CFO's comments

"Even though Aracruz's operations remain solid, since the Company is one of the world’s lowest cash cost producers of market pulp, with an EBITDA margin above 40% in the last twelve months, the Company's liquidity has been severely affected by the scarcity of credit and increased risk in financial markets. This scenario has intensified over the last few weeks, as economic growth has slowed and uncertainty about the economic outlook has increased, leading to falling commodity demand and provoking deterioration on asset value.

Financial systems around the world are under extraordinary stress, and especially the credit and money markets. Reflecting this, the Brazilian currency started to significantly devaluate, from the middle of September, which negatively affected the Company's financial results.

Since about 98% of the Company’s revenues are linked to the US$, and approximately 75% of its cash production cost, as well as around 15% of its total debt, is exposed to the local currency, a stronger real increases the Company’s exposure. Since 2004, due to the scenario of a declining US$, the Company has been adopting measures to protect its cash flow and balance sheet exposure to the local currency, taking short positions in US$, which has generated a positive cash impact of $ 290 million over this period, which helped to offset the negative impact of the US$ against the Real. A consulting firm hired to analyze the Company’s derivative operations examined these instruments and confirmed a negative “fair value” for such contracts of approximately $1 billion, taking the base on September 30, 2008. In making this determination, the interest rate curve, the currency volatility and the exchange rate at closing – all of which have been extraordinarily influenced by the recent extreme instability of the global financial markets – were considered. The notional amount of target forward derivative transactions at the end of the 3Q08 was $360 million a month. Considering an average term of 12 months, the average notional amount was $340 million a month, with a strike at R$1.76/US$ (see Note 11 of the Condensed Consolidated Financial Information).

Aracruz Celulose S.A. maintain derivative contracts only with independent financial institutions, so there are no related parties, subsidiaries or affiliated Company as counterparties for such derivative instruments. (see the Derivative Transactions section).

A specialized consultant is concluding an internal audit to verify if the Company's internal policies were being complied with. The Company is analyzing its internal controls, in order to have better assessment of treasury operations.

The Company’s net revenues over the last twelve months totaled $2.1 billion. The exchange rate variations on exports will have an immediate cash effect, while in the case of the derivative operations, there is an initially accounting effect, while potential impact in disbursement, or receipt, may take place on the monthly contractual assessment or contractual maturity.

The Company's cash and cash equivalents position as at September 30, 2008 was approximately $ 600 million, excluding derivative instruments, mostly in local currency instruments. The average gross debt maturity profile, including the 50% share in Veracel, was at 54 months on that same date. In order to improve the Company's liquidity, several measures have been taken to gradually decrease the Company's exposure to target forward derivative instruments and to protect the Company’s cash position, while maintaining the normal course of its business over the coming months and preserving its the strong fundamentals, involving, among others, the ongoing the negotiations already started with banks and several other alternatives in order to preserve our cash position.

There is also a complete restructuring program in place, which includes, among other things:

þ operating cost and expense reductions up to the end of 2009;
þ postponement for one year of investments in the Guaíba II project;
þ slowing down the land purchases and forest development for the Veracel II project;
þ suspension of land purchases and forest development for the Minas Gerais project; and 
þ   reduction of the distribution on dividends and interest on shareholders equity.

Global pulp market

The world economy remain the key driver for the pulp and paper industry, although the correlation is not as strong as before. As major economies slow down rapidly, as a result of the financial crisis, limited credit availability and still high energy and commodity prices, many are close to or moving into

update

a period of recession. The total impact on the pulp and paper industry is still uncertain and is hard to predict, but it is already being felt. Caution should prevail during this moment of uncertainty in the industry.

On the paper side, P&W and Containerboard are the grades suffering the most. P&W demand has fallen in line with the worldwide decline in consumer confidence, to levels below those of 2007 and 2006. Demand for Containerboard is weakening, as world trade decelerates. As paper inventories pile up, the need for market related downtime will continue. In Asia, the slowdown is also being felt, with China suffering the most, as internal consumption and exports decrease. The impact of an economic slowdown on tissue demand does not compare to that of other grades of paper, because of the special characteristic of tissue consumption, which has become part of the day-to-day life of consumers and is harder to dispense with it.

As a consequence of these factors, demand for market pulp has increased at a more moderate rate. In the first eight months of 2008, global growth in chemical market pulp demand has declined to 2.7%. Among all grades, eucalyptus continues to show the strongest growth, at 16% on year-to-date basis, equivalent to 1,116,000 tons.

In the short term, the balance between supply and demand continues to be under pressure. It will take some time before adjustments on the pulp supply side, through market related downtime, maintenance downtime, and capacity closures in high cost regions, to compensate for the economic slowdown in the major paper consuming regions.

Production

Aracruz pulp production, without the 50% of Veracel, totaled 670,000 tons in the third quarter of 2008, compared to 668,000 tons in the 2Q08 and 627,000 tons in the 3Q07. There was a 10-day

and Sales

maintenance downtime at the Guaíba unit in June, and the Company decided to bring the maintenance downtime at Fiberlines "A" and "C" forward to the fourth quarter - it was previously scheduled for the 1Q09.

During the third quarter, Veracel Celulose S.A. (50% owned by Aracruz) produced 281,000 tons of pulp, of which 113,000 tons were sold to Aracruz. Veracel’s pulp production in the last twelve months totaled 1,097,000 tons, 22% above the plant's nominal capacity.

At the Guaíba unit, paper production in the quarter totaled 13,000 tons, consuming approximately 10,000 tons of the pulp produced. Paper inventories were at 1,000 tons at the end of September 2008, while paper sales in the third quarter of 2008 totaled 12,000 tons.

Aracruz pulp sales totaled 679,000 tons in the third quarter, with 580,000 tons of the pulp being produced internally, at the Barra do Riacho and Guaíba units, and 98,000 tons being supplied by Veracel and resold in the market by Aracruz, plus an additional 1,000 tons of direct sales by Veracel to unrelated parties (representing 50% of Veracel's total direct sales).

At the end of September, inventories at Aracruz stood at 533,000 tons, representing 58 days production, compared to 438,000 tons at the end of June 2008. The inventory level at Veracel, at the end September 2008, represented an additional 4 days of production for Aracruz. This total of 62 days is above the normal level due mainly to the global economic slowdown, the seasonal paper production stoppages Europe and the Olympic Games in China.

Income Statement

Total net operating revenue reached $480.9 million, $25.4 million higher than in the 3Q07 and $57. million lower than in the 2Q08.

Net paper operating revenue in the quarter totaled $14.5 million, $0.9 million lower than in the same

3Q08

period of 2007 and $4.0 million lower than in the 2Q08.

Derivative

Transactions

The reason for hedging

Ever since 2004, Brazil has seen its currency appreciate strongly against the US dollar. This has been negative for Aracruz, an exporter whose revenues are almost entirely linked to the dollar, whereas 15% of its debt and approximately 75% of its production costs are linked to the local currency (R$). From May 21, 2004, when the exchange rate (PTAX) reached R$ 3.2051/US$, to August 1, 2008, when the exchange rate reached R$ 1.5593/US$, its lowest level during the period, the appreciation of the real was 106%, thus reducing the Company's competitiveness when measured by the cash production cost denominated in US$ terms.

Back in 2004, in the face of the dollar’s devaluation, the Company decided to take steps to protect the cash flow that was exposed to local currency fluctuations, which basically meant taking up short positions in dollars. This hedging against the appreciation of the real in relation to the dollar has generated an accumulated cash gain of $ 290 million since 2004, which has reduced the negative impact of this appreciation on the Company’s results.

Impact on the Financial Results:

The consulting firm engaged to analyze the operations using financial derivatives examined all the Company’s contracts of this kind and came to a negative fair value of approximately $1 billion, using the base date of September 30, 2008.

The notional amount of the target forward derivative transactions up to the end of the 3Q08 was $360 million a month. When considering an average term of 12 months, the average notional amount was $340 million a month, with the strike at R$1.76/US$. The notional amount of the Tied Transactions with Pre-payment Export Loans, up to the end of the 3Q08, was $200 million a month. When considering an average term of 12 months, the average notional amount was $180 million a month, with the strike at R$1.90/US$, at each monthly fixing date. (see Note 11 of the Condensed Consolidated Financial Information).

The table below shows the "fair value" and the notional amount of the derivative transactions:

Notwithstanding the determination of the accounting results (“fair value”), the cash effect of these financial derivative operations was positive $20 million in the third quarter.

The Company’s net revenues in the last twelve months totaled $ 2.1 billion. The effect of the exchange rate variations on exports will have an immediate cash effect that could partially offset the negative impact of the monthly contractual settlements.

In the case of the derivative operations, there is an accounting effect, and cash disbursement or receipt, each month, will depend on the contractual settlement or maturity, meaning that positive or negative cash flow effects are spread out over the full term of the operation (twelve months on average).

The fair value of the derivative transactions will be recorded in the income statement under financial income (expenses). The accounting effect of derivative transactions for the quarter was the main reason for the tax credit provision of $464 million, which helped to reduce the impact of the derivative losses on the net income.

The Company's Strategy:

In order to increase the Company's liquidity, several measures have been taken to gradually decrease the Company's exposure to target forward derivative instruments and to protect the Company’s cash position, maintaining the course of its business over the coming months and preserving its strong fundamentals. These involved, among other things, ongoing negotiations with banks and a considerable variety of alternatives

There is also a complete restructuring program in place, as described at the CFO's comment.

The Company's cash and cash equivalents position, at September 30, 2008, came to approximately $ 600 million, not considering derivative instruments, most of which is in local currency instruments. The gross debt maturity profile, including our share in Veracel, was at 54 months on that same date.

Debt and Cash
Structure

The Company's total debt amounted to $1,995.3 million at the end of September 2008, $377.0 million higher than at the end of June 2008 and $630.5 million higher than at the end of September 2007.

EBITDA Analysis

- Adjusted EBITDA comparison 3Q08 vs. 3Q07 (not including the results of cash flow currency protection ) The third quarter 2008 adjusted EBITDA, including 50% of Veracel, totaled $189.1 million (39% margin), compared to $210.4 million for the same period of last year, mainly as a consequence of the negative impact of a lower pulp sales volume (10%), and the 23% higher cash COGS/ton (mainly due to the Brazilian currency's appreciation against the dollar), partially offset by the higher average net pulp prices (17%).

- Adjusted EBITDA comparison 3Q08 vs. 2Q08 (not including results of cash flow currency protection ) The third quarter 2008 adjusted EBITDA of $189.1 million (39% margin), including 50% of Veracel, was $35.9 million lower compared to that of the 2Q08. This was mainly due to the lower pulp sales volume (12%) and higher cash COGS/ton (5%), partially offset by higher average net pulp prices (2%).

According to the current scenario, and as part of the Company's strategy to protect its cash position in

Capital Expenditure - Forecast

the coming quarters, there has been a reduction of more than 50% in the planned investments for the next 15 months. The following table compares the capital expenditure forecast in the 2Q08 release with the updated information:

Stock

From September 30, 2007 to September 30, 2008, Aracruz's ADR price decreased by 50%, from $73.59 to $36.71. Over the same period, the Dow Jones Industrial Average index declined by 21%

Performance

and the S&P Paper and Forest index fell by 22%.

Results According to

The local currency consolidated result, according to Brazilian GAAP - the accounting principles adopted in Brazil, was a loss of R$1,642.4 million for the quarter. Aracruz has publicly released the unconsolidated financial results in Brazil, which under Brazilian GAAP serve as the basis for the

Brazilian GAAP

calculation of minimum dividends and income taxes. In the third quarter of 2008, Aracruz Celulose S.A. reported an unconsolidated loss of R$1,569.8 million (loss of R$1,022.8 million, excluding equity results).

Dividends/

Up to the end of the third quarter of 2008, a total amount of R$155 million has been declared as Interest on Stockholders’ Equity, in anticipation of the annual dividend for the fiscal year 2008, with

Interest on Stockholders'

Equity

R$70 million declared on March 18th and R$85 million on June 20th.

In the light of the events described in the material information releases of September 25 and October 2, 2008, and the present domestic and international scenario, and acting in the best interests of the Company and its stockholders, the Executive Board has decided to cancel the credit and payment of Interest on Stockholders’ Equity (ISE) to the sum of R$ 84,000,000 (eighty-four million reais), declared in a market announcement on September 19, 2008, the payment of which was scheduled to be made as from October 15, 2008.

For more information on historical dividend distribution, please access the following link: http://www.aracruz.com.br/show_inv.do?act=stcNews&menu=true&orig=fin&id=746&lastRoot=230&lang=2#2

Growth Plans

In the face of the worsening crisis in the global financial markets, with the consequent restriction and increasing cost of lines of credit and other financing and slowing down of the world’s leading economies, Aracruz has decided to adjust to the new scenario the expansion projects it had planned for the next few years, as follows:

With these measures, the Company expects to reduce its expenditures on investments by $ 868 million up to the end of 2009, in comparison with the amounts forecast in the 2Q08 release (Capex forecast on page 13).

Aracruz is determined to resume all its capacity expansion projects as soon as the financial crisis subsides and the macroeconomic scenario and world pulp demand, particularly, stabilize, in order to maintain its leadership among the world’s producers of market hardwood pulp, with one of the industry’s lowest production cash costs.

Information

Officer and Investor Relations Officer of the Company. An economist with a postgraduate degree in business administration and financial management specializations from the Stanford Business School in the U.S. and the IMD in Switzerland, Mr. Roque was CFO and IR officer for Votorantim Celulose e Papel (VCP) since 1994, having previously worked for companies such as Monsanto do Brasil, General Electric and Ford. Mr. Roque substitutes Isac Zagury.

Fitch and S&P downgraded Aracruz' ratings

Amid the systemic crisis in the international financial market, Moodys, S&P and Fitch, known as international risk classification agencies, announced on October 15^th, October 10^th and October 9^th, respectivelly, it had downgraded the foreign currency rating for Aracruz Celulose, due to the announcement of the negative "fair value" of derivative operations disclosed by the Company to the market on October 2^nd.

þ Standard & Poor's downgraded Aracruz' foreign currency corporate credit rating from 'BBB' to 'BBB-', investment grade, with CreditWatch Negative.

þ Moody's Investors Service has downgraded the issuer ratings of Aracruz to Baa3 from Baa2 on its global scale, investment grade, under review for possible further downgrade.

þ Fitch downgraded Aracruz' foreign currency Issuer Default Rating (IDR) from 'BBB' to 'BB+'

Aquisition of Arapar's stake in Aracruz has been postponed

Votorantim Celulose e Papel S.A. disclosed to the public on October 3rd that the steps towards closing the transaction for the acquisition of ARACRUZ's shares held by Arapar S.A. ("Arapar") were still being implemented and that the closing date of the transaction, previously scheduled to occur on October 6th, 2008, had been postponed.

For the 4^th consecutive year, Aracruz is in the Dow Jones Sustainability Index DJSI

Aracruz has been included, for the fourth consectutive year in a row, in the select rank of companies in the Dow Jones Sustainability Index (DJSI World) 2008/2009. The Company is the leader in the “Forestry and Paper Resources” category, selected from 14 forestry companies worldwide. Of these, only two are included in this year’s list.

Note: In the main body of the text (p.1 - 15), amounts are in US$ unless otherwise specified.