Brazil-based Aracruz Celulose S.A. (ARA) is the world's largest producer of bleached eucalyptus pulp, as well as one of the low-cost producers of this product. The company is responsible for 31% of the global supply of the product, which. is used in the production of a wide range of paper products, including premium tissue, printing and writing papers, liquid packaging board, and specialty papers.
We are keeping our Hold recommendation on Aracruz. We believe the company's expansion plans are solid, and that expansion should enhance the stock's value over the long term. However, the international pulp and paper markets remain tight, and the short-term outlook for pulp prices is positive. Recent results were disappointing.
The continued strength of the Brazilian real undermines ARA's exports and increases its real-denominated production costs. The recent deal with Votorantim Celulose Papel (VCP), however, is a positive sign. Votorantim, a direct competitor to Aracruz, recently acquired 28% of the voting capital of Aracruz. A new holding company will be formed with the ownership of 100% of the common stock of VCP, approximately 28% of the common shares and 14.8% of the preferred shares of Aracruz.
Read the full analyst report on ARA
Read the full analyst report on VCP
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