Fitch Ratings Upgrades National Scale Rating of Ripasa to 'A' -bra-.

RIO DE JANEIRO, Brazil & CHICAGO -- Fitch Ratings upgraded the national scale rating of Ripasa S.A. Celulose e Papel's (Ripasa) to 'A' (bra) from 'A-' (bra). In conjunction with this rating action Fitch Ratings has affirmed Ripasa's 'BB' senior unsecured local currency credit rating and its 'B+' foreign currency rating. All ratings have a Stable Rating Outlook. The upgrade reflects Ripasa's improved credit profile, despite a recently completed expansion program. The company's national scale and local currency credit ratings are constrained at the current level due to the company's relatively small size and limited financial resources vis-a-vis those of its largest competitors. This could lead to a decline in the company's market position within Brazil during the next five to 10 years.

Ripasa was the fourth-largest producer of printing and writing paper and the second-largest producer of boxboard in Brazil during 2003. Like its main competitors in these products, the company enjoys a good production cost structure. This is a result of Ripasa's access to low-cost fiber, which the company sources from its eucalyptus plantations. This inexpensive fiber source has allowed Ripasa's to generate positive cash flow throughout the troughs in the pricing cycles for pulp and paper.

In May 2003, Ripasa completed a US$250 million expansion project that increased its pulp capacity to 455,000 tons per year from 310,000 tons per year (most of the company's pulp is used internally) and its paper capacity to 429,000 tons per year from 335,000 tons per year. The company began an additional US$50 million project in May 2004. It will increase the company's annual pulp capacity by an additional 105,000 tons, all of which will be sold as market pulp. Despite the export nature of these projects, Ripasa is expected to sell about 55% to 65% of its total output in the Brazilian market. As a result, the majority of Ripasa's sales are exposed to Brazilian political and economic uncertainty. This has caused demand for paper and board to fluctuate substantially over the past decade.

Ripasa ended June 30, 2004, with BRL938 million of debt and BRL173 million of cash and marketable securities. During the first semester of 2004, the company generated BRL167 million of operating income plus depreciation and amortization (EBITDA) on BRL647 million of sales. On an annualized basis these figures translate into a total debt-to-EBITDA ratio of 2.8 times (x) and a net debt-to-EBITDA ratio of 2.3x. These ratios are above average for the rating category but remain consistent with the 'A' national scale rating and the 'BB' international local currency rating given the size of the company in relation to its peers.

Fitch maintains a 'B+' foreign currency rating for Ripasa. This rating is constrained by Fitch's 'B+' rating of the foreign and local currency obligations of the Brazilian government.