Executive Summary

In the first few months of 2009, the effects of the global crisis has continued to negatively impact the pulp & paper sector, with prices falling in all regions. Global market pulp shipments showed a 9% drop in demand in relation to the 1Q08, despite a record increase in shipments to China, which, at 2,140,000 tons, were up by 64% for the period. In March, however, global pulp shipments increased by 14% compared to February, with the shipments-to-capacity ratio at 92%. Eucalyptus pulp shipments increased by 12% in the 1Q09, while demand in March was up by 20% over that of February – for more information, see the "Global Pulp Market" section.

The consolidated pulp production, at 722,000 tons, was in line with that of the 4Q08 and 9% lower than that of the 1Q08, due to the downtimes taken at the Barra do Riacho unit in the 1Q09. Pulp sales came to a total of 815,000 tons, a record for the first quarter, and 11% higher than in the 1Q08 and 4Q08, mainly due to the strong sales volumes to China, which raised the Asian sales mix to a record level (1Q09: 45%; 4Q08: 25%; 1Q08: 18%). This, combined with the relative stability of sales to North America, more than offset the reduction in sales to the European market.

As a result, the inventory level at the end of March was 13 days of production lower than that at the end of Dec./08, at a total of 49 days, in line with the level of the 1Q08. The pulp prices announced by FOEX are already showing signs of recovery in Asia, while hardwood pulp producers have announced price rise for Europe, as from May, to US$ 500 /ton.

The consolidated pulp cash production cost was US$ 205/ton, 16% lower than in the 1Q08, of US$ 243/ton, mainly due to the 33% devaluation of the real against the dollar. The 10% decrease in comparison with the 4Q08 figure, was mainly due to the 2% devaluation of the real against the dollar, the quarterly reduced consumption of third-party wood and the company’s cost reduction program, announced in the 3Q08, despite the downtime at the Barra do Riacho fiberlines.

The adjusted EBITDA came to US$ 93 million, a decrease of 57% and 30%, respectively, in relation to the 1Q08 and 4Q08 figures, while the margin was 25% (1Q08: 45% and 4Q08: 33%). In comparison with the 1Q08, the main reason was the lower net average price (US$ 204/t), partially offset by the lower pulp cash production cost in the cost of goods sold (COGS - US$ 23/t), as well as the 11% higher sales volume. When compared to the 4Q08, the impact of the net average net pulp price reduction (US$ 96/ton) was again the main reason to the decrease in the EBITDA margin, despite the positive effect of lower cash production cost on the COGS (US$ 33/ton) and the lower operational expenses on a per ton basis – for more details, see page 11.

Net financial income showed a net expense of US$ 53 million, largely due to the cost of servicing a higher gross debt. As a result of the abovementioned factors, the company had a net loss for the quarter of US$ 50.0 million, or US$ 0.49/share.

The company’s cash position at March 31, 2009 was US$ 390 million, with 83% in local currency. The total gross debt, including 50% of Veracel’s debt, amounted to US$ 4,103 million, bearing an average maturity of 53 months.

It should be emphasized that the company has completed its negotiation of the derivative debt with its creditor banks, with a contract signed by the parties on May 13, according to the terms of the Material Information release of January 19, 2009 and with no changes required in the classification of this debt in the December 31, 2008 results.

Global pulp market update

The weakening global economy dominated the picture in the first quarter. Most of the world's major economies are currently in recession, with negative growth figures expected for 2009. This has created a challenging business climate for the pulp and paper industry.

The demand for printing & writing papers remained weak, on a global scale, falling 21% up to March compared to the same period of 2008. In the specialty papers segment, demand has been affected by the downturn in the construction, automotive, furniture, textile and labeling industries. On the other hand, paper and board production in China has improved in the last two months, but it is still too early to confirm any upturn in the trend. In North America, sales of consumer tissue products, which accounted for almost 60% of our sales in 2008, were stable throughout the first quarter. According to RISI latest survey, global tissue consumption is expected to grow at the rate of about 2.8% in 2009, down from an estimated 3.3% in 2008, then jump to 4.5% in 2010.

Global market pulp producers inventories for all grades declined quite sharply during the first quarter. By the end of March, inventories were at 43 days of supply, down from 50 days in January. However, the pulp market still suffers from imbalance, since inventories have not yet reached the level of equilibrium.

Global eucalyptus demand has been showing improvement through the first quarter of 2009, with an increase of 12% over the first quarter of 2008, as a result of demand stability in North America and a rebound in sales to Asia especialy to China. Due to its quality characteristics, eucalyptus is the fiber of choice for a variety of different paper & tissue producers, which explains why its use continues to grow despite the global economic slowdown.

Despite all the stimulus that major governments are injecting into the economy, credit availability is still a concern and has an effect on the whole supply chain, from the pulp producer through to the end use paper consumer. With more limited credit availability, and at a higher price, it does not make sense to be stockpiling in the industry. Stockpiling means increasing the company’s working capital, which doesn’t seem prudent in the light of the current financial turmoil and lower demand expectations.

The major driver of the pulp price today is the cost structure of the industry. At least 8 million tons of hardwood capacity operates at a cash cost above US$ 500/ton, which is the present average list price in Europe. From May 2008 to March 2009, closures were equivalent to a total chemical market pulp capacity of 2.7 million tons.

It is still too early to have a clear view of how the pulp market will continue to respond to the current global crisis, over the rest of 2009. What we are aware of is that further permanent closures should occur over the course of 2009, along with market-related production curtailments. Reduced customer inventories most probably will persist as a result of the financial crisis. All of this should bring improved balance to the pulp market.

Production and Sales

Aracruz pulp production, without the 50% of Veracel, totaled 593,000 tons, compared to 649,000 tons in the 1Q08 and 570,000 tons in the 4Q08. The reduction in comparison to the 1Q08 was mainly due to the downtime taken at all the Fiberlines of the Barra do Riacho unit.

During the first quarter, Veracel Celulose S.A. (50% owned by Aracruz) produced 258,000 tons of pulp, of which 124,000 tons were sold to Aracruz.

At the Guaíba unit, paper production in the quarter totaled 15,000 tons, consuming approximately 12,000 tons of the pulp produced. Paper inventories were at 1,000 tons at the end of March 2009, while paper sales in the first quarter of 2009 totaled 14,000 tons.

Aracruz pulp sales totaled 815,000 tons in the first quarter, with 693,000 tons of the pulp being produced internally, at the Barra do Riacho and Guaíba units, and 122,000 tons being supplied by Veracel and resold in the market by Aracruz.

At the end of March, inventories at Aracruz stood at 415,000 tons, representing 47 days of production, compared to 414,000 tons of March 2008 and 525,000 tons at the end of December 2008. The inventory level at Veracel, at the end of March 2009, represented two additional days of production for Aracruz. The total of 49 days of supply represented a reduction of 13 days of production compared to the end of the 4Q08, mainly due to the higher pulp sales volume coupled with the downtime taken in the 1Q09. When compared to March 2008, inventory levels were at 48 days of supply.

Income Statement 1Q09

Total net operating revenue reached $369.7 million, $114.5 million lower than in the 1Q08 and $38.1 million lower than in the 4Q08.

Net paper operating revenue in the quarter totaled $12.7 million, $2.7 million lower than in the same period of 2008 and $1.9 million lower than in the 4Q08.

Net pulp operating revenue during the quarter amounted to $351.2 million, $112.1 million lower than in the same period of last year, mainly due to 32% lower net pulp prices, partially offset by 11% higher sales volume. When compared to the 4Q08, the $35.7 million decrease was the result of 18% lower net pulp prices, partially offset by an 11% higher sales volume.

The total cost of sales in the first quarter of 2009 was $342.0 million, compared to $318.5 million in

Sales and distribution expenses came to $18.9 million, $2.7 million and $2.3 million lower, respectively, than in the 1Q08 and 4Q08, mainly due to the geographical sales mix, partially offset by the higher sales volumes.

Administrative expenses came to $15.8 million, compared to $13.5 million and $12.5 million in the 1Q08 and 4Q08, respectively. When compared to the 1Q08, there was a higher cost of third-party services, partially offset by the positive impact of the 33% devaluation of the real. Compared to the 4Q08, the main difference was the higher cost of third-party services in the 1Q09.

The other net operating expenses (income) result showed a net income of $9.6 million in the 1Q09, compared to a net expense $9.2 million in the 1Q08, mainly due to the lower provision for losses on ICMS tax credits and the reversal of a provision for losses on fixed asset write-offs. In the 4Q08 there was a net expense of $11.2 million. The difference is mainly due to lower labor contingencies, a lower provision for losses on ICMS tax credits and the reversal of a provision for losses on fixed asset write- offs.

The net financial result in the quarter showed an expense of $53.1 million, compared to a net income of $6.8 million in the same period of last year, mainly due to the lower net derivative results and the higher level of gross debt. When compared to an expense of $1,102.3 million in the fourth quarter of 2008, the difference is mainly due to the derivative losses in that quarter.

Debt and Cash Structure

The company's total debt, including 50% of Veracel, amounted to $4,102.8 million at the end of March 2009, $44.4 million lower than at the end of December 2008 and $2,371.5 million higher than at the end of March 2008.

The positions of the swap contracts were maintained by the company, in order to transfer its exposure from the cost of its debt in local currency (TJLP and CDI) to US$, since 98% of the company’s revenues come from exports denominated in US$.

The amounts shown in the table below reflect the position of the company’s outstanding derivatives at the end of the first quarter of 2009 (notional and "fair value").

Cash, cash equivalents and other investments, at the end of the quarter, totaled $389.1 million, of which $321.9 million (83%) was invested in Brazilian currency instruments and $67.2 million (17%) was invested in foreign currency.

Net debt (total debt less cash holdings) amounted to $3,494.1 million at the end of the quarter, $2,613.4 million higher than in the 1Q08, mainly due to the derivative related debt and $12.7 million higher than the net debt at the end of the 4Q08.

EBITDA Analysis

The first quarter 2009 adjusted EBITDA, including 50% of Veracel, totaled $93.0 million (25% margin), or $114/t, compared to $216.3 million ($296/t) for the same period of last year. The adjusted EBITDA per ton was negatively affected by the $204/t lower average net pulp prices, partially offset by the lower cash cost of goods sold (COGS), as described below:

When compared to the 4Q08, it was $39.6 million lower, or $66/t, mainly due to the lower average net pulp prices (-$96/t), partially offset mainly by the lower cash COGS.

Any increase/decrease in the cost of the pulp purchased from Veracel is offset by a greater/lesser EBITDA contribution from Veracel towards Aracruz’s figures, and therefore does not have any material effect on the company’s consolidated EBITDA over the quarters, given that half of Veracel’s annual production is allocated to each of the partners (50% to Aracruz and 50% to Stora Enso).

According to the company's strategy of protecting its liquidity, the planned capital expenditures for

Forecast

2009, limited to regular investment, were maintained, as described in the table below. Forecast investments do not include any new industrial capital expenditure on expansion projects, such as for Veracel II and Guaíba II:

Stock Performance

From March 31^st, 2008 to March 31^st, 2009, Aracruz's ADR price decreased by 90%, from $68.26 to $6.60. Over the same period, the Dow Jones Industrial Average index declined by 38% and the S&P

Paper and Forest index fell by 64%.

Dividends/ Interest on Stockholders' Equity

The Ordinary General Meeting, held on April 30, 2009, among other matters, saw the appreciation of the accounts presented by the management and the examination, discussion and approval of the financial statements for the financial year ended on December 31, 2008. Furthermore, the decision was made for the allocation of the net profit for the year, including ratification of the distribution of R$ 155,000,000 in the form of interest on capital, approved by the Board of Directors in meetings held on March 18th and June 20th of 2008.

This already paid Interest on Stockholders’ Equity (ISE) for the fiscal year 2008, is as follows:

Additional Information

Aracruz concluded negotiations with the group of derivative banks

Aracruz concluded its negotiations with the banks counterparties to the derivative operations, and the contract was signed by the parties on May 13.

It should be emphasized that, as a result of the aforementioned agreement, there is no change whatsoever with regard to the information released in the Material Information published on January 19, 2009. There was also no change in the agreement that needs to be reflected in the company’s financial statements as at December 31, 2008, including with regard to the accounting classification of the restructured debt (a portion classified under current liabilities and part under non-current liabilities), nor was there any change related to restrictive contractual clauses, financial charges and guarantees provided.

Veracel Information

Veracel pulp production totaled 258,000 tons in the first quarter. At the end of March, inventory stood at 29,000 tons of pulp.

Veracel pulp sales totaled 269,000 tons in the first quarter, of which 124,000 tons went to Aracruz, and 145,000 tons went to the other controlling shareholder.

Aracruz is a several guarantor of 50% of the indebtedness incurred by Veracel, and Stora Enso is the several guarantor of the other 50% of such indebtedness.

Veracel, located in the state of Bahia (Brazil), is jointly-controlled by Aracruz (50%) and Stora Enso OYJ (50%) and both shareholders must together approve all significant ordinary course of business actions, in accordance with contractual arrangements.