill** | ** ** | **Distance   to   port of   Santos** | ** ** | **Distance   to   port of   Portocel** | ** ** | **Pulp   capacity********(tons/year)** | ** ** |
|------------------|------------|-------------------------------------------------------|------------|-------------------------------------------|------------|---------------------------------------------|------------|----------------------------------------|------------|
| Aracruz          |       | 208 km                                                |       | —                                    |       | 3 km                                        |       | 2,340,000                              |       |
| Veracel (50%)    |       | 54 km                                                 |       | —                                    |       | 541 km                                      |       | 560,000                                |       |
| Três Lagoas |       | 76 km                                                 |       | 788 km                                    |       | —                                      |       | 1,300,000                              |       |
| Jacareí     |       | 225 km                                                |       | 150 km                                    |       | —                                      |       | 1,100,000                              |       |

 

***Eucalyptus forests***

 

Currently, we obtain the majority of our wood from 557 thousand hectares of forest plantation from a total of 962 (São Paulo, Rio de Janeiro, Espírito Santo, Bahia, Mato Grosso do Sul and Minas Gerais, not considering forest partnershipprogram areas, the forest base linked to the sale of forest assets in Southern Bahia State and Losango). While we have enough wood to fulfill our needs, from time to time and when the terms are attractive we purchase wood from unrelated third parties to be used in our pulp mills.

 

As of December 31, 2013, we also had over 2,600 of the forestry partnership program with 135 thousand hectares of land tracts with approximately 91 thousand hectares of planted areas (mostly in Espírito Santo, Bahia, Rio Grande do Sul and São Paulo state), making our wood supplies relatively dispersed. Our forests are located an average distance of 163 kilometers from our pulp mills. Brazilian forest legislation requires that private properties have at least 20% of the area kept for conservation of native ecosystems, fragments of wild life or natural restored forest area (through planting of indigenous species). Of our own forests, approximately 58% are eucalyptus forest plantation, while 36% is conservation forest and the remaining 6% has other uses.

 

While the dispersion of our forest land entails some additional costs, we believe that it significantly reduces the risks of fire and disease. We also seek to minimize fire risk by maintaining a system of fire observation towers, a fleet of fire trucks, fire fighting brigades and fully equipped patrol cars monitoring the areas 7 days a week. Given the natural protection afforded by the dispersion of our forests, we believe that prevention is the key strategy to avoid insuring our forests. Therefore, we assume all risks of losses from fire and other casualties. In addition, we annually monitor and manage our forests to prevent losses from leaf-cutter ants and any other insect break-outs. We have not suffered a material loss from, nor had our wood supply or operations compromised by, either fire or disease in forests that we harvest.

 

In 2013 as part of our reforestation efforts, we planted approximately 83 thousand hectares of eucalyptus in order to maintain our mills wood supply and pulp production. The harvested eucalyptus forests yielded between 35 and 42 cubic meters of wood per hectare per year that is an average of 230 vm3/ha/year at around 6 years harvesting age. Our forest productivity reflects the excellent climate and soil conditions for growing eucalyptus trees in all Brazilian states, with enough incidences of both sunlight and rainfall.

 

In 2013, we operated four nurseries and produced over 89 million plants (rooted cuttings/seedlings) at our nurseries, all of which were planted in our forests or supplied to the Forest Savings Program. To develop our eucalyptus forests, we select trees after precise genetic field trials, elite selected trees are cloned (cultivars) and then they are multiplied in large scale by vegetative propagation process (rooted cuttings). Vegetative propagation allows us to plant trees with the most favorable genetic characteristics for pulp production. These characteristics include fast growth rate, good quality of wood fibers, resistance to disease and “self-pruning” branches. Greater tree standardization provided by cloning also permits us to increase mechanization in tree harvesting, logging, and mill transportation, making it easier to adjust equipment and machinery to topographical conditions.

 

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We continue to review our efforts at community relations and the common good, as part of our contribution to social and economic development. For example, we invited our neighbors again to join the Forestry Savings Program that is an opportunity to have a share of the forest benefits as to diversify their production chain and to increase their property income in a partnership project. As of December 31, 2013, local farmers, mostly small properties, had already planted 5 thousand hectares (including Veracel) of forests with our support.

 

**Expansion**

 

Future expansion plans will depend on global market conditions. Possible expansion projects include the expansion of three existing mills as follows: Três Lagoas II which represents an additional capacity of 1.75 million metric tons of market pulp; Veracel II with a nominal capacity of 1.5 million metric tons (50% Fibria and 50% Stora Enso) and a 1.5 million metric tons additional capacity from a fourth line in the Aracruz Unit.

 

We continue investing in the development of the Três Lagoas II forest base. The combination of land acquisition and leasing aims at maintaining competitive cash production cost for the project, chiefly through a low forest-to-mill average distance. The expansion of the Três Lagoas Unit is one of the projects intended to maintain our global leadership in terms of scale and low production cost in the market pulp industry. However, due to an uncertain global economic environment and the number of pulp projects announced to reach the market in the next years and in view of our goal of generate value to our shareholders, the recommendation to execute the project will be submitted to our Board of Directors in 2014 taking into consideration the market and financial prospects.

 

**Ensyn**

 

In line with our strategy of complementing the pulp business and exploring opportunities within the value chain of the forestry industry, Fibria announced in October 2012 the establishment of an alliance with Ensyn Corporation (“Ensyn”), a private company incorporated in Delaware, USA.

 

Ensyn has developed the commercially-proven Rapid Thermal ProcessingTM (“RTP”) technology, which converts wood and other non-food biomass into renewable liquid fuels and chemicals. Ensyn’s key renewable liquid fuel, Renewable Fuel OilTM (“RFO”), is a multi-purpose petroleum replacement fuel with uses including heating, conversion to transportation fuels and power generation in diesel engines.

 

With an initial investment of U.S.$20 million, Fibria acquired approximately 6% of Ensyn voting shares and agreed to set up an equally-owned joint venture to be incorporated in Delaware for future investments in the production of liquid fuels and chemicals from biomass in Brazil.

 

The alliance also provides Fibria with the option to raise its participation up to 9% by an additional contribution of U.S.$10 million, which must be exercised before Ensyn’s IPO, whenever appropriate.

 

**ITEM 4A. UNRESOLVED STAFF COMMENTS**

 

We have no outstanding unresolved comments from the Staff of the SEC.

 

**ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**

 

The following discussion of our financial condition and operating results should be read in conjunction with our audited consolidated financial statements and the accompanying notes as of December 31, 2013, 2012 and, 2011, included in this annual report that have been prepared in compliance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), as well as with the information presented under “Presentation of Financial and Other Data” and “Item 3. Key Information — A. Selected Financial Data”.

 

“This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Item 3. — Key Information — D. Risk Factors” and the matters set forth in this annual report generally.

 

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**Overview**

 

We are the world’s largest producer of market pulp, according to Hawkins Wright and the PPPC, with an aggregate pulp production capacity of approximately 5.3 million tons of eucalyptus pulp per year. We believe that we are one of the lowest-cost producers of BEKP in the world, primarily due to our economies of scale, our state-of-the-art and strategically located production facilities, the short harvest cycle of our trees and our use of high-end technology in our operations. During the first half of 2009, we acquired control of Aracruz and have fully consolidated the results of operations of Aracruz into our consolidated financial statements as from January 1, 2009. In September 2009, we adopted the trademark “Fibria” for our pulp and paper operations.

 

**Factors Affecting our Results of Operations**

 

Our results of operations have been affected by the disposition of other pulp and paper assets during the three-years period ended December 31, 2013 (Conpacel, KSR and Piracicaba). In addition, our results of operations for the years ended December 31, 2013, 2012 and 2011 have been affected, and our results of operations will continue to be affected, by a variety of factors, including:

 

·                  the expansion or contraction of global production capacity for the products that we sell and the growth rate of the global economy;

 

·                  fluctuations in the international market prices of our products, which are denominated in, or referenced to, the U.S. Dollar, and which could significantly affect our net revenues;

 

·                  the rate of growth of the global and Brazilian GDP, which affects demand for our products and, consequently, our sales volume;

 

·                  our capacity utilization rates, which significantly affect the cost of producing our products and may lead to impairment of our assets;

 

·                  the results of operations of those companies in which we have or had non-controlling equity interests or shared equity control, such as Veracel, a portion of which are or were consolidated into our results of operations as required by IFRS;

 

·                  changes in the *Real*/U.S. Dollar exchange rate, including the depreciation of the *Real* against the U.S. Dollar by 11% in 2013, 8.2% in 2012 and 11.2% in 2011, which have affected (1) the amounts as expressed in *Reais* of our net revenues, our cost of sales and some of our operating and other expenses that are denominated in or linked to U.S. Dollars and (2) our net financial expenses as a result of our U.S. Dollar-denominated liabilities that require us to make principal and interest payments in U.S. Dollars;

 

·                  the level of our outstanding indebtedness, fluctuations in benchmark interest rates in Brazil, principally the LIBOR rate, which affects our interest expense on our U.S. Dollar-denominated floating rate debt, and fluctuations in the CDI rate, which affects our interest expense on our *Real* -denominated floating rate debt;

 

·                  inflation rates in Brazil, which were 5.9% in 2013, 5.8% in 2012 and 6.5% in 2011, as measured by the IPCA, and the effects of inflation (deflation) on our operating expenses denominated in *Reais* and our *Real*-denominated debt that is indexed to take into account the effects of inflation or bears interest at rates that are partially adjusted for inflation; and

 

·                  changes in accounting policies and the Brazilian Corporation Law, as discussed elsewhere herein.

 

Our financial condition and liquidity is influenced by a variety of factors, including:

 

·                  our ability to generate cash flows from our operations;

 

·                  prevailing Brazilian and international interest rates and movements in exchange rates, which affect our debt service requirements;

 

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·                  our ability to continue to be able to borrow funds from Brazilian and international financial institutions and to sell our debt securities in the Brazilian and international securities markets at acceptable rates, which is influenced by a number of factors discussed herein;

 

·                  our capital expenditure requirements, which consist primarily of maintenance of our operating facilities, expansion of our production capacity, acquisitions and research and development activities;

 

·                  the requirement under our by-laws that we pay dividends on an annual basis in an amount equal to at least 25% of our adjusted net income, unless our Board of Directors deems such payment inconsistent with our financial position; and

 

·                  changes in accounting policies and the Brazilian Corporation Law.

 

***Effects of Fluctuations in Pulp Price***

 

The international market prices of our pulp have fluctuated significantly, and we believe that they will continue to do so in light of global economic developments, such as the increase in demand for pulp in China. Significant increases in the international market prices of our products, and consequently, the prices that we are able to charge, would likely increase our net revenues and our results of operations to the extent that we are able to maintain our operating margins and increased prices do not reduce sales volumes of our products. Conversely, significant decreases in the international market prices of our products, and consequently, the prices that we charge, would likely reduce our net revenues and our results of operations if we are unable to increase our operating margins or these reduced prices do not result in increased sales volumes of our products.

 

World pulp prices are cyclical because demand for paper depends heavily on general economic conditions and because production capacity adjusts slowly to changes in demand. Over the last three years, BEKP average market prices in North America, Europe and Asia have fluctuated from U.S.$879, U.S.$844 and U.S.$777 per ton, respectively, in 2010 to U.S.$865, U.S.$810 and U.S.$699 per ton in 2011. For the year ended December 31, 2012, BEKP average market prices in North America, Europe and Asia were U.S.$815, U.S.$751 and U.S.$635 per ton, respectively. For the year ended December 31, 2013, BEKP average list prices in North America, Europe and Asia were U.S.$870, U.S.$791 and U.S.$673 per ton, respectively.

 

We have long-term sales relationships with substantially all of our pulp and paper customers in the domestic and the export markets. These contracts generally provide for the sale of our market pulp at prices we announce each month. These prices may vary among the different geographic areas where our customers are located. The price arrangements under our long-term contracts are generally consistent with prices for our other sales within the same region and follow the established list price of BEKP announced by major global pulp producers.

 

***Brazilian economic environment***

 

Our results of operations and financial condition, as reported in our consolidated financial statements, have been affected by the rate of Brazilian inflation and the rate of appreciation or depreciation of the Brazilian currency against the U.S. Dollar, considering an annual average rate.

 

The table below shows the Brazilian National Consumer Inflation Index (IPCA), appreciation (depreciation) of the *Real* against the U.S. Dollar and the period-end exchange rate and average exchange rates for the periods shown:

 
| ** **                                                                           | ** ** | **2013** | ** ** | **2012** | ** ** | **2011** | ** ** | **2010** | ** ** | **2009** | ** ** |
|--------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Inflation (IPCA)                                                                     |       | 5.9      | %          | 5.8      | %          | 6.5      | %          | 5.9      | %          | 4.2      | %          |
| Appreciation (depreciation) of the *Real* vs. U.S. Dollar (year on   year) |       | (11      | )%         | (8.2     | )%         | (11.2    | )%         | 4.5      | %          | 34.2     | %          |
| Year/period-end exchange rate—U.S.$ 1.00                                   |       | R$       | 2.34       |     | R$         | 2.04     |       | R$       | 1.88       |     | R$         | 1.66 |   | R$ | 1.74 |   |
| Average (daily-weighted) exchange rate(1) U.S.$ 1.00                       |       | R$       | 2.16       |     | R$         | 1.95     |       | R$       | 1.67       |     | R$         | 1.76 |   | R$ | 1.99 |   |

 

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(1)         The average (daily) exchange rate is the sum of the closing exchange rates at the end of each business day divided by the number of business days in the period.

 

***Effects of Fluctuations in Exchange Rates between the Real and the U.S. Dollar***

 

Our results of operations and financial condition have been, and will continue to be, affected by the rate of depreciation or appreciation of the *Real*against the U.S. Dollar because:

 

·                  a substantial portion of our revenues is denominated in U.S. Dollars;

 

·                  a substantial portion of our costs are incurred in *Reais*;

 

·                  we have certain operating expenses, costs for some of our raw materials and make certain other expenditures, that are denominated in or linked to U.S. Dollars; and

 

·                  we have significant amounts of U.S. Dollar-denominated liabilities that require us to make principal and interest payments in U.S. Dollars.

 

The majority of our pulp sales are made in the export market at prices that are based on international market prices expressed in U.S. Dollars. Although most of our domestic sales revenue is in *Reais,*substantially all of our products are sold at prices that are based on international market prices that are quoted in U.S. Dollars.

 

When the *Real* depreciates against the U.S. Dollar, assuming international market prices of our products remain constant in U.S. Dollars, our net sales revenue from export sales increases and we generally attempt to increase the domestic prices for our products in *Reais*, which may result in reduced domestic sales volumes of our products. Conversely, when the *Real*appreciates against the U.S. Dollar, assuming international market prices of our products remain constant in U.S. Dollars, our net sales revenue from export sales declines and we generally decrease the domestic prices for our products in *Reais*, which may result in increased domestic sales volumes of our products. In periods of high volatility in the *Real*/U.S. Dollar exchange rate, there is usually a lag between the time that the U.S. Dollar appreciates or depreciates and the time that we are able to pass on increased or reduced costs in *Reais*to our customers. These pricing mismatches decrease when the *Real*/U.S. Dollar exchange rate is less volatile.

 

Our consolidated U.S. Dollar-denominated indebtedness represented 95.0% (including currency swaps) of our outstanding indebtedness as of December 31, 2013. As a result, when the *Real* appreciates against the U.S. Dollar:

 

·                  the interest costs on our U.S. Dollar-denominated indebtedness decrease in *Reais*, which decrease positively affects our results of operations in *Reais*;

 

·                  the amount of our U.S. Dollar-denominated indebtedness decreases in *Reais*, and our total liabilities and debt service obligations in *Reais*decrease; and

 

·                  our net financial expenses tend to decrease as a result of foreign exchange gains that we must record.

 

A depreciation of the *Real*against the U.S. Dollar has converse effects.

 

The U.S. Dollar-denominated debt service obligations provide a natural hedge against our export sales, which enable us to generate receivables payable in foreign currencies but they do not fully match them. Accordingly, we often enter into derivative transactions to mitigate exchange rate fluctuations in our U.S. Dollar-denominated net exposure. A significant portion of our indebtedness is linked to and repaid principally with the proceeds of our exports. This indebtedness is denominated in U.S. Dollars and is generally available at a lower cost than other types of available funding. We generally pledge a portion of our receivables as collateral for the ongoing debt service obligations, usually to cover the next interest payment and principal installments. These agreements also contain certain financial and other covenants.

 

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***Effect of Level of Indebtedness and Interest Rates***

 

As of December 31, 2013, our total outstanding indebtedness on a consolidated basis was R$9,773 million. The level of our indebtedness results in significant financial expenses that are reflected in our statement of operations. Financial results consist of interest expense, exchange variations of U.S. Dollar- and other foreign currency-denominated assets and liabilities, derivative losses or gains, and other items as set forth in Note 32 to our 2013 consolidated financial statements. In 2013, we recorded total net financial expense of R$2,054 million, which mainly consisted of R$576 million of interest on loans and financings, R$350 million on financial charges in the partial repurchases of Bond and R$933 million of foreign exchange loss on loans and financings and other assets and liabilities. In 2012, we recorded total net financial expense of R$1,696 million, which mainly consisted of R$682 million of interest on loans and financings, R$151 million on financial charges in the partial repurchases of Bond and R$735 million of foreign exchange loss on loans and financings and other assets and liabilities. The interest rates that we pay depend on a variety of market factors, including prevailing Brazilian and international interest rates and our risk assessments, our industry and the Brazilian economy made by potential lenders to us, potential purchasers of our debt securities and the rating agencies that assess us and our debt securities.

 

S&P, Moody’s and Fitch maintain ratings of our Company and certain of our debt securities. Any ratings downgrades in the future would likely result in increased interest and other financial expenses relating to borrowings and debt securities and could adversely affect our ability to obtain such financing on satisfactory terms or in amounts required by us.

 

***Seasonality***

 

The market pulp industry seasonality pattern has been historically correlated with that of paper production. World paper production normally increases by the end of summer vacation in the northern hemisphere, as well as during the Christmas and New Year holidays. However, due to specific factors, including pulp and paper machine closures, start-up of new capacities, changes in the cost structure of the industry and the increase of global pulp demand, the seasonality trends observed in the past for the pulp industry may be subject to changes in the future.

 

**Discussion of critical accounting policies and estimates**

 

Critical accounting policies are those that are important to the portrayal of our consolidated financial position and results of operations and require management’s most difficult, subjective or complex judgments, estimates and assumptions. The application of these critical accounting policies often requires judgments made by management regarding the effects of matters that are inherently uncertain with respect to our results of operations and the carrying value of our assets and liabilities. Our results of operations and financial position may differ from those set forth in our consolidated financial statements if our actual experience differs from management’s assumptions and estimates. In order to provide an understanding of our critical accounting policies, including some of the variables and assumptions underlying the estimates, and the sensitivity of those assumptions and estimates to different parameters and conditions, we set forth below a discussion of our critical accounting policies relating to:

 

·                  revenue recognition and allowance for doubtful accounts;

 

·                  review of the useful lives and recoverability of long-lived assets;

 

·                  biological assets;

 

·                  contingent assets, liabilities and legal obligations;

 

·                  fair value of derivatives and other financial instruments;

 

·                  income tax and social contribution;

 

·                  goodwill impairment ; and

 

·                   employee benefits;

 

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**Revenue recognition**

 

We recognize revenue when: (1) the amount of revenue can be reliably measured; (2) it is probable that future economic benefits will flow to us; and (3) when specific criteria have been met for each of our sales including transfer of property and transfer of the risk of the product to the client based on the specific “Incoterm” (pre-defined commercial terms published by the International Chamber of Commerce) used and confirmation of available credit by the customer in order for the sale to be consummated. Revenue is the net amount, after deduction of taxes, discounts and sales returns.

 

(i)            Pulp - domestic market - sales are mainly made on credit, payable in average 12 days.

(ii)           Pulp - export market - export orders are normally supplied from third party warehouses located near strategic markets, sales are mainly made on credit, payable on average in 24 days. Revenue is recognized when the risk of ownership of the pulp has been transferred to the client in accordance with the specific terms of the transaction. Export sale agreements generally establish transfer of risk based on “Incoterms” (2010) and the moment of transfer of risk as per the corresponding “Incoterm” is the moment on which revenue is recognized.

 

Prior to the Conpacel, KSR and Piracicaba sales we operated in the paper segment and recognized sales from this segment as follows:

 

(i)            Paper - domestic market - sales were made at sight or on credit (usually payable in 30, 60 or 90 days). Revenue recognition is consistent to the criteria that we apply for the pulp sale in the domestic market.

 

(ii)           Paper - export market - export orders were normally supplied from own or third party warehouses located near strategic markets. Revenue is recognized when the products are delivered to the carrier and risk and benefits transferred to the customer.

 

The allowance for doubtful accounts is recorded in an amount we consider sufficient to cover any probable losses on realization of our accounts receivable from our customers and is included in selling expenses. Our accounting policy for establishing the allowance for doubtful accounts reserve requires that all invoices be individually reviewed by the legal, collection and credit departments, in order to determine the amount of the probable expected losses.

 

**Review of the useful lives and recoverability of long lived assets**

 

We review our long-lived assets to be held and used in our activities, for possible impairment whenever events or changes in circumstances indicate that the carrying value of an asset or group of assets may not be recoverable on the basis of future cash flows. We reduce the net book value if the carrying amount exceeds the recoverable amount. During the year ended December 31, 2013 we performed impairment tests and sensibility analyses over the main assumptions as detailed in Note 37 to our 2013 consolidated financial statements and no impairment losses were recognized.

 

**Biological Assets**

 

Biological assets are measured at their fair value, net of estimated costs to sell. Depletion is calculated based on the total volume expected to be harvested.

 

Biological assets consist of eucalyptus forests exclusively from renewable plantations and intended for the production of bleached pulp. As a result of improvements in forest management techniques, including the genetic improvement of trees, the cycle of harvesting through replanting occurs over approximately six to seven years.

 

Fair value is determined using the discounted cash flow method, taking into consideration the volume of wood, segregated by plantation year, measured at the sales price of standing timber. The average sales price was estimated based on local market prices based on research of actual transactions, adjusted to reflect the forest price. The volumes used in the valuation are consistent with the annual average harvest for each region. The main assumptions used by us to determine the fair value of its biological assets are described in Note 18 to our 2013 consolidated financial statements.

 

Our corporate policy requires that we perform appraisals of the fair value of these assets semi-annually.

 

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**Contingent Assets, Liabilities and Legal Obligations**

 

The accounting practices for the accounting and disclosure of contingent assets, contingent liabilities and legal obligations are as follows: (1) contingent assets are recognized only when there is evidence that realization is virtually certain, generally when favorable, final and unappealable court decisions have been obtained and for which the value is possible to be measured. Contingent assets with probable success are only disclosed in the notes to the financial statements; (2) contingent liabilities are provisioned to the extent that we expect that is probable that we will disburse cash and the amount can be reliably estimated. Tax and civil proceedings are accrued when losses are assessed as probable, and the amounts involved can be reliably measured. When the expectation of loss is possible, a description of the processes and amounts involved is disclosed in the notes to the financial statements. Labor proceedings are provisioned based on the historical percentage of disbursements. Contingent liabilities assessed as remote losses are neither accrued nor disclosed; and (c) legal obligations are accounted for as payables. As discussed in Note 24 to our 2013 consolidated financial statements as of and for the years ended December 31, 2013, 2012 and 2011 included elsewhere in this annual report, we are party to labor, civil and tax lawsuits at various court levels. The provisions for contingencies against potential unfavorable outcome of claims in progress are established and updated based on management’s evaluation, as supported by external legal counsel. In addition, we have tax and civil claims arising in the normal course of business that are assessed as possible losses, as supported by external legal counsel. No provision has been recorded to cover possible unfavorable outcomes from these claims.

 

**Fair Value of Derivatives and other Financial Instruments**

 

For derivative and other financial instruments, we make assumptions based on market observable data as to future foreign exchange and interest rates to recognize the fair value of each instrument. Derivatives are initially recognized at fair value on the date the derivative contract is entered into and are subsequently re-measured at fair value. Changes in fair value are recorded in the statement of profit or loss, in the line “Result of derivative financial instruments”.

 

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Fibria uses judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. We also use our judgment to define scenarios and amounts presented in the sensitivity analysis included in Note 5 to our 2013 consolidated financial statements. Any changes to the assumptions used for calculations involving the fair value of financial instruments could significantly affect our financial position.

 

Embedded derivatives in non-derivative host contracts are required to be separated when their risks and characteristics are not-closely related to those of the host contracts and these are not measured at fair value through profit or loss.

 

Non-option embedded derivatives are separated from the host contract in accordance with its stated or implied substantive terms, so that they have zero fair value on initial recognition.

 

The amounts estimated by management are also compared with the fair value provided by the banks (counterparties) and with the estimates performed by an independent financial advisor. Management believes that the fair value estimated for those instruments following the methods described in Note 6.2 to our 2013 consolidated financial statements is reliable.

 

The methods used for the measurement of the fair value of the derivative financial instruments (including embedded derivative) used by us consider methodologies commonly used in the market and which are based on widely tested theoretical bases. A summary of the methodologies used for fair value determination purposes by instrument is presented in our consolidated financial statements as of and for the years ended December 31, 2013, 2012 and 2011 included elsewhere in this annual report.

 

**Income tax and social contribution**

 

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not recognized if it arises from initial recognition of an asset or liability in a transaction that is not a business combination and that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

 

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized

 

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Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by us and it is probable that the temporary difference will not be reversed in the foreseeable future.

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

We have a history of recurring taxable income, which is usually offset with tax loss carryforwards. We believe, based on projections of income approved by the appropriate level of Corporate Governance that, the realization of the deferred tax assets is probable for the next several years.

 

**Impairment of goodwill**

 

Under IFRS, goodwill is not subject to amortization but is tested at least annually for impairment. Upon acquisition of a business, goodwill is allocated to the cash generating units (CGUs) or group of CGUs that are expected to benefit from the business combination originating the goodwill. Each CGU or group of CGUs to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.When impairment test of goodwill is performed the carrying amount of the assets and liabilities of the CGU or group of CGUs to which goodwill is allocated is compared to its recoverable amount.

 

We performed an impairment test as of December 31, 2013 and did not recognize any loss as of such date. Goodwill allocated to such groups of CGUs amounted to R$4,231 million as of December 31, 2013.

 

In measuring the value in use, we used discounted cash flows. A ten year period cash flow has been considered and an additional amount was calculated for the perpetuity of the cash flow of the tenth year, discounted to present value using the WACC rate less the estimate of growth of Brazilian Gross Domestic Product. A ten-year period was used as management considers that global price of pulp can be affected by several factors which generally are identified in periods longer than the production cycle of forest, which is approximately seven years.

 

The main assumptions used in determining value in use at December 31, 2013, are as follows:

 
| ** **                                              | ** ** | **Assumptions** |
|---------------------------------------------------------|------------|-----------------|
|                                                    |       |            |
| Exchange rate in the   period                           |       | R$2.15          |
| Average gross margin(1)                                 |       | 45.4%           |
| Discount rate - WACC   (gross and net from tax credits) |       | 12.10% - 6.26%% |

 

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(1) Gross margin was calculated excluding non cash items such as depreciation, depletion and amortization.

 

Management determined the gross margin based on past performance and on its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports.

 

**Employee benefits**

 

The accounting practices of employee benefits are as follows:

 

(a)         Pension obligation: we participate in pension plans, managed by a private pension entity, which provide post-employment benefits to employees, classified as defined contribution plans. It consists in a pension plan under which we pay fixed contributions to a separate entity and have no legal liabilities for making additional contributions if the fund does not have sufficient assets to honor the benefits related to employee service for the current and previous period. Contributions represent net costs and are recorded in the Statement of profit and loss in the period in which they are due. The amount of contributions for the year ended December 31, 2013 was R$8.8

 

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million (R$8.5 million as of December 31, 2012 and R$8.8 million as of December 31, 2011) as disclosed in the Note 28 (b) of our consolidated financial statements included elsewhere in this annual report.

 

(b)         Health care (post-retirement): some of our subsidiaries used to provide post-retirement health care benefits to their employees. This policy established a lifetime benefits to a determined group of employees. This benefit has been discontinued for over five years, hence the plan is no longer available to new participants since July 2007. The liability related to the health care plan for retired employees is stated at the present value of the obligation, in the amount of R$76.6  million as of December 31, 2013 (R$93.9  million as of December 31, 2012 and R$66.3 million as of December 31, 2011). The defined benefit obligation is estimated annually by independent qualified actuaries. The present value of the defined benefit obligation is determined through an estimate of the future cash outflow, utilizing the discount rate disclosed in the Note 28(c) of our consolidated financial statements included elsewhere in this annual report. Changes in the present value of the liabilities of the plan regarding the interest accrued are immediately recognized in the Statement of profit and loss. The changes in the present value of the liabilities of the plan regarding the actuarial gain and loss are recognized directly in shareholder’s equity, in “Other comprehensive income”.

 

(c)          Profit-sharing and bonus plans: we recognize a liability and an expense for bonuses and profit-sharing in the statement of operations. These provisions are calculated based on qualitative and quantitative targets established by management and are recorded in the statement of profit or loss. The amount recorded as expenses for the year ended December 31, 2013 was R$55.7  million (R$56.4  million as of December 31, 2012 and R$64.5  million December 31, 2011).

 

(d)         Share-based compensation: we offer a compensation plan in which the amount of the benefit is determined based on changes in the quoted market price of its shares, based on a predetermined floor price and an established measurement date. The plan consists of cash payments, not involving therefore the issue and/or delivery of shares for purposes of the plan. Our CEO and executive officers are eligible for the plan. The obligations are recorded as a provision for amounts payable to the officers, with a corresponding entry to the statement of profit or loss, based on the fair value of the benefits granted and the vesting period. The fair value of this liability is re-measured at each reporting period. Details regarding of this compensation plan are detailed in Note 29 of our consolidated financial statements included elsewhere in this annual report.

 

**New accounting pronouncements**

 

See Note 2.27 of our 2013 consolidated financial statements included elsewhere in this annual report for a discussion of new accounting pronouncements.

 

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**Main Components of o****ur Operating Results**

 

***Sales taxes and other deductions on revenues***

 

Our net revenues derived by our domestic operations are subject to the PIS/COFINS excise tax and the ICMS state value-added tax.The rate of the PIS/COFINS excise tax is 1.65% and 7.6%, respectively. The rate of the ICMS value-added tax varies from 7% to 18%, depending on the product sold and the Brazilian state in which the product is delivered. Revenues from export sales are not subject to Brazilian tax. Deductions consist of sales discounts that we provide to our customers and rebates on exports. Our net revenues are substantially denominated in U.S. Dollars.

 

***Cost of sales***

 

Cost of sales consist principally of cash production cost of pulp sold, depreciation, depletion and amortization, and freight. Cost of sales is mainly denominated in Brazilian *Reais.*

 

***Selling expenses***

 

Selling expenses consists of sales and distribution expenses, mainly terminal, pulp loading, sales commissions and allowance for doubtful accounts. Selling expenses are mainly denominated in Brazilian *Reais.*

 

***General and administrative expenses***

 

The main components of our administrative expenses are personnel, third-party services (including the cost of external advisors and auditors), and depreciation and amortization expenses, among other things. Administrative expenses are mainly denominated in Brazilian *Reais.*

 

***Other operating income (expenses), net***

 

Other operating income (expenses), net are largely comprised of the change in fair value of biological assets, variable employees compensation expense, capital gain - IPI credit premium (in 2012), capital gain on disposal of Piracicaba unit (in 2011), capital gain on land sale (2013), and others.

 

***Financial results***

 

Financial results mainly includes: (i) the earnings from financial investments generally denominated in U.S. Dollars; (ii)  net financial gains or losses from derivatives financial instruments; (iii) interest expense and early redemption costs on loans generally denominated in U.S. Dollars and (iv) foreign exchange gains and losses.

 

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**A.****                                   ****Operating Results**

 

**Results of operations**

 

The following table sets forth certain items derived from our statements of profit or loss and comprehensive income (loss) for the years indicated:

 
| **(in thousands of Reais, unless otherwise indicated)** | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|---------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                                                  |       |       |       |       |       |       |       |
| **Continuing   operations**                                                           |       |       |       |       |       |       |       |
|                                                                                  |       |       |       |       |       |       |       |
| **Revenues**                                                                          |       | 6,917,406  |       | 6,174,373  |       | 5,854,300  |       |
| Cost of sales                                                                         |       | (5,382,688 | )          | (5,237,258 | )          | (5,124,269 | )          |
|                                                                                  |       |       |       |       |       |       |       |
| **Gross   profit**                                                                    |       | 1,534,718  |       | 937,115    |       | 730,031    |       |
|                                                                                  |       |       |       |       |       |       |       |
| **Operating   income (expenses)**                                                     |       |       |       |       |       |       |       |
| Selling expenses                                                                      |       | (347,538   | )          | (298,052   | )          | (294,928   | )          |
| General and   administrative                                                          |       | (300,131   | )          | (286,002   | )          | (310,425   | )          |
| Equity in losses   ofassociate, net                                                   |       | —     |       | (592       | )          | (414       | )          |
| Other operating income,   net                                                         |       | 823,398    |       | 354,026    |       | 253,395    |       |
|                                                                                  |       |       |       |       |       |       |       |
|                                                                                  |       | 175,729    |       | (230,620   | )          | (352,372   | )          |
|                                                                                  |       |       |       |       |       |       |       |
| **Income   before financial income and expenses**                                     |       | 1,710,447  |       | 706,495    |       | 377,659    |       |
|                                                                                  |       |       |       |       |       |       |       |
| Financial income                                                                      |       | 110,723    |       | 167,646    |       | 217,000    |       |
| Financial expenses                                                                    |       | (1,016,526 | )          | (944,405   | )          | (873,005   | )          |
| Result of derivative   financial instruments                                          |       | (215,313   | )          | (184,465   | )          | (276,877   | )          |
| Foreign exchange loss                                                                 |       | (932,907   | )          | (735,001   | )          | (935,789   | )          |
|                                                                                  |       |       |       |       |       |       |       |
|                                                                                  |       | (2,054,023 | )          | (1,696,225 | )          | (1,868,671 | )          |
|                                                                                  |       |       |       |       |       |       |       |
| **Losses   from continuing operations before income taxes**                           |       | (343,576   | )          | (989,730   | )          | (1,491,012 | )          |
|                                                                                  |       |       |       |       |       |       |       |
| Income Taxes                                                                          |       |       |       |       |       |       |       |
| Current                                                                               |       | (619,606   | )          | (42,167    | )          | 67,835     |       |
| Deferred                                                                              |       | 265,600    |       | 333,927    |       | 314,408    |       |
|                                                                                  |       |       |       |       |       |       |       |
| **Net   loss from continuing operations**                                             |       | (697,582   | )          | (697,970   | )          | (1,108,769 | )          |
|                                                                                  |       |       |       |       |       |       |       |
| **Discontinued   operations**                                                         |       |       |       |       |       |       |       |
| Net income from   discontinued operations                                             | ** ** | **—** | ** ** | **—** |       | 240,655    |       |
|                                                                                  |       |       |       |       |       |       |       |
| **Net   Losses**                                                                      |       | (697,582   | )          | (697,970   | )          | (868,114   | )          |
|                                                                                  |       |       |       |       |       |       |       |
| **Attributable   to**                                                                 |       |       |       |       |       |       |       |
| Shareholders of the   Company - continuing operations                                 |       | (706,422   | )          | (704,706   | )          | (1,113,277 | )          |
| Shareholders of the   Company - discontinuing operations                              | ** ** | **—** | ** ** | **—** |       | 240,655    |       |
| Non-controlling   interest                                                            |       | 8,840      |       | 6,736      |       | 4,508      |       |
|                                                                                  |       |       |       |       |       |       |       |
| **Net   Losses**                                                                      |       | (697,582   | )          | (697,970   | )          | (868,114   | )          |
|                                                                                  |       |       |       |       |       |       |       |
| Basic and diluted loss   per share - continuing operations (in *Reais*)               |       | (1.28      | )          | (1.34      | )          | (2.38      | )          |
|                                                                                  |       |       |       |       |       |       |       |
| Basic and diluted   earnings per share - discontinued operations (in *Reais*)    |       | —     |       | —     |       | 0.51       |       |

 

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The following table sets forth our volume sold and net operating revenue by type of product:

 
| ** **                                | ** ** | **2013** | ** ** | **2012** | ** ** | **2011** | ** ** |
|-------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Pulp:**                                 |       |     |       |     |       |     |       |
| Volumes (in thousands of tons)            |       |     |       |     |       |     |       |
| Domestic                                  |       | 447      |       | 531      |       | 508      |       |
| Export                                    |       | 4,751    |       | 4,826    |       | 4,633    |       |
| Total                                     |       | 5,198    |       | 5,357    |       | 5,141    |       |
|                                      |       |     |       |     |       |     |       |
| Net operating revenue (in millions of R$) |       |     |       |     |       |     |       |
| Domestic                                  |       | 504      |       | 508      |       | 486      |       |
| Export                                    |       | 6,342    |       | 5,598    |       | 4,981    |       |
| Subtotal                                  |       | 6,846    |       | 6,106    |       | 5,467    |       |
| Services, allocated on pulp segment       |       | 72       |       | 68       |       | 63       |       |
| Total pulp                                |       | 6,918    |       | 6,174    |       | 5,530    |       |
|                                      |       |     |       |     |       |     |       |
| Average prices (in R$ per ton)       |       | 1,317    |       | 1,140    |       | 1,063    |       |
|                                      |       |     |       |     |       |     |       |
| **Paper:**                                |       |     |       |     |       |     |       |
| Volumes (in thousands of tons)            |       | —   |       | —   |       |     |       |
| Domestic                                  |       | —   |       | —   |       | 88       |       |
| Export net                                |       | —   |       | —   |       | 12       |       |
| Total                                     |       | —   |       | —   |       | 100      |       |
|                                      |       |     |       |     |       |     |       |
| Net operating revenue (in millions of R$) |       |     |       |     |       |     |       |
| Domestic                                  |       | —   |       | —   |       | 296      |       |
| Export                                    |       | —   |       | —   |       | 28       |       |
| Total                                     |       | —   |       | —   |       | 324      |       |
|                                      |       |     |       |     |       |     |       |
| Average prices (in R$ per ton)       |       | —   |       | —   |       | 3,230    |       |
|                                      |       |     |       |     |       |     |       |
| **Combined:**                             |       |     |       |     |       |     |       |
| Volumes (in thousands of tons)            |       |     |       |     |       |     |       |
| Domestic                                  |       | 447      |       | 531      |       | 596      |       |
| Export                                    |       | 4,751    |       | 4,826    |       | 4,645    |       |
| Total                                     |       | 5,198    |       | 5,357    |       | 5,241    |       |
|                                      |       |     |       |     |       |     |       |
| Net operating revenue (in millions of R$) |       |     |       |     |       |     |       |
| Domestic                                  |       | 504      |       | 508      |       | 782      |       |
| Export                                    |       | 6,342    |       | 5,598    |       | 5,009    |       |
| Services                                  |       | 72       |       | 68       |       | 63       |       |
| Total                                     |       | 6,918    |       | 6,174    |       | 5,854    |       |

 

The discussion below is based on our consolidated financial statements prepared in accordance with IFRS as issued by the IASB.

 

**Year ended December 31, 2013 compared to year ended December 31, 2012**

 

In 2013, the pulp market saw new capacity come on-stream, but also saw closures announced throughout the period, representing approximately 1.1 million tons, helping balance the industry’s supply (net increase of approximately 515 thousand tons). On the demand side, there was an increase in eucalyptus pulp shipments in the year, especially to China and North America. Hardwood producers’ inventories began falling in August, closing the year at 39 days, in line with the historical average. As a result of these events, the average pulp price in Dollars increased 5% as compared to 2012. In parallel, the appreciation of the Dollar throughout the year continued to drive the pulp price in*Reais*, this increase was a significant factor in Fibria’s record adjusted annual EBITDA.

 

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On November 15, 2013, we (through the Parent Company Fibria Celulose S.A. and its subsidiary Fibria-MS Celulose Sul Mato-Grossense Ltda.) entered into a Share Purchase Agreement and Other Covenants with Parkia, for the sale of certain land located in the states of São Paulo, Mato Grosso do Sul, Bahia and Espírito Santo, for a total of approximately 210 thousand hectares. On December 30, 2013, after obtaining the mandatory regulatory approvals as well as the completion of an audit by Parkia, the First Amendment to the Share Purchase Agreement and Other Covenants was concluded and signed, under which the total area subject to the transaction was adjusted to approximately 206 thousand hectares of lands, for the total amount of R$1,402,584 thousand, of which R$500,000 thousand was received by us upon signing the agreement.

 

In January 2014, we received R$710,702 thousand. The remaining balance of R$ 191,882 thousand will be received no later than the end of the first quarter of 2014 after the fulfillment of certain obligations and legal requirements, to be performed by us.

 

We may be entitled to an additional amount, limited to R$247,515 thousand, in three separated payments, each payment being up to one third of the amount, on the 7th, 14th and 21st anniversaries of the agreement. The entitlement to this amount is contingent on the appreciation of the land at each of such anniversaries, measured according to predefined measurement assumptions established in the agreement and adjusted by the variation of the IGP-M index through the actual payment dates.

 

On December 30, 2013, we also signed with the Parkia’s subsidiaries a Forestry Partnership Agreement and a Standing Timber Supply Agreement, both with a term up to 24 years (or four harvesting cycles of approximately 7 years), during which we will continue to operate our forests located in the land sold. The agreement does not provide any renewal or extension provisions to its original term. In exchange for the right to use the land by us for our forestry activities, the forestry partnership agreement grants to Parkia the right to receive 40% of the volume of wood (in cubic meters — m3), produced by us on the land during each harvesting cycle, limited to a “cap” contractually established. See Note No.1 (e) and No. 38 of our 2013 Consolidated Financial Statements.

 

On November 25, 2013 we decided to pay Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) liabilities regarding the taxation of earnings of our foreign subsidiaries, arising from tax assessments, by joining the Tax Refinancing Program (REFIS - “Profits Abroad”) established by Article 74 of Provisory Measure 2.158-35/01. The total amount paid in a single installment , with the reduction of 100% of penalties and fines, late fees and legal charges, totaled R$560 million. Of this amount, we used loss carryforwards and negative social contribution base credits to offset R$168 million or 30% of the principal, resulting in a cash payment of R$392 million.

 

In 2013, Fibria’s sales totaled 5.2 million tons (98% production during the period), down 3% as compared to 2012 when we had record sales volumes and inventories below 50 days. In addition, pulp availability was reduced as a result of lower production volume. Inventories closed 2013 at 50 days.

 

Cash production cost for the year was R$505/tons, up 6.7% over 2012, largely due to the higher wood cost, foreign exchange losses and higher cost of inputs. Excluding the Dollar’s appreciation effect and the impact of the rains in Aracruz Unit, the increase would have been below 2013’s inflation. Year-on-year, the 5% increase was , primarily as a result of higher wood transportation costs, higher need chemicals, energy and wood consumption (largely due to the impact of the Espirito Santo state rains in the Aracruz unit) (largely explained by the rains in Aracruz Unit), in addition to the R$7/t impact of foreign exchange effect.

 

The increase in the financial expense in 2013, is explained by the Dollar’s appreciation against the*Real*, partially offset by the 16% decline in interest expenses even though the Dollar appreciated 11%, evidencing our efforts to reduce our cost of debt.

 

Gross debt was U.S.$4,172 million, down 21% year-on-year. Considering the receipt of the first payment for the land sale to Parkia in the amount of R$500 million and the operating cash flow, we closed the year with a cash position of R$1,924 million. Cash position consists of cash and cash equivalent plus marketable securities minus net liability balance of derivative instruments. Net debt/Adjusted EBITDA in Dollars closed the period at 2.6x and, had the receipt of the second payment for the land sale to Parkia in the amount of R$903 million (R$605 million received on January 29, 2014) been considered, this ratio would have been 2.3x in Dollars and 2.5x in*Reais*. Net debt consists of total debt less cash position.

 

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As a result of these factors, we generated losses of R$697.6 million, primarily, explained by the Dollar’s appreciation against the *Real* in the period and the impact of income tax and social contribution due to losses recognized on tax payments REFIS — “Profits Abroad” program as explained above.

 

**Net Revenues**

 

Our net revenues increased by 12.0% to R$6,917 million in 2013 from R$6,174 million in 2012, although sales volume decreased by 3%, such decrease was offset by an increase of 16% in the pulp average price in*Reais*, due to a 11% appreciation of the U.S. Dollar during the period. The increase in the pulp average price is described in “Item 5. Operating and Financial Review and Prospects — *Effects of Fluctuations in Pulp Price”.*

 

Sales volume decreased from 5,357 kilotons in 2012 to 5,198 kilotons in 2013, or 3%, mainly due to a decrease in sales to Europe (172 kilotons, or 8%) and Brazil/South America (84 kilotons, or 16%) in 2013 as compared to 2012.

 

Export sales of pulp constituted 92.6% of our pulp net revenue and 91.4% of our pulp sales volume in 2013, compared to 91.7% and 90.1%, respectively, in 2012.

 

In 2013, 38.8% of our total sales volume was delivered to Europe, 27.9% to North America and 24.7% to Asia, as compared to 40.8%, 25% and 24.3%, respectively, in 2012. Discounts are frequently granted to our significant customers located in Europe and North America. In 2013, discounts totaled R$1,005 million as compared to R$895 million in 2012. The increase of 12.3% is consistent with the increase in net revenues as described above.

 

**Cost of Sales**

 

Cost of sales increased by 2.8% to R$5,383 million in 2013 from R$5,237 million in 2012, substantially as a result of the impact of the U.S. Dollar’s appreciation against the *Real*, that resulted in higher freight costs, which are denominated in U.S. Dollars and higher cash production cost offset by the decrease of 3% in pulp sales volume, as described above. The pulp cash production cost is one of the main components of our cost of sales. The cash production cost consists principally of the cost of sales excluding depreciation, depletion, amortization and freight. In 2013, the main components of the cash production cost were, by order of magnitude: wood, chemicals, fuel, maintenance and personnel, which represented approximately 45%, 23%, 12%, 10%, and 6%, respectively. There were no significant differences in the composition of cash production cost in 2013 as compared to 2012.

 

In 2013, our pulp cash production cost per ton was R$505, an increase of 6.7% as compared to 2012, of R$473 per ton, primarily as a result of higher wood transportation costs, higher need of chemicals, energy and wood consumption (largely due to the impact of the Espirito Santo state rains in the Aracruz unit), and the R$7/t impact of the U.S. Dollar’s average appreciation (11%) against the *Real*. These impacts were partially offset by lower fixed costs as a result of reduced payroll taxes beginning in January, 2013 and a decrease in maintenance costs (R$4/t) as part of our cost reduction initiatives.

 

Inflation for 2013 was 5.9% (IPCA) while the Dollar appreciated 11% against the *Real.*Approximately 15% of cash production cost is denominated in U.S. Dollars. If we exclude the R$7/t foreign exchange impact and the non-recurring R$2/t resulting from the impact of Espirito Santo state rains in the Aracruz unit, the increase in the annual cash production cost would have been 4.6%, therefore, below the inflation rate for the period.

 

As a result of the above, our gross profit increased by 63.8% to R$1,535 million in 2013 from R$937 million in 2012. Our gross margin increased to 22.2% in 2013 from 15.2% in 2012.

 

**Selling Expenses**

 

Selling expenses increased by 16.6% to R$348 million in 2013 from R$298 million in 2012, mainly due to higher terminal expenses, changes in the geographic sales mix, and foreign exchange effects as a result of the U.S. Dollar’s 11% appreciation against the *Real*. As a percentage of our net revenue, our selling expenses increased to 5% in 2013 from 4.8% in 2012.

 

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**General and Administrative Expenses**

 

General and administrative expenses increased by 4.9% to R$300 million in 2013 from R$286 million in 2012. This increase was mainly due to an increase of R$8.33 million in consulting, legal and other fees paid to external advisors; and an increase of R$8.31 million in labor expenses partially offset by a reduction of R$3.71 million in donation and sponsorship expenses. As a percentage of our net revenue, our general and administrative expenses decreased to 4.3% in 2013 from 4.6% in 2012.

 

**Equity in Losses of Associate**

 

Equity in losses of associate was zero in 2013, compared to a loss of R$0.6 million in 2012, as a result of the write-off of a non-controlling investment in Bahia Produtos de Madeira S.A.

 

**Other Operating Income (Expenses), Net**

 

Other operating income, net amounted to R$823 million in 2013 compared to other operating income, net of R$354 million in 2012. This net increase was primarily the result of (1) the capital gain on sale of land of R$527 recorded in 2013, related to Asset Light project, as described in Note 1(e) of our consolidated financial statements; (2) reversal of provision for contingencies in the amount of R$116 million off set by (3) R$196 million decrease in the fair value gain of biological assets from R$298 million in 2012 to R$102 million in 2013 and (4) R$221 million of loss on disposal of property, plant and equipment in 2013, compared to R$64 million gain in 2012.

 

**Financial Results**

 

Financial expense amounted to R$2,054 million in 2013, compared to R$1,696 million in 2012, primarily due to:

 

·                  Financial income: Financial income decreased to R$111 million in 2013 from R$168 million in 2012, primarily as a result of the use of cash and marketable securities for the settlement of debt in 2013.

 

·                  Financial expenses: Financial expenses increased to R$1,017 million in 2013 from R$944 million during 2012, due to an increase of R$199 million related to financial charges in the partial repurchases of Bonds and R$30 in other financial expenses offset by a decrease of R$106 million in interest on loans and financing and R$51 million in loan commissions.

 

·                  Foreign exchange (loss)gain: Foreign exchange losses were R$933 million in 2013, compared to R$735 million in 2012 mainly due to the U.S. Dollar 11% appreciation against the *Real*in 2013. .

 

**Income taxes**

 

Brazilian corporate statutory income tax and social contribution rate is 34%. The effective tax rate applicable to our income before tax and social contribution was (103.0)% and 29.5% for the years ended December 31, 2013 and 2012, respectively.

 

The change in the effective rate in 2013 refers to tax payments as a result our adherence to the Tax Refinancing Program (REFIS— “Profits Abroad”) established by the Law 12865/13 and Provisional Measure 627/13, issued in October and November 2013.

 

In late November 2013, we joined the REFIS — “Profits Abroad” by including three tax assessments described in Note 24(b)(i) to our 2013 consolidated financial statements. The total amount to be paid in a single installment, with 100% reduction in fines, penalties, interest and legal charges, was R$560,453 thousand, the impact of which was recorded in our 2013 fourth quarter results. Of this amount, we used R$168,136 thousand from tax-loss carryforwards, equivalent to 30% of the principal, resulting in an effective cash disbursement of R$392,317 thousand.

 

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**Non-controlling Interest**

 

There were no significant changes in “Non-controlling interest” in 2013 compared to 2012.

 

**Loss/Net Income**

 

As a result ofabove, we generated a loss of R$697.6 million in 2013, as compared to a loss of R$698.0 million in 2012. As a percentage of net revenue, the loss was 10.1% in 2013, as compared to 11.3% in 2012.

 

**Year ended December 31, 2012 compared to year ended December 31, 2011**

 

**Introduction**

 

The 2012 results were directly influenced by our good performance in 4Q12. Highlights included record production and sales volumes, stable cash production cost, free cash flow generation and net debt at its lowest since the incorporation of Fibria. Throughout the year, the world economic scenario was marked by uncertainties that brought challenges to the market pulp industry. However, market fundamentals were consistent, with pulp demand from emerging markets driving growth, especially with new tissue paper machines in China that kept inventories balanced. These factors helped the recovery of hardwood pulp prices, which opened the year at U.S.$652/t and closed it at U.S.$776/t (PIX/FOEX BHKP Europe index), up 19%. The Dollar’s average appreciation of 17% in 2012 also pushed a greater cash flow due our predominantly export-oriented business.

 

At the end of 2012, gross debt amounted to R$10,768 million, 5% lower than in 2011, partially absorbed by the closing Dollar’s 9% appreciation in the year. With the first payment of R$470 million from the Losango, we ended the year with a cash position of R$3,023 million, thereby reducing our net debt to R$7,745 million, or by 18%, compared to 2011 — being our lowest net debt since Fibria’s founding. In 2012, we generated R$2.9 billion by our operating free cash flow generation through the following: (i) the sale of non-strategic assets such as lands and forest assets in Bahia and the Losango sale; and (ii) an equity offering. These events contributed to a decrease in the Net Debt/ Adjusted EBITDA ratio to 3.4x, compared to 4.8x in 2011, evidencing our efforts to reduce our indebtness level and achieve an investment grade from the ratings agencies.

 

**Net Revenues**

 

Our net revenues increased by 5.5% to R$6,174 million in 2012 from R$5,854 million in 2011, due to the 4% increase in sales volume and the 7% increase in the pulp average net price in*Reais*, in turn due to the Dollar’s 17% appreciation in the period. These effects offset the absence of R$324 million in net revenues from the paper business during 2011, with the Piracicaba Unit sale in September of that year. The increase of the pulp average net price is described in Item 5. Operating and Financial Review and Prospects — *Effects of Fluctuations in Pulp Price.*

 

Sales volume increased from 5,141 kilotons in 2011 to 5,357 kilotons in 2012, or 4.2%,, , mainly due to Asia’s strong performance during 2012, with a sales volume increase of 11% in 2012 as compared to 2011 (2012: 1,300 kilotons — 2011: 1,171 kilotons).

 

Export sales of pulp constituted 91.7% of our pulp net revenue and 90.1% of our pulp sales volume in 2012, compared to 91.1% and 90.1%, respectively, in 2011.

 

In 2012, 41% of our total sales volume was delivered to Europe, 25% to North America and 24% to Asia, as compared to 42%, 25% and 23%, respectively, in 2011. Discounts are frequently granted to our significant customers located in Europe and North America. In 2012, discounts totaled R$895 million as compared to R$761 million in 2011. The increase is of 18% is consistent with the increase in net revenues as described above.

 

**Cost of Sales**

 

Cost of sales increased by 2.2% to R$5,237 million in 2012 from R$5,124 million in 2011, substantially as a result of the impact of the 4.2% increase in pulp sales volume and the U.S. Dollar’s appreciation against the *Real*, that resulted in higher freight costs, which are denominated in U.S. Dollars. The pulp cash production cost is one of the main components of

 

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our cost of sales. The cash production cost consists principally of the cost of sales excluding depreciation, depletion, amortization and freight. In 2012, the main components of cash production cost were, by order of magnitude: wood, chemicals, maintenance, fuel and personnel, which represented approximately 43%, 22%, 14%, 10%, and 6%, respectively. There were no significant differences in the composition of cash production cost as compared to 2011.

 

In 2012, our pulp cash production cost per ton was R$473, an increase of 0.4% as compared to 2011, of R$471 per ton, primarily as result of the U.S. Dollar’s average appreciation (17%) against the *Real* and the prices increase of our raw materials, partially offset by the decrease in raw materials consumption and operational stability. The annual increase in cash production cost was less than the 5.8% Brazilian inflation in 2012, in line with our target.

 

As a result of the above, our gross profit increased by 28.4% to R$937 million in 2012 from R$730 million in 2011. Our gross margin increased to 15.2% in 2012 from 12.5% in 2011.

 

**Selling Expenses**

 

Selling expenses remained relatively stable in 2012 (R$298 million) as compared to 2011 (R$295 million) mainly due to the 4.2% increase in our total sales volumes and foreign exchange effects as a result of the U.S. Dollar’s 17% appreciation against the *Real,*which contributed to the increase of the commercial expenses of R$20 million, partially offset by the R$3 million reversal of allowance for doubtful accounts and the write off of R$11 million uncollected in the year. The selling expenses mainly include handling, storage and transportation expenses, and sales commissions. As a percentage of our net revenue, our selling expenses decreased to 4.8% in 2012 from 5.0% in 2011.

 

**General and Administrative Expenses**

 

General and administrative expenses decreased by 7.7% to R$286 million in 2012 from R$310 million in 2011. This result is mainly due to 2011 charges and indemnifications expenses of the organizational restructuring process , and to the to the third party services and travel expenses reduction in 2012. As a percentage of our net revenue, our general and administrative expenses decreased to 4.6% in 2012 from 5.3% in 2011.

 

**Equity in Losses of Associate**

 

Equity in losses of associate was a loss of R$0.6 million in 2012, compared to a loss of R$0.4 million in 2011, as a result of the write-off of a non-controlling investment in Bahia Produtos de Madeira S.A.

 

**Other Operating Income (Expenses), Net**

 

Other operating income, net amounted to R$354 million in 2012 compared to other operating expense, net of R$253 million in 2011. This net increase was primarily the result of (1) a R$152 million increase in the fair value gain of biological assets from R$146 million in 2011 to R$298 million in 2012; and (2) the capital gain on the sale of the Piracicaba Unit for R$176 million in 2011, partially offset by the R$93 million in tax credit (*Crédito-Prêmio IPI*).

 

**Financial Results**

 

Financial expense amounted to R$1,696 million in 2012, compared to R$1,869 million in 2011, primarily due to:

 

·                  Financial income: Financial income decreased to R$168 million in 2012 from R$217 million in 2011, primarily as a result of reduced average return on investments due to the decline in the CDI rate in 2012 (Dec/2011: 11.60% p.a. | Dec/2012: 8.40% p.a.).

 

·                  Financial expenses: Financial expenses increased to R$944 million in 2012 from R$873 million during 2011, due to an increase of R$150 million of expense related to financial charges in the partial repurchase of Bond “Fibria 2020” and a 3.3% increase in interest on loans and financing, partially offset by a decrease of R$12 million in loan commissions and the absence of interest-acquisition of Aracruz shares appropriation.

 

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·                  Foreign exchange (loss) gain: Foreign exchange losses were R$735 million in 2012, compared to R$936 million in 2011 mainly due to the reduction of debt denominated in U.S. Dollars and the U.S. Dollar 8% appreciation against the Real in 2012.

 

**Income taxes**

 

Brazilian corporate statutory income tax and social contribution rate is 34%. The effective tax rate applicable to our income before tax and social contribution was 29.5% and 25.6% for the years ended December 31, 2012 and 2011, respectively. Our effective rates were lower than the nominal statutory rate mainly due to a benefit resulting from reduced tax rates (compared to the rates in Brazil) in our foreign subsidiaries.

 

The increase in the effective rate from 25.6% in 2011 to 29.5% in 2012 was mainly due to losses recorded in foreign subsidiaries, in turn as a result of lower tax loss carryforward.

 

**Non-controlling Interest**

 

There were no significant changes in “Non-controlling interest” in 2012 when compared to 2011.

 

**Loss/Net Income**

 

As a result of theabove, we generated a loss of R$698 million in 2012, as compared to a loss of R$868 million in 2011. As a percentage of net revenue, the loss was 11.3% in 2012, as compared to 14.8% in 2011.

 

**B.            Liquidity and Capital Resources**

 

Our primary sources of liquidity have historically been cash flows from operating and financing activities and short-term and long-term borrowings. We believe these sources will continue to be the principal means with which we will meet our cash flow needs.

 

Our material cash requirements include the following:

 

·                  working capital;

 

·                  our debt service; and

 

·                  capital expenditures.

 

Long-term borrowings have generally been used to finance our major capital expenditure projects and have historically been sourced principally by either export prepayment contracts under which we, or a wholly owned subsidiary, borrow funds by offering the guarantee of export contracts (see Note 23 to our 2013 consolidated financial statements) or capital expenditures acquisition financing programs offered by the BNDES, a related party (see Note 16 to our 2013 consolidated financial statements). The scheduled maturities of these long-term loans have been structured to match the expected cash flow from the conclusion of the related capital expenditure projects and, as a result, reduce the risk of any significant deterioration of our liquidity position. We also rely on bonds or notes issued in the international markets by either wholly owned subsidiaries or by Votorantim Group subsidiaries, all mainly domiciled in other countries. See Note 23 to our 2013 consolidated financial statements. Our ability to access long-term funding sources has not been, to-date, significantly affected by the effects of the global financial crisis, although the maturities and costs could be increased for this reason.

 

As of December 31, 2013 and 2012, our cash and cash equivalents and our marketable securities were R$2,388 million and R$3,296 million, respectively. Of our cash and cash equivalents and marketable securities held as of December 31, 2013, 43.7% was denominated in *Reais* invested in both public and private assets.

 

The fair value of derivative financial instruments represented a net liability balance of R$464 million as of December 31, 2013.

 

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At December 31, 2013, we had no deposits and investments with our affiliate, Banco Votorantim S.A, compared to R$198 million at December 31, 2012. See “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions” and Note 16(a) to our 2013 consolidated financial statements.

 

At December 31, 2013, our balance sheet presented a positive working capital balance (including our cash and cash equivalents, marketable securities, current loans and financings and derivative instruments) of R$1,359 million compared to R$3,771 million December 31, 2012. We do not expect to have any difficulty in meeting our short-term obligations since our current assets as of December 31, 2013 were equivalent to 1.3  times our current liabilities. Additionally we believe that we will be able to access either capital or banking markets, if necessary.

 

It is our indebtness strategy over the next few years to use a substantial portion of our consolidated cash flow to pay principal and interest with respect to our indebtedness. In addition, we are active on liability management initiatives to reduce the cost of our debt whenever there are market opportunities.

 

**Sources of funds**

 

Our cash flow from operating, investing and financing activities are affected by various factors. The key factors that affect our cash flow from operations are (i) the volume of product sold and the market price of pulp, (ii) the exchange rate between Brazilian *Reais* and U.S. Dollars and (iii) the cost of our raw materials. Investing activities are mainly affected by (i) our capital expenditure program and (ii) our decision to divest some of our long-lived assets. Finally our cash flow from financing activities is directly related to the level of new debt we have incurred and on the repayment of existing debt.

 

*Operating Activities*

 

Net cash flow provided by operating activities was R$2,164  million in 2013 compared to R$1,914 million in 2012, an increase of 13.1%, mainly due to a decrease of 65% in the loss from continuing operations before income taxes of the year, impacted mainly by (i) an increase of 16% in the average net pulp price in *Reais*partially offset by a decrease of 3% in volume sold and (ii) a result from the net operating income of R$176 million in 2013, when compared to a net operating expense of R$231 in 2012, due to, substantially, the gain on sale of land, related to the Asset Light project (R$799 million), the reversal of provision for contingencies (R$116 million) and loss on disposal of property, plant and equipment (R$221 million).

 

Net cash flow provided by operating activities was R$1,914 million in 2012 compared to R$1,348 million in 2011, an increase of 42%, mainly due to a decrease of 34% in the loss of the year, impacted mainly for an increase of 7.2% in the average net pulp price in *Reais*and an increase of 4.2% in volume sold and a decrease of 34.4% on net operating expenses.

 

We adopt the indirect cash flow method to report our cash flow statement. See our “Consolidated Statements of Cash Flows” in connection with “Item 5. Operational and Financial Review and Prospects”.

 

**Uses of funds**

 

*Investing activities*

 

Net cash provided by investing activities was R$434 in 2013, compared to net cash used in investing activities of R$1,161 million in 2012.

 

In 2013, investing activities for which we used cash primarily consisted of (1) investments of R$1,190 million in property, plant, equipment, intangible assets and forest and (2) R$97 million regarding advance for wood acquisition from forestry partnership program. In addition, we generated cash primarily consisting of (1) R$500 million of proceeds from sale of land and building related to the Asset Light project as mentioned in Note 1(e) to our 2013 consolidated financial statements and (2) R$1,204 million on marketable securities.

 

In 2012, investing activities for which we used cash primarily consisted of (1) investments of R$1,002 million in property, plant, equipment and forest and (2) R$661 million as net result of marketable securities. In addition, we receive the amount of R$470 million as advance regarding the disposal of assets of Losango Project and R$275 million of proceeds from sale of property, plant and equipment.

 

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In 2011, investing activities for which we used cash primarily consisted of (1) investments of R$1,240 million in property, plant, equipment and forest and (2) final installment of R$1,482 million for Aracruz Acquisition. These uses were partially offset by the proceeds from the sale of Conpacel, KSR and Piracicaba which totaled R$2,076 million.

 

*Financing Activities*

 

Net cash used in financing activities, which include short-term and long-term secured and unsecured borrowings, debt repayments, resulted in the use of cash of R$2,276 million in 2013 and R$258 million in 2012.

 

In 2013, we raised R$1,279 million, principally, from financing through export prepayment facilities with financial institutions. In 2013 we repaid the total amount of R$ 3,320 million of the principal amount, of which R$1,851 million refers to early redemption of our Bonds issued. The premium paid by us in this repurchase transaction was R$236 million and R$1,469 million to the settlement of other outstanding indebtedness.

 

In 2012, we raised R$864 million, from principally financing through export prepayment facilities with financial institutions and international debt capital market. In April 2012, we completed the issuance of 86 million common shares without par value, through an equity offering of shares, resulting in a net increase of capital of R$1,343 million. During 2012, we repaid R$2,411 million of our outstanding indebtedness.

 

In 2011, we raised R$2,707 million, from principally financing through export prepayment facilities with financial institutions and international debt capital markets. In 2011, we issued Fibria 2021 Notes in the total amount of U.S.$750 million. These funds were the main supporters of our liability management plan. During 2011, we repaid R$3,110 million of our outstanding indebtedness. During the year we also paid dividends of R$264 million.

 

Furthermore, we have access to short term and long term trade-finance lines to support any cash needs that could eventually arise.

 

*Cash Flow from Discontinued Operations*

 

In December 2010, we announced the sale of our Conpacel and KSR operations for R$1.5 billion. These transactions were concluded and proceeds were received on January 31 and February 28, 2011. Under IFRS, both operations were considered discontinued operations for the years ended 2010 and 2009.

 

**Debt**

 

In April 2013, we, through Fibria Trading International KFT., entered into an export prepayment contract with three banks in the amount of U.S.$100 million (equivalent to R$202 million), with maturity until 2018 and an initial interest rate of 1.625% p.a. over the quarterly LIBOR.

 

In 2013, Veracel entered into several advanced exchange contracts (“ACC”) in the aggregate of U.S.$70 million (equivalent then to R$163,836 million), with maturity until June 2014 and interest rate between 0.95% and 1.4% p.a.

 

In September 2012, we entered into 3 advanced exchange contracts (“ACC”) in the aggregate amount of U.S.$105 million (equivalent then to R$213 million), with maturity in September 2014  and fixed interest rate of 2.95% p.a.

 

In the first quarter of 2012, Veracel entered into export prepayment contracts in the amount of U.S.$43 million (equivalents then to R$76 million), with maturity between August 2012 and September 2013 and interest rate between 3.35% and 4.75% p.a. . The contracts were settled on the maturity dates.

 

In February 2012, Veracel repaid early five advanced exchange contracts (“ACC”) in the amount of U.S.$14 million (equivalent then to R$24 million) which were contracted in September and December 2011 with maturity in March 12, 2012.

 

In February 2012, Veracel entered into the export prepayment contract, in the amount of U.S.$33 million (equivalent then to R$56 million), with semiannual payment of interest, at 5% p.a. plus LIBOR and a single payment of the principal with maturity in 2017.

 

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We also have export prepayment contracts  with a financial institution in the total amount of U.S.$150 million, bearing interest at 0.78% p.a. plus LIBOR, maturing in 2014.

 

We also had a bilateral export prepayment agreement maturing in 2013 in the amount of U.S.$50 million, bearing interest at LIBOR plus 0.80%. The contract was settled on its maturity date.

 

In June 2011, we signed advanced exchange contracts in the amount of U.S.$125 million (equivalent then to R$198 million), with maturity in January 2013 and fixed interest rates,  of which U.S.$75 million at 2.05% p.a. and U.S.$50 million at 2.09% p.a. The contracts was settled on their maturity dates.

 

In May 2011, we signed an export prepayment agreement with a syndicate of banks in the amount of U.S.$300 million (equivalent then to R$489 million), bearing quarterly LIBOR plus 1.8% p.a., which can be reduced to 1.60%, depending on our level of leverage and risk rating, with an eight-year term and annual installments of U.S.$15 million in 2012; U.S.$30 million in 2015; U.S.$15 million in 2016; U.S.$90 million in 2018 and U.S.$150 million in 2019.

 

In January 2011, we signed three advanced export prepayment contracts in the amount of U.S.$50 million each, with a total of U.S.$150 million (equivalent then to R$249 million), with maturity in June 2012 and fixed interest rate at 2.09% p.a. In March 2012, we early repaid, with available resources, the total amount of U.S.$50 million (equivalent to R$90 million), corresponding to one contract. In September 2012, we repaid the remaining contracts in the total amount of U.S.$100 million, equivalent to R$211 million.

 

In October 2010, we entered into a two bilateral export prepayment agreement in the total principal amount of U.S.$100 million. The loan has a final maturity on October 2018 and it bears interest at a rate of 5.30% per annum payable on a quarterly basis. Principal amortizes on this loan quarterly beginning in October 2016.

 

In September 2010, Fibria Trading entered into an export prepayment agreement with a syndicate of banks in an aggregate principal amount of U.S.$800 million (equivalent then to R$1,355 million) with maturities through 2018, bearing quarterly LIBOR plus 2.755% p.a., which can be reduced to 2.30%, depending on our level of leverage and risk rating. The principal is amortized on this loan on a quarterly basis beginning in March 2013 (with a grace period of one year in 2014). The debt service under this loan is secured by certain of our export receivables. In March 2011, we prepaid the amount of U.S.$600 million (equivalent then to R$993 million).  The amount amortized in 2013 was U.S.$11 million (equivalent then to R$23 million). As of December 31, 2013, the outstanding principal amount was U.S.$189 million (equivalent then to R$443 million).

 

In September 2010, we entered into a bilateral export prepayment agreement in an aggregate principal amount of U.S.$250 million (equivalent then to R$ 423 million) with maturities through 2020, bearing semi-annual LIBOR plus 2.55% p.a., which can be reduced to 2.30%, depending on our level of leverage and risk rating. The loans are guaranteed by export contracts, and the installments mature on shipment dates. This line was used to repay debt with higher costs and less favorable maturities. The principal amortization begins in September 2015, being on a semiannual instalments.

 

In March 2010, we entered into a bilateral export credit agreement, as amended, with a syndicate of banks in an aggregate principal amount of U.S.$535 million (equivalent then to R$ 956 million) that bears quarterly LIBOR plus 2.95% p.a.. The principal payments are due from April 2012 through April 2017 in installments to match export shipments. The financings are secured by certain export receivables. At March 31, 2010 funds totaling US$ 314 million (equivalent then to R$ 558,991) were released, and the remaining balance of US$ 221 million (equivalent then to R$ 389,310) was released on April 6, 2010. This line was fully used to repay debt with higher costs and less favorable maturities. In April 2011, we prepaid the amount of U.S.$100 million (equivalent then to R$161 million) and negotiated a longer term for payment of the remaining balance (from 2013 until 2018, with quarterly instalments). There were no changes in interest rates charged. In August 2012, we prepaid the amount of U.S.$100 million (equivalent then to R$202 million) and in December 2012 we prepaid another portion of U.S.$100 million (equivalent then to R$209 million). During 2013, we prepaid the amount of U.S.$43 million. As of December 31, 2013, the outstanding principal amount was U.S.$192 million (equivalent then to R$450 million).

 

In August 2009, Fibria-MS entered into a U.S.$182 million export prepayment agreement with two financial institutions, as arrangers, and Finnvera, an Export Credit Agency (ECA), as lender. We are a guarantor under this floating rate facility. The loan bears interest at a rate of LIBOR plus 2.825% to 3.325% per annum (such margin is subject to adjustment based on our leverage ratio). Principal payments are due semi-annually from February 2010 to February 2018.  As 

 

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of December 31, 2013, the outstanding principal amount was U.S.$96.5 million (equivalent then to R$226 million). On February 18, 2014 we prepaid the total outstanding balance.

 

*Domestic floating-rate notes*

 

In June 2013, we entered into a contract with Banco do Brasil a NCE (Nota de Crédito à Exportação -  NCE), in the total amount of R$498 million, with maturity in 2018 and interest rate of 105.85% of CDI. This contract is also linked to a swap contract in order to exchange the currency from Reais to Dollar and change of the variable rate to fixed rate, being the final cost 4.16% p.a. plus foreign exchange currency.

 

In September 2012, we entered into an export financing facility (NCE) and a related interest swap agreement, for an aggregate principal amount of R$173 million facility together with the related swap agreement matures in 2020 and bears interest of 100% of CDI payable on a semiannually basis. Principal payments are due annually as from September 2017.

 

In December 2008, we contracted, through our subsidiary Portocel, an NCE with Banco HSBC in the amount of R$94 million (51%), with final maturity in December 2013 and charges of 100% of the CDI. The contract was settled on the maturity date.

 

*Domestic fixed-rate notes*

 

In September 2010, we entered into an export financing facility (Nota de Crédito à Exportação — NCE) and a related interest swap agreement, for an aggregate principal amount of R$428 million. The term of the facility and the related swap agreement, is for eight years and it bears interest at a fixed rate of 5.45% p.a. payable on a quarterly basis. Principal payments are due annually from September 2015 to September 2018.

 

In December 2009, Fibria entered into an R$73 million financing with Banco do Brasil referring to Fund for the Financing of the Brazilian Midwest at 8.5% p.a. fixed rates in *Reais* and a six-month grace period (with a discount of 15% in case of compliance with contract obligations). This is a line offered by the government in order to incentivize, through financing, investments on the Central East region of Brazil. This amount matures through December 2017.

 

*Voto-Votorantim III*

 

In January 2004, VPar, our ultimate controlling shareholder, formed Voto-Votorantim III, a company based in the Cayman Islands, for the sole purpose of raising funds. Voto-Votorantim III issued U.S.$300 million, 4.25% Bonds due 2014 in the international market. We received 15% of the total amount originally issued, U.S.$45 million, and are the guarantors for this amount. In December 2012, we prepaid 100% of the outstanding balance.

 

*Voto-Votorantim IV*

 

On June 24, 2005, we entered into a loan contract with Votorantim Overseas Trading Operations Limited IV (“VOTO IV”),  a jointly controlled entity together with Votorantim Participações, which raised U.S.$400 million  in the international capital markets (equivalent then to R$955 million ), bearing annual interest of 8.5%, maturing in 2020. We received 50% of the total funds raised, i.e., U.S.$200 million, equivalent then to R$477 million.  In 2013 we prepaid a total amount of U.S.$42 million. As a result of this early redemption, we recognized financial expenses amounting to R$ 13.5 million, of which R$ 12.3 million related to the premiums paid in the repurchase transaction and R$ 1.2 million relating to the proportional amortization of the transaction costs of the Notes. Our outstanding principal balance as of December 31, 2013 is U.S.$158 million (equivalent then to R$371 million).

 

*International fixed-rate notes*

 

*Fibria 2019 Notes*

 

On October 2009, Fibria Overseas issued U.S.$1 billion (equivalent then to R$ 1,744 million) aggregate principal amount of its semiannual interest 9.250%p.a. Senior Notes due 2019. In May 2010, the Company announced an offer to 

 

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exchange the Fibria 2019 Bonds for the Fibria 2020 Bonds, in order to reduce interest cost, improve the liquidity of the security and renegotiating covenant clauses. Fibria is a guarantor of 100% of the obligations under these notes. The outstanding principal balance as of December 31, 2013 is U.S.$63 million (equivalent then to R$148 million).

 

*Fibria 2020 Notes*

 

In May 2010, through Fibria Overseas Finance Ltd., we raised U.S.$750 million (“Fibria 2020”) in the international markets, maturing in ten years and with a repurchase option as from 2015, accruing semi-annual interest at 7.50% p.a.

 

Shortly after pricing Fibria 2020 Notes, we commenced an exchange offer in which additional Fibria 2020 Notes were offered in exchange for up to U.S.$1 billion of the Fibria 2019 Notes. The exchange offer was completed in May 2010, with holders representing approximately 94% of the aggregate principal amount of the Fibria 2019 Notes agreeing to exchange their notes for Fibria 2020 Notes. In July 2012, we prepaid, with proceeds from the public offering of shares, the amount of U.S.$514 million (equivalent then to R$1,044 million). During 2013, Fibria prepaid and canceled a total of U.S.$666 million (equivalent to R$1,347 million) related to the Bond. The remaining principal balance of the Bond in the amount of U.S.$690 million (R$1,616 million) is recorded as current liabilities due to Management’s decision to elect early redemption with settlement on March 26, 2014 through the Make-Whole Premium clause.

 

*Fibria 2021 Notes*

 

In March 2011, we, through Fibria Overseas Finance Ltd., raised U.S.$750 million (“Fibria 2021”) in the international markets, maturing in ten years, with a repurchase option as from 2016, accruing semi-annual interest at 6.75% p.a.. During 2013, Fibria prepaid and canceled a total of U.S.$189 million (equivalent to R$411 million). The outstanding principal balance as of December 31st 2013 is U.S.$ 561 million (equivalent then to R$1,314 million).

 

As a result of the early redemption of the Fibria 2020 Notes and Fibria 2021 Notes during 2013, we recognized financial expenses amounting to R$336.8 million, of which R$224.2 million related to the premiums paid in the repurchase transactions and R$112.6 million relating to the proportional amortization of the transaction costs of the Notes.

 

*BNDES Financing*

 

BNDES has been an important source of debt financing for our capital expenditures. In 2013 a total amount of R$267 million was lentto us by BNDES under the existing contracts. As of December 31, 2013, the BNDES loans outstanding totaled R$1,797 million mainly related to production capacity increase and silviculture projects, all of which are denominated in *Reais*. Loans from BNDES are secured by liens on property, plant and equipment and bank guarantee. The majority of our loans with BNDES bear interest indexed to a nominal long-term interest rate, TJLP. The remaining BNDES loans are indexed to UMBNDES (a weighted average exchange variation on a basket of currencies, predominantly U.S. Dollars) plus a spread. At December 31, 2013, the TJLP was fixed at 5.0% p.a.

 

As of December 31, 2013, BNDES represented approximately 18% of our financial indebtedness, and is expected to remain as a significant source of financing in the future. See below details on amount and maturities:

 
| **Index** | ** ** | **R$ in millions** | ** ** | **Maturity** | ** ** |
|-----------|------------|------------------------------|------------|--------------|------------|
| TJLP      |       | 1,440                        |       | 2023         |       |
| UMBNDES   |       | 357                          |       | 2022         |       |
|      |       | 1,797                        |       |         |       |

 

For further information on the financing agreements with BNDES, see Exhibit 4.6 incorporated by reference in this annual report.

 

*Leasing*

 

We signed capital leases agreement with the Bank Société Générale for the acquisition of machinery used to fell and harvest trees in the total amount of R$83 million. The first tranche of R$5 million was released in September 2008 and matures in 2013. In June 2012, we prepaid the full outstanding amount of this facility.

 

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*Maturities*

 

At December 31, 2013, the amount of our short-term debt was R$2,972  million. At December 31, 2013, the annual maturities of our debt were as follows:

 
| **Year**   | ** ** | **Amount**                     | ** ** |
|------------|------------|--------------------------------|------------|
| ** ** | ** ** | **(R$ in millions)** | ** ** |
|       |       |                           |       |
| 2014       |       | 2,972                          |       |
| 2015       |       | 834                            |       |
| 2016       |       | 830                            |       |
| 2017       |       | 1,256                          |       |
| 2018       |       | 976                            |       |
| 2019       |       | 763                            |       |
| 2020       |       | 670                            |       |
| 2021       |       | 1,441                          |       |
| 2022       |       | 26                             |       |
| 2023       |       | 5                              |       |
| Total      |       | 9,773                          |       |

 

*Covenants*

 

Financial covenants required under some long term borrowings were renegotiated in June 2012 in order to mitigate the effects from changes in exchange rates. The renegotiation resulted on the following changes: (a) covenants are measured based on consolidated information translated into US dollars (as opposed to consolidated financial information in Reais), and (b) the indebtedness Net debt to Adjusted EBITDA ratio was increased to a maximum ratio of 4.5x as from June 2012.

 

The measurement of the ratios based on information translated into US dollars reduces the of effects changes in exchanges rates as compared to ratios based on information measured in Reais. A substantial portion of our debt is denominated in US dollars and as a result particularly depreciation of the real against the US dollar had significant impacts on the ratio when measured in Reais. Under the prior computation criteria in the event of a depreciation the amount of net debt as of the end of the period would increase when measured in Reais. Under the revised criteria by translating the Adjusted EBITDA from Reais to US dollar at the average exchange rate of each quarter the impact of the depreciation of the Brazilian real is mitigated.

 

As of December 2013, our net debt to Adjusted EBITDA ratio (or indebtedness ratio) was 2.6x in US dollar (2.8x in R$). See Note 4 to our 2013 consolidated financial statements.

 
| ** **                                                        | ** ** | **Dec./   2013 and after** | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------------|------------|
| Debt Service Coverage   Ratio (1) – minimum ratio       |       | 1.0                                  |       |
| Net Debt to Adjusted   EBITDA Ratio (2) – maximum ratio |       | 4.5                                  |       |

 

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(1) The ratio of debt service coverage is defined as (a) Adjusted EBITDA (for the last four social quarters)  translated into U.S. Dollars at the average exchange rate of each quarter, plus the balance of cash, cash equivalents and marketable securities at period-end translated into US dollar at period-end exchange rates divided by (b) debt service payment requirements for the following four consecutive quarters plus interest paid during the past four quarters translated into US dollars at the average exchange rate of each quarter.

 

(2) Defined as the ratio of (a) consolidated net debt exchanged to U.S. Dollar period-end closing rate divided by (b) Adjusted EBITDA (for the last four quarters exchanged to U.S. Dollar at the average exchange rate of each quarter).

 

Many of these instruments also contain other covenants that restrict, among other things, the ability of Fibria and its subsidiaries to:

 

·                  merge or consolidate into other entities or otherwise dispose of all or substantially all of our assets;

 

·                  consummate certain asset sales and exchanges;

 

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·                  incur additional indebtedness;

 

·                  issue or sell share capital of relevant subsidiaries;

 

·                  making certain restricted payments, including payment of dividends; or

 

·                  enter into certain transactions with affiliates.

 

In addition, the instruments governing a substantial portion of our indebtedness contain cross-default or cross-acceleration clauses, such that the occurrence of an event of default under one of these instruments could trigger an event of default under other indebtedness or enable the creditors under other indebtedness to accelerate that indebtedness. The principal events of default under our export prepayment agreements include:

 

·                  non-payment of the principal amount or interest;

 

·                  inaccuracy of any declaration, guarantee or certification provided;

 

·                  cross-default and cross-judgment default, subject to an agreed minimum of U.S.$50 million;

 

·                  subject to certain cure periods, breach of any obligation under the agreement;

 

·                  certain events of bankruptcy or insolvency of Fibria or certain of its subsidiaries.

 

At December 31, 2013, we were in compliance with all covenants, which are required under some long term borrowings. See Note 23 to our 2013 consolidated financial statements and “Item 5 - Operating and Financial Review and Prospects — A. Operating Results — Results of Operations.”

 

***Liability Management Plan***

 

Since 2009, we have been implementing a liability management plan aimed at (1) improving our capital structure, (2) recovering our investment grade rating and (3) securing financing for our growth strategy under favorable market conditions.

 

In 2013, as part of our liability management plan we have entered into the following transactions:

 

·                  Prepayment and cancelation a total of U.S.$666 million (equivalent to R$1,347 million) related to our 2020 Notes;

 

·                  Prepayment and cancelation a total of U.S.$189 million (equivalent to R$411 million) related our Fibria 2021 Notes;

 

·                  On November 15, 2013, we entered into a Share Purchase Agreement and Other Covenants with Parkia , for the sale of certain land located in the states of São Paulo, Mato Grosso do Sul, Bahia and Espírito Santo, for a total of approximately 210 thousand hectares. On December 30, 2013, after obtaining the mandatory regulatory approvals as well as the completion of an audit by Parkia, the First Amendment to the Share Purchase Agreement and Other Covenants was concluded and signed, under which the total area subject to the transaction was adjusted to approximately 206 thousand hectares of lands, for the total amount of R$ 1,402,584 thousand, of which R$500,000 thousand has been received by us upon signing the agreement. In January 2014, we received R$710,702 thousand. The remaining balance of R$191,882 thousand will be received no later than the end of the first quarter of 2014 after the fulfillment of certain obligations and legal requirements, to be performed by us. We may be entitled to an additional amount, limited to R$247,515 thousand, contingent on the appreciation of the land sold. The proceeds of this sale will reinforce our cash position and can be used in the future to prepay debt.

 

The Management have decided to elect early redemption of the total remaining balance of our 2020 Notes in the amount of U.S.$690 million with settlement on March 26, 2014 through the Make-Whole Premium clause. Also, on February 18, 

 

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2014 we prepaid the total outstanding balance in the amount of U.S.$ 96.5 million with Finnvera export credit agency (ECA).

 

***Liability and Liquidity Management Policy***

 

In May 2011, we approved our Liability and Liquidity Management Policy, with which we formalized that we work toward the reduction of our leverage. Therefore, we aim to attain the investment grade allowing access to credit lines with more attractive costs. In addition, this policy also formalized the goal of maintaining the necessary liquidity for the cash conversion cycle and to meet short term financial obligations. It also provides that we will maintain a minimum cash balance comprised of the sum of: (i) a minimum operating cash balance, which reflects the cash conversion cycle and (ii) a minimum balance for coverage of debt service, which includes interest and short-term principal. In addition, we may seek additional liquidity, through a revolving credit facility, to meet the minimum cash balance according to rating agencies methodology.

 

***Capital expenditures***

 

Our capital expenditures (Capex) totaled R$1,287 million in 2013 and R$1,078 million in 2012. This increase was mainly due to the increase in forestry renewal,  higher purchase volume of standing timber in 2013 compared to 2012 and an increase in expenditures with maintenance, IT, R&D and modernization incurred in 2013.

 

The table below sets forth a breakdown of our most significant capital expenditures for the periods indicated:

 
| ** **                                      | ** **   | **2013**                               | ** **   | **2012**    | ** **   | **2011**    | ** **   |
|-------------------------------------------------|--------------|----------------------------------------|--------------|-------------|--------------|-------------|--------------|
| ** **                                      | ** **   | **(in millions   of Reais)** | ** **   | ** **  | ** **   | ** **  | ** **   |
| Industrial Expansion                            |         | 8                                      |         | 4           |         | 26          |         |
| Forest Expansion                                |         | 65                                     |         | 66          |         | 128         |         |
| ***Subtotal Expansion*****                      |         | 73                                     |         | 70          | *** *** | ***154***   | *** *** |
| Safety/ Environment                             |         | 31                                     |         | 47          |         | 62          |         |
| Forestry Renewal                                |         | 752                                    |         | 653         |         | 624         |         |
| Advance for Wood Purchase (partnership program) |         | 97                                     |         | 77          |         | 176         |         |
| Maintenance, IT, R&D, Modernization    |         | 253                                    |         | 166         |         | 310         |         |
| ***Subtotal Maintenance*****                    | *** *** | ***1,133***                            | *** *** | ***943***   | *** *** | ***1,172*** | *** *** |
| 50% Veracel                                     |         | 81                                     |         | 65          |         | 90          |         |
| ***Total*****                                   | *** *** | ***1,287***                            | *** *** | ***1,078*** | *** *** | ***1,416*** | *** *** |

 

For 2014, Management has approved a budget of R$1,520 million for future capital expenditures. The 18% increase over 2013 is explained by the forestry partner contracts signed as a result of the land sale in December of 2013 and a one-off impact of wood purchases, which is expected to continue for 2 to 2.5 years before returning to normal levels.

 

**C.****                                   ****Research and development, patents and licenses, etc.**

 

As a producer of pulp, we seek to gain a better understanding of the entire production process and obtain competitive advantages by continuous investments in research and technological development. By attempting to identify the characteristics of both wood and pulp that are essential for the production of high quality pulp and paper, we improve our processes and develop innovative, higher quality products. The research and development activities conducted within our research center are directed towards increasing the productivity of our forests, improving the quality of the eucalyptus wood used as our raw material, increasing the efficiency of our productive process and industrial yields, and developing new, innovative higher quality products, in a sustainable way. These efforts are conducted not only within our research facilities, but also in partnership with various universities, suppliers and private research institutes. Our total budget, including operational and capital expenditure in research and development was R$45 million in 2013 and R$41 million in 2012. Our expenditures in research and development have been commensurated with our growth and our continued efforts to maintain our competitive advantage. This strategy has enabled us to develop high quality sustainable forests at lower costs and with minimal environmental impact, and to continue to supply the market with improved products and reinforcing our long-term relationships with key customers. By the end of 2010, the average annual amount of pulp produced per hectare was 11.3 

 

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metric tons, compared to 6.4 metric tons obtained during the 1970s. Referring to this, one of the long-term targets we have is to keep reducing the amount of land required for the pulp production, as a result of increasing productivity via genetic, forest management and industrial performance improvements.

 

*Fibria Technology Center*

 

The main objective of the Fibria Technology Center is to add value to the overall business. Our portfolio of research projects includes activities ranging from plant breeding and propagation  to developing new products.  As a producer of pulp, we seek to gain a better understanding of the entire production process and obtain competitive advantages by continuous investments in research and technological development. By attempting to identify the characteristics of both wood and pulp that are essential for the production of high quality pulp and paper, we improve our processes and develop innovative, higher quality products. The research and development activities conducted within our research center are directed towards increasing the productivity of our forests, improving the quality of the eucalyptus wood used as our raw material, increasing the efficiency of our productive process and industrial yields, and developing new, innovative higher quality products, in a sustainable way. These efforts are conducted not only within our research facilities, but also in partnership with various universities, suppliers and private research institutes. Our total budget, including operational and capital expenditure in research and development were R$45 million in 2013 and R$41 million in 2012. Our expenditures in research and development have been commensurate with our growth and our continued efforts to maintain our competitive advantage.

 

Our forestry technology is focused on wood quality and forest productivity and sustainability through research in genetic improvement, forest biotechnology, plant physiology, soil and plant nutrition, silviculture, forest protection and environmental development.  This intense research program has significantly increased our competitiveness.

 

We currently perform 100% of our planting with improved clones which are efficiently propagated as a result of pioneering nursery procedures. In this regard, during the last few years, a new clonal propagation technology was designed to increase rooting ability and plant quality while reducing the production costs.  This new concept involves microcuttings production in temporary immersion bioreactors. As a result of this in house technology, two patents were recently filed in US and Brazil. We believe this new concept of propagation will establish new standards for eucalyptus nurseries.

 

In order to advance additional gains, a new strategy called Genome Wide Selection (GWS) is under development at Fibria for integration into the classical breeding program. The GWS is based on the very early selection of superior eucalyptus clones by analyzing their DNA (or molecular markers) profiles. By implementing this technique, which is totally new in the forestry sector, we expect to make the breeding cycles shorter, by antecipating selection of superior materials. A new high throughput platform for intensive tree genotyping  and different statistical models has been tested in order to increase the method efficiency. The preliminary results obtained by Fibria point out to very promising perspectives.

 

Fibria also maintains a significant level of investment in a biotechnology program (e.g. genetic transformation exclusively for research purposes), involving national and international partnerships. The main goals of this program are to evaluate the potenctial of such technologies to further improve forest and industrial productivity and to reduce total costs, with no risk to the environment.

 

Fibria has increased efforts in relation to intellectual property protection and development. Many achievements have been made during 2013 in the intellectual property field, for example: Internal Policies regarding Patents, Trademarks and Software. Further, during 2013, three new patents have been filed and several granted in biotechnology area in different countries. Finally, five new varieties of Eucalyptus were granted by National Plant Varieties Protection Service,  demonstrating  the success in genetic improvement efforts.

 

In a forestry based company, the maintenance and increase of forest biomass production together with silvicultural cost reduction is fundamental, especially in highly intensive management regimes. Thus, plant nutrition, fertility and soil conservation is crucial. We are achieving these objectives through the development and use of specific precision silviculture systems that optimize the allocation of the available resources, while monitoring soil fertility and conservation. Results from these monitoring processes conducted over the last two decades, have revealed, particularly over the last decade, that fertility may be enhanced through programs of nutritional management. In this sense, during 2013, we have developed activities related to the: (i) development and implementation of a unique fertilization system in all Fibria sites, aiming the optimization of the available resources (ii) establishment of a consolidated vision about the use of residual forestry biomass and its related impact in the productivity ans sustainability, (iii) determination of the best forest management practices to different products, including special pulps, biomass, with significant modification in the wood and biomass quality, (iv) consolidation of the 

 

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high intensive management concept, aiming the wood cost reduction, and your extension to all Fibria units. In the past years, to reduction in nutritional formulations, the extent of automated management and the control of fertilization, has already led to gains in logistics, costs and safety on the use of fertilizers.

 

We also have continuous studies in order to keep the forest healthy and to reduce the using of chemical pesticides. In this current year, our researches were focused on the screening of disease resistant clones and for increase the use of biological pest control. We also studied technologies to improve the firefighting performance and weed control. We answered all questions about the SmartStep process and at the pesticide derogation, contributing to the maintain the certification FSC in our all units. Our researchers are encouraging the idea to create a new FSC regulation polity for chemical pesticide use, considering the silvicultural aspects and rules for environmental security, instead of only the chemical characteristics of the molecules. In order to be prepared for the future challenges, the Technology Center started up the activities in its Forest Health Protection and Natural Resources Laboratory. This new laboratory has been used to produce agents of biological control of pests, to evaluate disease ́s resistance in all Fibria ́s Eucalyptus clones and to diagnose forestry problems, helping to maintain our sustainability.

 

Furthermore, we have performed specific studies since 1993 into the quantity and quality of superficial and underground water by monitoring water tables in representative locations in our plantations and by our production units, which continue to indicate that there have been no material changes to the composition of the water in these water tables, thus confirming that our plantation and production processes are not contaminating the surrounding water tables. In 2013, specific studies on the water cycle (Fibria’s Watershed Project) as well as the environmental interactions in our landscape model of production have been reinforced by the calibration and application of two hydrological models (SWAT - Soil and Water Assessment Tool and HYDRUS - Movement of water, heat, and multiple solutes in variably saturated media) enabling the analysis of different land use scenarios and their respective impacts on the natural available resources. The results allow us to better plan the plantations in the landscape and to identify and quantify Ecosystem Services.

 

In our continuous search for better environmental performance, we started to use Ecosystem Services approach to integrate research topics and to improve our landscape management practices. Technical planning for biodiversity conservation is based mainly on the assets in Fibria’s biodiversity database which comprises all information about fauna and flora species registered in Fibria’s areas since 1992, with special focus on birds, which have been used as indicators of the functionality of the managed forest landscape. Also for conservation planning, we use our Fibria Bioindex software, which combines relevant indicators for statistical analysis of diversity indices in our plantations and areas of natural vegetation (Rain Forest or Savanna fragments) based on landscape ecology analysis. Based on all these approaches, in 2013 we identified High Conservation Value Areas (HCV) at Tres Lagoas Unit and provided technical advice to improve forest operation practices in order to conserve biodiversity. In 2013, the Technology Center also provided technical advice on the improvement of our native forests restoration program and started partnerships to develop the agroforestry approach in our forest management areas in order to improve the income of communities. All Fibria’s technology efforts aimed to improve biodiversity also improve the value of ecosystem services provided by our forest production landscape.

 

Our research and development team has also continuously assessed new trends and advances in the market in which we operate, allowing the development of new products and the entry into new markets. In particular, we have been following recent developments on the production technologies resulting in biofuels or alternative biomass-based products. Biorefinery comes as an important subject in our project portfolio. Our roadmap on biorefinery had been updated, and the correspondent laboratory had received considerable investments on high-tech equipments to allow characterization of raw material and products, including biofuels. These capabilities and drivers along with the stablishment of strategic alliances is paving out the way to speedup research and development of bioproducts and/or biofuels. The ongoing projects and alliances envision the different and more promising alternatives, not only making use of forest biomass in nature, but also from the circling streams of the kraft process, such as those from lignin. Within this scope of increasing the value from our forestry biomass, in 2013 the JV created by Fibria and Ensyn advanced on assessing potential sites for the installation of the first RTP unit in Brazil. In the same direction, potential customers and applications had been assessed. Preliminary trials on the use of the renewable fuel oil had been performed with both potential customers and strategic partners resulting in very satisfactory results.

 

When it comes to our pulp and paper production processes, during this last year we assessed and introduced important setup changes in order to improve fiber strength even further. This approach associated with customers’s feedback comes in close connection, as a loop, with the tree breeding program. Alongwith what we call wood x process x product trinomiun and the advantages of having these teams working side by side, we had been able to support Fibria’s strategy to be considered one of the best commercial and R&D partner by some of our very important customers.

 

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Among these efforts in product development our team has focused the increase of BEKP share in the paper composition and/or helping customers improving their products’ performance. These efforts are split into two major streams: (a) looking forward to set specific properties on the BEKP fibers through changes in forest sourcing, pulping and bleaching processes and/or (b) determining the best practices for the use of BEKP in different systems of stock preparation, refining and papermaking technologies as a whole. One example of product application engineering relies on our partnered development of ultra-low intensity refining through the use of conical refiners. This kind of  technology and know-how allow our customers improve the usage of eucalyptus pulp and the performance of their final products.

 

**D.****                                   ****Trend Information**

 

The primary trends which influence our sales and production and inventory levels are: the patterns and cycles of pulp purchases by paper producers, pulp and paper prices, the level of pulp inventory in the hands of pulp producers in the global market, global economic conditions and the effect of currency fluctuations.

 

We continue to pursue growth opportunities to create value for our shareholders through business expansion, strong operational performance and profitability and/or technological and product improvements, always in the context of a long term strategic focus.

 

For additional information regarding trends in our business, see “Item 4 - B. Business Overview — Our Strategies”, “Item 4 - B. Business Overview — Effects of Fluctuations in Pulp Price” and “Item 5. Operating and Financial Review and Prospects - A. Operating Results.” For risks affecting our business, see “Item 3. Key Information — D. Risk Factors.”

 

**E.****                                   ****Off-Balance Sheet Arrangements**

 

We participate in a number of off-balance sheet arrangements, mainly related to guarantees and take or pay contracts. We also have a number of swap transactions that are described in “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” All of these transactions are further described elsewhere in this annual report. See Notes 12 and 26 to our 2013 consolidated financial statements.

 

**F.****                                    ****Tabular Disclosure of Contractual Obligations**

 

The following table summarizes our significant contractual obligations and commitments as of December 31, 2013. This table does not reflect swap transactions discussed under “Item 11. Quantitative and Qualitative Disclosures about Market Risk”.

 
| ** **                                        | ** ** | **Payments Due by Period** | ** ** |
|---------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                        | ** ** | **Less than   One Year**        | ** ** | **One to Three   Years** | ** ** | **Three to   Five Years** | ** ** | **More than   Five Years** | ** ** | **Total** | ** ** |
| ** **                                        | ** ** | **(in millions of Reais)** | ** ** |
| Total debt commitments (1)                        |       | 3,260                                     |       | 2,375 |   | 4,041 |   | 1,922 |   | 11,598 |   |
| Operating leases (2)                              |       | 218                                       |       | 425 |   | 626 |   | 1,976 |   | 3,245 |   |
| Purchase obligations (3)                          |       | 415                                       |       | 551 |   | 389 |   | 888 |   | 2,243 |   |
| Pension contributions (4)                         |       | 4                                         |       | 9 |   | 9 |   | 55 |   | 77 |   |
| Total contractual obligations and commitments (5) |       | 3,897                                     |       | 3,360 |   | 5,065 |   | 4,841 |   | 17,163 |   |

 

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(1)                     The amounts disclosed in the table are the contractual undiscounted cash flows and as such they differ from the amounts presented in the consolidated balance sheet.

 

(2)                     Includes land leases and sea transportation (domestic and export).

 

(3)                     Includes take-or-pay contracts. We have long-term “take-or-pay” contracts with suppliers of energy, transportation, diesel fuel and chemical products for an average period of 9.8 years for which the contractual obligations are R$228 million per year.

 

(4)                     Represents a contribution of R$4 million per year, in average.

 

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(5)                     Excludes amounts of probable cash outflows which are expected to arise upon settlement of contingencies due to uncertainties with respect to timing of payments.

 

We are also subject to contingencies with respect to tax, civil, labor and other claims and have made provisions for accrued liability for legal proceedings related to certain probable and estimable losses arising from tax, civil and labor claims of R$281 million as of December 31, 2013. See “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Contingencies”.

 

**ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**

 

**A.****                                   ****Directors and Senior Management**

 

We are managed by a Board of Directors and a Board of Executive Officers. The address of the management of our Company is Alameda Santos 1357, 6th floor, São Paulo, State of São Paulo, Brazil.

 

**Board of Directors**

 

Our Board of Directors is required to meet four times a year and on an extraordinary basis whenever corporate interests so require. The members of the Board of Directors are appointed at General Shareholders’ Meetings and serve for two-year terms. Our Board’s responsibilities include determining our general business strategies, electing the Executive Officers and supervising the management. As of December 31, 2013, the Board of Directors was made up of the following members:

 
| **Name**                                    | ** ** | **Member Since** | ** ** | **Age** | ** ** | **Position**  |
|---------------------------------------------|------------|-----------------------|------------|---------|------------|---------------|
| José   Luciano Duarte Penido           |       | 2009                  |       | 65      |       | Chairman      |
| *Paulo Henrique de Oliveira   Santos*       | * *   | *2009*                | * *   | *55*    | * *   | *Alternate*   |
| João Carvalho de Miranda               |       | 2009                  |       | 51      |       | Vice-chairman |
| *Mario   Antônio Bertoncini*           | * *   | *2011*                | * *   | *45*    | * *   | *Alternate*   |
| Raul   Calfat                               |       | 2009                  |       | 61      |       | Member        |
| *Gilberto   Lara Nogueira*                  | * *   | *2009*                | * *   | *65*    | * *   | *Alternate*   |
| Alexandre   Silva D’Ambrosio           |       | 2009                  |       | 51      |       | Member        |
| *Eduardo Borges de Andrade Filho*           | * *   | *2011*                | * *   | *47*    | * *   | *Alternate*   |
| Carlos   Augusto Lira Aguiar                |       | 2012                  |       | 68      |       | Member        |
| *Samuel   de Paula Matos*                   | * *   | *2009*                | * *   | *65*    | * *   | *Alternate*   |
| Julio   Cesar Maciel Ramundo                |       | 2011                  |       | 44      |       | Member        |
| *Laura Bedeschi Rego de Mattos*             | * *   | *2011*                | * *   | *38*    | * *   | *Alternate*   |
| Eduardo   Rath Fingerl                      |       | 2009                  |       | 60      |       | Member        |
| *Leonardo Mandelblatt de Lima   Figueiredo* | * *   | *2013*                | * *   | *36*    | * *   | *Alternate*   |
| José Armando de Figueiredo Campos      |       | 2009                  |       | 65      |       | Member        |
| *Maria Paula Soares Aranha*                 | * *   | *2013*                | * *   | *56*    | * *   | *Alternate*   |
| Alexandre Gonçalves Silva              |       | 2009                  |       | 68      |       | Member        |
| *José Ecio Pereira da Costa   Junior*  | * *   | *2013*                | * *   | *62*    | * *   | *Alternate*   |

 

We present below a brief biographical description of each member of our Board of Directors:

 

*José Luciano Duarte Penido*. Mr. Penido has been Chairman of the Board of Directors of Fibria Celulose S.A. since November 2009. Previously, from 2004 to 2009, he was President and CEO of Votorantim Celulose S.A., now Fibria, having served also as a member of the Board of that company. Between 1992 and 2004 he served as CEO of Samarco Mineração. He is also Chairman of the Board of Bracelpa (The Brazilian Pulp & Paper Association), Co-chairman of the WBCSD’s - World Business Council for Sustainable Development — Forest Solutions Group. He graduated in Mining Engineering from Universidade Federal de Minas Gerais - UFMG. Mr. Penido is an independent member of the Board of Directors of Copersucar S.A. and Orteng S.A., as well as a member of the Corporate Governance and Sustainability Committee of Santander S.A and Advisory Board Member of Masisa do Brasil Ltda.

 

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*João Carvalho de Miranda.*Mr. Miranda has been a member and vice chairman of the Board of Directors of Fibria Celulose S.A. since November 2009. He has been CFO and Investor Relations Officer of Votorantim Industrial S.A. since March 2009. Before joining the Votorantim Group, he was Executive Vice President of Citibank S.A. do Brasil, from 2006 to 2009. Previously, from 2004 to 2006, he held the position of CEO of Citibank N.A. in Chile, and acted as Corporate Banking Head at Citibank N.A. in Brazil, from 1998 to 2004. Mr. Miranda graduated in Economics from the Pontifícia Universidade Católica do Rio de Janeiro PUC-RJ, and attended the MSc. in degree in Business Administration from the Institute of Postgraduate Studies and Research in Administration of the Universidade Federal do Rio de Janeiro (COPPEAD). He also completed a graduate exchange program at Wharton Business School, University of Pennsylvania.

 

*Raul Calfat*. Mr. Calfat has been a member of the Board of Directors of Fibria since December 2009. He has been CEO of Votorantim Industrial S.A. since January 2012. In January 2004 he assumed the position of Executive Managing Director of Votorantim Investimentos Industriais and in January 2006 he became responsible for all industrial business of the Company. Previously, from 1996 to 2003, he held the position of CEO of Votorantim Celulose e Papel and served as Chairman of the Pulp and Paper Association of São Paulo between 1993 and 1995, and as Vice President of the Brazilian Association of Pulp and Paper from 1996 to 2004. Mr. Calfat graduated in Business Administration from Fundação Getulio Vargas - FGV and participated in management development programs for senior executives at the International Institute for Management Development (IMD), in Switzerland.

 

*Alexandre Silva D’Ambrosio.*Mr. D’Ambrosio has been a member of the Board of Directors of Fibria Celulose S.A. since November 2009. He is Corporate Director of Votorantim Industrial S.A., which he joined in 2003. He also held the position of Director of the Legal Department of Votorantim Participações S.A. Before joining the Votorantim Group, Mr. D’Ambrosio served as Vice President for legal and corporate affairs of Global Village Telecom Ltda (GVT) from 2001 to 2003 and also worked in the area of business law in the United States from 1986 to 1996, and is enrolled with the American Bar Association and member of the International Court of Commerce of New York. He is a lawyer graduated from the Law School of the Universidade de São Paulo (USP), has a master’s degree in International Law from Harvard University and another one in Comparative Law from the National Law Center of George Washington University, USA. Mr. D’Ambrosio is member of the Board of Directors of Cia.de Cimento Itambé.

 

*Carlos Augusto Lira Aguiar*. Mr. Aguiar has been a member of the Board of Directors of Fibria Celulose S.A. since January 2012. He was President and CEO of Fibria from the Company’s creation in August 2009 through June 2011. He was President of Aracruz Celulose S.A. from April 1998 through December 2009, having joined the Company in 1981, performing various management positions in the areas of Production, Quality and Engineering. In 1985 he was promoted to Industrial Director and during the period from 1993 to 1998 he served as Vice President of Industrial and Forestry Operations. Aguiar began his career in the Pulp and Paper industry in 1970, having held various management positions in the area of production and projects. He graduated in Chemical Engineering from the Universidade Federal do Ceará, with specialization and improvement courses at Harvard (USA) and Chelwood (UK). Mr. Aguiar is Chairman of the Board of Directors of Veracel Celulose S.A.

 

*Mr. Julio Cesar Maciel Ramundo.*Mr. Ramundo has been a member of the Board of Directors of Fibria Celulose S.A. since December 2011. He has served as Executive Director of the Banco Nacional de Desenvolvimento Economico e Social - BNDES since May, 2011, responsible for the Industrial, Capital Markets and Venture Capital areas. He joined BNDES in 1992, where he held various management positions mainly in the industrial division. Julio holds a bachelor’s degree in Economics from Universidade Federal do Rio de Janeiro-UFRJ and an MBA with distinction from the London Business School, University of London.

 

*Eduardo Rath Fingerl.*Mr. Rath Fingerl has been a member of the Board of Directors of Fibria Celulose S.A. since December 2009. From April 2006 to April 2011, Eduardo was a director of the areas of Capital Market, Venture Capital and Environment at Banco Nacional de Desenvolvimento Economico e Social - BNDES. He joined BNDES in May 1976, and has made a career at the bank acting in several positions. From August 1989 to June 1993, he acted in the private sector as Technical Director of FBDS - Fundação Brasileira para o Desenvolvimento Sustentável and Director of PQB - Petroquímica da Bahia S.A. He is member of the Board of The New Club of Paris and Vetria Mineração S.A. Eduardo has a degree in Industrial Engineering from the Universidade Federal do Rio de Janeiro - UFRJ and holds a master’s degree in the same area from COPPE/UFRJ.

 

*Jose Armando de Figueiredo Campos.* Mr. Campos has been an independent member of the Board of Directors of Fibria Celulose S.A. since December, 2009. In the period from 2006 to 2009, he served as President and CEO of Arcelor do Brasil S.A. (now ArcelorMittal Brasil S.A.), cumulatively to the role of President and CEO of the Division of Action Plans 

 

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for South America, and to the role of Executive Vice President of ArcelorMittal Group, with a seat on its Executive Committee in London. From 1992 to 1997, he was Vice President of Companhia Siderúrgica de Tubarão — CST. José Armando began his career at Companhia Vale do Rio Doce (Vale), where he held many management positions. He is graduated in Mining Engineering from the Mining School of Ouro Preto (EMOP/UFOP) and has an MBA from Fundação Dom Cabral/INSEAD. Mr. Campos is an independent member of the Board of Rede Gazeta de Comunicações (ES) and, since April 2009 he has been Chairman of the Board of Directors of ArcelorMittal Brasil S.A., where has been acting as Board member since 2006.

 

*Alexandre Gonçalves Silva.* Mr. Silva has been an independent member of the Board of Directors of Fibria Celulose S.A. since December 2009. From 2001 through 2007 he served as President and CEO of GE do Brasil. Previously, he served as President and CEO of GE Celma, an aero engine repair and overhaul company located in Petrópolis, Rio de Janeiro. In his 40-year career, he has worked most of his time in diverse sectors of the commercial aircraft industry. He graduated in Mechanical Engineering from the Pontifícia Universidade Católica do Rio de Janeiro PUC-RJ.

 

Mr. Silva is presently Chairman of the Board of Directors of Embraer, member of the Board of Directors of PDG Realty, Equatorial Energia and Alupar.

 

***ALTERNATES***

 

*Paulo Henrique de Oliveira Santos.**Mr. Santos* has been an alternate member of the Board of Directors of Fibria Celulose S.A. since December 2009. In January 2011 he assumed the position of Director of Mergers, Acquisitions & New Business of Votorantim Industrial S.A., which he accumulates with the position of CEO of Votorantim Novos Negócios - VNN, in the areas of private equity and venture capital, which he has held since 2000 and the position Interim CEO of Votorantim Cimentos. Previously, from 1997 to 2000, he was CFO of Votorantim Metais. Mr. Santos is graduated in Industrial Engineering from the School of Industrial Engineering (FEI) with post-graduation in Business Administration from Fundação Getulio Vargas - FGV. He also took a specialization course at Harvard Business School, OPM - Owner/President Management Program.

 

*Mr. Santos* is a member of the Board of Directors of Tivit S.A.

 

*Mario Antônio Bertoncini.*Mr. Bertoncini has been an alternate member of the Board of Directors of Fibria Celulose S.A. since October 2011. He has been Treasury and Investor Relations Director of Votorantim Industrial S.A. since September 2011. Previously he served as Regional Director of the Large Corporate Division at Banco Itaú BBA S.A., from 2009 to 2011 and Regional Director of the Large Corporate Division in Rio de Janeiro and São Paulo for Itaú Unibanco S.A. from 2005 to 2009. He graduated in Business Administration from Fundação Getulio Vargas - FGV and has an MBA in Finance from the Wharton School University of Pennsylvania.

 

*Gilberto Lara Nogueira*. Mr. Nogueira has been an alternate member of the Board of Directors of Fibria Celulose S.A. since December 2009. Since 2003 he has been Corporate Director of Human and Organizational Development in Votorantim Industrial S.A. Previously he worked for Rhodia, where he acted as Worldwide Director of Human Resources from 2001 to 2003, Director of Human Resources for Latin America between 1996 and 2001, Director of the Engineering Plastics Business from 1992 to 1996, and President of Rhodia Argentina from 1990 to 1992. Mr. Nogueira graduated in Mechanical Engineering from Engineering School Mauá, with post graduation in Business Administration from Fundação Getulio Vargas - FGV.

 

*Eduardo Borges de Andrade Filho*. Mr. Andrade Filho has been an alternate member of the Board of Directors of Fibria Celulose S.A. since December 2011. He currently holds the position of Strategy Corporate Director of Votorantim Industrial S.A. Between August 2010 and April 2011, he held the position of Vice President of Development of Usiminas, responsible for the business of Mining (MUSA) and Capital Goods (UMSA) and corporate areas of Strategic Planning, Business Development and M&A. Previously he was a partner at McKinsey & Company, Inc., where he worked for 13 years, from 1997 to 2010. Mr. Andrade Filho graduated in Civil Engineering from the School of Engineering - FUMEC and has an MBA from The Graduate School of Business - The University of Chicago.

 

*Samuel de Paula Matos*. Mr. Matos has been an alternate member of the Board of Directors of Fibria Celulose S.A. since December 2009. He was also Chairman of the Audit Committee of the Company. Previously, he was Chairman of the Audit Committee and Inspection Committee of Votorantim Celulose e Papel S.A. (now Fibria), from May 2007 through November 2009. Since June 2004 he has been acting as an independent consultant. From June 2002 to May 2004 he served 

 

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as a partner at Deloitte, Touche & Tohmatsu, being member of its Policy Committee. He was CEO of Coopers and Lybrand in Brazil and, after its merger with Arthur Andersen, he served as COO of the new company, as part of its Executive Committee. He worked in independent audit and business consulting since 1967. He is an Economist graduated from the School of Economics and Administration of USP and also holds a bachelor’s degree in Accounting.

 

Mr. Matos is a member of the Audit Committee and Inspection Committee of Tim Participacoes S.A.

 

*Laura Bedeschi Rego de Mattos*. Ms. Mattos has been an alternate member of the Board of Directors of Fibria Celulose S.A. since December 2011 and since April 2012 she has been part of the Finance Committee of the Company. Ms. Mattos joined the Banco Nacional de Desenvolvimento Economico e Social - BNDES in 2002, where since December 2010 she has been leading the department that manages BNDESPar’s equity portfolio. She also holds the position of Head of Department of Investment in the area of Capital Markets and Investment Manager at the same area. Previously, she worked at FINEP (Financier of Studies and Projects of the Ministry of Science and Technology) and COPPETEC Foundation (Foundation for the Coordination of Projects, Research and Technological Studies. She holds a bachelor’s degree in Chemical Engineering from Universidade Federal do Rio de Janeiro - UFRJ, a post-graduate degree in Finance from IBMEC-RJ and a master’s in science degree in energy planning from Instituto Alberto Luiz Coimbra de Pós-graduação e Pesquisa de Engenharia (COPPE) at UFRJ.

 

Ms. Mattos is an alternate member of the Board of Directors of OI S.A., ALL S.A. and Valepar S.A. (the controlling company of Vale S.A).

 

*Leonardo Mandelblatt de Lima Figueiredo.*Mr. Mandelblatt  is an alternate member of the Board of Directors of Fibria Celulose S.A since april 2013. From October 2009 to the present day Mr. Mandelblatt is responsible for the management of the equity portfolio of BNDESPAR. He currently manages the portfolio holding assets from the paper, cellulose and capital goods sectors. From January to September 2009 he was responsible for the management of the Equity Portfolio of the Caixa de Previdência dos Funcionários do Banco do Brasil — PREVI not connected to corporate control; management of private fixed income securities issued by non financial institutions; management of resource outsourcing applied in: (i) administered portfolios, (ii) Private Equity Investment Funds; (iii) Credit Investment Funds (FIDC). From 2003 to 2008 he held various positions at BB Gestão de Rescursos — Distribuidora de Títulos e Valores Mobiliários S.A. — BB DTVM, as an invesment consultant, manager of fixed income funds (ID denominated funds; private credit fund; price index funds and fixed income funds); and private equity fund manager, and was responsible for the creation and management of the BB Ações Construção Civil Fund, and the management of BB Ações Siderurgia.

 

Mr. Mandelblatt is a member of the Board of Directors of Tupy S/A and is an alternate member of the Board of Directors of IOCHPE-MAXION S/A.

 

*Maria Paula Soares Aranha.* Mrs. Maria Paula Aranha is an alternate member of the Board of Directors of Fibria Celulose S.A. since april 2013. She is also the Chairman of our Stutatory Audit Committee. She was member of the Fiscal Council of Fibria Celulose S.A. from April 2011 to April 2013. Since 2005 she has been acting in the field of controlling, corporate governance and operational risk management consultancy. Previously, she served as Superintendent of Planning and Control of Aliança do Brasil Companhia de Seguros (affiliate of Banco do Brasil). Mrs. Maria Paula joined Banco do Brasil S.A. in 1981 and has made a career at the bank acting as Division Manager of Controlling and Executive Manager of Controlling and Distribution.

 

*José Ecio Pereira da Costa Junior.* Mr.Pereira is an alternate member of the Board of Directors of Fibria Celulose S.A. He was  Chairman of the Fiscal Council  from December 2009 to April 2013. In December 2007 he started the business management consulting company JEPereira Consultoria em Gestão de Negócios. From June 2002 to June 2007 he acted as audit partner at Deloitte Touche Tohmatsu in Brazil in the sector of audit and consulting. He graduated in Business Administration from Getulio Vargas Foundation — FGV and Accounting from Faculdade São Judas Tadeu.

 

Mr. Pereira is a member of the Board of Directors and Chairman of the Audit Committee of Gafisa S.A., member of the Board of Directors of Brmalls S.A., Princecampos Participações S.A., Chairman of the Audit Committee of Votorantim Industrial S.A. and member of the Board of Directors of IBEF-PR.

 

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**Board of Executive Officers**

 

The following executive officers were appointed by our Board of Directors. They are members of our board of executive officers and are our legal representatives. The board of executive officers meets periodically to review production, and commercial and financial operations. Our executive officers are as follows:

 
| **Name**                          | ** ** | **Age** | ** ** | **Position**                                                    |
|-----------------------------------|------------|---------|------------|-----------------------------------------------------------------|
| Marcelo   Strufaldi Castelli      |       | 49      |       | Chief   Executive Officer                                       |
| Paulo Ricardo Pereira da Silveira |       | 51      |       | Industrial   Operations, Engineering and Procurement       |
| Guilherme   Perboyre Cavalcanti   |       | 45      |       | Chief   Financial Officer & Investor Relations Officer |
| Luiz   Fernando Torres Pinto      |       | 60      |       | Human   and Organizational Development                          |
| Henri   Philippe van Keer         |       | 46      |       | Commercial &   International Logistics                 |
| Aires   Galhardo                  |       | 36      |       | Forestry   Operations                                           |

 

We present below a brief biographical description of each executive officer that is not also member of our board of directors:

 

*Marcelo Strufaldi Castelli*. Mr. Castelli has been appointed as Chief Executive Officer effective on July 1st, 2011. Prior to that, he served as our executive officer of Paper, Planning, Procurement and Forestry Operations and Technology since August 28, 2009. Mr. Castelli also served as the supply chain and strategy director of our Company, where he has served as member of the executive board since December 2006. In addition, since joining our Company in 1997, Mr. Castelli held various positions, including recovery, utilities and environment manager, general manager of the Jacareí mill and associate director of operations. Prior to that, Mr. Castelli worked at Suzano, Bahia Sul and Aracruz. Mr. Castelli holds a bachelor’s degree in Mechanical Engineering from Universidade de Mogi das Cruzes and a degree in Business Administration from Faculdades Associadas de São Paulo (FASP). Mr. Castelli also attended courses at IMD in Switzerland and holds a Master of Business Administration degree from Fundação Dom Cabral (FDC).

 

*Paulo Ricardo Pereira da Silveira.*Mr. Silveira has been appointed as the Executive Officer of Industry and Engineering since June, 2013. Mr. Silveira has being working for the pulp and paper sector in the last 27 years. Before becoming Executive Officer Mr. Silveira was the Industry General Manager of our Aracruz unit. Previously, he worked for companies such as Riocell, Klabin and Aracruz Celulose. Mr. Silveira holds a bachelor’s degree in Chemistry Engineering from Pontifícia Universidade Católica do Rio Grande do Sul (PUC-RS) and holds a Master degree in Business Administration from Universidade Federal do Rio Grande do Sul (UGRS) and a Master degree in Corporate Finance from Fundação Getúlio Vargas (FGV).

 

*Guilherme Perboyre Cavalcanti.*Mr. Cavalcanti was appointed as Fibria’s Chief Financial Officer and Investor Relations Officer on February 1st, 2012. Mr. Cavalcanti joined Vale S.A. in 2005, as global director for corporate finance until July 2010, when he was appointed as Vale’s Chief Financial Officer and Investor Relations Officer. Previously, he worked for companies such as Globo Organizations, Banco UBS/Pactual and Banco Banif/Primus. He holds a Master’s degree in Economics from the Pontifícia Universidade Católica do Rio de Janeiro PUC-RJ.

 

*Luiz Fernando Torres Pinto.*Mr. Pinto has joined Fibria as the Executive Officer of Human & Organizational Development on October 24, 2011. Prior to Fibria, Mr. Pinto has held several management positions in human resources, industrial production and business units at the following Companies: SunCoke Energy, Cenibra, Aracruz Celulose and Paranasa. Mr. Pinto has a major in Chemical Engineering from Universidade Federal de Minas Gerais, a Master in Business Administration in Corporate Management from Fundação Dom Cabral and a HR specialization from Stanford Business School.

 

*Henri Philippe van Keer*. Mr. van Keer was appointed as the Executive Officer of Commercial and International Logistics— May 2012. Before becoming Executive Officer of Fibria, Mr. van Keer was General Manager of the Commercial Department (June 2011). He served as Vice-President (CEO) of Valcon Energy, a company specialized in the production of clean energy, for two and a half years (between January 2008 and May 2010). Nevertheless, he held positions in Aracruz Celulose SA: Brazil General Manager (between 2002 and 2007) and Area Sales Manager in Europe (between 1996 and 2002). In addition, he served as Director of Sales at EMI Area-Chambéry, Equipment Company / paper machines in France (between 1994 and 1996), as well as in CSNE - (French National Service) in São Paulo (between 1992 and 1994). Mr. van Keer is graduated in engineering at the Institut National Polytechnique de Grenoble, France, with refresher courses at the Ecole de Management de Lyon (Fr) & Cranfield School of Management (UK) MBA.

 

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*Aires Galhardo.*Mr. Galhardo has served as Fibria’s executive officer of Forestry Operations since June 2011. Mr. Galhardo joined our Company in July 2007, holding several management positions in Forestry Operations. Prior to that, Mr. Galhardo worked at Ambev (Cia de Bebidas das Américas), managing during 5 years logistic operations. Mr. Galhardo holds a bachelor’s degree in Business Administration from Fundação Getúlio Vargas and a Master degree in Business Administration also from Fundação Getúlio Vargas.

 

**Fiscal Council**

 

We have had a permanent Fiscal Council (*Conselho Fiscal*) since 2004, which is a corporate body independent of our management and our independent auditors.

 

At the Extraordinary Shareholders Meeting held on April 26, 2013  the Statutory Audit Committee  was established, the same meeting approved the amendment of our Bylaws where the Fiscal Council  became a non-permanent corporate body and will only be installed upon request by the shareholders. For the fiscal year of 2013 the Fiscal Council was appointed.

 

Members of our fiscal council may not be members of our Board of Directors or the board of executive officers, nor can be our employees  or the Votorantim Group, or a spouse or relative of any member of our management. Our Fiscal Council is made up of between three and five members who are elected at the annual shareholders’ meeting for a one-year term. Under the Brazilian Corporation Law, any group of non-controlling shareholders that holds at least 10% of the voting shares also has the right to separately elect one member of the fiscal council.

 

Set forth below are the names, ages and positions of the members of our Fiscal Council and their respective alternates, each of whom has been appointed to serve until April 2014:

 
| **Name**                              | ** ** | **Age** | ** ** | **Year First Elected** | ** ** | **Position** |
|---------------------------------------|------------|---------|------------|----------------------------------|------------|--------------|
| Mauricio Aquino Halewicz              |       | 40      |       | 2013                             |       | Member       |
| *Marcos   de Bem Guazzelli*           | * *   | *44*    |       | 2009                             | * *   | *Alternate*  |
| Gilsomar Maia Sebastião          |       | 37      |       | 2013                             |       | Member       |
| *Geraldo Gianini*                     | * *   | *63*    |       | 2009                             | * *   | *Alternate*  |
| Sérgio Mamede Rosa do Nascimento |       | 59      |       | 2013                             |       | Member       |
| *Lúcio Tameirão Machado*    | * *   | *52*    |       | 2011                             | * *   | *Alternate*  |

 

**Audit Committee**

 

NYSE rules require that listed companies have an Audit Committee that (i) is comprised of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding Audit Committees for listed companies, (iii) has at least one member who has accounting or financial management expertise and (iv) is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. Our Audit and Risk Committee, which, subject to certain exceptions, is equivalent to a U.S. audit committee, was installed at the meeting of our Board of Directors held on December 18, 2009. On April 26, 2013 the Audit and Risk Committee became the Statutory Audit Committee — CAE according to the Extraordinary Shareholders Meeting resolutions by the amendment of our Bylaws within the terms of CVM Ruling 509, of November 16, 2011, which shall operate on a permanent basis. On May 27, 2013 the Board of Directors approved the establishment of the Statutory Audit Committee, its Internal Rules and appointed its members. The CAE complies with all of such requirements and provides assistance to our Board of Directors in matters involving our accounting, internal controls, financial reporting and compliance. Our Statutory Audit Committee recommends the appointment of our independent auditors to our Board of Directors and reviews the compensation of, and coordinates with, our independent auditors. Our Statutory Audit Committee also evaluates the effectiveness of our internal financial and legal compliance controls. Our Statutory Audit Committee is composed of at least three (3) at most five (5) members appointed by the Board of Directors for a 5 year term. All members of our Statutory  Audit and Risk Committee satisfy the audit committee membership independence requirements established under rules of the SEC. The Board of Directors has determined that Samuel de Paula Matos is an audit committee “financial expert” within the meaning of the rules adopted by the SEC relating to the disclosure of financial experts on audit committees in periodic filings pursuant to the U.S. Securities Exchange Act.

 

The members of the Statutory Audit Committee are as follows:

 

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| **Name**                               | ** ** | **Member Since** | ** ** | **Age** |
|----------------------------------------|------------|-----------------------|------------|---------|
| Samuel   de Paula Matos                |       | May 27, 2013     |       | 65      |
|                                   |       |                  |       |    |
| Maria Paula Soares Aranha              |       | May 27, 2013     |       | 56      |
|                                   |       |                  |       |    |
| José Ecio Pereira da Costa Junior |       | May 27, 2013     |       | 62      |

 

As of December 31, 2013, the members of our Statutory Audit Committee, on an individual basis and as a group, directly own less than 1% of our common shares.

 

Our Statutory Audit Committee is governed by Internal Regulations which were approved by the Board of Directors in May 2013 which sets forth rules with respect to duties and responsibilities of the committee, its structure and functioning, as well as rights and obligations of its members.

 

**Advisory Committees**

 

We also have five advisory committees, comprised of Board members and others, with the power to make recommendations for the consideration of the Board. These are the Statutory Audit Committee, the Finance Committee, the Innovattion Committee, the Personnel and Remuneration Committee and the Sustainability Committee, each of which has its own internal regulations and acts in accordance with the scope our Bylaws. The Statutory Audit Committee supervises the quality and integrity of financial reports, adherence to legal, statutory and regulation, the suitability of processes relating to managing Risk and the activities of the internal and independent auditors. The Finance Committee advises on macroeconomic matters as well as financial strategy and cash and market risk management policies. The Innovation Committee assists the Board in analyzing initiatives related to research and technological innovation in forestry and industrial areas, and management in relation to new products and processes. The Personnel and Remuneration Committee is tasked with analyzing human resources policies, structures and practices and remuneration policy, among other related matters. The Sustainability Committee advises our Board od Directors on all matters relating to sustainability evaluates investment proposals in terms of sustainability and impact and monitors the implementation of policies, strategies and activities relating to the sustainability of our operations.

 

**B.****                                   ****Compensation**

 

In 2013, the aggregate annual remuneration paid to our executive officers and directors was R$37.3 million. Details are set forth in the table below:

 
| ** **                                                     | ** ** | **2013**                               | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                     | ** ** | **(in millions of   Reais)** | ** ** |
| Short-term benefits to officers and   directors |       | 23,933                                 |       |
| Rescission of contract benefits                                |       | 1,587                                  |       |
| Long-term benefits to officers and directors                   |       | 6,384                                  |       |
| Benefit program - Phantom Stock Options                        |       | 5,425                                  |       |
|                                                           |       | 37,329                                 |       |

 

The Brazilian Corporation Law requires that members of our fiscal council receive remuneration equal to at least 10% of the average amount paid to our executive officers.

 

**C.****                                   ****Board Practices**

 

Our Board of Directors meets ordinarily at least four times per year and extraordinarily whenever necessary, according to our interest or when called by the Chairman or by the majority of the members of the Board of Directors. Our Board of Directors is responsible for, among other things, establishing our general business policies and for electing our executive officers and supervising their management. The board of executive officers meets periodically to review production, commercial and financial operations. Each of our Board of Directors and our Board of Executive Officers is governed by their respective Internal Regulations both approved by the Board of Directors in February 2010 which set forth 

 

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rules with respect to duties and responsibilities of each Board, its structure and functioning, as well as rights and obligations of its members.

 

According to the Brazilian corporate law and to our by-laws, the members of the Board of Directors are elected by the holders of our common shares at the general shareholders meeting. Fibria’s members of the Board of Directors serve two year terms. In April 2013 the sitting and alternate members were elected to serve a mandate until the Ordinary General Meeting to be held in 2015.

 

**D.            Employees**

 

As of December 31, 2013, we employed 4,192 people. We outsource many of our operations and substantially all of the transportation of wood, pulp and other raw materials. This accounted for 13,324 people as of December 31, 2013.

 

Several unions represent our employees and they are considered well organized institutions. Annual Collective agreements related to non-executive employees were renewed in 2013 for another year, resulting in a base salary increase of up to 7%, including administrative, industry and forest personnel. We believe we have very good relations with our employees.

 

In March 2000, we began to participate in a Votorantim Group pension plan (Funsejem), which was made available to all of our employees. For more detailed information, see “Defined Contribution Pension Plan” below.

 

In December 2005, we provisioned for the costs of post-retirement benefits expected to be paid to current, former or inactive employees upon retirement. For more detailed information, see “Post-retirement Benefit Plan” below.

 

**Defined Contribution Pension Plan**

 

In March 2000, we began co-sponsoring a multi-employer defined contribution plan of the Votorantim Group (Funsejem) which is available to all employees. For employees below a certain income level we match their contribution limited to 1.5% of the employee’s compensation. For employees above that income level we match the employee’s contribution up to 6% of the employee’s compensation. Additional contributions can be made at the employee’s option. Contributions vest in a range of percentages depending on the employee’s years of service and will fully vest upon the employee’s retirement, death or disability, provided the employee has at least one year of service. Employees’ contributions amounted to R$8.5 million in 2013 and R$8.5 million in 2012.

 

Former Aracruz employees participated in ARUS — Fundação Aracruz de Seguridade Social, a private, not for profit, pension plan operating as a multi-sponsored fund. As a result of Aracruz Acquisition in 2009, all employees had the option to transfer their contributions made to ARUS to Funsejem as ARUS has been terminated.

 

**Profit Sharing Plan**

 

Pursuant to Brazilian federal law, companies operating in Brazil are required to share profits with employees beginning from fiscal year 1996. In 1996, we instituted a profit sharing plan for our employees in addition to providing health and life insurance, transportation, meals and training. Pursuant to the program, each employee’s share of profits is linked to our operational and financial results. Employees are eligible to receive a maximum payment of up to 2.5 monthly salaries payable in February of the following year. Payment is granted if defined goals set by management are achieved by the process or industrial unit in which the employee works and based on the individual performance of the employee. The unions that represent our employees have agreed to this profit sharing plan.

 

**Post-retirement Benefit Plan**

 

**Medical assistance provided to retirees**

 

We entered into an agreement with the São Paulo State Pulp and Paper Industry Workers’ Union to provide the funding for a lifetime medical assistance plan (SEPACO) for all of our employees, their dependents, until they come of age, and their spouses, for life.

 

Our policy determines that the cost of the benefit be allocated from the date of hiring to the date on which the employee becomes eligible to receive the medical assistance benefit.

 

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IAS 19(R) - “Benefits to Employees” requires that an entity calculate the present value of defined benefit obligations and the market value of the assets of the plans at the end of each reporting period and encourages the entity to contract qualified actuaries to measure such obligations. For interim reporting purposes, measurements are obtained by extrapolating the latest actuarial valuation by an independent expert. The amount recorded as expenses for the year ended December 31, 2013, 2012 and 2011, was R$4 million,  R$5 million and R$4 million, respectively.

 

The revised employee benefit standard (IAS 19(R) - “Employee Benefits”) introduces changes to the recognition, measurement, presentation and disclosure of post-employment benefits. The standard also requires net interest expense / income to be calculated as the product of the net defined benefit liability / asset and the discount rate as determined at the beginning of the year. The effect of this is to remove the previous concept of recognizing an expected return on plan assets. Also, the “corridor” approach was extinguished, and the revised standard requires the Company to recognize the actuarial results directly within “Other Comprehensive Income”.

 

The actuarial methods are based on economic and biometric assumptions, as follows:

 
| ** **                                                  | ** ** | **Actuarial assumptions** | ** ** |
|-------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                  | ** ** | **2013**                       | ** ** | **2012** | ** ** |
|                                                        |       |                           |       |   |   |
| Discount rate - %                                           |       | 6.25                           |       | 4.0 |   |
| Real growth rate of medical costs - %                       |       | 3.0                            |       | 3.0 |   |
| Rate of increase of utilization of medical   assistance - % |       | 3.0                            |       | 3.0 |   |
| Long-term inflation - %                                     |       | 5.0                            |       | 4.25 |   |
| Biometric table of general mortality                        |       | AT-2000                        |       | AT-83 |   |
| Biometric table of general mortality for invalids           |       | IAPB 57                        |       | IAPB 57 |   |

 

Based on the independent actuary’s report, the position of the actuarial calculations is as follows:

 
| ** **                             | ** ** | **2013 (Restated)**                  | ** ** | **2012** | ** ** |
|----------------------------------------|------------|-------------------------------------------|------------|----------|------------|
| ** **                             | ** ** | **(in thousand of Reais)** | ** ** |
| Reconciliation of liabilities          |       |                                      |       |     |       |
| Present value of actuarial obligations |       | 93,934                                    |       | 66,302   |       |
| Cost of current service                |       |                                      |       |     |       |
| Interest on actuarial obligations      |       | 7,750                                     |       | 8,618    |       |
| Benefits paid                          |       | (3,684                                    | )          | (3,971   | )          |
| (Gains) losses                         |       | (21,421                                   | )          | 22,985   |       |
|                                   |       |                                      |       |     |       |
| Balance of actuarial obligations       |       | 76,579                                    |       | 93,934   |       |

 

**Satisfaction survey**

 

Based on the results of the last Climate Survey, conducted in 2010, working groups were formed across our Company, involving managers and professionals in Human and Organizational Development. From these groups, we conducted initiatives to improve the organizational climate, employees’ motivation and our performance.

 

A new edition of the Climate Survey was promoted in September and October of 2012, in order to hear employees’ perceptions on the organization and our work environment, as well as strengthen actions initiated from the survey in 2010. The climate survey was answered by 3,245 employees, 85% of the employees who could participate. The average of the results in Fibria’s Units generated an overall favorability (satisfaction level), which represents an increase of nine percentage points in this indicator in relation to the 2010 edition of the survey. From the results, action plans at the corporate and Unit levels will be developed to implement improvement opportunities. The issues that were best evaluated were the quality of products and services offered by us and measures to protect the environment taken by us, both with 92% approval among the employees. The lowest satisfaction scores were related to the definition of goals for the Results Participation Programmes and variable remuneration, with 44% approval. The overall average achieved by the survey was 68%, above the 2010 rate (59%) and the market average (61%). A new Climate Survey will be held in 2014, when we expect to achieve an average of 70% favorability.

 

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**E.            Share Ownership**

 

As of December 31, 2013, the members of our Board of Directors and our officers, on an individual basis and as a group, directly owned less than 1% of our common shares. For information on the beneficial ownership by the Ermírio de Moraes family, see “Item 7. A. Major Shareholders and Related Party Transactions — Major Shareholders.”

 

The following table lists the amount of shares held directly by each individual member of our Board of Directors or executive officer and their representative percentage relative to the total outstanding shares as of December 31, 2013:

 
| **Board of Directors**          | ** ** | **Number of   Common Shares** | ** ** |
|-------------------------------------------|------------|-----------------------------------------|------------|
|                                      |       |                                    |       |
| José Luciano Duarte Penido           |       | 2,001                                   |       |
| Paulo Henrique de   Oliveira Santos       |       | 675                                     |       |
| João Carvalho de   Miranda           |       | 15                                      |       |
| Mario Antônio Bertoncini             |       | 0                                       |       |
| Raul Calfat                               |       | 70                                      |       |
| Gilberto Lara Nogueira                    |       | 1                                       |       |
| Alexandre Silva D’Ambrosio           |       | 2                                       |       |
| Eduardo Borges de   Andrade Filho         |       | 0                                       |       |
| Carlos Augusto Lira Aguiar                |       | 2,431                                   |       |
| Samuel de Paula Matos                     |       | 1                                       |       |
| Julio Cesar Maciel Ramundo                |       | 0                                       |       |
| Laura Bedeschi Rego   de Mattos           |       | 0                                       |       |
| Eduardo Rath Fingerl                      |       | 616                                     |       |
| Leonardo   Mandelblatt de Lima Figueiredo |       | 0                                       |       |
| José Armando de   Figueiredo Campos  |       | 1                                       |       |
| Maria Paula Soares   Aranha               |       | 0                                       |       |
| Alexandre Gonçalves   Silva          |       | 1                                       |       |
| José Ecio Pereira   da Costa Junior  |       | 0                                       |       |
| ** **                                |       |                                    |       |
| **Executive   Officers**                  |       |                                    |       |
| Marcelo Strufaldi Castelli                |       | 0                                       |       |
| Paulo Ricardo   Pereira da Silveira       |       | 2,000                                   |       |
| Luiz Fernando Torres Pinto                |       | 0                                       |       |
| Henri Philippe van Keer                   |       | 5,000                                   |       |
| Aires Galhardo                            |       | 0                                       |       |
| Guilherme Perboyre Cavalcanti             |       | 0                                       |       |
| **Total**                                 | ** ** | **12,814**                              | ** ** |

 

Source: Itaú Custódia.

 

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**ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

 

**A.****                                   ****Major Shareholders**

 

As of December 31, 2013, Fibria had 553,934,646 common shares. The table below presents certain information as of December 31, 2013, regarding (i) any person known to us as the owner of more than 5% of our outstanding common stock, and (ii) the total amount of the common stock owned by the members of our Board of Directors, Executive Officers and Fiscal Council.

 
| ** **                                                  | ** ** | **December 31, 2013** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------|------------|
| **Shareholders**                                            | ** ** | **Number of   shares**     | ** ** | **% of total** | ** ** |
| **Common Shares**                                           |       |                            |       |   |   |
| Votorantim Industriais S.A.                                 |       | 162,974,335                     |       | 29.42 |   |
| BNDES Participações   S.A.                        |       | 168,296,658                     |       | 30.38 |   |
| Gávea Fundo de   Investimento Ltda.                    |       | 33,300,000                      |       | 6.01 |   |
| Jupiter Global Strategy Ltd.                                |       | 33,217,145                      |       | 6.00 |   |
| Board of Directors, Executive Officers and Fiscal   Council |       | 12,828                          |       | 0.002 |   |
| Public (Free Float)                                         |       | 156,133,680                     |       | 28.19 |   |
| **Total Common Shares**                                     | ** ** | **553,934,646**                 | ** ** | **100.00** | ** ** |

 

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(1)   Under the Shareholders’ Agreement, BNDESPar was required to hold 20.7606% of the total capital during the first three years (until October 2012) of the signature of the Shareholders’ Agreement which took place on October 29, 2009, and for the next two years and currently, 11.0445% (from October 2012 to October 2014).

 

**B.****                                   ****Related-Party Transactions**

 

We have engaged in a number of transactions with related parties, which are described in Note 16 to our 2013 consolidated financial statements, as of and for the years ended December 31, 2013, 2012 and 2011 included elsewhere in this annual report.

 

During 2013 we continued to refine our corporate governance, with the development of a Policy for Related Party Transactions, approved by our Board of Directors. This Policy is intended to establish standard procedures to be observed in the execution of transactions with related parties and in situations in which there may exist a conflict of interest, so as to assure that these transactions are conducted on market terms and are disclosed and reflected in our records in the correct and complete form.

 

Our commercial and financial transactions with our subsidiaries, associates, companies of the Votorantim Group and other related parties are carried out at normal market prices and conditions, based on usual terms and rates applicable to third parties.

 

The following is a summary of the nature and conditions of the transactions with the related parties:

 

**Controlling shareholders**

 

We have a contract with VID related to services provided by the Votorantim Shared Service Center, which provides outsourcing of operational services relating to administrative activities, personnel department, back office, accounting, taxes and the information technology infrastructure shared by the companies of the Votorantim Group. The contract provides for an overall remuneration of R$10.7 million and has a one-year term, with annual renewal upon formal confirmation by the parties.

 

Additionally, VID provides various services related to technical advice, trainings, including management improvement programs. These services are also provided to the entire Votorantim Group and we reimburse VID at cost for the charges related to the services used.

 

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We have financing contracts with BNDES, the majority shareholder of BNDESPAR, for the purpose of financing investments in infrastructure and the acquisition of equipment and machines, as well as the expansion and modernization of its plants (See Note 23 to our 2013 consolidated financial statements).

 

Management believes that these transactions were contracted at terms consistent with those entered with independent parties, based on technical studies performed when these contracts were executed.

 

**Associates**

 

We have a balance receivable of R$3.8 million from Bahia Produtos de Madeira S.A., corresponding to the sale of wood, maturing in 2019, renewable for 15 years.

 

**Votorantim Group companies**

 

We have a contract to purchase energy from Votener - Votorantim Comercializadora de Energia Ltda. to supply our unit in Jacareí. The total amount contracted is R$15 million, guaranteeing 115,700 megawatt-hours, and maturing in five years through December 31, 2014. Should either party request an early termination of the contract, that party is required to pay 50% of the remaining contract amount. In addition, we entered into a contract to purchase energy from Votener, expiring on December 31, 2014, to supply the Três Lagoas and Aracruz units. Since these units already generate its own energy, the contract has the purpose of maximizing the competitiveness of the energy matrix. The total amount contracted may change based on the needs and consumption of energy by those plants.

 

We maintain investments in CDB and securities purchased under agreement to resell (“reverse repos”) issued by Banco Votorantim S.A., with average remuneration of 103.5% of the CDI and daily liquidity as from September 2013 and final maturity in April 2015. Our cash management policy is intended to provide efficiency in investment returns and to maximize liquidity, based on market practices. We have also entered into derivative financial instruments contracts with Banco Votorantim. The Shareholders Agreement limits the intercompany investments to R$200 million for securities and R$100 million of notional value for derivative instruments.

 

In January, 2012, we entered into a contract to purchase sulfuric acid from Votorantim Metais, for R$18.5 million, in exchange for the supply of 36,000 metric tons of acid for two years, up to December 31, 2013.

 

We have an agreement with Votorantim Cimentos for the supply of road construction supplies, such as rock and calcareous rock, in the approximate amount of R$11.7 million through December 12, 2014. This agreement may be terminated at any time with prior notice of 30 days, without any contractual penalties.

 

On December, 2012, we entered into a contract with Votorantim Cimentos to sale of lands, in the amount of R$31.3 million, which was settled in November, 2013.

 

We have land lease agreements, for approximately 22,400 hectares, with Votorantim Metais Ltda., which matures in 2019, totaling R$76.5 million.

 

We have land lease agreements, for approximately 2,062 hectares, with Companhia Brasileira de Alumínio - CBA and Votorantim Cimentos, which mature in 2023, totaling R$4.1 million.

 

In the years ended December 31, 2013, 2012 and 2011, no provision for impairment was recognized on assets involving related parties.

 

The total annual amount authorized by the Annual General Meeting on April 27, 2012 for the remuneration of Board of Executive Officers, Board of Directors, Fiscal Council, Audit, Risk, Compensation and Sustainability Committees for 2012 was R$ 43.4 million. The remuneration expenses in 2013 include: (i) short-term benefits to officers and directors (R$ 23.9 million); (ii) rescission of contract benefits (R$1.6 million); (iii) long-term benefits to officers and directors (R$ 6.4 million); and (iv) benefit program - Phantom Stock Options (5.4 million).

 

Short-term benefits include fixed compensation (salaries and fees, vacation pay and 13th month salary), social charges and contributions to the National Institute of Social Security (INSS), the Government Severance Indemnity Fund for

 

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Employees (FGTS) and the variable compensation program. The longterm benefits refer to the variable compensation program. In the third quarter of 2010, the Company approved a benefit program based on the rights based on the increase in the value of its shares (refer to note 28 to our 2013 consolidated financial statements).

 

Short-term benefits to officers and directors do not include the compensation for the Audit, Risk, Compensation and Sustainability Committees’ members of R$1.3 million for the year ended December 31, 2013.

 

The Company does not have any additional post-employment active plan and does not offer any other benefits, such as additional paid leave for time of service.

 

**Guarantees**

 

We do not provide guarantees in favor of other companies of the Votorantim Group.

 

**C.****                                   ****Interests of Experts and Counsel**

 

Not applicable.

 

**ITEM 8. FINANCIAL INFORMATION**

 

**A.****                                   ****Consolidated Statements and Other Financial Information**

 

See “Item 3. Key Information — A. Selected Financial Data” and “Item 18. Financial Statements.”

 

***Contingencies***

 

We are subject to numerous contingencies with respect to tax, labor and other claims. See Note 24 to our 2013 consolidated financial statements and discussions on our critical accounting policies.

 

We are party to certain legal proceedings in Brazil arising in the normal course of business, and have made provisions when we believe that we can reasonably estimate probable losses. In connection with some of these proceedings we have made deposits (included in other non-current assets) which will only be released to us upon a judgment in our favor. The provisions for tax and other litigation and the deposits are as follows:

 
| ** **                               | ** ** | **2013**                | ** ** | **2012**      | ** ** |
|------------------------------------------|------------|-------------------------|------------|---------------|------------|
| **In thousands of Reais** | ** ** | **Judicial   deposits** | ** ** | **Provision** | ** ** | **Net** | ** ** | **Judicial   deposits** | ** ** | **Provision** | ** ** | **Net** | ** ** |
|                                     |       |                    |       |          |       |   |   |   |   |   |   |   |   |
| Nature of claims                         |       |                    |       |          |       |   |   |   |   |   |   |   |   |
| Tax                                      |       | 86,921                  |       | 102,906       |       | 15,985 |   | 123,791 |   | 162,222 |   | 38,431 |   |
| Labor                                    |       | 55,250                  |       | 152,442       |       | 97,192 |   | 47,703 |   | 108,014 |   | 60,311 |   |
| Civil                                    |       | 9,503                   |       | 25,164        |       | 15,661 |   | 6,520 |   | 12,591 |   | 6,071 |   |
| Total                                    |       | 151,674                 |       | 280,512       |       | 128,838 |   | 178,014 |   | 282,827 |   | 104,813 |   |

 

**Legal Matters**

 

We are party to a number of legal actions arising from our normal business activities. These include general civil, tax and employee litigation and administrative and environmental proceedings. Although the amount of any liability that could arise with respect to these actions cannot be accurately predicted, in our opinion, except as described below, such actions, if decided adversely, would not, individually or in the aggregate, have a material adverse effect on our financial condition.

 

We believe that our provisions for legal proceedings are sufficient to meet probable and reasonably estimable losses in the event of unfavorable court decisions and that the ultimate outcome of these matters will not have a material effect on

 

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our financial condition or results of operations. We cannot estimate the amount of all potential costs that we may incur or penalties that may be imposed on us other than those amounts for which we have provisions.

 

***Tax Proceedings***

 

We have instituted a number of legal proceedings in which we are seeking a refund or contesting the imposition of certain taxes. The following is a description of some of our most significant judicial and administrative tax proceedings.

 

Tax Assessment Notice — Normus

 

In December 2007, Fibria’s subsidiary, Normus Empreendimentos e Participações Ltda. or Normus received an income tax assessment on earnings of its Hungarian subsidiary from the Brazilian Federal Revenue Service charging Income Tax and Social Contribution, during the period from 2002 to 2006. Subsequent assessments were also received in respect of 2007 and 2008. In November 2013, the Brazilian Government launched a tax Amnesty and Refinancing Program (REFIS — “Profits Abroad”, pursuant to LawNo. 12.865/13). This program allowed Brazilian companies to pay overdue federal taxes in up to 180 installments with reduced penalties and accumulated interest for late payment.

 

In late November 2013, we decided to join the REFIS — “Profits Abroad” by including those three tax assessments in the program. The total amount to be paid to be paid in a single installment, with 100% reduction in fines,  penalties,  interest and legal charges, was R$560,453 thousand, the impact of which was recorded in our 2013 fourth quarter results. Of this amount, we used R$168,136 thousand from tax-loss carryforwards, equivalent to 30% of the principal, resulting in an effective cash disbursement of R$392,317 thousand.

 

As a condition for joining REFIS — “Profits Abroad”, we were required to discontinue proceedings in defense of our position.

 

Tax Incentive — Agency for the Development of the Northeastern Brazil (ADENE)

 

We have business units located within the regional development area of ADENE. As that region is deemed a priority for the Brazilian development, in December 2002, we requested and were granted by the Brazilian Federal Revenue Service the right to benefit from reductions in corporate income tax and non-refundable surcharges calculated on operating profits (as defined) for Aracruz plants A and B (period from 2003 to 2013) and plant C (period from 2003 to 2012).

 

On January 9, 2004, the benefit was cancelled, by the Ministry of Integration and we continued using the benefits, because it was challenging the Ministry of Integration Decision.

 

Nevertheless, the Brazilian Federal Revenue Service served us an assessment notice in December 2005 requiring the payment of the amounts of the tax incentive used in 2003 and 2004, plus interest, but without imposing any fine, amounting to R$316 million. The Tax Federal Administrative Court cancelled the part of the assessment related with 2003 benefits and the part related with 2004 was upheld. Because this ruling, the amount of the assessment was reduced to R$101 million updated to December 31, 2013. We will challenge the Tax Federal Administrative Court ruling in a Judicial Court.

 

Our management, supported by our legal counsel, believes that the decision to cancel the tax benefits is erroneous and should not prevail, whether with respect to benefits already used, or in respect of future periods.

 

As regards to the benefits utilized, based on the position of its external legal counsel, our management believe that the tax payment demanded is unjustified, since we used the benefits strictly in accordance with the legal parameters and in conformity with the Brazilian Federal Revenue Service (Receita Federal do Brasil) determinations and ADENE’s qualifying reports.

 

Considering the facts that occurred in 2004, we decided to cease the use of tax benefits as from 2005, until a final court decision is obtained on the matter.

 

Based on the position of outside legal counsel, management understands that the likelihood of an unfavorable outcome for the tax benefits used until 2004 and those still pending use as from 2005 is considered as possible and therefore no provision has been recorded.

 

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IRPJ/CSLL - partial approval

 

We have three requests for the approval of income tax credits with the Brazilian Federal Revenue Service, referring to 1997, 1999 and the fourth quarter of 2000, totaling R$134 million, of which only R$83 million was approved, creating a contingency of R$145 million updated through December 31, 2013. We timely appealed the rejection of the tax credits.

 

With respect to the year 1997, the claim is pending a decision from the Tax Federal Administrative Court (Conselho Administrativo de Recursos Fiscais). With respect to the fourth quarter of 2000, we are awaiting a decision from Tax Federal Administrative Court (*Conselho Administrativo de Recursos Fiscais*), and with respect to 1999 it awaits a decision on an appeal to the High Court of Justice.

 

Based on the position of legal counsel, management understands that the likelihood of an unfavorable outcome for these trials is possible and therefore no provision has been recorded.

 

IRPJ/CSLL - Newark

 

Fibria received, in December 2007 and December 2010, two tax assessments in the amount, together, of R$221 million where Brazilian Federal Revenue Service charged Income Tax and Social Contribution of Newark Financial Inc., an offshore company controlled by VCP Exportadora e Participações Ltda. (succeeded by Fibria) with respect to the fiscal year 2005. Based on advice of counsel, we have determined that the probability of loss for the first tax assessment (December 2007 - R$120 million) is remote and the probability of loss for the second tax assessment (December 2010 - R$101 million) is possible and, accordingly, no provision has been recorded with respect thereto.

 

Tax assessment - IRPJ/CSLL - Swap of industrial and forestry assets

 

In December 2012, we received a tax assessment notice from the Brazilian Federal Revenue Service (*Receita Federal do Brasil*) with respect to the collection of income tax and social contribution on profits in the amount of R$1,666 million, of which R$556 million corresponds to the alleged tax due and R$1,110 million corresponds to fines and interest. The amount updated through December 31, 2013 was R$1,798 million. The Tax Authorities inquire a probable gain of capital in operation made on February 2007, in which we executed an agreement with International Paper for the swap of industrial and forestry assets between both companies. On January 9, 2013 we filed an appeal on the Brazilian Federal Revenue Service Delegacy.

 

In November 13, 2013, we became aware of the decision accepting the Company’s appeal against the tax assessment notice issued by the Brazilian Federal Revenue Service regarding the swap of industrial and forestry assets between us and International Paper.

 

This is a first administrative instance decision and The public prosecutor will be notified to make a mandatory appeal. Based on the position of our internal and external legal advisors, the probability of loss is possible and no provision has been recorded with respect thereto.

 

IRPJ/CSLL — Fibria Trading International

 

In October,  2013, we received a tax assessment charging Income Tax and Social Contribution for 2010. The amount of the assessment was R$275 million up to December, 2013. On November 28, 2013 we filed an appeal with the Brazilian Federal Revenue Service. Based on the position of our internal and external legal advisors, the probability of loss is possible and no provision has been recorded with respect thereto.

 

Other Tax liabilities

 

Fibria has more than 570 proceedings for individual amounts of less than R$100 million. The aggregate amount involved in all of these proceedings is R$1.9 billion.

 

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***Labor Proceedings***

 

We are a party to approximately 5.835 labor lawsuits filed by former employees, third parties and unions, claiming the payment of severance pay, health and safety premiums, overtime, commuting time, occupational illnesses and workers’ compensation, tangible and moral damages, understated indexation on the fine of 40% of the Government Severance Indemnity Fund for Employees (FGTS), and we have recorded a provision for labor proceedings of R$152.4  million as of December 31, 2013.

 

***Civil Proceedings***

 

We are a party to approximately 1,075 civil lawsuits, most of which refer to claims for compensation by former employees or third parties for alleged occupational illnesses and workers’ compensation, collection lawsuits and bankruptcy situations, reimbursement of funds claimed from delinquent landowners and possessory actions filed in order to protect our equity. We have insurance for public liability that covers, within the limits set in the policy, unfavorable sentences in the civil courts for claims for compensation of losses.

 

We have recorded a provision for civil proceedings of R$25.2 million as of December 31, 2013 corresponding only to the probable losses.

 

Class Action

 

In November 2008, a securities class action was filed against us and certain of our current and former officers and directors on behalf of purchasers of our ADRs between April 7 and October 2, 2008. The complaint asserts alleged violations of the US Securities Exchange Act, alleging that we failed to disclose information in connection with, and losses arising from, certain derivative transactions.

 

During our Board of Directors meeting in December 2012, we ratified, the agreement under judicial mediation, where we and the other co-defendants agreed to pay the full amount of U.S.$37.5 million (equivalent to R$76.6 million) to all holders of ADRs (American Depositary Receipt), from April 7 to October 2, 2008. We have active insurance policy D&O (Directors and Officers), to cover a significant amount of this disbursement, with no material effect for us. See Note 24 to our Financial Statements.

 

Relevant comments regarding tax proceedings

 

We entered on January 1995, with a judicial tax proceeding, seeking the reimbursement of the Tax Incentive denominated “*Crédito-Prêmio de IPI*”. After final decision favorable for us, which determined the reimbursement of that credit, we recognized the amount of R$170.6 million (being R$ 77.5 million in 2013 and R$ 93.2 million in 2012), under the “Other assets”, in the “Non-current assets” against “Other operational revenue”, net of the lawyer fees. We submitted a formal request for the issuance of precatory related to the judicial process.

 

Remaining judicial deposits (consolidated)

 

We have at December 31, 2013 the amount of R$106 million (R$158 million in December 31, 2012) deposited judicially in cases classified by external legal advisors as of remote or possible loss, for which no provision have been recorded. The contingencies refer to PIS, COFINS, Income taxes and to contributions to the INSS, among others of smaller amount. Additionally, it includes the amount of R$53 million of the credit balance of REFIS — “Profits Abroad”, as detailed in Note 25 to our 2013 consolidated financial statements.

 

Land Disputes

 

In April and October, 2006 and in December 2009, the Brazilian Institute for Land Reform (INCRA) published Public Notes informing that Technical Identification Reports issued by commissions set up by INCRA concluded that approximately 34,430 hectares of land located in the State of Espírito Santo are considered the territory of the *Comunidades Quilombolas de Linharinho, São Jorge e São Domingos*. From that total area, approximately 25,330 hectares are legitimate property and possession of us. The cases are still underway with no final decision by INCRA. We are confident that the 

 

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acquisition of this area by us was made in compliance with the legislation and was registered in the appropriate government offices.

 

In November 2013, we noted the filing of a civil action by the Federal Public Prosecutor’s Office in São Mateus (Espírito Santo State) for titles domain of land acquired by us in the northern of such state. Once we are notified, we will challenge the prosecution on the basis that the acquisition of the lands was made pursuant to the applicable laws and the usual practices at the time.

 

**Commitments**

 

The significant contractual obligations and commitments that affect our liquidity are short-term debt, long term debt, take-or-pay contracts, leases and capital expenditures.

 

Fibria entered into Take or Pay long-term agreements with suppliers of power, transport, diesel fuel and chemical products for the average period of 9.8 years. These agreements contain termination and suspension clauses of supply due to non-compliance with material obligations. The contractual obligations assumed on December 31, 2013 represented R$228  million p.a. (R$259 million as of December 31, 2012).

 

See Note 26 to our 2013 consolidated financial statements.

 

**Dividends**

 

***General***

 

Under the Brazilian corporate law, we must allocate 5% of our annual net income to a legal reserve (used only to offset any accumulated deficit or to increase the corporate capital) that shall not exceed the amount equivalent to 20% of the company’s capital.

 

In addition, according to the Brazilian corporate law, after the allocation of any amounts to the legal reserve, we may, subject to shareholders’ approval, make allocations from the remaining balance to a contingency reserve against future losses.

 

As determined by the Brazilian corporate law and reflected in our by-laws, at the end of each fiscal year, all shareholders are entitled to receive a mandatory dividend, also known as the Mandatory Distribution. The company must distribute at least 25% of its net income after taxes, after deducting the accumulated losses and after deducting any amounts allocated to employee’s and management participation, and as reduced or increased, as the case may be, by the following amounts:

 

·                  the amount allocated to the legal reserve; and

 

·                  the amount allocated to the contingency reserve and any amount written off in respect of the contingency reserve accumulated in previous fiscal years.

 

Dividends must be distributed within 60 days, from the annual shareholders’ meeting in which the distribution was approved, unless a shareholders’ resolution determines another date, not later than the end of the fiscal year in which such dividend was declared.

 

The Brazilian corporate law permits, however, a company to suspend the mandatory distribution of dividends if the Board of Directors reports to the shareholders’ meeting that the distribution would be incompatible with the financial condition of the company, subject to approval by the shareholders’ meeting and review by the Fiscal Council. Net income not distributed due to the suspension mentioned here must be attributed to a special reserve and, if not absorbed by subsequent losses, must be paid as dividends as soon as the financial situation of the company permits. The rules regarding suspension apply to the holders of ADSs.

 

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The amounts available for distribution are determined on the basis of financial statements prepared in accordance with the requirements of the Brazilian corporate law. In addition, amounts arising from tax incentive benefits or rebates are appropriated to a separate capital reserve in accordance with the Brazilian corporate law. This investment incentive reserve is not normally available for distribution, although it can be used to absorb losses under certain circumstances, or be capitalized. Amounts appropriated to this reserve are not available for distribution as dividends.

 

The Brazilian corporate law permits a company to pay interim dividends out of preexisting and accumulated profits for the preceding fiscal year or semester, based on financial statements approved by its shareholders. We may prepare financial statements semiannually or for shorter periods. Our Board of Directors may declare a distribution of dividends based on the profits reported in semiannual financial statements. The Board of Directors may also declare a distribution of interim dividends based on profits previously accumulated or in profits reserve which are reported in such financial statements or in the last annual financial statement approved by resolution taken at a shareholders’ meeting.

 

In general, shareholders who are not residents of Brazilian residents must register their equity investment with the Central Bank to have dividends, sales proceeds or other amounts with respect to their shares eligible to be remitted outside of Brazil. The common shares underlying the ADSs are held in Brazil by Banco Itaú S.A., also known as the custodian, as agent for the depositary, which is the registered owner on the records of the registrar for our shares.

 

Payments of cash dividends and distributions, if any, are made in Brazilian *Reais* to the custodian on behalf of the depositary, which then converts such proceeds into U.S. Dollars and causes such U.S. Dollars to be delivered to the depositary for distribution to holders of ADSs. In the event that the custodian is unable to convert immediately the Brazilian currency received as dividends into U.S. Dollars, the amount of U.S. Dollars payable to holders of ADSs may be adversely affected by devaluations of the Brazilian currency that occur before the dividends are converted. Under the current Brazilian corporate law, dividends paid to persons who are not Brazilian residents, including holders of ADSs, will not be subject to Brazilian withholding tax, except for dividends declared based on profits generated prior to December 31, 1995, which will be subject to Brazilian withholding income tax at varying tax rates. See “Item 10. Additional Information — E. Taxation —Brazilian tax consequences.”

 

Brazilian law allows the payment of dividends only in *Reais* limited to the inappropriated retained earnings in our financial statements prepared in accordance with IFRS. At December 31, 2013, in our financial statements prepared in accordance with IFRS, we had inappropriated retained earnings —Reserve for Investments of R$2,805 million. Inappropriated retained earnings as reported in accordance with IFRS may be used to make additional discretionary dividend payments, but we cannot assure you that we will make dividend payments out of these inappropriated retained earnings in the foreseeable future. No dividend distribution can be made if an accumulated deficit is reported in accordance with IFRS, unless the negative balance is eliminated by the reversal of other reserves.

 

***Payment of dividends***

 

In 2009, in addition to the factors described above and in view of the Aracruz Acquisition, the resulting increase of our level of indebtedness, the liability management program and our long term business plan and as permitted by the applicable statutes of Brazilian corporate law, our Board of Directors recommended that no dividends or interest attributable to capital be paid with respect to the reported results of 2009. The General Shareholders’ Meeting held on April 30, 2010 approved to omit such payment.

 

For the year ended December 31, 2010, our Board of Directors proposed to the General Shareholders’ Meeting held on April 28, 2011 the distribution of dividends relative to the fiscal year ended on December 31, 2010 in the amount of R$0.30 per share, totaling R$142 million and also the payment of the dividends related to the fiscal year ended on December 31, 2009 considering that our financial situation permitted such dividend. This dividend reflected only the mandatory minimum dividend established in our by-laws and as determined by the Brazilian corporate law.

 

For the years ended December 31, 2013, 2012 and 2011, our Board of Directors recommended that no dividend or interest attributable to capital be paid with respect to the reported results of 2013, 2012 and 2011 because of loss recorded in these periods.

 

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**B.****                                   ****Significant Changes**

 

No significant changes or events have occurred after the close of the balance sheet date at December 31, 2013, other than the events already described in this annual report.

 

**ITEM 9.  THE OFFER AND LISTING**

 

**A.****                                   ****Offer and Listing Details**

 

The ADSs are listed on the New York Stock Exchange under the trading symbol “FBR.” Our common shares trade on the São Paulo Stock Exchange under the symbol “FIBR3” (prior to November 18, 2009 we traded under the symbol “VPCA4”). At December 31, 2013, we had approximately 12,957 shareholders of record at the BM&FBOVESPA.

 

**Market Price Information**

 

The table below sets forth, for the periods indicated, the reported high and low closing sale prices in nominal *Reais* for each preferred share (until August 12, 2009) and common shares (from August 12, 2009 on) on the São Paulo Stock Exchange. The table also sets forth, for the periods indicated, the reported high and low sales prices per ADS at the last day of each respective quarter. See “Item 3 — Key Information — A. Selected Financial Data — Exchange Rates” for information with respect to exchange rates applicable during the periods set forth below:

 
| ** **                                  | ** ** | ** **                                     | ** ** | **Reais**** per********Share (Preferred share until   August 12, 2009,****and ****Common Shares   thereafter)** | ** ** | **U.S. Dollars********per ADS** | ** ** |
|---------------------------------------------|------------|------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                  | ** ** | ** **                                     | ** ** | **High**                                                                                                                                                | ** ** | **Low**                                   | ** ** | **High** | ** ** | **Low** | ** ** |
| ** **                                  | ** ** | ** **                                     | ** ** | ** **                                                                                                                                              | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** |
| 2009                                        |       | Annual                                         |       | 39.77                                                                                                                                                   |       | 8.51                                      |       | 23.11 |   | 3.92 |   |
|                                        |       |                                           |       |                                                                                                                                                    |       |                                      |       |   |   |   |   |
| 2010                                        |       | Annual                                         |       | 40.80                                                                                                                                                   |       | 24.47                                     |       | 24.13 |   | 13.73 |   |
|                                        |       |                                           |       |                                                                                                                                                    |       |                                      |       |   |   |   |   |
| 2011                                        |       | Annual                                         |       | 27.95                                                                                                                                                   |       | 12.57                                     |       | 16.78 |   | 6.68 |   |
|                                        |       |                                           |       |                                                                                                                                                    |       |                                      |       |   |   |   |   |
| 2012                                        |       | First Quarter                                  |       | 16.51                                                                                                                                                   |       | 14.24                                     |       | 9.69 |   | 7.73 |   |
|                                        |       | Second Quarter                                 |       | 16.00                                                                                                                                                   |       | 12.37                                     |       | 8.64 |   | 6.01 |   |
|                                        |       | Third Quarter                                  |       | 19.08                                                                                                                                                   |       | 14.32                                     |       | 9.51 |   | 7.01 |   |
|                                        |       | Fourth Quarter                                 |       | 23.60                                                                                                                                                   |       | 14.32                                     |       | 11.50 |   | 8.81 |   |
|                                        |       | Annual                                         |       | 23.60                                                                                                                                                   |       | 12.37                                     |       | 11.50 |   | 6.01 |   |
|                                        |       |                                           |       |                                                                                                                                                    |       |                                      |       |   |   |   |   |
| 2013                                        |       | First Quarter                                  |       | 26.33                                                                                                                                                   |       | 21.48                                     |       | 13.05 |   | 10.90 |   |
|                                        |       | Second Quarter                                 |       | 25.25                                                                                                                                                   |       | 20.98                                     |       | 12.77 |   | 10.37 |   |
|                                        |       | Third Quarter                                  |       | 29.22                                                                                                                                                   |       | 24.10                                     |       | 12.76 |   | 10.39 |   |
|                                        |       | Fourth Quarter                                 |       | 29.45                                                                                                                                                   |       | 26.11                                     |       | 13.15 |   | 11.37 |   |
|                                        |       | Annual                                         |       | 29.45                                                                                                                                                   |       | 20.98                                     |       | 13.15 |   | 10.37 |   |
|                                        |       |                                           |       |                                                                                                                                                    |       |                                      |       |   |   |   |   |
| Share Price for the most recent six months: |       |                                           |       |                                                                                                                                                    |       |                                      |       |   |   |
|                                        |       |                                           |       |                                                                                                                                                    |       |                                      |       |   |   |   |   |
|                                        |       | September                                      |       | 28.63                                                                                                                                                   |       | 25.47                                     |       | 12.76 |   | 11.42 |   |
|                                        |       | October                                        |       | 29.05                                                                                                                                                   |       | 26.11                                     |       | 13.15 |   | 11.75 |   |
|                                        |       | November                                       |       | 29.45                                                                                                                                                   |       | 27.47                                     |       | 13.03 |   | 12.07 |   |
|                                        |       | December                                       |       | 28.20                                                                                                                                                   |       | 26.34                                     |       | 12.14 |   | 11.37 |   |
|                                        |       | January                                        |       | 27.65                                                                                                                                                   |       | 24.95                                     |       | 11.65 |   | 10.55 |   |
|                                        |       | February (through February 24, 2014) |       | 26.90                                                                                                                                                   |       | 25.59                                     |       | 11.21 |   | 10.68 |   |

 

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**B.****                                   ****Plan of Distribution**

 

Not applicable.

 

**C.****                                   ****Markets**

 

**Trading on the São Paulo Stock Exchange**

 

Settlement of transactions conducted on the São Paulo Stock Exchange is effected three business days after the trade date. Delivery of, and payment for, shares is made through the facilities of separate clearinghouses for each exchange, which maintain accounts for member brokerage firms. The seller is ordinarily required to deliver the shares to the clearinghouse on the second business day following the trade date. The clearinghouse for the São Paulo Stock Exchange is *Companhia Brasileira de Liquidação e Custódia*, or CBLC.

 

In order to better control volatility, the São Paulo Stock Exchange has adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever the indices of these stock exchanges fall below the limits of 10% and 15%, respectively, in relation to the index registered in the previous trading session.

 

The São Paulo Stock Exchange is less liquid than the New York Stock Exchange or other major exchanges in the world. At December 31, 2013, the aggregate market capitalization of the 66 companies listed on the São Paulo Stock Exchange Index (Ibovespa) was equivalent to approximately U.S.$807 billion, and the ten largest companies listed on the São Paulo Stock Exchange Index represented approximately 65% of the market capitalization in the year. Although any of the outstanding shares of a listed company may trade on a Brazilian stock exchange, in most cases fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, by governmental entities or by one principal shareholder. On December 31, 2013, we accounted for approximately 0.81% of the market capitalization of the companies listed on the Ibovespa Index.

 

Trading on the São Paulo Stock Exchange by non-residents of Brazil is subject to certain limitations under Brazilian foreign investment and tax legislation See “Item 10 - Additional Information — E. Taxation” and “Item 10. Additional Information — D. Exchange Controls.”

 

**São Paulo Stock Exchange Corporate Governance Standards**

 

The São Paulo Stock Exchange has three listing segments:

 

·                                          Level 1;

 

·                                          Level 2; and

 

·                                          Novo Mercado (New Market)

 

These listing segments have been designed for the trading of shares issued by companies that voluntarily undertake to abide by corporate governance practices and disclosure requirements in addition to those already required under the Brazilian Corporation Law. The inclusion of a company in any of the new segments requires adherence to a series of corporate governance rules. These rules are designed to increase shareholders’ rights and enhance the quality of information provided by Brazilian corporations.

 

After being listed on the Level 1 of Corporate Governance since November 14, 2001, on May 20, 2010 we agreed to comply with heightened corporate governance and disclosure requirements established by the São Paulo Stock Exchange in order to qualify for a differentiated listing qualification as a company admitted to the “Novo Mercado level of Corporate Governance Requirements.”

 

As a result we have agreed, among other things, to: (i) maintain a share capital structure composed exclusively of common shares; (ii) ensure that shares representing 25% of our total outstanding share capital are held by investors other than

 

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our directors, executive officers and any controlling shareholders; (iii) adopt offering procedures that favor widespread ownership of shares whenever making a public offering; (iv) comply with minimum quarterly disclosure standards; (v) follow stricter disclosure policies with respect to transactions involving our securities made by any controlling shareholders and our directors and executive officers; (vi) make a schedule of corporate events available to our shareholders; (vii) offer tag-along rights to minority shareholders (meaning that, upon the acquisition of a controlling interest, the purchaser must also agree to purchase the shares of minority shareholders for the same price paid for the shares in the controlling stake); (viii) in the event of a delisting of shares, conduct a public tender offer for our common shares at a price at least equal to the economic value determined pursuant to an appraisal; (ix) present an annual balance sheet prepared in accordance with, or reconciled to, U.S. GAAP or International Financial Reporting Standards; (x) establish a two-year term for all members of the board of directors; (xi) require that at least 20% of our board of directors consist of independent directors; and (xii) submit to arbitration by the Market Arbitration Chamber (*Câmara de Arbitragem do Mercado*) all controversies and disputes involving us, members of our Board of Directors, Board of Executive Officers, Fiscal Council or shareholders relating to the application, validity, efficacy, interpretation, violation or effect of the Novo Mercado listing agreement and regulations, our bylaws, the Brazilian Corporation Law or the rules of the CMN, the Central Bank, the CVM or the Market Arbitration Chamber or other rules within the jurisdiction of the Market Arbitration Chamber.

 

All members of our Board of Directors, our board of executive officers and our Fiscal Council have signed a management compliance statement (Termo de Anuência dos Administradores) under which they take personal responsibility for compliance with the Novo Mercado listing agreement, the rules of the Market Arbitration Chamber and the regulations of the Novo Mercado.

 

**Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards**

 

See “Item 16G. Corporate Governance — Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards.”

 

**D.****                                   ****Selling Shareholders**

 

Not applicable.

 

**E.****                                   ****Dilution**

 

Not applicable.

 

**F.****                                    ****Expenses of the Issue**

 

Not applicable.

 

**ITEM 10.  ADDITIONAL INFORMATION**

 

**A.****                                   ****Share Capital**

 

Not applicable.

 

**B.****                                   ****Memorandum and Articles of Association**

 

Our by-laws are filed as Exhibit 1 to this annual report. The information otherwise contemplated by this Item has previously been reported in our registration statement on Form F-4 filed with the Commission on October 28, 2009 (Reg. No. 333-162703). This description does not purport to be complete and is qualified in its entirety by reference to our Bylaws, the Brazilian Corporation Law and the rules and regulations of the CVM.

 

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**C.****                                   ****Material Contracts**

 

**Shareholders’ Agreement of Fibria**

 

Under the terms of the Investment Agreement entered into between BNDESPar, VID and ourselves (as an intervening party), VID and BNDESPar have entered into a shareholders’ agreement of Fibria under which the approval of certain matters will depend on the affirmative vote of BNDESPar; including:

 

·                  indebtedness incurred by us and our controlled companies;

 

·                  capital stock reduction;

 

·                  proposal of extrajudicial reorganization plan, filing for judicial reorganization or bankruptcy, liquidation or dissolution;

 

·                  change in the preferences and advantages of the preferred shares or creation of a new and more favored class of shares;

 

**·**                 reduction of mandatory dividend;

 

·                  any proposal for distribution of dividends or interest on equity;

 

·                  our participation in groups of companies, reduction in the level of listing with BM&FBOVESPA or deregistration;

 

·                  any amendment to the Bylaws before the Adherence to the Novo Mercado;

 

·                  amendment to the articles of our Bylaws regarding the business purpose, Fiscal Council, diluted control and maintenance of the share base dilution;

 

·                  conversion, consolidation, split or merger, including of shares;

 

·                  capital increase, issuance of any security convertible into or exchangeable for shares;

 

·                  any transaction between us and/or its controlled companies, on the one part, and any related parties, on the other part, in an amount exceeding R$20 million per year;

 

·                  disposal of or encumbrance on permanent assets;

 

·                  proposal for creation of reserves, provisions or for changing accounting criteria;

 

·                  the approval of annual budget;

 

·                  execution of agreements of any nature in an individual amount exceeding R$500 million;

 

·                  capital investments not provided for in the business or budget plan approved by the Board of Directors;

 

·                  our acquisition of material interest, as defined by applicable law, not provided for in the business or budget plan approved by our Board of Directors;

 

·                  creation of encumbrances or guarantees to ensure performance of third-party obligations;

 

·                  acquisition of any equity interest in companies whose core business is not provided within the scope of the business purpose;

 

·                  reappraisal of assets resulting in positive variation of the asset in an amount exceeding R$500 million.

 

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** **

**Agreements filed as Exhibits**

** **

The representations, warranties and covenants granted by us in any agreement that is filed as an exhibit to this report were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to others. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

 

For additional information on our material contracts, see “Item 5 - Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”

 

**D.****                                   ****Exchange Controls**

 

There are no restrictions on ownership of our common shares by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of common shares into foreign currency and to remit such amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally require, among other things, obtaining an electronic registration with the Central Bank.

 

Under Resolution No. 2,689, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that some requirements are fulfilled. In accordance with Resolution No. 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities that are domiciled or headquartered abroad.

 

Investors under Resolution No. 2,689 who are not a Tax Haven Holder or a country that does not impose income tax or in which the maximum income tax rate is lower than 20%, are entitled to favorable tax treatment. See “Material Tax Considerations—Material Brazilian Tax Considerations.”

 

Resolution No. 1,927 provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. An application was filed to have the ADSs approved by the Central Bank and the CVM under Annex V, and we received final approval before the ADSs Offering.

 

An electronic registration, which replaced the amended Certificate of Registration, was issued in the name of the depositary with respect to the ADSs and is maintained by the Custodian on behalf of the Depositary. This electronic registration was carried on through the SISBACEN. Pursuant to the electronic registration, the Custodian and the Depositary are able to convert dividends and other distributions with respect to the common shares represented by the ADSs into foreign currency and remit the proceeds outside Brazil. In the event that a holder of ADSs exchanges the ADSs for common shares, the holder will be entitled to continue to rely on the Depositary’s electronic registration for only five business days after the exchange. Thereafter, a holder must seek to obtain its own electronic registration. Unless the common shares are held pursuant to Resolution No. 2,689 by a duly registered investor or a holder of common shares who applies for and obtains a new electronic registration, that holder may not be able to obtain and remit abroad U.S. Dollars or other foreign currencies upon the disposition of the common shares, or distributions with respect thereto. In addition, if the foreign investor resides in a tax haven jurisdiction or is not an investor registered pursuant to Resolution No. 2,689, the investor will also be subject to less favorable tax treatment.

 

**Preemptive Rights**

 

Each of our shareholders has a general preemptive right to subscribe for shares or convertible securities in any capital increase, in proportion to its shareholding, except (i) in the event of the grant and exercise of any stock option to acquire or subscribe for shares of our capital stock; and (ii) in the context of a capital increase derived from merger, merger of shares and/or spin-off implemented according to Brazilian Corporate Law. A minimum period of 30 days following the publication of notice of the issuance of shares or convertible securities is allowed for exercise of the right, and the right is negotiable. However, according to our by-laws, our Board of Directors can eliminate this preemptive right or reduce the 30-day period in case we issue debentures that are convertible into shares, warrants (*bônus de subscrição*) or shares within the limits authorized by the by-laws: (i) through a stock exchange or through a public offering or (ii) through an exchange of shares in a public offering to acquire control of another publicly-held company.

 

Except as described above, in the event of a capital increase that would (i) maintain the proportion of capital represented by common and preferred shares, the holders of common and preferred shares would have preemptive rights to subscribe to our newly issued shares in proportion to their shareholdings in each class of shares; (ii) modify the proportion of 

 

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capital represented by common and preferred shares, the holders of common and preferred shares would have preemptive rights to subscribe to our newly issued common and preferred shares, respectively, in proportion to their shareholdings, and to the other class of shares only to the extent necessary to prevent dilution of their interest in their shares; and (iii) create a new class or type of shares, all shareholders have preemptive rights to subscribe to our newly issued shares of such new class or type, in proportion to their shareholdings. You may not be able to exercise the preemptive rights relating to the preferred shares underlying your ADSs unless a registration statement under the Securities Act is effective with respect to the shares to which the rights relate or an exemption from the registration requirements of the Securities Act is available and the ADS depositary determines to make the rights available to you. See “Item 3. Key Information — D. Risk Factors —Holders of our ADSs may not be able to exercise the preemptive rights relating to the shares.”

 

**Right of Withdrawal**

 

The Brazilian corporate law provides that, under certain circumstances, a shareholder has the right to withdraw its equity interest from the company and to receive payment for the portion of shareholders’ equity attributable to its equity interest. Such right of withdrawal may be exercised by a dissenting or non-voting shareholder, if a vote of at least 50% of voting shares authorizes us:

 

·                  to establish new shares or to disproportionately increase an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by the by-laws (our by-laws currently authorize such action);

 

·                  to modify a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares, or to create a new class with greater privileges than the existing classes of preferred shares;

 

·                  to reduce the mandatory distribution of dividends;

 

·                  to change our corporate purpose;

 

·                  to merge with another company (including if we are merged into one of our controlling companies) or to consolidate, except as described in the fourth paragraph following this list;

 

·                  to transfer all of our shares to another company or in order to make us a wholly owned subsidiary of such company, known as an incorporação de ações, except as described in the fourth paragraph following this list;

 

·                  to approve the acquisition of control of another company at a price which exceeds certain limits set forth in the Brazilian corporate law, except as described in the fourth paragraph following this list;

 

·                  to approve our participation in a centralized group of companies, as defined under the Brazilian corporate law, and subject to the conditions set forth therein, except as described in the fourth paragraph following this list; or

 

·                  to conduct a spin-off that results in (a) a change of our corporate purposes, except if the assets and liabilities of the spun-off company are contributed to a company that is engaged in substantially the same activities, (b) a reduction in the mandatory dividend or (c) any participation in a centralized group of companies, as defined under Brazilian corporate law.

 

In addition, in the event that the entity resulting from a merger of shares, or *incorporação de ações*, a consolidation or a spin-off of a listed company fails to become a listed company within 120 days of the shareholders’ meeting at which such decision was taken, the dissenting or non-voting shareholders may also exercise their withdrawal rights.

 

Only holders of shares adversely affected by the changes mentioned in the first and second items above may withdraw their shares. The right of withdrawal lapses 30 days after publication of the minutes of the relevant shareholders’ meeting. In the first two cases mentioned above, however, the resolution is subject to confirmation by the preferred shareholders, which must be obtained at a special meeting held within one year. In those cases, the 30 day term is counted from the date the minutes of the special meeting are published. We would be entitled to reconsider any action giving rise to appraisal rights within 10 days following the expiration of such rights if the withdrawal of shares of dissenting shareholders would jeopardize our financial stability.

 

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The Brazilian corporate law allows companies to redeem their shares at their economic value as set forth in the Brazilian corporate law, subject to certain requirements. Because our by-laws currently do not provide that our shares be subject to withdrawal at their economic value, our shares would be subject to withdrawal at their book value, determined on the basis of the last balance sheet approved by the shareholders. If the shareholders’ meeting giving rise to appraisal rights occurs more than 60 days after the date of the last approved balance sheet, a shareholder may demand that its shares be valued on the basis of a new balance sheet that is of a date within 60 days of such shareholders’ meeting.

 

Pursuant to the Brazilian corporate law, in events of consolidation, merger, *incorporação de ações*, participation in a group of companies, and acquisition of control of another company, the right to withdraw does not apply if the shares meet certain tests relating to liquidity and dispersal of the type or class of shares in question on the market. In these cases, shareholders will not be entitled to withdraw their shares if the shares are a component of a general securities index in Brazil or abroad admitted to trading on the securities markets, as defined by the Brazilian Securities Commission, and the shares held by persons unaffiliated with the controlling shareholder represent more than half of the outstanding shares of the relevant type or class.

 

**E.****                                   ****Taxation**

 

*The following discussion contains a description of the material Brazilian and United States federal income tax consequences of the purchase, ownership and disposition of preferred shares or ADSs but does not purport to be a comprehensive description of all the tax considerations that may be relevant to these matters based upon the particular circumstances of a holder.*

 

This summary is based upon tax laws of Brazil and the federal income tax laws of the United States as in effect on the date of this annual report*,* which are subject to change, possibly with retroactive effect, and to differing interpretations. You should consult your own tax advisors as to the Brazilian, United States or other tax consequences of the purchase, ownership and disposition of common shares or ADSs, including, in particular, the effect of any U.S. federal estate, gift, or alternative minimum taxes, and non U.S., state or local tax laws.

 

Although there is presently no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty. No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. holders of common shares or ADSs.

 

For purposes of Brazilian taxation, there are two types of Non-Brazilian Holders of common shares or ADSs: (a) Non-Brazilian Holders that are not resident or domiciled in a tax haven jurisdiction (i.e., a country or location that does not impose income tax or where the maximum income tax rate is lower than 20% or where the internal legislation imposes restrictions to disclosure of shareholding composition or the ownership of the investment), and that, in the case of holders of common shares, are registered before the Central Bank and the CVM to invest in Brazil in accordance with Central Bank Resolution No. 2.689; and (b) other Non-Brazilian Holders, which include any and all non-residents of Brazil who invest in equity securities of Brazilian companies through any other means and all types of investors that are located in tax haven jurisdiction*s.* The investors mentioned in item (a) above are subject to a favorable tax regime in Brazil, as described below.

 

**Brazilian Tax Considerations**

 

The following discussion summarizes the material Brazilian tax consequences of the acquisition, ownership and disposition of our common shares or ADSs by a holder that is not domiciled in Brazil for purposes of Brazilian taxation and, in the case of common shares, which has registered its investment in such securities with the Central Bank as a U.S. Dollar investment (in each case, a Non-Brazilian Holder).

 

Central Bank Resolution No. 2.689 permits foreign investors, defined to include individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad may invest in almost all financial assets and to engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain legal and regulatory requirements are fulfilled. The foreign investors must: (a) appoint at least one representative in Brazil with powers to perform actions relating to the foreign investment; (b) complete the appropriate foreign investor registration form; (c) register as a foreign investor with the Brazilian securities commission; and (d) register the foreign investment with the Central Bank.

 

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Securities and other financial assets held by foreign investors pursuant to Resolution No. 2.689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock exchanges or organized over-the-counter markets licensed by the CVM, except for transfers resulting from a corporate reorganization, occurring upon the death of an investor by operation of law or will or as a consequence of the delisting of the relevant shares from a stock exchange and the cancellation of the registration with the CVM.

 

**Taxation of dividends**

 

As a result of tax legislation adopted on December 26, 1995, dividends based on profits generated after January 1, 1996, including dividends paid in kind, payable by us in respect of common shares, are exempt from withholding tax. Stock dividends with respect to profits generated before January 1, 1996 are not subject to Brazilian tax, provided that the stock is not redeemed by us or sold in Brazil within five years after distribution of such stock dividends. Dividends relating to profits generated prior to January 1, 1996 are subject to Brazilian withholding tax at either the 15% or 25% rate, depending on the year in which the profits were generated.

 

**Taxation of gains**

 

**Transactions conducted outside of a Brazilian stock, future or commodity exchange (or similar entities)**

 

Non Brazilian holders are generally subject to income tax imposed at a rate of 15% on gains realized on disposal or exchanges of common shares if the transaction is carried out outside any Brazilian stock, future or commodities exchange (and also in case of redemption of shares in a transaction occurring outside of a stock exchange), except for a Tax Haven Holder which, in this case, is subject to income tax at a rate of 25%. If these gains are related to transactions conducted on the Brazilian over-the-counter market with intermediation (or in case of transactions carried out on markets subject to future liquidation), the withholding income tax of 0.005% of the gross proceeds shall also be applicable and can be offset against the eventual income tax due on the capital gains.

 

**Transactions conducted within a Brazilian stock, future or commodity exchange (or similar entities):**

 

***Disposal of securities:***

 

****ADSs:**

 

Gains realized outside Brazil by a non Brazilian holder on the disposition of assets located in Brazil to another non-Brazilian holder were not subject to Brazilian tax through December 29, 2003. However, according to Law No. 10.833, enacted on that date, capital gains realized on the disposition of these assets by a Non-Brazilian Holder are subject to taxation in Brazil (at a 15% or 25% rate, depending on the case), regardless of whether the sale or the disposition is made by a Non-Brazilian Holder to another non-Brazilian resident or to a Brazilian resident. At the present time no definitive jurisprudence has been established with respect to this matter. There are grounds to sustain that the gains realized by a Non-Brazilian Holder on the disposition of ADSs to another non-Brazilian resident are not taxed in Brazil, based on the argument that ADSs would not constitute assets located in Brazil for purposes of Law No. 10,833/03. However, we cannot assure you how Brazilian courts would interpret the definition of assets located in Brazil in connection with the taxation of gains realized by a Non- Brazilian Holder on the disposition of ADSs to another non-Brazilian resident.

 

As a result, gains on a disposition of ADSs by a Non-Brazilian Holder to Brazilian resident, or even to Non-Brazilian Holder in the event that courts determine that ADSs would constitute assets located in Brazil, may be subject to income tax in Brazil according to the rules described above. It is important to clarify that, for purposes of Brazilian taxation, the income tax rules on gains related to disposition of common shares or ADSs vary depending on the domicile of the Non-Brazilian Holder, the form by which such Non-Brazilian Holder has registered its investment before the Central Bank and/or how the disposition is carried out, as described below.

 

****Common Stock:**

 

With respect to the disposition of common shares, as they are assets located in Brazil, the Non-Brazilian Holder will be subject to income tax on the gains assessed, following the rules described below, regardless of whether the disposition is conducted in Brazil or with a Brazilian resident. Gains assessed on the disposition of the common shares carried out on the 

 

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Brazilian stock exchange (which, in principle, should also include the transactions carried out on the organized over-the-counter market) are:

 

·                  Exempt from income tax, when assessed by a Non-Brazilian Holder that (1) has registered its investment in Brazil before the Central Bank under the rules of Resolution No. 2,689/00 (“2,689 Holder”) and (2) is not a Tax Haven Holder; or

 

·                  Subject to income tax at a rate of 15% in any other case, including the gains assessed by a Non-Brazilian Holder that is not a 2,689 Holder or is a Tax Haven Holder. In these cases, a withholding income tax of 0.005% shall also be applicable on the gross proceeds and can be offset with the eventual income tax due on the capital gain.

 

**Exchange of securities via deposit**

 

The deposit of common shares in exchange for ADSs may be subject to Brazilian capital gain tax at the rate of 15%, if the amount previously registered with the Central Bank as a foreign investment in the common shares is lower than (1) the average price per preferred share on a Brazilian stock exchange on which the greatest number of such shares were sold on the day of deposit; or (2) if no common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of common shares were sold in the 15 trading sessions immediately preceding such deposit. In this case, the difference between the amount previously registered and the average price of the common shares, calculated as above, shall be considered a capital gain (although there are grounds to challenge this taxation). On receipt of the underlying common shares, the non Brazilian holder registered under Resolution No. 2,689 will be entitled to register the U.S. Dollar value of such shares with the Central Bank as described below in “—Registered Capital.” However, if this non Brazilian holder does not register under Resolution No. 2,689, it will be subject to the less favorable tax treatment described below.

 

**Exercise of preemptive rights**

 

Any exercise of preemptive rights relating to the common shares will not be subject to Brazilian taxation. However, any gain on the disposition or assignment of preemptive rights relating to common shares by a holder of common shares, or by the depositary on behalf of holders of the ADSs, will be subject to Brazilian taxation at the same rate applicable to the sale or disposition of common shares.

 

**Interest attributed to capital**

 

Distribution of a notional interest charge attributed to capital in respect of the preferred or common shares as an alternative form of dividend payment to shareholders or depositary agents who are either Brazilian residents or non-Brazilian residents is subject to Brazilian withholding income tax at the rate of 15% (except for those shareholders or beneficiaries resident in tax havens or low tax jurisdictions -see further discussion below). Such payments, subject to certain limitations, are deductible for Brazilian income tax and for social contribution purposes as long as the payment of a distribution of interest is credited to a shareholder’s account and approved at our general meeting of shareholders and is calculated by reference to the TJLP interest rate determined by the Central Bank from time to time and cannot exceed the greater of:

 

· 50% of net income (after the deduction of social contribution on profits and before taking such distribution and the provision for income tax into account) for the period from which the payment is being made; or

 

· 50% of the sum of retained profits and profit reserves that exist as of the beginning of the period from which the payment is being made.

 

Current Brazilian corporate law establishes that a notional interest charge attributed to shareholders’ equity can either be accounted for as part of the mandatory dividend or not. In case the payment of such interest is accounted for as part of the mandatory dividend, we would be required to pay an additional amount to ensure that the net amount received by the shareholders, after the income tax, is at least equal to the mandatory dividend. The distribution of interest attributed to capital would be proposed by our Board of Directors and subject to subsequent declaration by the shareholders at a general meeting.

 

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**Beneficiaries resident or domiciled in tax havens or low tax jurisdictions**

 

Law No. 9.779/99, in effect as of January, 1999, states that, with the exception of certain prescribed circumstances, income derived from operations by a beneficiary, resident or domiciled in a country considered as a tax haven, is subject to withholding income tax at a rate of 25%. Accordingly, if the distribution of interest attributed to capital is made to a beneficiary resident or domiciled in a tax haven, the income tax rate applicable will be 25% instead of 15%. A tax haven jurisdiction is considered to be, for this purpose, any country or location, which does not impose income tax or imposes income tax at a maximum rate lower than 20% (there is also an interpretation according to which the definition of tax haven for this purpose also encompasses a country or location where internal legislation imposes restrictions on the disclosure of the shareholding composition or beneficial owners of investments).

 

Currently, said countries / location considered to be a tax haven are listed within the Brazilian tax regulation.

 

**Other Relevant Brazilian taxes**

 

There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of common shares or ADSs by a non Brazilian holder. However, some Brazilian states may impose gift and estate taxes on gifts made or inheritances bestowed by individuals or entities not resident or domiciled within such state to individuals or entities residing or domiciled within such state in Brazil. There are no Brazilian stamp, issue, registration, or similar taxes or duties payable by holders of common shares or ADSs.

 

***Taxation of foreign exchange transactions (IOF/Exchange Rate)***

 

Pursuant to Decree Law 6.306/07, the conversion into foreign currency or the conversion into Brazilian currency of the proceeds received or remitted by a Brazilian entity from a foreign investment in the Brazilian securities market, including those in connection with the investment by the Non-Brazilian Holder in the common shares and ADSs may be subject to the Tax on Foreign Exchange Transaction (“IOF/Exchange”). Currently, for most exchange transactions related to this type of investment, the rate of IOF/Exchange is zero, however the Minister of Finance has the legal power to increase at any time the rate to a maximum of 25%, but only on a prospective basis.

 

***Tax on bonds and securities transactions (IOF/ Financial securities)***

 

Pursuant to Decree Law 6.306/07, the Tax on Bonds and Securities Transactions (the IOF/Financial securities) may be imposed on any transactions involving bonds and securities, even if these transactions are performed on Brazilian stock, futures or commodities exchanges. The applicable rate for variable income transactions is currently 0%, but the Minister of Finance has the legal power to increase at any time the rate to a maximum of 1.5% per day of the transaction’s value, but only on a prospective basis.

 

***Tax on ADS issuance transactions (IOF/ Issuance)***

 

Pursuant to Decree Law 6.306/07, since December 24th of 2013 the Tax on Financial Transactions levied over the issuance of ADSs that are backed by shares traded on the Brazilian stock exchange, was reduced to a zero tax rate. However, the Minister of Finance has the legal power to increase this tax rate at any time.

 

**Registered capital**

 

The amount of an investment in common shares held by a non-Brazilian holder who qualifies under Resolution No. 2,689 and obtains registration with the CVM, or by the depositary representing such holder, is eligible for registration with the Central Bank; such registration (the amount registered is referred to as registered capital) allows the remittance of foreign currency outside Brazil, converted at the commercial market rate, acquired with the proceeds of distributions on, and amounts realized with respect to dispositions of, such common shares. The registered capital for each preferred share purchased as part of the international offering, or purchased in Brazil after that date, and deposited with the Depositary will be equal to its purchase price in U.S. Dollars. The registered capital for a preferred share that is withdrawn upon surrender of an ADS will be the U.S. Dollar equivalent of (i) the average price of a preferred share on the Brazilian stock exchange on which the greatest number of such shares was sold on the day of withdrawal, or (ii) if no common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of common shares was sold in the 15th trading session immediately preceding such withdrawal. The U.S. Dollar value of the common shares is determined on the basis of the average commercial market rates quoted by the Central Bank on such date (or, if the average price of common 

 

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shares is determined under clause (ii) above, the average of such quoted rates on the same 15 dates used to determine the average price of the common shares).

 

A non Brazilian holder of common shares may experience delays in effecting such registration, which may delay remittances abroad. Such a delay may adversely affect the amount in U.S. Dollars received by the non Brazilian holder.

 

**U.S. federal income tax considerations**

 

The following discussion summarizes the principal U.S. federal income tax considerations relating to the purchase, ownership and disposition of common shares or ADSs by a U.S. holder (as defined below) holding such common shares or ADSs as capital assets (generally, property held for investment). This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations, administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date hereof, and all of which are subject to change (possibly with retroactive effect) and to differing interpretations. This summary does not describe any implications under state, local or non-U.S. tax law, or any aspect of U.S. federal tax law other than income taxation. This summary does not consider the recently enacted 3.8% Medicare tax on certain investment income.

 

This summary does not purport to address all the material U.S. federal income tax consequences that may be relevant to the U.S. holders of the common shares or ADSs, and does not take into account the specific circumstances of any particular investors, some of which (such as tax-exempt entities, banks or other financial institutions, insurance companies, broker-dealers, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, regulated investment companies, real estate investment trusts, U.S. expatriates, investors liable for the alternative minimum tax, partnerships and other pass-through entities, investors that own or are treated as owning 10% or more of our voting stock, investors that hold the common shares or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or other integrated transaction and U.S. holders (as defined below) whose functional currency is not the U.S. Dollar) may be subject to special tax rules.

 

As used below, a “U.S. holder” is a beneficial owner of common shares or ADSs that is, for U.S. federal income tax purposes:

 

(i)                                     an individual citizen or resident of the United States;

 

(ii)                                  a corporation (or entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

(iii)                               an estate the income of which is subject to U.S. federal income tax regardless of its source; or

 

(iv)                              a trust if (A) a court within the U.S. is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

 

If a partnership or other entity taxable as a partnership holds common shares or ADSs, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partners of partnerships holding common shares or ADSs should consult their tax advisors.

 

In general, for U.S. federal income tax purposes, holders of American Depositary Receipts evidencing ADSs will be treated as the beneficial owners of the common shares represented by those ADSs.

 

**Taxation of Distributions**

 

In general, distributions with respect to the common shares or ADSs, as described above under “Brazilian Tax Considerations” will, to the extent made from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income tax purposes.

 

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If a distribution exceeds the amount of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles, it will be treated as a non-taxable return of capital to the extent of the U.S. holder’s tax basis in the common shares or ADSs, and thereafter as capital gain. As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes.

 

The gross amount of any dividends (including amounts withheld in respect of Brazilian taxes) paid with respect to the common shares or ADSs generally will be subject to U.S. federal income taxation as ordinary income and will not be eligible for the dividends received deduction allowed to corporations. Dividends paid in Brazilian currency will be included in the gross income of a U.S. holder in a U.S. Dollar amount calculated by reference to the exchange rate in effect on the date the dividends are received by the U.S. holder, or in the case of dividends received in respect of ADSs, on the date the dividends are received by the depositary or its agent, whether or not converted into U.S. Dollars. A U.S. holder will have a tax basis in any distributed Brazilian currency equal to its U.S. Dollar amount on the date of receipt, and any gain or loss recognized upon a subsequent disposition of such Brazilian currency generally will be foreign currency gain or loss that is treated as U.S. source ordinary income or loss. If dividends paid in Brazilian currency are converted into U.S. Dollars on the day they are received by the U.S. holder or the depositary or its agent, as the case may be, U.S. holders generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. U.S. holders should consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any Brazilian currency received by the U.S. holder or the depositary or its agent is not converted into U.S. Dollars on the date of receipt.

 

Subject to certain exceptions for short-term and hedged positions, the U.S. Dollar amount of dividends received by an individual with respect to the ADSs will generally be subject to U.S. federal income taxation at a maximum rate of 20% if the dividends represent “qualified dividend income.” Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States, (ii) the U.S. holder meets the holding period requirement for the ADSs (generally more than 60 days during the 121-day period that begins 60 days before the ex-dividend date), and (iii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). The ADSs are listed on the New York Stock Exchange, and should qualify as readily tradable on an established securities market in the United States so long as they are so listed. However, no assurances can be given that the ADSs will be or remain readily tradable. Based on our audited consolidated financial statements as well as relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2013 taxable year. In addition, based on our audited consolidated financial statements and current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2014 taxable year. Because these determinations are based on the nature of our income and assets from time to time, and involve the application of complex tax rules, no assurances can be provided that we will not be considered a PFIC for the current (or any past or future tax year).

 

Based on existing guidance, it is not entirely clear whether dividends received with respect to the common shares (to the extent not represented by ADSs) will be treated as qualified dividend income, because the common shares are not themselves listed on a U.S. exchange. In addition, the U.S. Treasury Department has announced that the IRS is continuing to study procedures pursuant to which holders of ADSs or preferred stock and intermediaries through whom such securities are held will be able to determinate whether dividends are treated as qualified dividends. Because such procedures have not yet been issued, we are not certain that we will be able to comply with them. U.S. holders of ADSs and common shares should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.

 

Dividends paid by us generally will constitute income from non-U.S. sources and will be subject to various classification and other limitations for U.S. foreign tax credit purposes. Subject to generally applicable limitations under U.S. federal income tax law, Brazilian withholding tax imposed on such dividends, if any, will be treated as a foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability (or at a U.S. holder’s election if it does not elect to claim a foreign tax credit for any foreign taxes paid during the taxable year, all foreign income taxes paid may instead be deducted in computing such U.S. holder’s taxable income). In general, special rules will apply to the calculation of foreign tax credits in respect of dividend income that is subject to preferential rates of U.S. federal income tax. U.S. holders should be aware that the IRS has expressed concern that parties to whom ADSs are transferred may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. holders of ADSs. Accordingly, the discussion above regarding the creditability of Brazilian withholding tax on dividends could be affected by future actions that may be taken by the IRS.

 

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**Taxation of Capital Gain**

 

Deposits and withdrawals of common shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.

 

In general, gain or loss, if any, realized by a U.S. holder upon a sale or other taxable disposition of common shares or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized on the sale or other taxable disposition and such U.S. holder’s adjusted tax basis in the common shares or ADSs. Such capital gain or loss will be long-term capital gain or loss if at the time of sale or other taxable disposition the common shares or ADSs have been held for more than one year. Under current U.S. federal income tax law, net long-term capital gain of certain U.S. holders is eligible for taxation at preferential rates (generally 20% for non-corporate U.S. holders). The deductibility of capital losses is subject to certain limitations under the Code. Gain, if any, realized by a U.S. holder on the sale or other taxable disposition of common shares or ADSs generally will be treated as U.S. source gain for U.S. foreign tax credit purposes. Consequently, if a Brazilian withholding tax is imposed on the sale or disposition of common shares or ADSs, a U.S. holder may not be able to derive effective U.S. foreign tax credit benefits in respect of such Brazilian withholding tax. Alternatively, a U.S. holder may take a deduction for all foreign income taxes paid during the taxable year if it does not elect to claim a foreign tax credit for any foreign taxes paid during the taxable year. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, common shares or ADSs.

 

**Passive Foreign Investment Company Rules**

 

If 75% or more of our gross income in any taxable year (including our pro rata share of the gross income of any company treated as a corporation for U.S. federal income tax purposes, U.S. or foreign, in which we are considered to own, directly or indirectly, 25% or more of the shares by value) is passive income, or alternatively, if 50% or more of our assets in any taxable year (averaged quarterly over the year and ordinarily determined based on fair market value and including our pro rata share of the assets of any company treated as a corporation for U.S. federal income tax purposes, U.S. or foreign, in which we are considered to own, directly or indirectly, 25% or more of the shares by value) are held for the production of, or produce, passive income, then we will be a PFIC.

 

Based upon our current and projected income, assets and activities, we do not expect the common shares or ADSs to be considered shares of a PFIC for our current fiscal year or for future fiscal years. However, because the determination of whether the common shares or ADSs constitute shares of a PFIC will be based upon the composition of our income and assets, and the composition of income and assets of entities in which we hold at least a 25% interest from time to time, and because there are uncertainties in the application of the relevant rules, there can be no assurance that the common shares or ADSs will not be considered shares of a PFIC for any fiscal year. If the common shares or ADSs were shares of a PFIC for any fiscal year, U.S. holders (including certain indirect U.S. holders) will generally be subject to adverse tax consequences. A U.S. Holder that holds shares of a PFIC is taxed at ordinary income rates on any gain realized on the sale or exchange of the shares and on any “excess distributions” received. Excess distributions are amounts received by a U.S. person with respect to its shares in any taxable year that exceed 125% of the average distributions received by the U.S. Holder in the shorter of either the three previous years or the U.S. Holder’s holding period for the shares before the current taxable year. Such U.S. holders would also be subject to the imposition of an interest charge on gains or excess distributions allocable to prior years in the U.S. holder’s holding period during which we were determined to be a PFIC. If we are deemed to be a PFIC for a taxable year, dividends on our common shares or ADSs would not be “qualified dividend income” subject to preferential rates of U.S. federal income taxation. In addition, if we are a PFIC, U.S. holders would generally be required to comply with annual reporting requirements. U.S. holders should consult their own tax advisors regarding the application of the PFIC rules to the common shares or ADSs.

 

**U.S. Backup Withholding and Information Reporting**

 

A U.S. holder of common shares or ADSs may, under certain circumstances, be subjected to information reporting and “backup withholding” with respect to certain payments to such U.S. holder, such as dividends paid by us or the proceeds of a sale or other taxable disposition of common shares or ADSs, unless such U.S. holder (i) is a corporation or comes within certain other exempt categories, and demonstrates this fact when so required, or (ii) in the case of backup withholding, provides a correct taxpayer identification number, certifies that it is a U.S. person and that it is not subject to backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amount withheld under these rules will be creditable against a U.S. holder’s U.S. federal income tax liability or may be refunded, provided the requisite information is timely furnished to the IRS.

 

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Under U.S. federal income tax law and the Treasury regulations, certain categories of U.S. holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, the U.S. tax authorities generally impose tax return disclosure obligations (and related penalties) on U.S. holders that hold certain specified foreign financial assets in excess of $50,000. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U. S. holders may be subject to these reporting requirements unless their common stock or ADSs are held in an account at a domestic financial institution. Penalties for failure to file certain of these information returns are substantial. U.S. holders should consult with their own tax advisers regarding the requirements of filing information returns, and, if applicable, filing obligations relating to the PFIC rules.

 

***Internal Revenue Service Circular 230 Notice: *****To ensure compliance with U.S. Internal Revenue Service Circular 230, prospective investors are hereby notified that: (a) any discussion of U.S. federal tax issues contained or referred to in this Form 20-F is not intended or written to be used, and cannot be used, by prospective investors for the purpose of avoiding penalties that may be imposed on them under the U.S. federal tax laws; (b) such discussion is written to support the promotion or marketing of the transactions or matters addressed herein; and (c) prospective investors should seek advice based on their particular circumstances from an independent tax adviser.**

 

**F.****                                    ****Dividends and Paying Agents**

 

Not applicable.

 

**G.****                                  ****Statements by Experts**

 

Not applicable.

 

**H.****                                  ****Documents on Display**

 

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, pursuant to which we file reports and other information with the Commission. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549-2521. Copies of the materials may be obtained from the Public Reference Room of the Commission at 100 F Street, N.E., Washington, D.C. 20549-2521 at prescribed rates. The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1 800 SEC-0330. In addition, the SEC maintains an internet website at www.sec.gov from which you can electronically access these materials. Furthermore, material we filed can be inspected at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005, on which our ADSs are listed.

 

We also file electronically financial statements and other periodic reports with the CVM. The CVM website is www.cvm.gov.br.

 

Copies of our annual reports on Form 20-F and accompanying documents and our by-laws will be available for inspection at our headquarters or our website at www.fibria.com.br/ir. The information on our website is however, not incorporated by reference in, and shall not be considered a part of this annual report.

 

**I.****                                       ****Subsidiary Information**

 

Not required.

 

**ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates and interest rates. Also see Note 4.2.1.(a) of our 2013 consolidated financial statements.

 

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**General**

 

We have established a strict framework of internal policies with respect to our currency exposure, commodity prices, interest rate, counterparty risk, cash investments and indebtedness and liquidity. These policies are continuously revised by our Finance Committee in response to different macroeconomic scenarios. The compliance with these policies is monitored by an independent GRC (Governance, Risk and Compliance) department, which reports directly to our CEO and to the Statutory Audit Committee.

 

We also use conventional instruments, mainly options, non-deliverable forwards (NDFs) and swaps to mitigate the volatility of foreign exchange rate fluctuations on our revenue. For a portion of our revenue we enter into forward contracts or currency options effectively fixing some revenues in Brazilian *Reais* to match our budget and goals. The unrealized gains and losses on these contracts are recorded on our balance sheet as assets or liabilities and in our statement of operations in “Results of derivative financial instruments”.

 

We use cross-currency interest rate swap contracts in the market to reduce our foreign currency exposure and also take into account the natural hedge, matching our revenue and debt. Other financial instruments have also been used extensively as part of a defined financial strategy designed to optimize opportunities in the Brazilian foreign exchange and interest rate markets. Like many other Brazilian exporters, we have had access to U.S. Dollar-denominated sources of long-term financing. Opportunities may arise between the lower interest rates payable on the U.S. Dollar-denominated export credits compared to the Brazilian interest rate.

 

In Brazil, we have limited sources of long-term financing denominated in *Reais*. We believe we have access to a sufficient number of foreign-currency financing sources to meet our needs without resorting to more expensive *Real*-denominated financing. U.S. Dollar denominated debt also works as a natural hedge for our U.S. Dollar denominated revenue generated from our pulp exports.

 

Our foreign currency debt reflects a strategy to continue borrowing funds in U.S. Dollars. We have succeeded in lengthening the average maturity of our debt over time. The percentage of our short-term debt (i.e., the debt, including the current portion of long-term debt, maturing within 12 months) compared to our total debt was 30.4% at December 31, 2013 and 10.6% in December 31, 2012.

 

**Foreign currency risk**

 

Our foreign currency exposure gives rise to market risks associated with exchange rate movements against the U.S. Dollar. The vast majority of our debt is denominated in U.S. Dollars. Our revenues are either denominated in U.S. Dollars or linked to U.S. Dollars (domestic pulp sales are denominated in *Reais* but linked to U.S. Dollar prices), thus our U.S. Dollar denominated debt works to a certain extent as a natural hedging for this exposure. In our income statement, revenues are translated into *Reais* at the prevailing exchange rate at the time of the sale. On the other hand, our debt is translated into *Reais* taking into account the closing foreign currency rate. The difference between those rates may generate a mismatch from the conversion of our revenues and debt into *Reais*. In order to minimize the effect of the currency mismatch on our financial covenants measurement, we were able to amend those contracts under which those covenants are established to perform these measurements in U.S. Dollar terms.

 

The following table presents the carrying amount of our assets and liabilities denominated in U.S. Dollars:

 
| ** **                      | ** ** | **2013**                                  | ** ** | **2012** | ** ** |
|---------------------------------|------------|-------------------------------------------|------------|----------|------------|
| ** **                      | ** ** | **(in millions of Reais)** | ** ** |
|                            |       |                                      |       |     |       |
| Assets in foreign currency      |       |                                      |       |     |       |
| Cash and cash equivalents       |       | 1,247                                     |       | 891      |       |
| Marketable securities           |       | 98                                        |       | 433      |       |
| Trade accounts receivable       |       | 376                                       |       | 714      |       |
|                            |       |                                      |       |     |       |
|                            |       | 1,721                                     |       | 2,038    |       |
|                            |       |                                      |       |     |       |
| Liabilities in foreign currency |       |                                      |       |     |       |
| Loans and financing             |       | 7,281                                     |       | 8,543    |       |
| Trade payables                  |       | 99                                        |       | 105      |       |
| Derivative instruments          |       | 464                                       |       | 273      |       |
|                            |       |                                      |       |     |       |
|                            |       | 7,844                                     |       | 8,921    |       |
|                            |       |                                      |       |     |       |
| Liability exposure              |       | (6,123                                    | )          | (6,883   | )          |

 

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***Sensitivity Analysis***

 

Our significant risk factor, considering the period of three months for the evaluation is our US Dollar exposure. We adopted as the probable scenario the fair value considering the market yield as at December 31, 2013.

 

Considering this projected scenario compared with the average exchange rate of R$2.1579 observed during the year ended December 31, 2013, net revenue would have increased by 8%, representing an approximate amount of R$555 million over a 12 month period considering the volume and sale prices of the year 2013.

 

To calculate the probable scenario the closing exchange rate at the date of these consolidated financial statement was used (R$ x USD = 2.3426). As the amounts are already recognized in the consolidated financial statement, there are no additional effects in the income statement in this scenario. The probable scenario was stressed considering an additional 25% and 50% with respect to the probable. Management believes that a reasonably possible scenario includes an appreciation of the *Real* against the U.S. Dollar from R$2.3426 as of December 31, 2013 to R$3.5139.

 

Therefore, the following table presents the change in the fair value of derivatives, loans and marketable securities, in the above mentioned adverse exchange rate scenarios:,

 
| ** **                                | ** **   | **Impact of an appreciation/depreciation of the Real against the U.S. Dollar on the fair value** | ** **   |
|-------------------------------------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
| **(in millions of Reais)** | ** **   | **Appreciation of the exchange   rate to R$2.3426**                                                                                           | ** **   | **Depreciation of the   exchange rate to R$2.9283** | ** ** | **Depreciation of the   exchange rate to R$3.5139** | ** ** |
| Derivative instruments                    |         | —                                                                                                                                                                 |         | (869,974 | ) | (1,988,700 | ) |
| Loans and financing                       |         | —                                                                                                                                                                 |         | (1,731,012 | ) | (3,462,024 | ) |
| Marketable securities                     |         | —                                                                                                                                                                 |         | 336,389 |   | 672,779 |   |
| *** ***                              | *** *** | *** ***                                                                                                                                                           | *** *** | *** *** | *** *** | *** *** | *** *** |
| Total impact                              |         | —                                                                                                                                                                 |         | (2,264,597 | ) | (4,777,945 | ) |

 

**Cash flow and****interest rate risk**

 

Our net income and operating cash flows are substantially independent of changes in market interest rates because we have no significant interest-bearing assets. Our cash and cash equivalents are mostly denominated in *Reais* and are based on the CDI rate. On December 31, 2013, the CDI rate was 9.77% p.a. and on December 31, 2012 it was 6.9% p.a.

 

Our interest rate risk arises from our debt. Our debt is primarily denominated in U.S. Dollar and to a lesser extent to Brazilian *Reais*. The U.S. Dollar-denominated debt has exposure to fixed rates (mainly the Notes issued by Fibria — Notes 2019, 2020 and 2021) and Libor rates (mainly Export Prepayment Agreements). The *Real*-denominated debt has exposure to fixed rates, to the Brazilian Interbank Deposit Rate*or CDI* and to the Brazilian Long Term Interest Rate or TJLP.

 

As of December 31, 2013, we had loans and financings subject to floating interest rates, which totaled 60.3% of our total indebtedness and bore interest based on LIBOR, TJLP, CDI and a foreign currency basket of our credit facilities with BNDES. Loans and financings subject to fixed rates totaled 39.7% and are primarily linked to our Notes (Fibria 2019, 2020 and 2021).

 

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The table below provides information about our significant interest rate-sensitive instruments and classify our exposures by currency and type of interest rate (floating or fixed).

 
| ** **                                     | ** ** | **2014**                                  | ** ** | **2015** | ** ** | **2016** | ** ** | **After   2016** | ** ** | **Total** | ** ** |
|------------------------------------------------|------------|-------------------------------------------|------------|----------|------------|----------|------------|------------------|------------|-----------|------------|
| ** **                                     | ** ** | **(in millions of Reais)** | ** ** |
| Assets:                                        |       |                                      |       |     |       |     |       |             |       |      |       |
| Cash and cash equivalents                      |       |                                      |       |     |       |     |       |             |       |      |       |
| Floating-rate denominated in *Reais*           |       | 24                                        |       | —   |       | —   |       | —           |       | 24        |       |
| Fixed-rate denominated in U.S. Dollars         |       | 1,247                                     |       | —   |       | —   |       | —           |       | 1,247     |       |
| Marketable securities                          |       |                                      |       |     |       |     |       |             |       |      |       |
| Floating-rate denominated in *Reais*           |       | 970                                       |       | —   |       | —   |       | 48               |       | 1,018     |       |
| Fixed-rate denominated in U.S. Dollars         |       | 98                                        |       |     |       |     |       |             |       | 98        |       |
| Total exposed assets                           |       | 2,340                                     |       | —   |       | —   |       | 48               |       | 2,388     |       |
|                                           |       |                                      |       |     |       |     |       |             |       |      |       |
| Liabilities:                                   |       |                                      |       |     |       |     |       |             |       |      |       |
| Floating-rate debt denominated in *Reais*      |       | 393                                       |       | 434      |       | 284      |       | 1,318            |       | 2,429     |       |
| Floating-rate debt denominated in U.S. Dollars |       | 563                                       |       | 384      |       | 530      |       | 1,988            |       | 3,465     |       |
| Fixed-rate debt denominated in *Reais*         |       | 17                                        |       | 17       |       | 15       |       | 15               |       | 63        |       |
| Fixed-rate debt denominated in U.S. Dollars    |       | 1,999                                     |       | —   |       | —   |       | 1,816            |       | 3,816     |       |
| Total exposed liabilities                      |       | 2,972                                     |       | 834      |       | 830      |       | 5,137            |       | 9,773     |       |

 

**Derivative Instruments**

 

Most of our revenue is denominated in U.S. Dollars. We have U.S. Dollars/Brazilian *Reais* forward contracts (NDFs) and currency options (zero cost collars) to protect our short term cash flow from unfavorable exchange rate movements. We also have interest rate swaps and cross-currency swaps to hedge our indebtedness. Our interest rate swaps hedge the LIBOR and our cross-currency swaps hedge, swapping such debt to U.S. Dollar-denominated debt. See Notes 2.6 and 2.7 to our 2013 consolidated financial statements for a discussion of the accounting policies for derivatives and other financial instruments.

 

At December 31, 2013, derivatives held by us are as follows:

 

(i)                                      Swaps in which we receive three month LIBOR and pays fixed interest rate, with notional amount of U.S. $540 million and last maturity date on May 2019. This swap was contracted to fix the cost of the underlying loan and reduce our cash flow risk. As of December 31, 2013, the sum of the fair values of these swaps resulted in a net liability of R$15 million.

 

(ii)                                   Cross-currency swaps in which we receive *CDI* (a Brazilian interbank rate in *Reais*) and pays U.S. Dollar fixed rate. The purpose of the swaps is to hedge a *Real* denominated debt, converting it to a U.S. Dollar-denominated debt. The notional amount is U.S.$ 423 million and, the longest maturity is August 2020. As of December 31, 2013, the sum of the fair values of these swaps resulted in a net liability of R$150 million.

 

(iii)                                Cross-currency swaps in which we receive *TJLP* (Brazilian Long Term Interest Rate) in Brazilian *Real*and pays U.S. Dollar fixed rate. The total notional amount is U.S.$276 million, and the longest maturity is June 2017. As of December 31, 2013, the sum of the fair values of those swaps resulted in a net liability of R$225 million.

 

(iv)                               Cross-currency swaps in which we receive Brazilian *Real* fixed rate and pays U.S. Dollar fixed rate. The notional amount is U.S.$273 million, with longest maturity of December 2017. As of December 31, 2013, the sum of the fair values of those swaps resulted in a net liability of R$92 million.

 

(v)                                  An option based strategy known as Zero Cost Collar, which provides a floor and a cap to the foreign currency rate between U.S. Dollar and Brazilian *Real*. The instrument is used to protect our U.S. Dollar revenue below a given threshold in Brazilian *Real terms*. As of December 31, 2013, the notional amount was U.S.$ 1,122 million, and the sum of the fair values resulted in a net liability of R$12 million.

 

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(vi)                               An embedded derivative, in which we receive a fixed U.S. Dollar rate and pays a floating U.S. Dollar rate (U.S. Consumer Price Index). The embedded derivative arises from the Forestry Partnership and Standing Timber Supply Agreements with Parkia. Since the signing of the Agreements was in December 30, 2013, the fair value of the embedded derivative in December 31, 2013 was close to zero and, therefore, was not recorded. See “Item 4. Information on Fibria — A. History and Development of Fibria — *Disposition of forestry assets and land*”. Also see Note 11.(e) of our 2013 consolidated financial statements.

 

The following procedures were adopted for the derivatives contract valuations as of December 31, 2013:

 

(i)                                      Swaps: were evaluated by the future cash flow, considering the contractual or projected rates, up to maturity dates, discounted to present value using market rates, in each currency, from BM&FBOVESPA and Bloomberg;

 

(ii)                                   Currency Options: were calculated using the Garman-Kohlhagen option pricing formula, a Black and Scholes formula variation. The volatility is obtained from BM&FBOVESPA option market rates.

 

(iii)                                U.S. CPI Swap (Embedded derivative) — the liability leg future cashflows were projected by the U.S. CPI swap curve (conctructed with the Treasury Inflation-Protected Securities (TIPS) — published by Bloomberg). The asset leg cashflows were evaluated by the fixed rate established in the beginning of the embedded derivative. The fair value of the embedded derivative is the present value of the difference between the two legs.

 

Our derivatives counterparties are all financial institutions, most of them, with rating equal or better than A / A2 (from Fitch, S&P or Moody’s) or brAA- / AA3.br.

 

The following table provides the notional and the fair value of our financial derivatives as of December 31, 2013:

 
| ** **            | ** ** | **Notional amount**                | ** ** | **Fair value as of   December 31, 2013** | ** ** |
|-----------------------|------------|-----------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **            | ** ** | **(in millions of U.S.** | ** ** | **(in millions of Reais)**                         | ** ** |
| ** **            | ** ** | **Dollars)**                            | ** ** | ** **                                                        | ** ** |
| NDF (U.S.$)           |       | —                                  |       |                                                              |       |
| Swap CDI x USD        |       | 423                                     |       | 15                                                                |       |
| Swap LIBOR 3M x Fixed |       | 540                                     |       | (150                                                              | )          |
| Swap TJLP x USD       |       | 276                                     |       | (225                                                              | )          |
| Swap BRL x USD        |       | 273                                     |       | (92                                                               | )          |
| Zero Cost Collar      |       | 1,122                                   |       | (12                                                               | )          |
|                  |       |                                    |       | (464                                                              | )          |

 

For further information concerning risks associated with the foregoing, see Note 4 of our 2013 consolidated financial statements filed herewith.

 

**ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES**

 

Citibank, N.A., as depositary, has agreed to reimburse us for expenses it incurs that are related to the establishment and maintenance of our ADS program. The depositary has agreed to reimburse us for our continuing and annual stock exchange listing fees. It has also agreed to pay the standard out-of-pocket maintenance costs for the ADRs, and to reimburse us annually for certain investor relations programs or special promotional activities. In certain instances, the depositary has agreed to provide additional payments us based on any applicable performance indicators relating to the ADR facility. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available

 

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to us is not necessarily tied to the amount of fees the depositary collects from investors. During calendar year 2013 the depositary reimbursed us in the amount of U.S.$1,075 thousand (net of tax).

 

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect is annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them.

 

**PART II**

 

**ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**

 

See discussion at “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Covenants”.

 

**ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

 

None.

 

**ITEM 15.  CONTROLS AND PROCEDURES**

 

*Disclosure Controls and Procedures*: Management, with the participation of our chief executive officer and our chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the U.S. Securities Exchange Act of 1934 under Rules 13a-15(e)) as of the end of the period covered by this annual report, has concluded that, as of that date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

 

*Management’s Report on Internal Control over Financial Reporting*: Fibria’s management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Fibria’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of Fibria’s internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management concluded that, as of December 31, 2013, Fibria’s internal control over financial reporting is effective based on those criteria.

 

*Changes in internal controls*. There was no change in our internal control over financial reporting that occurred in the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

*Attestation Report of the Registered Public Accounting Firm.*The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their attestation report which appears herein.

 

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**ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT**

 

Our Board of Directors has determined that Mr. Samuel de Paula Matos, a member of our Board of Directors and of our Statutory Audit Committee, is an audit committee financial expert within the meaning of Sarbanes-Oxley and related regulations.

 

**ITEM 16B.  CODE OF ETHICS**

 

Our Board of Directors has adopted a code of conduct (“Code of Conduct”) that applies to all Fibria’s Board members, suppliers and employees, including the members of our financial department, our chief executive officer, our chief financial officer and our chief accounting officer. No waivers, either explicit or implicit, of provisions of the Code of Conduct were granted to our chief executive officer, chief financial officer or chief accounting officer in 2013. A copy of our Code of Conduct has been filed as Exhibit 11.1 to this annual report.

 

Our Code of Conduct addresses, among others, the following topics:

 

·                  honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

·                  full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us;

 

·                  compliance with applicable governmental laws, rules and regulations; and

 

·                  the prompt internal reporting of breaches related to Fibria ́s Code to the Ombudsman.

 

In 2013 we implemented a specific policy for the prevention of corruption, approved by our Board of Directors.  The rules for the conduct of our employees, including those outsourced, management and shareholders in the case of donations, gifts and presents, and entertainment, for example, have been clarified in this policy, with a view to maintaining the conduct of our business always within the highest levels of integrity and transparency. The policy emphasizes also our intolerance for irregular conduct, the application of disciplinary measures for proven improper acts and also highlights the liability of all in reporting any suspect activity to the Ombudsman. In addition, we held live training sessions for senior management regarding these matters, and beginning in 2014, training will be given to our other executives.

 

**ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

The following table sets forth by category of service the total fees for services performed by PricewaterhouseCoopers Auditores Independentes during the fiscal years ended December 31, 2013 and 2012.

 
| **Year Ended December 31** | ** ** | **2013**                                   | ** ** | **2012** | ** ** |
|-------------------------------------------|------------|--------------------------------------------|------------|----------|------------|
| ** **                                | ** ** | **(In thousands of Reais)** | ** ** |
| ** **                                | ** ** | ** **                                 | ** ** |
| Audit Fees                                |       | 3,908                                      |       | 4,321    |       |
| Tax Fees                                  |       | 90                                         |       | 65       |       |
| Audit-Related Fees                        |       | 91                                         |       | 149      |       |
| Total                                     |       | 4,089                                      |       | 4,535    |       |

 

**Audit Fees**

 

Audit fees in 2013 and 2012 consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes in connection with the integrated audit of our annual financial statements, reviews of quarterly financial statements, statutory audits of our subsidiaries, the bond offers and of our internal control over financial reporting, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

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**Tax Fees**

 

Tax fees in 2013 and 2012 consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes in connection with tax services related to the audit procedures. Includes fees charged in connection with the review of the income tax returns of Fibria Celulose S.A.

 

**Audit-Related Fees**

 

Audit-related fees in 2013 and 2012 consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes and refer to services provided in connection with the assessment and review of controls related to labour contingencies and IT systems and issuance of assurance special purpose reports.

 

**Pre-Approval Policies and Procedures**

 

Our Statutory Audit Committee pre-approves all audit, audit-related, tax and other services provided by PricewaterhouseCoopers Auditores Independentes. Any services provided by PricewaterhouseCoopers Auditores Independentes that are not specifically included within the scope of the audit must be pre-approved by our Board of Directors in advance of any engagement. Under the Sarbanes Oxley Act of 2002, audit and risk committees are permitted to approve certain fees for audit-related, tax and other services pursuant to a *de minimis* exception prior to the completion of an audit engagement. In 2013 and 2012 none of the fees paid to PricewaterhouseCoopers Auditores Independentes were approved pursuant to the *de minimis* exception.

 

**ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**

 

Not applicable.

 

**ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS**

 

Treasury shares transactions and additional paid-in capital:

 

(i)                                     On March 23, 2010 we repurchased 309,451 of our own shares at an average price of R$33.99 per share regarding the agreement between VCP and Suzano Bahia Sul Papel e Celulose S.A. for the acquisition of a controlling interest in Ripasa established in November 2004 (Note 25(c) to our 2011 consolidated financial statements).

 

(ii)                                  On July 2, 2009, certain shareholders exercised the right of withdrawal of 36,670 preferred shares regarding the Aracruz Acquisition. Based on the redemption amount of R$20.61 per share, the amount due to dissenting shareholders was R$0.756 million (Note 26(a) to our 2011 consolidated financial statements).

 

**ITEM 16F.  CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT**

 

Not applicable.

 

**ITEM 16G.  CORPORATE GOVERNANCE**

 

**Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards**

 

We are subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different than the standards applied to U.S. listed companies. Under the NYSE rules, we are required only to: (i) have an audit committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (ii) provide prompt certification by our chief executive officer of any material non compliance with any corporate governance rules, and (iii) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practice required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

 

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***Majority of Independent Directors***

 

The NYSE rules require that a majority of the board must consist of independent directors. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Brazilian law does not have a similar requirement. Under Brazilian law, neither our Board of Directors nor our management is required to test the independence of directors before their election to the Board. However, both the Brazilian Corporate Law and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors. We do not have a majority of independent directors serving on its Board of Directors.

 

***Executive Sessions***

 

NYSE rules require that the non management directors must meet at regularly scheduled executive sessions without management. The Brazilian Corporate Law does not have a similar provision. According to the Brazilian Corporate Law, up to one third of the members of the Board of Directors can be elected from management. In our case, none of them occupies both an executive and director position. The directors are not expressly empowered to serve as check on management and there is no requirement that our directors meet regularly without management. As a result, our directors do not typically meet in executive sessions.

 

***Nominating/Corporate Governance Committee***

 

NYSE rules require that listed companies have a Nominating/Corporate Governance Committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. We are not required under applicable Brazilian law to have a Nominating Committee/Corporate Governance Committee, and accordingly, to date, have not established such a committee. The directors are elected by our shareholders at a general shareholders’ meeting. Our corporate governance practices are adopted by the entire board.

 

***Compensation Committee***

 

NYSE rules require that listed companies have a Compensation Committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to CEO compensation, evaluating CEO performance and approving CEO compensation levels and recommending to the board non CEO compensation, incentive compensation and equity based plans. We are not required under applicable Brazilian law to have a Compensation Committee, although we have established an advisory committee (that is not comprised entirely of Board members) to advise on certain of these matters. Under the Brazilian Corporate Law, the total amount available for compensation of our directors and executive officers and for profit sharing payments to our executive officers is established by our shareholders at the annual general meeting. The Board of Directors is then responsible for determining the individual compensation and profit-sharing of each executive officer, as well as the compensation of our board and committee members. In making such determination, the board reviews the performance of each executive officer and each of the goals they were supposed to achieve during the year.

 

***Statutory Audit Committee***

 

Under NYSE Rule 303A.06 and the requirements of Rule 10A-3 of the Securities and Exchange Commission, domestic listed companies are required to have an audit committee consisting entirely of independent directors that otherwise complies with Rule 10A-3. In addition, the audit committee must have a written charter that addresses the matters outlined in NYSE Rule 303.A.06(c), have an internal audit function and otherwise fulfill the requirements of the NYSE and Rule 10A-3. There is no requirement for an audit committee under Brazilian law and there are features of Brazilian law that require adaptation of the independent audit committee rule to local practice, as permitted by NYSE Rule 303A.06 and Rule 10A-3. As a foreign private issuer, Fibria is in compliance with Rule 303A.06 and Rule 10A-3. Our audit committee, which is equivalent to a U.S. audit committee, was installed at the meeting of our Board of Directors held on December 18, 2009 and became a statutory corporate body by resolution of the Extraordinary General Meeting held on April 26, 2013. It complies with all of such requirements and provides assistance to our Board of Directors in matters involving our accounting, internal

 

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controls, financial reporting and compliance. Our audit committee recommends the appointment of our independent auditors to our Board of Directors and reviews the compensation of, and coordinates with, our independent auditors. Our audit committee also evaluates the effectiveness of our internal financial and legal compliance controls.

 

***Shareholder Approval of Equity Compensation Plans***

 

NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions. Under the Brazilian Corporate Law, shareholders must approve all stock option plans. In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval. We have no equity compensation plans.

 

***Corporate Governance Guidelines***

 

NYSE rules require that listed companies adopt and disclose corporate governance guidelines. We have not adopted any formal corporate governance guidelines beyond those required by applicable Brazilian law. We believe that the corporate governance guidelines applicable to us under Brazilian corporate law are consistent with the guidelines established by the NYSE.

 

***Code of Business Conduct and Ethics***

 

NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Applicable Brazilian law does not have a similar requirement. However, we have amended our code of conduct to comply with the requirements of the Sarbanes-Oxley Act and the NYSE rules. We believe our code, as amended, substantially addresses the matters required to be addressed by the NYSE rules. A copy of our Code of Conduct has been filed as Exhibit 11.1 to this annual report. For a further discussion of our Code of Conduct, see “Item 16B. — Code of Conduct.”

 

***Internal Audit Function***

 

NYSE rules require that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control. Brazilian law does not require that companies maintain an internal audit function. However, as a best practice, we maintain an internal audit function. Our internal audit function is under the supervision of the Statutory Audit Committee.

 

**ITEM 16H.  MINE SAFETY DISCLOSURE**

 

Not applicable.

 

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**PART III**

** **

**ITEM 17.  FINANCIAL STATEMENTS**

 

Not applicable.

 

**ITEM 18.  FINANCIAL STATEMENTS**

 

The following consolidated financial statements are filed as part of this annual report, together with the report of Independent Registered Public Accounting Firm:

 
| Management’s Report on Internal Control Over Financial   Reporting                                                    |   | F-2    |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                       |   |   |
| Report of Independent Registered Public Accounting   Firm                                                                  |   | F-3    |
|                                                                                                                       |   |   |
| Consolidated   Balance Sheets as of December 31, 2013, 2012 and 2011                                                  |   | F-7    |
|                                                                                                                       |   |   |
| Consolidated Statement of Profit or Loss for the years   ended December 31, 2013, 2012 and 2011                       |   | F-9    |
|                                                                                                                       |   |   |
| Consolidated Statement of Comprehensive Income for the   years ended December 31, 2013, 2012 and 2011                 |   | F-10   |
|                                                                                                                       |   |   |
| Consolidated Statement of Changes in Shareholders’   Equity for the years ended December 31, 2013, 2012 and 2011 |   | F-11   |
|                                                                                                                       |   |   |
| Consolidated Statement of Cash Flows for the years   ended December 31, 2013, 2012 and 2011                           |   | F-12   |
|                                                                                                                       |   |   |
| Notes to the Consolidated Financial Statements                                                                             |   | F-13   |

 

All schedules for which provision is made in the applicable accounting regulations of the Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

 

**ITEM 19.  EXHIBITS**

 
| **Exhibit********Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|---------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 1#                        |       | English   translation of the By-laws                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.(a)(1)**                |       | Form of   Amended and Restated Deposit Agreement dated as of August 12, 2009 among   us, Citibank, N.A., as depositary, and the Owners and Beneficial Owners of   American Depositary Receipts, including the form of American Depositary   Receipts.                                                                                                                                                                                                           |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.(a)(2) ********    |       | Free   translation of the Novo Mercado Listing Rules                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.(b)(1)****              |       | Indenture,   dated June 24, 2005, among Voto-Votorantim Overseas Trading Operations   IV Limited, as issuer, The Bank of New York, as trustee, The Bank of New   York, as transfer agent, paying agent and registrar, The Bank of   Tokyo-Mitsubishi Ltd., London Branch, as principal paying agent, and Votorantim   Participações S.A., Votorantim Celulose e Papel S.A., Cimento Rio Branco   S.A., and Companhia Níquel Tocantins, as guarantors. |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.(b)(2)*******           |       | Indenture   dated as of March 3, 2011 among Fibria Overseas Finance Ltd., Fibria   Celulose S.A. and Deutsche Bank Trust Company Americas, in respect of the   6.750% Senior Notes due 2021                                                                                                                                                                                                                                                                          |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.(b)(3)*******           |       | Indenture   dated as of May 4, 2010 among Fibria Overseas Finance Ltd., Fibria   Celulose S.A. and Deutsche Bank Trust Company Americas, in respect of the   7.500% Senior Notes due 2020.                                                                                                                                                                                                                                                                           |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.(b)(4)                  |       | The   Company agrees to furnish to the Commission upon its request any instrument   relating to long-term debt issued by the Company or any subsidiary where the   total amount of securities authorized under                                                                                                                                                                                                                                                            |

 

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| **Exhibit********Number** | ** ** | **Description**                                                                                                                                                                                                                                                 |
|---------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |       | that   instrument does not exceed 10% of the Company’s consolidated assets.                                                                                                                                                                                |
|                      |       |                                                                                                                                                                                                                                                            |
| 3.1.+++++                 |       | Investment   Agreement, dated January 19, 2009, among us, VID, BNDESPar and VPar                                                                                                                                                                           |
|                      |       |                                                                                                                                                                                                                                                            |
| 3.2##                     |       | Form of   Shareholders’ Agreement, dated October 29, 2009, among us, VID, BNDESPar   and VPar                                                                                                                                                    |
|                      |       |                                                                                                                                                                                                                                                            |
| 4.1+                      |       | Exchange   Agreement dated September 19, 2006 by and between Votorantim Celulose e   Papel S.A. and International Paper Investments (Holland) B.V.                                                                                                         |
|                      |       |                                                                                                                                                                                                                                                            |
| 4.2+++                    |       | Financing   Agreement dated July, 2008 through credit facility of R$540 million by and   between the National Bank of Economic and Social Development — BNDES, VCP                                                                                         |
|                      |       |                                                                                                                                                                                                                                                            |
| 4.3********               |       | Quota   Purchase and Sale Agreement dated as of September 22, 2011 between the   Company and Oji Paper Co. Ltd., together with ancillary agreements.                                                                                                       |
|                      |       |                                                                                                                                                                                                                                                            |
| 4.4‡                 |       | Share   Purchase Agreement and Other Covenants dated as of November 15, 2013   between the Company and Parkia Participações S.A. and First Amendment to the   Share Purchase Agreement and Other Covenants dated as of December 30,   2013. |
|                      |       |                                                                                                                                                                                                                                                            |
| 6                         |       | See   Note 35 to our 2013 consolidated financial statements for information   explaining how earnings per share were calculated.                                                                                                                                |
|                      |       |                                                                                                                                                                                                                                                            |
| 8                         |       | See   Note 2 and 17 to our 2013 consolidated financial statements for information   regarding our subsidiaries.                                                                                                                                                 |
|                      |       |                                                                                                                                                                                                                                                            |
| 11.1±                |       | English   translation of Code of Conduct.                                                                                                                                                                                                                       |
|                      |       |                                                                                                                                                                                                                                                            |
| 12.1‡                |       | Rule 13a-14(a)/15(d)-14(a) Certificate   of Chief Executive Officer                                                                                                                                                                                   |
|                      |       |                                                                                                                                                                                                                                                            |
| 12.2‡                |       | Rule 13a-14(a)/15(d)-14(a) Certificate   of the Chief Financial Officer                                                                                                                                                                               |
|                      |       |                                                                                                                                                                                                                                                            |
| 13.1‡                |       | Section 1350   Certification of Chief Executive Officer                                                                                                                                                                                                    |
|                      |       |                                                                                                                                                                                                                                                            |
| 13.2‡                |       | Section 1350   Certification of the Chief Financial Officer                                                                                                                                                                                                |
|                      |       |                                                                                                                                                                                                                                                            |
| 23.01‡               |       | Consent   of Independent Registered Public Accounting Firm                                                                                                                                                                                                      |
|                      |       |                                                                                                                                                                                                                                                            |
| **                        |       | Incorporated   herein by reference to our registration statement on Form F-6 filed on   June 24, 2009 (File No. 160187).                                                                                                                         |
|                      |       |                                                                                                                                                                                                                                                            |
| ***                       |       | Incorporated   herein by reference to our annual report on Form 20-F filed on June 30,   2004 (File No. 001-15018).                                                                                                                              |
|                      |       |                                                                                                                                                                                                                                                            |
| ****                      |       | Incorporated   herein by reference to our annual report on Form 20-F filed on   June 29, 2006 (File No. 001-15018).                                                                                                                              |
|                      |       |                                                                                                                                                                                                                                                            |
| *****                     |       | Incorporated   herein by reference to our submission on Form 6-K filed on   October 23, 2009 (File No. 001-15018).                                                                                                                               |
|                      |       |                                                                                                                                                                                                                                                            |
| ********                  |       | Incorporated   herein by reference to our annual report on Form 20-F filed on   February 29, 2012 (File No. 001-15018)                                                                                                                           |
|                      |       |                                                                                                                                                                                                                                                            |
| +                         |       | Incorporated   herein by reference to our annual report on Form 20-F filed on   February 1, 2007 (File No. 001-15018).                                                                                                                           |
|                      |       |                                                                                                                                                                                                                                                            |
| ++                        |       | Incorporated   herein by reference to our annual report on Form 20-F filed on   January 31, 2008 (File No. 001-15018).                                                                                                                           |

 

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| **Exhibit********Number** | ** ** | **Description**                                                                                                                                                                |
|---------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |       |                                                                                                                                                                           |
| +++++                     |       | Incorporated   herein by reference to our submission on Form 6-K filed on   January 27, 2011 (File No. 001-15018).                                              |
|                      |       |                                                                                                                                                                           |
| ##                        |       | Incorporated   herein by reference to Exhibit 3.1.10 to Exhibit 3.1 to our   submission on Form 6-K filed on January 27, 2011 (File   No. 001-15018). |
|                      |       |                                                                                                                                                                           |
| #                         |       | Incorporated   herein by reference to our submission on Form 6-K filed on May 26,   2012 (File No. 001-15018).                                                  |
|                      |       |                                                                                                                                                                           |
| ±                    |       | Incorporated   herein by reference to our annual report on Form 20-F filed on   February 27, 2013 (File No. 001-15018).                                         |
|                      |       |                                                                                                                                                                           |
| ‡                    |       | Filed   herewith.                                                                                                                                                              |

 

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**Fibria Celulose S.A.**

**Consolidated financial statements at**

**December 31, 2013 and report of independent registered public accounting firm**

 

F-1

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Table of Contents

 

**Management’s Report on Internal Control over Financial Reporting**

 

1 The management of Fibria Celulose S.A. and subsidiaries (the “Company”) is responsible for establishing and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.

 

2 The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s Audit Committee, principal executive and principal financial officers, and effected by the Company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) as approved by the International Accounting Standards Board (“IASB”). The Company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS as approved by the IASB, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

 

3 Because of its inherent limitations, internal control over financial reporting may not prevent or detect material misstatements on a timely basis. Therefore even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

4 The effectiveness of the Company’s internal control over financial reporting as of December 31, 2013, is based on the criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, management has concluded that as of December 31, 2013 the Company’s internal control over financial reporting is effective.

 

São Paulo, January 29, 2014

 

 
| /s/ Marcelo Strufaldi Castelli |   | /s/ Guilherme Perboyre Cavalcanti                       |
|--------------------------------|--------|---------------------------------------------------------|
| Marcelo Strufaldi Castelli     |   | Guilherme Perboyre Cavalcanti                           |
| Chief Executive Officer        |   | Chief Financial Officer

and Investor Relations Officer |

 

F-2

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Table of Contents

 

**Report of independent registered public accounting firm**

 

To the Board of Directors and Shareholders

Fibria Celulose S.A.

 

1                                        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of profit or loss, comprehensive income, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Fibria Celulose S.A. and its subsidiaries at December 31, 2013, December 31, 2012 and January 1, 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and International Standards on Auditing. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

2                                        A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,

 

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and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

3                                        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

São Paulo, January 29, 2014

 

 

/s/ PricewaterhouseCoopers

Auditores Independentes

CRC 2SP000160/O-5

 

F-4

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**Index**

 
| **Financial statements**                       | ** **                                                       |
|------------------------------------------------|------------------------------------------------------------------|
|                                           | Consolidated balance sheet                                       | F-7 |
|                                           | Consolidated statement of profit or loss                         | F-9 |
|                                           | Consolidated statement of comprehensive income                   | F-10 |
|                                           | Consolidated statement of changes in shareholders’   equity | F-11 |
|                                           | Consolidated statement of cash flows                             | F-12 |
| Notes to the consolidated financial statements |                                                             |
|                                           | 1                                                                | Operations and   current developments | F-13 |
|                                           | 2                                                                | Presentation of   financial statements and summary of significant accounting policies | F-20 |
|                                           |                                                             | 2.1 | Financial   statements - basis of preparation | F-20 |
|                                           |                                                             | 2.2 | Consolidation | F-20 |
|                                           |                                                             | 2.3 | Segment reporting | F-25 |
|                                           |                                                             | 2.4 | Foreign currency   translation | F-25 |
|                                           |                                                             | 2.5 | Cash and cash   equivalents | F-25 |
|                                           |                                                             | 2.6 | Financial assets | F-25 |
|                                           |                                                             | 2.7 | Derivative   financial instruments and hedging activities | F-28 |
|                                           |                                                             | 2.8 | Trade accounts   receivable | F-28 |
|                                           |                                                             | 2.9 | Inventory | F-29 |
|                                           |                                                             | 2.10 | Current and   deferred income tax and social contribution | F-29 |
|                                           |                                                             | 2.11 | Intangible assets | F-30 |
|                                           |                                                             | 2.12 | Property, plant   and equipment | F-31 |
|                                           |                                                             | 2.13 | Leases | F-31 |
|                                           |                                                             | 2.14 | Biological assets | F-32 |
|                                           |                                                             | 2.15 | Business combination | F-32 |
|                                           |                                                             | 2.16 | Impairment of   non-financial assets, other than goodwill | F-33 |
|                                           |                                                             | 2.17 | Trade payables | F-33 |
|                                           |                                                             | 2.18 | Loans and financing | F-33 |
|                                           |                                                             | 2.19 | Other assets   and liabilities (current and non-current) | F-33 |
|                                           |                                                             | 2.20 | Employee benefits | F-34 |
|                                           |                                                             | 2.21 | Contingent   assets and contingent liabilities and legal obligations | F-35 |
|                                           |                                                             | 2.22 | Asset retirement   obligations | F-35 |
|                                           |                                                             | 2.23 | Revenue recognition | F-35 |
|                                           |                                                             | 2.24 | Dividend distribution | F-36 |
|                                           |                                                             | 2.25 | Non-current   assets held for sale and discontinued operations | F-36 |
|                                           |                                                             | 2.26 | Adoption of new   standards, amendments and interpretations issued by IASB and CPC | F-37 |
|                                           |                                                             | 2.27 | New standards,   amendments and interpretations not yet adopted | F-38 |
|                                           | 3                                                                | Critical   accounting estimates and assumptions | F-39 |
|                                           | 4                                                                | Risk management | F-42 |
|                                           |                                                             | 4.1 | Environmental risks | F-43 |
|                                           |                                                             | 4.2 | Financial risks | F-44 |
|                                           | 5                                                                | Sensitivity analysis | F-50 |
|                                           | 6                                                                | Fair value estimates | F-51 |
|                                           |                                                             | 6.1 | Fair value of   loans and financing | F-54 |
|                                           |                                                             | 6.2 | Fair value   measurement of derivative financial instruments | F-55 |
|                                           | 7                                                                | Financial   instruments by category | F-57 |
|                                           | 8                                                                | Credit quality   of financial assets | F-57 |
|                                           | 9                                                                | Cash and cash   equivalents | F-60 |

 

F-5

----

Table of Contents

 
|   | 10 | Marketable securities                                        | F-60  |
|--------|----|--------------------------------------------------------------|-------|
|   | 11 | Derivative   financial instruments                           | F-61  |
|   | 12 | Trade accounts   receivable                                  | F-66  |
|   | 13 | Inventory                                                    | F-68  |
|   | 14 | Recoverable taxes                                            | F-69  |
|   | 15 | Taxes   on income                                            | F-70  |
|   | 16 | Significant   transactions and balances with related parties | F-74  |
|   | 17 | Investments                                                  | F-79  |
|   | 18 | Biological assets                                            | F-80  |
|   | 19 | Property, plant and   equipment                              | F-82  |
|   | 20 | Intangible assets                                            | F-84  |
|   | 21 | Finance and   operating lease agreements                     | F-85  |
|   | 22 | Advances to   suppliers - forestry partnership programs      | F-87  |
|   | 23 | Loans and financing                                          | F-88  |
|   | 24 | Contingencies                                                | F-97  |
|   | 25 | Tax Amnesty and   Refinancing Program (“REFIS”)    | F-104 |
|   | 26 | Long-term commitments                                        | F-105 |
|   | 27 | Shareholders’ equity                                    | F-105 |
|   | 28 | Employee benefits                                            | F-106 |
|   | 29 | Compensation   program based on shares                       | F-108 |
|   | 30 | Asset retirement   obligations                               | F-110 |
|   | 31 | Revenue                                                      | F-111 |
|   | 32 | Financial results                                            | F-113 |
|   | 33 | Expenses by nature                                           | F-114 |
|   | 34 | Insurance (unaudited)                                        | F-115 |
|   | 35 | Earnings per share                                           | F-115 |
|   | 36 | Current assets   held for sale and discontinued operations   | F-116 |
|   | 37 | Impairment tests                                             | F-118 |
|   | 38 | Subsequent events                                            | F-119 |

 

F-6

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Consolidated balance sheet at**

**In thousands of Reais**

 
| **Assets**                                                 | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
| ** **                                                 | ** ** | ** **                   | ** ** | **(Restated)(*)**            | ** ** | **(Restated)(*)**                    | ** ** |
| Current                                                    |       |                         |       |                         |       |                                 |       |
| Cash and cash   equivalents (Note 9)                       |       | 1,271,752                    |       | 943,856                      |       | 381,915                              |       |
| Marketable securities   (Note 10)                          |       | 1,068,182                    |       | 2,351,986                    |       | 1,677,926                            |       |
| Derivative instruments   (Note 11)                         |       | 22,537                       |       | 18,344                       |       | 31,638                               |       |
| Trade accounts   receivable, net (Note 12)                 |       | 382,087                      |       | 754,768                      |       | 945,362                              |       |
| Accounts receivable -   land and building sold (Note 1(e)) |       | 902,584                      |       |                         |       |                                 |       |
| Inventory (Note 13)                                        |       | 1,265,730                    |       | 1,183,142                    |       | 1,178,707                            |       |
| Recoverable taxes (Note   14)                              |       | 201,052                      |       | 209,462                      |       | 327,787                              |       |
| Assets held for sale   (Note 36)                           |       | 589,849                      |       | 589,849                      |       | 644,166                              |       |
| Other assets                                               |       | 103,228                      |       | 194,526                      |       | 108,062                              |       |
|                                                       |       |                         |       |                         |       |                                 |       |
|                                                       |       | 5,807,001                    |       | 6,245,933                    |       | 5,295,563                            |       |
|                                                       |       |                         |       |                         |       |                                 |       |
| Non-current                                                |       |                         |       |                         |       |                                 |       |
| Marketable securities   (Note 10)                          |       | 48,183                       |       |                         |       |                                 |       |
| Derivative financial   instruments (Note 11)               |       | 71,017                       |       | 26,475                       |       | 43,446                               |       |
| Related parties   receivables (Note 16)                    |       | 7,142                        |       | 6,245                        |       | 5,469                                |       |
| Recoverable taxes (Note   14)                              |       | 743,883                      |       | 657,830                      |       | 677,232                              |       |
| Advances to suppliers   (Note 22)                          |       | 726,064                      |       | 740,310                      |       | 760,611                              |       |
| Judicial deposits (Note   24)                              |       | 197,506                      |       | 157,567                      |       | 137,060                              |       |
| Deferred taxes (Note   15)                                 |       | 968,116                      |       | 879,606                      |       | 995,368                              |       |
| Other assets                                               |       | 252,135                      |       | 172,612                      |       | 95,060                               |       |
|                                                       |       |                         |       |                         |       |                                 |       |
| Investments (Note 17)                                      |       | 46,922                       |       | 40,674                       |       | 7,506                                |       |
| Biological assets (Note   18)                              |       | 3,423,434                    |       | 3,325,604                    |       | 3,264,210                            |       |
| Property, plant and   equipment (Note 19)                  |       | 9,824,504                    |       | 11,174,561                   |       | 11,841,247                           |       |
| Intangible assets (Note   20)                              |       | 4,634,265                    |       | 4,717,163                    |       | 4,809,448                            |       |
|                                                       |       |                         |       |                         |       |                                 |       |
|                                                       |       | 20,943,171                   |       | 21,898,647                   |       | 22,636,657                           |       |
|                                                       |       |                         |       |                         |       |                                 |       |
| Total assets                                               |       | 26,750,172                   |       | 28,144,580                   |       | 27,932,220                           |       |

 

----

(*) Refer to Note 2.26 for the effects of the restatements.

 

F-7

----

Table of Contents

 
| **Liabilities and shareholders’   equity**                       | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-----------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
| ** **                                                            | ** ** | ** **                   | ** ** | **(Restated)(*)**            | ** ** | **(Restated)****(*)**                | ** ** |
| Current                                                               |       |                         |       |                         |       |                                 |       |
| Loans and financing   (Note 23)                                       |       | 2,972,361                    |       | 1,138,005                    |       | 1,092,108                            |       |
| Trade payable                                                         |       | 586,541                      |       | 435,939                      |       | 373,692                              |       |
| Payroll, profit sharing   and related charges                         |       | 129,386                      |       | 128,782                      |       | 134,024                              |       |
| Taxes payable                                                         |       | 55,819                       |       | 41,368                       |       | 53,463                               |       |
| Derivative financial   instruments (Note 11)                          |       | 106,793                      |       | 54,252                       |       | 163,534                              |       |
| Liabilities related to   the assets held for sale (Note 1(d)(i)) |       | 470,000                      |       | 470,000                      |       |                                 |       |
| Dividends payable                                                     |       | 2,374                        |       | 2,076                        |       | 1,520                                |       |
| Other payables                                                        |       | 125,081                      |       | 204,833                      |       | 142,367                              |       |
|                                                                  |       |                         |       |                         |       |                                 |       |
|                                                                  |       | 4,448,355                    |       | 2,475,255                    |       | 1,960,708                            |       |
|                                                                  |       |                         |       |                         |       |                                 |       |
| Non-current                                                           |       |                         |       |                         |       |                                 |       |
| Loans and financing   (Note 23)                                       |       | 6,800,736                    |       | 9,629,950                    |       | 10,232,309                           |       |
| Derivative financial   instruments (Note 11)                          |       | 451,087                      |       | 263,646                      |       | 125,437                              |       |
| Taxes payable                                                         |       | 159                          |       | 77,665                       |       | 76,510                               |       |
| Deferred taxes (Note   15)                                            |       | 235,896                      |       | 227,923                      |       | 739,878                              |       |
| Provision for   contingencies (Note 24)                               |       | 128,838                      |       | 104,813                      |       | 101,594                              |       |
| Other payables                                                        |       | 193,847                      |       | 194,521                      |       | 163,096                              |       |
|                                                                  |       |                         |       |                         |       |                                 |       |
|                                                                  |       | 7,810,563                    |       | 10,498,518                   |       | 11,438,824                           |       |
|                                                                  |       |                         |       |                         |       |                                 |       |
| Total liabilities                                                     |       | 12,258,918                   |       | 12,973,773                   |       | 13,399,532                           |       |
|                                                                  |       |                         |       |                         |       |                                 |       |
| Shareholders’ equity (Note 27)                                   |       |                         |       |                         |       |                                 |       |
| Share capital (Note   27(a))                                          |       | 9,729,006                    |       | 9,729,006                    |       | 8,379,397                            |       |
| Share capital reserve                                                 |       | 2,688                        |       | 2,688                        |       | 2,688                                |       |
| Treasury shares                                                       |       | (10,346                      | )          | (10,346                      | )          | (10,346                              | )          |
| Statutory reserves   (Note 27(c))                                     |       | 3,109,281                    |       | 3,815,584                    |       | 4,520,290                            |       |
| Other reserves                                                        |       | 1,614,270                    |       | 1,596,666                    |       | 1,611,837                            |       |
|                                                                  |       |                         |       |                         |       |                                 |       |
| Equity attributable to   shareholders of the Company             |       | 14,444,899                   |       | 15,133,598                   |       | 14,503,866                           |       |
| Equity attributable to   non-controlling interests                    |       | 46,355                       |       | 37,209                       |       | 28,822                               |       |
|                                                                  |       |                         |       |                         |       |                                 |       |
| Total shareholders’   equity                                     |       | 14,491,254                   |       | 15,170,807                   |       | 14,532,688                           |       |
|                                                                  |       |                         |       |                         |       |                                 |       |
| Total liabilities and shareholders’ equity                       |       | 26,750,172                   |       | 28,144,580                   |       | 27,932,220                           |       |

 

----

(*) Refer to Note 2.26 for the effects of the restatements.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-8

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Consolidated statement of profit or loss**

**Years ended December 31**

**In thousand of Reais, except for the income per shares**

 
| ** **                                                                                   | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                                                         |       |       |       |       |       |       |       |
| **Continuing   operations**                                                                  |       |       |       |       |       |       |       |
|                                                                                         |       |       |       |       |       |       |       |
| **Revenues   (Note 31)**                                                                     |       | 6,917,406  |       | 6,174,373  |       | 5,854,300  |       |
| Cost of sales (Note 33)                                                                      |       | (5,382,688 | )          | (5,237,258 | )          | (5,124,269 | )          |
|                                                                                         |       |       |       |       |       |       |       |
| **Gross   profit**                                                                           |       | 1,534,718  |       | 937,115    |       | 730,031    |       |
|                                                                                         |       |       |       |       |       |       |       |
| **Operating   income (expenses)**                                                            |       |       |       |       |       |       |       |
| Selling expenses (Note   33)                                                                 |       | (347,538   | )          | (298,052   | )          | (294,928   | )          |
| General and   administrative (Note 33)                                                       |       | (300,131   | )          | (286,002   | )          | (310,425   | )          |
| Equity in losses of   associate                                                              |       |       |       | (592       | )          | (414       | )          |
| Other operating income   (expenses), net (Note 33)                                           |       | 823,398    |       | 354,026    |       | 253,395    |       |
|                                                                                         |       |       |       |       |       |       |       |
|                                                                                         |       | 175,729    |       | (230,620   | )          | (352,372   | )          |
|                                                                                         |       |       |       |       |       |       |       |
| **Income   before financial income and expenses**                                            |       | 1,710,447  |       | 706,495    |       | 377,659    |       |
|                                                                                         |       |       |       |       |       |       |       |
| Financial income (Note   32)                                                                 |       | 110,723    |       | 167,646    |       | 217,000    |       |
| Financial expenses   (Note 32)                                                               |       | (1,016,526 | )          | (944,405   | )          | (873,005   | )          |
| Result of derivative   financial instruments (Note 32)                                       |       | (215,313   | )          | (184,465   | )          | (276,877   | )          |
| Foreign exchange loss (Note 32)                                                         |       | (932,907   | )          | (735,001   | )          | (935,789   | )          |
|                                                                                         |       |       |       |       |       |       |       |
|                                                                                         |       | (2,054,023 | )          | (1,696,225 | )          | (1,868,671 | )          |
|                                                                                         |       |       |       |       |       |       |       |
| **Losses   from continuing operations before income taxes**                                  |       | (343,576   | )          | (989,730   | )          | (1,491,012 | )          |
|                                                                                         |       |       |       |       |       |       |       |
| Income taxes                                                                                 |       |       |       |       |       |       |       |
| Current (Note 15)                                                                            |       | (619,606   | )          | (42,167    | )          | 67,835     |       |
| Deferred (Note 15)                                                                           |       | 265,600    |       | 333,927    |       | 314,408    |       |
|                                                                                         |       |       |       |       |       |       |       |
| **Net   losses from continuing operations**                                                  |       | (697,582   | )          | (697,970   | )          | (1,108,769 | )          |
|                                                                                         |       |       |       |       |       |       |       |
| **Discontinued   operations**                                                                |       |       |       |       |       |       |       |
| Net income from   discontinued operations (Note 36)                                          |       |       |       |       |       | 240,655    |       |
|                                                                                         |       |       |       |       |       |       |       |
| **Net losses   for the year**                                                                |       | (697,582   | )          | (697,970   | )          | (868,114   | )          |
|                                                                                         |       |       |       |       |       |       |       |
| **Attributable   to**                                                                        |       |       |       |       |       |       |       |
| Shareholders of the   Company - continuing operations                                        |       | (706,422   | )          | (704,706   | )          | (1,113,277 | )          |
| Shareholders of the   Company - discontinuing operations                                     |       |       |       |       |       | 240,655    |       |
| Non-controlling   interest                                                                   |       | 8,840      |       | 6,736      |       | 4,508      |       |
|                                                                                         |       |       |       |       |       |       |       |
| **Net   losses for the year**                                                                |       | (697,582   | )          | (697,970   | )          | (868,114   | )          |
|                                                                                         |       |       |       |       |       |       |       |
| Basic and diluted loss   per share - continuing operations (in Reais) (Note 35)              |       | (1.28      | )          | (1.34      | )          | (2.38      | )          |
|                                                                                         |       |       |       |       |       |       |       |
| Basic and diluted   (loss) earnings per share - discontinued operations (in Reais) (Note 35) |       |       |       |       |       | 0.51       |       |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-9

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Consolidated statement of comprehensive income**

**Years ended December 31**

**In thousand of Reais, except for the income per shares**

 
| ** **                                                                                                | ** ** | **2013**   | ** ** | **2012**          | ** ** | **2011**          | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|------------|------------|-------------------|------------|-------------------|------------|
| ** **                                                                                                | ** ** | ** ** | ** ** | **(Restated)(*)** | ** ** | **(Restated)(*)** | ** ** |
|                                                                                                      |       |       |       |              |       |              |       |
| **Net   losses for the year**                                                                             |       | (697,582   | )          | (697,970          | )          | (868,114          | )          |
|                                                                                                      |       |       |       |              |       |              |       |
| **Other   comprehensive income**                                                                          |       |       |       |              |       |              |       |
| Items that will not be   reclassified to profit or loss, net of taxes                                     |       |       |       |              |       |              |       |
| Actuarial   gains/(losses) of post employment   benefit obligations - Fibria (*)                          |       | 14,919     |       | (15,171           | )          | (6,987            | )          |
| Share of other comprehensive income - actuarial losses of post   employment benefit obligation of Veracel |       | (781       | )          |              |       |              |       |
|                                                                                                      |       |       |       |              |       |              |       |
|                                                                                                      |       | 14,138     |       | (15,171           | )          | (6,987            | )          |
|                                                                                                      |       |       |       |              |       |              |       |
| Items that may be subsequently reclassified to profit or loss, net of   taxes                             |       |       |       |              |       |              |       |
| Foreign exchange effect on available-for-sale financial assets, net of   tax                              |       | 3,466      |       |              |       |              |       |
|                                                                                                      |       |       |       |              |       |              |       |
| **Other   comprehensive income (loss) for the year, net of taxes**                                        |       | 17,604     |       | (15,171           | )          | (6,987            | )          |
|                                                                                                      |       |       |       |              |       |              |       |
| **Total   comprehensive losses for the year, net of taxes**                                               |       | (679,978   | )          | (713,141          | )          | (875,101          | )          |
|                                                                                                      |       |       |       |              |       |              |       |
| **Attributable   to**                                                                                     |       |       |       |              |       |              |       |
| Shareholders of the   Company - continuing operations                                                     |       | (688,818   | )          | (719,877          | )          | (1,120,264        | )          |
| Shareholders of the   Company - discontinued operations                                                   |       |       |       |              |       | 240,655           |       |
| Non-controlling   interest                                                                                |       | 8,840      |       | 6,736             |       | 4,508             |       |
|                                                                                                      |       |       |       |              |       |              |       |
|                                                                                                      |       | (679,978   | )          | (713,141          | )          | (875,101          | )          |

 

----

(*)    The actuarial losses of post employment benefit obligations in 2012 and 2011, in the amount of R$ 15,171 and R$ 6,987, respectively, refer to the adjustment made in those years due to the retrospective impact of the adoption of IAS 19 (R), as Note 2.26.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-10

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Statement of changes in shareholders’ equity**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                                                     | ** ** | **Capital** | ** ** | ** **                 | ** ** | ** **  | ** ** | **Other reserves** | ** ** | ** **        | ** ** | ** **                  | ** ** | **Retained**     | ** ** | ** **   | ** ** | ** **      | ** ** | ** **   | ** ** |
|--------------------------------------------------------------------------------|------------|-------------|------------|----------------------------|------------|-------------|------------|-------------------------|------------|-------------------|------------|-----------------------------|------------|------------------|------------|--------------|------------|-----------------|------------|--------------|------------|
| ** **                                                                     | ** ** | ** **  | ** ** | **Transaction**            | ** ** | ** **  | ** ** | ** **              | ** ** | **Other**         | ** ** | ** **                  | ** ** | ** **       | ** ** | **earnings** | ** ** | ** **      | ** ** | **Non-**     | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | ** **  | ** ** | **costs to the** | ** ** | **Capital** | ** ** | **Treasury**            | ** ** | **comprehensive** | ** ** | **Statutory reserves** | ** ** | **(accumulated** | ** ** | ** **   | ** ** | **controlling** | ** ** | ** **   | ** ** |
| ** **                                                                     | ** ** | **Capital** | ** ** | **capital increase**  | ** ** | **reserve** | ** ** | **shares**              | ** ** | **Income**        | ** ** | **Legal**                   | ** ** | **Investments**  | ** ** | **losses)**  | ** ** | **Total**       | ** ** | **interest** | ** ** | **Total** | ** ** |
|                                                                           |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| **As at   January 1, 2011**                                               |       | 8,379,397   |       |                       |       | 2,688       |       | (10,346                 | )          | 1,627,903         |       | 303,800                     |       | 5,077,971        |       |         |       | 15,381,413      |       | 23,433       |       | 15,404,846 |   |
|                                                                           |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| Total loss                                                                     |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| Net (loss)/ income                                                             |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       | (872,622     | )          | (872,622        | )          | 4,508        |       | (868,114 | ) |
| Other comprehensive   loss for the year (impact of the adoption of IAS 19 (R)) |       |        |       |                       |       |        |       |                    |       | (6,987            | )          |                        |       |             |       |         |       | (6,987          | )          |         |       | (6,987 | ) |
|                                                                           |       |        |       |                       |       |        |       |                    |       | (6,987            | )          |                        |       |             |       | (872,622     | )          | (879,609        | )          | 4,508        |       | (875,101 | ) |
| Transactions with   shareholders                                               |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| Capital increase                                                               |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       | 881          |       | 881 |   |
| Realization of   revaluation reserve, net of tax                               |       |        |       |                       |       |        |       |                    |       | (9,079            | )          |                        |       |             |       | 9,079        |       |            |       |         |       |   |   |
| Lapsed dividends                                                               |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       | 2,062        |       | 2,062           |       |         |       | 2,062 |   |
| Investment reserve   appropriation                                             |       |        |       |                       |       |        |       |                    |       |              |       |                        |       | (861,481         | )          | 861,481      |       |            |       |         |       |   |   |
|                                                                           |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| **As at   January 1, 2012 - restated**                                    |       | 8,379,397   |       |                       |       | 2,688       |       | (10,346                 | )          | 1,611,837         |       | 303,800                     |       | 4,216,490        |       |         |       | 14,503,866      |       | 28,222       |       | 14,532,688 |   |
|                                                                           |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| Total loss                                                                     |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| Net (loss)/ income                                                             |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       | (704,706     | )          | (704,706        | )          | 6,736        |       | (697,970 | ) |
| Other comprehensive   loss for the year                                        |       |        |       |                       |       |        |       |                    |       | (15,171           | )          |                        |       |             |       |         |       | (15,171         | )          |         |       | (15,171 | ) |
|                                                                           |       |        |       |                       |       |        |       |                    |       | (15,171           | )          |                        |       |             |       | (704,706     | )          | (719,877        | )          | 6,736        |       | (713,141 | ) |
| Transactions with   shareholders                                               |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| Capital increase (Note   27(a))                                                |       | 1,361,380   |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       | 1,361,380       |       | 3,335        |       | 1,364,715 |   |
| Transaction costs                                                              |       |        |       | (11,771                    | )          |        |       |                    |       |              |       |                        |       |             |       |         |       | (11,771         | )          |         |       | (11,771 | ) |
| Dividends declared -   non-controlling interest (Portocel)                     |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       | (1,684       | )          | (1,684 | ) |
| Investment reserve   appropriation                                             |       |        |       |                       |       |        |       |                    |       |              |       |                        |       | (704,706         | )          | 704,706      |       |            |       |         |       |   |   |
|                                                                           |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| **As at   December 31, 2012 - restated**                                  |       | 9,740,777   |       | (11,771                    | )          | 2,688       |       | (10,346                 | )          | 1,596,666         |       | 303,800                     |       | 3,511,784        |       |         |       | 15,133,598      |       | 37,209       |       | 15,170,807 |   |
|                                                                           |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| Total loss                                                                     |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| Net income (loss)                                                              |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       | (706,422     | )          | (706,422        | )          | 8,840        |       | (697,582 | ) |
| Other comprehensive   income for the year                                      |       |        |       |                       |       |        |       |                    |       | 17,604            |       |                        |       |             |       |         |       | 17,604          |       |         |       | 17,604 |   |
|                                                                           |       |        |       |                       |       |        |       |                    |       | 17,604            |       |                        |       |             |       | (706,422     | )          | (688,818        | )          | 8,840        |       | (679,978 | ) |
| Transactions with   shareholders                                               |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| Reversal of dividends                                                          |       |        |       |                       |       |        |       |                    |       |              |       |                        |       | 119              |       |         |       | 119             |       |         |       | 119 |   |
| Capital increase of   non-controlling interest — Portocel                 |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       | 2,405        |       | 2,405 |   |
| Dividends declared -   non-controlling interest (Portocel)                     |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       | (2,099       | )          | (2,099 | ) |
| Investment reserve   appropriation                                             |       |        |       |                       |       |        |       |                    |       |              |       |                        |       | (706,422         | )          | 706,422      |       |            |       |         |       |   |   |
|                                                                           |       |        |       |                       |       |        |       |                    |       |              |       |                        |       |             |       |         |       |            |       |         |       |   |   |
| **As at   December 31, 2013**                                             |       | 9,740,777   |       | (11,771                    | )          | 2,688       |       | (10,346                 | )          | 1,614,270         |       | 303,800                     |       | 2,805,481        |       |         |       | 14,444,899      |       | 46,355       |       | 14,491,254 |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-11

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Consolidated statement of cash flows**

**Years ended December 31**

**In thousand of Reais**

 
| ** **                                                                          | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|-------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                                                |       |       |       |       |       |       |       |
| **Loss   from continuing operations before income taxes**                           |       | (343,576   | )          | (989,730   | )          | (1,491,012 | )          |
|                                                                                |       |       |       |       |       |       |       |
| **Adjusted   by**                                                                   |       |       |       |       |       |       |       |
| Income before taxes on   discontinued operations (Note 36)                          |       |       |       |       |       | 364,629    |       |
| Depreciation, depletion   and amortization                                          |       | 1,751,947  |       | 1,720,067  |       | 1,838,827  |       |
| Depletion of wood from   forestry partnership programs                              |       | 111,214    |       | 128,241    |       | 45,368     |       |
| Foreign exchange   losses, net                                                      |       | 932,907    |       | 735,001    |       | 935,922    |       |
| Change in fair value of   derivative financial instruments                          |       | 215,313    |       | 184,465    |       | 276,877    |       |
| Equity in losses of   associate                                                     |       |       |       | 592        |       | 414        |       |
| Gain on sale of land   and building - Asset Light project (Note 1(e))               |       | (799,040   | )          |       |       |       |       |
| Gain on sale of others   investments                                                |       | (3,201     | )          |       |       |       |       |
| Gain on sale of   investments (CONPACEL, KSR and Piracicaba) (Note 36(b)(iii))      |       |       |       |       |       | (532,850   | )          |
| Accretion of present   value - payable for Aracruz acquisition                      |       |       |       |       |       | 40,893     |       |
| Loss (gain) on disposal   of property, plant and equipment                          |       | 220,936    |       | (64,419    | )          | (25,361    | )          |
| Interest and gain and   losses in marketable securities                             |       | (90,014    | )          | (143,809   | )          | (178,895   | )          |
| Interest expense                                                                    |       | 575,877    |       | 681,840    |       | 660,084    |       |
| Change in fair value of   biological assets (Note 18 and Note 33)                   |       | (102,265   | )          | (297,686   | )          | (145,884   | )          |
| Financial charges of   Bonds partial repurchase transaction                         |       | 350,295    |       | 150,917    |       |       |       |
| Impairment of   recoverable ICMS                                                    |       | 91,192     |       | 90,248     |       |       |       |
| Tax credits                                                                         |       | (13,531    | )          |       |       |       |       |
| IPI credit premium   (Note 24 (d)(i))                                               |       | (77,486    | )          | (93,152    | )          |       |       |
| Reversal of provision   for contingencies and other                                 |       | (116,042   | )          |       |       |       |       |
| Provisions and other                                                                |       | 50,526     |       | 109,955    |       | 124,632    |       |
|                                                                                |       |       |       |       |       |       |       |
| **Decrease   (increase) in assets**                                                 |       |       |       |       |       |       |       |
| Trade accounts receivable                                                           |       | 446,371    |       | 246,798    |       | 160,940    |       |
| Inventory                                                                           |       | (62,662    | )          | 45,236     |       | (148,446   | )          |
| Recoverable taxes                                                                   |       | (144,192   | )          | (16,875    | )          | (177,117   | )          |
| Related parties                                                                     |       |       |       |       |       | (161       | )          |
| Other assets/advances   to suppliers                                                |       | (3,642     | )          | (20,857    | )          | 63,506     |       |
|                                                                                |       |       |       |       |       |       |       |
| **Increase   (decrease) in liabilities**                                            |       |       |       |       |       |       |       |
| Trade payable                                                                       |       | 106,817    |       | 57,762     |       | 5,916      |       |
| Taxes payable                                                                       |       | (18,464    | )          | (38,475    | )          | (26,321    | )          |
| Payroll, profit sharing   and related charges                                       |       | 603        |       | (5,241     | )          | 22,386     |       |
| Other payable                                                                       |       | (35,402    | )          | (32,182    | )          | (78,829    | )          |
|                                                                                |       |       |       |       |       |       |       |
| **Cash   provided by operating activities**                                         |       | 3,044,481  |       | 2,448,696  |       | 1,735,518  |       |
|                                                                                |       |       |       |       |       |       |       |
| Interest received                                                                   |       | 144,486    |       | 131,637    |       | 198,880    |       |
| Interest paid                                                                       |       | (602,112   | )          | (651,288   | )          | (582,047   | )          |
| Income taxes paid                                                                   |       | (423,325   | )          | (14,712    | )          | (4,151     | )          |
|                                                                                |       |       |       |       |       |       |       |
| **Net   cash provided by operating activities**                                     |       | 2,163,530  |       | 1,914,333  |       | 1,348,200  |       |
|                                                                                |       |       |       |       |       |       |       |
| **Cash   flows from investing activities**                                          |       |       |       |       |       |       |       |
| Proceeds from sale of   land and building - Asset Light project (Note 1(e))         |       | 500,000    |       |       |       |       |       |
| Installments paid for   acquisition of Aracruz                                      |       |       |       |       |       | (1,481,569 | )          |
| Installments paid for   acquisition of Ensyn                                        |       |       |       | (40,674    | )          |       |       |
| Acquisition of   property, plant and equipment and intangible assets and forest     |       | (1,189,716 | )          | (1,001,711 | )          | (1,240,189 | )          |
| Advance for wood   acquisition from forestry partnership program                    |       | (96,968    | )          | (76,556    | )          | (176,479   | )          |
| Marketable securities,   net                                                        |       | 1,204,356  |       | (660,951   | )          | (56,978    | )          |
| Proceeds from sale of   investments (CONPACEL, KSR and Piracicaba)(Note 36(a)(iii)) |       |       |       |       |       | 2,076,143  |       |
| Proceeds from sale of   property, plant and equipment                               |       | 36,543     |       | 274,743    |       | 82,491     |       |
| Advances received from   the disposal of assets (Losango) (Note 35)                 |       |       |       | 470,000    |       |       |       |
| Derivative transactions   settled (Note 11(c))                                      |       | (24,065    | )          | (126,368   | )          | 69,982     |       |
| Others                                                                              |       | 3,699      |       | 714        |       | (1,067     | )          |
|                                                                                |       |       |       |       |       |       |       |
| **Net   cash provided by (used in) investing activities**                           |       | 433,849    |       | (1,160,803 | )          | (727,666   | )          |
|                                                                                |       |       |       |       |       |       |       |
| **Cash   flows from financing activities**                                          |       |       |       |       |       |       |       |
| Borrowings                                                                          |       | 1,279,414  |       | 864,334    |       | 2,707,265  |       |
| Repayments - principal   amount                                                     |       | (3,320,157 | )          | (2,410,719 | )          | (3,109,589 | )          |
| Net of capital increase   (Note 27)                                                 |       |       |       | 1,343,546  |       |       |       |
| Dividends paid                                                                      |       |       |       |       |       | (263,902   | )          |
| Treasury stock   acquisition                                                        |       |       |       |       |       |       |       |
| Premium on Bonds   repurchase transaction                                           |       | (236,536   | )          | (62,158    | )          |       |       |
| Other                                                                               |       | 1,288      |       | 6,747      |       | 17,093     |       |
|                                                                                |       |       |       |       |       |       |       |
| **Net   cash used in financing activities**                                         |       | (2,275,991 | )          | (258,250   | )          | (649,133   | )          |
|                                                                                |       |       |       |       |       |       |       |
| Effect of exchange rate   changes on cash and cash equivalents                      |       | 6,508      |       | 66,661     |       | (20,949    | )          |
|                                                                                |       |       |       |       |       |       |       |
| **Net   increase (decrease) in cash and cash equivalents**                          |       | 327,896    |       | 561,941    |       | (49,548    | )          |
|                                                                                |       |       |       |       |       |       |       |
| **Cash   and cash equivalents at beginning of year**                                |       | 943,856    |       | 381,915    |       | 431,463    |       |
|                                                                                |       |       |       |       |       |       |       |
| **Cash   and cash equivalents at end of year**                                      |       | 1,271,752  |       | 943,856    |       | 381,915    |       |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-12

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements**

**at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**1****                                       ****Operations and current developments**

 

**(a)****                               ****General information**

 

Fibria Celulose S.A. is incorporated under the laws of the Federal Republic of Brazil, as a publicly-held company. Fibria Celulose S.A. and its subsidiaries are referred to in these financial statements as the “Company”, “Fibria”, or “we”. We have the legal status of a share corporation, operating under Brazilian corporate law. Our headquarters and principal executive office is located in São Paulo, SP, Brazil.

 

We are listed on the stock exchange of São Paulo (BM&FBOVESPA) and the New York Stock Exchange (NYSE) and we are subject to the reporting requirements of the Brazilian *Comissão de Valores Mobiliários* (CVM) and the United States Securities and Exchange Commission (SEC).

 

Our activities are focused on the growth of renewable and sustainable forests and the manufacture and sale of bleached eucalyptus kraft pulp. We operate in a single operating segment, which is the producing and selling of short fiber pulp.

 

Our bleached pulp is produced from eucalyptus trees, resulting in a variety of high quality hardwood pulp with short fibers, which is generally used in the manufacturing of toilet paper, uncoated and coated paper for printing and writing, and coated cardboard for packaging. We use different energy sources including thermal and electric, including black liquor, biomass derived from wood debarking, bark and scraps.

 

Our business is affected by global pulp prices, which are historically cyclical and subject to significant volatility over short periods. The most common factors that affect global pulp prices are: (i) global demand for products derived from pulp, (ii) global production capacity and the strategies adopted by the main producers, (iii) availability of substitutes for these products and (iv) fluctuations on US dollar. All of these factors are beyond our control.

 

In 2012, we established a strategic alliance with Ensyn Corporation (“Ensyn”), through the acquisition of approximately 6% of its capital stock for an amount of US$ 20,000 (equivalent to R$ 40,674 at the date), with the purpose of leveraging our forestry expertise and our competitive position in Brazil and to develop alternatives with high added value to complement our global leadership position and excellence in the production of pulp. We believe that the combination of our expertise and Ensyn’s technology can generate a relevant business in the biofuels segment in the future.

 

**(b)****                               ****Operating facilities and forest base**

 

The Company operates the following facilities as of December 31, 2013 to produce bleached eucalyptus kraft pulp with a total annual capacity of approximately 5.3 million tons:

 
| **Pulp   production   facility** | ** ** | **Location (Brazil)** | ** ** | **Annual   production   capacity ****- ****tons** | ** ** |
|----------------------------------|------------|----------------------------|------------|-------------------------------------------------------------|------------|
|                             |       |                       |       |                                                        |       |
| Aracruz                          |       | Espírito Santo        |       | 2,340,000                                                   |       |
| Três Lagoas                 |       | Mato Grosso do Sul         |       | 1,300,000                                                   |       |
| Jacareí                     |       | São Paulo             |       | 1,100,000                                                   |       |
| Veracel (*)                      |       | Bahia                      |       | 560,000                                                     |       |
|                             |       |                       |       |                                                        |       |
|                             |       |                       |       | 5,300,000                                                   |       |

 

F-13

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

----

(*)         Represents 50% of the annual production capacity of the jointly-controlled entity Veracel Celulose S.A.

 

Fibria produces hardwood pulp from planted eucalyptus trees which we refer to as forests and the average extraction cycle of the forest is between six and seven years and are located in six Brazilian States, consisting of approximately 962 thousand hectares as of December 31, 2013, including reforested and protected areas, as follows (in thousand hectares):

 
| ** **          | ** ** | **Area of forest** | ** ** | **Total area** | ** ** |
|---------------------|------------|------------------------------|------------|---------------------|------------|
|                |       |                         |       |                |       |
| State               |       |                         |       |                |       |
| São Paulo      |       | 78,117                       |       | 144,952             |       |
| Minas Gerais        |       | 13,009                       |       | 27,349              |       |
| Rio de Janeiro      |       | 1,638                        |       | 3,368               |       |
| Mato Grosso do Sul  |       | 224,911                      |       | 341,904             |       |
| Bahia               |       | 134,583                      |       | 264,001             |       |
| Espírito Santo |       | 104,537                      |       | 180,097             |       |
|                |       |                         |       |                |       |
|                |       | 556,795                      |       | 961,671             |       |

 

The forest base of the Losango project in the State of Rio Grande do Sul is excluded from the table above as such assets qualify as assets held for sale and are being presented as such as detailed in item (d)(ii) and Note 36.

 

**(c)****                               ****Logistics**

 

The pulp produced for export is delivered to customers by means of sea vessels on the basis of long-term contracts with the owners of these vessels.

 

The company operates in two ports, Santos and Barra do Riacho. The port of Santos is located on the coast of the State of São Paulo and seeps the pulp produced in the Jacareí and Três Lagoas plants. The port is operated under a concession from the Federal Government, through the Companhia Docas do Estado de São Paulo (“CODESP”). The concession period of one of the terminals at the port of Santos ends in 2017. However, we are looking for alternative means for shipping the pulp produced, in order to maintain our export capacity in the long term.

 

The port of Barra do Riacho is a port specializing in the transportation of pulp, located approximately three kilometers from the Aracruz unit, in the State of Espírito Santo, and seeps the pulp produced in the Aracruz and Veracel plants. This port is operated by Portocel - Terminal Especializado Barra do Riacho S. A. (“Portocel”) - a company controlled by Fibria (which has a 51% interest in its share capital). Portocel operates with the authorization of the federal government, through a contract signed on November 14, 1995.

 

In October 2010, four long-term contracts were signed with the South Korean Pan Ocean Co. Ltd. (former STX Pan Ocean), valid for a period of 25 years for the construction of 20 sea vessels. Five have been already delivered, of which, four are already dedicated to the transportation of pulp and the remaining one, is expected to begin its activities as from February 2014.

 

F-14

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Due the Pan Ocean’s financial difficulties, the long-term contracts are in process of renegotiation between the parties involved (Fibria, banks and Pan Ocean).

 

Due to the renegotiation in progress, it is expected that the exports of pulp and the related logistics costs will not be impacted, since the Company has contracts of affreightment with other logistics companies, which will be able to meet the export demand, with guaranteed of service quality and cost efficiency.

 

**(d)****                               ****Current assets held for sale**

 

During the years presented the Company approved and consummated the sale of certain Cash Generating Units (CGUs) and of certain assets, as presented in the following table:

 
| **CGU/Asset**                                              | ** ** | **Reference**                     | ** ** | **Classification for   accounting purposes** | ** ** | **Date when   classified for   accounting   purposes** | ** ** | **Date when    the sale was   consummated** |
|------------------------------------------------------------|------------|-----------------------------------|------------|--------------------------------------------------------|------------|------------------------------------------------------------------|------------|-----------------------------------------------------------------|
|                                                       |       |                              |       |                                                   |       |                                                             |       |                                                            |
| CONPACEL CGU                                               |       | Note 36(b) and Note 1(d)(i)  |       | Assets held for sale and discontinued   operations     |       | December 2010                                               |       | January 2011                                               |
|                                                       |       |                              |       |                                                   |       |                                                             |       |                                                            |
| KSR CGU                                                    |       | Note 36(b) and Note 1(d)(i)  |       | Assets held for sale and discontinued   operations     |       | December 2010                                               |       | February 2011                                              |
|                                                       |       |                              |       |                                                   |       |                                                             |       |                                                            |
| Piracicaba CGU                                             |       | Note 36(b) and Note 1(d)(i)  |       | Assets held for sale                                   |       | June 2011                                                   |       | September 2011                                             |
|                                                       |       |                              |       |                                                   |       |                                                             |       |                                                            |
| Losango project assets                                     |       | Note 1(d)(ii) and Note 36(a) |       | Assets held for sale                                   |       | June 2011                                                   |       | Not yet consummated                                             |
|                                                       |       |                              |       |                                                   |       |                                                             |       |                                                            |
| Forests and land located in the south of the   Bahia State |       | Note 1(e) and Note 36(b)     |       | Assets held for sale                                   |       | March 2012                                                  |       | December 2012                                              |

 

**(i)****                                 ****Sale of CONPACEL, KSR and Piracicaba**

 

On December 21, 2010, the Board of Directors approved the disposal of the following CGUs: Consórcio Paulista de Papel e Celulose - CONPACEL and KSR Distribuidora. The CONPACEL pulp and paper mill consisted of a pulp mill with an annual production capacity of 650 kilotons and a paper mill with an annual production capacity of 390 kilotons, and approximately 71 thousand hectares of timberland, 30 thousand hectares of protected forest, a distribution business unit which operates 19 branches throughout Brazil and a distribution warehouse located in the State of São Paulo.

 

The Company concluded the sale of the net assets of CONPACEL and KSR on January 31, 2011 and February 28, 2011, respectively, for an aggregate sale consideration of R$ 1.5 billion, through the execution of the sales and purchase agreement with Suzano Papel e Celulose S.A. (“Suzano”), meeting the terms and conditions precedent of the sale and purchase agreement and through the payment of selling price by Suzano.

 

The Company also concluded the sale of the net assets of the CGU Piracicaba on September 29, 2011, consisting of a plant to produce thermal papers, coated and carbonless, located at the city of Piracicaba, in the State of São Paulo, with an annual capacity of over 160 thousand tons, to

 

F-15

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Oji Paper CO., LTD. (“Oji”) for an aggregate sale consideration of US$ 313 million, equivalent to R$ 567,375 at that date. The sale was consummated through the transfer of the net assets of the unit to Piracicaba Indústria de Papéis Especiais e Participações Ltda. and the subsequent sale of the quotas of such entity to Oji.

 

The disposal of these CGUs is consistent with our strategy of concentrating activities in the pulp business and strengthening our focus in the pulp market.

 

We used the proceeds of those sales to reduce our indebtedness level. Information on the assets, liabilities, profit and loss and cash flows of the CGUs sold are presented in Note 35.

 

**(ii)****                              ****Losango project assets**

 

On June 30, 2011, we decided to classify as “held for sale” the assets related to the Losango project assets.

 

On December 28, 2012, the Company and CMPC Celulose Riograndense Ltda. (“CMPC”) signed the definitive Purchase and Sale Agreement for the sale of all of the Losango project assets, comprising approximately 100 thousand hectares of land owned by Fibria and approximately 39 thousand hectares of planted eucalyptus and leased land, all located in the State of Rio Grande do Sul, in the amount of R$ 615 million. On this date the first installment of the purchase price, amounting to R$ 470 million, was paid to us. The second installment, amounting to R$ 140 million, was deposited in an escrow account and will be released to us once additional government approvals are obtained. The final installment of R$ 5 million is payable to us upon the completion of the transfer of the existing land lease contracts for the assets, and the applicable government approvals. The sale and purchase agreement establishes a period of 48 months, renewable at the option of CPMC for an additional 48 months, to obtain the required government approvals. If this approval is ultimately not obtained, we will be required to return to CMPC the first installment it paid to us, plus interests, and the escrow deposits made by CMPC will revert. We have recorded the amount of the first installment received as a liability under “Advances received in relation to assets held for sale”.

 

Since the signing of the Purchase and Sale Agreement with CMPC, we have been working to obtain the approvals needed, as well as the fulfillment of all other conditions precedent, with an emphasis on obtaining the documentation to be presented to the applicable government agencies.

 

The completion of the sale depends on these government approvals, the assets continue to be classified as assets held for sale as at December 31, 2013, and will remain so until the sale is completed. Upon classification as assets held for sale, the carrying amounts of the assets held for sale were compared to their estimated fair values less cost of sale, and no impairment losses were identified.

 

The Losango assets did not generate any significant impact in the profit or losses in 2013 and 2012.

 

The carrying amounts of the assets related to items (i) and (ii) above, are disclosed in Note 36.

 

**(iii)****                          ****Forests and land located in the south of Bahia**

 

On March 8, 2012, as part of our strategy to strengthen our capital structure, we entered into a binding agreement with Fundo Florestas do Brasil (the “Fund”), through its subsidiary Caravelas Florestal S.A., for the sale of certain forests and land located in the south of Bahia, consisting of 16,152 thousand

 

F-16

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

hectares of forests of eucalyptus for timber and pulp with an average annual production of 660 thousand cubic meters of wood.

 

On June 29, 2012, Fibria signed a purchase and sale agreement for these assets by the total amount of R$ 200 million, which was received on the same date. On December 7, 2012, the transaction was completed upon receipt of an acceptance notice signed by the buyer.

 

A gain on sale of R$ 19,551 (net of taxes) was recognized in the statement of profit and loss in 2012. Further details are presented in Note 36 (b).

 

**(e)****                                ****Asset Light project**

 

On November 15, 2013, the Company (through the Parent Company Fibria Celulose S.A. and its subsidiary Fibria-MS Celulose Sul Mato-Grossense Ltda.) entered into a Share Purchase Agreement and Other Covenants with the company Parkia Participações S.A. (“Parkia”), for the sale of certain land located in the states of São Paulo, Mato Grosso do Sul, Bahia and Espírito Santo, for a total of approximately 210 thousand hectares.

 

On December 30, 2013, after obtaining the mandatory regulatory approvals as well as the completion of an audit by Parkia, the First Amendment to the Share Purchase Agreement and Other Covenants was concluded and signed, under which the total area subject to the transaction was adjusted to approximately 206 thousand hectares of lands, for the total amount of R$ 1,402,584, of which R$ 500,000 has been received by the Company upon signing the agreement. The remaining balance, in the amount of R$ 902,584, will be received after the fulfillment of certain obligations and legal registers, to be performed by the Company. See Note 38.

 

An additional value, limited to R$ 247,515, may be received by the Company in three separated payments, of up to one third of the value each payment, on the 7th, 14th and 21st anniversaries of the agreement. The collection of this value is contingent to the appreciation of the land in each of the anniversaries, measured according to predefined measurement assumptions established in the agreement and adjusted by the variation of the IGP-M index through the actual payment dates.

 

On December 30, 2013, the Company also signed with the Parkia’s subsidiaries (“Counterparty”) a Forestry Partnership Agreement and a Standing Timber Supply Agreement, both with a term up to 24 years (or four harvesting cycles of approximately 7 years), during which the Company will continue to operate its forests located in the sold areas. The agreement does not provide any renewal or extension provisions to its original term.

 

In exchange for the right to use the land by the Company for its forestry activities, the forestry partnership agreement grants to the Counterparty and land owner, the right to receive 40% of the volume of wood (in cubic meters — m3), produced by the Company on the land during each harvesting cycle, limited to a “cap” contractually established.

 

As established in the standing timber supply agreement, the Company will acquire the 40% wood volume that the Counterparty has the right to pursuant to the forestry partnership agreement at a m3 price established in each agreement. The m3 price is determined in USD and will be readjusted based on the consumer price index of the U.S. economy - US-CPI index. The payments will be due on a quarterly basis. At the end of each harvesting cycle, any difference between the total quarterly payments paid by the Company and the equivalent to 40% of the actual timber harvested during the harvesting cycle will be settled, only in the event that the quarterly payments made by the Company were higher than the

 

F-17

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

equivalent to 40% of the actual timber harvested at the end of the harvesting cycle, in which case the Company will be reimbursed for the excess amount.

 

The Share Purchase Agreement has a clause that allows Parkia to withdraw up to 30% of the total land subject to the forestry partnership agreement and the standing timber supply agreement, pursuant to a pre-defined withdrawal schedule. Additionally, in relation to the areas not subject to the withdrawal,  Fibria has a first refusal right to acquire the land at market value in the event Parkia receives an offer to sell the land to a third party.

 

In case of the sale of any portion of lands for a third party, regarding the lands not included in the 30% mentioned above, the new land owner is committed with all rights and obligations of the agreements signed between Fibria and former land owner until the end of the period of the forestry agreement.

 

The Share Purchase Agreement does not provide the Company with a right to repurchase the land during or at the end of the term of the agreement.

 

*Accounting treatment of the transaction*

 

The share purchase agreement, the forestry partnership and standing timber supply agreements result in a quarterly payment obligation by the Company towards the Counterparty for the right to use of the land, with a settlement provision based on the pre-cutting wood inventory counts. The final settlement amount payable is limited to the “cap” defined in the agreements. The annual estimated payment by the Company under the transaction is approximately US$ 46 million. Fibria has the contractual right to operate the land or direct others to operate the land during the term of the agreement in a manner it determines while ultimately retaining 100% of the harvested timber in such land, through the 60% that Fibria will contractually retain and the rest of the 40% that it will purchase from the Counterparty.

 

Based on the above, for accounting purposes, and according to IFRIC 4, Determining whether an Arrangement Contains a Lease, the contracts are deemed to be within the scope of the technical pronouncement IAS 17 (R1) — Leases. Therefore, the Company accounts for this transaction as a sale leaseback transaction. The lease is considered to be an operating in nature, with exclusively contingent payments.

 

In accordance with IAS 39, Financial Instruments: Recognition and Measurement, the Company the transaction contains an embedded derivative embedded in the standing timber supply agreement, corresponding to the USD m3 price which is adjusted by the U.S.-CPI index,  that is not closely related to the economic environment where the areas are located. Since the agreements were signed on December 30, 2013, the fair value of the embedded derivative on December 31, 2013 is close to zero.

 

The Company did not recognize separately the fair value of the embedded derivative regarding to the price in US dollar from the standing timber supply agreement due to the fact of the functional currency of the Counterparty is the US dollar and, consequently, the embedded derivative is considered to be closely related to the host agreement.

 

*Gain on sale*

 

The Company recognized a gain on sale, as described in the following table:

 

F-18

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| Sale amount (excluding the contingent asset   amount)                 |   | 1,402,584 |   |
|-----------------------------------------------------------------------|--------|-----------|--------|
| (-) Cost of net assets derecognized                                   |   |      |   |
| Fixed Assets — Lands and improvements   (Consolidated) (Note 19) |   | (596,528  | )      |
| (-) Others                                                            |   | (7,016    | )      |
|                                                                  |   |      |   |
| (=) Gain on sale before income tax and social   contribution          |   | 799,040   |   |
|                                                                  |   |      |   |
| (-) Income tax and social contribution expense                        |   | (271,674  | )      |
|                                                                  |   |      |   |
| (=) Gain on sale, net of income tax and social   contribution         |   | 527,366   |   |

 

**(f)****                                 ****Change in the international corporate structure**

 

In November 2011, management approved, subject to certain conditions, a project for the corporate restructuring of our international activities.

 

On July 1st, 2013 the current commercial, operational, logistical, administrative and financial operations of Fibria Trading International KFT were transferred to another subsidiary, located in Austria, Fibria International Trade GmbH.

 

In December 2013, the direct investment held in Fibria, International Trade GmbH, was contributed to Fibria International Celulose GmbH, a wholly owned subsidiary of Fibria.

 

This international corporate reorganization and restructuring has different stages, and it is expected to be completed by December 2015. However, the implementation of the steps of the planned total restructuring is subject to the approval from the local authorities of each country involved.

 

**(g)****                               ****Merged Company without effect on the consolidated financial statements**

 

On September 30, 2013, the subsidiary Normus Empreendimentos e Participações Ltda. (“Normus”) was merged by the Company. The Company held a 100% interest in Normus, which was located in Brazil. As a result the indirect subsidiaries Fibria International Trade GmbH(*), Fibria Overseas Holding KFT and Fibria International Celulose GmbH became direct subsidiaries of the Company.

 

----

(*)    As mentioned in Note 1(f) above, this direct investment was contributed to Fibria International Celulose GmbH in December 2013.

 

**(h)****                               ****Public offering of common shares**

 

On April 30, 2012, we concluded a primary public offering of common shares, obtaining gross proceeds of R$ 1,361,380 (the “Public Offering”).

 

The Public Offering was carried out in accordance with our strategy to strengthen the capital structure and to improve our leverage ratios. The details of this operation are described in Note 27(a).

 

F-19

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**2****                                       ****Presentation of financial statements and summary of significant accounting policies**

 

**2.1****                             ****Financial statements - basis of preparation**

 

**(a)****                               ****Accounting policies adopted**

 

The Company’s consolidated financial statements have been prepared and are being presented in accordance with and in compliance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

 

**(b)****                               ****Approval of the financial statements**

 

The consolidated financial statements were approved by the Board of Directors and Fibria’s Management on January 29, 2014.

 

**2.2****                             ****Consolidation**

 

**2.2.1****                   ****Consolidated financial statements**

 

**(a)****                               ****Subsidiaries**

 

Subsidiaries are all entities (including special-purpose entities) over which the Group has the power to govern the financial and operating policies of the entity, generally accompanying a shareholding of more than half of the voting rights. The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether Fibria controls another entity.

 

Subsidiaries are fully consolidated from the date on which control is transferred to Fibria and de-consolidated from the date that control ceases.

 

The exclusive or controlled investment fund is consolidated.

 

Intercompany transactions, balances and unrealized gains and losses on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of a loss of value (impairment) of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.

 

The application of the provision of IFRS 11/CPC 19(R2) did not have a material impact in the Company’s financial position and result of operations as compared to December 31, 2012.

 

**(b)****                               ****Joint operations**

 

As of January 1, 2013, the companies Veracel Celulose S.A., Asapir Produção Florestal e Comércio Ltda. and VOTO — Votorantim Overseas Trading Operations IV Limited met the definition of joint operations under IFRS 11 and CPC 19(R2) - “Joint Arrangements”, accordingly, assets, liabilities, revenue and expenses are recognized in relation to the interest in the joint operation. The changes in the classification of the companies as joint operations did not impact the financial position and result of operations of the Company compared to the proportional consolidation method allowed by the standard

 

F-20

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

until December 31, 2012.

 

Intercompany transactions, balances and unrealized gains and losses on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of a loss of value (impairment) of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.

 

None of the jointly-operated entities have publicly traded shares.

 

Additionally, the Company does not have any significant restriction or commitment with regards to its jointly-operated entities.

 

The balance of current and non-current assets, current and non-current liabilities, profit and loss at December 31, 2013 and 2012 of the jointly-operations mentioned above are presented as follow:

 

F-21

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                        | ** ** | **2013**    | ** ** |
|---------------------------------------------------|------------|-------------|------------|
| ** **                                        | ** ** | **Veracel** | ** ** | **Asapir** | ** ** | **VOTO IV** | ** ** |
| ** **                                        | ** ** | **100%**    | ** ** | **50%** | ** ** | **100%** | ** ** | **50%** | ** ** | **100%** | ** ** | **50%** | ** ** |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Assets                                            |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Current assets                                    |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash   equivalents                       |       | 5,946       |       | 2,973 |   | 278 |   | 139 |   | 54,394 |   | 27,197 |   |
| Others current assets                             |       | 682,534     |       | 341,267 |   | 3,934 |   | 1,967 |   |   |   |   |   |
|                                              |       | 688,480     |       | 344,240 |   | 4,212 |   | 2,106 |   | 54,394 |   | 27,197 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Non-current assets                                |       | 3,047,072   |       | 1,523,536 |   | 290 |   | 145 |   | 741,752 |   | 370,876 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Total assets                                      |       | 3,735,552   |       | 1,867,776 |   | 4,502 |   | 2,251 |   | 796,146 |   | 398,073 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Liabilities and   shareholders’ equity       |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Current   liabilities                             |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Loans and financing                               |       | 318,650     |       | 159,325 |   |   |   |   |   |   |   |   |   |
| Suppliers and other   account payables            |       | 51,094      |       | 25,547 |   | 252 |   | 126 |   |   |   |   |   |
| Others                                            |       | 20,518      |       | 10,259 |   | 2,148 |   | 1,074 |   |   |   |   |   |
|                                              |       | 390,262     |       | 195,131 |   | 2,400 |   | 1,200 |   |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Non-current   liabilities                         |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Loans and financing                               |       | 456,772     |       | 228,386 |   |   |   |   |   | 728,344 |   | 364,172 |   |
| Suppliers and other   account payables            |       | 878         |       | 439 |   |   |   |   |   |   |   |   |   |
| Others                                            |       | 51,498      |       | 25,749 |   | 1,686 |   | 843 |   | 24,675 |   | 12,337 |   |
|                                              |       | 509,148     |       | 254,574 |   | 1,686 |   | 843 |   | 753,019 |   | 376,509 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                         |       | 2,836,142   |       | 1,418,071 |   | 416 |   | 208 |   | 43,127 |   | 21,564 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Total liabilities   and shareholder’s equity |       | 3,735,552   |       | 1,867,776 |   | 4,502 |   | 2,251 |   | 796,146 |   | 398,073 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Profit and loss                                   |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Revenue                                           |       | 1,018,772   |       | 509,386 |   |   |   |   |   |   |   |   |   |
| Cost of sales                                     |       | (861,620    | )          | (430,810 | ) |   |   |   |   |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                      |       | 157,152     |       | 78,576 |   |   |   |   |   |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| General and   administrative                      |       | (36,542     | )          | (18,271 | ) | (890 | ) | (445 | ) |   |   |   |   |
| Selling expenses                                  |       | (36,380     | )          | (18,190 | ) |   |   |   |   |   |   |   |   |
| Other operating   expenses, net                   |       | (29,108     | )          | (14,554 | ) | (596 | ) | (298 | ) |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Operating income   (loss)                         |       | 55,122      |       | 27,561 |   | (1,486 | ) | (743 | ) |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Financial loss,   net                             |       | (71,832     | )          | (35,916 | ) | (900 | ) | (450 | ) | (22,864 | ) | (11,432 | ) |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Losses before   income taxes                      |       | (16,710     | )          | (8,355 | ) | (2,386 | ) | (1,193 | ) | (22,864 | ) | (11,432 | ) |
| Net income taxes                                  |       | (1,029      | )          | (514 | ) |   |   |   |   |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Net loss of the year                              |       | (17,739     | )          | (8,869 | ) | (2,386 | ) | (1,193 | ) | (22,864 | ) | (11,432 | ) |

 

Only the jointly-operated entity Veracel recognized expenses of depreciation, amortization and depletion for an amount of R$ 191,324 for the year ended December 31, 2013 (corresponding to 50% of our partnership).

 

F-22

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                        | ** ** | **2012**    | ** ** |
|---------------------------------------------------|------------|-------------|------------|
| ** **                                        | ** ** | **Veracel** | ** ** | **Asapir** | ** ** | **VOTO IV** | ** ** |
| ** **                                        | ** ** | **100%**    | ** ** | **50%** | ** ** | **100%** | ** ** | **50%** | ** ** | **100%** | ** ** | **50%** | ** ** |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Assets                                            |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Current assets                                    |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash   equivalents                       |       | 4,162       |       | 2,081 |   | 100 |   | 50 |   | 4,324 |   | 2,162 |   |
| Others current assets                             |       | 456,902     |       | 228,451 |   | 43,764 |   | 21,882 |   | 1,930 |   | 965 |   |
|                                              |       | 461,064     |       | 230,532 |   | 43,864 |   | 21,932 |   | 6,254 |   | 3,127 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Non-current assets                                |       | 3,277,348   |       | 1,638,674 |   | 406 |   | 203 |   | 829,662 |   | 414,831 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Total assets                                      |       | 3,738,412   |       | 1,869,206 |   | 44,270 |   | 22,135 |   | 835,916 |   | 417,958 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Liabilities and   shareholders’ equity       |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Current   liabilities                             |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Loans and financing                               |       | 348,534     |       | 174,267 |   |   |   |   |   |   |   |   |   |
| Suppliers and other   account payables            |       | 47,570      |       | 23,785 |   | 260 |   | 130 |   |   |   |   |   |
| Others                                            |       | 28,176      |       | 14,088 |   | 1,734 |   | 867 |   |   |   |   |   |
|                                              |       | 424,280     |       | 212,140 |   | 1,994 |   | 997 |   |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Non-current   liabilities                         |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Loans and financing                               |       | 352,600     |       | 176,300 |   |   |   |   |   | 778,494 |   | 389,247 |   |
| Suppliers and other   account payables            |       | 106,088     |       | 53,044 |   | 5,474 |   | 2,737 |   |   |   |   |   |
|                                              |       | 458,688     |       | 229,344 |   | 5,474 |   | 2,737 |   | 778,494 |   | 389,247 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                         |       | 2,855,444   |       | 1,427,722 |   | 36,802 |   | 18,401 |   | 57,422 |   | 28,711 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Total liabilities   and shareholder’s equity |       | 3,738,412   |       | 1,869,206 |   | 44,270 |   | 22,135 |   | 835,916 |   | 417,958 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Profit and loss                                   |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Revenue                                           |       | 988,442     |       | 494,221 |   |   |   |   |   |   |   |   |   |
| Cost of sales                                     |       | (840,732    | )          | (420,366 | ) |   |   |   |   |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                      |       | 147,710     |       | 73,855 |   |   |   |   |   |   |   |   |   |
| General and   administrative                      |       | (34,510     | )          | (17,255 | ) |   |   |   |   |   |   |   |   |
| Selling expenses                                  |       | (26,192     | )          | (13,096 | ) |   |   |   |   |   |   |   |   |
| Other operating   income (expenses), net          |       | 45,483      |       | 22,742 |   | (2,728 | ) | (1,364 | ) |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Operating income   (loss)                         |       | 132,491     |       | 66,246 |   | (2,728 | ) | (1,364 | ) |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Financial   (loss)/income, net                    |       | (68,622     | )          | (34,311 | ) | (1,374 | ) | (687 | ) | 1,742 |   | 871 |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Income (loss)   before income taxes               |       | 63,869      |       | 31,935 |   | (4,102 | ) | (2,051 | ) | 1,742 |   | 871 |   |
| Ne income taxes                                   |       | (16,014     | )          | (8,007 | ) |   |   |   |   |   |   |   |   |
|                                              |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)   of the year                   |       | 47,855      |       | 23,928 |   | (4,102 | ) | (2,051 | ) | 1,742 |   | 871 |   |

 

Only the jointly-operated entity Veracel recognized expenses of depreciation, amortization and depletion for an amount of R$ 194,771 for the year ended December 31, 2012(corresponding to 50% of our partnership).

 

The jointly-operated entity Veracel is located in the south of Bahia State, in the city of Eunápolis, the Company’s partnership ownership is 50% and the remaining 50% is owned by the Swedish-Finnish Stora Enso Amsterdam B.V.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The jointly-operated entity Veracel was established on July 15, 1991 and its main activities are the silviculture operations, production and sale of paper, pulp and wood.

 

**(c)****                            ****Associated companies**

 

Associates are all entities over which the company has significant influence but not control or joint control, generally with an ownership percentage between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition.

 

At December 31, 2013, 2012 and January 1, 2012, our only associate is Bahia Produtos de Madeira S.A. (previously called Aracruz Produtos de Madeira S.A.).

 

The application of the provision of IFRS 11/CPC 19(R2) did not have a material impact in the Company’s financial position and result of operations as compared to December 31, 2012.

 

**(d)****                               ****Subsidiaries and jointly-operated entities included in the consolidated financial statements**

 

The subsidiaries and jointly-operated entities included in the consolidation are as follows:

 
|                                                                |   | **Percentage of total capital** |       |
|---------------------------------------------------------------------|--------|------------------------------------------------|------------|
|                                                                |   | **2013**                                       |       | **2012** |   | **2011** |   |
|                                                                |   | **Direct**                                     | ** ** | **Indirect** | ** ** | **Total** | ** ** | **Total** | ** ** | **Total** |   |
|                                                                |   |                                           |       |   |   |   |   |   |   |   |   |
| Companies located   in Brazil                                       |   |                                           |       |   |   |   |   |   |   |   |   |
| Normus Empreendimentos e Participações Ltda. (i)     |   |                                           |       |   |   |   |   | 100 |   | 100 |   |
| Fibria-MS Celulose Sul Mato-Grossense Ltda.                    |   | 100                                            |       |   |   | 100 |   | 100 |   | 100 |   |
| Fibria Terminais Portuários S.A.                          |   | 100                                            |       |   |   | 100 |   | 100 |   | 100 |   |
| Projetos Especiais e Investimentos S.A.                        |   | 100                                            |       |   |   | 100 |   | 100 |   | 100 |   |
| Portocel - Terminal Especializado de Barra do Riacho S.A.      |   | 51                                             |       |   |   | 51 |   | 51 |   | 51 |   |
| Veracel Celulose S.A. (ii)                                     |   | 50                                             |       |   |   | 50 |   | 50 |   | 50 |   |
| Asapir Produção Florestal e Comércio Ltda. (ii) |   | 50                                             |       |   |   | 50 |   | 50 |   | 50 |   |
|                                                                |   |                                           |       |   |   |   |   |   |   |   |   |
| Abroad                                                              |   |                                           |       |   |   |   |   |   |   |   |   |
| VOTO - Votorantim   Overseas Trading Operations IV Limited (ii)     |   | 50                                             |       |   |   | 50 |   | 50 |   | 50 |   |
| Fibria Trading   International KFT                                  |   | 48,3                                           |       | 51,7 |   | 100 |   | 100 |   | 100 |   |
| Fibria Overseas   Holding KFT                                       |   | 100                                            |       |   |   | 100 |   | 100 |   | 100 |   |
| Newark Financial   Inc. (i)                                         |   |                                           |       |   |   |   |   |   |   | 100 |   |
| Fibria Overseas   Finance Ltd.                                      |   | 100                                            |       |   |   | 100 |   | 100 |   | 100 |   |
| Fibria   International Trade GmbH.                                  |   |                                           |       | 100 |   | 100 |   | 100 |   | 100 |   |
| Fibria Celulose   (USA) Inc.                                        |   | 100                                            |       |   |   | 100 |   | 100 |   | 100 |   |
| Fibria   (Europe) S.A.                                         |   |                                           |       | 100 |   | 100 |   | 100 |   | 100 |   |
| Fibria   International Celulose GmbH.                               |   | 100                                            |       |   |   | 100 |   |   |   |   |   |
| Green Parrot BV                                                     |   |                                           |       | 100 |   | 100 |   |   |   |   |   |

 

----

(i)        Companies liquidated/merged as detailed in Note 1(e).

(ii)     Jointly-operated entities.

 

F-24

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**2.3****                             ****Segment reporting**

 

The financial statements do not include segment reporting for the reason that the Company operates only the pulp segment.

 

**2.4****                             ****Foreign currency translation**

 

**(a)****                               ****Functional and presentation currency**

 

The Brazilian Real (“Real”, “Reais” or “R$”) is the functional currency of the Company and all its subsidiaries, and is also the currency used for the preparation and presentation of the consolidated financial statements of the Company.

 

**(b)****                               ****Transactions and balances**

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or the date of valuation for items that are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit or loss, presented as “Foreign exchange gain (loss)”.

 

**2.5****                             ****Cash and cash equivalents**

 

Cash and cash equivalents include cash, bank deposits, and highly liquid short-term investments, which have original maturities up to three months and are readily convertible into a known amount of cash and subject to an immaterial risk of change in value.

 

**2.6****                             ****Financial assets**

 

**2.6.1****                   ****Classification**

 

The Company classifies its financial assets in the following categories: (a) at fair value through profit or loss (b) held-to-maturity investments, (c) loans and receivables, and (d) available for sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

 

**(a)****                               ****Financial assets at fair value through profit or loss**

 

Financial assets at fair value through profit or loss are financial assets held for trading. Derivative financial instruments, including embedded derivatives, are classified as held for trading except when they qualify for hedge accounting. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current. Changes in fair value are recognized in the statement of profit or loss under “Financial income” or “Financial expenses” for non-derivative instruments and under “Result of derivative financial instruments” for derivative instruments.

 

F-25

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

** **

**(b)****                               ****Held-to-maturity investments**

 

The investments in non-derivative instruments that the Company has the ability and intention to hold until maturity are classified as investments held to maturity and are measured initially at fair value, including cost of the transaction and subsequently at amortized cost. The Company evaluates whether there is objective evidence that a financial asset or a group of financial assets is registered above its recovery value. When applicable, a provision for impairment is recognized.

 

**(c)****                            ****Loans and receivables**

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the end of the reporting period. Loans and receivables are classified as non-current assets and are recorded at amortized cost based on the effective interest rate of the transaction. The effective interest rate is the contractual rate adjusted by the related transaction costs. The Company’s loans and receivables are comprised of “Trade account receivables”, “Related parties receivables” and “Cash and cash equivalents”.

 

**(d)****                               ****Available-for-sale financial assets**

 

Available-for-sale financial assets are non-derivative instruments that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months after the end of the reporting period.

 

**2.6.2****                   ****Recognition and measurement**

 

Regular purchases and sales of financial assets are recognized on the trade date - the date on which Fibria commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not measured at fair value through profit or loss. Financial assets measured at fair value through profit or losses are initially recognized at fair value, and the transaction costs are recorded in the Statement of profit and loss. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred but only if Fibria has transferred substantially all risks and rewards of ownership. Financial assets measured at fair value through profit or losses are recorded at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method.

 

The changes in the fair value of the available for sale financial asset are recognized as follow: (i) the effect of the exchange foreign currency and changes in the fair value of the investment are recognized directly in Equity, in “Other comprehensive income” and, (ii) the effect of the exchange foreign currency and changes in the fair value of the warrant of acquire shares are recognized in profit or loss of the year.

 

**2.6.3****                   ****Offsetting financial instruments**

 

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

 

F-26

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

** **

**2.6.4****                   ****Impairment of financial assets**

 

**(a)****                                ****Assets carried at amortized cost**

 

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are only if there is objective evidence of an impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

 

The criteria that the Company uses to determine whether there is objective evidence of an impairment loss include:

 

·             significant financial difficulty of the issuer or debtor;

 

·             a breach of contract, such as a default or delinquency in interest or principal payments;

 

·             Fibria, for economic or legal reasons relating to the borrower’s financial difficulty, grants to the borrower a concession that the lender would not otherwise consider;

 

·             it becomes probable that the borrower will enter bankruptcy or other financial reorganization;

 

·             the disappearance of an active market for that financial asset because of financial difficulties;

 

·             observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

 

·             adverse changes in the payment status of borrowers in the portfolio;

 

·             national or local economic conditions that correlate with defaults on the assets in the portfolio.

 

The amount of an impairment loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. If the financial asset is impaired the carrying amount of the asset is reduced and a loss is recognized in the statement of profit and loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, Fibria may measure impairment on the basis of an instrument’s fair value using an observable market price.

 

If, in a subsequent period, the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the statement of profit or loss.

 

**(b)****                                ****Assets classified as available for sale**

 

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of investments classified as available for sale, a significant or prolonged decline in the fair value of the equity below its cost is also evidence 

 

F-27

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

that the assets are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss — will be recognized in profit or loss.

** **

**2.7****                             ****Derivative financial instruments and hedging activities**

 

Derivatives are initially recognized at fair value on the date the derivative contract is entered into and are subsequently re-measured at fair value. Changes in fair value are recorded in the statement of profit or loss, in the line “Result of derivative financial instruments”.

 

Embedded derivatives in non-derivative host contracts are required to be separated when their risks and characteristics are not-closely related to those of host contracts and these are not measured at fair value through profit or loss.

 

Non-option embedded derivative are separated from the host contract in accordance with its stated or implied substantive terms, so that they have zero fair value on initial recognition.

 

Even though the Company uses derivatives to mitigate risks, hedge accounting has not been applied in the periods presented. The fair value of derivative instruments is disclosed in Note 11.

 

**2.8****                            ****Trade accounts receivable**

 

Trade accounts receivable correspond to the amounts receivable from sales made in the course of the Company’s normal business. If collection is expected in one year or less, the accounts receivable are classified as current assets, otherwise, they are classified as non-current assets.

 

Accounts receivable are initially recognized at fair value and, subsequently, measured by the effective interest rate method less a provision for impairment, if necessary. Accounts receivable from customers abroad are presented based on the exchange rates at the balance sheet date.

 

A provision for impairment is recognized when there is objective evidence that Fibria will not be able to collect all the amounts due in accordance with the original terms of the accounts receivable. The calculation of the provision is based on a reasonable estimate to cover expected probable losses on the realization of receivables, considering the situation of each customer and the respective guarantees.

 

In performing such analysis of impairment our Treasury Department, examines on a monthly basis the maturity of receivables from domestic and foreign customers and identifies those customers with balances over due and assesses the specific situation of each client, a and exercises judgment on the risk of loss involved, considering the existence of contracted insurance, letters of credit, existence of collateral, the customer financial situation, and the status of legal processes in the event of execution. As a result of this analysis management determines a percentage that is applied to the outstanding balances due by the client and determines the amount to be recorded as an impairment.

 

The recognition and reversal of a provision for trade receivables is recorded as “Selling expenses” in the statement of profit or loss.

 

F-28

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

** **

**2.9****                             ****Inventory**

 

Inventory is stated at the lower average purchase or production cost and the net realizable value. Finished products and work-in-process consist of raw materials, direct labor, other direct costs and general production expenses.

 

The raw materials derived from biological assets are measured based on their fair value less cost to sell at the point of harvest, when transferred from biological assets to inventory.

 

Imports in transit are stated at the accumulated cost of each import. The net realizable value is the estimated sales price in the normal course of business, less the applicable variable selling expenses.

 

**2.10****                      ****Current and deferred income tax and social contribution**

 

Tax expense for the year comprises current and deferred tax. Tax is recognized in the statement of profit or loss, except to the extent that it relates to items recognized in other comprehensive income. In this case the tax is recognized directly in shareholders’ equity in other comprehensive income.

 

The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not recognized if it arises from initial recognition of an asset or liability in a transaction that is not a business combination and that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

 

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

 

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by Fibria and it is probable that the temporary difference will not be reversed in the foreseeable future.

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

F-29

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

** **

**2.11****                      ****Intangible assets**

 

**(a)****                               ****Goodwill**

 

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Company’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired and the fair value of the non-controlling interest in the acquired. Goodwill is recorded as intangible assets. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. An impairment is recognized immediately as an expense and is not subsequently reversed.

 

Goodwill is allocated to CGUs or groups of CGUs. The allocation is made to the CGUs or group of CGUs which will benefit/from the business combination originating the goodwill. Each CGU or group of CGUs to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

 

**(b)****                               ****Database**

 

The database represents the technical knowledge accumulated over several years and the database of forestry and industrial technologies originating from the Aracruz acquisition. These assets are the bases for improvements in the productivity per hectare of eucalyptus and also in the industrial process of pulp production.

 

The database was recognized at fair value at the acquisition date, it has a definite useful life and is recorded at cost less accumulated amortization. The amortization is calculated on a straight-line basis, at the annual rate of 10%, and recorded in the Statement of profit and loss in “Other operating income (expenses), net”.

 

The database of forestry and industrial technologies comprises: documentation center (CEDOC), information base for research and process (BIP), software utilized in knowledge management (KDP) and Microbacia (sensors and markers which capture the effects of rain in the planted areas during their cycle).

 

**(c)****                                ****Patent**

 

A registered patent was acquired in the Aracruz business combination and corresponds to the pulp process for a specific application and customer.

 

The patent was initially recorded at fair value on the acquisition date and is subsequently stated at cost less accumulated amortization. Amortization is calculated on a straight-line basis at an annual rate of 15.9%.

 

**(d)****                               ****Relationship with suppliers**

 

It relates to the contracts that the Company has for the supply of diesel oil, ethanol fuel and chemical products, arising from the Aracruz acquisition.

 

This asset was recorded at fair value on the acquisition date, it has a definite useful life and is 

 

F-30

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

subsequently recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis, at the annual rates of 20% for the supply of diesel oil and ethanol fuel and of 6.3% for chemical products.

 

**(e)****                                ****Development and implementation of systems (software)**

 

The costs associated with the maintenance of software are recognized as expenses, as incurred. The costs directly attributable to the development and testing of identifiable and unique software, controlled by Fibria, are recognized as intangible assets when the following criteria are met: (i) it is technically feasible to complete the software for it to be available for use; (ii) management intends to complete the software and use or sell it; (iii) there is an ability to use or sell the software product; (iv) it will provide probable future benefits that can be demonstrated; (v) suitable technical, financial and other resources are available to conclude its development and to use or sell it; (vi) the attributable expenditure during its development can be reliably measured.

 

Other development expenditures which do not meet these criteria are recognized as expenses, when incurred. The development costs that have been recognized as expenses are not capitalized in subsequent periods.

 

Software development costs are amortized over their estimated useful lives at an annual rate of 20%.

 

**2.12****                      ****Property, plant and equipment**

 

Property, plant and equipment are stated at cost and depreciated on a straight-line basis, in accordance with the estimated economic useful lives of the related assets. Annual depreciation rates are described in Note 19. Land is not depreciated.

 

The cost of major renovations is capitalized if the future economic benefits exceed the performance standard initially estimated for the asset.

 

Renovations are depreciated over the remaining useful life of the related asset. Repairs and maintenance are expensed when incurred.

 

Financing costs are capitalized during the period necessary to execute and prepare the asset for its intended use.

 

The residual values and useful lives of assets are reviewed and adjusted, if appropriate, at the end of each year.

 

An asset’s book value is immediately written down to its recoverable amount if it is greater than its estimated recoverable amount.

 

Gains and losses on disposals are determined by comparing the proceeds with the book value and are recognized as “Other operating income (expenses), net” in the statement of profit or loss.

 

**2.13****                      ****Leases**

 

At the inception of an agreement the Company determines whether a contract or set of contracts is or contains a lease. This is the case if the following two conditions are met: (i) performance of the contract is dependent upon the use of that specified asset and, (ii) the contract gives the Company the right of use

 

F-31

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

of the asset.

 

Leases of property, plant and equipment in which the Company assumes substantially all the risks and benefits of ownership are classified as finance leases. Finance leases are recorded as a financed purchase, initially recognized as property, plant and equipment with a corresponding leasing liability.

 

Leases in which substantially all of the ownership risks and benefits are retained by the lessor are classified as operating leases.

 

The minimum payments for operating leases (net of any incentives received from the lessor) are expensed on the straight-line method over the lease term. The contingent values of payment (those that are not a fixed amount but are based in the future amount of a factor such as volume of standing timber) are accounted in the periods where they are incurred.

 

Financial or operational leases are recognized in profit and loss except for those related to land leased for forest plantations which are capitalized as part of the cost of biological assets.

 

**2.14****                      ****Biological assets**

 

Biological assets are measured at fair value, net of estimated costs to sell. Depletion is calculated based on the total volume expected to be harvested.

 

Biological assets consist of eucalyptus forests exclusively from renewable plantations and intended for the production of bleached pulp. As a result of improvements in forest management techniques, including the genetic improvement of trees, the cycle of harvesting through replanting occurs over approximately six to seven years.

 

Fair value is determined using the discounted cash flow method, taking into consideration the volume of wood, segregated by plantation year, measured at the sales price of standing timber. The average sales price was estimated based on local market prices based on research of actual transactions, adjusted to reflect the forest price. The volumes used in the valuation are consistent with the annual average harvest for each region. See Note 18.

 

The Company has a policy of carrying out semi-annual appraisals of the fair value of these assets.

 

**2.15****                      ****Business combination**

 

The Company applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition-related costs are expensed as incurred. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.

 

The identifiable assets acquired and liabilities assumed are measured at fair value on the acquisition date. The non-controlling interest in the company acquired is valued at the fair value of the total net identifiable assets or at the proportionate share of the fair value of such net identifiable assets. The excess of the acquisition cost in relation to the fair value of identifiable assets acquired and liabilities assumed is recorded as goodwill (Note 2.11(a)) and, if the acquisition cost is lower than such fair value, the difference is recorded as a bargain purchase gain in the Statement of profit and loss on the acquisition date.

 

F-32

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquire is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss.

 

**2.16****                      ****Impairment of non-financial assets other than goodwill**

 

Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

 

**2.17****                      ****Trade payables**

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

 

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. In practice, they are usually recognized at the amount of the related invoice.

 

**2.18****                      ****Loans and financing**

 

Loans and financing are initially recognized at fair value, net of transaction costs incurred, if significant, and are subsequently stated at amortized cost. Any difference between the proceeds and the redemption value is recognized in the Statement of profit and loss over the period of the loans and financing using the effective interest rate method.

 

Costs of loans and financing directly attributable to the acquisition, construction or production of a qualifying asset are an integral part of the cost of such asset. Other costs of loans and financing are recognized as expenses, on the accrual basis.

 

**2.19****                      ****Other assets and liabilities (current and non-current)**

 

An asset is recognized in the balance sheet when it is probable that it will generate future economic benefits for the Company, and its cost or value can be reliably measured. A liability is recognized in the balance sheet when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of funds will occur. Liabilities include contractual charges, indexation charges or exchange rate changes incurred, when applicable. Provisions are recognized based on the best estimates of the risk involved.

 

Assets and liabilities are classified as current when their realization or settlement is likely to occur within 12 months after the balance sheet date. Otherwise, assets and liabilities are presented as non-current.

 

F-33

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**2.20****                      ****Employee benefits**

 

**(a)****                               ****Pension obligations**

 

The Company participates in pension plans, managed by a private pension entity, which provide post-employment benefits to employees, classified as defined contribution plans. It consists in a pension plan under which the Company pays fixed contributions to a separate entity and has no legal liabilities for making additional contributions if the fund does not have sufficient assets to honor the benefits related to employee service for the current and previous period.

 

Contributions represent net costs and are recorded in the Statement of profit and loss in the period in which they are due.

 

**(b)****                               ****Health care (post-retirement)**

 

Some Fibria’s subsidiaries used to provide post-retirement health care benefits to their employees. This policy established a lifetime benefits to a determined group of employees. This benefit has been discontinued for over five years, hence the plan is no longer available to new participants since July 2007.

 

The liability related to the health care plan for retired employees is stated at the present value of the obligation. The defined benefit obligation is estimated annually by independent qualified actuaries. The present value of the defined benefit obligation is determined through an estimate of the future cash outflow, utilizing the discount rate disclosed in Note 28(c).

 

Changes in the present value of the liabilities of the plan regarding the interest accrued are immediately recognized in the Statement of profit and loss. The changes in the present value of the liabilities of the plan regarding the actuarial gain and loss are recognized directly in shareholder’s equity, in “Other comprehensive income”.

 

**(c)****                                ****Profit-sharing and bonus plans**

 

Fibria recognizes a liability and an expense for bonuses and profit-sharing in the Statement of profit and loss. These provisions are calculated based on qualitative and quantitative targets established by management and are recorded in the statement of profit or loss as “Benefit to employees”.

 

**(d)****                               ****Share-based compensation**

 

The Company offers a compensation plan in which the amount of the benefit is determined based on changes in the quoted market price of its shares, based on a predetermined floor price and an established measurement date. The plan consists of cash payments, not involving the issue and/or delivery of shares for purposes of the plan. The Company’s CEO and executive officers are eligible for the plan.

 

The obligations are recorded as a provision for amounts payable to the CEO and executive officers, with a corresponding entry to the statement of profit or loss, based on the fair value of the benefits granted and the vesting period. The fair value of this liability is re-measured at each reporting period.

 

F-34

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**2.21****                      ****Contingent assets and contingent liabilities**

 

The accounting practices for the accounting and disclosure of contingent assets and contingent liabilities and legal obligations are as follows:

 

(a)                                Contingent assets are recognized only when there is evidence that realization is virtually certain, generally when favorable, final and unappealable court decisions have been obtained and which the value is possible to be measured. Contingent assets with probable success are only disclosed in the notes to the financial statements.

 

(b)                                Contingent liabilities are provided to the extent that the Company expects that is probable that will disburse cash and the amount can be reliably estimated. Tax and civil proceedings are accrued when losses are assessed as probable and the amounts involved can be reliably measured. When the expectation of loss is possible, a description of the processes and amounts involved is disclosed in the notes to the financial statements. Labor proceedings are provided based on the historical percentage of disbursements. Contingent liabilities assessed as remote losses are neither accrued nor disclosed.

 

**2.22****                       ****Asset retirement obligations**

 

It is, primarily, related to future costs for the decommissioning of industrial landfill cells, with the completion of the activities and decommissioning of assets linked to landfills. A provision is recorded as a long-term obligation against an item of fixed asset. The provision and the corresponding asset are initially recorded at fair value, based on the present value of estimated cash flows for future cash payments discounted by an adjusted risk-free rate. The long-term obligation accrues interest using a long-term discount. The asset is depreciated on a straight-line basis over the useful life of the principal. Depreciation is recorded in profit and loss.

 

**2.23****                      ****Revenue recognition**

 

Fibria recognizes revenue when: (i) the amount of revenue can be reliably measured; (ii) it is probable that future economic benefits will flow to the entity; and (iii) when specific criteria have been met for each of the Company sales including transfer of property and transfer of the risk of the product to the client based on the specific “Incoterm” (pre-defined commercial terms published by the International Chamber of Commerce) used and confirmation of available credit by the customer in order for the sale to be consummated. Revenue is the net amount after deduction of taxes, discounts and sales returns.

 

**(a)****                               ****Sale of products**

 

The recognition of revenue for domestic and export pulp sales is based on the following principles:

 

(i)                                    Pulp - domestic market - sales are mainly made on credit, payable in average in 12 days. Revenue is recognized when the customer receives the product, whether on the carrier’s premises or on its own premises, at which point risk and rewards on ownership are transferred.

 

(ii)                                 Pulp - export market - export orders are normally supplied from third party warehouses located near strategic markets, sales are mainly made on credit, payable in average in 24 days. Revenue is recognized when the risk of ownership of the pulp has been transferred to the client in accordance with the specific terms of the transaction. Export sale agreements generally establish transfer of risk based on “Incoterms” (2010) and the moment of transfer of risk as per the corresponding “Incoterm” is the moment on which revenue is recognized.

 

F-35

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Prior to the sale of CONPACEL, KSR and Piracicaba, as described in Note 1(d), Fibria operated in the paper segment and recognized sales from this segment as follows:

 

(iii)                              Paper - domestic market - sales were made at sight or on credit (usually payable in 30, 60 or 90 days). Revenue recognition was consistent to the criteria that the Company applies for the pulp sale in the domestic market.

 

(iv)                             Paper - export market - export orders were normally supplied from own or third party warehouses located near strategic markets. Revenue was recognized when the products were delivered to the carrier and risk and benefits transferred to the customer.

 

**(b)****                               ****Financial income**

 

Financial income is recognized on an accrual basis, using the effective interest method, and to the extent that realization is probable.

 

**2.24****                      ****Dividend distribution**

 

Dividend distribution to the Company’s shareholders is recognized as a liability in Fibria’s financial statements at year-end based on the Company’s by-laws. Any amount that exceeds the minimum mandatory dividend is only provided on the date it is approved by the shareholders at the general meeting.

 

**2.25****                      ****Non-current assets held for sale and discontinued operations**

 

The Company records assets held for sale as non-current assets when the asset (or disposal group of assets) is available for immediate sale in its present condition and subject only to terms that are usual and customary for sales of such assets and the sale is highly probable.

 

For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group of assets), and an active program to locate a buyer and a complete plan must have been initiated. Further, the asset (or disposal group of assets) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale is expected to qualify for recognition as a completed sale within one year from the date of classification, unless completion beyond one year is caused by events outside the Company’s control. Such circumstances include when at the date the Company commits to a plan to sell it has a reasonable expectation that other parties that are not the buyer (such as regulators or legal requirements) impose conditions that will extend the period to complete the sale beyond one year and both: (a) actions required to meets those conditions cannot begin until a firm purchase commitment is obtained, and (b) a firm purchase commitment is highly probable within one year.

 

The Company measures the assets held for sale (or group of assets) at the lower of its carrying amount and fair value less costs to sell. If the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized in the statement of profit or loss. Any subsequent reversal of impairment is recognized only to the extent of the loss previously recognized.

 

The depreciation of an asset (or group of assets) stops when it is classifies as held for sale. The assets and liabilities of a disposal group classified as held for sale are presented separately and are not offset and presented as a single amount.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The effects on the Statement of profit and loss and the cash flow statement from discontinued operations are presented separately from the continuing operations, including the related income taxes and any impairment expense, if applicable. The operating, investing and financing cash flows related to the discontinued operations are presented in Note 36.

 

**2.26****                      ****Adoption of new standards, amendments and interpretations issued by IASB and CPC and adjustments to comparative financial information**

 

A number of new standards and amendments to standards and interpretations were issued by the IASB and CPC (“Comitê de Pronunciamentos Contábeis”), and are effective for annual periods beginning as from January 1, 2013, as follow:

 

·             IAS 1/CPC 26(R1) - Presentation of financial statements

·             IAS 19 (R)/CPC 33(R1) - Employee benefits

·             IAS 28(R)/CPC 18(R2) - Investments in associates

·             IFRS 7/CPC 40(R1) - Financial instruments: Disclosures

·             IFRS 10/CPC 36(R3) - Consolidated financial statements

·             IFRS 11/CPC 19(R2) - Joint Arrangements

·             IFRS 12/CPC 45 - Disclosure of interest in other entities

·             IFRS 13/CPC 46 - Fair value measurement

 

As a result of the new standards, amendments and interpretations issued by the IASB and the CPC mentioned above, are applicable to us:

 

·                  IAS 1/CPC 26(R1) - Presentation of financial statements, with the main changes reflected in the Company’s statement of other comprehensive income;

·                  IFRS 7/CPC 40(R1) - Financial instruments: Disclosures, without relevant effect;

·                  IFRS 10/CPC 36(R3) - Consolidated financial statements, without relevant effect;

·                  IFRS 11/CPC 19(R2) - Joint Arrangements, with the effect described in Note 2.2.1 (b);

·                  IFRS 12/CPC 45 - Disclosure of interest in other entities, with impacts of disclosure in these financial statements;

·                  IFRS 13/CPC 46 - Fair value measurement, with impacts of disclosure in these financial statements; and,

·                  IAS 19(R)/CPC 33(R1) - Employee benefits, with the effect described below:

 

**IAS 19(R)/CPC 33(R1) — Employee benefits**

 

Until December 31, 2012 the Company booked actuarial gains and losses using the “corridor” approach, and such actuarial gains and losses were recognized in the income statement if they exceeded the “corridor” carrying amount, and amortized over the remaining estimated average life of the individuals eligible to the benefit, considering that the actuarial gains and losses do not exceed the “corridor” amount. As a result, actuarial gains and losses were not immediately recognized in profit or loss, and the the carrying amount recognized as liability was different from the estimated present value of the obligations calculated based on the amount of actuarial gains and losses not yet recognized.

 

On December 31, 2013, the Company adopted the new provisions of IAS 19. The main impact of the adoption of the amendments on the financial statements for the year ended December 31, 2013, with retrospective effect on the financial statements for the year ended December 31, 2012, and the respective 

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

opening balances as at January 1, 2012, is to immediately recognize all actuarial gains and losses directly in “Other comprehensive income”, with the extinction of the “corridor method” for the recognition of actuarial gains and losses resulting from re-measurement.

 

The reconciliation of the adjusted actuarial obligations as at December 31, 2012 and the opening balance as at January 1, 2012, impacted by the adoption of the new provisions, are as follow:

 
| ** **                                                                  | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                                                        |       |                         |       |                                 |       |
| Present value of   actuarial obligations from previous accounting practices |       | 60,362                       |       | 55,715                               |       |
|                                                                        |       |                         |       |                                 |       |
| Impact of the   adoption of IAS 19(R)/CPC 33(R1)                            |       | 33,572                       |       | 10,587                               |       |
|                                                                        |       |                         |       |                                 |       |
| Present value of   actuarial obligations after adoption (*)                 |       | 93,934                       |       | 66,302                               |       |

 

----

(*)         The actuarial obligation is recorded as non-current “Other payables”, at December 31, 2013 and December 31, 2012 and January 1st, 2012.

 

As a result of the adjustments described above, the balances of “Deferred taxes” classified as non-current assets, “Other payables” classified as non-current liabilities and “Other reserves” in shareholders’ equity as at December 31, 2012 and January 1st, 2012, in the comparative period were adjusted as follow:

 
| ** **                  | ** ** | **December 31, 2012** | ** ** | **January 1****st****, 2012** | ** ** |
|-----------------------------|------------|---------------------------------|------------|-----------------------------------------|------------|
| ** **                  | ** ** | **Original   balance**          | ** ** | **Adjustment**                          | ** ** | **Restated   balance** | ** ** | **Original   balance** | ** ** | **Adjustment** | ** ** | **Restated   balance** | ** ** |
|                        |       |                            |       |                                    |       |   |   |   |   |   |   |   |   |
| Non-current assets          |       |                            |       |                                    |       |   |   |   |   |   |   |   |   |
| Deferred assets             |       | 868,192                         |       | 11,414                                  |       | 879,606 |   | 991,768 |   | 3,600 |   | 995,368 |   |
|                        |       |                            |       |                                    |       |   |   |   |   |   |   |   |   |
| Non-current   liabilities   |       |                            |       |                                    |       |   |   |   |   |   |   |   |   |
| Other payables              |       | 160,949                         |       | 33,572                                  |       | 194,521 |   | 152,509 |   | 10,587 |   | 163,096 |   |
|                        |       |                            |       |                                    |       |   |   |   |   |   |   |   |   |
| Shareholders’   equity |       |                            |       |                                    |       |   |   |   |   |   |   |   |   |
| Other reserves              |       | 1,618,824                       |       | (22,158                                 | )          | 1,596,666 |   | 1,618,824 |   | (6,987 | ) | 1,611,837 |   |

 

**2.27****                      ****New standards, amendments and interpretations not yet adopted**

 

**(a)****                               ****New and amended standards adopted**

 

There are no IFRSs or IFRIC interpretations for which the initial adoption was effective on fiscal years beginning on or after January 1, 2012 that had a material impact on the Company.

 

**(b)****                               ****New standards and interpretations not yet adopted**

 

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after January 1, 2013, and have not been yet adopted in these consolidated financial

 

F-38

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

statements. None of these are expected to have a significant impact on the consolidated financial statements of the Company, except for the following:

 

·           IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortized cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Company is currently assessing of the impacts of IFRS 9’s adoption. The Company will also consider the impact of the remaining phases of IFRS 9 when completed by the Board.

 

·           IFRIC 21, ‘Levies’, provides guidance on when to recognize a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain. It does not include income taxes. Since the Company is not currently subject to significant levies it expects that the adoption of this new standard will not be material.

 

There are no other IFRSs or IFRIC interpretations that are not yet effective that the Company expect to have a material impact on the Company’s financial position and results of operations.

 

**3****                                       ****Critical accounting estimates and assumptions**

 

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The accounting estimates will seldom equal the related actual results. The estimates and assumptions that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next fiscal year are described below.

 

**(a)****                               ****Income tax and social contribution**

 

The Company recognizes deferred tax assets and liabilities based on the temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. If we or one of our subsidiaries operate at a loss or are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, our deferred tax asset could be reduced and, then the effective tax rate would increase.

 

The Company has a history of recurring taxable income, which is usually compensated with tax loss deferred tax assets. The Company’s management believes, based on projections of income approved by the appropriate level of Corporate Governance that, the realization of the deferred tax assets its probable 

 

F-39

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

for the next years.

 

As further disclosed in Note 15(e), in November 2011 the Company decided to transfer certain operations between subsidiaries outside Brazil which resulted in uncertainties with respect to the realization of deferred tax assets recorded by the subsidiary affected by the restructuring and, therefore, its realization no longer can be considered probable. Ultimate realization of deferred tax assets by such subsidiary depends on the level of taxable income that it will generate. As a result, the Company recognized a loss to reduce the deferred tax assets for R$ 278,486.

 

**(b)****                               ****Employee benefits**

 

The current value of the obligations under the healthcare plan depends on a number of factors that are determined based on actuarial calculations using various assumptions. The discount rate is one of the assumptions used in determining the net cost (revenue) of the actuarial obligations balances. We consider appropriate the use of the discount rate that is based on the return offered by the Government, which are denominated in the currency in which the benefits will be paid and that have terms to maturity similar to the terms of the obligations of the healthcare plan.

 

Further information, including a sensibility analyses, are disclosed in Note 28.

 

The liability for stock-based compensation is recorded at its estimated fair value which is calculated by the Company using the Binomial Tree model-Trinomial.

 

Any changes in the assumptions used for calculating the liability will affect the amount recorded at the balance sheet date.

 

**(c)****                                ****Fair value of derivatives and other financial instruments**

 

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Fibria uses judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. The Company also uses its judgment to define scenarios and figures presented in the sensitivity analysis included in Note 5.

 

Any changes to the assumptions used for calculations involving the fair value of financial instruments could significantly affect the financial position of the Company. See Note 5 for the sensibility analyses of the derivative financial instruments and other financial instruments as at December 31, 2013.

 

**(d)****                               ****Biological assets**

 

The calculation of the fair value of biological assets takes into consideration various assumptions with a high degree of judgment, as the sales price, cubic volume of wood and/or the annual average harvest for each region. Any changes in these assumptions used, would have an impact on the discounted cash flow result, resulting in an appreciation or devaluation of these assets.

 

The main premises used by Management to calculate the fair value of the biological assets and the correlation between changes in such premises and the fair value of the biological assets, are described as follow:

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| **Premises used**                        | ** ** | **Impact in the fair value of the biological assets** |
|-----------------------------------------------|------------|-----------------------------------------------------------------------------------------------|
| ** **                                    | ** ** | ** **                                                                                    |
| Actual planted area (hectare)                 |       | Increase of the premise, increase the   fair value                                            |
| Average annual growth (IMA) - m3/hectare      |       | Increase of the premise, increase the   fair value                                            |
| Net average sale   price - R$/m3              |       | Increase of the premise, increase the   fair value                                            |
| Remuneration of   own contributory assets - % |       | Increase of the premise, decrease the   fair value                                            |
| Discount rate - %                             |       | Increase of the premise, decrease the   fair value                                            |

 

**(e)****                                ****Revenue recognition and allowance for doubtful accounts**

 

The Company recognizes revenue and associated costs of sales at the time our products are delivered to our customers or when title and associated risks pass to our customers. Revenue is recorded net of tax deductions, discounts and sales returns.

 

The allowance for doubtful accounts is recorded in an amount we consider sufficient to cover any probable losses on realization of our accounts receivable from our customers and is included in selling expenses. Our accounting policy for establishing the allowance for doubtful accounts reserve requires that all invoices be individually reviewed by the legal, collection and credit departments, in order to determine the amount of the probable expected losses.

 

**(f)****                                 ****Review of the useful lives and recoverability of long-lived assets**

 

The Company reviews its long-lived assets to be held and used in its activities, for possible impairment whenever events or changes in circumstances indicate that the carrying value of an asset or group of assets may not be recoverable on the basis of future cash flows. The Company reduces the net book value if the carrying amount exceeds the recoverable amount. During the year ended December 31, 2013 the Company performed impairment tests and sensibility analyses over the main assumptions as detailed in Note 37.

 

**(g)****                               ****Contingent assets, contingent liabilities and legal obligations**

 

The Company is currently involved in certain labor, civil and tax proceedings. The provision for contingencies are recorded based on management’s evaluation and on the advice of internal and external legal counsel, and are subjected to a high level of judgment.

 

**(h)****                               ****Goodwill impairment**

 

The Company performs at lease annually or more frequently,  impairment tests when events or changes in circumstances may indicate that the carrying amount of cash-generating units to which goodwill has been allocated might not be recoverable. See Note 2.16. The recoverable amount of UGCs is determined based on calculations of the value in use, which involves significant estimates. See Note 37 for further details and sensibility analyses over main premises used on the impairment testing.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**4****                                       ****Risk management**

 

The Company’s risk management is carried out by the Governance, Risks and Compliance department which performs risk management activities, Corporative Governance, internal controls, internal audit, compliance and ombudsman areas. The objective is to promote synergy between the areas, adding value to the business and strengthening the Company’s governance. This area reports directly to the CEO and its activities are monitored by the Statutory Audit Committee, an advisory body of the Board of Directors.

 

In 2010, an Enterprise Risk Management (ERM) program was implemented to perform analysis, treatment and monitoring of risks. For those risks defined as a priority (those with high level of potential impacts and high probability of occurrence) different work streams have been implemented by the Company, as definition of action plans and Key Risk Indicators (KRIs) have been developed.

 

The Company’s activities expose it to a variety of risks. As such, risk management classifies the risks inherent to its business in the following categories:

 

(a)                                Financial risks - corresponds to inadequate cash management, use of resource in new operations, unknown, with great complexity and/or high risk. Details regarding the policies of market risk management, credit risk and liquidity risk are presented in the items 4.2.1(a), 4.2.1(b) and 4.2.1(c), respectively.

 

(b)                                Compliance risk - corresponds to legal or regulatory penalties, financial losses or reputational damage that the Company may face due to a regulatory noncompliance. In order to manage this risk, the Company continually monitors compliance with laws, standards and regulations, implements contingency plans and segregation of duties in order to avoid conflicts of interest and to facilitate the assessment of risk and the related internal controls of the Company. These assessments include environmental, labor and tax risks assessments. The monitoring process includes communication and reporting of issues to senior management.

 

(c)                                 Operational risk - results from the lack of consistency or adequacy of information systems, processing and operational controls, asset management failures, or cash flow management, or from frauds that affect the activities of the Company. Fibria has implemented a matrix system in which we perform materiality analysis accompanying the Company ́s strategy in order to design controls to monitor the most significant accounts and processes of Fibria. The Company performs quarterly the validation of the risk matrix and controls through “GRC Process Control”, a tool that make easier the process of assurance regarding the effectiveness of the control, the reporting and correction of deviations in the process, considered this a unified strategy that guides managers, standardizes and integrates GRC processes at every level of the organization, with the final product a unique repository of the risks, a single taxonomy and the more commitment of top management in the letter of controls. The activity made by the Controls and Compliance Management, which works together with business managers to seek compliance of internal controls, carried out by monitoring the processes, mitigating factor being the occurrence of operational risk for the adequacy controls the activity.

 

(d)                                Strategic risk - results from internal and external events that affect the reputation and sustainability of the Company, such as the risks related to the lack of capability or ability by the Company in response to changes that can impact the achievement of the strategic subjects. The Company monitors these risk events to identify and anticipate potential risk events that we are exposure.

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**4.1****                             ****Environmental risks**

 

**(a)****                               ****Risks associated with climate changes**

 

Our activities expose us to climate changes, which can affect the equilibrium of the ecosystems, the productivity of the forest and the availability of the necessary volume of water and energy for the factories.

 

Fibria adopts a cautionary approach in managing and operating its forest and industrial activities through the adoption of controls and monitoring tools, such as agronomic studies, genetic improvement in the production of eucalyptus that contemplates the adaptation of species in different climatic conditions, monitoring of water consumption in forested areas, among others.

 

**(b)****                               ****Environmental risks**

 

(i)                                     Management of water resources - Fibria constantly monitors the situation in the watersheds where it operates with respect to water quantity and quality and might be the effect of the Company’s forest management. Use of water by the factories is governed by the environmental legislation of each location and the licensing requirements of each plant. Each of our facilities operates under proper and valid licenses.

 

(ii)           Forest protection - protection of the forests against pests, disease, weeds and fires is based on a strategy involving continuous cycles of prevention, monitoring and control. The Company has ongoing efforts to select and plant increasingly resistant plant strains, and is also concerned with preserving an ecological balance and acquiring know-how to improve its forest management.

 

(iii)          Biodiversity - the Company’s forestry activities are licensed by the relevant regulatory bodies and are socio environmental planning activities are performed. Relevant areas of native forest species are interspersed with eucalyptus plantations. Fibria tries to maintain its protected areas in the legal form of Legal Reserves, Permanent Preservation Areas (APPs) and Private Natural Heritage Reserves (RPPNs) through the protection, restoration, management and integration of those areas with its forest activities. The Company also seeks to minimize external factors and degradation factors that may affect these areas.

 

(iv)          Waste - Fibria is undertaking efforts to recycle pulp production waste by transforming them in products that can be used in the forestry area. This practice generates both environmental and economic benefits, with reduction in disposal of waste in landfills and replacing supplies with recycled waste in the silviculture operations.

 

**(c)****                                ****Impacts on communities**

 

Fibria is committed to the communities with different economic, social and cultural backgrounds, which are affected positively or negatively with varying degrees by the cultivation of eucalyptus. In order to maintain a positive relationship with all communities, the Company has developed a plan to monitor these neighboring populations and classified them based on the intensity of the relationship with the Company. The relationship model has been implemented in all the forestry operations with respect to the silviculture and harvest activities.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(d)****                               ****Contracting with suppliers**

 

In order to mitigate the risk of having our suppliers hiring child or forced labor, Fibria requires its suppliers to provide a formal confirmation with respect to this matter.

 

Two other mandatory requirements to engage our suppliers are compliance with the environmental policies of Fibria and with the criteria for safe transportation (Safe Road Program). All contracts with suppliers and other business partners incorporate our Code of Conduct or refer to it. The Code reinforces the prohibition of discriminatory practices or violation of existing legislation.

 

The process to approve suppliers is performed every two years.

 

**4.2****                             ****Financial risks**

 

**4.2.1****                   ****Factors of financial risks**

 

Fibria’s activities expose it to a number of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk, price risk and commodity price risk), credit risk and liquidity risk. The majority of Fibria’s sales are denominated in US dollars, while costs are predominantly incurred in Reais. Accordingly, there is a currency mismatch between Fibria’s costs and revenues.

 

Fibria’s overall risk management program focuses on minimizing, mitigating or transferring exposures to market risks. In this context, derivatives are used exclusively for economic hedge purposes as follows: (i) cash flow hedge against currency mismatching; (ii) cash flow hedge of debt and interest payments against interest and exchange rate volatility; and (iii) hedge against volatility in the price of pulp or other risk factors.

 

The execution of the operations to mitigate market risks is carried out by a central Treasury department following policies approved by the Board of Directors. The control of risks and monitoring of compliance with the policies is performed by the General Governance, Risks and Compliance area, which reports directly to the CEO and to the Finance Committee and has independence to report non-compliance with the policies, to measure and to assess market risks. The General Governance, Risk and Compliance area monitors all market risk exposures and ensures compliance with our policies. The Treasury department identifies, evaluates and hedges financial risks following the policies established. The Board of Directors reviews on an annual basis the policies and principles for the overall risk management, definition of the areas involved, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

 

**Policies for the use of derivative financial instruments**

 

On December 13, 2012, the Company’s Board of Directors approved the annual revision of the Market Risk Management Policy, valid from January 1, 2013. The use of derivative financial instruments should follow such policy. The use of derivative financial instruments follow is in the view of management a conservative policy and every derivative contracted should be matched to an underlying risk generated by a hedged item which in turn results from operational transactions and expose the Company to risks related to changes in the price of commodities or risks arising from debt. Accordingly, derivative transactions are only permitted if related to an existing exposure (hedge) and leveraged financial instruments are not allowed.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(a)****                               ****Market risk**

 

It is related to changes in prices or rates including interest rates, exchange rates and commodities prices. These changes may affect the expected return of an investment, of a financial investment, of revenue of probable sales, of the cash flow and fair value of principal and interest on debts. Indicators were developed to measure those risks. An internal assessment tool was developed to measure those risks. One internal tool was developed to assess the impacts of stressed scenarios and to perform sensitivity analysis and analysis of gaps. The Governance, Risk and Compliance area developed a compliance tool to monitor compliance with the approved policies.

 

**(i)****                                  ****Foreign exchange risk**

 

The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, mainly with respect to the US dollar.

 

The Company’s financial policy establishes that the purpose of its operations with derivatives is to reduce costs, mitigate cash flows volatility, hedge foreign exchange exposure and avoid currency mismatches.

 

The following table presents the carrying amount of the assets and liabilities denominated in US dollars:

 
| ** **                            | ** ** | **2013**   | ** ** | **2012**   | ** ** |
|---------------------------------------|------------|------------|------------|------------|------------|
|                                  |       |       |       |       |       |
| Assets in foreign   currency          |       |       |       |       |       |
| Cash and cash   equivalents (Note 9)  |       | 1,247,404  |       | 891,046    |       |
| Marketable   securities (Note 10)     |       | 98,153     |       | 432,706    |       |
| Trade accounts   receivable (Note 12) |       | 375,711    |       | 714,142    |       |
|                                  |       |       |       |       |       |
|                                  |       | 1,721,268  |       | 2,037,894  |       |
|                                  |       |       |       |       |       |
| Liabilities in   foreign currency     |       |       |       |       |       |
| Loans and   financing (Note 23)       |       | 7,281,177  |       | 8,542,851  |       |
| Trade payables                        |       | 98,996     |       | 105,194    |       |
| Derivative   instruments (Note 11)    |       | 464,326    |       | 273,079    |       |
|                                  |       |       |       |       |       |
|                                  |       | 7,844,499  |       | 8,921,124  |       |
|                                  |       |       |       |       |       |
| Liability exposure                    |       | (6,123,231 | )          | (6,883,230 | )          |

 

The Company calculates its net exposure to each risk factor. When the risk factor is an exposure to US dollar or euro, maximum hedge limits are determined for exposure of up to 18 months. Hedging the exposure of transactions for periods between 12 and 18 months requires a recommendation by the Finance Committee.

 

The Company’s exposure to foreign currency generates market risks associated with changes in the exchange rates. Liabilities in foreign currency include loans obtained, mainly, in US dollars. The majority of the Company’s sales abroad are denominated in US dollars, while the sales of pulp in Brazil are in Reais. Accordingly, the Company’s liabilities act as a natural hedge for currency exposure in relation to export revenue, mitigating the mismatch between assets and liabilities.

 

F-45

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(ii)****                              ****Cash flow and fair value interest rate risk**

 

As Fibria has no significant interest-bearing assets, Fibria’s net income and operating cash flows are substantially independent of changes in market interest rates on such assets.

 

Fibria’s interest rate risk arises from its debt. Loans issued at variable rates expose Fibria to cash flow interest rate risk. Loans issued at fixed rates expose Fibria to fair value interest rate risk.

 

Fibria’s policy on the use of derivatives establishes that, with respect to interest rate risk, transactions with terms and amounts matching the corresponding hedge debt may be entered into. The Company must maintain at least 50% of its debt subject to fixed interest rates.

 

Fibria manages its cash flow interest rate risk by using swaps following the terms and conditions imposed by the approved policies.

 

**(iii)****                          ****Commodity price risk**

 

This risk is related to the volatility in the price of pulp, which is considered a commodity. Prices fluctuate depending on demand, productive capacity, inventories, commercial strategies adopted by the major forestry companies, paper producers, and availability of substitutes for these products in the market.

 

This risk is managed through different strategies. The Company has a specialized team, which continuously monitors the price of pulp and analyzes future trends, adjusting Fibria’s estimates, in order to assist in the process of taking preventive actions to best deal with the various scenarios. There are no liquidity in the market to mitigate a substantive portion of the risk to which Fibria’s operations are exposed. Pulp price derivatives available in the market are driven by their low liquidity, low volume and as a result prices may be subject to significant distortion.

 

Currently, the Company has no derivative to hedge against the fluctuation of the pulp price.

 

**(b)*****                               *****Credit risk**

 

Credit risk is the risk of one counterparty failing to discharge its obligation.

 

For every type of credit exposure and type of agreement a specific modeling is developed in order to evaluate the risks, identifying the exposure and performing sensitivity analysis of credit limits.

 

A monthly report is prepared by the Governance, Risk and Compliance area quantifying credit risk exposure arising from all the relationships of Fibria.

 

Credit risk is managed on a consolidated basis. Credit risk arises from cash equivalents (including bank deposits), derivative financial instruments, instruments recorded under marketable securities (Brazilian federal government securities, Bank Deposit Certificates (CDBs), Fixed Income Box (CDB Box), reverse repurchase agreements), letters of credit, insurance companies, customers (considering the payment terms agreed), suppliers (with respect to advances made for new projects) and others.

 

F-46

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(i)****                                  ****Banks and financial institutions**

 

Quantitative measures of credit risk were developed for exposures with banks and financial institutions (investments, current accounts and derivative financial instruments). The expected value of the exposure “Expected Credit Exposure (ECE)” and the worst expected exposure “Worst Credit Exposure (WCE)” of all exposures with counterparties are measured. We disclose the credit ratings of these entities in Note 8.

 

Fibria has a policy of contracting with private entities which have a minimum credit rating issued by one of the following rating agencies: Fitch, Moody’s or Standard & Poor’s. The minimum rating required for the counterparties is “AA-” (or “Aa3” at the local level) or “A” (or “aA2”at the global level). The exposure to a single private counterparty cannot exceed none of the following limits: 20% of Fibria’s total cash and cash equivalents plus marketable securities, 10% of the shareholders’ equity of the counterparty (based on the most recent information published by the counterparty), or 15% of the Company’s shareholders’ equity (based on the most recent information available).

 

**(ii)****                              ****Clients and advance to suppliers**

 

In the case of credit risk arising from customer credit exposure, Fibria assesses, through the Credit Committee, the credit quality of the customer, taking into account mainly past experience and defines individual credit limits, which are continuously monitored.

 

Fibria major customers are large solid companies and, for a large part, with more than 20 years of relationship with the Company, reducing the credit risk.

 

Credit analyses are performed on a regular basis and when considered necessary, and letters of credit or credit insurance coverage is obtained to protect the Company. The majority of export sales to Europe and Asia are covered by letters of credit or credit insurance with the *Compagnie Française d’ Assurance pour le Commerce Extérieur*(COFACE)*.*

 

The allowance for doubtful accounts is recorded at an amount sufficient to cover expected probable losses on the collection of trade accounts receivable and is recorded in “Selling expenses” (Note 12).

 

**(c)****                                ****Liquidity risk**

 

With respect to liquidity risk, the Company’s policy is to maintain balances of cash and financial investments of at least an amount equivalent to the operational cash needs outflow for the following twelve months plus debt service for a period of also twelve months.

 

Excess of cash is invested in instruments that generally have current availability and the approved policies allow for a minor portion to be invested in instruments with maturity not exceeding 365 days.

 

All derivatives instruments are over-the-counter derivatives and do not require to post margin deposits as collateral.

 

The table below presents Fibria’s financial liabilities into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and as such they differ from the amounts presented in the consolidated balance sheet.

 

F-47

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **               | ** ** | **Less than********one year** | ** ** | **Between********one and********two years** | ** ** | **Between********two and********five years** | ** ** | **Over five   years** | ** ** |
|--------------------------|------------|-----------------------------------------|------------|-------------------------------------------------------|------------|--------------------------------------------------------|------------|----------------------------|------------|
| ** **               | ** ** | ** **                              | ** ** | ** **                                            | ** ** | ** **                                             | ** ** | ** **                 | ** ** |
| At December 31, 2013     |       |                                    |       |                                                  |       |                                                   |       |                       |       |
| Loans and financing      |       | 3,259,720                               |       | 2,375,473                                             |       | 4,041,476                                              |       | 1,922,459                  |       |
| Derivative instruments   |       | 99,259                                  |       | 136,072                                               |       | 479,812                                                |       | 173,044                    |       |
| Trade and other payables |       | 710,198                                 |       | 34,873                                                |       | 24,617                                                 |       | 43,080                     |       |
|                     |       |                                    |       |                                                  |       |                                                   |       |                       |       |
|                     |       | 4,069,177                               |       | 2,546,418                                             |       | 4,545,905                                              |       | 2,138,583                  |       |
|                     |       |                                    |       |                                                  |       |                                                   |       |                       |       |
| At December 31, 2012     |       |                                    |       |                                                  |       |                                                   |       |                       |       |
| Loans and financing      |       | 1,739,139                               |       | 2,881,125                                             |       | 4,163,566                                              |       | 5,878,870                  |       |
| Derivative instruments   |       | 44,853                                  |       | 50,739                                                |       | 246,710                                                |       | 117,785                    |       |
| Trade and other payables |       | 564,172                                 |       | 54,234                                                |       | 14,516                                                 |       | 31,452                     |       |
|                     |       |                                    |       |                                                  |       |                                                   |       |                       |       |
|                     |       | 2,348,164                               |       | 2,986,098                                             |       | 4,424,792                                              |       | 6,028,107                  |       |
|                     |       |                                    |       |                                                  |       |                                                   |       |                       |       |
| At January 1, 2012       |       |                                    |       |                                                  |       |                                                   |       |                       |       |
| Loans and financing      |       | 1,636,635                               |       | 2,723,403                                             |       | 3,919,605                                              |       | 7,916,925                  |       |
| Derivative instruments   |       | 134,886                                 |       | 6,321                                                 |       | 104,913                                                |       | 16,099                     |       |
| Trade and other payables |       | 516,061                                 |       | 47,197                                                |       | 14,516                                                 |       | 35,081                     |       |
|                     |       |                                    |       |                                                  |       |                                                   |       |                       |       |
|                     |       | 2,287,582                               |       | 2,776,921                                             |       | 4,039,034                                              |       | 7,968,105                  |       |

 

**4.2.2****                   ****Capital risk management**

 

Management monitors indebtedness on the basis of a consolidated indebtedness ratio. This ratio is calculated as net debt divided by net income before interest, income taxes including social contribution, depreciation and amortization and other items as further described below (“Adjusted EBTIDA”). Net debt represents total loans, less cash and cash equivalents and marketable securities and the fair value of derivative financial instruments.

 

The Indebtedness and Liquidity Management Policy set guidelines with the ultimate objective of regaining and subsequently maintaining an investment grade rating issued by S&P, Moody’s and Fitch. Achieving better rating investment grade would enable Fibria to diversify its financing sources, allow timely access to the capital markets, lower financing costs, and ultimately create value to stakeholders. This policy reinforces Fibria’s corporate governance and is part of its internal controls. This policy supplements the “Market Risk Management Policy” referred to above. The Governance, Risk and Compliance area has the discretion to monitor and report, independently from the Treasury area, about the compliance with the requirements of the policy.

 

Fibria’s policy predicts the relation between net debt *versus* adjusted EBITDA ratio within the range of 2.0x and 2.5x. In spite of such stated objective, Fibria may reach a maximum leverage ratio up to 3.5x depending on the point of the expansion cycle. The management and strategic decisions of the Company should not imply that this ratio exceeds 3.5x. The net debt to adjusted EBITDA ratio shall be computed on the last day of each quarter as the division of net debt at the measurement date by accumulated adjusted EBITDA during the preceding four quarters. In the event the ratios exceed the limits 

 

F-48

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

established by the policy due to external factors, all efforts shall be taken to bring them back to compliance.

 

The Company should maintain a minimum cash balance, as defined below, in order to minimize the risk that cash flow mismatches affect the ability of the Company to meet its commitments. The minimum cash balance is defined as the sum of: (i) the minimum operating cash used during the cash conversion cycle of the Company; plus (ii) the cash needs to meet financial debt obligation (principal and interest) for the next 12 months. In addition, the Company may seek additional liquidity, through revolving credit facilities, to meet the minimum cash balance required by rating agencies methodologies. Fibria’s liquidity is mainly monitored through 12 months projected cash flows. Cash flow projections comprise stress tests considering exogenous market risk factors such as changes in foreign exchange rates, interest rates and pulp prices, as well as endogenous factors.

 

Management of debt and liquidity should also consider the contractual financial covenants, contemplating a safety margin in order to avoid them being exceeded.

 

The Company prioritizes funding in the same currency of its cash generation, thus seeking a natural currency hedge for its cash flow. Instruments shall be compatible with the Company’s desired debt profile. All sources of funds shall be approved by the bodies which are required by the current Bylaws, and also approved by those individuals and bodies established in the internal policies and procedures.

 

Treasury is responsible for developing contingency plans, which should specify all necessary actions to address potential non-compliance. The plan shall be submitted to the Finance Committee and monitored by all parties involved in this process.

 

The indebtedness ratios at December 31, 2013, 2012 and 2011 were as follows measured in Reais:

 
| ** **                                       | ** ** | **Millions of Reais** | ** ** |
|--------------------------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **2013**                        | ** ** | **2012** | ** ** | **2011** | ** ** |
|                                             |       |                            |       |   |   |   |   |
| Loans and   financing (Note 23)                  |       | 9,773                           |       | 10,768 |   | 11,324 |   |
| Payable - Aracruz   acquisition                  |       |                            |       |   |   |   |   |
|                                             |       |                            |       |   |   |   |   |
| Less - cash and   cash equivalents (Note 9)      |       | 1,272                           |       | 944 |   | 382 |   |
| Less (plus) -   derivative instruments (Note 11) |       | (464                            | )          | (273 | ) | (214 | ) |
| Less - marketable   securities (Note 10)         |       | 1,116                           |       | 2,352 |   | 1,678 |   |
|                                             |       |                            |       |   |   |   |   |
| Net debt                                         |       | 7,849                           |       | 7,745 |   | 9,478 |   |
|                                             |       |                            |       |   |   |   |   |
| Adjusted EBITDA                                  |       | 2,796                           |       | 2,253 |   | 1,981 |   |
|                                             |       |                            |       |   |   |   |   |
| Indebtedness ratio   in Reais                    |       | 2.8                             |       | 3.4 |   | 4.8 |   |
|                                             |       |                            |       |   |   |   |   |
| Indebtedness ratio   in Dollar                   |       | 2.6                             |       | 3.3 |   | 4.2 |   |

 

The indebtedness ratio decreased from 4.8 in 2011 to 3.4 at December 2012, mainly due to increase in cash regarding of the sale of assets and capital increase and reduction on level of gross indebtedness in the period.

 

F-49

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The indebtedness ratio decreased from 3.4 in 2012 to 2.8 at December 2013, mainly due to increase in cash regarding of the sale of land and a reduction on level of gross indebtedness due prepayments in the period.

 

As from June 2012 debt financial covenants including the indebtedness ratio are measured in US dollars as further described in Note 23. Since the ratios used above for the year ended December 31, 2013 and 2012 are measured in Reais there are differences between the ratio presented above and the ratio measured following the debt financial covenant requirements.

 

The Company continues to focus on actions including reductions in fixed and variable costs, selling expenses, capital expenditure and improvements in working capital. We have also focused on actions that may result in the additional liquidity through the disposal of non-strategic assets. These actions are intended to strengthen the capital structure of the Company, resulting in an improved Net Debt to Adjusted EBITDA ratio.

 

**5****                                       ****Sensitivity analysis**

 

The analysis below presents the sensitivity analysis of the effects of changes in relevant risk factors to which the Company is exposed to at the end of the year.

 

According to the local CVM Instruction no 475/08, the following tables present the change in the fair value of derivative financial instruments, loans and financings and marketable securities, in two adverse scenarios, that could generate significant gain or losses to the Company.

 

*Sensitivity analysis of changes in foreign currency*

 

The Company’s significant risk factor, considering the period of three months for the evaluation is its US Dollar exposure. We adopted as the probable scenario the fair value considering the market yield as at December 31, 2013.

 

Considering this projected scenario compared with the average exchange rate of R$ 2.1579 observed during the year ended December 31, 2013, net revenue would have increased by 8%, representing an approximate amount of R$ 555 million over a 12 month period considering the volume and sale prices of the year 2013.

 

To calculate the probable scenario the closing exchange rate at the date of these consolidated financial statement was used (R$ x USD = 2.3426). As the amounts are already recognized in the consolidated financial statement, there are no additional effects in the income statement in this scenario. The probable scenario was stressed considering an additional 25% and 50% with respect to the probable:

 
| ** **               | ** ** | **Impact of an appreciation of the real agains****t**** the ****US**** dollar on the fair value** | ** ** |
|--------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **               | ** ** | **Probable**** -**                                                                                                                                                 | ** ** | **Possible (25****%) -** | ** ** | **Remote (50****%) -** | ** ** |
| ** **               | ** ** | **R$ 2.3426**                                                                                                                                                      | ** ** | **R$ 2.9283** | ** ** | **R$ 3.5139** | ** ** |
| ** **               | ** ** | ** **                                                                                                                                                              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Derivative   instruments |       |                                                                                                                                                                    |       | (869,974 | ) | (1,988,700 | ) |
| Loans and   financing    |       |                                                                                                                                                                    |       | (1,731,012 | ) | (3,462,024 | ) |
| Marketable   securities  |       |                                                                                                                                                                    |       | 336,389 |   | 672,779 |   |
|                     |       |                                                                                                                                                                    |       |   |   |   |   |
| Total impact             |       |                                                                                                                                                                    |       | (2,264,597 | ) | (4,777,945 | ) |

 

F-50

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

*Sensitivity analysis in changes in interest rate*

 

We adopted as the probable scenario the fair value considering the market yield as at December 31, 2013. As the amounts are already recognized in the consolidated financial statement, there are no additional effects in the income statement in this scenario. The probable scenario was stressed considering an additional 25% and 50% with respect to the probable:

 
| ** **                  | ** ** | **Impact of an appreciation of the interest rate   on the fair value** | ** ** |
|-----------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                  | ** ** | **Probable**                                                                                                             | ** ** | **Possible (25****%)** | ** ** | **Remote (50****%)** | ** ** |
| ** **                  | ** ** | ** **                                                                                                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Derivative   instruments    |       |                                                                                                                     |       | (53,390 | ) | (103,079 | ) |
| Loans and   financing (a)   |       |                                                                                                                     |       | (3,892 | ) | (6,207 | ) |
| Marketable   securities (b) |       |                                                                                                                     |       | 33,717 |   | 67,111 |   |
|                        |       |                                                                                                                     |       |   |   |   |   |
| Total impact                |       |                                                                                                                     |       | (23,565 | ) | (42,175 | ) |

 

----

(a) Only our exposure regarding loans and financing, for which we did not enter into derivative financial instruments to hedge our exposure, was considered in sensitivity analysis above.

 

(b) Only marketable securities indexed to post-fixed rate were considered in the sensitivity analysis above.

 

**6****                                       ****Fair value estimates**

 

The assets and liabilities measured at fair value in the balance sheet are classified in the following levels based on the fair value hierarchy:

 

(a)                                Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

The fair value of the assets and liabilities traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company has only the marketable securities comprised by the Brazilian federal government securities, classified as Level 1.

 

(b)                                Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

 

The fair value of assets and liabilities that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an asset or liability are observable, the asset or liability is included in Level 2.

 

(c)                                 Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

 

If one or more of the significant inputs is not based on observable market data, the asset or liability is 

 

F-51

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

included in Level 3.

 

Specific valuation techniques used to calculate the fair value of the assets and liabilities are:

 

·             quoted market prices or dealer quotes for similar instruments;

 

·             the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves;

 

·             the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value;

 

·             other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining assets and liabilities.

 

·             the fair value of future contracts on inflation rate (such as embedded derivative contained on contracts accounted for as capital leases described in Note 1 (e)) based on future inflation rates at the balance sheet date, with the resulting value discounted to present value.

 

F-52

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The table below presents the assets and liabilities measured by the fair value as at:

 
| ** **                                         | ** ** | **December 31, 2013** | ** ** |
|----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                         | ** ** | **Level 1**                | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|                                               |       |                            |       |   |   |   |   |   |   |
| **Recurring   fair value measurements**            |       |                            |       |   |   |   |   |   |   |
| Assets                                             |       |                            |       |   |   |   |   |   |   |
| At fair value   through profit and loss            |       |                            |       |   |   |   |   |   |   |
| Derivative   instruments (Note 11)                 |       |                            |       | 93,554 |   |   |   | 93,554 |   |
| Warrant to acquire   Ensyn’s shares (Note 17) |       |                            |       |   |   | 7,098 |   | 7,098 |   |
| Marketable securities   (Note 10)                  |       | 589,605                         |       | 478,577 |   |   |   | 1,068,182 |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Available for sale financial   assets              |       |                            |       |   |   |   |   |   |   |
| Other investments   - fair value method            |       |                            |       |   |   | 39,824 |   | 39,824 |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Biological asset   (Note 18) (*)                   |       |                            |       |   |   | 3,423,434 |   | 3,423,434 |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Total assets                                       |       | 589,605                         |       | 572,131 |   | 3,470,356 |   | 4,632,092 |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Liabilities                                        |       |                            |       |   |   |   |   |   |   |
| At fair value   through profit and loss            |       |                            |       |   |   |   |   |   |   |
| Derivative   instruments (Note 11)                 |       |                            |       | 557,880 |   |   |   | 557,880 |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Total liabilities                                  |       |                            |       | 557,880 |   |   |   | 557,880 |   |

 
| ** **                                         | ** ** | **December 31, 2012** | ** ** |
|----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                         | ** ** | **Level 1**                | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|                                               |       |                            |       |   |   |   |   |   |   |
| **Recurring   fair value measurements**            |       |                            |       |   |   |   |   |   |   |
| Assets                                             |       |                            |       |   |   |   |   |   |   |
| At fair value   through profit and loss            |       |                            |       |   |   |   |   |   |   |
| Derivative   instruments (Note 11)                 |       |                            |       | 44,819 |   |   |   | 44,819 |   |
| Warrant to acquire   Ensyn’s shares (Note 17) |       |                            |       |   |   | 6,101 |   | 6,101 |   |
| Marketable   securities (Note 10)                  |       | 567,265                         |       | 1,784,721 |   |   |   | 2,351,986 |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Available for sale financial   assets              |       |                            |       |   |   |   |   |   |   |
| Other investments   - fair value method            |       |                            |       |   |   | 34,573 |   | 34,573 |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Biological asset   (Note 18) (*)                   |       |                            |       |   |   | 3,325,604 |   | 3,325,604 |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Total assets                                       |       | 567,265                         |       | 1,829,540 |   |   |   |   |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Liabilities                                        |       |                            |       |   |   |   |   |   |   |
| At fair value   through profit and loss            |       |                            |       |   |   |   |   |   |   |
| Derivative   instruments (Note 11)                 |       |                            |       | 317,898 |   |   |   | 317,898 |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Total liabilities                                  |       |                            |       | 317,898 |   |   |   | 317,898 |   |

 

F-53

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                              | ** ** | **January 1****st****, 2012** | ** ** |
|-----------------------------------------|------------|-----------------------------------------|------------|
| ** **                              | ** ** | **Level 1**                        | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|                                    |       |                                    |       |   |   |   |   |   |   |
| **Recurring   fair value measurements** |       |                                    |       |   |   |   |   |   |   |
| Assets                                  |       |                                    |       |   |   |   |   |   |   |
| At fair value   through profit and loss |       |                                    |       |   |   |   |   |   |   |
| Derivative   instruments (Note 11)      |       |                                    |       | 75,084 |   |   |   | 75,084 |   |
| Marketable   securities (Note 10)       |       | 362,998                                 |       | 1,314,928 |   |   |   | 1,677,926 |   |
|                                    |       |                                    |       |   |   |   |   |   |   |
| Biological asset   (Note 18) (*)        |       |                                    |       |   |   | 3,264,210 |   | 3,264,210 |   |
|                                    |       |                                    |       |   |   |   |   |   |   |
| Total assets                            |       | 362,998                                 |       | 1,390,012 |   | 3,264,210 |   | 5,017,220 |   |
|                                    |       |                                    |       |   |   |   |   |   |   |
| Liabilities                             |       |                                    |       |   |   |   |   |   |   |
| At fair value   through profit and loss |       |                                    |       |   |   |   |   |   |   |
| Derivative   instruments (Note 11)      |       |                                    |       | 288,971 |   |   |   | 288,971 |   |
|                                    |       |                                    |       |   |   |   |   |   |   |
| Total liabilities                       |       |                                    |       | 288,971 |   |   |   | 288,971 |   |

 

----

(*) See the changes in the fair value of the biological assets in Note 18.

 

There were no transfers between levels 1 and 2 during the years presented.

 

**6.1****                             ****Fair value of loans and financing**

 

The fair value of loans and financing, which are measured at amortized cost in the balance sheet, is estimated as follows: (a) bonds, for which fair value is based on the observed quoted price in the market (based on an average of closing prices provided by Bloomberg), and (b) for the other financial liabilities that do not have a secondary market, or for which the secondary market is not active, fair value is estimated by discounting the future contractual cash flows by current market interest rates, also considering the Company’s credit risk. The following table presents the fair value of loans and financing:

 

F-54

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                | ** ** | **Yield used to** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|-----------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                | ** ** | **discount (*)**       | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|                                      |       |                        |       |       |       |       |       |       |       |
| Quoted in the   secondary market          | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** |       | ** ** |
| In foreign currency                       |       |                        |       |       |       |       |       |       |       |
| Bonds - VOTO IV                           |       |                        |       | 428,329    |       | 501,430    |       | 418,757    |       |
| Bonds - VOTO III                          |       |                        |       |       |       |       |       | 126,676    |       |
| Bonds - Fibria Overseas                   |       |                        |       | 3,372,843  |       | 4,928,110  |       | 4,852,233  |       |
| Estimated based on   discounted cash flow |       |                        |       |       |       |       |       |       |       |
| In foreign   currency                     |       |                        |       |       |       |       |       |       |       |
| Export credits                            |       | LIBOR USD                   |       | 2,888,240  |       | 2,937,262  |       | 3,057,792  |       |
| Export credits   (ACC/ACE)                |       | DDI                         |       | 455,141    |       | 661,363    |       | 618,796    |       |
| FINIMP                                    |       | LIBOR USD                   |       |       |       |       |       |       |       |
| Leasing                                   |       | LIBOR USD                   |       |       |       |       |       | 14,942     |       |
| Export credits   (Finnvera)               |       | LIBOR USD                   |       | 234,809    |       | 262,511    |       | 287,359    |       |
| EIB Europe Inv. Bank                      |       | LIBOR USD                   |       |       |       |       |       | 781        |       |
| Others                                    |       |                        |       |       |       |       |       |       |       |
| In local currency                         |       |                        |       |       |       |       |       |       |       |
| BNDES — TJLP                         |       | DI 1                        |       | 1,304,644  |       | 1,469,549  |       | 1,444,994  |       |
| Currency basket                           |       | DI 1                        |       | 297,964    |       | 264,602    |       | 238,096    |       |
| FINEP                                     |       | DI 1                        |       | 1,970      |       | 2,487      |       | 1,886      |       |
| FINAME                                    |       | DI 1                        |       | 13,643     |       | 14,450     |       | 9,013      |       |
| NCE in Reais                              |       | DI 1                        |       | 938,248    |       | 726,727    |       | 627,590    |       |
| Accounts payable -   stocks acquisition   |       | DI 1                        |       |       |       |       |       |       |       |
| Midwest Fund                              |       | DI 1                        |       | 42,902     |       | 56,960     |       | 63,070     |       |
|                                      |       |                        |       |       |       |       |       |       |       |
|                                      |       |                        |       | 9,978,733  |       | 11,825,451 |       | 11,761,985 |       |

 

----

(*) Used to calculate the present value of the loans.

 

**6.2****                             ****Fair value measurement of derivative financial instruments (including embedded derivative)**

 

Derivative financial instruments (including embedded derivative) are recorded at fair value as detailed in Note 11. All derivative financial instruments are classified as Level 2 in the fair value hierarchy.

 

The Company estimates the fair value of its derivative financial instruments and acknowledges that it may differ from the amounts payable/receivable in the event of early settlement of the instrument. This difference results from factors such as liquidity, spreads or the intention of early settlement from the counterparty, among others. The amounts estimated by management are also compared with the Mark-to-Market (MtM) provided as reference by the banks (counterparties) and with the estimates performed by an independent financial advisor.

 

Management believes that the fair value estimated for those instruments following the methods described below, reliably reflect fair values.

 

The methods used for the measurement of the fair value of the derivative financial instruments (including embedded derivative) used by the Company consider methodologies commonly used in the market and which are based on widely tested theoretical bases.

 

The methodologies used to estimate the MtM and to record the financial instruments is defined in the manual developed by the Company’s risk and compliance management area.

 

F-55

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

A summary of the methodologies used for purposes of determining fair value by type of instrument is presented below.

 

·             Non-deliverable forwards - a projection of the future exchange rate is made, using the observable foreign currency coupon and the observed fixed yield curve in Reais at each maturity date. The difference between the forward exchange rate obtained through this method and the contractual forward exchange rate is determined. This difference is multiplied by the notional amount of each contract and discounted to present value using the observed fixed yields in Reais.

 

·             Swap contracts - the present value of both the asset and liability legs are estimated through the discount of forecasted cash flows using the observed market interest rate for the currency in which the swap is denominated. The contract fair value is the difference between the asset and liability.

 

·             Options (Zero Cost Collar) - the fair value was calculated based on the Garman-Kohlhagen model. Volatility information and interest rates are observable and obtained from BM&FBOVESPA exchange information to calculate the fair values.

 

·             Swap US-CPI - the cash flow of the liability position is projected using the yield of the US-CPI index, obtained through the implicit rates in the American titles indexed to the inflation (TIPS), issued by the Bloomberg. The cash flow of the asset position is projected using the fixed rate established in the embedded derivative instrument. The fair value of the embedded derivative instrument is the present value of the difference between both positions.

 

The yield curves used to calculate the fair value in December 31, 2013 are as follows:

 
| **Interest rate curves** | ** ** | ** **                                     | ** ** | ** **             | ** ** |
|------------------------------------|------------|------------------------------------------------|------------|------------------------|------------|
| **Brazil**                         | ** ** | **United States**                         | ** ** | **Dollar coupon** | ** ** |
| **Vertex**                         | ** ** | **Rate (p.a****.****)**** - %** | ** ** | **Vertex**             | ** ** | **Rate (p.a****.) - %** | ** ** | **Vertex** | ** ** | **Rate (p.a****.****)**** - %** | ** ** |
|                               |       |                                           |       |                   |       |   |   |   |   |   |   |
| 1M                                 |       | 9.97                                           |       | 1M                     |       | 0.18 |   | 1M |   | -2.52 |   |
| 6M                                 |       | 10.28                                          |       | 6M                     |       | 0.26 |   | 6M |   | 0.89 |   |
| 1Y                                 |       | 10.58                                          |       | 1Y                     |       | 0.31 |   | 1Y |   | 1.64 |   |
| 2Y                                 |       | 11.62                                          |       | 2Y                     |       | 0.47 |   | 2Y |   | 2.01 |   |
| 3Y                                 |       | 12.28                                          |       | 3Y                     |       | 0.85 |   | 3Y |   | 2.41 |   |
| 5Y                                 |       | 12.83                                          |       | 5Y                     |       | 1.78 |   | 5Y |   | 3.52 |   |
| 10Y                                |       | 13.22                                          |       | 10Y                    |       | 3.17 |   | 10Y |   | 6.02 |   |

 

F-56

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**7****                                       ****Financial instruments by category**

 

The Company’s financial instruments by category are presented below:

 
| ** **                                                      | ** ** | **December 31,** | ** ** | **December 31, ** | ** ** | **January 1st, ** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                                      | ** ** | **2013**              | ** ** | **2012**                    | ** ** | **2012**                    | ** ** |
|                                                            |       |                  |       | **(restated)**              |       | **(restated)**              |       |
| Assets                                                          |       |                  |       |                        |       |                        |       |
| Loans and   receivables                                         |       |                  |       |                        |       |                        |       |
| Cash and cash   equivalents (Note 9)                            |       | 1,271,752             |       | 943,856                     |       | 381,915                     |       |
| Trade accounts   receivable (Note 12)                           |       | 382,087               |       | 754,768                     |       | 945,362                     |       |
| Accounts   receivable — land and building sold (Note 1(e)) |       | 902,584               |       |                        |       |                        |       |
| Other                                                           |       | 355,363               |       | 367,138                     |       | 203,122                     |       |
|                                                            |       |                  |       |                        |       |                        |       |
|                                                            |       | 2,911,786             |       | 2,065,762                   |       | 1,530,399                   |       |
|                                                            |       |                  |       |                        |       |                        |       |
| At fair value   through profit and loss                         |       |                  |       |                        |       |                        |       |
| Derivative   instruments (Note 11)                              |       | 93,554                |       | 44,819                      |       |                        |       |
| Marketable   securities (Note 10)                               |       | 1,068,182             |       | 2,351,986                   |       | 1,677,926                   |       |
| Warrant to acquire   Ensyn’s shares (Note 17)              |       | 7,098                 |       | 6,101                       |       |                        |       |
|                                                            |       |                  |       |                        |       |                        |       |
|                                                            |       | 1,168,834             |       | 2,402,906                   |       | 1,677,926                   |       |
|                                                            |       |                  |       |                        |       |                        |       |
| Held-to-maturity   investments                                  |       |                  |       |                        |       |                        |       |
| Marketable   securities (Note 10)                               |       | 48,183                |       |                        |       |                        |       |
|                                                            |       |                  |       |                        |       |                        |       |
| Available for sale financial   assets                           |       |                  |       |                        |       |                        |       |
| Other investments   - fair value method (Note 17)               |       | 39,824                |       | 34,573                      |       |                        |       |
|                                                            |       |                  |       |                        |       |                        |       |
| Liabilities                                                     |       |                  |       |                        |       |                        |       |
| At amortized cost                                               |       |                  |       |                        |       |                        |       |
| Loans and   financing (Note 23)                                 |       | 9,773,097             |       | 10,767,955                  |       | 11,324,417                  |       |
| Trade and other   payables                                      |       | 905,469               |       | 835,293                     |       | 679,155                     |       |
|                                                            |       |                  |       |                        |       |                        |       |
|                                                            |       | 10,678,566            |       | 11,603,248                  |       | 12,003,572                  |       |
|                                                            |       |                  |       |                        |       |                        |       |
| At fair value   through profit and loss                         |       |                  |       |                        |       |                        |       |
| Derivative   instruments (Note 11)                              |       | 557,880               |       | 317,898                     |       | 213,887                     |       |

 

**8****                                       ****Credit quality of financial assets**

 

The credit quality of financial assets can be assessed by reference to external credit ratings (when available) or to historical information about counterparty default rates, analysis of its financial position and information about negative credit events. With respect to credit quality of counterparties that are financial institutions (such as amounts recorded in cash and cash equivalents, marketable  securities and derivative financial instruments) the Company considers the lowest rating of the counterparty as rated by the three main international agencies (Moody’s, Fitch and Standard & Poor’s) in accordance with the internal policy of market risk management:

 

F-57

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                                                                                              | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                                                                                                    |       |                         |       |                         |       |                                 |       |
| Trade accounts   receivable                                                                                             |       |                         |       |                         |       |                                 |       |
| Counterparties   with external credit rating (S&P - Standard Poor’s and D&B -   Dun & Bradstreet) |       |                         |       |                         |       |                                 |       |
| S&P - AA-                                                                                                           |       | 18,965                       |       | 124,188                      |       | 158,628                              |       |
| S&P - A                                                                                                             |       | 84,576                       |       | 74,236                       |       | 149,735                              |       |
| S&P - BBB+                                                                                                          |       | 10,174                       |       |                         |       |                                 |       |
| S&P - BBB                                                                                                           |       | 6,006                        |       | 66,726                       |       | 21,523                               |       |
| S&P - BB                                                                                                            |       | 586                          |       | 75,913                       |       | 27,347                               |       |
| D&B - 2                                                                                                             |       |                         |       |                         |       | 40,220                               |       |
|                                                                                                                    |       |                         |       |                         |       |                                 |       |
| Counterparties   without external credit rating                                                                         |       |                         |       |                         |       |                                 |       |
| A - Low risk                                                                                                            |       | 101,399                      |       | 261,129                      |       | 128,819                              |       |
| B - Average risk                                                                                                        |       | 117,151                      |       | 125,174                      |       | 287,195                              |       |
| C - Average to   high risk                                                                                              |       | 43,230                       |       | 27,402                       |       | 131,985                              |       |
| D - High risk                                                                                                           |       | 12,158                       |       | 61,955                       |       | 76,212                               |       |
|                                                                                                                    |       |                         |       |                         |       |                                 |       |
| Total trade   accounts receivable                                                                                       |       | 394,245                      |       | 816,723                      |       | 1,021,574                            |       |
|                                                                                                                    |       |                         |       |                         |       |                                 |       |
| Cash and cash   equivalents and marketable securities                                                                   |       |                         |       |                         |       |                                 |       |
| brAAA                                                                                                                   |       | 2,140,746                    |       | 2,641,602                    |       | 1,578,282                            |       |
| brAA+                                                                                                                   |       | 12                           |       | 231,333                      |       | 274,015                              |       |
| brAA                                                                                                                    |       | 170,824                      |       | 194,047                      |       | 57,006                               |       |
| brAA- (ii)                                                                                                              |       | 10,145                       |       | 70,052                       |       | 119,096                              |       |
| A (ii)                                                                                                                  |       | 27,449                       |       | 64,252                       |       | 24,266                               |       |
| Other (i)                                                                                                               |       | 38,941                       |       | 94,556                       |       | 7,176                                |       |
|                                                                                                                    |       |                         |       |                         |       |                                 |       |
| Total cash and   cash equivalents and marketable securities                                                             |       |                         |       |                         |       |                                 |       |
| (Notes 9 and 10)                                                                                                        |       | 2,388,117                    |       | 3,295,842                    |       | 2,059,841                            |       |
|                                                                                                                    |       |                         |       |                         |       |                                 |       |
| Assets -   derivative financial instruments                                                                             |       |                         |       |                         |       |                                 |       |
| brAAA                                                                                                                   |       | 87,145                       |       | 40,603                       |       | 63,183                               |       |
| brAA+                                                                                                                   |       |                         |       | 3,650                        |       | 7,957                                |       |
| Others                                                                                                                  |       | 6,409                        |       | 566                          |       | 3,944                                |       |
|                                                                                                                    |       |                         |       |                         |       |                                 |       |
|                                                                                                                    |       | 93,554                       |       | 44,819                       |       | 75,084                               |       |

 

----

(i)            Includes counterparties without external credit rating by none of the three main rating agencies.

(ii)         Transaction approved by the Finance Committee, advisory of the Board of Directos.

 

F-58

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The risk rating of the main financial institutions to which we are exposed is presented below:

 
| ** **                            | ** ** | **Rating used**   | ** ** | ** **   | ** ** |
|---------------------------------------|------------|------------------------|------------|--------------|------------|
| ** **                            | ** ** | **for credit**    | ** ** | **Rating**   | ** ** |
| **Counterparty**                      | ** ** | **risk analysis** | ** ** | **agency**   | ** ** |
|                                  |       |                   |       |         |       |
| Banco ABC Brasil S.A.                 |       | AA.br                  |       | Fitch        |       |
| Banco Alfa de Investimento S.A.       |       | AA.br                  |       | Fitch        |       |
| Banco Bradesco   S.A.                 |       | AAA.br                 |       | Fitch        |       |
| Banco BTG Pactual S.A.                |       | AA.br                  |       | Fitch        |       |
| Banco Credit Agricole Brasil S.A.     |       | AAA.br                 |       | Fitch        |       |
| Banco Daycoval   S.A.                 |       | AA.br                  |       | Fitch        |       |
| Banco do Brasil S.A.                  |       | AAA.br                 |       | Fitch        |       |
| Banco Itaú BBA                   |       | AAA.br                 |       | Fitch        |       |
| Banco Mizuho do Brasil S.A.           |       | A                      |       | S&P      |       |
| Banco Safra S.A.                      |       | AAA.br                 |       | Fitch        |       |
| Banco Santander Brasil S.A.           |       | AAA.br                 |       | Fitch        |       |
| Banco Volkswagen   S.A.               |       | AAA.br                 |       | S&P      |       |
| Banco Votorantim   S.A.               |       | AA+.br                 |       | Fitch        |       |
| Bank of America   Corp                |       | BBB                    |       | Moody’s |       |
| Bank of Austria                       |       | BBB+                   |       | Moody’s |       |
| BNP Paribas Brasil                    |       | AAA.br                 |       | S&P      |       |
| Caixa Economica   Federal             |       | AAA.br                 |       | Fitch        |       |
| Citibank Brasil                       |       | AAA.br                 |       | S&P      |       |
| Credit Suisse AG                      |       | A-                     |       | S&P      |       |
| Deutsche Bank S.A.- Banco Alemão |       | AAA.br                 |       | Fitch        |       |
| Goldman Sachs   Group Inc.            |       | BBB+                   |       | Moody’s |       |
| HSBC Brasil                           |       | AAA.br                 |       | Moody’s |       |
| JPMorgan Chase   Bank NA              |       | A+                     |       | Fitch        |       |
| Morgan Stanley                        |       | BBB                    |       | Moody’s |       |
| Standard Chartered   PLC              |       | A                      |       | Moody’s |       |
| Banco ABC Brasil S.A.                 |       | AA.br                  |       | Fitch        |       |
| Banco Alfa de Investimento S.A.       |       | AA.br                  |       | Fitch        |       |

 

The internal risk rating regarding customers is as follows:

 

·             A - Low risk - customer with highly solid financial position, with no market restrictions and with no historical default experience, with a long time of relationship, or covered by credit insurance.

 

·             B - Average risk - customer with solid financial position, with no market restrictions and with no default history.

 

·             C - Average to high risk - customer with reasonable financial position, with moderate market restrictions and low default history.

 

·             D - High risk - customer with weak financial position, with moderate through high market restrictions and negative default history with the Company.

 

None of the financial assets that are fully performing has been renegotiated in the last year. None of the loans to related parties is past due or impaired.

 

F-59

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**9****                                       ****Cash and cash equivalents**

 
| ** **                       | ** ** | **Average   yield - %** | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|----------------------------------|------------|-----------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                             |       |                              |       |                         |       |                         |       |                                 |       |
| Cash and banks                   |       |                              |       | 24,348                       |       | 52,810                       |       | 62,989                               |       |
| Foreign currency                 |       |                              |       |                         |       |                         |       |                                 |       |
| Fixed-term   deposits — CDB |       | 0.32                              |       | 1,247,404                    |       | 891,046                      |       | 318,926                              |       |
|                             |       |                              |       |                         |       |                         |       |                                 |       |
| Cash and cash   equivalents      |       |                              |       | 1,271,752                    |       | 943,856                      |       | 381,915                              |       |

 

**10****                                ****Marketable securities**

 

Marketable securities include financial assets classified as trading as follows:

 
| ** **                                                                               | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                                                                     |       |                         |       |                         |       |                                 |       |
| Brazilian federal   government securities, including under reverse repurchase agreements |       |                         |       |                         |       |                                 |       |
| LFT                                                                                      |       | 52,151                       |       | 268,984                      |       | 208,602                              |       |
| LTN-Over                                                                                 |       | 47,645                       |       | 111,907                      |       | 149,730                              |       |
| NTN-F                                                                                    |       | 489,809                      |       | 186,374                      |       |                                 |       |
| NTN-B(*)                                                                                 |       | 48,183                       |       |                         |       |                                 |       |
| Other                                                                                    |       |                         |       |                         |       | 4,666                                |       |
|                                                                                     |       |                         |       |                         |       |                                 |       |
| Private securities   including securities under reverse repurchase agreements            |       |                         |       |                         |       |                                 |       |
| Reverse repurchase   agreements                                                          |       | 241,084                      |       | 766,281                      |       | 1,282,236                            |       |
| CDB                                                                                      |       | 138,340                      |       | 584,734                      |       | 31,750                               |       |
| CDB Box                                                                                  |       |                         |       |                         |       | 942                                  |       |
| RDB - fixed   interest rate                                                              |       | 1,000                        |       | 1,000                        |       |                                 |       |
|                                                                                     |       |                         |       |                         |       |                                 |       |
| In foreign   currency                                                                    |       |                         |       |                         |       |                                 |       |
| Private securities   including securities under reverse repurchase agreements            |       |                         |       |                         |       |                                 |       |
| Time deposits                                                                            |       | 98,153                       |       | 432,706                      |       |                                 |       |
|                                                                                     |       |                         |       |                         |       |                                 |       |
| Marketable   securities                                                                  |       | 1,116,365                    |       | 2,351,986                    |       | 1,677,926                            |       |
|                                                                                     |       |                         |       |                         |       |                                 |       |
| Current                                                                                  |       | 1,068,182                    |       | 2,351,986                    |       | 1,677,926                            |       |
|                                                                                     |       |                         |       |                         |       |                                 |       |
| Non-Current                                                                              |       | 48,183                       |       |                         |       |                                 |       |

 

----

(*)    These Notes, issued by the Brazilian federal government, are classified as held-to-maturity investments, they bear an average interest rate of 5.97% p.a. and a have a maturity date of August 15, 2020.

 

Private securities are mainly composed of short-term investments in CDB and reverse repurchase agreements which have immediate liquidity and bear interest based on the Interbank Deposit

 

F-60

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Certificate (CDI) interest rate. Government securities are composed of National Treasury Bills and Notes all issued by the Brazilian federal government. The average yield of marketable securities in the year of 2013 was 102.56% of the CDI (102.66% of the CDI as at December 31, 2012 and 102.47% of the CDI as at January 1, 2012). Securities in foreign currency correspond to time deposits with maturity over 90 days.

 

**11****                                ****Derivative financial instruments**

 

The following tables presents the Company’s derivative instruments, segregated by type, presenting both asset and liability position of swap contracts, by hedge strategy adopted, and the maturity schedule based on contractual terms.

 

**(a)****                               ****Derivative financial instruments by type**

 
| ** **                       | ** ** | **Reference value (notional) -   in US dollars** | ** ** | **Fair value**          | ** ** |
|----------------------------------|------------|---------------------------------------------------------------------------|------------|------------------------------|------------|
| **Type of derivative** | ** ** | **December 31,   2013**                                              | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|                             |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Operational hedge                |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Cash flow hedges   of exports    |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| NDF (US$)                        |       |                                                                      |       | 170,000                      |       | 921,900 |   |   |   | (26,432 | ) | (134,206 | ) |
| Zero cost dollar                 |       | 1,122,000                                                                 |       | 410,000                      |       | 162,000 |   | (12,451 | ) | 1,171 |   | (6,954 | ) |
|                             |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Hedges of debts                  |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Hedges of interest   rates       |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Swap LIBOR x Fixed   (US$)       |       | 540,309                                                                   |       | 564,012                      |       | 227,891 |   | 15,332 |   | (8,145 | ) | (10,655 | ) |
|                             |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Hedges of foreign   currency     |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Swap JPY x US$ (JPY)        |       |                                                                      |       |                         |       | 45,000 |   |   |   |   |   | 27,804 |   |
| Swap DI x US$ (US$)         |       | 422,946                                                                   |       | 306,226                      |       | 233,550 |   | (149,807 | ) | (78,345 | ) | 11,373 |   |
| Swap TJLP x US$ (US$)       |       | 275,712                                                                   |       | 349,860                      |       | 416,478 |   | (225,340 | ) | (148,123 | ) | (92,165 | ) |
| Swap Pre x US$ (US$)        |       | 273,472                                                                   |       | 97,737                       |       | 41,725 |   | (92,060 | ) | (13,205 | ) | (9,084 | ) |
|                             |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
|                             |       |                                                                      |       |                         |       |   |   | (464,326 | ) | (273,079 | ) | (213,887 | ) |
|                             |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Classified                       |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| In current assets                |       |                                                                      |       |                         |       |   |   | 22,537 |   | 18,344 |   | 31,638 |   |
| In non-current   assets          |       |                                                                      |       |                         |       |   |   | 71,017 |   | 26,475 |   | 43,446 |   |
| In current   liabilities         |       |                                                                      |       |                         |       |   |   | (106,793 | ) | (54,252 | ) | (163,534 | ) |
| In non-current   liabilities     |       |                                                                      |       |                         |       |   |   | (451,087 | ) | (263,646 | ) | (125,437 | ) |
|                             |       |                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Total, net                       |       |                                                                      |       |                         |       |   |   | (464,326 | ) | (273,079 | ) | (213,887 | ) |

 

F-61

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(b)****                               ****Derivative financial instruments by type and broken down by nature of the exposure (asset and liability exposure for swaps)**

 
| ** **                                | ** ** | **Reference value (notional) -    in currency of origin** | ** ** | **Fair value**          | ** ** |
|-------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| **Type of derivative**          | ** ** | **December 31,   2013**                                                                 | ** ** | **December 31,   2012** | ** ** | **January 1,   2012** | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1,   2012** | ** ** |
|                                      |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
| Future contracts -   NDF                  |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
| Cash flow hedge   (US$)                   |       |                                                                                         |       | 170,000                      |       | 921,900 |   |   |   | (26,432 | ) | (134,206 | ) |
| * *                                  |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
| Swap contracts                            |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
| Asset                                     |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
| JPY fixed rate   (JPY to USD)             |       |                                                                                         |       |                         |       | 4,754,615 |   |   |   |   |   | 136,077 |   |
| USD LIBOR (LIBOR   to fixed)              |       | 540,309                                                                                      |       | 564,012                      |       | 227,891 |   | 1,266,940 |   | 1,153,420 |   | 427,843 |   |
| BRL fixed rate   (BRL to USD)             |       | 822,168                                                                                      |       | 551,195                      |       | 399,370 |   | 1,036,022 |   | 706,349 |   | 514,257 |   |
| BRL TJLP (BRL to   USD)                   |       | 447,925                                                                                      |       | 569,708                      |       | 679,784 |   | 425,413 |   | 572,177 |   | 611,091 |   |
| BRL Pre (BRL to   USD)                    |       | 559,353                                                                                      |       | 183,427                      |       | 66,468 |   | 450,066 |   | 170,934 |   | 64,391 |   |
| Liability                                 |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
| USD fixed rate   (JPY to USD)             |       |                                                                                         |       |                         |       | 45,000 |   |   |   |   |   | (108,273 | ) |
| USD fixed rate   (LIBOR to fixed)         |       | 540,309                                                                                      |       | 564,012                      |       | 227,891 |   | (1,251,608 | ) | (1,161,565 | ) | (438,498 | ) |
| USD fixed rate   (BRL to USD)             |       | 422,946                                                                                      |       | 306,226                      |       | 233,550 |   | (1,185,829 | ) | (784,694 | ) | (502,884 | ) |
| USD fixed rate   (BRL TJLP to USD)        |       | 275,712                                                                                      |       | 349,861                      |       | 416,478 |   | (650,753 | ) | (720,300 | ) | (703,256 | ) |
| USD fixed rate   (BRL to USD)             |       | 273,472                                                                                      |       | 97,737                       |       | 41,725 |   | (542,126 | ) | (184,139 | ) | (73,475 | ) |
|                                      |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
| Total of swap   contracts                 |       |                                                                                         |       |                         |       |   |   | (451,875 | ) | (247,818 | ) | (72,727 | ) |
|                                      |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
| Options                                   |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
| Cash flow hedge —   zero cost collar |       | 1,122,000                                                                                    |       | 410,000                      |       | 162,000 |   | (12,451 | ) | 1,171 |   | (6,954 | ) |
|                                      |       |                                                                                         |       |                         |       |   |   |   |   |   |   |   |   |
|                                      |       |                                                                                         |       |                         |       |   |   | (464,326 | ) | (273,079 | ) | (213,887 | ) |

 

**(c)****                                ****Derivative financial instruments by type of economic hedge strategy**

 
| ** **                       | ** ** | **Fair value**          | ** ** | **Value (paid) or received** | ** ** |
|----------------------------------|------------|------------------------------|------------|---------------------------------------------|------------|
| **Type of derivative** | ** ** | **December 31,   2013** | ** ** | **December 31,   2012**                | ** ** | **January 1****st****,   2012** | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** |
|                             |       |                         |       |                                        |       |   |   |   |   |   |   |
| Operational hedges               |       |                         |       |                                        |       |   |   |   |   |   |   |
| Cash flow hedges   of exports    |       | (12,451                      | )          | (25,261                                     | )          | (141,160 | ) | (14,554 | ) | (151,109 | ) |
| Hedges of debts                  |       |                         |       |                                        |       |   |   |   |   |   |   |
| Hedges of interest   rates       |       | 15,332                       |       | (8,145                                      | )          | (10,655 | ) | (10,767 | ) | (8,743 | ) |
| Hedges of foreign   currency     |       | (467,207                     | )          | (239,673                                    | )          | (62,072 | ) | 1,256 |   | 33,484 | ) |
|                             |       |                         |       |                                        |       |   |   |   |   |   |   |
|                             |       | (464,326                     | )          | (273,079                                    | )          | (213,887 | ) | (24,065 | ) | (126,368 | ) |

 

**(d)****                               ****Fair value of derivative financial instruments by maturity date and counterparty**

 

The following tables present information about derivative financial instruments grouped by maturity and counterparty.

 

F-62

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The following table presents the fair values by month of maturity:

 
| ** ** | ** ** | **December 31, 2013** | ** ** |
|------------|------------|---------------------------------|------------|
| ** ** | ** ** | **2014**                        | ** ** | **2015** | ** ** | **2016** | ** ** | **2017** | ** ** | **2018** | ** ** | **2019** | ** ** | **2020** | ** ** | **2021** | ** ** | **Total** | ** ** |
|       |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| January    |       | (3,923                          | )          | (6,285 | ) | (5,215 | ) | (3,814 | ) | (857 | ) | (1,698 | ) |   |   |   |   | (21,792 | ) |
| February   |       | (7,632                          | )          | (8,889 | ) | (6,652 | ) | (5,296 | ) | 2,126 |   | 429 |   | 419 |   |   |   | (25,495 | ) |
| March      |       | (5,441                          | )          | (6,278 | ) | (4,097 | ) | (3,590 | ) | (1,468 | ) | (1,759 | ) |   |   |   |   | (22,633 | ) |
| April      |       | (6,544                          | )          | (7,187 | ) | (4,802 | ) | (4,074 | ) | (1,122 | ) | (1,777 | ) |   |   |   |   | (25,506 | ) |
| May        |       | (10,307                         | )          | (9,637 | ) | (6,772 | ) | (5,353 | ) | 173 |   | (1,176 | ) |   |   |   |   | (33,072 | ) |
| June       |       | (9,701                          | )          | (10,182 | ) | (7,968 | ) | (6,832 | ) | (1,637 | ) | (1,832 | ) |   |   |   |   | (38,152 | ) |
| July       |       | (5,063                          | )          | (6,407 | ) | (3,423 | ) | (693 | ) | (1,474 | ) | (1,862 | ) |   |   |   |   | (18,922 | ) |
| August     |       | (8,266                          | )          | (8,810 | ) | (5,253 | ) | (2,732 | ) | (16,953 | ) | (18,222 | ) | (19,081 | ) |   |   | (79,317 | ) |
| September  |       | (5,360                          | )          | (15,188 | ) | (12,574 | ) | (55,700 | ) | (33,734 | ) |   |   |   |   |   |   | (122,556 | ) |
| October    |       | (6,106                          | )          | (6,676 | ) | (3,535 | ) | (3,768 | ) | (1,611 | ) |   |   |   |   |   |   | (21,696 | ) |
| November   |       | (7,967                          | )          | (8,961 | ) | (5,276 | ) | (2,749 | ) | (371 | ) |   |   |   |   |   |   | (25,324 | ) |
| December   |       | (7,947                          | )          | (9,440 | ) | (6,484 | ) | (4,334 | ) | (1,656 | ) |   |   |   |   |   |   | (29,861 | ) |
|       |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       |       | (84,257                         | )          | (103,940 | ) | (72,051 | ) | (98,935 | ) | (58,584 | ) | (27,897 | ) | (18,662 | ) |   |   | (464,326 | ) |

 
| ** ** | ** ** | **December 31, 2012** |
|------------|------------|---------------------------------|
| ** ** | ** ** | **2013**                        | ** ** | **2014** | ** ** | **2015** | ** ** | **2016** | ** ** | **2017** | ** ** | **2018** | ** ** | **2019** | ** ** | **2020** | ** ** | **Total** | ** ** |
|       |       |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| January    |       | (11,875                         | ) | (2,652 | ) | (4,065 | ) | (4,067 | ) | (3,311 | ) |   |   |   |   |   |   | (25,970 | ) |
| February   |       | (10,120                         | ) | (3,188 | ) | (4,586 | ) | (3,882 | ) | (2,976 | ) | 1,651 |   | 1,096 |   | 292 |   | (21,713 | ) |
| March      |       | (2,092                          | ) | (1,856 | ) | (2,784 | ) | (2,403 | ) | (2,238 | ) | (80 | ) |   |   |   |   | (11,453 | ) |
| April      |       | (3,195                          | ) | (3,095 | ) | (4,511 | ) | (3,932 | ) | (3,420 | ) | 15 |   |   |   |   |   | (18,138 | ) |
| May        |       | (1,873                          | ) | (3,590 | ) | (4,915 | ) | (3,952 | ) | (2,987 | ) | 628 |   | 279 |   |   |   | (16,410 | ) |
| June       |       | 93                              |   | (3,578 | ) | (5,154 | ) | (4,499 | ) | (3,674 | ) | (116 | ) |   |   |   |   | (16,928 | ) |
| July       |       | (1,058                          | ) | (3,453 | ) | (3,852 | ) | (3,077 | ) | (1,683 | ) |   |   |   |   |   |   | (13,123 | ) |
| August     |       | (1,965                          | ) | (3,993 | ) | (4,176 | ) | (2,969 | ) | (1,231 | ) | (9,170 | ) | (11,040 | ) | (12,195 | ) | (46,739 | ) |
| September  |       | 770                             |   | (2,111 | ) | (7,304 | ) | (6,637 | ) | (27,668 | ) | (15,716 | ) |   |   |   |   | (58,666 | ) |
| October    |       | (1,459                          | ) | (3,791 | ) | (3,980 | ) | (3,202 | ) | (1,722 | ) |   |   |   |   |   |   | (14,154 | ) |
| November   |       | (1,813                          | ) | (4,189 | ) | (4,228 | ) | (3,051 | ) | (1,288 | ) | 500 |   |   |   |   |   | (14,069 | ) |
| December   |       | (1,320                          | ) | (4,546 | ) | (4,465 | ) | (3,567 | ) | (1,818 | ) |   |   |   |   |   |   | (15,716 | ) |
|       |       |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       |       | (35,907                         | ) | (40,042 | ) | (54,020 | ) | (45,238 | ) | (54,016 | ) | (22,288 | ) | (9,665 | ) | (11,903 | ) | (273,079 | ) |

 

F-63

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Additionally, we present a table breaking down the notional and fair value by counterparty:

 
| ** **                         | ** ** | **December 31, 2013**                    | ** ** | **December 31, 2012** | ** ** | **January 1****st****, 2012**            | ** ** |
|------------------------------------|------------|----------------------------------------------------|------------|---------------------------------|------------|----------------------------------------------------|------------|
| ** **                         | ** ** | **Notional – in   US Dollars** | ** ** | **Fair   value**                | ** ** | **Notional – in   US Dollars** | ** ** | **Fair   value** | ** ** | **Notional – in   US Dollars** | ** ** | **Fair   value** | ** ** |
|                               |       |                                               |       |                            |       |                                               |       |   |   |   |   |   |   |
| Banco Itaú BBA S.A.      |       | 371,800                                            |       | (44,568                         | )          | 243,261                                            |       | (17,865 | ) | 382,812 |   | (49,975 | ) |
| Deutsche   Bank S.A.          |       | 342,450                                            |       | 247                             |       | 143,450                                            |       | (2,033 | ) | 37,500 |   | (3,699 | ) |
| Banco CreditAgricole Brasil S.A.   |       | 245,457                                            |       | (8,473                          | )          | 213,950                                            |       | (3,844 | ) |   |   |   |   |
| Banco Citibank   S.A.              |       | 234,732                                            |       | (65,783                         | )          | 138,181                                            |       | (39,734 | ) | 240,376 |   | (6,695 | ) |
| Bank of America   Merrill Lynch    |       | 229,657                                            |       | 1,120                           |       |                                               |       |   |   | 96,400 |   | (20,041 | ) |
| Banco Santander Brasil S.A.        |       | 211,958                                            |       | (143,371                        | )          | 248,918                                            |       | (93,734 | ) | 255,556 |   | (57,139 | ) |
| Banco   Safra S.A.            |       | 209,559                                            |       | (102,127                        | )          | 221,226                                            |       | (55,131 | ) | 233,550 |   | 11,372 |   |
| Banco BNP Paribas Brasil S.A. |       | 207,000                                            |       | (3,336                          | )          | 125,000                                            |       | 853 |   |   |   |   |   |
| HSBC Bank   Brasil S.A.       |       | 190,810                                            |       | (41,271                         | )          | 154,601                                            |       | (21,101 | ) | 135,046 |   | (22,460 | ) |
| Banco   Bradesco S.A.         |       | 141,618                                            |       | (45,960                         | )          | 85,000                                             |       | (23,214 | ) |   |   |   |   |
| Banco J. P Morgan S.A.             |       | 125,000                                            |       | 274                             |       |                                               |       |   |   |   |   |   |   |
| Goldman Sachs do   Brasil          |       | 64,650                                             |       | (1,073                          | )          | 123,250                                            |       | (3,107 | ) | 186,850 |   | (17,507 | ) |
| Banco   Votorantim S.A.       |       | 27,966                                             |       | (9,668                          | )          | 42,086                                             |       | 200 |   |   |   |   |   |
| Banco Mizuho do Brasil S.A.        |       | 20,000                                             |       | (195                            | )          |                                               |       |   |   | 45,500 |   | (2,521 | ) |
| Morgan   Stanley & CO.    |       | 11,782                                             |       | (142                            | )          | 58,912                                             |       | (1,747 | ) | 229,042 |   | (22,415 | ) |
| Banco ABC Brasil S.A.              |       |                                               |       |                            |       |                                               |       |   |   |   |   |   |   |
| Rabobank   Brasil S.A.        |       |                                               |       |                            |       | 50,000                                             |       | (2,389 | ) |   |   |   |   |
| Banco Standard de   Investimentos  |       |                                               |       |                            |       | 35,000                                             |       | (6,821 | ) | 14,500 |   | (1,791 | ) |
| Standard Chartered   Bank          |       |                                               |       |                            |       |                                               |       |   |   | 57,500 |   | (8,285 | ) |
| Banco Itaú BBA S.A.      |       | 371,800                                            |       | (44,568                         | )          | 243,261                                            |       | (17,865 | ) | 382,812 |   | (49,975 | ) |
|                               |       |                                               |       |                            |       |                                               |       |   |   |   |   |   |   |
|                               |       | 2,634,439                                          |       | (464,326                        | )          | 1,897,835                                          |       | (273,079 | ) | 2,049,132 |   | (213,887 | ) |

 

Fair value does not necessarily represent the cash required to immediately settle each contract, as such disbursement will only be made on the date of maturity of each transaction, when the final settlement amount will be determined.

 

The outstanding contracts at December 31, 2013 are not subject to margin calls or anticipated liquidation clauses resulting from mark-to-market variations. All operations are over-the-counter and registered at CETIP (a clearing house).

 

Find below the description of the types of contracts and risks being hedged.

 

**(i)****                                  ****Non-Deliverable Forwards (NDF)**

 

The Company entered into US dollar forwards in order to hedge part of its future export revenue, which is considered highly probably to occur, against a devaluation of the real against the US dollar.

 

**(ii)****                              ****LIBOR versus fixed rate swap**

 

The Company has plain-vanilla swaps of quarterly LIBOR versus fixed rates with the objective of hedging debt carrying interest based on LIBOR against any increase in LIBOR.

 

**(iii)****                          ****DI versus US dollar swap**

 

The Company has plain-vanilla swaps of Interbank Deposit (DI) versus the US dollar with the objective of changing our debt exposure in Reais, subjected to DI into a debt in US dollars with fixed interest. The swaps are matched to debt with respect to underlying amounts, maturity dates and cash flows.

 

F-64

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(iv)****                           ****TJLP versus US dollar swap**

 

The Company has plain-vanilla swaps of Long-term Interest Rate (TJLP) versus the US dollar with the objective of changing our debt exposure in Reais subject to interest based on TJLP, to debt in US dollars with fixed interest. The swaps are matched to the related debt with respect to underlying amounts, maturity dates and cash flows.

 

**(v)****                               ****Zero cost collar**

 

The Company entered into a zero cost collar (a purchased option (put) to purchase dollars and a written option (call) to sell dollars) with no leverage, with the objective of protecting our exposure to export sales denominated in US Dollar, with a strike price of the put (floor) and the call (ceiling) results in a floor and cap of the dollar exchange rate.

 

**(vi)****                           ****Pre swap versus US dollar swap**

 

The Company has plain-vanilla swaps to transform fixed interest debt in Reais to a debt in US dollar with fixed rate. The swaps are matched to debt with respect to underlying amounts, maturity dates and cash flows.

 

**(vii)****                       ****Fair value measurement of derivative financial instruments**

 

As Note 6.2, the Company estimates the fair values of its derivative financial instruments, and acknowledges that these may differ from the amounts payable/receivable in the event of the early settlement of the instrument. This difference arises due to factors such as liquidity, spreads or the intention regarding early settlement by the counterparties, among other factors. The amounts estimated by management are also compared to the Mark-to-Market (“MtM”) prices provided as a reference by the banks (counterparties), and to estimates performed by an independent financial advisor.

 

**(viii)****                   ****Hedge of receivable from the sale of investments**

 

The Company entered into US dollar forwards in order to hedge its future cash inflow, in Reais, from the collection of the amount in US dollar, regarding the sale of the Piracicaba CGU. The notional amount is equivalent to the sale price of US$ 313 million and was contracted with an exchange rate of R$ 1.6181 resulting in an equivalent amount in Reais of R$ 506,455. The operation was settled on September 29, 2011.

 

**(e)****                                ****Embedded derivative in forestry partnership****and standing timber supply agreements**

 

As described in Note 1(e), the forestry partnership and standing timber supply agreements signed on December 30, 2013 determine that the price of the wood volume to be purchased by Fibria from the Counterparty, be denominated in US Dollars per m3 of standing timber readjusted according to the US-CPI index. The US-CPI index is not closely related to inflation of the economic environment where the land is located.

 

The embedded derivative is a swap of sale of the US-CPI variations during the term of the forestry partnership and wood supply agreements. Considering that the price of the lease is contingent (determined as 40% of the volume of timber that is actually harvested in each harvesting cycle, multiplied by the purchase price of standing timber per m3, as established in the agreement), the

 

F-65

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Company has considered as the notional value of the embedded derivative, the maximum possible payment amount contractually agreed (the “cap”). The notional value of the derivative is reduced as the payments are made by the Company every quarter. Since it is an embedded derivative, there were no disbursements or receivables relating to the derivative, and the disbursements will only be related to the corresponding standing timber supply pursuant to the contractual terms.

 

Considering that the forestry partnership and standing timber agreements were signed in December 30, 2013, the fair value of the embedded derivative at December 31, 2013 is close to zero, therefore, was not recorded.

 

The following table presents the change in the fair value of embedded derivative, in two adverse scenarios, that could generate significant losses to the Company.

 

To calculate the probable scenario, was considered the US-CPI index at the date of the singing of the forestry partnership and standing timber agreements. Since the fair value of the embedded derivative at December 31, 2013 is estimated to be zero, the Company has not recognized any effects in the income statement. The probable scenario was stressed considering an additional impact of 25% and 50%.

 
| ** **                                                                              | ** ** | **Impact of an appreciation of the US-CPI at the fair value** | ** ** |
|-----------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                              | ** ** | **Probable**                                                                                                    | ** ** | **Possible (25****%)** | ** ** | **Remote (50****%)** | ** ** |
| ** **                                                                              | ** ** | ** **                                                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Embedded   derivative in forestry partnership and standing timber supply agreements (*) |       |                                                                                                            |       | (109,410 | ) | (227,390 | ) |
|                                                                                    |       |                                                                                                            |       |   |   |   |   |
| Total impact                                                                            |       |                                                                                                            |       | (109,410 | ) | (227,390 | ) |

 

----

(*) The reference value (notional) involved in this transaction is US$ 937 million, as at December 31, 2013.

 

**12****                                ****Trade accounts receivable**

 

**(a)****                               ****Breakdown of the balance by type of customer**

 
| ** **                        | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-----------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                              |       |                         |       |                         |       |                                 |       |
| Domestic customers                |       | 14,553                       |       | 99,601                       |       | 102,305                              |       |
| Intercompany                      |       | 3,981                        |       | 2,980                        |       | 2,878                                |       |
| Export customers                  |       | 375,711                      |       | 714,142                      |       | 916,391                              |       |
|                              |       |                         |       |                         |       |                                 |       |
|                              |       | 394,245                      |       | 816,723                      |       | 1,021,574                            |       |
|                              |       |                         |       |                         |       |                                 |       |
| Allowance for   doubtful accounts |       | (12,158                      | )          | (61,955                      | )          | (76,212                              | )          |
|                              |       |                         |       |                         |       |                                 |       |
|                              |       | 382,087                      |       | 754,768                      |       | 945,362                              |       |

 

In 2013, we made some factoring transactions without recourse for certain customers’ receivables, in the amount of R$ 1,331,898 (R$ 686,619 at December 31, 2012 and R$ 306,787 at January 1, 2012), that were derecognized from accounts receivable in the balance sheet.

 

F-66

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(b)****                               ****Breakdown of the balance by maturity and allowance for doubtful accounts**

 

The following table presents a breakdown of trade receivables by maturity:

 
| ** **           | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|----------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                 |       |                         |       |                         |       |                                 |       |
| Not past due         |       |                         |       |                         |       |                                 |       |
| Up to two months     |       | 155,342                      |       | 438,069                      |       | 511,079                              |       |
| Two to six months    |       | 165,019                      |       | 247,297                      |       | 306,411                              |       |
| Six to twelve months |       |                         |       | 579                          |       | 16                                   |       |
|                 |       |                         |       |                         |       |                                 |       |
| Past due             |       |                         |       |                         |       |                                 |       |
| Up to two months     |       | 61,726                       |       | 63,576                       |       | 125,363                              |       |
| Two to six months    |       |                         |       | 1,962                        |       | 330                                  |       |
| Six to twelve months |       |                         |       | 2,069                        |       | 609                                  |       |
| Over one year        |       |                         |       | 1,216                        |       | 1,554                                |       |
|                 |       |                         |       |                         |       |                                 |       |
|                 |       | 382,087                      |       | 754,768                      |       | 945,362                              |       |

 

At December 31, 2013, trade accounts receivable of R$ 61,726 (R$ 68,823 at December 31, 2012 and R$ 127,856 at January 1, 2012) were past due but not impaired. Management has a process to manage collections and does not expect to recognize any losses on these receivables. The receivables are related to several unrelated customers for whom there is no recent history of default.

 

At December 31, 2013, trade accounts receivable of R$ 12,158 (R$ 61,955 at December 31, 2012 and R$ 76,212 at January 1, 2012) were impaired and included in the allowance for doubtful accounts. The individually impaired trade accounts receivable mainly relate to customers under judicial collection with a low probability of recovery.

 

Changes in the allowance for doubtful accounts are as follows:

 
| ** **                                                                                            | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                                                                  |       |       |       |       |       |       |       |
| At the beginning   of the year                                                                        |       | (61,955    | )          | (76,212    | )          | (56,114    | )          |
| Reversal (provision)                                                                                  |       | 1,950      |       | 3,376      |       | (22,237    | )          |
| Trade accounts   receivable written off during the year as uncollectible, related to previous   years |       | 47,847     |       | 10,940     |       | 2,139      |       |
| Exchange effect                                                                                       |       |       |       | (59        | )          |       |       |
| Reclassification   to assets held for sale                                                            |       |       |       |       |       |       |       |
| ** **                                                                                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| At the end of the   year                                                                              |       | (12,158    | )          | (61,955    | )          | (76,212    | )          |

 

**(c)****                                ****Main customers**

 

For the year ended December 31, 2013, the Company has three customers that represent 50% of the Company’s net revenue (32% in 2012 and 29% in 2011, represented by two customers).

 

F-67

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(d)****                               ****Breakdown of the balance by currency**

 

Fibria’s trade accounts receivable are denominated in the following currencies:

 
| ** ** | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|       |       |                         |       |                         |       |                                 |       |
| Real       |       | 6,376                        |       | 41,345                       |       | 29,632                               |       |
| US dollar  |       | 367,475                      |       | 707,609                      |       | 914,048                              |       |
| Euro       |       | 8,236                        |       | 5,814                        |       | 1,682                                |       |
|       |       |                         |       |                         |       |                                 |       |
|       |       | 382,087                      |       | 754,768                      |       | 945,362                              |       |

 

**(e)****                                ****Guarantees in Compror operations and factoring of trade receivables**

 

The Company is a guarantor in factoring Compror operations, performed with selected customers in Brazil. The amount guaranteed by Fibria at December 31, 2013 was R$ 36,825 (R$ 67,389 at December 31, 2012 and R$ 84,376 at January 1, 2012). Fair value of these guarantees is not significant considering the high credit quality of those selected customers, as well as no history of default.

 

The Company makes factoring transactions without credit recourse for certain customers’ receivables. These assets were derecognized from accounts receivable in the balance sheet

 

**13****                                ****Inventory**

 
| ** **                       | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|----------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                             |       |                         |       |                         |       |                                 |       |
| Finished goods                   |       |                         |       |                         |       |                                 |       |
| At   plants/warehouses in Brazil |       | 128,893                      |       | 131,806                      |       | 135,110                              |       |
| Outside Brazil                   |       | 587,032                      |       | 470,082                      |       | 518,305                              |       |
| Work in process                  |       | 15,592                       |       | 13,438                       |       | 31,141                               |       |
| Raw materials                    |       | 385,447                      |       | 422,288                      |       | 360,473                              |       |
| Supplies                         |       | 140,873                      |       | 142,288                      |       | 129,298                              |       |
| Imports in transit               |       | 7,587                        |       | 2,333                        |       | 2,140                                |       |
| Advances to   suppliers          |       | 306                          |       | 907                          |       | 2,240                                |       |
|                             |       |                         |       |                         |       |                                 |       |
|                             |       | 1,265,730                    |       | 1,183,142                    |       | 1,178,707                            |       |

 

F-68

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**14****                                ****Recoverable taxes**

 
| ** **                                                                                   | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                                                                         |       |                         |       |                         |       |                                 |       |
| Withholding tax   and prepaid Income Tax (IRPJ) and Social Contribution (CSLL)               |       | 226,410                      |       | 187,941                      |       | 208,993                              |       |
| Value-added Tax on   Sales and Services (ICMS) on purchases of property, plant and equipment |       | 17,869                       |       | 16,140                       |       | 19,520                               |       |
| Value-added Tax on   Sales and Services (ICMS) on purchases of raw materials and supplies    |       | 816,727                      |       | 715,904                      |       | 614,274                              |       |
| Social Integration   Program (PIS) and Social Contribution on Revenue (COFINS) Recoverable   |       | 542,237                      |       | 526,410                      |       | 669,805                              |       |
| Provision for the   impairment of ICMS credits                                               |       | (658,308                     | )          | (579,103                     | )          | (507,573                             | )          |
|                                                                                         |       |                         |       |                         |       |                                 |       |
|                                                                                         |       | 944,935                      |       | 867,292                      |       | 1,005,019                            |       |
|                                                                                         |       |                         |       |                         |       |                                 |       |
| Current                                                                                      |       | 201,052                      |       | 209,462                      |       | 327,787                              |       |
|                                                                                         |       |                         |       |                         |       |                                 |       |
| Non-current                                                                                  |       | 743,883                      |       | 657,830                      |       | 677,232                              |       |

 

Fibria has been accumulating ICMS credits in the States of Espírito Santo and Mato Grosso do Sul since its sales are mostly to foreign customers. The Company’s management revised the estimates for the realization of such credits and recognized an impairment: (i) for the full amount for the Mato Grosso do Sul unit due to the low probability of realization; and (ii) a partially for the Espírito Santo unit for approximately 80% of the total amount. When the partial provision was recorded management had already taken actions in order to recover these taxes, which are being recovered through the operations in the state.

 

Based on the budget approved by the Company’s management, substantially all the tax credits are expected to be realized by the end of 2020:

 
| ** **                                                    | ** ** | **Amount** | ** ** | **Percentage** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|----------------|------------|
|                                                          |       |       |       |           |       |
| In the next 12   months                                       |       | 201,052    |       | 24             |       |
| In 2015                                                       |       | 174,694    |       | 21             |       |
| In 2016                                                       |       | 191,441    |       | 23             |       |
| In 2017                                                       |       | 77,138     |       | 10             |       |
| In 2018                                                       |       | 109,997    |       | 13             |       |
| In 2019                                                       |       | 30,355     |       | 4              |       |
| In 2020                                                       |       | 45,001     |       | 5              |       |
|                                                          |       |       |       |           |       |
| ** **                                                    |       | 829,678    |       | 100            |       |
| ** **                                                    | ** ** | ** ** | ** ** | ** **     | ** ** |
| PIS and COFINS   related to property, plant and equipment (*) |       | 115,257    | ** ** | ** **     | ** ** |
| ** **                                                    | ** ** | ** ** | ** ** | ** **     | ** ** |
| ** **                                                    |       | 944,935    | ** ** | ** **     | ** ** |

 

----

(*)      These credits were not included in the schedule above, since they will be realized over the useful lives of the property, plant and equipment.

 

F-69

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Changes in the provision for impairment of the Company’s recoverable taxes are as follows:

 
| ** **                     | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|--------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                           |       |       |       |       |       |       |       |
| At the beginning   of the year |       | (579,103   | )          | (507,573   | )          | (481,527   | )          |
| Provision for   impairment     |       | (79,205    | )          | (71,530    | )          | (46,941    | )          |
| Reversal                       |       |       |       |       |       | 20,895     |       |
| ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| At the end of the   year       |       | (658,308   | )          | (579,103   | )          | (507,573   | )          |

 

The provision and reversal of the provision for impaired ICMS credits were recorded in the Statement of profit and loss under “Cost of sales”.

 

**15****                                ****Income taxes**

 

The Company and the subsidiaries located in Brazil are taxed based on their taxable income (profit). The subsidiaries located outside of Brazil use methods established by the respective local regulations. Income taxes have been calculated and recorded considering the applicable statutory tax rates enacted at the date of the financial statements.

 

**(a)****                               ****Deferred taxes**

 

Deferred income tax and social contribution tax assets arise from tax loss carryforwards and temporary differences related to (i) the effect of foreign exchange gains/losses mainly of loans and financings (which for tax purposes are taxed/deductible on a cash basis); (ii) adjustment to fair value of derivative instruments; (iii) provisions not currently deductible for tax purposes; (iv) investments in rural activity; and (vi) temporary differences arising from the adoption of IFRS/CPCs.

 

F-70

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                                                    | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                                                          |       |                         |       |                         |       |                                 |       |
| Tax loss   carryforwards (*)                                                  |       | 172,519                      |       | 349,010                      |       | 320,982                              |       |
| Provision for   contingencies                                                 |       | 118,237                      |       | 65,578                       |       | 30,506                               |       |
| Sundry provisions   (impairment, operational and other)                       |       | 417,574                      |       | 401,113                      |       | 383,395                              |       |
| Results of derivative   contracts recognized on a cash basis for tax purposes |       | 157,871                      |       | 92,847                       |       | 72,537                               |       |
| Exchange   variations - recognized on a cash basis for tax purposes           |       | 646,286                      |       | 470,825                      |       | 73,412                               |       |
| Tax amortization   of goodwill                                                |       | 110,940                      |       | 113,178                      |       | 110,936                              |       |
| Actuarial gains on   medical assistance plan (SEPACO)                         |       | 3,729                        |       | 11,414                       |       | 3,600                                |       |
| Tax depreciation                                                              |       | (9,518                       | )          | (11,391                      | )          | (14,986                              | )          |
| Reforestation   costs already deducted for tax purposes                       |       | (311,965                     | )          | (299,632                     | )          | (284,020                             | )          |
| Fair values of   biological assets                                            |       | (199,861                     | )          | (239,094                     | )          | (214,952                             | )          |
| Effects of   business combination - acquisition of Aracruz                    |       | (13,972                      | )          | (31,998                      | )          | (45,212                              | )          |
| Tax benefit of   goodwill not amortized for accounting purposes               |       | (357,835                     | )          | (268,376                     | )          | (178,917                             | )          |
| Other provisions                                                              |       | (1,785                       | )          | (1,791                       | )          | (1,791                               | )          |
|                                                                          |       |                         |       |                         |       |                                 |       |
| Total deferred   taxes, net                                                   |       | 732,220                      |       | 651,683                      |       | 255,490                              |       |
|                                                                          |       |                         |       |                         |       |                                 |       |
| Deferred taxes -   asset (net by entity)                                      |       | 968,116                      |       | 879,606                      |       | 995,368                              |       |
|                                                                          |       |                         |       |                         |       |                                 |       |
| Deferred taxes -   liability (net by entity)                                  |       | 235,896                      |       | 227,923                      |       | 739,878                              |       |

 

----

(*)   The balance as at December 31, 2013 includes the amount of R$ 278,486 (R$ 238,201 in 2012 and R$ 200,711 in 2011) related to the provision for impairment, as detailed in item (e) below.

 

On November 27, 2013, the Company applied R$ 174,985 of credits from tax loss carryforwards and negative basis of social contribution for the payment of the debts related to the REFIS, as Note 25(a) and (b).

 

Tax loss carryforwards and deferred credits from temporary differences are expected to be realized in accordance with the following schedule:

 
| ** **              | ** ** | **Amount** | ** ** | **Percentage** | ** ** |
|-------------------------|------------|------------|------------|----------------|------------|
|                    |       |       |       |           |       |
| In the next 12   months |       | 161,242    |       | 10             |       |
| In 2015                 |       | 194,510    |       | 12             |       |
| In 2016                 |       | 152,517    |       | 9              |       |
| In 2017                 |       | 215,152    |       | 13             |       |
| In 2018                 |       | 212,360    |       | 13             |       |
| Between 2019 to   2020  |       | 286,784    |       | 18             |       |
| Between 2021 to   2022  |       | 145,468    |       | 9              |       |
| After 2023              |       | 259,123    |       | 16             |       |
|                    |       |       |       |           |       |
|                    |       | 1,627,156  |       | 100            |       |

 

During the next 12 months, the Company expects to realize R$ 116,770 related to deferred tax liabilities.

 

F-71

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Changes in the provision for impairment of the Company’s foreign tax credits are as follows:

 
| ** **                     | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|--------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                           |       |                         |       |                         |       |                                 |       |
| At the beginning of the   year |       | (238,201                     | )          | (200,711                     | )          |                                 |       |
| Provision                      |       |                         |       |                         |       | (200,711                             | )          |
| Exchange currency              |       | (40,285                      | )          | (37,490                      | )          |                                 |       |
|                           |       |                         |       |                         |       |                                 |       |
| At the end of the year         |       | (278,486                     | )          | (238,201                     | )          | (200,711                             | )          |

 

Changes in the net balance of deferred income tax are as follows:

 
| ** **                                                     | ** ** | **2013** | ** ** | **2012** | ** ** | **2011** | ** ** |
|----------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                           |       |     |       |     |       |     |       |
| At the beginning   of the year                                 |       | 651,683  |       | 251,890  |       | 109,665  |       |
| Tax loss   carryforwards                                       |       | (136,206 | )          | 28,558   |       | (180,634 | )          |
| Provision for   impairment of foreign deferred tax assets      |       | (40,285  | )          | (37,490  | )          | (200,711 | )          |
| Temporary   differences regarding provisions                   |       | 69,120   |       | 52,790   |       | (66,241  | )          |
| Derivative   financial instruments taxed on a cash   basis     |       | 65,024   |       | 20,310   |       | 117,709  |       |
| Amortization of   goodwill                                     |       | (91,697  | )          | (87,217  | )          | (78,114  | )          |
| Reforestation   costs                                          |       | (10,460  | )          | (12,018  | )          | (89,056  | )          |
| Exchange   gains/losses taxed on a cash basis                  |       | 175,461  |       | 434,373  |       | 539,069  |       |
| Fair value of   biological assets                              |       | 39,233   |       | (24,141  | )          | 82,321   |       |
| Actuarial gains   (losses) on medical assistance plan (SEPACO) |       | (7,685   | )          | 11,414   |       | 3,600    |       |
| Other                                                          |       | 18,032   |       | 13,214   |       | 17,882   |       |
|                                                           |       |     |       |     |       |     |       |
| At the end of the   year                                       |       | 732,220  |       | 651,683  |       | 255,490  |       |

 

F-72

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(b)****                               ****Reconciliation of income tax and social contribution benefit (expense)**

 
| ** **                                                                             | ** ** | **2013** | ** ** | **2012** | ** ** | **2011**   | ** ** |
|----------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|------------|------------|
|                                                                                   |       |     |       |     |       |       |       |
| Loss from   continuing operations taxes on income                                      |       | (343,576 | )          | (989,730 | )          | (1,491,012 | )          |
|                                                                                   |       |     |       |     |       |       |       |
| Income tax and   social contribution benefit (expense) at statutory nominal rate - 34% |       | 116,816  |       | 336,508  |       | 506,944    |       |
|                                                                                   |       |     |       |     |       |       |       |
| Reconciliation to   effective expense                                                  |       |     |       |     |       |       |       |
|                                                                                   |       |     |       |     |       |       |       |
| Adherence to Refis   (Provisional Measure no 627/2013) (Note 25 (a))              |       | (560,454 | )          |     |       |       |       |
| Non-taxable equity   in earnings (losses) of associates                                |       |     |       | (201     | )          | (141       | )          |
| Transaction costs   - capital increase                                                 |       |     |       | (6,063   | )          |       |       |
| Provision for   impairment of foreign deferred tax credits assets (i)                  |       |     |       |     |       | (200,711   | )          |
| Taxes from foreign   subsidiaries                                                      |       | (15,306  | )          |     |       |       |       |
| Difference in tax   rates of foreign subsidiaries                                      |       | 4,446    |       | (91,963  | )          | 137,415    |       |
| Effects of the   elimination of the intercompany transactions                          |       | 114,181  |       | 74,923   |       | (26,329    | )          |
| Present value   adjustment - Aracruz acquisition                                       |       |     |       |     |       | (13,156    | )          |
| Other, mainly   non-deductible provisions                                              |       | (13,689  | )          | (21,444  | )          | (21,779    | )          |
|                                                                                   |       |     |       |     |       |       |       |
| Income tax and   Social Contribution (expense) benefit for the year (*)                |       | (354,006 | )          | 291,760  |       | 382,243    |       |
|                                                                                   |       |     |       |     |       |       |       |
| Effective rate - %                                                                     |       | (103.0   | )          | 29.5     |       | 25.6       |       |

 

----

(i)        See item (e) below.

 

(*)    In 2013, the amount of R$ 354,006 includes R$ (560,454) Refis related payments recorded in current income taxes and R$ (206,448) of current income tax expense for the year and R$ 265,600 related to deferred income tax and social contribution benefit.

 

In 2012, the amount of R$ 291,760 includes R$ (42,167) of current income taxes expense for the year and R$ 333,927 related to deferred income tax and social contribution benefit.

 

In 2011, the amount of R$ 382,243 includes R$ 67,835 of current income taxes benefits for the year and R$ 314,408 related to deferred income tax and social contribution benefit.

 

**(c)****                                ****Transitional Tax System (RTT)**

 

For purposes of determining income taxes and social contribution on net income for 2013 and 2012, the Company in Brazil elected to adopt the provisions of the RTT, in which it is allowed to annul the accounting effects of Law 11,638/07 and Provisional Measure (MP) 449/08, converted into Law 11,941/09, and control reconciling items in the Taxable Income Assessment Book (LALUR) or auxiliary records, without affecting the statutory accounting records.

 

On November 11, 2013, the Provisional Measure (MP) 627/13 was issued repealing the Transitional Tax System (RTT) and regulates the taxation for residents in Brazil in relation to profits from foreign companies. One of the goals of the MP is to establish the adjustments that must be made in the tax books for calculating the basis the income tax and social contribution, with the end of the tax neutrality to new accounting methods and criteria introduced by Law 11,638/07 and Law 11,941/09. Fibria’s management analyzed the potential effects of the application of the new standard, and considers them to be immaterial, and is awaiting for the MP to become Law to determine its early adoption starting 2014.

 

F-73

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(d)****                               ****Income tax on business combinations**

 

The Company has taxable temporary differences associated with a gain on bargain purchase resulting from the asset exchange with International Paper, for which a deferred tax liability, in the amount of R$ 605,540, was not recognized, since the realization of such gain is under the control of management and there are no plans for realizing such gain in the foreseeable future.

 

Tax goodwill resulting from the acquisition of Aracruz has been attributed to expectation of future profitability and amounts to R$ 1,359,420, representing a tax benefit for income tax and social contribution of R$ 462,203, to be recognized over 62 months.

 

**(e)****                                ****Recoverability of tax loss carryforwards**

 

As mentioned in Note 3(a), the subsidiary Fibria Trading International KFT, has tax loss carryforwards amounting to US$ 133,550 thousand, equivalent to R$ 312,854 as of December 31, 2013, for which realization is not probable as result of the decision to transfer its current operations to Fibria International Trade GmbH. Management performed a recoverability analysis based on the estimated taxable income.

 

As a result, the Company recorded a loss for a substantial portion of the previously recognized deferred tax assets with the loss amounting to US$ 118,679 thousand, equivalent to R$ 278,485, as of December 31, 2013 (US$ 116,565 thousand, equivalent to R$ 238,201, as of December 31, 2012 and US$ 107,000 thousand, equivalent to R$ 200,711, as of January 1, 2012). Such expense has been within “Income tax and social contribution - Deferred” in the Statement of profit and loss.

 

**16****                                ****Significant transactions and balances with related parties**

 

**(a)****                               ****Related parties**

 

The Company is governed by a Shareholders Agreement entered into between Votorantim Industrial S.A. (“VID”), which holds 29.42% of our shares, and BNDES Participações S.A. (“BNDESPAR”), which holds 30.38% of our shares (together the “Controlling shareholders”).

 

The Company’s commercial and financial transactions with its subsidiaries, associates, companies of the Votorantim Group and other related parties are carried out at normal market prices and conditions, based on usual terms and rates applicable to third parties. Balances and transactions with related parties are as follows:

 

F-74

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(i)****                                  ****Balances recognized in assets and liabilities**

 
| ** **                                      | ** ** | **Balances receivable (payable)**       | ** ** |
|-------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                      | ** ** | **Nature**                                        | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
| ** **                                      | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Transactions with   controlling shareholders    |       |                                              |       |   |   |   |   |   |   |
| Votorantim   Industrial S.A.               |       | Rendering of   services                           |       | (716 | ) | (722 | ) | (63 | ) |
| BNDES                                           |       | Financing                                         |       | (1,796,757 | ) | (1,747,272 | ) | (1,773,842 | ) |
|                                            |       |                                              |       |   |   |   |   |   |   |
|                                            |       |                                              |       | (1,797,473 | ) | (1,747,994 | ) | (1,773,905 | ) |
|                                            |       |                                              |       |   |   |   |   |   |   |
| Transactions with   associates                  |       |                                              |       |   |   |   |   |   |   |
| Bahia Produtos de Madeira S.A.                  |       | Sales of wood                                     |       | 3,815 |   | 2,980 |   | 2,878 |   |
|                                            |       |                                              |       |   |   |   |   |   |   |
| Transactions with   Votorantim Group companies  |       |                                              |       |   |   |   |   |   |   |
| VOTO III                                        |       | Bonds                                             |       |   |   |   |   | (117,767 | ) |
| Votener - Votorantim Comercializadora e Energia |       | Energy supplier                                   |       |   |   | (388 | ) | (388 | ) |
| Banco   Votorantim S.A.                    |       | Financial   investments and financial instruments |       | (9,668 | ) | 197,782 |   | 176,156 |   |
| Votorantim Cimentos   S.A.                 |       | Energy supplier                                   |       | 74 |   |   |   |   |   |
| Votorantim Cimentos   S.A.                 |       | Input supplier                                    |       | (34 | ) | (11 | ) | (87 | ) |
| Votorantim Cimentos   S.A.                 |       | Sales of land                                     |       |   |   | 31,362 |   |   |   |
| Votorantim   Siderurgia S.A.                    |       | Sales of waste                                    |       | 24 |   | 57 |   | 47 |   |
| Sitrel Siderurgia   Três Lagoas            |       | Energy supplier                                   |       | 267 |   |   |   |   |   |
| Votorantim Metais                               |       | Chemical products   supplier                      |       | (241 | ) | (228 | ) | (214 | ) |
| Votorantim Metais                               |       | Leasing of land                                   |       | (788 | ) | (1,476 | ) |   |   |
| Companhia Brasileira de Alumínio (CBA)     |       | Leasing of land                                   |       | (37 | ) | (33 | ) | (33 | ) |
|                                            |       |                                              |       |   |   |   |   |   |   |
|                                            |       |                                              |       | (10,403 | ) | 227,065 |   | 57,714 |   |
|                                            |       |                                              |       |   |   |   |   |   |   |
| Net                                             |       |                                              |       | (1,804,061 | ) | (1,517,949 | ) | (1,713,313 | ) |
|                                            |       |                                              |       |   |   |   |   |   |   |
| Presented in the   following lines              |       |                                              |       |   |   |   |   |   |   |
| In assets                                       |       |                                              |       |   |   |   |   |   |   |
| Marketable   securities (Note 10)               |       |                                              |       |   |   | 191,537 |   | 170,687 |   |
| Trade accounts   receivable (Note 12)           |       |                                              |       | 3,981 |   | 2,980 |   | 2,878 |   |
| Related parties -   non-current                 |       |                                              |       | 7,142 |   | 6,245 |   | 5,469 |   |
| Other assets -   current                        |       |                                              |       |   |   | 31,362 |   |   |   |
| In liabilities                                  |       |                                              |       |   |   |   |   |   |   |
| Loans and   financing (Note 23)                 |       |                                              |       | (1,796,757 | ) | (1,747,272 | ) | (1,891,609 | ) |
| Derivative   financial instruments (Note 11)    |       |                                              |       | (9,668 | ) |   |   |   |   |
| Suppliers                                       |       |                                              |       | (8,759 | ) | (2,801 | ) | (738 | ) |
|                                            |       |                                              |       |   |   |   |   |   |   |
|                                            |       |                                              |       | (1,804,061 | ) | (1,517,949 | ) | (1,713,313 | ) |

 

F-75

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(ii)****                              ****Transactions recognized in the Statement of profit and loss**

 
| ** **                                                        | ** ** | **Income (expense****)**           | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                        | ** ** | **Nature**                              | ** ** | **2013** | ** ** | **2012** | ** ** | **2011** | ** ** |
| ** **                                                        | ** ** | ** **                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Transactions with   controlling shareholders                      |       |                                    |       |   |   |   |   |   |   |
| Votorantim Industrial S.A.                                   |       | Rendering of services                   |       | (10,682 | ) | (10,776 | ) | (10,418 | ) |
| Banco Nacional de Desenvolvimento Econômico e Social (BNDES) |       | Financing                               |       | (165,774 | ) | (156,339 | ) | (170,213 | ) |
|                                                              |       |                                    |       |   |   |   |   |   |   |
|                                                              |       |                                    |       | (176,456 | ) | (167,115 | ) | (180,631 | ) |
|                                                              |       |                                    |       |   |   |   |   |   |   |
| Transactions with   associates                                    |       | Sales of wood                           |       |   |   |   |   |   |   |
| Bahia Produtos de Madeira S.A.                                    |       |                                    |       | 11,332 |   | 9,614 |   | 10,796 |   |
|                                                              |       |                                    |       |   |   |   |   |   |   |
| Transactions with   Votorantim Group companies                    |       |                                    |       |   |   |   |   |   |   |
| VOTO III                                                          |       | Bond                                    |       |   |   | 7,994 |   | 22,524 |   |
| Votener - Votorantim Comercializadora de Energia                  |       | Energy supplier                         |       | (40,425 | ) | (19,546 | ) | (31,267 | ) |
| Banco   Votorantim S.A.                                      |       | Investments and   financial instruments |       | (2,589 | ) | 16,372 |   | 20,780 |   |
| Votorantim Cimentos   S.A.                                        |       | Energy supplier                         |       | 7,753 |   | 22 |   |   |   |
| Votorantim Cimentos   S.A.                                        |       | Leasing of lands                        |       | (503 | ) | (396 | ) | (1,113 | ) |
| Votorantim Cimentos   S.A.                                        |       | Sale of lands                           |       |   |   | 31,362 |   |   |   |
| Votorantim Siderurgia   S.A.                                      |       | Sale of waste                           |       | 83 |   | 135 |   |   |   |
| Sitrel Siderurgia Três   Lagoas                              |       | Energy supplier                         |       | 1,034 |   |   |   |   |   |
| Votorantim Metais Ltda.                                           |       | Chemical products   supplier            |       | (4,363 | ) | (5,560 | ) | (8,929 | ) |
| Votorantim Metais Ltda.                                           |       | Leasing of lands                        |       | (9,164 | ) | (9,709 | ) | (7,067 | ) |
| Companhia Brasileira de Alumínio (CBA)                       |       | Leasing of lands                        |       | (441 | ) | (394 | ) | (401 | ) |
|                                                              |       |                                    |       |   |   |   |   |   |   |
|                                                              |       |                                    |       | (48,615 | ) | 20,280 |   | (5,473 | ) |

 

**Comments on the main transactions and contracts with related parties**

 

The following is a summary of the nature and conditions of the transactions with the related parties:

 

**·****           ****Controlling shareholders**

 

The Company has a contract with VID related to services provided by the Votorantim Shared Service Center, which provides outsourcing of operational services relating to administrative activities, Personnel department, back office, accounting, taxes and the information technology infrastructure shared by the companies of the Votorantim Group. The contract provides for an overall remuneration of R$ 10,706 and has a one-year term, with annual renewal upon formal confirmation by the parties.

 

Additionally, VID provide various services related to technical advice, trainings, including management improvement programs. These services are also provided to the entire Votorantim Group and the Company reimburses VID at cost for the charges related to the services used.

 

The Company has financing contracts with BNDES, the majority shareholder of BNDESPAR, for the purpose of financing investments in infrastructure and the acquisition of equipment and machines,

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

as well as the expansion and modernization of its plants (Note 23).

 

Management believes that these transactions were contracted at terms consistent with those entered with independent parties, based on technical studies performed when these contracts were executed.

 

**·****           ****Associates**

 

The Company has balance receivable of R$ 3,815 from Bahia Produtos de Madeira S.A., corresponding to sale of wood, with maturity in 2019, renewable for 15 years.

 

**·****          ****Votorantim Group companies**

 

The Company has a contract to purchase energy from Votener - Votorantim Comercializadora de Energia Ltda. to supply our unit in Jacareí. The total amount contracted is R$ 15,000, guaranteeing 115,700 megawatt-hours, and maturing in five years through December 31, 2014. Should either party request an early termination of the contract, that party is required to pay 50% of the remaining contract amount. In addition, the Company entered into a contract to purchase energy from Votener, expiring on December 31, 2014, to supply the Três Lagoas and Aracruz units. Since these units already generate its own energy, the contract has the purpose of maximizing the competitiveness of the energy matrix. The total amount contracted may change based on the needs and consumption of energy by those plants.

 

The Company maintains investments in CDB and securities purchased under agreement to resell (“reverse repos”) issued by Banco Votorantim S.A., with average remuneration of 103.5% of the CDI and diary liquidity as from September 2013 and final maturity in April 2015. The Company’s cash management policy is intended to provide efficiency in investment returns and to maximize liquidity, based on market practices. The Company has also entered into derivative financial instruments contracts with Banco Votorantim. The Shareholders Agreement limits the intercompany investments to R$ 200 million for securities and R$ 100 million of notional value for derivative instruments.

 

On January, 2012, the Company entered into a contract to purchase sulfuric acid 98% from Votorantim Metais, for R$ 18,500, in exchange for the supply of 36,000 metric tons of acid for two years, up to December 31, 2013.

 

The Company has an agreement with Votorantim Cimentos for the supply of road construction supplies, such as rock and calcareous rock, in the approximate amount of R$ 11,706 through December 12, 2014. This agreement may be terminated at any time with prior notice of 30 days, without any contractual penalties.

 

On December, 2012, the Company entered into a contract with Votorantim Cimentos to sale of lands, in the amount of R$ 31,362, which was settled in November, 2013.

 

The Company has land lease agreements, for approximately 22,400 hectares, with Votorantim Metais Ltda., which matures in 2019, totaling R$ 76,496.

 

The Company has land lease agreements, for approximately 2,062 hectares, with Companhia Brasileira de Alumínio - CBA and Votorantim Cimentos, which mature in 2023, totaling R$ 4,062.

 

In the years ended December 31, 2013, 2012 and 2011, no provision for impairment was recognized on assets involving related parties.

 

F-77

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(b)****                               ****Remuneration of officers and directors**

 

The total annual amount authorized by the Annual General Meeting on April 27, 2012 for the remuneration of Board of Executive Officers, Board of Directors, Fiscal Council, Audit, Risk, Compensation and Sustainability Committees for 2012 was R$ 43,481. The remuneration expenses, including all benefits, are summarized as follows:

 
| ** **                                      | ** ** | **2013** | ** ** | **2012** | ** ** | **2011** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                            |       |     |       |     |       |     |       |
| Short-term   benefits to officers and directors |       | 23,933   |       | 24,495   |       | 21,624   |       |
| Rescission of   contract benefits               |       | 1,587    |       | 2,839    |       | 8,224    |       |
| Long-term benefits   to officers and directors  |       | 6,384    |       | 3,887    |       |     |       |
| Benefit program -   Phantom Stock Options       |       | 5,425    |       | 471      |       |     |       |
|                                            |       |     |       |     |       |     |       |
|                                            |       | 37,329   |       | 31,692   |       | 29,848   |       |

 

Short-term benefits include fixed compensation (salaries and fees, vacation pay and 13th month salary), social charges and contributions to the National Institute of Social Security (INSS), the Government Severance Indemnity Fund for Employees (FGTS) and the variable compensation program. The long-term benefits refer to the variable compensation program. In the third quarter of 2010, the Company approved a benefit program based on the rights based on the increase in the value of its shares  (Note 28).

 

Short-term benefits to officers and directors do not include the compensation for the Audit, Risk, Compensation and Sustainability Committees’ members of R$1,286 for the year ended December 31, 2013 (R$ 917 for the year ended December 31, 2012 and R$ 908 for the year ended December 31, 2011).

 

The Company does not have any additional post-employment active plan and does not offer any other benefits, such as additional paid leave for time of service.

 

The balances to be paid to the Company’s officers and directors are recorded in the following lines items of the current and non-current liabilities:

 
| ** **                                    | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-----------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                          |       |                         |       |                         |       |                                 |       |
| Current liability                             |       |                         |       |                         |       |                                 |       |
| Payroll, profit   sharing and related charges |       | 8,080                        |       | 7,418                        |       | 6,427                                |       |
|                                          |       |                         |       |                         |       |                                 |       |
| Non-current   liability                       |       |                         |       |                         |       |                                 |       |
| Other payables                                |       | 12,827                       |       | 4,861                        |       | 313                                  |       |
|                                          |       |                         |       |                         |       |                                 |       |
|                                          |       | 20,907                       |       | 12,279                       |       | 6,740                                |       |

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**17****                                ****Investments**

 
| ** **                                    | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-----------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                          |       |                         |       |                         |       |                                 |       |
| Investment in   associate - equity method (a) |       | 6,913                        |       | 6,913                        |       | 7,506                                |       |
| Provision for   impairment of investments (a) |       | (6,913                       | )          | (6,913                       | )          |                                 |       |
| Other investment —   at fair value (b)   |       | 46,922                       |       | 40,674                       |       |                                 |       |
|                                          |       |                         |       |                         |       |                                 |       |
|                                          |       | 46,922                       |       | 40,674                       |       | 7,506                                |       |

 

**(a)****                               ****Investment in associate**

 
| ** **                                   | ** ** | **Our ownership**                   | ** ** |
|----------------------------------------------|------------|------------------------------------------|------------|
| ** **                                   | ** ** | **Associate’s    information** | ** ** | ** ** | ** ** | **On equity** | ** ** | **On profit and loss** | ** ** |
| ** **                                   | ** ** | ** **                               | ** ** | **Profit** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                   | ** ** | **Equity**                               | ** ** | **and   loss** | ** ** | **%** | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** | **2013** | ** ** | **2012** | ** ** | **2011** | ** ** |
|                                         |       |                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Associate recorded   under the equity method |       |                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bahia Produtos de Madeira S.A.          |       | 20,740                                   |       |   |   | 33.3 |   | 6,913 |   | 6,913 |   | 7,506 |   |   |   | (592 | ) | (414 | ) |
|                                         |       |                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for   impairment                   |       |                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bahia Produtos de Madeira S.A.          |       |                                     |       |   |   |   |   | (6,913 | ) | (6,913 | ) |   |   |   |   |   |   |   |   |
|                                         |       |                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |       |                                     |       |   |   |   |   |   |   |   |   | 7,506 |   |   |   | (592 | ) | (414 | ) |

 

None of the associates or jointly-operated entity has publicly traded shares.

 

There are no contingent liabilities related to the Company’s interest in the associate. The provisions and contingent liabilities related to the jointly-operated entities of the Company are described in Note 24.

 

Additionally, the Company does not have any significant restriction with regards to its associate and jointly-operated entities and does not have any commitment related to its jointly-operated entities.

 

**(b)****                           ****Other investment**

 

We have, approximately, 6% of ownership in Ensyn’s share capital. We performed an assessment regarding the rights related to these shares and concluded that we do not have a significant influence over Ensyn, as such this investment has been recorded at fair value.

 

Fair value changed in our interest in Ensyn was not significant between the date of acquisition of our investment (October 2012, as mentioned in Note 1(h)) and December 31, 2013, therefore, the carrying amount as of December 31, 2013 equals the cost of the investment. See below the changes in the investment for the year ended December 31, 2013:

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                                                                 | ** ** | **2013** | ** ** |
|--------------------------------------------------------------------------------------------|------------|----------|------------|
|                                                                                       |       |     |       |
| At the beginning   of the year                                                             |       | 40,674   |       |
|                                                                                       |       |     |       |
| Fair   value of the warrants, recognized in the profit and loss                            |       | 70       |       |
| Foreign   exchange of the warrants, recognized in the profit and loss                      |       | 927      |       |
| Foreign   exchange of the shares, recognized in the “Other comprehensive income” |       | 5,251    |       |
|                                                                                       |       |     |       |
| At the end of the year                                                                     |       | 46,922   |       |

 

**18****                                ****Biological assets**

 

The Company’s biological assets are substantially comprised of growing forests, intended for the supply of wood for pulp production. Forests in formation are located in the states of São Paulo, Mato Grosso do Sul, Minas Gerais, Rio de Janeiro, Espírito Santo and Bahia.

 

The reconciliation of the book balances at the beginning and at the end of the year is as follows:

 
| ** **                                 | ** ** | **2013**  | ** ** | **2012**  | ** ** | **2011**  | ** ** |
|--------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
|                                       |       |      |       |      |       |      |       |
| At the beginning   of the year             |       |      |       |      |       |      |       |
| Historical cost                            |       | 2,451,612 |       | 2,477,271 |       | 2,499,001 |       |
| Fair value                                 |       | 873,992   |       | 786,939   |       | 1,051,635 |       |
|                                       |       | 3,325,604 |       | 3,264,210 |       | 3,550,636 |       |
|                                       |       |      |       |      |       |      |       |
| Additions                                  |       | 860,134   |       | 755,531   |       | 761,502   |       |
| Harvests in the   period                   |       |      |       |      |       |      |       |
| Historical cost                            |       | (580,192  | )          | (502,691  | )          | (569,813  | )          |
| Fair value                                 |       | (283,333  | )          | (365,726  | )          | (405,617  | )          |
| Change in fair   value                     |       | 102,265   |       | 297,686   |       | 125,053   |       |
| Reclassification   to assets held for sale |       |      |       |      |       |      |       |
| CONPACEL                                   |       |      |       |      |       |      |       |
| Losango                                    |       |      |       |      |       | (241,595  | )          |
| Assets on the   south of Bahia State       |       | (822      | )          | (129,745  | )          |      |       |
| Transfer                                   |       | (222      | )          | 6,339     |       | 44,044    |       |
|                                       |       |      |       |      |       |      |       |
| At the end of the year                     |       | 3,423,434 |       | 3,325,604 |       | 3,264,210 |       |
| Historical cost                            |       | 2,730,510 |       | 2,451,612 |       | 2,477,271 |       |
| Fair value                                 |       | 692,924   |       | 873,992   |       | 786,939   |       |

 

In determining the fair value of biological assets, the discounted cash flow model DCF was used, with projections based on a single scenario, with productivity and area of plantation (eucalyptus trees) for a harvest cycle of six to seven years.

 

The projected cash flows is consistent with area’s growing cycle. The volume of production of eucalyptus to be harvested was estimated considering the average productivity in cubic meters of wood from each plantation per hectare at the time of harvest. The average productivity varies according to the genetic material, climate and soil conditions and the forestry management programs. This projected volume is 

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

based on the average annual growth (IMA) by region.

 

The average net sales price was projected based on the estimated price for eucalyptus in the local market, through a market study and research of actual transactions, adjusted to reflect the price of standing timber by region. The average estimated cost contemplates expenses for selling, chemical control of growth, ant and other pest control, composting, road maintenance, inputs and labor services. Tax effects based on current rates, as well as the contribution of other assets, such as property, plant and equipment and land were considered in the estimated based on average rates of return for those assets, based on the average of the existing lease agreements.

 

The valuation model considers the net cash flows after income taxes and the discount rate used also considers the tax effects.

 

The following table presents the main inputs considered in estimating the fair value of biological assets:

 
| ** **                                  | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                        |       |                         |       |                         |       |                                 |       |
| Actual planted   area (hectare)             |       | 446,544                      |       | 446,168                      |       | 551,959                              |       |
| Average annual   growth (IMA) - m3/hectare  |       | 41                           |       | 41                           |       | 41                                   |       |
| Net average sale price - R$/m3              |       | 56.53                        |       | 53.86                        |       | 50,70                                |       |
| Remuneration of own contributory assets - % |       | 5.6                          |       | 5.6                          |       | 5.6                                  |       |
| Discount rate - %                           |       | 6.26                         |       | 6.45                         |       | 7.9                                  |       |

 

The increase in the fair value of biological assets during the year ended December 31, 2013 was the result of the combined fluctuation of the inputs presented above which resulted in a gain of R$ 102,265. The changes in the fair value of the biological assets are recognized in the profit and loss, within “Other operating income (expenses)” (Note 33).

 
| ** **                                            | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                                  |       |                         |       |                         |       |                                 |       |
| Fair value of the   renovation of forests in the year |       | (13,127                      | )          | 144,729                      |       | 152,405                              |       |
| Growing of   plantation (IMA, area and age)           |       | (88,738                      | )          | 9,197                        |       | (95,143                              | )          |
| Variation of price   and discount rate                |       | 204,130                      |       | 143,760                      |       | 67,791                               |       |
|                                                  |       |                         |       |                         |       |                                 |       |
|                                                  |       | 102,265                      |       | 297,686                      |       | 125,053                              |       |

 

Fair values of biological assets as of December 31, 2013, 2012 and January 1, 2012 was estimated by management. The biological assets are classified within Level3 of the fair value hierarchical level. There were no transfers between levels during 2013.

 

As detailed in Notes 36 and 1(d), the Company reclassified forest assets and land located in the south of Bahia state for assets held for sale.

 

The Company has no biological assets pledged as of December 31, 2013.

 

In 2013, the volume of harvested wood from the Company’s biological assets was 15,796 million of m3.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**19           Property, plant and equipment**

** **
| ** **                                                          | ** ** | **Land**  | ** ** | **Buildings** | ** ** | **Machinery,   equipment   and facilities** | ** ** | **Advances to   suppliers** | ** ** | **Construction   in progress** | ** ** | **Other** | ** ** | **Total**  | ** ** |
|---------------------------------------------------------------------|------------|-----------|------------|---------------|------------|--------------------------------------------------|------------|----------------------------------|------------|-------------------------------------|------------|-----------|------------|------------|------------|
|                                                                |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| At   December 31, 2010                                         |       | 2,119,325 |       | 1,618,144     |       | 8,516,831                                        |       | 280,455                          |       | 391,667                             |       | 53,009    |       | 12,979,431 |       |
| Additions                                                           |       | 15,066    |       | 1,578         |       | 14,272                                           |       |                             |       | 436,302                             |       | 3,717     |       | 470,935    |       |
| Disposals                                                           |       | (17,862   | )          | (7,902        | )          | (28,339                                          | )          | (3,075                           | )          |                                |       | (847      | )          | (58,025    | )          |
| Depreciation                                                        |       |      |       | (122,247      | )          | (673,546                                         | )          |                             |       |                                |       | (16,419   | )          | (812,212   | )          |
| Tax credits                                                         |       |      |       |          |       | (428                                             | )          |                             |       |                                |       |      |       | (428       | )          |
| Reclassification   to assets held for sale (Losango and Piracicaba) |       | (283,867  | )          | (60,237       | )          | (261,124                                         | )          |                             |       | (20,456                             | )          | (5,480    | )          | (631,164   | )          |
| Transfers and   others (*)                                          |       | 20,581    |       | 132,784       |       | 408,009                                          |       | (71,597                          | )          | (609,647                            | )          | 12,580    |       | (107,290   | )          |
|                                                                |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| At   December 31, 2011                                         |       | 1,853,243 |       | 1,562,120     |       | 7,975,675                                        |       | 205,783                          |       | 197,866                             |       | 46,560    |       | 11,841,247 |       |
| Additions                                                           |       | 32        |       | 299           |       | 2,886                                            |       | 3,061                            |       | 230,475                             |       | 950       |       | 237,703    |       |
| Disposals                                                           |       | (56,768   | )          | (5,201        | )          | (14,509                                          | )          |                             |       |                                |       | (518      | )          | (76,996    | )          |
| Depreciation                                                        |       |      |       | (122,268      | )          | (676,576                                         | )          |                             |       |                                |       | (15,389   | )          | (814,233   | )          |
| Transfers and   others (*)                                          |       | 19,179    |       | 54,809        |       | 115,201                                          |       | 63                               |       | (213,980                            | )          | 11,568    |       | (13,160    | )          |
|                                                                |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| At   December 31, 2012                                         |       | 1,815,686 |       | 1,489,759     |       | 7,402,677                                        |       | 208,907                          |       | 214,361                             |       | 43,171    |       | 11,174,561 |       |
| Additions                                                           |       |      |       | 342           |       | 14,310                                           |       | (35,624                          | )          | 347,837                             |       | 2,696     |       | 329,561    |       |
| Disposals                                                           |       | (31,202   | )          | (3,641        | )          | (97,443                                          | )          | (148,966                         | )          |                                |       | (13,608   | )          | (294,860   | )          |
| Depreciation                                                        |       |      |       | (121,831      | )          | (676,386                                         | )          |                             |       |                                |       | (15,123   | )          | (813,340   | )          |
| Disposals related   Asset Light project (Note 1(e))                 |       | (544,126  | )          | (52,402       | )          |                                             |       |                             |       |                                |       |      |       | (596,528   | )          |
| Transfers and   others (*)                                          |       | 8,974     |       | 114,365       |       | 259,559                                          |       |                             |       | (371,169                            | )          | 13,381    |       | 25,110     |       |
|                                                                |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| At   December 31, 2013                                         |       | 1,249,332 |       | 1,426,592     |       | 6,902,717                                        |       | 24,317                           |       | 191,029                             |       | 30,517    |       | 9,824,504  |       |

 

----

(*)    Refer to advances reclassified to biological assets group and non-current advances.

 

F-82

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                  | ** ** | **Land**  | ** ** | **Buildings** | ** ** | **Machinery,   equipment   and facilities** | ** ** | **Advances to   suppliers** | ** ** | **Construction   in progress** | ** ** | **Other** | ** ** | **Total**  | ** ** |
|-----------------------------|------------|-----------|------------|---------------|------------|--------------------------------------------------|------------|----------------------------------|------------|-------------------------------------|------------|-----------|------------|------------|------------|
|                        |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| At   December 31, 2013 |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| Cost                        |       | 1,249,332 |       | 2,650,750     |       | 13,219,529                                       |       | 24,317                           |       | 191,029                             |       | 223,623   |       | 17,558,580 |       |
| Accumulated   depreciation  |       |      |       | (1,224,158    | )          | (6,316,812                                       | )          |                             |       |                                |       | (193,106  | )          | (7,734,076 | )          |
|                        |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| Net                         |       | 1,249,332 |       | 1,426,592     |       | 6,902,717                                        |       | 24,317                           |       | 191,029                             |       | 30,517    |       | 9,824,504  |       |
|                        |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| At   December 31, 2012 |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| Cost                        |       | 1,815,686 |       | 2,663,057     |       | 13,192,701                                       |       | 208,907                          |       | 214,361                             |       | 236,772   |       | 18,331,484 |       |
| Accumulated   depreciation  |       |      |       | (1,173,298    | )          | (5,790,024                                       | )          |                             |       |                                |       | (193,601  | )          | (7,156,923 | )          |
|                        |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| Net                         |       | 1,815,686 |       | 1,489,759     |       | 7,402,677                                        |       | 208,907                          |       | 214,361                             |       | 43,171    |       | 11,174,561 |       |
|                        |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| At January 1st, 2012   |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| Cost                        |       | 1,853,243 |       | 2,619,911     |       | 13,144,928                                       |       | 205,783                          |       | 197,866                             |       | 226,921   |       | 18,248,652 |       |
| Accumulated   depreciation  |       |      |       | (1,057,791    | )          | (5,169,253                                       | )          |                             |       |                                |       | (180,361  | )          | (6,407,405 | )          |
|                        |       |      |       |          |       |                                             |       |                             |       |                                |       |      |       |       |       |
| Net                         |       | 1,853,243 |       | 1,562,120     |       | 7,975,675                                        |       | 205,783                          |       | 197,866                             |       | 46,560    |       | 11,841,247 |       |

 

F-83

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of****Reais,****unless otherwise indicated**

 

The annual average depreciation rates for property plant and equipment as of December 31, 2013, based on their useful life, are as follow:

 
| ** **                            | ** ** | **Average rates** | ** ** |
|---------------------------------------|------------|------------------------|------------|
|                                  |       |                   |       |
| Buildings                             |       | 4%                     |       |
| Machinery,   equipment and facilities |       | 5.5%                   |       |
| Others                                |       | 10% to 20%             |       |

 

The balance of construction in progress is comprised mainly of expansion and optimization projects of the Company’s industrial units, being R$ 52,104 in the Jacareí unit, R$ 17,700 of forest area, R$49,858 of Fibria - MS, R$ 51,197 in the Aracruz unit, R$ 13,201 in Veracel.

 

Borrowing costs capitalized were calculated based on the weighted average cost of the related debt. During the first six months of 2013, the rate applied was 3.61% p.a., and, in accordance with our internal policy, it was revised in July to 3.84% p.a. In 2012, the rate used was 5.08% p.a. in the first semester and 3.88% p.a. in the second semester.

 

The amounts related to depreciation, depletion and amortization expenses were recorded in the statement of operations in “Cost of sales”, “Selling expenses” and “General and administrative expenses” and are disclosed in Note 33.

 

Property, plant and equipment given as collateral are disclosed in Note 22.

 

The amount regarding the disposals related to advances to suppliers refers, substantially, to Guaíba Project which was canceled.

 

The Company currently does not have items of fixed assets for which it expects to abandon or dispose of or for which provision for asset retirement obligations would be required.

 

**20****                                ****Intangible assets**

 
| ** **                                             | ** ** | ** **             | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **January 1****st****, ** | ** ** |
|--------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|-----------------------|------------|-------------------------------------|------------|
| ** **                                             | ** ** | **Annual**             | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2012**                            | ** ** |
| ** **                                             | ** ** | **amortization**       | ** ** | ** **            | ** ** | **Accumulated**       | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                             | ** ** | **rate - %** | ** ** | **Cost**              | ** ** | **amortization**      | ** ** | **Net**                             | ** ** | **Net** | ** ** | **Net** | ** ** |
| ** **                                             | ** ** | ** **             | ** ** | ** **            | ** ** | ** **            | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Goodwill - CGU Aracruz                                 |       |                   |       | 4,230,450             |       |                  |       | 4,230,450                           |       | 4,230,450 |   | 4,230,450 |   |
| Systems development and deployment                     |       | 20                     |       | 188,573               |       | (156,224              | )          | 32,349                              |       | 40,004 |   | 49,199 |   |
| Intangible assets acquired in the business combination |       |                   |       |                  |       |                  |       |                                |       |   |   |   |   |
| Databases                                              |       | 10                     |       | 456,000               |       | (228,000              | )          | 228,000                             |       | 273,600 |   | 319,200 |   |
| Patents                                                |       | 15.9                   |       | 129,000               |       | (103,200              | )          | 25,800                              |       | 46,820 |   | 67,365 |   |
| Relationship with   suppliers                          |       |                   |       |                  |       |                  |       |                                |       |   |   |   |   |
| Diesel and ethanol                                     |       | 20                     |       | 29,000                |       | (29,000               | )          |                                |       | 2,668 |   | 9,251 |   |
| Chemical products                                      |       | 6.3                    |       | 165,000               |       | (51,562               | )          | 113,438                             |       | 123,420 |   | 133,815 |   |
| Other                                                  |       |                   |       | 4,228                 |       |                  |       | 4,228                               |       | 201 |   | 168 |   |
|                                                   |       |                   |       |                  |       |                  |       |                                |       |   |   |   |   |
|                                                   |       |                   |       | 5,202,251             |       | (567,986              | )          | 4,634,265                           |       | 4,717,163 |   | 4,809,448 |   |

 

F-84

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Table of Contents

 

**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(a)****                           ****Roll forward of net book value**

 
| ** **                                                             | ** ** | **2013**  | ** ** | **2012**  | ** ** | **2011**  | ** ** |
|------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
|                                                                   |       |      |       |      |       |      |       |
| At the beginning   of the year                                         |       | 4,717,163 |       | 4,809,448 |       | 4,906,443 |       |
| Changes in   intangible asset from business combinations - CGU Aracruz |       |      |       |      |       |      |       |
| Amortization of   databases, patents and suppliers                     |       | (79,271   | )          | (83,124   | )          | (83,123   | )          |
| Reclassification   of goodwill to assets held for sale (CONPACEL)      |       |      |       |      |       |      |       |
| Acquisition and   disposal of software, net                            |       | (7,687    | )          | (9,192    | )          | (13,180   | )          |
| Other                                                                  |       | 4,060     |       | 31        |       | (692      | )          |
|                                                                   |       |      |       |      |       |      |       |
| At the end of the   year                                               |       | 4,634,265 |       | 4,717,163 |       | 4,809,448 |       |

 

Amortization of intangible assets was recorded in “General and administrative expenses” and “Other operating income (expenses), net”.

 

The impairment test for the goodwill related to the CGU Aracruz is described in Note 37.

 

**21****                                ****Finance and operating lease agreements**

 

**(a)****                               ****Financial leases**

 

Financial leases correspond to the purchase of forestry equipment for cutting and transport of timber and also for the purchase of industrial equipment for processing of chemicals and oxygen. The financial lease agreements have purchase option at the end of period of the leasing.

 

The assets are recognized substantially under “Machinery, equipment and facilities” within property, plant and equipment and its respective obligation is recognized under “Other payable”.

 
| ** **                       | ** ** | **December 31,** | ** ** | **December**      | ** ** | **January 1****st****, ** | ** ** |
|----------------------------------|------------|-----------------------|------------|-------------------|------------|-------------------------------------|------------|
| ** **                       | ** ** | **2013**              | ** ** | **31, 2012** | ** ** | **2012**                            | ** ** |
| ** **                       | ** ** | ** **            | ** ** | **Accumulated**   | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                       | ** ** | **Cost**              | ** ** | **depreciation**  | ** ** | **Net**                             | ** ** | **Net** | ** ** | **Net** | ** ** |
|                             |       |                  |       |              |       |                                |       |   |   |   |   |
| Forestry equipment               |       | 13,775                |       | (13,453           | )          | 322                                 |       | 8,205 |   | 17,386 |   |
| Oxygen   and chemical facilities |       | 88,990                |       | (32,661           | )          | 56,329                              |       | 67,689 |   | 73,369 |   |
|                             |       |                  |       |              |       |                                |       |   |   |   |   |
|                             |       | 102,765               |       | (46,114           | )          | 56,651                              |       | 75,894 |   | 90,755 |   |

 

F-85

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Table of Contents

 

**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The following is a detail of the present value and future minimum payments for each of the periods indicated below:

 
| **Years**    | ** ** | **Present value** | ** ** | **Future ****v****alue** | ** ** |
|--------------|------------|------------------------|------------|-------------------------------|------------|
| ** **   | ** ** | ** **             | ** ** | ** **                    | ** ** |
| 2014         |       | 10,940                 |       | 11,336                        |       |
| 2015 to 2019 |       | 45,032                 |       | 56,676                        |       |
| After 2019   |       | 28,137                 |       | 48,173                        |       |
| ** **   | ** ** | ** **             | ** ** | ** **                    | ** ** |
|         |       | 84,109                 |       | 116,185                       |       |

 

There are no restrictions imposed by financial lease agreements.

 

**(b)****                               ****Operating leases**

 

***(i)******                                  ******Minimum non-cancellable payments***

 

·             Land leasing - the Company leases land for planting forests based on third-party operational leases as a source of raw materials for its production. The leases are for a period up to 21 years. Lease payments, equivalent to market value are made according to the contract. The land lease agreements have renewal options of the lease period at market value.

 

·             Sea domestic transport - the Company is party to a long-term contract to receive sea freight services for 20 years, for the sea domestic transport of raw materials utilizing pushers and maritime barges from the Terminal of Caravelas (BA) to Portocel (ES).

 

·            Export transport - the Company is also a party to long-term contracts with STX Pan Ocean Co. Ltd. to receive sea freight services for 25 years for transportation of pulp from Brazil to several ports in Europe, North America and Asia.

 

At December 31, 2012, minimum payments of future operating leases are as follows:

 
| ** **   | ** ** | ** **            | ** ** | **Sea domestic** | ** ** | **Export**    | ** ** |
|--------------|------------|-----------------------|------------|-----------------------|------------|---------------|------------|
| **Years**    | ** ** | **Land leasing** | ** ** | **transport**         | ** ** | **transport** | ** ** |
| ** **   | ** ** | ** **            | ** ** | ** **            | ** ** | ** **    | ** ** |
| 2014         |       | 97,924                |       | 49,985                |       | 70,223        |       |
| 2015 to 2016 |       | 184,178               |       | 99,969                |       | 140,446       |       |
| 2017 to 2019 |       | 265,626               |       | 149,954               |       | 210,669       |       |
| After 2020   |       | 494,254               |       | 199,938               |       | 1,281,570     |       |
| ** **   | ** ** | ** **            | ** ** | ** **            | ** ** | ** **    | ** ** |
|         |       | 1,041,982             |       | 499,846               |       | 1,702,908     |       |

 

***(ii)******                              ******Contingent payments***

 

·             *Forestry partnership agreements* — as explained in Note 1(e), on December 30, 2013, the Company entered into a forestry partnership and a standing timber supply agreement for a maximum term of 24 years, with contingent payments related to the repurchase of the standing timber volume that the counterparty has the right to receive. The purchase price is established in US dollars, as defined in the contract, and adjusted according to the US-CPI index.

 

F-86

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Table of Contents

 

**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Since there is not a mandatory volume of timber determined by the forestry partnership agreement that could guarantee a minimum payment to the counterparty, there are no minimum future payments to be disclosed by the Company. During the year ended December 31, 2013 the Company did not recognize any contingent payment with regards to this agreement.

 

**22****                                ****Advances to suppliers - forestry partnership programs**

 

The program, which commenced in 1990, in the States of Espírito Santo and expanded to Bahia, Minas Gerais, Rio Grande do Sul and Rio de Janeiro, is directed towards planting eucalyptus forests on the land of partners. Under the program, the Company provides technology, technical assistance, inputs and funding depending on the type of agreement, and is guaranteed wood for its pulp production. These advances will be reimbursed through delivery of wood by forest producers.

 

The table below presents the movement during the years:

 
| ** **                                                | ** ** | **December 31,   2013** | ** ** | **December 31,    2012** | ** ** | **January 1****st****,    2012** | ** ** |
|-----------------------------------------------------------|------------|------------------------------|------------|------------------------------------|------------|--------------------------------------------|------------|
|                                                      |       |                         |       |                               |       |                                       |       |
| At the beginning   of the year                            |       | 740,310                      |       | 760,611                            |       | 693,490                                    |       |
| Advances made                                             |       | 134,035                      |       | 87,500                             |       | 176,479                                    |       |
| Wood harvested                                            |       | (111,214                     | )          | (128,241                           | )          | (45,368                                    | )          |
| Transfers to   forest and others                          |       | (37,067                      | )          | (12,710                            | )          | (31,557                                    | )          |
| Reversal   (reclassification) of assets held for sale (*) |       |                         |       | 33,150                             |       | (32,433                                    | )          |
|                                                      |       |                         |       |                               |       |                                       |       |
| At the end of the   year                                  |       | 726,064                      |       | 740,310                            |       | 760,611                                    |       |

 

----

(*)         Related to the Losango Project (Note 1 (d)(i)).

 

F-87

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**23****                                ****Loans and financing**

 

**(a)****                               ****Breakdown of the balance by type of loan**

 
| ** **                            | ** ** | **Average**                       | ** ** | ** **                    | ** ** | ** **                    | ** ** | ** **                           | ** ** | ** **                    | ** ** | ** **                    | ** ** | ** **                           | ** ** | ** **                    | ** ** | ** **                    | ** ** | ** **                           | ** ** |
|---------------------------------------|------------|-----------------------------------|------------|-------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|
| ** **                            | ** ** | **annual**                        | ** ** | **Current**                   | ** ** | **Non- current**         | ** ** | **Total**                            | ** ** |
| **Type/purpose**                      | ** ** | **interest   rate - %** | ** ** | **December 31,****2013** | ** ** | **December 31,****2012** | ** ** | **January 1****st****,   2012** | ** ** | **December 31,****2013** | ** ** | **December 31,****2012** | ** ** | **January 1****st****,   2012** | ** ** | **December 31,****2013** | ** ** | **December 31,****2012** | ** ** | **January 1****st****,   2012** | ** ** |
|                                  |       |                              |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |
| In foreign   currency                 |       |                              |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |
| BNDES - currency   basket             |       | 5.9                               |       | 53,038                        |       | 49,075                        |       | 48,790                               |       | 304,091                       |       | 233,397                       |       | 220,471                              |       | 357,129                       |       | 282,472                       |       | 269,261                              |       |
| Export credits   (Finnvera)           |       | 3.5                               |       | 52,210                        |       | 46,319                        |       | 42,731                               |       | 173,244                       |       | 193,959                       |       | 217,218                              |       | 225,454                       |       | 240,278                       |       | 259,949                              |       |
| Bonds - US$                           |       | 7.3                               |       | 1,547,708                     |       | 65,763                        |       | 34,575                               |       | 1,816,385                     |       | 4,577,197                     |       | 5,103,839                            |       | 3,364,093                     |       | 4,642,960                     |       | 5,138,414                            |       |
| Bonds - JPY                           |       |                              |       |                          |       |                          |       | 2,223                                |       |                          |       |                          |       | 115,544                              |       |                          |       |                          |       | 117,767                              |       |
| Export credits   (prepayment)         |       | 3.0                               |       | 457,523                       |       | 218,662                       |       | 29,051                               |       | 2,425,260                     |       | 2,503,308                     |       | 2,777,003                            |       | 2,882,783                     |       | 2,721,970                     |       | 2,806,054                            |       |
| Export credits   (ACC/ACE)            |       | 2.3                               |       | 451,718                       |       | 440,604                       |       | 623,632                              |       |                          |       | 214,567                       |       |                                 |       | 451,718                       |       | 655,171                       |       | 623,632                              |       |
| EIB Europe Inv.   Bank                |       |                              |       |                          |       |                          |       | 784                                  |       |                          |       |                          |       |                                 |       |                          |       |                          |       | 784                                  |       |
| Leasing                               |       |                              |       |                          |       |                          |       | 8,773                                |       |                          |       |                          |       | 5,958                                |       |                          |       |                          |       | 14,731                               |       |
|                                  |       |                              |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |
|                                  |       |                              |       | 2,562,197                     |       | 820,423                       |       | 790,559                              |       | 4,718,980                     |       | 7,722,428                     |       | 8,440,033                            |       | 7,281,177                     |       | 8,542,851                     |       | 9,230,592                            |       |
|                                  |       |                              |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |
| In Reais                              |       |                              |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |
| BNDES - TJLP                          |       | 7.7                               |       | 346,593                       |       | 248,731                       |       | 242,321                              |       | 1,093,035                     |       | 1,216,069                     |       | 1,262,260                            |       | 1,439,628                     |       | 1,464,800                     |       | 1,504,581                            |       |
| FINAME                                |       | 4.2                               |       | 4,853                         |       | 7,483                         |       | 2,336                                |       | 10,410                        |       | 7,182                         |       | 7,516                                |       | 15,263                        |       | 14,665                        |       | 9,852                                |       |
| NCE                                   |       | 12.1                              |       | 46,770                        |       | 49,344                        |       | 45,203                               |       | 942,665                       |       | 636,982                       |       | 463,987                              |       | 989,435                       |       | 686,326                       |       | 509,190                              |       |
| Midwest Region   Fund (FCO and FINEP) |       | 8.2                               |       | 11,948                        |       | 12,024                        |       | 11,689                               |       | 35,646                        |       | 47,289                        |       | 58,513                               |       | 47,594                        |       | 59,313                        |       | 70,202                               |       |
|                                  |       |                              |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |
|                                  |       |                              |       | 410,164                       |       | 317,582                       |       | 301,549                              |       | 2,081,756                     |       | 1,907,522                     |       | 1,792,276                            |       | 2,491,920                     |       | 2,225,104                     |       | 2,093,825                            |       |
|                                  |       |                              |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |
|                                  |       |                              |       | 2,972,361                     |       | 1,138,005                     |       | 1,092,108                            |       | 6,800,736                     |       | 9,629,950                     |       | 10,232,309                           |       | 9,773,097                     |       | 10,767,955                    |       | 11,324,417                           |       |
|                                  |       |                              |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |
| Interest                              |       |                              |       | 94,946                        |       | 117,992                       |       | 114,432                              |       | 35,337                        |       | 105,053                       |       | 65,828                               |       | 130,283                       |       | 223,045                       |       | 180,260                              |       |
| Short-term borrowing                  |       |                              |       | 20,670                        |       | 111,898                       |       | 98,667                               |       |                          |       |                          |       |                                 |       |                          |       | 111,898                       |       | 98,667                               |       |
| Long-term   borrowing                 |       |                              |       | 2,847,745                     |       | 908,115                       |       | 879,009                              |       | 6,765,399                     |       | 9,524,897                     |       | 10,166,481                           |       | 9,642,814                     |       | 10,433,012                    |       | 11,045,490                           |       |
|                                  |       |                              |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |                          |       |                          |       |                                 |       |
|                                  |       |                              |       | 2,972,361                     |       | 1,138,005                     |       | 1,092,108                            |       | 6,800,736                     |       | 9,629,950                     |       | 10,232,309                           |       | 9,773,097                     |       | 10,767,955                    |       | 11,324,417                           |       |

 

The average rates were calculated based on the forward yield curve of benchmark rates to which the loans are indexed, weighted through the maturity date for each installment, including the issuing/contracting costs, when applicable.

 

F-88

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(b)****                               ****Breakdown by maturity**

 

Non-current portion of the debt at December 31, 2013 by maturity:

 
| ** **                          | ** **   | **2015**     | ** **   | **2016**     | ** **   | **2017**     | ** **   | **2018**     | ** **   | **2019**     | ** **   | **2020**     | ** **   | **2021**     | ** **   | **2022**     | ** **   | **2023**     | ** ** | **Total**  | ** ** |
|-------------------------------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|------------|------------|------------|
| ** **                          | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** **   | ** ** | ** ** | ** ** |
| In foreign   currency               |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |       |       |       |
| BNDES - currency   basket           |         | 48,986       |         | 38,037       |         | 50,582       |         | 46,308       |         | 32,975       |         | 45,304       |         | 38,019       |         | 3,880        |         |         |       | 304,091    |       |
| Export credits   (Finnvera)         |         | 49,419       |         | 49,419       |         | 49,419       |         | 24,987       |         |         |         |         | ** **   | ** **   | ** **   | ** **   |         |         |       | 173,244    |       |
| Bonds - US$                         |         |         |         |         |         |         |         |         |         | 143,547      |         | 369,439      |         | 1,303,399    |         |         |         |         |       | 1,816,385  |       |
| Export credits   (prepayment)       |         | 285,455      |         | 442,942      |         | 650,262      |         | 482,522      |         | 457,597      |         | 106,482      | ** **   | ** **   | ** **   | ** **   |         |         |       | 2,425,260  |       |
|                                |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |       |       |       |
|                                |         | 383,860      |         | 530,398      |         | 750,263      |         | 553,817      |         | 634,119      |         | 521,225      |         | 1,341,418    |         | 3,880        |         |         |       | 4,718,980  |       |
|                                |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |       |       |       |
| In Reais                            | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |       |       |       |
| BNDES - TJLP                        |         | 317,242      |         | 176,649      |         | 162,010      |         | 119,684      |         | 84,877       |         | 106,048      |         | 99,622       |         | 22,287       |         | 4,616        |       | 1,093,035  |       |
| FINAME                              |         | 4,959        |         | 3,225        |         | 2,059        |         | 167          |         |         |         |         |         |         |         |         |         |         |       | 10,410     |       |
| NCE                                 |         | 116,425      |         | 107,846      |         | 329,867      |         | 302,079      |         | 43,225       |         | 43,223       |         |         |         |         |         |         |       | 942,665    |       |
| Midwest Region   Fund (FCO e FINEP) |         | 11,643       |         | 11,643       |         | 11,643       |         | 409          |         | 308          |         |         |         |         |         |         |         |         |       | 35,646     |       |
|                                |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |       |       |       |
|                                |         | 450,269      |         | 299,363      |         | 505,579      |         | 422,339      |         | 128,410      |         | 149,271      |         | 99,622       |         | 22,287       |         | 4,616        |       | 2,081,756  |       |
|                                |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |       |       |       |
|                                |         | 834,129      |         | 829,761      |         | 1,255,842    |         | 976,156      |         | 762,529      |         | 670,496      |         | 1,441,040    |         | 26,167       |         | 4,616        |       | 6800,736   |       |

 

F-89

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(c)****                                ****Breakdown by currency and interest rate**

 

Loans and financing are broken-down in the following currencies:

 
| ** **      | ** ** | **Currency**                 | ** ** |
|-----------------|------------|------------------------------|------------|
| ** **      | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
| ** **      | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Real            |       | 2,491,920                    |       | 2,225,104 |   | 2,093,825 |   |
| Dollar          |       | 6,924,048                    |       | 8,260,379 |   | 8,843,564 |   |
| JPY             |       |                         |       |   |   | 117,767 |   |
| Currency basket |       | 357,129                      |       | 282,472 |   | 269,261 |   |
|            |       |                         |       |   |   |   |   |
|            |       | 9,773,097                    |       | 10,767,955 |   | 11,324,417 |   |

 

Loans and financing are broken-down by interest rate:

 
| ** **      | ** ** | **Interest rate**       | ** ** |
|-----------------|------------|------------------------------|------------|
| ** **      | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
| ** **      | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| CDI             |       | 989,435                      |       | 686,326 |   | 509,190 |   |
| TJLP            |       | 1,397,463                    |       | 1,449,587 |   | 1,504,491 |   |
| Libor           |       | 3,107,014                    |       | 2,756,150 |   | 2,929,970 |   |
| Currency basket |       | 357,129                      |       | 282,472 |   | 269,261 |   |
| Fixed           |       | 3,922,056                    |       | 5,593,420 |   | 6,111,505 |   |
|            |       |                         |       |   |   |   |   |
|            |       | 9,773,097                    |       | 10,767,955 |   | 11,324,417 |   |

 

**(d)****                           ****Amortization of transaction costs**

 

The table below presents the annual effects of the amortization of transaction costs in the effective interest rate method:

 

 
| ** **                    | ** ** | **December 31, 2013** | ** ** |
|-------------------------------|------------|---------------------------------|------------|
| **Descri****pti****o****n**   | ** ** | **2014**                        | ** ** | **2015** | ** ** | **2016** | ** ** | **2017** | ** ** | **2018** | ** ** | **After   2019** | ** ** | **Total** | ** ** |
|                          |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Export credits   (Finnvera)   |       | 830                             |       | 830 |   | 830 |   | 830 |   | 138 |   |   |   | 3,458 |   |
| Bond - USD                    |       | 64,310                          |       | 13,400 |   | 13,400 |   | 13,400 |   | 13,400 |   | 19,918 |   | 137,828 |   |
| Export credits   (prepayment) |       | 6,426                           |       | 1,407 |   | 1,407 |   | 1,407 |   | 1,093 |   | 275 |   | 12,015 |   |
|                          |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                          |       | 71,566                          |       | 15,637 |   | 15,637 |   | 15,637 |   | 14,631 |   | 20,193 |   | 153,301 |   |

 

The capitalization of transaction costs for loans and financing increases the average effective cost of the debt in 0.40% p.a.

 

F-90

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(e)****                                ****Roll forward**

 

The roll forward of the carrying amounts at the presented period is as follows:

 
| ** **                                             | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|--------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                   |       |       |       |       |       |       |       |
| At the   beginning of year                             |       | 10,767,955 |       | 11,324,417 |       | 10,581,457 |       |
| Borrowings                                             |       | 1,279,414  |       | 864,334    |       | 2,707,265  |       |
| Interest   expense                                     |       | 575,877    |       | 681,840    |       | 660,084    |       |
| Foreign   exchange                                     |       | 927,278    |       | 803,641    |       | 1,036,274  |       |
| Repayments - principal amount                          |       | (3,320,157 | )          | (2,410,719 | )          | (3,109,589 | )          |
| Interest paid                                          |       | (602,112   | )          | (651,288   | )          | (582,047   | )          |
|                                                   |       |       |       |       |       |       |       |
| Expense of transaction costs of Bonds early   redeemed |       | 113,759    |       | 88,759     |       |       |       |
| Other (*)                                              |       | 31,083     |       | 66,971     |       | 30,973     |       |
|                                                   |       |       |       |       |       |       |       |
| At the end of the year                                 |       | 9,773,097  |       | 10,767,955 |       | 11,324,417 |       |

 

----

(*)    Includes amortization of transactions costs.

 

**(i)****                                  ****Export credits (prepayments)**

 

In April 2013, the Company, through Fibria Trading International KFT., entered into an export prepayment contract with three banks in the amount of US$ 100 million (equivalents to R$ 201,540), with maturity until 2018 and an initial interest rate of 1.63% p.a. over the quarterly LIBOR.

 

On September 2012, the Company entered into export prepayment contracts in the amount of US$ 105 million (equivalents then to R$ 212,950), with maturity on September 2014 and interest rate of 2.95% p.a.

 

On August 2012, we early repaid, with available funds, the amount of US$ 100 million (equivalent then to R$ 202,090) of a prepayment contract entered into in January 2011, with an original maturity in April 2018 and fixed interest rate of 2.95% p.a.

 

In the first quarter of 2012, Veracel entered into export prepayment contracts in the amount of US$ 43 million (equivalents then to R$ 76,939), with maturity between August 2012 and September 2013 and interest rate between 3.35% and 4.75% p.a.

 

On February 2012, Veracel entered into the export prepayment contract, in the amount of US$ 33 million (equivalent then to R$ 56,694), with semiannual payment of interest, at 5% p.a. plus LIBOR and a single payment of the principal with maturity in 2017.

 

On February 2012, Veracel early repaid five export prepayment contracts ACC in the amount of US$ 14 million (equivalent then to R$ 24,314) which were contracted in September and December 2011 with maturity in March 12, 2012.

 

On June 2011, the Company signed six export prepayment contracts in the amount of US$ 125 million (equivalent then to R$ 197,575), with maturity in January 2013 and fixed interest rate, of which US$ 75 million at 2.05% p.a. and US$ 50 million at 2.09% p.a.

 

On May, 2011, the Company signed an export prepayment contract with eleven banks in the amount of US$ 300 million (equivalent then to R$ 488,850), bearing quarterly LIBOR plus 1.80% p.a., which can be reduced to 1.60%, depending on the level of leverage and risk rating of the Company with a eight-year term, annual installments of US$ 15 million in 2012; US$ 30 million in 2015; US$ 15 million 

 

F-91

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

in 2016; US$ 90 million in 2018 and US$ 150 million in 2019.

 

On January 2011, the Company signed three export prepayment contracts in the amount of US$ 50 million each for a total of US$ 150 million (equivalent then to R$ 248,640), with maturity in June 2012 and fixed interest rate at 2.09% p.a. On March 2012, the Company early repaid the total amount of US$ 50 million, equivalent to R$ 90,675, corresponding to one contract and, on September 2012, the Company repaid the remaining contracts in the total amount of US$ 100 million, equivalent to R$ 211,143.

 

On September 30, 2010, the Company signed an Export Credit Contract with 11 banks in the amount of US$ 800 million (equivalent then to R$ 1,355,360), with maturities through 2018, bearing quarterly LIBOR plus 2.755% p.a., which can be reduced to 2.30%, depending on the level of leverage and risk rating of the Company. The loans are guaranteed by export contracts, and the installments mature on shipment dates. This line was used to repay debt with higher costs and less favorable maturities. In March 29, 2011, the company prepaid the amount of US$ 600 million (equivalent then to R$ 992,760), with funds from the CONPACEL sale and the issuance of the Fibria 2021 Bond.

 

On September 29, 2010, the Company signed a bilateral Export Credit Contract in the amount of US$ 250 million (equivalent then to R$ 423,550), with maturities through 2020, bearing semi-annual LIBOR plus 2.55% p.a., which can be reduced to 2.30%, depending on the level of leverage and risk rating of the Company. The loans are guaranteed by export contracts, and the installments mature on shipment dates. This line was used to repay debt with higher costs and less favorable maturities.

 

In March 2010, the Company signed a bilateral Export Credit Contract in the amount of US$ 535 million thousand (equivalent then to R$ 956,152), bearing quarterly LIBOR plus 2.95% p.a., with maturities through 2017. The loans are guaranteed by export contracts, and the installments mature on shipment dates. At March 31, 2010 funds totaling US$ 314 million (equivalent then to R$ 558,991) were released, and the remaining balance of US$ 221 million (equivalent then to R$ 389,310) was released on April 6, 2010. This line was fully used to repay debt with higher costs and less favorable maturities. In April, 2011, the company prepaid the amount of US$ 100 million (equivalent then to R$ 160,970), and negotiated a longer term for payment of the remaining balance (from 2013 until 2018, with quarterly depreciation). There were no changes in interest rates charged. In 2012, the Company prepaid the amount of US$ 200 million, with no changes on the other conditions of the contract.

 

The Company has export prepayment contracts with Banco Bradesco in the amount of US$ 150 million, bearing interest of LIBOR plus 0.78%, maturing in 2014.

 

The Company has export prepayment contracts with Nordea bank in the amount of US$ 50 million, bearing interest of LIBOR plus 0.80%, maturing in 2013.

 

**(ii)****                              ****Loans - VOTO III (Bonds)**

 

On January 16, 2004, Votorantim Overseas Trading Operations III (“VOTO III”), a wholly-owned subsidiary of Votorantim Participações S.A. (“VPAR”), raised in the international capital markets US$ 300 million (equivalent then to R$ 873,000), maturing in ten years and bearing annual interest of 4.25%. The Company received 15% of the total funds raised, i.e., US$ 45,000 million, equivalent then to R$ 131,000. On December 2012, the Company prepaid 100% of the outstanding balance.

 

**(iii)****                          ****Loans - VOTO IV (Bonds)**

 

On June 24, 2005, Votorantim Overseas Trading Operations Limited IV (“VOTO IV”), a company jointly-controlled together with Votorantim Participações, raised US$ 400 million in the international capital markets (equivalent then to R$ 955,000), maturing on June 24, 2020 and bearing annual 

 

F-92

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

interest of 8.50%. The Company received 50% of the total funds raised, i.e., US$ 200 million, equivalent then to R$ 477,000 million. In 2013 the Company prepaid the total amount of US$ 42 million (equivalents to R$ 93,034). As a result of the early redemption, we recognized financial expenses amounting to R$ 13,496, of which R$ 12,341 related to the premiums paid in the repurchase transaction and R$ 1,155 relating to the proportional amortization of the transaction costs of the Bonds.

 

**(iv)****                           ****Loans - Fibria 2020 and Fibria 2021 (Bonds)**

 

During 2013, Fibria prepaid and canceled a total of US$ 855 million (equivalents to R$ 1,758,155) related to the Bonds “Fibria 2020” and “Fibria 2021” issued in May 2010 and March 2011, with original maturities in May 2020 and March 2021,  with fixed interest rates of 7.5% and 6.75% per year, respectively. As a result of the early redemption, we recognized financial expenses amounting to R$ 336,799, of which R$ 224,195 related to the premiums paid in the repurchase transaction and R$ 112,604 relating to the proportional amortization of the transaction costs of the Bonds.

 

“The remaining balance of the Bond “Fibria 2020” in the amount of R$ 1,616 million, is recorded as current liabilities due to the Management’s Company of early redeem, as Note 38.”

 

On July 2012, the Company made a tender offer to early redeem Fibria 2020 Bonds and as a result early prepaid, the amount of US$ 514 million (equivalent then to R$ 1,044,698) of debt issued under the Fibria 2020 Bond, with proceeds from the public offering of shares.  The early repurchase generated a loss of R$ 150,917 recorded under “Financial Expenses” corresponding to R$ 62,158 of the premium offered to the bondholders for the early redemption and R$ 88,759 of transaction costs expensed upon repurchase (Note 31).

 

In March 2011, the Company, through Fibria Overseas Finance Ltd., raised US$ 750 million (“Fibria 2021” equivalent then to R$ 1,240,875) in the international markets, maturing in ten years, with a repurchase option starting 2016, accruing semi-annual interest at 6.75% p.a.

 

In May 2010, through Fibria Overseas Finance Ltd., the Company raised US$ 750 million (“Fibria 2020” equivalent then to R$ 1,339,650) in the international markets, maturing in ten years and with a repurchase option starting 2015, accruing semi-annual interest at 7.50% p.a.

 

In October 2009, the Company, through Fibria Overseas Finance Ltd., raised US$ 1 billion (“Fibria 2019” equivalent then to R$ 1,744,000) in the international markets, maturing in ten years, accruing semi-annual interest at 9.25% p.a. In May 2010, the Company announced an offer to exchange the Fibria 2019 Bonds for the Fibria 2020 Bonds, in order to reduce interest cost, improve the liquidity of the security and renegotiating covenant clauses. The participation in the exchange offer was 94%.

 

The average effective interest rate on these operations listed above, including the transaction costs, is 8.66% p.a.

 

**(v)****                               ****BNDES**

 

In 2013, Fibria entered into four contracts through the credit limit of R$ 1.7 billion defined in 2011, in the amounts of R$ 499.3 million (forestry projects financing), R$ 49.9 million (industries investments financing), R$ 30.7 million (IT projects financing) and R$ 167.8 million (reforest financing in areas of preservation). A total amount of R$ 267.427 were released regarding these contracts, corresponding to 36% of the total. On December 31, 2013, including the existing contracts since 2005, the outstanding balance of the contracts signed with BNDES was R$ 1.797 billion, being, R$ 1.440 billion subject to interest rate from TJLP and, R$ 357 million to a Currency basket.

 

On December 31, 2013, considering only the 50% of our partnership, Veracel had total principal amount outstanding of R$ 86,614, repayable from 2014 to 2021, with a portion subject to interest ranging from TJLP plus 1.8% to 3.3% p.a. and UMBNDES plus 1.8% p.a.

 

F-93

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

In the first semester of 2009, a financing agreement in the amount of R$ 673,294 was approved, bearing interest for a portion at the Long-term Interest Rate (TJLP) plus 0% to 4.41% and for the remaining portion at the BNDES Monetary Unit (UMBNDES) plus 2.21% p.a, with the maturity to July 2017. Regarding this financing agreement, 93% of this total amount had been released and the remaining balance will not be used by us. UMBNDES is an index based on a basket of currencies, substantially the US dollar.

 

In the second semester of 2008, a financing agreement with BNDES totaling R$ 540,000 was approved, bearing TJLP plus 1.36% to 1.76% for part of the loan and UMBNDES plus 2.45% p.a., with the final maturity to April 2015. Regarding this financing agreement, 62% of this amount had been released and the remaining balance will not be used by us.

 

On October 2007, a financing agreement was executed with BNDES totaling R$ 21,701, indexed by the TJLP plus 1.8% and UMBNDES plus 1.3% p.a., which was paid by the Company on July 2012.

 

On November 2006, a financial agreement was executed into with BNDES, in the amount of R$ 596 million, of which, 900% has already been released in December 31, 2012, bearing interest at the TJLP plus 0% e 2.9% p.a. for portion of the loan and UMBNDES plus 1.4% to 2.4% p.a. for the other portion, maturing from 2009 to 2016.

 

In 2005, three agreements were entered into with BNDES, in December, August and May. In the contract signed in December, the total funds released were R$ 139,284, repayable from 2007 to 2016, subject to interest ranging between TJLP plus zero to 4.5% p.a. and UMBNDES plus 2.0% to 3.0% p.a. In the August agreement, the total funds released were R$ 55,222, of which a portion is indexed to the TJLP plus 3.5% to 4.5% and a portion is indexed to UMBNDES plus 3% p.a. The final maturity of this agreement is 2015. In the May agreement, the total funds released were R$ 99,109, of which a portion is indexed to TJLP plus 4.5% p.a. and a portion is indexed to UMBNDES plus 4.5% p.a. The final maturity of the principal amount is 2015.

 

The Company has given the pulp plant located in Três Lagoas (MS) and in Jacareí (SP) as the main collateral for these financings.

 

**(vi)****                           ****Leases**

 

In December 2009, the Company renegotiated the terms and the amount outstanding of its finance lease with Banco Société Générale, originally entered in 2008, for the acquisition of forest machinery and equipment. The original maturity of this contract was 2013. However, on June 2012, the Company prepaid 100% of the lease contracts related to the acquisition of forest machinery and equipment.

 

Finance lease liabilities are guaranteed by a statutory lien on the assets leased.

 

**(vii)****                       ****Export Credit Note (NCE)**

 

In June 2013, the Company entered into a contract with Banco do Brasil a NCE, in the total amount of R$ 497,745, with final maturity in 2018 and interest rate of 105.85 of CDI. This contract is also linked to a swap contract in order to exchange the currency Reais to Dollar and change of the variable rate to fixed rate, being the final cost 4.16% p.a. plus foreign exchange currency.

 

On September 2012, the Company signed an NCE totaling R$ 172,899, with semiannual payment of interest of 100% of CDI and amortization of the principal in four annual settlements as from 2017.

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

On September 28, 2010, the Company signed an NCE totaling R$ 427,500, maturing in 2018 and bearing charges of CDI plus 1.85% p.a. In connection with this NCE a swap was contracted to convert the floating rate in Reais to a fixed rate of 5.45% in US dollar.

 

In December 2008, the Company contracted, through its subsidiary Portocel, an NCE with Banco HSBC in the amount of R$ 94,014, with final maturity in December 2013 and charges of 100% of the CDI. The contract was settled on the maturity date.

 

**(viii)****                   ****Export credit (Finnvera)**

 

On September 30, 2009, the Company entered into a loan agreement with FINNVERA (Finnish Development Agency, which provides credit to companies committed to sustainability programs) in the amount of € 125 million at semi-annual LIBOR plus 3.325% p.a., maturing in eight-and-a-half years.

 

**(ix)****                           ****Fund for the financing of the Brazilian Midwest Region (FCO)**

 

On December 31, 2009, the Company entered into a loan agreement for R$ 73,000 with Banco do Brasil through its subsidiary Fibria - MS, maturing in December 2017, with a six-month grace period, at a rate of 8.5% p.a.

 

**(x)****                               ****Covenants**

 

Some of the financing agreements of the Company contain covenants establishing maximum indebtedness and leverage levels, as well as minimum coverage of outstanding amounts.

 

**Covenants requirements as of December 31, 2013**

 

On June 6, 2012, the Company concluded the renegotiation of the debt financial covenants, which resulted on the following changes: (a) covenants are measured based on consolidated information translated into US dollars (as opposed to consolidated financial information in Reais), and (b) the indebtedness ratio (Net debt to EBITDA) was increased to a maximum ratio of 4.5x as from June 2012.

 

The measurement of the ratios based on information translated into US dollars reduces the of effects changes in exchanges rates as compared to ratios based on information measured in Reais. A substantial portion of the debt of the Company is denominated in US dollars and as a result particularly depreciation of the real against the US dollar had significant impacts on the ratio when measured in Reais. Under the prior computation criteria in the event of a depreciation the amount of net debt as of the end of the period would increase when measured in Reais. Under the revised criteria by translating the EBITDA from Reais to US dollar at the average exchange rate of each quarter the impact of the depreciation of the Brazilian real is mitigated.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The following table presents the financial covenant ratios:

 
| ** **                                              | ** ** | **December,   2012 and   after** | ** ** |
|---------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                              | ** ** | ** **                            | ** ** |
| Ratio of debt service coverage (i) - Minimum ratio |       | More than 1.00                        |       |
|                                                    |       |                                  |       |
| Indebtedness ratio (ii)- Maximum ratio                  |       | Less than 4.50                        |       |

 

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(i)   The ratio of debt service coverage is defined as (a) adjusted EBITDA (for the last four social quarters) in accordance with  practices adopted in Brazil and adjusted translated into US dollars at the average exchange rate of each quarter, plus the balance of cash, cash equivalents and marketable securities at period-end translated into US dollar at period-end exchange rates divided by (b) debt service payment requirements  for the following four consecutive quarters  plus interest paid during the past four quarters translated into US dollars at the average exchange rate of each quarter.

 

(ii)  The indebtedness ratio is defined as (a) consolidated net debt translated into US dollars at the period-end closing rate divided by (b) Adjusted EBITDA for the last four social quarters translated into US dollars at the average exchange rate of each quarter.

 

The Company is in full compliance with the covenants established in the financial contracts at December 31, 2013, for which the debt service ratio totaled 1.4 (2.3 not taking into consideration the effects of the reclassification from non-current liabilities to current liabilities regarding the early redeem of Fibria’s 2020 Bond, as Note 38(b)) and indebtedness ratio totaled 2.6.

 

The debt agreements that have debt financial covenants also have the following events of default:

 

·             Non-payment, within the stipulated period, of the principal or interest.

 

·             Inaccuracy of any declaration, guarantee or certification provided.

 

·             Cross-default and cross-judgment default, subject to an agreed minimum of US$ 50 million.

 

·             Subject to certain periods for resolution, breach of any obligation under the contract.

 

·             Certain events of bankruptcy or insolvency of the Company, its main subsidiaries or Veracel  Celulose S.A.

 

**(xi)****                          ****Loans and financing guarantees**

 

At December 31, 2013, certain loans and financing are guaranteed mainly by property, plant and equipment items from Três Lagoas (State of Mato Grosso do Sul), Jacareí (State of São Paulo) and Aracruz (State of Espírito Santo) units, with a net book value of R$ 6,966,056 (December 31, 2012 - R$ 7,954,206 and January 1, 2012 - R$ 8,456,937), considered sufficient to cover the corresponding loans and financing amounts.

 

**(xii)****                       ****Unused credit lines**

 

In April 2013, the Company obtained a revolving credit facility with Banco Bradesco, in the amount of R$ 300,000 with availability for five years and an interest rate of 100% of the CDI plus 1.5% p.a., when 

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

fully used. During the unused period, the Company will pay a commission in Reais of 0.05% p.a. quarterly. The Company has not used this credit facility.

 

In May 2011, the Company, through its international subsidiary Fibria Trading International Ltd. obtained a revolving credit facility with eleven foreign banks, in the amount of US$ 500 million with availability of four years and interest payable quarterly at quarterly LIBOR rate plus from 1.40% to 1.70% over the disbursed amounts. For unused amounts the Company is charged an equivalent to 35% of the agreed interest cost on a quarterly basis.

 

The total amount paid related to unused credit lines until December 31, 2013 was R$ 8,873.

 

**24****                                ****Contingencies**

 

The Company is party to labor, civil and tax lawsuits at various court levels. The provisions for contingencies against probable unfavorable outcome of claims in progress are established and updated based on management evaluation, as supported by external legal counsel. Provisions and corresponding judicial deposits are as follows:

 
| ** **       | ** ** | **December 31, 2013** | ** ** | **December 31, 2012** | ** ** | **January 1****st****, 2012** | ** ** |
|------------------|------------|---------------------------------|------------|---------------------------------|------------|-----------------------------------------|------------|
| ** **       | ** ** | **Judicial   deposits**         | ** ** | **Provision**                   | ** ** | **Net**                                 | ** ** | **Judicial   deposits** | ** ** | **Provision** | ** ** | **Net** | ** ** | **Judicial   deposits** | ** ** | **Provision** | ** ** | **Net** | ** ** |
|             |       |                            |       |                            |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Nature of claims |       |                            |       |                            |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax              |       | 86,921                          |       | 102,906                         |       | 15,985                                  |       | 123,791 |   | 162,222 |   | 38,431 |   | 119,572 |   | 173,823 |   | 54,251 |   |
| Labor            |       | 55,250                          |       | 152,442                         |       | 97,192                                  |       | 47,703 |   | 108,014 |   | 60,311 |   | 47,819 |   | 88,834 |   | 41,015 |   |
| Civil            |       | 9,503                           |       | 25,164                          |       | 15,661                                  |       | 6,520 |   | 12,591 |   | 6,071 |   | 821 |   | 7,149 |   | 6,328 |   |
|             |       |                            |       |                            |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
|             |       | 151,674                         |       | 280,512                         |       | 128,838                                 |       | 178,014 |   | 282,827 |   | 104,813 |   | 168,212 |   | 269,806 |   | 101,594 |   |

 

The Company has tax and civil claims arising in the normal course of business that is assessed as of possible (but not probable) loss by management, as supported by outside legal counsel. No provision has been recorded to cover possible unfavorable outcomes from these claims. At December 31, 2013, these claims amount to: tax R$ 4,383,236 and civil R$ 952,988.

 

The change in the provision for contingencies is as follows:

 
| ** **                     | ** ** | **2013**   | ** ** | **2012**   | ** ** |
|--------------------------------|------------|------------|------------|------------|------------|
| ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| At the beginning   of the year |       | 282,827    |       | 269,806    |       |
| Reversal                       |       | (125,203   | )          | (39,129    | )          |
| New litigation                 |       | 60,633     |       | 8,923      |       |
| Accrual of   financial charges |       | 62,255     |       | 43,227     |       |
| ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| At the end of the   year       |       | 280,512    |       | 282,827    |       |

 

**(a)****                               ****Comments regarding probable tax contingencies**

 

The tax processes with probable loss are represented by discussions related to federal, state and municipal taxes, for which, substantially, there are judicial deposits as collateral, so there is no material exposure for the Company.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(b)****                               ****Comments regarding possible tax contingencies**

 

We present below comments on possible tax contingencies for which the Company has not recognized any provision. In the table below we present a detail of the amounts of these contingencies as of December 31, 2013:

 
| ** **                                                                       | ** ** | **Amount** | ** ** |
|----------------------------------------------------------------------------------|------------|------------|------------|
|                                                                             |       |       |       |
| Income tax   assessment - Normus (i)                                             |       |       |       |
| Tax incentive -   agency for the development (ii)                                |       | 101,163    |       |
| IRPJ/CSL - partial approval (iii)                                                |       | 145,000    |       |
| IRPJ/CSLL - Newark (iv)                                                          |       | 221,569    |       |
| Income tax   assessment - IRPJ/CSLL - swap of industrial and forestry assets (v) |       | 1,798,207  |       |
| Income tax   assessment — IRPJ/CSLL - Fibria Trading International (vi)     |       | 274,835    |       |
| Other tax   liabilities (a) (vii)                                                |       | 1,937,602  |       |
|                                                                             |       |       |       |
| Total possible tax contingencies                                                 |       | 4,478,376  |       |

 

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(a)        Includes the amount of R$ 95,140 related to the process of our jointly-controlled entity Veracel.

 

(i)            Income tax assessment - Fibria Celulose (“Normus”)

 

On December 2007, Fibria’s subsidiary Normus Empreendimentos e Participações Ltda., incorporated by Fibria on September 30, 2013, received an income tax assessment from the Brazilian Federal Revenue Service (*Receita Federal do Brasil*) charging Income Tax (*Imposto de Renda*) and Social Contribution (*Contribuição Social sobre o Lucro Líquido*) over earnings of its foreign subsidiaries, during the period from 2002 to 2006.

 

On October 2011, the assessment was revised by the Tax Federal Administrative Court (*Conselho Administrativo de Recursos Fiscais*) which decided to maintain the assessment through a casting vote after a tie of three votes favorable to Fibria and three votes against Fibria by the six members of the court. The Company appealed of this decision (Motion of Clarification) and, at the moment, the tax assessment still waiting for judgment.

 

On September 2011, Normus received a new tax assessment charging Income Tax (*Imposto de Renda*) and Social Contribution (*Contribuição Social sobre o Lucro Líquido*), but this time for the year 2007.

 

In March 2013, Normus received another income tax assessment from the Brazilian Federal Revenue Service (Receita Federal do Brasil) where Brazilian Federal Revenue Service claimed Income Tax (Imposto de Renda) and Social Contribution (Contribuição Social sobre o Lucro Líquido) on the earnings of its foreign subsidiary for the year 2008.

 

The subsidiary, domiciled in Hungary, was responsible for the sales of pulp and paper in the global market.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Based on the position of outside legal counsel, management understands that this Hungarian subsidiary was subject to taxation in its country of incorporation and the position taken by the tax authorities violates prevision of Brazilian tax law, in particular the Brazilian-Hungarian treaty to avoid double taxation, which precludes double taxation by Brazilian taxes of net income of a Brazilian company for operations in Hungary.

 

In 2011 a Unconstitutionality Process (*Ação Direta de Inconstitucionalidade*(ADI)) was filed by the National Industry Association (*Confederação Nacional da Indústria*(CNI)) with the Supreme Federal Court (*Supremo Tribunal Federal*(STF)) challenging the constitutionality of article 74 of Provisional Measure 2,158 which establishes the taxation for income tax and social contribution purposes of income earned by subsidiaries and associates incorporated outside Brazil irrespective of whether such income was made available to the shareholder in Brazil.

 

On its session of August 17, 2011 the STF considered the ADI with five members voting for the constitutionality of article 74 and four members voting for the unconstitutionality of such article. The session was suspended until Justice Joaquim Barbosa casts its vote which is the only vote not yet casted.

 

Considering the outcome of the session of the STF indicated above internal and external legal counsel have reviewed their probability assessment which previously was of a remote loss, in 2011 was considered as reasonably possible the probability of loss.

 

However, as disclosed in Note 25 (a), the income tax assessments above mentioned were included in the refinancing program (REFIS) established by Law no 12,865/13 and by the Provisional Measure no 627/13 in the form of cash payment, settled in November 27, 2013, by the total amount of R$ 560,453. The Company filed in the records of each administrative process, corresponding waiver request stating its inclusion in REFIS, so awaiting the approval of such applications and the filing of the records.

 

(ii)         Tax incentives - Agency for the Development of Northeastern Brazil (ADENE)

 

The Company has business units located within the regional development area of ADENE. For that reason, considering that the paper and pulp industry is deemed to be a priority for regional development (Decree 4,213, of April 16, 2002), in December 2002, the Company requested and was granted by the Brazilian Federal Revenue Service (*Receita Federal do Brasil*) the right to benefit from reductions in corporate income tax and non-refundable surcharges calculated on operating profits (as defined) for Aracruz plants A and B (period from 2003 to 2013) and plant C (period from 2003 to 2012), when the qualification reports for the tax reductions are approved by ADENE.

 

On January 9, 2004, the Company was served Official Notice 1,406/03 by the liquidator of the former Superintendence for the Development of the Northeast (SUDENE), who reported that, “based on the review carried out by the Legal Advisory Office of the Ministry of Integration as regards the special extent of the incentive, the right to use the benefit previously granted is unfounded and will be cancelled”.

 

During 2004 and 2005, various ADENE determinations were issued to cancel the tax benefits. Such determinations were challenged and/or refuted by the Company, but no final court decision has been announced in relation to the merits of the case.

 

Nevertheless, the Brazilian Federal Revenue Service (*Receita Federal do Brasil*) served the Company 

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

an assessment notice in December 2005 requiring the payment of the amounts of the tax incentive used, plus interest, but without imposing any fine, amounting to R$ 316,355. The Company challenged such assessment notice, which was deemed to be valid at the administrative level. The Company filed an appeal against that assessment and in August 2011, the Tax Federal Administrative Court (*Conselho Administrativo de Recursos Fiscais*) considered that part of the assessment needed to be upheld. Therefore, the portion of the assessment related with 2003 benefits was canceled and the portion related with 2004 was upheld. Because this ruling, the amount of the assessment was reduced to R$ 101,163 (updated through December 31, 2013 for monetary correction).

 

Company’s management, supported by its legal counsel, believes that the decision to cancel the tax benefits is erroneous and should not prevail, whether with respect to benefits already used, or with respect to future periods.

 

With respect to the benefits obtained through 2004, based on the position of its legal counsel, management believes that the tax payment demanded is not justified, since the Company used the benefits strictly in accordance with the legal requirements and in conformity with the Brazilian Federal Revenue Service (*Receita Federal do Brasil*) determinations and ADENE’s qualifying reports.

 

Considering that the CARF maintained the assessment with respect to the benefits used during 2004 amounting to R$ 73,100, the Company offered to provide a bank guarantee for the amount being challenged and expects for the collection phase of the legal process where it will challenge the amount of the assessment.

 

With respect to the remaining incentive period, extending to 2012 (plant C) and 2013 (plants A and B), based on the opinion of its legal counsel, management believes that it is illegal revoke the tax benefits, because the benefits granted were conditional to achieving certain pre-established requirements (implementation, expansion or modernization of industrial enterprise) and the benefits were granted through the end of the term established in the Law and related regulations.

 

Although the Company is confident that it will prevail, considering the facts that occurred in 2004 and 2005, which indicate that ADENE and the Brazilian Federal Revenue Service (*Receita Federal do Brasil*) intend to cancel the tax benefits, the Company decided to cease the use of tax benefits as from 2005, until a final court decision is obtained on the matter.

 

Since the benefits used through 2003 were maintained by the decision of CARF they are currently under discussion the benefits for the year 2004 and those after 2005 for which the Company has not used the benefits. The tax contingency is considered as of possible loss and therefore no provision has been recorded.

 

(iii)  Income tax/CSLL - partial approval

 

The Company has three requests for the approval of income tax credits with the Brazilian Federal Revenue Service (Receita Federal do Brasil), referring to 1997, 1999 and the fourth quarter of 2000, totaling R$ 134 million, of which only R$ 83 million was approved, creating a contingency of R$ 145 million updated through December 31, 2013. The Company timely appealed the rejection of the tax credits.

 

With respect to the year 1997, the claim is pending a decision from the first trial court (*Delegacia Regional de Julgamento*) of the voluntary resource requested by the Company. With respect to the 

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

fourth quarter of 2000, the Company is awaiting a decision from Tax Federal Administrative Court (*Conselho Administrativo de Recursos Fiscais*), and with respect to 1999 it awaits a decision on an appeal to the High Court of Justice.

 

Based on the position of legal counsel, management understands that the likelihood of an unfavorable outcome for these trials is possible and therefore no provision has been recorded.

 

(iv)     Income tax/CSLL - Newark

 

Fibria received, in December 2007 and December 2010, two tax assessments in the amount, together, of R$ 221 million where Brazilian Federal Revenue Service charged Income Tax and Social Contribution of Newark Financial Inc., an offshore company controlled by VCP Exportadora e Participações Ltda. (succeeded by Fibria) with respect to the fiscal year 2005. Based on advice from internal and external counsel the probability of loss for the first tax assessment (December 2007 - R$ 120 million) is remote and the probability of loss for the second tax assessment (December 2010 - R$ 101 million) is possible. Accordingly, no provision has been recorded with respect thereto.

 

(v)        Tax assessment - IRPJ/CSLL - Swap of industrial and forestry assets

 

On December 2012, the Company received a tax assessment notice from the Brazilian Federal Revenue Service (*Receita Federal do Brasil*) with respect to the collection of income tax and social contribution on profits in the amount of R$ 1,666 million, of which R$ 556 million corresponds to the alleged tax due and R$ 1,110 million corresponds to fines and interest. The Tax Authorities inquire a probable gain of capital in operation made on February 2007, in which the Company executed an agreement with International Paper for the swap of industrial and forestry assets between both companies. On January 9, 2013, the Company filed an appeal on the Brazilian Federal Revenue Service Delegacy.

 

On November 13, 2013 a decision was issued by the Regional Office of Judgment from Brasília — Federal District, in favor to the appeal filed by the Company, exonerating the tax credit in discussion. It is important to note that this decision was issued by first administrative instance and an appeal might occur by the Tax Federal Administrative Court (“Conselho Administrativo de Recursos Fiscais — CARF”). Based on the review of the Company internal and external legal advisors the probability of loss was classified as possible without the need to account any provision. The updated amount of the tax assessment is R$ 1,798,207 as at December 30, 2013.

 

(vi)     Tax assessment - IRPJ/CSLL - Fibria Trading International

 

On October 2013, the Company received a tax assessment notice with respect to the earnings of Fibria Trading International, related to 2010, which was recognised by Fibria according to equity method. Therefore, for this tax assessment were not considered by the Brazilian Federal Revenue Service the accumulated losses in previous years. The updated value of the cause is R$ 274,835, as at December 31, 2013. Based on our internal and external legal advisors, the probability of loss was classified as possible, without the need to account provision.

 

 (vii) Others tax liabilities with probability of loss classified as possible

 

Fibria has more than 570 trials for individual amounts of less than R$ 100 million. The amount involved in all of these trials is R$ 1,937,602. The average value of each trail is R$ 3.4 million.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(c)****                                ****Comments on labor/civil proceedings**

 

The Company is a party to approximately 5,835 labor lawsuits filed by former employees, third parties and unions, claiming the payment of severance pay, health and safety premiums, overtime, commuting time, occupational illnesses and workers’ compensation, tangible and moral damages, understated indexation on the fine of 40% of the Government Severance Indemnity Fund for Employees (FGTS), and 1,075 civil lawsuits, most of which refer to claims for compensation by former employees or third parties for alleged occupational illnesses and workers’ compensation, collection lawsuits and bankruptcy situations, reimbursement of funds claimed from delinquent landowners and possessory actions filed in order to protect the Company’s equity. The Company has insurance for public liability that covers, within the limits set in the policy, unfavorable sentences in the civil courts for claims for compensation of losses.

 

**(i)****                                  ****Civil proceeding with probability of loss classified as possible**

 

On June 2012, a Public Civil Action was filed by the Federal Public Ministry from Distrito Federal, aiming a prohibition for the Company of travel in any federal highway overweight, under a penalty, which was granted by the Judge of first instance as well as the action claiming the payment of moral and material damages due to alleged damage to federal highways, the environment and economic order. The amount of R$ 889,191 was given by the Federal Public Ministry for the proceeding. The Company appealed with success against the decision and also filed appeal for the others matters of the Action.

 

The proceeding is in the initial stage and, according to the Company’s legal advisors, the probability of loss was classified as possible and for that reason, no provision was recorded.

 

**(ii)****                               ****Class action**

 

In November 2008, a securities class action lawsuit was filed against the Company and some of its current and former officers and directors on behalf of purchasers of the Company’s ADRs between April 7 and October 2, 2008. The complaint alleges violations of the US Securities Exchange Act, asserting that the Company failed to disclose information in connection with, and losses arising from, certain derivatives transactions.

 

During our Board of Directors meeting in December 2012, the Company ratified the agreement under judicial mediation, where the Company and the other co-defendants agreed to pay the full amount of US$ 37.5 million (equivalent to R$ 76.6 million) to all holders of American Depositary Receipts (“ADRs”), from April 7 to October 2, 2008.

 

On March 28, 2013, Fibria paid an amount of US$ 37.5 million (equivalent to R$ 75.4 million) and was reimbursed under the D&O policy, as agreed by the Company and the other co-defendants in 2012.

 

**(d)****                               ****Relevant comments regarding tax proceeding**

 

(i)                                    “Crédito-Prêmio de IPI”

 

The Company entered on January 1995, with a judicial tax proceeding, aiming the reimbursement of the Tax Incentive denominated “*Crédito-Prêmio de IPI*”. After final decision favorable for us, which determined the reimbursement of that credit, we recognized the amount of R$ 170,638 (being R$ 77,486 in 2013 and R$ 93,152 in 2012), under the “Other assets”, in the “Non-current assets” against “Other operational revenue”, net of the lawyer fees. The Company submitted a formal request for the issuance of precatory related to the judicial process.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

(ii)                                 BEFIEX Program

 

The Company obtained a favorable court decision, which became final on October 2013 in injunction proposed in 2002 aimed the recognizing the right to IPI premium credit, due to tax incentives on exports in the period between December of 1993 and May of 1997, in the duration of BEFIEX program.

 

The IPI Premium Credit was a fiscal financial benefit to exporting companies, established as a form of compensation paid in the acquisition of raw materials. This benefit was regulated by Decree no 64,833/69, after being introduced by Decree 461/69, being kept until the year of 1983, the year of termination under the law. However, the rules which governed the deadline for the use of the benefit, however, were repealed by Decree - Law no 1,724/79 and 1,894/81, so that there was no mention over the deadline of use the benefit.

 

Subsequently, the Decree-laws were declared unconstitutional, which led to numerous legal disputes about the date of termination of the benefit. The precedent is consolidating to limit the use of such credits by the year of 1990, however, the case of the Company differs from this discussion, since it joined the BEFIEX Program, which in the case of tax benefit granted under specific conditions and for a definite period resulted in vested right, as recognized in the records of the injunction mentioned above.

 

No primeiro semestre de 2014 a Companhia protocolará pedido de habilitação do crédito obtido por meio da decisão mencionada acima. Após a análise do pedido de habilitação por parte da Receita Federal do Brasil, o valor do crédito será conhecido

 

In the first half of 2014, the Company will file application for qualification of this credit mentioned above. After the approval of the application for qualification by the Federal Tax authority, the value of the credit will be known and booked by us.

 

**(e)****                                ****Remaining judicial deposits (consolidated)**

 

The Company has at December 31, 2013 the amount of R$ 106,060 (R$ 157,567 in December 31, 2012 and 137,060 in January 1, 2012) deposited judicially in cases classified by external legal advisors as of remote or possible loss, for which no provision have been recorded. The contingencies refer to PIS, COFINS, Income taxes and to contributions to the INSS, among others of smaller amount. Additionally, it includes the amount of R$ 53,209 of the credit balance of REFIS, as detailed in Note 25.

 

**(f)****                                 ****Significant contingencies resolved**

 

During the year 2013 the Company had an amount of R$ 29,178 accrued on the assessment received in August 2009, of the São Paulo State Revenue Service (Fazenda do Estado de São Paulo) in the original amount of R$ 21,841 , including penalties and interest. Such notice was issued with the reasoning that the Company conducted operations in issuing the Federal District as a destination of goods , and they have not left the state territory claimed, which generated differential between applied rates and those which would apply . Whereas the prognosis of loss classified as probable, in June of 2013, the Company opted to join the Special Installment Program, for payment of the debt to reduce penalties and interest, have been paid the amount of R$ 14,8 million, in July 2013.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(g)****                                ****Drawback Suspension tax benefit - Veracel**

 

During the construction of the pulp mill of the Veracel, part of the mill was acquired from a specific supplier. The mill was eligible to the tax benefit entitled Drawback Suspension which would provide exemptions on imports, in case the funds received to pay the supplier were received abroad. However, part of the mill was financed with funds from Brazil and, for this reason, the Federal Tax authority issued a tax assessment to the supplier and canceled the Drawback benefit.

 

Veracel’s supplier entered an appeal according to the assessment received, which is still pending for judgment, and in parallel, the supplier filed an arbitration proceeding against Veracel in order to determine which company would be responsible for eventual damages in case supplier is considered guilty.

 

In September 2013, the International Chamber of Commerce Arbitration Court decided that Veracel and its supplier shall share the potential damages in a ratio of 75% to Veracel and 25% to its supplier. In November 2013, Veracel joined the REFIS to proceed with the payment in a single installment in order to regularize the debt, with impact of R$ 22 million for the Company (corresponding to 50% of our partnership).

 

**25****                                ****Tax Amnesty and Refinancing Program (“REFIS”)**

 

**(a)****                                ****Law 12,865/13 and Provisional Measure 627/13 — Foreign earnings**

 

As per Law 12865/13 and Provisional Measure 627/13, issued in October and November 2013, respectively, the Tax Refinancing Program (REFIS) was established, arising from tax assessments over foreign earnings of Brazilian controlled or associated entities.

 

Based on the REFIS, the Company decided on November 25, 2013, to join the program in the way of cash payment for debts arising from tax assessments received by its former subsidiary Normus, described in Note 24 (b)(i), discounted 30% of the principal upon use of credits from tax losses and negative basis of social contribution on net income, and 100% reduction of fines, craft or isolated, of the interest of arrears and legal charges.

 

The amount paid in joining the REFIS was R$ 560,453, where R$ 168,136 upon the use of credits from tax losses and negative basis of social contribution on net income and R$ 392,317 in cash disbursements on November 27, 2013.

 

**(b)****                                ****Law 11,941/09**

 

In November 2009, the Company joined the REFIS introduced by Law 11941/09, the objective of which is the settlement of fiscal liabilities through a special system for payment of tax and social security debt in installments.

 

On June 28, 2011, all amounts under the program were consolidated after meeting all formal requirements established in the legislation.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The following is a summary of the amounts included in the program, as well the benefits obtained:

 
| Detail of amounts                                               | ** ** |     | ** ** |
|-----------------------------------------------------------------|------------|----------|------------|
| Total updated   debts included in the program                   |       | 532,734  |       |
| Benefits for   reduction of fines and interest                  |       | (78,030  | )          |
| Fines and interest   offset against tax loss and negative basis |       | (129,397 | )          |
|                                                            |       |     |       |
| Total debt payable                                              |       | 325,307  |       |
| Payments made                                                   |       | (21,356  | )          |
|                                                            |       |     |       |
| Balance of debt                                                 |       | 303,951  |       |
|                                                            |       |     |       |
| Total of judicial   deposits updated                            |       | 349,802  |       |
|                                                            |       |     |       |
| Credit balance                                                  |       | 45,851   |       |

 

Considering the legal right to offset judicial deposits related to the debts included in the program and since judicial deposits exceed the outstanding debt (after the reductions established by the program) the remaining balance in favor of the Company, at December 31, 2013 is R$ 53,209, which is monthly updated by SELIC, the interest rate applicable to tax debts, and it is presented within non-current assets under other accounts receivable and monthly.

 

With the reopening of the period for adherence to REFIS regarding the Law 11,941/09, established by the Law 12,865/13 on October 9, 2013, the Company decided to include 13 processes, in the way of cash payment in a single payment. The total amount for payment, after the discounts permitted by the Law was R$ 13,168, of which R$ 6,849 was settled upon use of credits from tax losses and negative basis of social contribution on net income and R$ 6,319 in cash disbursements on November 27, 2013.

 

**26****                                ****Long-term commitments**

 

**Take or pay arrangements**

 

The Company entered into long-term take-or-pay agreements with power, transportation, diesel, and chemical and natural gas suppliers effective for an average period of 9.8 years. These agreements contain termination and supply interruption clauses in the event of default of certain essential obligations. Generally, the Company purchases the minimums agreed under the agreements, and for that reason there is no liability accounted for at December 31, 2013. The contractual obligations assumed at December 31, 2013 correspond to R$ 228,057 per year (R$ 258,694 at December 31, 2012 and R$ 301,117 at January 1, 2012).

 

**27****                                ****Shareholders’ equity**

 

**(a)****                               ****Capital**

 

At December 31, 2013 and 2012, fully subscribed and paid-up capital is represented by 553,934,646 nominative common shares without par value (467,934,646 nominative common shares without par value as of January 1, 2012).

 

On April 30, 2012, the Company completed the issuance of 86,000,000 common shares without par value, through a public offering of shares. The net proceeds obtained from the public offering of shares is presented below:

 

F-105

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                                | ** ** | **Number of   shares** | ** ** | **Gross proceeds** | ** ** |
|-----------------------------------------------------------|------------|-----------------------------|------------|-------------------------|------------|
|                                                      |       |                        |       |                    |       |
| Offered through American Depositary Shares outside Brazil |       | 12,319,972                  |       | 195,025                 |       |
| Offered as common shares in Brazil                        |       | 73,680,028                  |       | 1,166,355               |       |
|                                                      |       |                        |       |                    |       |
| Total shares offered/gross proceeds                       |       | 86,000,000                  |       | 1,361,380               |       |
|                                                      |       |                        |       |                    |       |
| Total amount of transaction costs (*)                     |       |                        |       | (17,834                 | )          |
| Income tax on transaction costs                           |       |                        |       | 6,063                   |       |
|                                                      |       |                        |       |                    |       |
| Total amount of transaction costs, net                    |       |                        |       | (11,771                 | )          |
|                                                      |       |                        |       |                    |       |
| Total capital increase                                    |       |                        |       | 1,349,609               |       |

 

----

(*) Transactions costs are mainly represented by commission and fees for lawyers and auditors.

 

**(b)****                               ****Dividends and interest on own capital**

 

The Company’s by-laws provide for a minimum annual dividend of 25% of net income, adjusted by the changes in reserves, as determined by Brazilian Corporate Law.

 

No dividends were declared for the years ended December 31, 2013, 2012 and 2011 as the Company generated losses.

 

**(c)****                                ****Revenue reserves**

 

The legal reserve is constituted through the appropriation of 5% of the net income for the year. The investment reserve, corresponding to the balance of retained earnings, after the appropriation of the legal reserve, mainly relates to earnings reserved to meet the investment plans, modernization and maintenance of plants, as approved by the Statutory Audit Committee and the Board of Directors.

 

**(d)****                               ****Treasury shares**

 

The Company has 342,824 common shares with unit value of R$ 30.18 per share, which corresponds to R$ 10,346.

 

**28****                                ****Employee benefits**

 

**(a)****                              ****Variable remuneration program**

 

The Company maintains a performance based bonus program for its employees, which is tied to its performance plans and the attainment of specific objectives based on cash generation, which are established and agreed upon at the beginning of each year. The amount recorded as expenses for the year ended December 31, 2013 was R$ 55,742 (December 31, 2012 - R$ 56,402 and December 31, 2011 - R$ 64,597).

 

**(b)****                               ****Defined contribution pension plan**

 

In 2000, the Company became a sponsor of the Senador José Ermírio de Moraes Foundation (FUNSEJEM), a not-for-profit pension fund for the employees of the Votorantim Group. Under the fund’s rules, the Company matches employees’ contributions to FUNSEJEM, which may range from 0.5% to 6% of nominal salary. The Company’s contributions for the year ended December 31, 2013 amounted to R$ 8,829 (R$ 8,519 as of December 31, 2012 and R$ 8,835 as of December 31, 2011).

 

F-106

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(c)****                                ****Medical assistance provided to retirees**

 

The Company entered into an agreement with the São Paulo State Pulp and Paper Industry Workers’ Union to provide the funding for a lifetime medical assistance plan (SEPACO) for all of the Company’s employees, their dependents, until they come of age, and their spouses, for life.

 

The Company’s policy determines that the cost of the benefit be allocated from the date of hiring to the date on which the employee becomes eligible to receive the medical assistance benefit.

 

The revised employee benefit standard (IAS 19(R) - “Employee Benefits”) introduces changes to the recognition, measurement, presentation and disclosure of post-employment benefits. The standard also requires net interest expense / income to be calculated as the product of the net defined benefit liability / asset and the discount rate as determined at the beginning of the year. The effect of this is to remove the previous concept of recognizing an expected return on plan assets. Also, the “corridor” approach was extinguished, and revised standard requires the Company to recognize the actuarial results directly within “Other Comprehensive Income”. The amount recorded as expenses for the year ended December 31, 2013 was R$ 4,065 (R$ 4,647 as of December 31, 2012 and R$ 4,211 as of December 31, 2011).

 

The actuarial methods are based on economic and biometric assumptions, as follows:

 
| ** **                                                  | ** ** | **Actuarial   assumptions**  | ** ** |
|-------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                  | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **December 31,   2011** | ** ** |
|                                                        |       |                         |       |   |   |   |   |
| Discount rate - %                                           |       | 6.25                         |       | 4.0 |   | 5.5 |   |
| Real growth rate   of medical costs - %                     |       | 3.0                          |       | 3.0 |   | 3.0 |   |
| Rate of increase   of utilization of medical assistance - % |       | 3.0                          |       | 3.0 |   | 3.0 |   |
| Long-term   inflation - %                                   |       | 5.0                          |       | 4.25 |   | 4.25 |   |
| Biometric table of   general mortality                      |       | AT-2000                      |       | AT-83 |   | AT-83 |   |
| Biometric table of   general mortality for invalids         |       | IAPB 57                      |       | IAPB 57 |   | IABP57 |   |

 

The sensibility analysis of the obligation related to the healthcare plan regarding changes in the main premises is the follows:

 
| ** **                      | ** ** | **Change in   premises** | ** ** | **Increase in   premises** | ** ** | **Decrease in   premises** | ** ** |
|---------------------------------|------------|-------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
|                            |       |                          |       |                            |       |                            |       |
| Discount rate - %               |       | 0.50                          | %          | Decrease of   5.5%              |       | Increase of   6.1%              |       |
| Trend rate of medical costs - % |       | 0.50                          | %          | Increase of   6.4%              |       | Decrease of   5.9%              |       |
| Mortality                       |       | 1 year                        |       | Increase of   4.3%              |       | Decrease of   4.2%              |       |

 

The sensibility analysis is based on changes in just one premise while the other premises still unchanged.

 

The actuarial obligation, recorded under “Other payables”, is as follows:

 

F-107

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                                              | ** ** | **2013**   | ** ** | **2012**       | ** ** | **2011**       | ** ** |
|-------------------------------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|
| ** **                                                              | ** ** | ** ** | ** ** | **(Restated)** | ** ** | **(Restated)** | ** ** |
|                                                                    |       |       |       |           |       |           |       |
| Reconciliation of   liabilities                                         |       |       |       |           |       |           |       |
| Present value of   actuarial obligations at beginning of the period     |       | 93,934     |       | 66,302         |       | 51,504         |       |
| Cost of current   service from:                                         |       |       |       |           |       |           |       |
| Interest on   actuarial obligations                                     |       | 7,750      |       | 8,618          |       | 7,472          |       |
| Benefits paid                                                           |       | (3,684     | )          | (3,971         | )          | (3,261         | )          |
| Actuarial (gain)   losses in the “Other comprehensive income” |       | (21,421    | )          | 22,985         |       | 10,587         |       |
|                                                                    |       |       |       |           |       |           |       |
| Present value of   actuarial obligations at end of the period           |       | 76,579     |       | 93,934         |       | 66,302         |       |

 

**(d)****                               ****Employee benefits expenses**

 
| ** **                                  | ** ** | **2013** | ** ** | **2012** | ** ** | **2011** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                        |       |     |       |     |       |     |       |
| Payroll, profit sharing and related charges |       | 501,453  |       | 497,327  |       | 470,376  |       |
| FGTS and other rescission indemnifications  |       | 37,972   |       | 36,572   |       | 37,010   |       |
| INSS                                        |       | 17,888   |       | 82,701   |       | 88,224   |       |
| Others                                      |       | 24,801   |       | 13,717   |       | 18,007   |       |
|                                        |       |     |       |     |       |     |       |
|                                        |       | 582,114  |       | 630,317  |       | 613,617  |       |

 

**29****                                ****Compensation program based on shares**

 

**Phantom Stock Options (PSO)**

 

On April 28, 2010, the Board of Directors approved the Long-term Incentive Program, which consists of a plan to grant Phantom Stock Options, the 2009 and 2010 Programs, with the purpose of incentivize executives in the Company growth in the medium and long term, allowing their participation in the increase in value of the Company’s shares.

 

The program is based on the PSO concept, which consists of an award in cash based on the appreciation, of the shares of the Company, as compared to a predetermined price during a predetermined period. The wards cannot be settled in shares. The Company’s CEO and the Executive Officers are eligible for the plan.

 

At the time of each award, the participants under the plan will receive a quantity of PSO, to be defined based on a target reward and on the expectation of an increase in the value of the Company. The target for the appreciation of the shares of the Company is established by the Board of Directors and the number of PSO awarded will be calculated in such a manner that, if the appreciation target is attained, the resulting reward will be equal to the target value.

 

The PSOs can only be exercised after a vesting period of three years, as from the award date established in the contracts, and the maximum period for the exercise of the option is five years since granted. Exceptionally, the first award, denominated as the Program 2009, has a graded vesting period.

 

The exercise price of the options at the award date is calculated by reference to the average price of the FIBR3 shares, in accordance with the volume traded in the three months prior to the date of the award.

 

F-108

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

The Programs awarded up to December 31, 2013 are presented below, as follow:

 
| ** **  | ** ** | **Programs**        | ** ** |
|-------------|------------|---------------------|------------|
| **Program** | ** ** | **Award date** | ** ** | **Vesting   period** | ** ** | **Expiration   date** | ** ** | **Options** | ** ** | **Exercise   price** | ** ** |
|        |       |                |       |   |   |   |   |   |   |   |   |
| 2009        |       | 08.26.10            |       | 08.27.10 |   | 12.31.16 |   | 17,889 |   | 27.55 |   |
| 2009        |       | 08.26.10            |       | 12.26.10 |   | 12.31.16 |   | 17,889 |   | 27.55 |   |
| 2009        |       | 08.26.10            |       | 10.27.11 |   | 12.31.16 |   | 17,889 |   | 27.55 |   |
| 2010        |       | 08.26.10            |       | 08.28.13 |   | 12.31.17 |   | 37,997 |   | 27.55 |   |
| 2011        |       | 01.02.12            |       | 01.02.14 |   | 12.31.18 |   | 67,656 |   | 28.31 |   |
| 2012        |       | 01.02.12            |       | 01.02.15 |   | 12.31.19 |   | 278,724 |   | 14.09 |   |
| 2013        |       | 01.02.13            |       | 01.02.16 |   | 12.31.20 |   | 241,032 |   | 20.37 |   |

 

**Assumptions and calculation of fair value of options granted**

 

The pricing of options was based on the Binominal Trinomial Trees (BTT) model, due to its easy implementation, validation and consideration of the specific terms of the program. This BTT model is a numerical approximation of the risk-neutral or equivalent martingale methodology which is frequently utilized in the valuation of instruments that cannot have a closed-form pricing formula.

 

The following economic assumptions were used at December 31 of each year:

 
| ** **                                                | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-----------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                                      |       |                         |       |                         |       |                                 |       |
| Annualized   volatility of share price - % (i)            |       | 3.35                         |       | 3.77                         |       | 10.00                                |       |
| Risk free return   rate - % (ii)                          |       | 9.77 to 13.22                |       | 6.55 to 8.58                 |       | 10.00 to 11.55                       |       |
| Average price of   shares (average of three prior months) |       | 27.90                        |       | 18.63                        |       | 14.09                                |       |
| Options exercise   price                                  |       | 19.55                        |       | 21.57                        |       | 27.55                                |       |
| Weighted-average   term of vesting of option (months)     |       | 13.69                        |       | 15.27                        |       | 11.87                                |       |
| Weighted-average   term of life of option (months)        |       | 71.91                        |       | 73.11                        |       | 31.96                                |       |
| Fair value of   option resulting from the model (average) |       | 5.19                         |       | 1.82                         |       |                                 |       |

 

----

(i)            Based on the daily volatility price for a three-month period.

(ii)         The curve of fixed-DI interest rate (Brazil) at the measurement date was utilized.

 

As result of the increase in the quoted market price of the FIBR3 shares in 2013 the fair value of the options as of December 31, 2013 was R$ 5,425 (R$ 471 as of December 31, 2012).

 

The settlement of this benefit plan for executives will be made by the Company in cash when the options are exercised.

 

The change in the number of SPO and their corresponding weighted average prices for the period are presented below:

 

F-109

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                 | ** ** | **2013**                 | ** ** | **2012**                                                                                  | ** ** |
|--------------------------------------------|------------|--------------------------|------------|-------------------------------------------------------------------------------------------|------------|
| ** **                                 | ** ** | **Number of   SPO** | ** ** | **Weighted   average price   for exercise of   options - Reais** | ** ** | **Number of   SPO** | ** ** | **Weighted   average price   for exercise of   options - Reais** | ** ** |
|                                       |       |                     |       |                                                                                      |       |   |   |   |   |
| Outstanding at the beginning of the year   |       | 607,399                  |       | 21.57                                                                                     |       | 379,851 |   | 27.55 |   |
| Granted during the year                    |       | 241,032                  |       | 20.37                                                                                     |       | 553,710 |   | 21.15 |   |
| Forfeited                                  |       | (169,356                 | )          | 27.94                                                                                     |       | (326,162 | ) | 27.83 |   |
|                                       |       |                     |       |                                                                                      |       |   |   |   |   |
| Outstanding at the end of the year         |       | 679,075                  |       | 19.55                                                                                     |       | 607,399 |   | 21.57 |   |
|                                       |       |                     |       |                                                                                      |       |   |   |   |   |
| Exercisable options at the end of the year |       | 424,491                  |       | 20.44                                                                                     |       | 353,511 |   | 24.25 |   |

 

For the year ended December 31, 2013 compensation expense of R$ 5,425 was recorded in “General and administrative expenses” and the corresponding provision in “Other payables” (for December 31, 2012, not compensation expense was recognized as the provision balance was reduced for R$ 471).

 

**30****                                ****Asset retirement obligations**

 

The Company uses judgment and various assumptions when determining the assets retirement obligation. Environmental obligations relate to future obligations to restore/recover the environment arising from the right of use of the asset, which causes environmental damages as a results of the activities of the project or from regulatory requirements of the environmental agencies, and which are required to be compensated.

 

The dismantling and retirement of an asset occur when is permanently retired, through its shutdown, sale or disposal. This future long term obligation accrues interest which is recorded as a financial expense in profit and loss and it is also adjusted for inflation. Depreciation expense of the asset retirement obligation asset is recorded in profit and loss.

 

The balance of the provision for asset retirement obligations as of December 31, 2013 amounted to R$ 14,315 and it is included in non-current “Other payables”, against the fixed assets in the same amount.

 

F-110

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**31****                                ****Revenue**

 

**(a)****                               ****Reconciliation**

 
| ** **                  | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**  | ** ** |
|-----------------------------|------------|------------|------------|------------|------------|-----------|------------|
|                        |       |       |       |       |       |      |       |
| Gross amount                |       | 8,053,038  |       | 7,208,452  |       | 6,861,041 |       |
| Sales taxes                 |       | (130,175   | )          | (138,820   | )          | (245,759  | )          |
| Discounts and   returns (*) |       | (1,005,457 | )          | (895,259   | )          | (760,982  | )          |
|                        |       |       |       |       |       |      |       |
| Net revenues                |       | 6,917,406  |       | (6,174,373 | )          | 5,854,300 |       |

 

----

(*)    Related mainly to the export customers’ performance rebate.

 

F-111

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(b)****                               ****Information about products**

 
| ** **                         | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                               |       |       |       |       |       |       |       |
| Pulp                               |       |       |       |       |       |       |       |
| Volumes (tons)                     |       |       |       |       |       |       |       |
| Domestic market                    |       | 447,429    |       | 530,566    |       | 507,559    |       |
| Foreign market                     |       | 4,750,337  |       | 4,825,990  |       | 4,633,402  |       |
| ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                               |       | 5,197,766  |       | 5,356,556  |       | 5,140,961  |       |
| ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Pulp revenue                       | ** ** | ** ** | ** ** | ** ** |       | ** ** |       |
| Domestic market                    |       | 503,649    |       | 508,533    |       | 486,248    |       |
| Foreign market                     |       | 6,341,772  |       | 5,597,725  |       | 4,980,570  |       |
| ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                               |       | 6,845,421  |       | 6,106,258  |       | 5,466,818  |       |
| ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Average price (in   Reais per ton) |       | 1,317      |       | 1,140      |       | 1,063      |       |
| ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                            | ** ** | ** ** | ** ** | ** ** |       | ** ** |       |
| Domestic market                    |       | 503,649    |       | 508,533    |       | 486,248    |       |
| Foreign market                     |       | 6,341,772  |       | 5,597,725  |       | 4,980,570  |       |
| Paper                              |       |       |       |       |       | 324,122    |       |
| Services                           |       | 71,985     |       | 68,115     |       | 63,360     |       |
| ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                               |       | 6,917,406  |       | 6,174,373  |       | 5,854,300  |       |

 

**(c)****                                ****Information by geographic areas**

 

The geographic areas are determined based on the customer location. The Company’s revenue classified by geographic areas is described below:

 
| ** **        | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|-------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Europe            |       | 2,679,705  |       | 2,539,214  |       | 2,343,284  |       |
| North America     |       | 1,930,893  |       | 1,581,021  |       | 1,395,009  |       |
| Asia              |       | 1,708,368  |       | 1,454,963  |       | 1,262,191  |       |
| Brazil and others |       | 598,440    |       | 599,175    |       | 853,816    |       |
|              |       |       |       |       |       |       |       |
|              |       | 6,917,406  |       | 6,174,373  |       | 5,854,300  |       |

 

F-112

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**32****                                ****Financial results**

 
| ** **                                                 | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                       |       |       |       |       |       |       |       |
| Financial expenses                                         |       |       |       |       |       |       |       |
| Interest on loans   and financing                          |       | (575,877   | )          | (681,839   | )          | (660,084   | )          |
| Appropriation of   interest-acquisition of Aracruz shares  |       |       |       |       |       | (40,893    | )          |
| Loans commissions                                          |       | (22,118    | )          | (72,840    | )          | (84,866    | )          |
| Financial charges   in the partial repurchase of Bond      |       | (350,295   | )          | (150,917   | )          |       |       |
| Others                                                     |       | (68,236    | )          | (38,848    | )          | (87,162    | )          |
|                                                       |       |       |       |       |       |       |       |
|                                                       |       | (1,016,526 | )          | (944,405   | )          | (873,005   | )          |
| ** **                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Financial income                                           |       |       |       |       |       |       |       |
| Financial   investment earnings                            |       | 96,942     |       | 151,728    |       | 180,377    |       |
| Reversal of   indexation charges on contingent liabilities |       |       |       |       |       |       |       |
| Others                                                     |       | 13,781     |       | 15,918     |       | 36,623     |       |
|                                                       |       |       |       |       |       |       |       |
|                                                       |       | 110,723    |       | 167,646    |       | 217,000    |       |
|                                                       |       |       |       |       |       |       |       |
| Gains (losses) on   derivative financial instruments       |       |       |       |       |       |       |       |
| Gain                                                       |       | 376,750    |       | 438,896    |       | 556,766    |       |
| Losses                                                     |       | (592,063   | )          | (623,361   | )          | (833,643   | )          |
|                                                       |       |       |       |       |       |       |       |
|                                                       |       | (215,313   | )          | (184,465   | )          | (276,877   | )          |
|                                                       |       |       |       |       |       |       |       |
| Foreign exchange   and (loss) gain                         |       |       |       |       |       |       |       |
| Loans and   financing                                      |       | (910,316   | )          | (803,641   | )          | (1,036,274 | )          |
| Other assets and   liabilities (*)                         |       | (22,591    | )          | 68,640     |       | 100,485    |       |
|                                                       |       |       |       |       |       |       |       |
|                                                       |       | (932,907   | )          | (735,001   | )          | (935,789   | )          |
|                                                       |       |       |       |       |       |       |       |
| Net financial   result                                     |       | (2,054,023 | )          | (1,696,225 | )          | (1,868,671 | )          |

 

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(*)    Includes the effect of exchange foreign on cash and cash equivalents, trade accounts receivable, trade payable and others.

 

F-113

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**33****                                ****Expenses by nature**

 
| ** **                                                             | ** ** | **2013**   | ** ** | **2012**   | ** ** | **2011**   | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                                   |       |       |       |       |       |       |       |
| Cost of sales                                                          |       |       |       |       |       |       |       |
| Depreciation,   depletion and amortization                             |       | (1,833,548 | )          | (1,811,974 | )          | (1,812,855 | )          |
| Freight                                                                |       | (774,851   | )          | (691,994   | )          | (611,273   | )          |
| Labor expenses                                                         |       | (412,624   | )          | (442,459   | )          | (473,426   | )          |
| Variable costs                                                         |       | (2,361,665 | )          | (2,290,831 | )          | (2,226,715 | )          |
|                                                                   |       |       |       |       |       |       |       |
|                                                                   |       | (5,382,688 | )          | (5,237,258 | )          | (5,124,269 | )          |
|                                                                   |       |       |       |       |       |       |       |
| Selling expenses                                                       |       |       |       |       |       |       |       |
| Labor expenses                                                         |       | (19,881    | )          | (17,541    | )          | (18,564    | )          |
| Commercial   expenses (*)                                              |       | (299,979   | )          | (260,326   | )          | (239,787   | )          |
| Operational   leasing                                                  |       | (1,758     | )          | (1,310     | )          | (907       | )          |
| Depreciation and   amortization charges                                |       | (6,957     | )          | (12,609    | )          | (11,779    | )          |
| Other expenses                                                         |       | (18,963    | )          | (6,265     | )          | (23,891    | )          |
|                                                                   |       |       |       |       |       |       |       |
|                                                                   |       | (347,538   | )          | (298,052   | )          | (294,928   | )          |
|                                                                   |       |       |       |       |       |       |       |
| General and   administrative and directors’ compensation expenses |       |       |       |       |       |       |       |
| Labor expenses                                                         |       | (122,223   | )          | (113,915   | )          | (121,627   | )          |
| Third-party   services (consulting, legal and others)                  |       | (111,480   | )          | (103,149   | )          | (127,891   | )          |
| Contingencies                                                          |       |       |       |       |       |       |       |
| Depreciation and   amortization charges                                |       | (22,656    | )          | (23,725    | )          | (23,674    | )          |
| Donations and   sponsorship                                            |       | (5,690     | )          | (9,402     | )          | (7,617     | )          |
| Taxes and   contributions                                              |       | (5,851     | )          | (4,628     | )          | (4,411     | )          |
| Operating leases   and insurance                                       |       | (9,198     | )          | (8,657     | )          | (8,802     | )          |
| Other expenses                                                         |       | (23,033    | )          | (22,526    | )          | (16,403    | )          |
|                                                                   |       |       |       |       |       |       |       |
|                                                                   |       | (300,131   | )          | (286,002   | )          | (310,425   | )          |
|                                                                   |       |       |       |       |       |       |       |
| Other operating expenses, net                                          |       |       |       |       |       |       |       |
| Program of   variable compensation to employees                        |       | (55,742    | )          | (56,402    | )          | (60,071    | )          |
| Capital gain -   Piracicaba disposal                                   |       |       |       |       |       | 175,654    |       |
| Capital gain of   land and building sold - Asset Light (Note 1(e))     |       | 799,040    |       |       |       |       |       |
| Tax credits                                                            |       | 29,973     |       |       |       |       |       |
| Capital gain - IPI   credit premium (Note 24 (d)(i))                   |       | 77,486     |       | 93,152     |       |       |       |
| Loss (gain) on   disposal of property, plant and equipment             |       | (220,936   | )          | 64,419     |       |       |       |
| Change in fair   value of biological assets (Note 18)                  |       | 102,265    |       | 297,686    |       | 145,884    |       |
| Reversal of   provision for contingencies                              |       | 116,042    |       |       |       |       |       |
| Others                                                                 |       | (24,730    | )          | (44,829    | )          | (8,072     | )          |
| ** **                                                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                             |       | 823,398    |       | 354,026    |       | 253,395    |       |

 

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(*)        Includes handling expenses, storage and transportation expenses and sales commissions, among others.

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**34****                                ****Insurance**

 

The Company has insurance coverage for operational risks, with a maximum coverage of R$ 5,000 million. Additionally, the Company has insurance coverage for civil general liabilities in the amount of US$ 25 million corresponding to R$ 58,565 on December 31, 2013. Fibria’s management considers these amounts to be sufficient to cover any potential liability, risks and damages to its assets and loss of profits.

 

The Company does not have insurance coverage for its forests. To mitigate the risk of fire, the Company maintains internal fire brigades, a watchtower network, and a fleet of fire trucks. There is no history of material losses from forest fires.

 

The Company has a domestic and international (import and export) transportation insurance policy effective until January 31, 2014, renewable for additional 12 months.

 

In addition, Fibria has insurance coverage for civil responsibility of its directors and officers for amounts considered to be adequate by management.

 

**35****                                ****Earnings per share**

 

**(a)****                               ****Basic**

 

The basic earnings per share is calculated by dividing net income (loss) attributable to the Company’s shareholders by the weighted average of the number of common shares outstanding during the period, excluding the common shares purchased by the Company and maintained as treasury shares.

 
| ** **                                                          | ** ** | **Continued operations** | ** ** | **Discontinued   operations** | ** ** |
|---------------------------------------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|
| ** **                                                          | ** ** | **2013**                      | ** ** | **2012**                      | ** ** | **2011** | ** ** | **2011** | ** ** |
| ** **                                                          | ** ** | ** **                    | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net (loss) income   attributable to the shareholders of the Company |       | (706,422                      | )          | (704,706                      | )          | (1,113,277 | ) | 240,655 |   |
|                                                                |       |                          |       |                          |       |   |   |   |   |
| Weighted average   number of common shares outstanding              |       | 553,591,822                   |       | 524,925,157                   |       | 467,591,824 |   | 467,591,824 |   |
| Basic earnings per   share (in Reais)                               |       | (1.28                         | )          | (1.34                         | )          | (2.38 | ) | 0.51 |   |

 

The weighted average number of shares in the presented periods is represented by a total number of shares of 553,934,646 issued and outstanding for the year ended December 31, 2013 and 2012, without considering treasury shares, for total of 342,824 shares in the year ended December 31, 2013 and 342,822 shares in the year ended December 31, 2012. During the year 2013 there was no changes in the number of shares of Company.

 
| ** **              | ** ** | **Shares outstanding** | ** ** |
|-------------------------|------------|-----------------------------|------------|
| ** **              | ** ** | **2013**                    | ** ** | **2012** | ** ** |
|                    |       |                        |       |   |   |
| January to   April |       | 553,591,822                 |       | 467,591,824 |   |
| May to   December  |       | 553,591,822                 |       | 553,591,824 |   |
|                    |       |                        |       |   |   |
| Weighted average        |       | 553,591,822                 |       | 524,925,157 |   |

 

F-115

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(b)****   ****Diluted**

 

The Company has no convertible securities or share purchase options that would have a diluted effect in earnings per share.

 

**36****                                ****Assets held for sale and discontinued operations**

 

As mentioned in Note 1(d)(ii), the CGUs Conpacel, KSR and Piracicaba were sold in 2011 and the forest and lands located in the south of Bahia were sold in 2012. We have also classified the Losango project assets as assets held for sale since June 2011.

 

The forest and lands located in the south of Bahia do not meet the definition of discontinued operations because they do not represent a major separate line of business or geographical area.

 

**(a)****   ****Assets held for sale**

 

The assets held for sale are related to the Losango project, as detailed in Note 1(d)(ii) and (iii):

 
| ** **                                            | ** ** | **December 31,   2013** | ** ** | **December 31,   2012** | ** ** | **January 1****st****,   2012** | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|--------------------------------------|------------|
|                                                  |       |                         |       |                         |       |                                 |       |
| Losango Project                                       |       |                         |       |                         |       |                                 |       |
| Biological assets                                     |       | 284,217                      |       | 284,217                      |       | 269,918                              |       |
| Property, plant   and equipment - substantially lands |       | 305,632                      |       | 305,632                      |       | 341,784                              |       |
| Others                                                |       |                         |       |                         |       | 32,464                               |       |
|                                                  |       |                         |       |                         |       |                                 |       |
|                                                  |       | 589,849                      |       | 589,849                      |       | 644,166                              |       |

 

Upon classification as assets held for sale, the carrying amount of the assets held for sale was compared to their estimated fair values less cost of sale, and no impairment losses were recognized.

 

**(b)****                               ****Discontinued operations (Conpacel, KSR and Piracicaba) and assets on south of Bahia State**

 

The results of discontinued operations regarding the year ended December 31, 2011 are summarized on the following table. The results earned with the sale of Piracicaba unit and assets on south of Bahia State were not presented as discontinued operations due to the fact that the values are not significant compared to the Company’s income.

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

**(i)****                                  ****Discontinued operations - Conpacel and KSR - information on Statement of profit and loss**

 
| ** **                                | ** ** | **2011** | ** ** |
|-------------------------------------------|------------|----------|------------|
|                                      |       |     |       |
| Net revenue                               |       | 65,640   |       |
| Cost of sales                             |       | (41,648  | )          |
|                                      |       |     |       |
| Gross profit                              |       | 23,992   |       |
|                                      |       |     |       |
| Selling and   administrative expenses     |       | (13.575  | )          |
| Financial results                         |       | (106     | )          |
| Gain on disposal                          |       | 357.196  |       |
| Others                                    |       | (2.878   | )          |
|                                      |       |     |       |
| Income before   income taxes              |       | 364,629  |       |
|                                      |       |     |       |
| Income taxes                              |       | (123,974 | )          |
|                                      |       |     |       |
| Net income from   discontinued operations |       | 240,655  |       |

 

**(ii)****                              ****Discontinued operations - Conpacel and KSR - information on cash flows**

 
| ** **                                  | ** ** | **2011**   | ** ** |
|---------------------------------------------|------------|------------|------------|
|                                        |       |       |       |
| Net cash provided   by operating activities |       | 36,886     |       |
| Net cash provided   by investing activities |       | 1,558,768  |       |
| Net cash used in   financing activities (*) |       | (1,595,654 | )          |

 

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(*)         The Conpacel and KSR treasury operations were centralized by the Company. This amount represents the proceeds from the sale transferred to the Company net of investments realized.

 

**(iii)****                          ****Gain on disposal of discontinued operations, Piracicaba and assets on south of Bahia State**

 

We present bellow the gain recorded in the year ended December 31, 2012 and 2011 for the disposal of the CGUs assets on south of Bahia State (in 2012) and Conpacel, KSR and Piracicaba (in 2011):

 

F-117

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                        | ** ** | **2012**                                                       | ** ** | **2011**                             | ** ** |
|---------------------------------------------------|------------|----------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                        | ** ** | **Assets in the   south of   Bahia State** | ** ** | **Conpacel   and KSR (i)** | ** ** | **Piracicaba (ii)** | ** ** | **Gain** | ** ** |
|                                              |       |                                                           |       |                                 |       |   |   |   |   |
| Selling price                                     |       | 210,000                                                        |       | 1,508,768                            |       | 567,375 |   | 2,076,143 |   |
| (-) Net carrying   amount of disposed             |       |                                                           |       |                                 |       |   |   |   |   |
| Fixed assets and   biological assets              |       | (139,399                                                       | )          | (588,946                             | )          | (291,578 | ) | (880,524 | ) |
| Goodwill                                          |       |                                                           |       | (475,413                             | )          |   |   | (475,413 | ) |
| Fair value (IFRS   3(R)/CPC 15 and IAS 41/CPC 29) |       | (29,319                                                        | )          |                                 |       |   |   |   |   |
| Inventories                                       |       |                                                           |       | (84,055                              | )          | (90,143 | ) | (174,198 | ) |
| Other assets and   liabilities                    |       |                                                           |       | (3,158                               | )          | (10,000 | ) | (13,158 | ) |
| Other expenses                                    |       | (11,660                                                        | )          |                                 |       |   |   |   |   |
|                                              |       |                                                           |       |                                 |       |   |   |   |   |
| (=) Gross gain   recognized before taxes          |       | 29,622                                                         |       | 357,196                              |       | 175,654 |   | 532,850 |   |
| (-) Income taxes                                  |       | (10,074                                                        | )          | (121,447                             | )          | (59,722 | ) | (181,169 | ) |
|                                              |       |                                                           |       |                                 |       |   |   |   |   |
| (=) Net gain after   taxes                        |       | 19,551                                                         |       | 235,749                              |       | 115,932 |   | 351,681 |   |

 

----

(i)        The gain is included as part of net income from discontinued operations.

(ii)     The gain is included in “Other operating expenses, net”.

 

**(c)****                                ****Indemnification liabilities**

 

In connection with the sale of CGUs and assets described above the Company assumed indemnification commitments with respect to potential losses, as agreed in the corresponding sale agreements which have specific limits, period for the indemnification commitments and procedures for the other party to require the indemnification.

 

**37****                                ****Impairment testing**

 

Following the accounting policy described in Note 2.11(a), as of December 31, 2013 and 2012, the Company performed its annual impairment test of the CGUs to which goodwill is allocated as described on the item (a) below. In addition, as of December 31, 2012 and 2011 the book value of the Company’s net assets exceeded its value as per market capitalization, therefore, an impairment analysis of long-lived assets was performed. As a result, as described in the item (b) below, the Company performed an impairment analysis of the long lived assets of the CGUs Jacareí - SP and Três Lagoas - MS.

 

**(a)****                               ****CGUs with goodwill allocated - Aracruz**

 

In December 2013, the Company assessed the need for performing an impairment analysis of the carrying amount of goodwill based on the value in use of the group of CGUs where goodwill was allocated. Value in use was estimated using a discounted cash flow model for the group of CGUs. The process of estimating the value in use involves assumptions, judgments and estimates for future cash flows which represent the Company’s best estimate approved by management. The impairment test did not result in the need to recognize an impairment loss.

 

Goodwill allocated to the group of CGUs (Aracruz and Veracel) amounted to R$ 4,230,450 at December 31, 2013.

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

Future estimated cash flows for each period are discounted to present value using a discount rate that best reflects the Weighted Average Cost of Capital (WACC) for the CGU. This rate takes into consideration the various components of financing, debt and own capital used by the Company to finance its activities. The cost of capital of the CGU was determined using the Company’s own capital cost through the Capital Asset Pricing Model.

 

Cash flows for a period of ten years were considered and an additional amount was calculated for the perpetuity of the cash flow of the tenth year, discounted to present value using the WACC rate less the estimate of growth of Brazilian Gross Domestic Product. A ten-year period was used as management considers that global price of pulp can be affected by several factors which generally are identified in periods longer than the production cycle of forest, which is approximately seven years.

 

The main assumptions used in determining value in use at December 31, 2013, are as follows:

 
| ** **                                                  | ** ** | **Assumptions** | ** ** |
|-------------------------------------------------------------|------------|-----------------|------------|
| ** **                                                  | ** ** | ** **      | ** ** |
| Exchange rate in the   period - R$                          |       | 2.15            |       |
| Average gross margin -   %                                  |       | 45.4            |       |
| Discount rate - WACC   (gross and net from tax credits) - % |       | 12.10 and 6.26  |       |

 

Management determined the gross margin based on past performance and on its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports.

 

Management believes to be reasonably possible that future changes in the pulp price combined with changes in the exchange rate could result in the recoverable amount of the UGCs to be different.

 

For purposes of the sensitivity analysis, an isolated reduction of 10% in the pulp price and in the exchange rate (US Dollar) for the next four years of discounted cash flows, would result in the UGC recoverable amount to be higher than its value in use at December 31, 2013, not being necessary the recognition of a provision for impairment.

 

The recoverable value of the UGC as per the impairment test exceeds its book value by R$ 5.4 billion.

 

**(b)****                               ****Três Lagoas and Jacareí**

 

At December 31, 2013 the Company assessed whether the value in use of the UGCs Jacareí and Três Lagoas exceeded its carrying amount. Value is use was measured using the discounted cash flows method. The processes to estimate the value in use followed the same assumptions and judgments described in item (a). The impairment test did not result in the need to recognize an impairment loss.

 

**38****                                ****Subsequent events**

 

(a)                                *Land Sale Receivable - Asset Light project*

 

As stated in Note 1(e) as of December 31, 2013, R$ 902,584 of the purchase price of the sale of land was pending payment and subject to the fulfillment of certain obligations and legal administrative processes. In January, we received in cash R$ 604,618. The remaining balance of R$ 297,966 will be received as follows: R$106,084 in one installment on January 30, 2014 and the balance of R$ 191,882, no later than the end of the first quarter of 2014.

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2013**

**In thousands of Reais, unless otherwise indicated**

 

(b)                                *Fibria 2020 Bond Early Redeem*

 

In January 2014, the Company’s Management approved the early redeem 100% of the Fibria’s 2020 Bond, that bear an interest rate of 7.5% p.a. As of December 31, 2013, the outstanding balance of the bonds amounted to R$ 1,616 million (US$ 690 million). The Company expects to complete this transaction in March of 2014 and, consequently, the balance is recorded as current liabilities.

 

*       *       *

 

F-120

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** **

**SIGNATURES**

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 
|                          |   | FIBRIA   CELULOSE S.A.              |
|-------------------------------|--------|-------------------------------------|
|                          | By:    | /s/ Marcelo Strufaldi   Castelli    |
|                          |   | Name:                               | Marcelo   Strufaldi Castelli |
|                          |   | Title:                              | Chief Executive Officer |
|                          |   |                                |   |
|                          |   |                                |   |
|                          | By:    | /s/ Guilherme   Perboyre Cavalcanti |
|                          |   | Name:                               | Guilherme   Perboyre Cavalcanti |
|                          |   | Title:                              | Chief Financial Officer |
|                          |   |                                |   |
| Date: February 28, 2014. |   |                                |   |

 

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