(Recasts with Asia sales outlook, executive comments)
SAO PAULO, May 15 (Reuters) - Brazil’s Fibria Celulose SA, , the world’s largest producer of eucalyptus pulp, expects to sell in the Asian market nearly half the 1.75 million tonnes in annual capacity of a new expansion at its Tres Lagoas mill, executives said on Friday.
Fibria announced its plans for the so-called Horizon 2 project late on Thursday, confirming an investment of 7.7 billion reais ($2.6 billion) in a new line of bleached eucalyptus pulp that should start producing in late 2017.
Fibria’s head of sales, Henri Philippe Van Keer, said on a conference call that 45 percent of the new output would be destined for Asia, compared to 25 percent of current production.
Van Keer said that pulp prices should be stable over the next three years. Recovering prices and a weaker Brazilian currency have boosted pulp exporters such as Fibria, which plans to finance much of the expansion through free cash flow.
Horizon 2, a project that Fibria has been mulling for years, will be 40-percent funded with the company’s cash flow, with the rest likely financed with bank loans. Executives said the company’s net debt should remain near current levels, below 2.5 times annual operating profit in dollar terms.
The expansion at Tres Lagoas, in the southern state of Mato Grosso do Sul, will not prevent Fibria from engaging in possible merger talks, said Chief Executive Marcelo Castelli, who said the sector is due for consolidation “at some point.”
Fibria currently operates four factories with a pulp production capacity of 5.3 million tonnes per year, including a joint venture with Finland’s Stora Enso in Bahia.
$1 = 3 reais Reporting by Aberto Alerigi Jr; Writing by Caroline Stauffer and Brad Haynes Editing by W Simon