By 1967, Lorentzen had formed Aracruz Florestal S.A. and begun planting its first eucalyptus forests using seed produced in Brazil. Because these trees were not geneticallydeveloped, the initial planting presented a number of difficulties, including a susceptibility to trunk rot and irregular growth and shape patterns. Nonetheless, by 1972, the company began its first harvest and began eyeing the start-up of pulp production. As part of that development, Lorentzen formed a new company, Aracruz Celulose, which absorbed the original Aracruz company as its subsidiary. Aracruz Forestal was fully merged into its parent in 1993.
Yet Aracruz was not satisfied with the quality of its eucalyptus forests. In 1973, the company launched a research and development program in order to enhance the quality of its forests by developing varieties of eucalyptus adapted to Brazil's soil and climate conditions. In particular the company sought to develop fast-growing, disease-resistant species with uniform growing cycles, straight trunks, and few side branches--which would allow more dense planting.
From the start, however, Aracruz emphasized the need for environmentally friendly plantation policies, including the interspersing of its eucalyptus plantations with significant acreage set aside for native species. This move not only protected native plant species in the area, it also helped limit the effects of insect and disease on Aracruz's eucalyptus forests. The company also began seeking financing for construction of its own pulp mill, a difficult task in the slumping market of the mid-1970s.
Aracruz launched actual production of wood pulp only in 1978. The company's production unit at Barra do Riacho, in Espirito Santo, initially had capacity of 400,000 tons per year. Aracruz's timing proved fortunate: soon after it launched production, worldwide pulp prices began to rise again, and by the mid-1980s had paid off its debts. Aracruz quickly developed into one of the world's lowest-cost producers of wood pulp, with per-tonnage prices as much as one-third or more that of competing world markets.