Annual Report 2004

The Company

Aracruz Celulose is the world's leading producer of bleached eucalyptus pulp. The Company is responsible for 28% of the global supply of the product, used to manufacture printing and writing, tissue, and high value added specialty papers.

Aracruz's forestry operations are located in the states of Espírito Santo, Bahia, Minas Gerais and Rio Grande do Sul. They involve some 252,000 hectares of eucalyptus plantations, intermingled with around 133,000 hectares of native forest reserves, which are of fundamental importance for ensuring the balance of the ecosystem.

The Company runs a Forestry Partners Program that involves some 71,000 hectares contracted in partnership with approximately 3,000 farmers in the states of Espirito Santo, Bahia, Minas Gerais and Rio Grande do Sul.

Aracruz’s nominal pulp production capacity, totaling 2.4 million tons a year, is distributed between two pulp making units: Barra do Riacho in Espírito Santo, and Guaíba in Rio Grande do Sul.

In Espírito Santo, Aracruz operates a pulp making complex that is fully integrated with Company-owned eucalyptus plantations and a specialized private port, Portocel, through which most of Aracruz's pulp production is exported. The Barra do Riacho Unit mill contains three production units with a total capacity of two million tons a year of pulp. Environmental control is ensured through modern systems that treat all emissions, effluents and solid wastes.

At the Guaíba Unit, located in the municipality of Guaíba (RS), Aracruz operates a pulp mill that is also equipped with advanced environmental protection resources, with a nominal capacity to produce 400,000 tons annually of bleached eucalyptus pulp. This unit also produces some 40,000 tons per year of printing and writing paper, all of which is destined for the domestic market.

A third unit – Veracel Celulose – is being built in the municipality of Eunápolis, in the south of Bahia, in partnership with Stora Enso (both partners owning a 50% stake). With start-up of operations scheduled for 2005, Veracel will have the nominal capacity to produce 900,000 tons a year of bleached eucalyptus pulp. In association with Weyerhaeuser of the U.S., Aracruz owns one-third of Aracruz Produtos de Madeira, which operates a high technology sawmill in southern Bahia, supplying top quality solid wood products made from eucalyptus plantation lumber to the furniture and interior design industries in Brazil and abroad. Aracruz's commitment to sustainable development is reflected both in the Company's management of its eucalyptus plantations and in its preservation of the natural ecosystems. Strict environmental practices at the Company's pulp mills are also subject to a process of continuous improvement.

The Company's standards of social responsibility are reflected, among other aspects, in a significant program of social contributions to neighboring communities in the regions in which Aracruz operates. Four major shareholders control the Company's voting shares: the Safra, Lorentzen and Votorantim groups (each owning 28% of the voting shares) and BNDES, the Brazilian National Economic and Social Development Bank (12.5%). Aracruz's preferred shares, which constitute 56% of the Company's total outstanding shares, are traded on the São Paulo, New York and Madrid stock exchanges.