EARNINGS TELECONFERENCE 1st Quarter 2017 Highlights improvement - - PowerPoint PPT Presentation

EARNINGS TELECONFERENCE

1st Quarter 2017

Highlights

Improved Results Working Capital Wood Deca

improvement in profitability vs. 1T16

• Slightly more favorable scenario;
• Harnessing of gains arising from our Internal Agenda.

Lower investment in working capital

• Extension of supplier payment lead times.

Announcement of price increase

• Panels |+8% to 15% | Implementation in March and April.

Greater volumes shipped and leaner cost base. Announcement of price increase

• Entire Deca portfolio | +6% | Implementation in April.

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Consolidated Result

(in BRL million) 1Q17 1Q16 % Variance 4Q16 % Variance Net Income 952 901 5.6% 1,029 7.5% Wood Division 609 608 0.1% 692

• 12.0%

Deca Division 343 293 17.1% 337 1.9% EBITDA Adjust. & Rec. 148 106 39.4% 217 31.8% EBITDA margin Adjust. & Rec. 15.6% 11.8%

• 21.1%
• Net Profit

(7) (30) 74.6% 25

• 129.8%

Recurring Net Profit (9) (30) 68.6% 6 243.5% ROIC 1.3% 0.1%

• 3.6%
• 4%

2012 2013 2014 2015 2016 1Q16 1Q17

4% 10% 15% 19% 20% 16%

Participation in External Market

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Lower financial outlay Nominal reduction in G&A Expenses

Free Cash Flow

Maintenance & Projects Forest OPEX Mergers & Aquisitions

446 262 190

2014 2015 2016 1Q17

162 178 191

2014 2015 2016 1Q17

152 116 93

2014 2015 2016 1Q16

55 44

In millions of BRL

Working Capital incorporated into the Duratex Management System; Investments restricted to sustaining operations; Implementation of new S&OP model in both divisions; Renegotiation of lead times with suppliers; Land sales of around ~ R$ 2m.

44

1Q16

42

1Q16

67

1Q17

(in days) 1Q17 1Q16 4Q16 Receipt Lead time 64 69 63 Stock lead time 94 98 94 Payment lead time 28 23 25 Cash cycle 130 144 132

4 Working Capital Capex Taxes Others Financial Result Free Cash Flow EBITDA 148 106 29 (31) (99) (153) (8) (2) 2

• (42) (46)

30 (126) 2017 T1 2016 T1

(in BRL million) 1Q17 1Q16 Variance R$ 4Q16 Variance R$ Short term debt 620 850 (230) 681 (61) Long term debt 2,634 2,048 585 2,776 (142) Total Indebtedness 3,254 2,898 356 3,457 (203) Availability 1,219 748 472 1,416 (197) Net Indebtedness 2,034 2,151 (116) 2,041 (6) Net Indebtedness / PL (in %) 44.5% 47.8%

• 44.6%
• Net Indebtedness / Ebitda Rec. UDM

2.81 2.95

• 2.99
• 1,219

Cash Gross debt 2017 2018 2019 2020 2021 & beyond

3,254 620 628 720 470 816

Amortization Schedule (BRL million) Reduction of net indebtedness and of leverage in the quarter; Impact of the decrease in interest rates, reducing expenses;

Indebtedness

Average timescale 3.3 years (1Q16: 3.0 years) 5

WOOD DIVISION

Source: IBÁ In millions of m³

Panels Market in Brazil

7 2009 2010 2011 2012 2013 2014 2015 2016

2,4 3,0 3,1 3,5 3,9 4,0 3,6 3,5 0,9 0,9 21% 20% 21% 18%

2009 2010 2011 2012 2013 2014 2015 2016

2,4 2,9 3,0 3,2 3,2 3,0 2,5 2,5 0,6 0,6 38% 40% 39% 35%

MDF MDP

4,4 4,0 4,0 3,8 3,6 3,4 3,2 2,6 2,7 3,2 3,7 4,0 4,6 4,9 5,2 5,4

0,6 0,4 0,3 0,2 0,1

• 0,3

0,1 0,3 0,2 0,1

• 0,1

1,3

1Q17 1Q17

0,1

1,1

0,2

1,4

1Q16

• 1,0

1Q16 % Iddle Capacity Exports Domestic Market Demand Installed Capacity Installed Capacity

1Q17

Volume Shipped (m³)

585

4Q16

639

1Q17

609

4Q16

692

Net Income (BRL m)

1Q17

92

4Q16

175

Recurring EBITDA (BRL m)

20.2% 20.7% Gross Margin % 15.0% 11.6% Ebitda Margin %

Price base deteriorated since end of last year Concentration on line maintenance during the quarter, resulting in tighter profit margins

1Q16 1Q16 1Q16

601 608 71

25.3%

Performance of the Wood Division

Utilization of Capacity With Itapetininga Ex Itapetininga MDF 59% 78% MDP 53% 68% Wood Division 56% 71%

24.6%

Sale of surplus forestry assets

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Price increase in March ~15%

• 2.5%

0.1% 29.7%

DECA DIVISION

4.5%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

5.1% 8.5%

• 6.3%

11.9% 4.0% 0.7% 1.1%

• 5.9%
• 12.5% -11.5%

Measures revenue growth in the domestic market of the construction materials industry, relating performance to the same period the previous year.

ABRAMAT INDEX – DOMESTIC MARKET

Abramat forecasts that the performance of the civil construction materials market in 2017 will be unchanged from 2016

Source: ABRAMAT

Construction Materials Market

• 6.3%

1Q17 10

1Q17

6,806

4Q16

5,944

1Q17

343

4Q16

337

1Q17

57

4Q16

42

26.4% 31.0% Gross Marin % 16.5% 12.2% Ebitda Margin %

Volume Shipped (‘000 items) Net Income (BRL m) Recurring EBITDA (BRLm)

Increase in Volumes Strong performance from new launches

1Q16

5,422 293

1Q16

36

1Q16 12.4%

Performance of the Deca Division

Utilization of Capacity

Metals and Showers 81% Bathroom ware 62% Deca Division 75%

28.2%

Improvement in results triggered mainly by the capture of gains from the Duratex Management System

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25.5% 17.1% 58.5%

Expo Revestir

Once again our positioning centered on innovative products, displaying sustainable products and solutions which bring together design and technology.

We participated for the 15th time as Master Sponsor of the Furnishing Exhibition, (Expo Revestir) in São Paulo, the largest construction and architecture fair in Brazil

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Sustainability Strategy

People

Working Conditions and People Development

To have absenteeism level equal or lower than 1 for own employees and third parties

Engagement of Clients & Consumers

To have 50% of the product portfolio developed using co-creation models models

Relationship with Communities and Local Development 80% approval from the community of the engagement project

Processes

Eco-efficiency

To reduce the relative consumption of water by 10% To reduce relative landfill waste by 20%

Climate Change

To reduce absolute GEE Duratex emissions by 25% (scope 1)

Sustainable Management of Forests

To reduce water consumption per hectare by 50%

Responsible Supply Chain

100% strategic purchasing with socio-environmental criteria

Products & Services

Sustainable materials and Solutions

To develop 2 alternatives for renewable raw materials for Deca and Hydra Revenue of R$20 million from Pró-Água services Deca portfolio to be 100% eco-efficient finished metals and basins

New Business

Exploratory Fronts

2025

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Message from the Management

Focus on advancing the Internal Agenda, with initiatives relating to cost reduction, efficiency gains and growing working capital Investment restricted to sustaining the operations Liquidation of iddle assets Reduction of debt and deleveraging Consolidation of the journey of cultural transformation

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Disclaimer & Glossary

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The information herein has been prepared by Duratex S.A. and does not represent any form of prospectus regarding the purchase or subscription to the company’s shares or securities. This material contains general information relating to Duratex and the markets the company operates in. No representation or guarantee, expressed or implied, is made herein, and no reliance should be placed on the accuracy, justification or completeness of the information provided. Duratex does not offer any assurances or guarantees regarding the fulfilment of expectations described.

April, 2017

1) Recurring EBITDA: EBITDA adjusted for events not arising from the fluctuation in the fair value of biological assets, a combination of extraordinary business and events. 2) Recurring EBITDA UDM: Sum of Recurring EBITDA from the previous 12 months