Quarterly Report 3Q18 OCTOBER

Transcription

1 Quarterly Report 3Q18 OCTOBER ADJUSTED EBITDA FOR THE QUARTER REACHES R$ BILLION IN 3Q18, YEAR-ON-YEAR GROWTH OF 66%. ADJUSTED EBITDA SALES REVENUES LEVERAGE REDUCTION PULP PRODUCTION EBITDA MARGIN OF R$ bi R$ bi 0,5x 404 K t 44% Adjusted EBITDA Net sales revenues At the end of Puma Unit produced EBITDA margin of reported a 66% growth increased 26% versus September net 404 thousand tons of 44% in 3Q18, a year- in 3Q18 in relation to 3Q17 driven by the debt/ebitda ratio pulp in the quarter, a on-year improvement the same period of improved price reduced to 3.4x, 0.5x record volume since of 10 p.p scenario. less when compared start-up. nnnnnnnnnnnn Lllll to 2Q18 nnnn. nn d.n Klabin Market Value* R$ 21.5 billion *based on price of KLBN11 KLBN11 Closing price R$ Daily average volume 3Q18 R$ 48.7 million Teleconferência Portuguese (with simultaneous translation) Tuesday, 10/30/2018 at 10h00 NY time Tel: (+55 11) Password: Klabin RI invest@klabin.com.br

2 FINANCIAL HIGHLIGHTS R$ million 3Q18 2Q18 3Q17 3Q18/2Q18 3Q18/3Q17 9M18 9M17 9M18/9M17 Sales volume (thousand tonnes) % 1% 2,328 2,378-2% % Domestic Market 49% 52% 49% - 3 p.p. + 0 p.p. 51% 48% + 3 p.p. Net Revenue 2,807 2,235 2,225 26% 26% 7,231 6,075 19% % Domestic Market 53% 57% 60% - 4 p.p. - 7 p.p. 56% 60% - 4 p.p. Adjusted EBITDA 1, % 66% 2,891 1,883 54% Adjusted EBITDA Margin 44% 40% 34% + 4 p.p p.p. 40% 31% + 9 p.p. Net Income 104 (955) 391 n/a -73% (726) 615 n/a Net Debt 12,816 12,597 11,147 2% 15% 12,816 11,147 15% Net Debt / EBITDA (LTM - BRL) 3.4x 3.9x 4.4x 3.4x 4.4x Net Debt / EBITDA (LTM - USD) 3.0x 3.3x 4.4x 3.0x 4.4x Capex % 17% % 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. 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 Brazilian market focus in the third quarter 2018 centered on the upcoming general elections and the possible consequences for the country on both fiscal and economic fronts over the next few years. In addition, greater risk aversion in relation to emerging market economies, increasing global interest rates and continuing uncertainty surrounding the trade war between the United States and China maintained volatility high especially in FX and stock markets. In this context, the food industry as well as other non-durable consumer goods producers proved their resilience, being less affected by this unsettled scenario. Corrugated box shipments increased by 2.5% in 3Q18 in relation to the same period of 2017, as revealed in data published by the Brazilian Corrugated Board Association (ABPO). Growth for the first nine months was 2.0%, negatively impacted by truckers strike in Brazil in May. On the international front, despite summer vacations in the northern hemisphere and uncertainties of protectionist trade measures by the United Sates, continued demand mainly from China combined with environmental protection measures restricting the use of recycled materials continued to lend support for packaging paper and pulp prices globally. Demand in Kraftliner market remained buoyant during the quarter, and European list prices, published by FOEX, ended 3Q18 on average at US$861/tonne. This represents an 11% year-onyear increase. Consistent pulp demand especially from China saw the improving tendency in prices remain in place throughout the third quarter In this context, hardwood (short fiber) list prices, published by FOEX, reached US$ 1.050/t during 3Q18 in Europe, a 1% increase in relation to prices in 2Q18 and 20% compared with the same period in Softwood (long fiber) market price increases were even stronger, with European list prices on average in the quarter at US$1,227/t versus US$1,159/t in 2Q18, and US$ 894/t at the end of 3Q17, 6% and 37% increases, respectively. These changes led to a strong increase in spreads between hardwood and softwood prices, rising from US$150/t in Europe at the end of 2Q18 to US$180/t in the quarter under review. 2

3 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-17 Dec-17 Mar-18 Jun-18 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 2,738 2,959 3,248 3,746 EARNINGS 3Q18 OCTOBER 29, 2018 Maximizing its innate advantages of flexibility coupled with the good performance at the Puma unit the latter reporting record production and cash cost during the period - Klabin concentrated sales volumes on those products showing the most significant price increases during the last few months. In this context, the Company registered sales volume increases in pulp and kraftliner of 12% and 3%, respectively relative to 3Q17. of increased revenue and cost discipline, EBITDA margin in 3Q18 reached 44% versus 34% in 3Q17. Adjusted EBITDA also rose in 3Q18 to reach R$ 1,248 million, a record for the Company, a 66% increase year-on-year and the 29 th consecutive quarter of growth. In the last twelve months, adjusted EBITDA was R$ 3,746 million. Price and product mix improvements boosted net revenue growth by 26% year-on-year. In the light 4, th QUARTER OF EBITDA GROWTH 3,500 3,000 2,500 2,000 1,500 1, LTM Last Twelve Months Sales Volume LTM (excluding wood million tonnes) Adjusted EBITDA LTM (R$ million) Exchange Rate The R$/US$ rate continued on a weakening trajectory during the quarter, mainly on the back of political and economic uncertainties both in domestic and foreign markets, a reflection of key factors such as: the trade war, OPEP-inspired adjustments in oil prices, increased FED rates and Brazilian elections. The average FX rate for the period was R$3.94/US$, a 9% devaluation in relation to 2Q18 and 25% in relation to 3Q17. The closing rate for marking currency denominated debt was R$4.00/US$, a 4% depreciation in relation to the rate at the end of second quarter R$ / US$ 3Q18 2Q18 3Q17 3Q18/2Q18 3Q18/3Q17 9M18 9M17 9M18/9M17 Average Rate % 25% % End Rate % 26% % Source: Brazilian Central Bank 3

4 OPERATING AND ECONOMIC FINANCIAL PERFORMANCE Sales volume Klabin s total sales volume during the third quarter, excluding wood, totaled 854 thousand tonnes, versus 843 thousand tonnes sold in the same period of the previous year, especially on the back of Puma Unit s good performance. Pulp sales during the period reached 395 thousand tons, a 12% growth in comparison to 3Q17, of which 289 thousand tonnes of hardwood and 106 thousand tonnes of softwood and fluff. Sales Volume (excluding wood tsd tons) % -31 Paper / Packaging +42 Pulp % Sales Volume by Product 3Q18 Kraftliner 11% Other 1% 49% 49% Coated Boards 18% Pulp 46% Packaging 24% 3Q17 Domestic Market 3Q18 Exports It is worth highlighting the 3% increase in kraftliner sales volume in the paper and packaging markets, reflecting the Company s flexibility in seeking out markets with the best returns. Also a highlight is the performance of the packaging units supported Klabin s strong positioning in markets such as fruits in the Northeast and industrial bags for exports, partially offsetting the still weak demand from the domestic civil construction market. Net Revenues Net revenues grew 26% in 3Q18 in comparison to the same period of 2017, reaching R$2,807 million. The growth is a reflection of higher pulp sales volumes, good price momentum in international markets, in addition to the devaluation of the Real in relation to the US dollar during the period and enhanced by Klabin s flexibility in switching sales to markets where returns are better. Worthy of note is the year-on-year 72% and 39% increases in revenues from the pulp and Kraftliner markets, respectively. In addition to improvements in prices and to higher volumes, these markets were direct 4

5 beneficiaries of the local currency s devaluation. In this context, export revenue increased by 45% versus 3Q17and now accounts for a 47% share of total revenues. Net Revenue (R$ million) Net Revenue by Product 3Q % +110 Paper / Packaging / Wood +472 Pulp 47% Kraftliner 10% Wood 3% Other 1% 60% 53% Coated Boards 19% Pulp 40% Packaging 27% 3Q17 Domestic Market 3Q18 Exports Operating Costs and Expenses PULP CASH COST For comparative purposes, the unit cash cost of pulp production is 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 as such. During the quarter, Puma Unit produced above nominal capacity, reaching an output of 404 thousand tonnes, 14% above the same quarter of the previous year. This is an all-time record for a quarter since plant start-up and had a direct effect in diluting the Unit s fixed costs. Another important factor contributing to cash cost reduction, in addition to lower lumber prices, was higher energy generation, boosted by price increases in spot markets. Consequently, the unit cash cost of pulp production during 3Q18 was R$ 628/ton, 8% less than in the same period of the previous year and 18% lower than 2Q18. This also represents another record - the lowest production cash cost since the Puma Unit began operations. 5

6 R$ 681 / t Cash Cost Composition Pulp R$ 628 / t Others Labor Fuel Oil Chemical Wood Q17 3Q18 TOTAL CASH COST Total unit cash cost, which includes the sale of all Company products, reached R$ 1,826/t in the quarter, a 4% increase in relation to 3Q17. Despite the impact of higher freight, chemical and fuel costs seen during the period, a reduction in lumber costs and higher energy efficiency at the Puma Unit offset these increases. Cost of goods sold during the quarter was R$ 1,613 million, 2% below the same period in the preceding year. This value represents a 4% reduction per tonne on the same comparative basis impacted mainly by lower wood costs and improvements in energetic efficiency, especially at the Puma Unit and more than offsetting increases in chemical and fuel costs during the period. Sales expenses totaled R$ 206 million in the quarter, versus R$ 171 million in 3Q17. In addition to the increase in Company sales volume, increased freight costs, a direct effect of the truckers strike, and more expensive maritime freight charges were largely responsible for driving up expenses. General and administrative expenses totaled R$ 139 million in the quarter, compared to R$ 125 million in the 3Q17 and R$ 132 million in 2Q18. The adjustments to the variable compensation plan in the light of Klabin s improved results, mainly explains this increase. It is worth noting that for the first nine months of the year (9M18 x 9M17) the increase in general and administrative expenses is in line with inflation during the period. Other operating revenues/expenses totaled R$ 13 million in expenses in the period, in line with 3Q17. 6

7 Cash Cost Breakdown 3Q17 Cash Cost Breakdown 3Q18 Other 4% Fuel Oil 4% Electricity 3% Other 7% Fuel Oil 4% Electricity 2% Maintenance / stoppage 11% Freight 11% Labor / Third parties 36% Maintenance / stoppage 7% Freight 13% Labor / Third parties 34% Chemicals 12% Wood / Fibers 19% Chemicals 15% Wood / Fibers 18% Effects of the variation of the fair value of biological assets During 3Q18, the effects of the variation in fair value of biological assets were positive at R$ 62 million, mainly due to growth in forests and recognized at their fair value. In turn, the depletion effect of fair value of the biological assets on the cost of goods sold was R$ 94 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$ 32 million in the quarter. Operating Cash Generation (EBITDA) Higher sales volume and continued price increases in all of Klabin s markets generated a 26% net revenue increase this quarter in relation to 3Q17. This fact, combined with the Company s efforts to control costs contributed to the increase in operational cash generation (adjusted EBITDA), this reporting R$ 1,248 million in 3Q18, 66% higher than in the same period of the previous year. As a result, the Company was able to register an important increase in EBITDA margin at 44% versus 34% in the 3Q17. R$ million 3Q18 2Q18 3Q17 3Q18/2Q18 3Q18/3Q17 9M18 9M17 9M18/9M17 Net Income (loss) 104 (955) 391 n/a -73% (726) 615 n/a (+) Income taxes and social contribution 39 (508) 351 n/a -89% (416) 386 n/a (+) Net Financial Revenues 757 2,012 (330) -62% n/a 3, % (+) Depreciation, amortization, depletion % -16% 1,258 1,565-20% Adjustments according to IN CVM 527/12 art. 4º (+) Biological assets adjustment (62) (69) (145) -10% -57% (250) (702) -64% (-) Equity Pickup (1) (2) (5) -25% -67% (5) (11) -56% (+) Vale do Corisco n/a n/a - 9 n/a Ajusted EBITDA 1, % 66% 2,891 1,883 54% Adjusted EBITDA Margin 44% 40% 34% + 4 p.p p.p. 40% 31% + 9 p.p. n/a - Not applicable Note: Adjusted EBITDA margin is calculated considering the pro forma net revenue, which includes Vale do Corisco 7

8 Free Cash Flow R$ million 3Q18 2Q18 3Q17 9M18 9M17 LTM Adjusted EBITDA 1, ,891 1,883 3,746 (-) Capex (253) (193) (216) (676) (677) (924) (-) Interest paid/received (277) (83) (224) (755) (574) (890) (-) Income tax (76) (1) (1) (78) (5) (78) (+/-) Working Capital (191) 27 (91) (152) (-) Dividends (177) (152) (119) (500) (357) (650) (+/-) Others (3) (1) (7) (8) (40) (9) Free Cash Flow ,358 Dividends Special projects and growth Adjusted Free Cash Flow* , ,249 Adjusted FCF Yield 11.0% * 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. Adjusted free cash flow before dividends and expansion projects was positive at R$ 508 million during the quarter. Free cash flow for the first nine months of 2018 was R$1,408 million, an increase in relation to R$918 million seen in 9M17, largely a reflection of growth in the Company s operating cash generation. Considering the last twelve months, adjusted free cash flow was R$ 2,249 million, equivalent to a FCF yield for the period of 11.0% Debt and financial investments Debt (R$ million) Short term Local currency Sep % Jun % Foreign currency 1,631 8% 1,508 8% Total short term 2,274 11% 2,200 11% Long term Local currency 4,886 24% 4,301 22% Foreign currency 12,980 64% 12,991 67% Total long term 17,867 89% 17,293 89% Total local currency 5,530 27% 4,993 26% Total foreign currency 14,611 73% 14,499 74% Gross debt 20,141 19,492 (-) Cash 7,325 6,895 Net debt 12,816 12,597 Net debt / EBITDA (LTM) 3,4 x 3,9 x Gross debt on September 30, 2018 was R$ 20,141 million, a R$ 649 million increase in relation to the end of 2Q18, mainly due to the impact of FX rates on Company debt denominated in US Dollars, in addition to new funding to lengthen debt maturity profile and compensating borrowings maturing during the quarter. Out of total debt, R$ 14,611 million, or 73% (US$ 3,653 million), is US Dollar denominated. Average maturity on 8

9 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 11,473 12,005 11,377 11,748 11,147 11,278 11,108 12,597 12,816 EARNINGS 3Q18 OCTOBER 29, 2018 all outstanding debt now stands at 45 months, of which 38 months for loans in Reais and 48 months in currency-denominated lines. Short-term debt at the end of the quarter was 11% of the total with the average cost of domestic market funding and currency-denominated lines being 7.5% p.a. and 5.0% p.a. respectively. The company s position in cash and cash equivalents at the end of 3Q18 amounted to R$ 7,325 million, R$ 430 million more than at the end of the 2Q18 due mainly to strong cash generation during the period. This amount is sufficient to cover debt payments maturing over the next 33 months. 19,000 17,000 15,000 13,000 11,000 9,000 7,000 5, NET DEBT AND LEVERAGE Net Debt (R$ million) Net Debt/EBITDA (R$) Net Debt/EBITDA (US$) Consolidated net debt on September 30, 2018 amounted to R$ 12,816 million, a R$ 219 million increase compared with June 30, largely reflecting the devaluation of the Real in relation to currency denominated debt, partially offset by cash generation. Strong cash generation during 3Q18 strengthened Klabin s deleveraging trend, ending the quarter with an adjusted net debt/ebitda ratio of 3.4x, a 0.5x reduction compared to the end of 2Q18. Financial Result (R$ mil) 3Q18 2Q18 3Q17 3T18/2T18 1Q18/1Q17 9M18 9M17 6M18/6M17 Financial Expenses (346) (326) (315) 6% 10% (1,018) (980) 4% Financial Revenues % -34% % Financial result (248) (169) (165) 47% 50% (626) (337) 86% Net Foreign Exchange Losses (509) (1,843) % n/a (2,404) 316 n/a Net Financial Revenues (757) (2,012) % n/a (3,030) (21) 14540% Financial expenses were R$ 346 million in the quarter, a R$ 19 million increase in relation to 2Q18. Financial revenues reached R$ 98 million in the quarter, R$ 59 million below the previous quarter. Consequently, the financial result in the period, excluding the currency translation effect, was a negative R$ 248 million. FX rates ended the quarter at R$4.00/US$, reflecting a 4% devaluation relative to the end of 2Q18 and resulting in net FX variation reporting a negative R$ 509 million in 3Q18. 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 3Q18: R$ million Forestry Pulp Papers Packaging Net revenue Domestic market ,500 Exports ,307 Third part revenue 88 1, ,807 Segments revenue (796) - Total net revenue 475 1,158 1, (796) 2,807 Change in fair value - biological assets Cost of goods sold (501) (468) (805) (629) 791 (1,612) Gross income (5) 1,257 Operating expenses (33) (100) (109) (95) (21) (358) Operating results before financial results (26) 899 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. Note: Please see Annex 5 Consolidation Total FORESTRY BUSINESS UNIT Volume (tsd tons) 3Q18 2Q18 3Q17 3Q18/2Q18 3Q18/3Q17 9M18 9M17 9M18/9M17 Wood % -9% 1,666 1,725-3% R$ million Wood % -3% % In third quarter 2018, sales volume of wood logs to third parties was 579 thousand tons, 9% less than posted in 3Q17, reflecting in a 3% reduction in net revenues by the same comparison. PULP BUSINESS UNIT Production 9M18 9M17 Volume (tsd tons) 3Q18 2Q18 3Q17 3Q18/2Q18 3Q18/3Q17 9M18/9M17 Short Fiber % 13% % Long Fiber % 12% % Total Pulp Volume % 13% 1,029 1,007 2% 10

11 Sales Volume Volume (tsd tons) 3Q18 2Q18 3Q17 3Q18/2Q18 3Q18/3Q17 9M18 9M17 9M18/9M17 Short Fiber DM % -21% % Short Fiber EM % 19% % Total short fiber volume % 14% % Long Fiber DM % 21% % Long Fiber EM % -5% % Total long fiber volume % 7% % Total pulp volume % 12% 1, % R$ million Short Fiber % 76% 1,796 1,137 58% Long Fiber % 63% % Total Pulp Revenues 1, % 72% 2,567 1,689 52% Maintenance of strong demand from Asian countries continued to influence international prices for pulp this quarter, mainly softwood (long fiber) for which average list prices reached US$1,227/ton in Europe (FOEX), increasing 6% in relation to average prices in 2Q18. On the same comparative basis, hardwood (short fiber) reached on average US$1,050/ton, a 20% increase in the last twelve months. The Puma Unit s performance positively influenced sales volume during the period with record output since plant start-up. Thus, sales volume increased 12% in relation to the same period of 2017, reaching 395 thousand tonnes, of which 289 thousand tonnes of hardwood (short fiber) and the rest softwood (long fiber) and fluff. Sales of hardwood are mainly anchored to an agreement with Fibria signed in May Under this agreement, Klabin supplies Fibria with a minimum of 900 thousand tons of hardwood pulp annually, to be sold by Fibria on an exclusive basis to countries outside South America. Klabin commercializes directly all of the remaining pulp output, hardwood pulp being sold in Brazil and South America, and softwood and fluff pulps in both domestic and global markets. In the same way as LyptusCel hardwood pulp, PineCel (softwood) and PineFluff pulps produced at the Puma Units since startup have received excellent market acceptance, consolidating Klabin as an important player in these markets. High sales volumes both in Brazil and abroad underscore the production flexibility the Company enjoys in different products and markets. PAPER BUSINESS UNIT 9M18 9M17 Volume (tsd tons) 3Q18 2Q18 3Q17 3Q18/2Q18 3Q18/3Q17 9M18/9M17 Kraftliner DM % 25% % Kraftliner EM % -7% % Total Kraftliner % 3% % Coated boards DM % 2% % Coated boards EM % -43% % Total Coated boards % -18% % Total Paper % -11% % R$ million Kraftliner % 39% % Coated boards % -3% 1,524 1,530 0% Total Paper % 7% 2,231 2,059 8% 11

12 Kraftliner Kraftliner prices continued at historically high levels, and FOEX published list prices in Europe closed on average in 3Q18 at US$ 861/t., a year-on-year increase of 11%, indicating continued strong global demand for virgin fiber papers. Favorable market conditions for kraftliner were also matched in the domestic market, Klabin increasing sales volumes by 25% versus 3Q17. Good production performance together with more attractive FX rates directly fed through to exports, generating a 39% increase in net revenue during the period. Coated boards Data published by the Brazilian Tree Industry for September showed a consistent improvement in coated board segment in the aftermath of the truckers strike which temporarily depressed coated board markets in the second quarter. Sales for the first nine months of 2018 were up by 6%. During the quarter, Klabin maintained its strategy of seeking markets with better returns, focusing sales on the domestic market, recording a small increase to sales volume in Brazil in relation to the same period in the preceding year. CONVESRSION UNIT BUSINESS Volume (tsd tons) 3Q18 2Q18 3Q17 3Q18/2Q18 3Q18/3Q17 9M18 9M17 9M18/9M17 Total packaging % 1% % R$ million Total packaging % 9% 2,081 1,954 7% Maintaining modest signs of improvement, corrugated box shipments measured by the Brazilian Corrugated Board Association (ABPO) showed a 2.5% growth in relation to 3Q17. ABPO estimates 2.2% growth in 2018 in relation to volumes seen in 2017, although these should have been potentially higher still had it not been for the truckers strike in May. Klabin s results in 3Q18 in this segment benefited from its market presence in the Northeast and the region s fruit harvest. In the industrial bags segment, Klabin has continuously redirected sales to new markets such as fertilizers, food and coffee, due to weak demand from the Brazilian cement industry. Klabin also maintained its strategy in export markets of selling industrial bags to growing markets such as Mexico and United States, where it has been successful both in bag sales to the civil construction segment as well as to food, grain and the chemical sectors. In this context, Klabin s packaging sales increased by 1% in 3Q18 in relation to 3Q17 and net revenues increased 9% on the same comparison, a consequence of the Company s strategy and manufacturing flexibility which allows it to maximize opportunities in the paper and packaging product markets. 12

13 INVESTMENTS R$ million Forestry Maintenance Special projects and growth Total 3Q Q M Klabin invested R$ 253 million throughout the third quarter Of the total invested in the quarter, R$ 71 million was allocated to forestry operations, R$ 125 million to investments in the operational uptime of the plants, and R$ 58 million to special and expansion projects, more particularly those with a high return, with the objective of improving operational performance in the various segments in which the Company operates. During the first nine months of 2018, the Company invested R$ 676 million. CAPITAL MARKETS Equity Markets In the third quarter of 2018, Klabin s units (KLBN11) reported a 2% appreciation versus a 9% increase for the IBOVESPA. However, on the last twelve months, both Company and the stock index posted similar growth reporting a 7% and 8% appreciation, respectively. Trading on every day B3 was open for business during the 3Q18, the Units registered a trading volume of 150 million securities corresponding to average daily trading volume of R$ 49 million, with Units reaching a maximum price of R$ on 09/03 and minimum of R$ on 08/10. Klabin s capital stock was unchanged, represented by 5,410 million shares, of which 1,985 million are common and 3,425 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 business 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) KLBN11 x Ibovespa LTM 0% +8% +7% Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 KLBN11 Ibovespa Index 13

14 yield (%) EARNINGS 3Q18 OCTOBER 29, 2018 Dividends In the third quarter of 2018, the Company paid out R$ 177 million in dividends based on interim results for In the last twelve months, dividend payments have totaled R$ 650 million, equivalent to a 3.2% dividend yield % % % 3.2% LTM Dividends payment (R$ million) Dividend Yield 3.0% 1.0% -1.0% -3.0% LTM Last twelve months Fixed Income Klabin s securities representing debt (notes) maturing in October 2024 and September 2027, both with an issue value of US$ 500 million, are listed in the secondary market of the Luxembourg Stock Exchange. The Notes were issued at a coupon rate of 5.25% p.a. and 4.875% p.a. with interest disbursed semi-annually Klabin is rated as BB+ by Fitch Ratings and Standard & Poors. 6.0 Yield - Notes Klabin 2024 LTM Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 14

15 yield (%) EARNINGS 3Q18 OCTOBER 29, 2018 Yield - Notes Klabin 2027 LTM Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 15

16 CONFERENCE CALL Português Terça-feira, 30 de Outubro de h00 (Brasília). Senha: Klabin Telefone: (11) ou (11) Replay: (11) ou (11) Senha: Klabin O áudio da Teleconferência também será transmitido pela internet. Acesso: English (simultaneous translation) Tuesday, October 30, :00 a.m. (NY). Password: Klabin Phone: U.S. participants: International participants: Replay: (55 11) or (55 11) Password: Klabin The conference call will also be broadcasted on the internet. Access: Klabin is the largest integrated producer, exporter and packaging paper recycler in Brazil with gross revenues of R$ 9.7 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, hardwood (short fiber) and softwood (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 EARNINGS RESULTADOS 3Q18-4T17 OCTOBER 01 DE FEVEREIRO 29, 2018 DE 2017 Annex 1 Consolidated Income Statement (R$ thousands) (R$ thousands) 3Q18 2Q18 3Q17 9M18 9M17 3Q18/2Q18 3Q18/3Q17 9M18/9M17 Gross Revenue 3,219,433 2,586,863 2,575,004 24% 25% 8,329,478 7,056,853 18% Net Revenue 2,806,826 2,235,178 2,224,595 26% 26% 7,231,158 6,075,482 19% Change in fair value - biological assets 62,086 69, ,104-10% -57% 250, ,255-66% Cost of Products Sold (1,612,790) (1,451,332) (1,652,498) 11% -2% (4,621,775) (4,918,573) -6% Gross Profit 1,256, , ,201 47% 75% 2,859,727 1,887,164 52% Selling Expenses (206,320) (172,658) (170,747) 19% 21% (549,891) (478,124) 15% General & Administrative Expenses (138,765) (132,159) (125,499) 5% 11% (397,264) (387,296) 3% Other Revenues (Expenses) (13,304) (460) (14,340) n/a -7% (29,030) (10,256) 183% Total Operating Expenses (358,389) (305,277) (310,586) 17% 15% (976,185) (875,676) 11% Operating Income (before Fin. Results) 897, , ,615 64% 121% 1,883,542 1,011,488 86% Equity pickup 1,325 1,762 5,295-25% -75% 4,716 10,707-56% Financial Expenses (345,749) (326,304) (314,878) 6% 10% (1,017,681) (980,251) 4% Financial Revenues 98, , ,497-38% -34% 391, ,162-39% Net Foreign Exchange Losses (508,815) (1,842,763) 495,485-72% n/a (2,403,838) 316,390 n/a Net Financial Revenues (756,505) (2,011,639) 330,104-62% n/a (3,030,320) (20,699) 14540% Net Income before Taxes 142,553 (1,462,203) 742,014 n/a -81% (1,142,062) 1,001,496 n/a Income Tax and Soc. Contrib. (38,733) 507,569 (351,394) n/a -89% 415,903 (386,434) n/a Net income 103,820 (954,634) 390,620 n/a -73% (726,159) 615,062 n/a Depreciation and amortization 412, , ,401 2% -16% 1,258,214 1,564,663-20% Change in fair value of biological assets 62,086 69, ,104-10% -57% 250, ,255-66% Vale do Corisco % 0% - - 0% Adjusted EBITDA 1,247, , ,912 41% 66% 2,891,439 1,883,223 54% 17

18 EARNINGS RESULTADOS 3Q18-4T17 OCTOBER 01 DE FEVEREIRO 29, 2018 DE 2017 Annex 2 Consolidated Balance Sheet (R$ thousands) Assets Jun-18 Sep-18 Liabilities and Stockholders' Equity Jun-18 Sep-18 Current Assets 10,290,857 10,954,647 Current Liabilities 3,550,861 3,722,590 Cash and banks 108, ,305 Loans and financing 2,136,784 2,192,612 Short-term investments 5,517,185 5,942,212 Debentures 61,686 80,772 Securities 1,269,779 1,281,198 Suppliers 807, ,934 Receivables 1,706,115 2,009,240 Income tax and social contribution 0 8,881 Inventories 1,041,103 1,128,255 Taxes payable 54,174 53,698 Recoverble taxes and contributions 381, ,707 Salaries and payroll charges 262, ,966 Other receivables 266, ,730 Dividends to pay 0 0 REFIS Adherence 72,627 73,270 Noncurrent Assets 18,545,988 18,408,320 Other accounts payable 155, ,457 Long term Taxes to compensate 1,419,231 1,354,596 Noncurrent Liabilities 19,193,319 19,620,455 Judicial Deposits 86,363 87,717 Loans and financing 16,681,594 17,251,385 Other receivables 334, ,716 Debentures 611, ,191 Other investments 169, ,381 Deferred income tax and social contribution 959, ,184 Property, plant & equipment, net 12,297,060 12,231,596 Other accounts payable - Investors SCPs 284, ,994 Biological assets 4,149,689 4,147,965 REFIS Adherence 288, ,338 Intangible assets 89,094 87,349 Other accounts payable 367, ,363 Stockholders Equity 6,092,665 6,019,922 Capital 4,076,035 4,076,035 Capital reserve (361,231) (361,231) Revaluation reserve 48,705 48,705 Profit reserve 1,546,599 1,473,418 Valuation adjustments to shareholders'equity 979, ,610 Treasury stock (196,581) (196,615) Total 28,836,845 29,362,967 Total 28,836,845 29,362,967 18

19 EARNINGS RESULTADOS 3Q18-4T17 OCTOBER 01 DE FEVEREIRO 29, 2018 DE 2017 Annex 3 Loan Maturity Schedule 09/30/18 R$ million Total BNDES ,971 Others ,862 Debentures Interests Local Currency Trade Finance ,352 1,804 1, ,327 Fixed Assets ,224 Bonds , ,002 3,998 ECA`s ,062 Foreign Currency 363 1,495 1,899 2,338 2,431 1,348 2, ,002 14,611 Gross Debt 601 2,065 2,894 2,873 3,657 2,323 2, ,002 20,141 R$ millions Foreign Currency Local Currency Gross Debt Average Cost Average Tenor Local Currency 7.5% p.y. 38 months Foreign Currency 5.0% p.y. 48 months Gross Debt 45 months Local currency : R$ 5.5 billion Average tenor: 38 months Foreign currency: R$ 14.6 billion Average tenor : 48 months 19

20 EARNINGS RESULTADOS - 3Q18 4T17 01 OCTOBER DE FEVEREIRO 29, 2018 DE 2017 Annex 4 Consolidated Cash Flow (R$ thousand) R$ million 3Q18 3Q17 9M18 9M17 Cash flow from operating activities 751, ,635 2,124,538 1,456,809 Operating activities 918, ,003 2,236,503 1,329,550. Net income 103, ,620 (726,159) 615,062. Depreciation and amortization 257, , , ,308. Depletion in biological assets 154, , , ,355. Change in fair value - biolgical assets (62,086) (145,104) (250,344) (730,255). Equity results 34,795 (1,602) 37,854 18,617. Results on Equity Pickup (1,325) (5,295) (4,716) (10,707). Deferred income taxes and social contribution (131,692) 255,332 (711,199) 171,507.Income taxes and social contribution (1,206) (1,119) (3,218) (5,098). Interest and exchange variation on loans and financing 836,477 (263,341) 3,397, ,765. Interest, exchange variation and profit sharing of debentures (7,013) 151,436 32,196 78,847. Variation of the present value of debentures - 3,846-12,674. Payment of interest on loans (343,497) (323,799) (862,898) (827,030). REFIS Reserve 7,585 9,456 26,383 31,105. Others (1,731) (53,828) 42,479 (18,600) Variations in Assets and Liabilities (166,835) (240,368) (111,965) 127,259. Receivables (303,125) (391,989) (255,177) (167,201). Inventories (87,152) 26,057 (195,094) (29,614). Recoverable taxes 207, , , ,135. Marketable Securities (11,419) (17,560) (38,025) (40,819). Other receivables 11,980 (102,166) 11,165 (65,498). Suppliers (40,817) 8,923 85,935 72,566. Taxes and payable 8,405 (7,576) 6,906 (8,401). Salaries, vacation and payroll charges 66,423 63,255 47,500 51,720. Other payables (18,584) (14,044) (38,838) (9,629) Net Cash Investing Activities (244,466) (210,977) (638,854) (601,857). Purchase of property, plant and equipment (162,400) (160,083) (441,939) (512,026). Cost biological assets planting (ex taxes) (90,923) (56,246) (234,485) (164,950). Sale of property, plant and equipment 1,530-11, Income of assets sale 7,327 5,352 25,585 75,119 Net Cash Financing Activities (89,038) 675,375 (2,470,589) 341,098. New loans and financing 720,549 1,546, ,876 3,494,894. Debentures capitalization Debentures interest payment 30,769 (2,659) (209,103) (286,875). Loan amortization (587,910) (794,661) (2,489,433) (2,521,880). Minority shareholders entry - 132, ,766. Minority shareholders exit (3,490) (87,202) (7,855) (122,526). Dividends payment (177,000) (119,090) (500,000) (356,910). Stocks repurchase (11,468). Stocks disposal ,926 13,097 Increase (Decrease) in cash and cash equivalents 417, ,033 (984,905) 1,196,050 Cash and cash equivalents at beginning of period 5,625,686 6,339,737 7,028,422 5,872,720 Cash and cash equivalents at end of period 6,043,517 7,068,770 6,043,517 7,068,770 20

21 Annex 5 Business Units Evolution 3Q18 R$ million Forestry Pulp Papers Packaging Consolidation Total Net revenue Domestic market ,500 Exports ,307 Third part revenue 88 1, ,807 Segments revenue (796) - Total net revenue 475 1,158 1, (796) 2,807 Change in fair value - biological assets Cost of goods sold (501) (468) (805) (629) 791 (1,612) Gross income (5) 1,257 Operating expenses (33) (100) (109) (95) (21) (358) Operating results before financial results (26) 899 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. 2Q18 R$ million Forestry Pulp Papers Packaging Consolidation Total Net revenue Domestic market (2) 1,280 Exports Third part revenue (2) 2,235 Segments revenue (690) - Total net revenue , (692) 2,235 Change in fair value - biological assets Cost of goods sold (495) (384) (680) (591) 698 (1,451) Gross income (16) Operating expenses (29) (85) (107) (89) 7 (304) Operating results before financial results (45) 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. 3Q17 R$ million Forestry Pulp Papers Packaging Consolidation Total Net revenue Domestic market ,325 Exports Third part revenue ,225 Segments revenue (727) - Total net revenue , (726) 2,225 Change in fair value - biological assets Cost of goods sold (573) (434) (783) (586) 723 (1,653) Gross income (3) 717 Operating expenses (21) (84) (95) (84) (21) (305) Operating results before financial results (7) (24) 412 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