December 6, 2017 / 3:52 AM / 10 months ago

Brazil's Fibria sees capex rise, possible industry mergers

NEW YORK (Reuters) - Fibria Celulose SA, the world’s largest producer of eucalyptus pulp, said on Tuesday it was projecting a nearly 60 percent rise in capital spending next year as it boosts capacity and executives said they were mulling mergers going forward.

At an investor day presentation in New York, Fibria forecast investments of 3.43 billion reais ($1.06 billion) in 2018, up from 2.18 billion in 2017. Some 444 million reais of the increase will come from investments at its recently completed Horizonte 2 plant, which began producing wood pulp in August.

Fibria also said it remained confident about demand from China, which has allowed a string of pulp price increases this year, helping to lift shares to record highs in recent months.

“There is no doubt that Chinese growth is far from losing steam,” the company said in one slide. “It is actually getting to a next level, with very aggressive targets.”

To exploit that demand, Fibria is looking at potential expansion, both in the form of another potential plant in the central Brazilian state of Mato Grosso do Sul and possible mergers or acquisitions, Chief Executive Marcelo Castelli told reporters.

The watchword with both is “discipline,” he said, pointing to a relatively balanced outlook for supply and demand in coming years.

He said Fibria considered buying rival pulp producer Eldorado but decided it was too pricey. The company was sold to Netherlands-based Paper Excellence NV, controlled by the owners of Indonesia’s Asia Pulp & Paper Co Ltd for 15 billion reais.

Some analysts have speculated that deal could precipitate a new wave of dealmaking in the industry.

If consolidation is possible, it is likely to happen with “a big ‘M’ and small ‘a’,” Castelli said. “No one has enough financial capacity to acquire another one ... The name of the game is mergers.”

Shares of Fibria were up 2.5 percent at 45.02 reais in early afternoon trading in Sao Paulo, and have soared 44 percent so far this year. The company’s top two shareholders are industrial conglomerate Votorantim and Brazilian state development bank BNDES.

($1 = 3.23 reais)

Reporting By Christian Plumb; Editing by Chizu Nomiyama and David Gregorio

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