EARNINGS RELEASE 3Q17

Transcription

1 EARNINGS RELEASE 3Q17 OCTOBER 26, 2017 ADJUSTED EBITDA REACHES R$ 750 MILLION IN 3Q17, 28% GROWTH IN RELATION TO THE SAME PERIOD IN ADJUSTED EBITDA R$ 750 mi PULP SALES VOLUME 353 mil t CONVERSION SALES VOLUME +7% vs 3Q16 NET REVENUE +13% vs 3Q16 NET DEBT/ EBITDA 4.4x Adjusted EBITDA was R$ 750 million in 3Q17, a year-on-year increase of 28%. Sales volume of pulp in the quarter was 353 thousand tonnes, an increase of 5% in relation to the preceding quarter. Conversion product sales in 3Q17 amounted to 196 thousand tonnes, 7% more than in the 3Q16, reflecting growth strategy in the segment. Growth in pulp and converted product sales boosted sales revenues that reached R$2,225 million in the quarter, up 13% in relation to the same period of the previous year. With the improvement in the company s operating cash generation during the quarter, the net debt/ebitda ratio decreased from 4.9x at the end of June to 4.4x by the end of September. KLABIN September Market Value: R$ 19.2 billion KLBN11 Closing Price: R$ Daily volume 3Q17: R$ 29 million CONFERENCE CALL Portuguese (with simultaneous translation) Friday, 10/27/17, 11:30 (Brasilia) Tel: (11) Password: Klabin IR invest@klabin.com.br

2 HIGHLIGHTS R$ million 3Q17 2Q17 3Q16 3Q17/2Q17 3Q17/3Q16 9M17 9M16 9M17/9M16 Sales volume (thousand tonnes) % 7% 2,378 1,873 27% % Domestic Market 49% 50% 44% -1 p.p. 5 p.p. 48% 51% -3 p.p. Net Revenue 2,225 1,984 1,965 12% 13% 6,075 5,127 18% % Domestic Market 60% 61% 57% -1 p.p. 3 p.p. 60% 60% 0 p.p. Adjusted EBITDA % 28% 1,883 1,635 15% Adjusted EBITDA Margin 34% 30% 30% 4 p.p. 4 p.p. 31% 32% -1 p.p. Net Income 391 (378) 31 n/a n/a 615 2,373-74% Net Debt 11,147 11,748 11,473-5% -3% 11,147 11,473-3% Net Debt / EBITDA (LTM - BRL) 4,4x 4,9x 5,1x 4,4x 5,1x Capex % -61% 677 2,055-67% Klabin presents its consolidated financial statements according to international accounting standards (International Financial Reporting Standards - IFRS) as determined by CVM 457/07 and CVM 485/10 instructions. Information on Vale do Corisco is not consolidated in the Financial Statements and is represented by the Equity Pick up method only. Adjusted EBITDA is in accordance with CVM Instruction 527/12. Notes: Some of the figures on the charts and tables may not express a precise result due to rounding. The EBITDA margin incorporates the effects of Vale do Corisco LTM last 12 months. SUMMARY The third quarter in Brazil was marked by more optimism in relation to the domestic economy with decoupling from a still very uncertain political scenario. Consequently, FX volatility was muted and the Ibovespa surged strongly to reach historic highs. The increase in optimism in relation to economic data in Brazil continued to benefit food producers and other non-durable consumer goods. As a reflection of this phenomenon, following strong first half growth, corrugated board shipments increased 6.1% in 3Q17 in relation to the same quarter in the previous year, as shown in data published by the Brazilian Corrugated Board Association (ABPO). For the year to September 2017, growth was 4.3%. Abroad, good US economic performance and more particularly, further growth in China, continued to boost global product prices such as pulp and kraftliner, positively feeding through to Klabin s results. In the international packaging paper markets, kraftliner prices continued to show significant increases during the third quarter of the year - list prices published by FOEX still not fully reflected in recent announcements by producers - ending the month of September at US$804/ton. After a 25% increase during the first half of the year, prices have again returned to record highs and representing a 12% increase in relation to the end of June. The continued pulp demand from emerging markets, especially from China, resulted in price improvements throughout the third quarter of In this context, hardwood list prices published by FOEX, reached in Europe US$890/tonne at the end of September and US$695/tonne in China, 7% and 8% increases in relation to prices on June 30, Market softwood list prices in Europe increased from US$890/ton to US$906/ton on the same comparison basis. Worthy of mention this quarter was the 7% increase in volumes sold by Klabin in relation to the same period last year, driven by the continued increase in Puma Unit s pulp sales, in addition to the good performance of the conversion paper market. In this context, in addition to the 5% increase in the volume of pulp sold in relation to the 2Q17, the company obtained a 7% increase in the volume of conversion 2

3 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep ,027 1,089 1,180 1,286 1,351 1,424 1,452 1,504 1,562 1,602 1,627 1,652 1,718 1,755 1,812 1,881 1,976 2,026 2,173 2,238 2,287 2,314 2,371 2,536 RELATÓRIO - 4T13 12 DE FEVEREIRO DE 2014 paper sold in relation to the 3Q16, mainly reflecting Klabin s good performance in the corrugated board market. While boosting net revenue growth by 13% on the same basis comparison at a lower average FX rate, the increase in volumes sold contributed to the dilution of fixed and administrative costs. This, allied to the Company s efforts to control costs, contributed to the EBITDA margin increase to 34% during the 3Q17 in comparison to the 30% of same period of the previous year and to the preceding quarter. On the back of the increase in volumes sold and net revenues, plus cost discipline, Klabin s adjusted EBITDA reached R$750 million in the quarter, 28% growth in relation to the same period of the previous year. During the last twelve months, adjusted EBITDA amounted to R$2,536 million, the 25th consecutive quarter of growth. 3, st QUARTER OF EBITDA GROWTH 2,500 2, , , LTM Last twelve months Sales Volume LTM (excluding wood million tonnes) Adjusted EBITDA LTM (R$ million) Exchange Rate After the higher volatility seen in the second quarter of the year, FX rates remained flat during the third quarter, ending the period on average at R$3.16/US$, respectively 2% and 3% below closing rates for 2Q17 and 3Q16. The closing rates used to convert foreign currency debt was R$3.17/US$, 4% lower than at the end of the second quarter R$ / US$ 3Q17 2Q17 3Q16 3Q17/2Q17 3Q17/3Q16 9M17 9M16 9M17/9M16 Average Rate % -3% % End Rate % -2% % Source: Bacen 3

4 OPERATING AND ECONOMIC-FINANCIAL PERFORMANCE Sales volume Klabin s sales volume during the third quarter, excluding wood, totaled 843 thousand tonnes, 7% more than in the 3Q16, driven by increases in the amount of pulp and converted products sold. During the quarter, pulp sales reported additional growth of 5% in comparison to the 2Q17, highlights being the sale of softwood and fluff, which increased by 16% on the same comparison basis. Total pulp volume in the third quarter was 353 thousand tonnes, with 254 thousand tonnes of hardwood and 99 thousand tonnes of softwood and fluff. Throughout the 3Q17, the sale of paper and packaging amounted to 490 thousand tonnes, 4% more than sales of the same products during the 3Q16. Once more, the highlight was the growth in conversion product sales, boosted by the acquisition of two new corrugated board plants finalized at the of 2016 and good momentum in Brazilian corrugated board shipments in line with data published by the ABPO (Brazilian Corrugated Board Association). Sales volume (excluding wood tsd tonnes) Sales volume by product 3Q % +17 Paper / Conversion +39 Pulp % Kraftliner 11% Others 2% 49% Conversion 24% Pulp 42% 44% 3Q16 3Q17 Coated Board 22% Domestic Market Exports Exports represented 51% of total volume sold. Growth in paper, converted product and softwood sales boosted domestic sales in comparison to the 3Q16, when exports accounted for 56%. Net Revenues Growth in the sale of all types of product boosted Klabin s sales revenue growth in comparison to the same period of Total sales revenues in the 3Q17, including wood, was R$2,225 million, 13% more than in the same quarter of the previous year. With larger volumes sold during the quarter, sales of hardwood, softwood and fluff pulps totaled R$656 million, 34% more than in 3Q16 and 13% above the 2Q17. Sales revenues from paper, packaging and wood were also boosted by higher volumes in the quarter and reached R$1,569 million, 6% more than in 3Q16, despite less favorable FX rates. 4

5 The larger pulp volumes and better international pulp and paper prices increased total export revenues, growing 7% when compared to the 3Q16, and 18% in comparison to 2Q17 and amounting to R$900 million in the quarter. The larger paper sales, converted products and fluff to Brazilian buyers also contributed to the increase in net revenues in the domestic market that grew by 18% in comparison to the same period in the previous year, reaching R$1,324 million. Exports as a share of total revenue were 40% in 3Q17 against 43% in the same quarter of Net Revenue (R$ million) Net Revenue by Product 3Q17 1,965 43% Celulose Pulp / Conversion/ Wood 2,225 40% Kraftliner 9% Others 2% Wood 4% Pulp 30% 60% 57% Conversion 30% Coated Board 25% 3Q16 3Q17 Domestic Market Exports Operating Costs and Expenses PULP CASH COST With the unveiling of pulp sales from the Puma Unit in 3Q16, for comparative purposes, the unit cash cost of pulp production is now disclosed for each quarter, contemplating production costs for hardwood, softwood and fluff and volumes produced during the period. The production cash cost does not include selling and general and administrative expenses, constituting exclusively amounts expended on pulp production. With the end of ramp-up operations, pulp production at the Puma Unit reached 358 thousand tonnes during the third quarter, the same level as the previous quarter. Thus, unit cash cost of pulp production during the 3Q17 was R$681/tonnes, 3% higher than in the 2Q17, mainly because of non-recurrent additional costs which impacted the month of August. Worthy of note also was the fact that the company was able to take full advantage of lower rainfall in the region, pushing wood harvesting further afield to areas where access is normally difficult during rainy periods, thus reflecting in one-off costs. During the month of September, without the impact from non-recurring items, unit cash cost of pulp production already posted lower levels, even when compared with 2Q17 level. 5

6 R$ 663 / t R$ 681 / t Others Labor Fuel Oil Chemical Wood Q17 3Q17 TOTAL CASH COST Total unit cash cost, which includes the sale of all Company products, reached R$1,751/tonne in the quarter, 2% less when compared to the same period of the previous year. The decrease in total unit cash costs is due to the larger volume of pulp production with lower cost per unit, the dilution effect of higher sales volume as well as lower selling and administrative expenses during the quarter explaining the decrease in total unit cash cost. Cash Cost Breakdown 3Q16 Cash Cost Breakdown 3Q17 Electricity 7% Maintenance materials / stoppage 9% Fuel Oil 4% Others 6% Labor / third parties 33% Electricity Maintenance 3% materials / stoppage 11% Fuel Oil 4% Others 4% Labor / third parties 36% Freight 12% Chemicals 13% Wood / Fibers 16% Freight 11% Chemicals 12% Wood / Fibers 19% Cost of goods sold during the quarter was R$1,652 million, 7% above the same period in the preceding year, in line with the increase in volumes sold. 6

7 Sales expenses totaled R$171 million in the quarter, 8% less in comparison to the 3Q16. The reduction is a reflection of normalization in commercial expenses following the ramp-up phase in pulp sales. In comparison to the 2Q17, expenses were up by 12%, mainly due to higher volumes sold during the period. Thus, 3Q17 sales expenses represent 7.7% of net revenues, the same as in the second quarter of the year and a drop in relation to the 9.5% registered in 3Q16. General and administrative expenses were flat in comparison to 3Q16, totaling R$125 million in 3Q17. The highlight for the quarter stemmed from the company s efforts that focused on the normalization of administrative expenses after adjustments in structures to allow for the new pulp operations, offsetting the impacts of inflation and annual wage increases during the period. Comparing 2Q17, general and administrative expenses posted an 8% drop, due to lower non-recurring items in the period. Other operational revenues / expenses resulted in a R$14 million expense during the period. Effects of the variation of fair value of biological assets During 3Q17, the effects of the variation in fair value of biological assets was positive at R$ 145 million, reflecting principally the growth in forest plantations and recognized at their fair value. In turn, the depletion effect of fair value of the biological assets on the costs of goods sold was R$ 205 million in the period under review. Hence, the non-cash effect of the fair value of biological assets on operational results (EBIT) was a negative R$ 60 million in the quarter. Operating Cash Generation (EBITDA) R$ million 3Q17 2Q17 3Q16 3Q17/2Q17 3Q17/3Q16 9M17 9M16 9M17/9M16 Net Income (loss) 391 (378) 31 n/a n/a 615 2,373-74% (+) Income taxes and social contribution 351 (223) (15) n/a n/a % (+) Net Financial Revenues (330) n/a n/a 21 (2,052) n/a (+) Depreciation, amortization, depletion % 10% 1,565 1,017 54% Adjustments according to IN CVM 527/12 art. 4º (+) Biological assets adjustment (145) (102) (133) 42% 9% (702) (469) 50% (-) Equity Pickup (5) 1 (9) n/a -43% (11) (33) -68% (+) Vale do Corisco % -100% % Ajusted EBITDA % 28% 1,883 1,635 15% Adjusted EBITDA Margin 34% 30% 30% 4 p.p. 4 p.p. 31% 32% -1 p.p. n/a - Not applicable Note: Adjusted EBITDA margin is calculated considering the pro forma net revenue, which includes Vale do Corisco A highly competitive and diversified line of quality products together with the completion of ramp-up at the pulp unit, were both instrumental in Klabin increasing volumes sold to all segments during the 3Q17. Improved international kraftliner and pulp prices and strong demand for converted products in Brazil, drove sales growth both in the domestic and export market. In addition to net revenue growth, the new level in cost and the important improvements in general, administrative and sales expenses during the period contributed to the significant Adjusted EBITDA growth during 3Q17. Thus, operating cash generation (Adjusted EBITDA) was R$750 million with a 34% margin and a 28% increase in comparison to the 3Q16 resulting in the 25th consecutive quarter of growth. 7

8 Free cash flow R$ million 3Q17 2Q17 3Q16 9M17 9M16 LTM Adjusted EBITDA ,883 1,635 2,536 (-) Capex (216) (209) (552) (676) (2,055) (1,187) (-) Interest paid/received (177) (57) (118) (471) (454) (559) (-) Income tax (1) (2) (1) (5) (15) (124) (+/-) Working Capital (182) (103) 72 (-) Dividends (119) (108) (108) (357) (331) (474) (+/-) Others 53 (4) Free Cash Flow (1,275) 315 Dividends Puma Project , Special projects and growth Adjusted Free Cash Flow* , ,385 Adjusted FCF Yield 9.2% * excluding dividends and expansion projects - LTM - last twelve months. - Yield - Adjusted FCF per share (excluding treasury stock) divided by the average price of the Units in the LTM. Before dividends and expansion projects, free cash flow was positive at R$ 290 million in the period. In the ninemonth period, free cash flow was R$ 1,150 million, up from R$ 729 million in 9M16, mainly explained by the growth in operating cash generation and greater working capital efficiency. The FCL yield of the last twelve months was 9.2%. Debt and financial investments Gross debt on September 30, 2017 was R$18,848 million, a R$146 million increase in relation to the end of 2Q17, impacted on the one hand the offering during the period of US$500 million in Green Bonds and on the other, by the effect of exchange rate reductions on currency denominated debt in addition to the amortization of some lines of finance. Out of total debt, R$13,636 million, or 72% (US$ 4,302 million), are dollar denominated. Average maturity increased from 44 to 51 months as a result of the new issue. Average maturity for domestic funding was 39 months and 53 months for currency denominated funding. Short term debt at the end of the quarter was 12% of the total with the average cost of local funding and currency-denominated lines being 8.3%p.a. and 4.9% p.a. respectively. The company s position in cash and financial investments at the end of 3Q17 amounted to R$7,701 million, R$747 million more than at the end of the 2Q17, the effect of cash generation, the bond issue and amortizations during the period. This amount in cash and financial investments is equivalent to debt payments maturing over the next 47 months. Consolidated net debt on September 30, 2017 amounted to R$ 11,147 million, a reduction of R$ 601 million against June 30, 2017, in large part due to cash generation and to the currency translation effect on dollar denominated debt. This contributed to Klabin s planned deleveraging, the company ending the period with a net debt /Adjusted EBITDA ratio of 4.4x, a 0.5x reduction in comparison to 2Q17. 8

9 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 12,009 11,382 11,473 12,005 11,377 11,748 11,147 RELATÓRIO - 4T13 12 DE FEVEREIRO DE 2014 NET DEBT AND LEVERAGE 17,000 15,000 13,000 11,000 9,000 7,000 5,000 3,000 1,000 (1,000) Net Debt (R$ million) Net Debt/EBITDA (R$) Debt (R$ million) Short term sep-17 jun-17 Local currency 917 5% % Foreign currency % % Total short term % % Long term Local currency % % Foreign currency % % Total long term % % Total local currency % % Total foreign currency % % Gross debt (-) Cash Net debt Net debt / EBITDA (LTM) 4.4x 4.9x Financial Result Financial expenses were R$ 315 million in the quarter, an R$ 25 million reduction in relation to 2Q17. Financial revenues reached R$ 149 million, R$ 79 million below the preceding quarter. Consequently, the financial result in the period, excluding the currency translation effect, was a negative R$ 165 million. FX rates ended the quarter at 4% below the rate for the end of 2Q17. Thus, due to the impact on the Company s currency denominated debt, net FX variation amounted to a positive R$ 495 million in 3Q17. Note that the effect of FX variation on the company s balance sheet is purely an accounting one with no short-term cash effect. 9

10 BUSINESS PERFORMANCE Consolidated information per unit in 9M17: R$ million Forestry Pulp Papers Conversion Consolidation Total Net revenue Domestic market ,180 1,834 (3) 3,655 Exports - 1, ,420 Third part revenue 236 1,693 2,154 1,995 (3) 6,075 Segments revenue 1, (2,031) - Total net revenue 1,244 1,732 3,121 2,012 (2,034) 6,075 Change in fair value - biological assets Cost of goods sold (1,717) (1,280) (2,262) (1,687) 2,027 (4,919) Gross income (7) 1,886 Operating expenses (69) (242) (281) (245) (27) (864) Operating results before financial results (34) 1,022 Note: In this table, total net revenue includes sales of other products. * Forestry COGS includes the exaustion of the fair value of biological assets in the period. FORESTRY BUSINESS UNIT Volume (1.000 tonnes) 3Q17 2Q17 3Q16 3Q17/2Q17 3Q17/3Q16 9M17 9M16 9M17/9M16 Wood % -3% 1,725 1,674 3% R$ million Wood % 10% % In the third quarter 2017, sales volume of wood logs to third parties was 636 thousand tonnes, 3% less than posted in 3Q16. On the other hand, the more favorable mix and prices increased revenues by 10% year-on-year. PULP BUSINESS UNIT Production Volume (1.000 tonnes) 3Q17 2Q17 3Q16 3Q17/2Q17 3Q17/3Q16 9M17 9M16 9M17/9M16 Short Fiber % 24% % Long Fiber % 15% % Total Pulp Volume % 22% 1, % 10

11 Sales Volume Volume (1.000 tonnes) 3Q17 2Q17 3Q16 3Q17/2Q17 3Q17/3Q16 9M17 9M16 9M17/9M16 Short Fiber DM % 16% % Short Fiber EM % 17% % Total short fiber volume % 16% % Long Fiber DM % 312% % Long Fiber EM % -37% % Total long fiber volume % 3% % Total pulp volume % 12% % R$ million Short Fiber % 40% 1, % Long Fiber % 23% % Total Pulp Revenues % 34% 1, % Continued strong demand from Asian countries and below forecast growth in supply continued to influence international prices for hardwood pulp, thus maintaining the scenario prevailing in the first half. List prices for hardwood pulp in Europe published by FOEX rose 7% in relation to the end of June, reaching US$ 890/tonne. Trends in the price list for international markets influenced prices throughout the period, more especially towards the end of the quarter and these are expected to be reflected in growing US Dollar revenue. Pulp sales volume in the period rose 5% compared with 2Q17 and reached 353 thousand tonnes, of which 254 thousand was hardwood and 99 thousand tonnes, softwood and fluff. Pulp volume produced in the quarter was 358 thousand tonnes. Sales of hardwood are mainly anchored to an agreement with Fibria signed in May Under this agreement, Klabin supplies Fibria with a minimum of 900 thousand tonnes of hardwood pulp annually, to be sold by Fibria on an exclusive basis to countries outside South America. Klabin commercializes directly all of the remaining output from Puma, hardwood pulp being sold in Brazil and South America, and softwood and fluff pulps in both domestic and global markets. In the same path of LyptusCel, Klabin s short fiber pulp, which has been widely accepted in Fibria's various markets, Company s PineCel (long fiber) and PineFluff have also shown excellent acceptance, evidenced by growth of the exports of these products, which already reached 34 different markets. 11

12 PAPER BUSINESS UNIT Kraftliner 3Q17/2Q17 3Q17/3Q16 9M17 9M16 9M17/9M16 Volume (1.000 tonnes) 3Q17 2Q17 3Q16 Kraftliner DM % 39% % Kraftliner EM % -13% % Total Kraftliner % -2% % Coated boards DM % -2% % Coated boards EM % 10% % Total Coated boards % 3% % Total Paper % 2% % R$ million Kraftliner % 10% % Coated boards % 2% 1,530 1,612-5% Total Paper % 4% 2,059 2,231-8% Global kraftliner prices have been reporting increases since the beginning of 2017, FOEX list prices in Europe closing September at US$ 804/tonne, 12% higher in relation to values reported at the end of 2Q17. The price rises are expected to continue to be reflected in Klabin s last quarter results and are indicative of strong global demand for virgin fiber papers. The currently strong sales of corrugated boxes and the two acquisitions concluded by Klabin in this segment at the end of 2016 have increased paper volumes being delivered to the conversion units. However, with the greater use of recycled papers destined for the corrugated box market, kraftliner volumes for sale to third parties were flat during the quarter in comparison to the 3Q16. Coated Boards In the coated boards market, in this quarter Klabin achieved a 3% increase in sales volume compared to 3Q16, driven mainly by higher export sales. With the domestic coated boards market giving the first signs of stability, Klabin allocated higher sales volume to the foreign market, especially for the food segment. Therefore, Klabin's sales for export increased by 10% in relation to the same period of the previous year, using its flexibility of destination and of products to different markets. CONVERSION UNIT BUSINESS Volume (1.000 tonnes) 3Q17 2Q17 3Q16 3Q17/2Q17 3Q17/3Q16 9M17 9M16 9M17/9M16 Total conversion % 7% % R$ million Total conversion % 10% 1,954 1,763 11% Brazilian Corrugated Board Association (ABPO) data for corrugated boxes shipments again showed a strong evolution in 3Q17, reporting growth of 6.1% in relation to 3Q16 and 4.3% for the first nine months in relation to the same periods in In 3Q17, the improvement was not only in sales to the food industry but also to some industrial 12

13 segments of the economy where hitherto there had been no signs of recovery. Klabin, in the quarter, boosted by recent acquisitions, recorded even stronger growth in sales volume in comparison. In the industrial bags market, Klabin is increasingly focusing its business on new markets such as fertilizers, food and coffee in view of decreased demand of 7.4% from the cement industry in the first nine months of 2017 as registered in National Cement Industry Union statistics. In the export market, Klabin continues to pursue its strategy of industrial bag sales to growing markets such as Mexico and United States where it is successfully selling to both the civil construction industry as well as to the food, grains and chemicals market. In the light of the foregoing scenario, Klabin reported a 7% year-on-year growth in conversion volume in 3Q17 and 9% in 9M17 in relation to 9M16. Despite the negative effect of currency rates on exports of industrial bags, revenues also rose year-on-year by 10% and 11% respectively, once more demonstrating the company s ability to adapt and compete under different markets conditions. INVESTMENTS R$ million 3Q17 2Q17 9M17 Forestry Maintenance Special projects and growth Puma Project Total performance in all the segments in which the Company operates. Klabin invested R$ 216 million in 3Q17. Of the total invested in the quarter, R$ 54 million was allocated to forestry operations, R$ 99 million to investments in the operational continuity of the plants, R$23 million in remaining investments at the Puma unit and R$ 40 million to special and expansion projects, more particularly those with a high return for improving CAPITAL MARKETS Equity Markets In the third quarter of 2017, Klabin s units (KLBN11) reported an appreciation of 13% in line with the 18% appreciation of the IBOVESPA. Trading on every day B3 was open for business, the Units registered 447 thousand transactions involving 111 million securities and an average daily trading volume of R$30 million at the end of the period. Klabin s capital stock comprises 4,733 million shares, of which 1,849 million are common and 2,884 million, preferred shares. The Company s shares are also traded in the United States market and listed under a Level I ADR program on the Over-the-Counter market under the KLBAY ticker symbol. Klabin is a component of B3 s Corporate Sustainability Index (ISE). The index represents shares of companies that are outstanding in the degree of their commitment to the sustainability of the businesses and the country as a whole. The participating companies are selected annually, based on the criteria of the Getúlio Vargas Foundation s Center for Sustainability Studies (GVces). 13

14 KLBN11 x Ibovespa Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 KLBN11 Ibovespa Index Dividends In the third quarter of 2017, the Company paid out R$ 119 million in dividends on August 11, Further dividend payments of R$ 150 million were approved in a Board Meeting realized at October 25, reflecting a payout of R$ per lot of a thousand shares and R$ per lot of a thousand Units, to be paid on November 14, % 2.2% 2.8% 3.3% 4.5% 3.5% 2.5% % % -0.5% -1.5% LTM Dividends payment (R$ million) Dividend Yield -2.5% LTM Last twelve months Fixed Income Klabin s securities representing debt (notes) maturing in October 2024, have an issue value of US$ 500 million and are listed in the secondary market of the Luxembourg Stock Exchange. The Notes were issued at a coupon rate of 5.25% p.a. with interest disbursed semi-annually in January and October. Klabin has an investment grade rating of BB+ from Fitch Ratings and Standard & Poors. 14

15 US$/note RELATÓRIO - 4T13 12 DE FEVEREIRO DE Notes Klabin , Green Bonds On September 12, 2017, Klabin completed its first green bond offering of US$500,000, (five hundred million dollars), coupon of 4.875% p.a. and maturing on September 19, Pioneer in the adoption of sustainable practices, the company is a bellwether in sustainable development, having been classified as High Standard by the Sustainalytics consultancy. The issue will be used to underscore Klabin s sustainable strategic planning performance and is in synergy with the vision and commitments of the company s Sustainability Policy. The proceeds from the issue will be allocated to projects for reinforcing Klabin s socio-environmental performance. Klabin Investor Day Klabin invites its shareholders, partners, the market and the general public for the first Klabin Investor Day, to be held on December 1 at the newly opened Technology Center, located in the city of Telemaco Borba / PR. The event will be attended by company executives, who will present the Company's results and strategies. In addition, site visits to the Monte Alegre and Puma units will be available for the participants. For further information, contact us by at klabinday@maringaturismo.com.br. 15

16 CONFERENCE CALL Portuguese Sexta-feira, 27 de Outubro de h30 (Brasília). Senha: Klabin Telefone: (11) ou (11) Replay: (11) ou (11) Senha: # O áudio da Teleconferência também será transmitido pela internet. Acesso: English (simultaneous translation) Friday, October 27, :30 a.m. (NY). Password: Klabin Phone: U.S. participants: International participants: Brazilian participants: (55 11) or (55 11) Replay: (55 11) or (55 11) Password: # The conference call will also be broadcasted by internet. Access: Klabin is the largest integrated producer, exporter and packaging paper recycler in Brazil with gross revenues of R$ 8.2 billion in The Company has a capacity to produce 3.5 million tonnes of products annually. It has defined the strategic focus of its operation on the following businesses: paper and coated boards for packaging, short and long fiber pulp, corrugated boxes, industrial bags and wood logs. The Company is a leader in all markets in which it operates. Statements in this release relative to the Company s business perspectives, estimates for operational and financial and the Company s potential growth are merely forecasts and based on Management s expectations in relation to the future of the Company. These expectations are highly dependent on market changes, on Brazilian general economic performance, on the industry and on international markets, therefore being subject to change. 16

17 Appendix 1 Consolidated Income Statement (R$ thousand) (R$ thousands) 3Q17 2Q17 3Q16 3Q17/2Q17 3Q17/3Q16 9M17 9M16 9M17/9M16 Gross Revenue 2,575,004 2,241,657 2,260,526 15% 14% 7,056,853 5,941,089 19% Net Revenue 2,224,595 1,984,195 1,964,848 12% 13% 6,075,482 5,126,953 19% Change in fair value - biological assets 145, , ,745 42% 4% 730, ,634 54% Cost of Products Sold (1,652,498) (1,738,226) (1,537,686) -5% 7% (4,918,573) (3,797,491) 30% Gross Profit 717, , , % 27% 1,887,164 1,805,096 5% Selling Expenses (170,747) (152,008) (186,008) 12% -8% (478,124) (418,753) 14% General & Administrative Expenses (125,499) (136,726) (124,623) -8% 1% (387,296) (335,789) 15% Other Revenues (Expenses) (14,340) 11,131 7,768 n/a n/a (10,256) 3,670 n/a Total Operating Expenses (310,586) (277,603) (302,863) 12% 3% (875,676) (750,872) 17% Operating Income (before Fin. Results) 406,615 70, , % 54% 1,011,488 1,054,224-4% Equity pickup 5,295 (1,177) 9,352 n/a -43% 10,707 33,131-68% Financial Expenses (314,878) (339,952) (341,795) -7% -8% (980,251) (876,571) 12% Financial Revenues 149, , ,305-34% -8% 643, ,509-8% Net Foreign Exchange Losses 495,485 (557,367) (77,109) n/a n/a 316,390 2,228,339-86% Net Financial Revenues 330,104 (669,196) (256,599) n/a n/a (20,699) 2,052,277 n/a Net Income before Taxes 742,014 (600,162) 16,797 n/a 4318% 1,001,496 3,139,632-68% Income Tax and Soc. Contrib. (351,394) 222,579 14,649 n/a n/a (386,434) (766,548) -50% Net income 390,620 (377,583) 31,446 n/a 1142% 615,062 2,373,084-74% Depreciation and amortization 488, , ,550-22% 10% 1,564,663 1,017,197 54% Change in fair value of biological assets (145,104) (101,845) (139,745) 42% 4% (730,255) (475,634) 54% Vale do Corisco , % -100% 9,124 32,273-72% Adjusted EBITDA 749, , ,041 26% 28% 1,883,223 1,634,793 15% 17

18 Appendix 2 Consolidated Balance Sheet (R$ thousand) Assets Sep-17 Jun-17 Liabilities and Stockholders' Equity Sep-17 Current Assets 11,277,315 10,257,144 Current Liabilities 3,488,779 3,557,326 Cash and banks 25,322 22,870 Loans and financing 2,086,903 2,066,774 Short-term investments 7,043,448 6,316,867 Debentures 253, ,841 Securities 632, ,562 Suppliers 578, ,420 Receivables 1,792,581 1,400,592 Taxes payable 45,242 52,818 Inventories 906, ,586 Salaries and payroll charges 309, ,177 Recoverble taxes and contributions 600, ,726 Dividends to pay 0 101,000 Other receivables 276, ,941 REFIS Adherence 64,312 69,142 Other accounts payable 150, ,154 Noncurrent Assets 18,884,512 19,121,331 Long term Noncurrent Liabilities 19,175,650 18,692,213 Taxes to compensate 1,438,126 1,493,877 Loans and financing 15,846,857 15,702,566 Judicial Deposits 88,218 87,167 Debentures 660, ,268 Other receivables 339, ,979 Deferred income tax and social contribution 1,715,491 1,459,751 Other investments 176, ,995 Other accounts payable - Investors SCPs 268, ,424 Property, plant & equipment, net 12,611,085 12,747,566 REFIS Adherence 321, ,616 Biological assets 4,139,334 4,178,530 Other accounts payable 362, ,588 Intangible assets 91,715 93,217 Stockholders Equity 7,497,398 7,128,936 Capital 2,384,484 2,384,484 Capital reserve 1,319,553 1,319,553 Revaluation reserve 48,704 48,704 Profit reserve 2,928,366 2,558,404 Valuation adjustments to shareholders'equit 1,022,331 1,023,831 Treasury stock (206,040) (206,040) Total 30,161,827 29,378,475 Total 30,161,827 29,378,475 Jun-17 18

19 Appendix 3 Loan Maturity Schedule 9/30/17 R$ million 4Q /26/27 Total BNDES ,544 Others ,753 Debentures Interests Local Currency , , ,211 Trade Finance ,299 1,230 1,428 1, ,384 Fixed Assets ,210 Bonds ,573 1,573 3,165 ECA's ,877 Foreign Currency ,382 1,760 1,671 1,859 1,895 1,064 1,950 1,789 13,636 Gross Debt ,267 2,343 2,707 2,418 3,184 1,438 2,235 1,789 18,848 R$ million 3,184 Average Cost Average Tenor Local Currency 8.3% p.y. 39 months Foreign Currency 4.9% p.y. 53 months Gross Debt 51 months 1,895 2,707 2,267 1,382 2,343 1,760 1,671 2,418 1,859 2,235 1,789 Foreign Currency 13,636 1,289 1,438 1,064 1,950 1,789 Gross Debt 18,848 1, Local Currency 5,211 4Q /26/27 Local currency : R$ 5.2 billion Average tenor: 39 months Foreign currency: R$ 13.6 billion Average tenor : 53 months 19

20 Appendix 4 - Consolidated Cash Flow (R$ thousand) 3Q17 3Q16 9M17 9M16 Cash flow from operating activities 264, ,234 1,456, ,672 Operating activities 505, ,611 1,329, ,611. Net income 390,620 31, ,062 2,373,084. Depreciation and amortization 247, , , ,370. Depletion in biological assets 240, , , ,827. Change in fair value - biolgical assets (145,104) (139,745) (730,255) (475,634). Equity results (1,602) (17,655) 18,617 (40,370). Results on Equity Pickup (5,295) (9,352) (10,707) (33,131). Deferred income taxes and social contribution 255,332 (56,129) 171, ,712.Income taxes and social contribution (1,119) (920) (5,098) (14,901). Interest and exchange variation on loans and financing (263,341) 336, ,765 (1,803,471). Interest, exchange variation and profit sharing of debentures 151,436 24,971 78,847 41,558. Variation of the present value of debentures 3,846 7,254 12,674 21,762. Payment of interest on loans (323,799) (280,312) (827,030) (768,864). REFIS Reserve 9,456 12,556 31,105 37,093. Others (53,828) 16,354 (18,600) 39,576 Variations in Assets and Liabilities (240,368) 241, ,259 (102,939). Receivables (391,989) 88,620 (167,201) 146,832. Inventories 26,057 37,508 (29,614) (174,049). Recoverable taxes 194,732 (45,558) 324,135 (409,413). Marketable Securities (17,560) 17,516 (40,819) (19,626). Prepaid expenses Other receivables (102,166) (83,793) (65,498) (153,546). Suppliers 8, ,965 72, ,884. Taxes and payable (7,576) 6,450 (8,401) (2,497). Salaries, vacation and payroll charges 63,255 52,389 51,720 81,578. Other payables (14,044) 26,526 (9,629) (38,102) Net Cash Investing Activities (210,977) (550,237) (601,857) (2,045,903). Purchase of property, plant and equipment (160,083) (517,068) (512,026) (1,958,680). Cust biological assets planting (ex taxes) (56,246) (35,664) (164,950) (96,746) Acquisition of investments and payment of capital in subsidiaries Sale of property, plant and equipment Income of assets sale 5,352 1,737 75,119 8,765 Net Cash Financing Activities 675,375 40, ,098 1,438,249. New loans and financing 1,546, ,068 3,494,894 3,262,870. Debentures capitalization Debentures interest payment (2,659) - (286,875) (385,857). Loan amortization (794,661) (173,761) (2,521,880) (1,152,766). Minority shareholders entry 132,766 65, ,766 65,000. Minority shareholders exit (87,202) (156) (122,526) (17,517). Dividends payment (119,090) (107,988) (356,910) (330,503). Stocks repurchase - (2,593) (11,468) (9,194). Stocks disposal ,097 6,216 Increase (Decrease) in cash and cash equivalents 729, ,567 1,196, ,018 Cash and cash equivalents at beginning of period 6,339,737 5,216,174 5,872,720 5,053,723 Cash and cash equivalents at end of period 7,068,770 5,317,741 7,068,770 5,317,