Earnings Release 2Q17

Transcription

1 Earnings Release 2Q17 JULY 27, 2017 ADJUSTED EBITDA REACHES R$ 595 MILLION IN 2Q17, 11% GROWTH IN RELATION TO THE SAME PERIOD IN ADJUSTED EBITDA R$ 595 mm PULP SALES VOLUME 337k tonnes NET REVENUE R$ 1,984 mm CONVERSION SALES VOLUME +8% vs 2Q16 RAMP-UP OF PUMA UNIT Concluded Adjusted EBITDA was R$ 595 million in 2Q17, which represents an 11% growth when compared to the same period of last year. Sales volume of pulp in the quarter was 337 thousand tonnes, an increase of 12% in relation to the preceding quarter. Driven by volume of pulp sales, total sales reached 777 thousand tons in 2Q17, a growth of 23% in relation to 2Q16. Net revenue amounted to R$ 1,984 million in the quarter, a 17% increase over the same period in Conversion products volumes in 2Q17 amounted to 190 thousand tonnes, a year-on-year increase of 8%, as result of the strategy for growth in the segment. In the second quarter of 2017, the Puma Unit successfully completed its ramp-up process reaching the projected pulp production cash cost. KLABIN June 30, 2017 Market Value: R$ 17.3 billion KLBN11 Closing Price: R$ Daily Volume 2Q17: R$ 44 million CONFERENCE CALL Portuguese (with simultaneous translation) Friday, 07/28/17, 10:00 (Brasília) Tel: (11) Password: Klabin IR invest@klabin.com.br

2 FINANCIAL HIGHLIGHTS R$ million 2Q17 1Q17 2Q16 2Q17/1Q17 2Q17/2Q16 1H17 1H16 1H17/1H16 Sales volume (thousand tonnes) % 23% 1,535 1,086 41% % Domestic Market 50% 46% 50% 4 p.p. 0 p.p. 48% 56% -8 p.p. Net Revenue 1,984 1,867 1,699 6% 17% 3,851 3,162 22% % Domestic Market 61% 60% 60% 1 p.p. 1 p.p. 61% 62% -1 p.p. Adjusted EBITDA % 11% 1,133 1,050 8% Adjusted EBITDA Margin 30% 29% 31% 1 p.p. -1 p.p. 29% 33% -4 p.p. Net Income (378) 602 1,268 n/a n/a 224 2,342-90% Net Debt 11,748 11,377 11,382 3% 3% 11,748 11,382 3% Net Debt / EBITDA (LTM - BRL) 4.9x 4.9x 5.2x 4.9x 5.2x Capex % -68% 670 1,498-55% 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 second quarter in Brazil was once more marked by political events engendering market volatility due to the increasing uncertainty surrounding the approval of the current federal administration s reform proposals, more especially social security reform. Conversely, economic indicators again signaled declining inflation and interest rates as well as an increase in GDP in the first quarter - the first growth since Greater optimism in relation to economic data in Brazil continued to benefit producers of foodstuffs and other non-durable consumer goods. Reflecting this phenomenon and following robust growth in the first quarter, shipments of cardboard boxes reported a year-on-year increase of 1.3% in 2Q17 based on data published by the Brazilian Corrugated Boxes Association (ABPO). For the year to June 2017, growth was 3.2%. In spite of a degree of political tension, the overseas scenario was one of good economic performance in both China and the United States. This in turn has been driving global prices of certain products such as pulp and kraftliner, both of which are favorably impacting Klabin s results. In the international packaging paper markets, kraftliner prices continued to register significant increases in the second quarter. List prices in Europe published by FOEX - and still not fully reflecting recent producer announcements - closed June at US$ 719/t, 15% higher than posted for month-end March 2017 and in addition to the 9% rise already registered in the first quarter of Demand from emerging markets continued, more especially China, with the price improvement extending throughout the second quarter Short FOEX fiber pulp prices at the end of June were US$ 832/t in Europe and US$ 641/t in China, increases of 15% and 6%, respectively in relation to March 31, European list prices for long fiber pulp also climbed 8% from US$ 826/t to US$ 890/t on the same comparative basis. 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 ,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 Worthy of note in this quarter was the excellent performance of the Puma Unit following the first maintenance stoppage at the end of March. The Unit continued the ramp-up process and in the quarter once more posting a reduction in production cash costs. Pulp sales volume reached 337 thousand tonnes of pulp with the plant operating close to its nominal capacity. Additionally, the Company reported a conversion products sales volume 8% higher in relation to 2Q16, once again replicating the significant increase posted for the first quarter of This growth reflects Klabin s good performance in the corrugated board and industrial bags markets as well as the output from the two acquisitions made at the end of With the good results from the pulp, paper and conversion units, in 2Q17, Klabin registered production of 777 thousand tonnes, 23% greater in relation to the same period in In addition to driving year-on-year growth of 17% in net revenue, the increase in sales brought considerable benefits through the dilution of fixed and administrative costs. This together with the Company s efforts to control costs compensated the effects of inflation which still persist in the case of some raw materials and contracted services. It should also be noted that there was a stoppage at the Monte Alegre (PR) plant for annual maintenance which generated additional operational costs in the period. Nevertheless, with an increase in pulp sales and the Company s cost discipline, Klabin was able to report an Adjusted EBITDA of R$ 595 million in the quarter, growth of 11% in relation to the same period in In the last twelve months, Adjusted EBITDA amounted to R$ 2,371 million, the 24th consecutive month of growth. 2, st QUARTER OF EBITDA GROWTH 1, , Sales Volume LTM (excluding wood million tonnes) Adjusted EBITDA LTM (R$ million) Exchange Rate At the outset of the second quarter, exchange rates remained stable at levels pertaining throughout 1Q17. Following the worsening of the political crisis and the resulting increase in uncertainty surrounding approval of the economic reforms proposed by the government, this tendency was interrupted by a devaluation in the Real. Consequently, the average rate for USD/Real in the period was 2% weaker compared with 1Q17, albeit still 8% stronger than rates in 2Q16. The closing rate for the period used for converting currency denominated debt was R$ 3.31/US$, a depreciation of 4% in relation to the closing rate for 1Q17. 3

4 R$ / US$ 2Q17 1Q17 2Q16 2Q17/1Q17 2Q17/2Q16 1H17 1H16 1H17/1H16 Average Rate % -8% % End Rate % 3% % Source: Bacen OPERATING AND ECONOMIC-FINANCIAL PERFORMANCE Sales volume Klabin posted a second quarter sales volume, excluding wood, of 777 thousand tonnes, driven largely by growth in pulp production at the Puma Unit. During the quarter, operations at the Unit progressed towards conclusion of the ramp-up process with pulp sales volume reaching 337 thousand tonnes, 252 thousand of which in the form of short fiber pulp and 85 thousand tonnes of long fiber and fluff pulps. It is important to highlight that there was consistent progress in the Unit s ramp-up since the annual maintenance stoppage at the end of March, with operations reaching their nominal capacity. During the second quarter, year-on-year growth in the sales volume of conversion products was also particularly notable, driven by output from the two new corrugated board plants, acquisitions of which were concluded at the end of 2016, and the favorable moment for Brazilian corrugated box shipments according to published ABPO (Brazilian Corrugated Board Association) data. Growth in conversion product volumes helped minimize the effects of less favorable exchange rates for exports. Sales volume of paper and packaging were 440 thousand tonnes, 2% lower in relation to 2Q16. Sales volume (excluding wood tsd tonnes) Sales volume by product 2Q % Kraftliner 11% Others 2% 50% -10 Paper / Conversion Pulp 50% Conversion 24% Pulp 43% 50% 2Q16 2Q17 Coated Board 20% Domestic Market Exports Sales volume to the export market in the quarter represented 50% of the total, the same proportion as 2Q16. In comparison with the 54% in 1Q17, higher sales of conversion products and greater volumes of long fiber and fluff pulps were determining factors for 2Q17 results. 4

5 Net Revenues Improving pulp output at the Puma Unit continued to sustain growth in Klabin s net revenue in relation to 2Q16 - the first quarter of the Unit s operations - despite a less favorable exchange rate on a year-on-year comparative basis. Total net revenue in 2Q17, including wood, was R$ 1,984 million, 17% more than in the same period in 2016, principally a reflection of R$ 582 million in revenue from the pulp unit. Revenue from sales of paper, packaging and wood in the quarter amounted to R$ 1,402 million, 1% lower than 2Q16, again a reflection of the less favorable average exchange rate in relation to 1Q16 and impacting export revenue from these products during the period. Higher pulp volume increased total export revenue which grew 13% compared with 2Q16 and reached R$ 765 million in the quarter. Growth in domestic sales of conversion products and fluff pulp also boosted total net revenue from the Brazilian market to R$ 1,219 million, 19% more than in 2Q16. During the quarter, exports represented 39% of total revenue, the same level as registered in 2Q16. Net Revenue (R$ million) Net Revenue by Product 2Q % Kraftliner 8% Others 2% Wood 4% 40% -11 Pulp / Celulose Conversion/ Wood Pulp 29% 60% 61% Conversion 33% Coated Board 24% 2Q16 2Q17 Domestic Market Exports Considering Klabin s stake in the revenue of Florestal Vale do Corisco S.A., pro-forma net revenue totaled R$1,999 million in the quarter. 5

6 Operating Costs and Expenses PULP CASH COST With the unveiling of pulp sales from the Puma Unit in 2Q16, for comparative purposes, the unit cash cost of pulp production is now disclosed for each quarter. Unit cash costs include the production costs of short and long fiber and fluff pulp and pulp tonnage produced during the period. The production cash cost does not include selling and general and administrative expenses, constituting exclusively amounts expended on pulp production. Following the first maintenance stoppage at the end of March, the Puma Unit progressed up the final stages of the plant learning curve, reaching higher production levels compatible with its nominal capacity. The corresponding unit cash cost of pulp production during 2Q17 was R$ 663/t, recording a reduction of R$ 70/t compared with unit cash costs for 1Q17 and excluding the costs of the maintenance stoppage. The greater operational stability was reflected in better technical indicators for fuel and chemical consumption while higher output during the quarter produced a greater dilution of fixed costs, principally those involving labor and services in the period. It should be pointed out that with a unit cash cost of production of R$ 663/t in 2Q17, the Company has achieved the target published at the outset of the Puma Unit s operations of reducing the unit cash cost by 25% from the R$ 890/t in the second quarter the first occasion on which unit cash cost was calculated. R$ 733 / t R$ 663 / t Others People Oil R$ 781 / t R$ 768 / t Q Q Chemical Wood Energy Others Labor / Third parties TOTAL CASH COST Fuel Oil Chemicals Total unit cash cost, which includes the sale of all products sold by the Company, was R$ 1,791/t in the quarter including non-recurring amounts for other operating revenues and expenses. This represented a reduction of 4% in Wood relation to the same period for the preceding year and mainly reflects the dilution effect of increase in sales volume in the quarter due to sales from the -56 new pulp unit. It should also be -88 noted that the cash cost for the quarter was also impacted by the scheduled annual stoppage for maintenance at the Monte Alegre (PR) plant. Compared with 1Q17, when there was a maintenance stoppage 4Q16 at the Puma Unit, the unit 1Q17 cash cost remained stable. 6

7 Cash Cost Breakdown 2Q16 Cash Cost Breakdown 2Q17 Maintenance materials / stoppage 13% Electricity 8% Others 5% Labor / third parties 37% Electricity Maintenance 3% materials / stoppage 11% Fuel Oil 4% Others 4% Labor / third parties 34% Fuel Oil 2% Freight 11% Chemicals 11% Wood / Fibers 13% Freight 11% Chemicals 13% Wood / Fibers 20% Cost of goods sold in the quarter was R$ 1,738 million, 38% higher than in the same period of the previous year, increasing mainly on the back of higher pulp volumes sold but also due to more robust sales of conversion projects which incur higher production costs. Selling expenses were R$ 152 million in the quarter versus R$ 127 million in 2Q16 and R$ 155 million in 1Q17. In relation to the same period in 2016, the increase represents the significant boost to sales volume from output at the new pulp plant. The reduction in relation to 1Q17 and despite the increase in sales volume, reflects the normalization of commercial expenses following the initial ramp-up phase in pulp sales. Thus, 2Q17 selling expenses represented 7.7% of net revenue, a decline in relation to the 8.3% reported in 1Q17. General and administrative expenses were R$ 137 million in the quarter. In relation to the same quarter in 2016, the increase of R$ 26 million stems largely from increases due to the annual wage bargaining agreement together with inflation in employee benefits in the period and also the adjustment in structures for the new pulp operations and expansion in the Company s long term incentive program. However, following the significant increase in pulp sales, general and administrative sales per tonne remained nominally stable in relation to 2Q16. Other operating revenues/expenses resulted in an expense of R$ 11 million for 2Q17. Effects of the variation of fair value of biological assets During 2Q17, the effects of the variation in fair value of biological assets was positive at R$ 102 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$ 346 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$ 244 million in the quarter. 7

8 Operating Cash Generation (EBITDA) R$ million 2Q17 1Q17 2Q16 2Q17/1Q17 2Q17/2Q16 1H17 1H16 1H17/1H16 Net Income (loss) (378) 602 1,268 n/a n/a 224 2,342-90% (+) Income taxes and social contribution (223) n/a n/a % (+) Net Financial Revenues 669 (318) (1,296) n/a n/a 351 (2,309) n/a (+) Depreciation, amortization, depletion % 94% 1, % Adjustments according to IN CVM 527/12 art. 4º (+) Biological assets adjustment (102) (455) (272) -78% -63% (557) (336) 66% (-) Equity Pickup 1 (7) (17) n/a n/a (5) (24) -77% (+) Vale do Corisco % -95% % Ajusted EBITDA % 11% 1,133 1,050 8% Adjusted EBITDA Margin 30% 29% 31% 1 p.p. -1 p.p. 29% 33% -4 p.p. n/a - Not applicable Note: Adjusted EBITDA margin is calculated considering the pro forma net revenue, which includes Vale do Corisco The sharp increase in sales revenue, principally the result of the growing sales of Pulp from the Puma Unit and greater volume of conversion products, was the main driver of Klabin s operational cash generation in 2Q17. Together with greater revenue, the conclusion in the middle of the second quarter of the Puma Unit s ramp-up phase contributed to a greater dilution of fixed costs in pulp production and also positively impacting Klabin s overall results in the period. Consequently, the Company was able to report further growth in relation to 2Q16 in Adjusted EBITDA. It is worth reiterating that this improvement came despite a domestic scenario of uncertainties and economic stagnation as well as an average exchange rate 8% less favorable than 2Q16. The Company was thus able to report an operating cash generation (adjusted EBITDA) of R$ 595 million and 11% higher than 2Q16, completing 24 consecutive quarters of growth. Debt and financial investments Gross debt on June 30 was R$ 18,702 million, stable in relation to the end of 1Q17 and impacted on the one hand by the increase in exchange rate on currency denominated debt and on the other, by greater paying down of debt during 2Q17. Out of total debt, R$ 13,016 million, or 70% (US$ 3,934 million), was USDollar denominated, mainly in the form of pre-export advances. The average maturity profile of debt held stable at the end of 2Q17, standing at 44 months, while local currency financing had an average maturity of 39 months and currency denominated lines, 47 months. Short-term debt at the end of the quarter was 12% of the total with the average cost of domestic lines at 8.3% p.a. and currency lines at FX variation plus 4.8% p.a.. The company s position in cash and financial investments at the end of 2Q17 amounted to R$6,954 million, R$305 million less than at the end of the 1Q17. This cash position is equivalent to debt payments maturing over the next 40 months. Consolidated net debt on June 30, 2017 amounted to R$ 11,748 million, an increase of R$ 371 million against March 31, 2017, in large part due to the currency translation effect on dollar denominated debt. Conversely, in the light of the increase in cash generation over the past twelve months, the net debt /Adjusted EBITDA remained stable compared with the preceding quarter, closing 2Q17 at 4.9 times. 8

9 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 2,711 2,824 4,028 5,242 7,440 8,144 11,614 12,411 12,009 11,382 11,473 12,005 11,377 11,748 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 jun-17 mar-17 Local currency 1,041 5% 975 5% Foreign currency 1,299 7% 1,758 10% Total short term 2,340 12% 2,734 15% Long term Local currency 4,644 25% 4,760 25% Foreign currency 11,718 63% 11,142 60% Total long term 16,362 87% 15,902 85% Total local currency 5,685 30% 5,735 31% Total foreign currency 13,016 70% 12,901 69% Gross debt 18,702 18,636 (-) Cash 6,954 7,259 Net debt 11,748 11,377 Net debt / EBITDA (LTM) 4.9x 4.9x Financial Result Financial expenses were R$ 340 million in the quarter, a R$ 15 million increase in relation to 1Q17. Financial revenues reached R$ 228 million, R$ 37 million below the preceding quarter. Consequently, the financial result in the period, excluding the currency translation effect, was a negative R$ 112 million. FX rates ended the quarter at 4% above the rate for the end of 1Q17. Thus, due to the impact on the Company s currency denominated debt, net foreign exchange variation amounted to a negative R$ 557 million in 2Q17. It is worth highlighting 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 1H17: R$ million Forestry Pulp Papers Conversion Consolidation Net revenue Domestic market ,195 (4) 2,331 Exports ,520 Third part revenue 152 1,035 1,367 1,301 (4) 3,851 Segments revenue (1,303) - Total net revenue 802 1,056 1,988 1,312 (1,307) 3,851 Change in fair value - biological assets Cost of goods sold (1,144) (846) (1,479) (1,101) 1,304 (3,266) Gross income (3) 1,170 Operating expenses (48) (158) (186) (161) (7) (560) Operating results before financial results (10) 610 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. Total FORESTRY BUSINESS UNIT Volume (1.000 tonnes) 2Q17 1Q17 2Q16 2Q17/1Q17 2Q17/2Q16 1H17 1H16 1H17/1H16 Wood % 7% 1,089 1,017 7% R$ million Wood % -8% % In the second quarter 2017, sales volume of wood logs to third parties was 565 thousand tonnes, 7% greater than posted in 2Q16. On the other hand, the less favorable mix and prices reduced revenues by 8% year-on-year. In the first half, the same factors were responsible for the increase of 7% in volume and a fall of 8% in revenues in relation to the same period in PULP BUSINESS UNIT Production Volume (1.000 tonnes) 2Q17 1Q17 2Q16 2Q17/1Q17 2Q17/2Q16 1H17 1H16 1H17/1H16 Short Fiber % 54% % Long Fiber % 70% % Total Pulp Volume % 58% % 10

11 Sales volume Volume (1.000 tonnes) 2Q17 1Q17 2Q16 2Q17/1Q17 2Q17/2Q16 1H17 1H16 1H17/1H16 Short Fiber DM % 111% % Short Fiber EM % 46% % Total short fiber volume % 52% % Long Fiber DM % 2035% % Long Fiber EM % 204% % Total long fiber volume % 433% % Total pulp volume % 86% % R$ million Short Fiber % 54% % Long Fiber % 523% % Total Pulp Revenues % 103% 1, % In 2Q17, continuing strong demand from Asian countries and, conversely, below forecast growth in supply, continued to influence international prices for short fiber pulp and maintaining a scenario which has persisted since early List prices for short fiber pulp in Europe published by FOEX rose 15% in relation to the end of March, reaching US$ 832/t. Trends in the price list for the international markets influenced prices throughout the period, more especially towards the end of the quarter and are expected to be reflected in growing USDollar revenue. With the conclusion of the first general maintenance stoppage at the Puma Unit at the end of March, the Unit s production increased during the entire 2Q17 period. At the end of June, the Unit was operating at full capacity. Pulp volume produced during 2Q17 was 363 thousand tonnes. Pulp sales volume in the period rose 12% compared with 1Q17 and reached 337 thousand tonnes, of which 252 thousand was short fiber pulp and 85 thousand tonnes, long fiber and fluff pulps. Sales of short fiber pulp are mainly anchored to an agreement with Fibria signed in May Under this agreement, Klabin will supply Fibria with a minimum of 900 thousand tonnes of short fiber pulp annually, to be sold by Fibria on an exclusive basis to countries outside South America. Klabin commercializes all of the remaining output from Puma, with short fiber pulp sold in Brazil and South America, and long fiber and fluff pulps in both domestic and global markets. Sales price is equivalent to the average net price practiced by Fibria, FOB (free on board) Paranaguá, excluding South American countries. Following the period of product ratification, fluff pulp sales are already showing consistent growth with a significant share in volumes destined for the domestic market, a trend which is expected to accelerate in the coming months. The company has already sold long fiber and fluff pulps to 34 different countries, indicative of the excellent acceptance of Klabin s pulp in world markets. 11

12 PAPER BUSINESS UNIT Kraftliner Global kraftliner prices have been reporting increases since the beginning of 2017, FOEX list prices in Europe closing June at US$ 719/t, 15% higher in relation to values reported at year-end 1Q17. The price rises are expected to continue to be reflected in Klabin s second half results and are indicative of strong global demand for virgin fiber papers. The larger volume of papers sent to the conversion units reflects good domestic demand for corrugated boxes and results from the two acquisitions made by Klabin in this segment at the end of Thus, kraftliner volumes destined for sale to third parties fell over the course of the quarter compared with 2Q16 when sales of conversion products were less buoyant. Coated Boards 2Q17/1Q17 2Q17/2Q16 1H17 1H17/1H16 Volume (1.000 tonnes) 2Q17 1Q17 2Q16 1H16 Kraftliner DM % -23% % Kraftliner EM % -20% % Total Kraftliner % -21% % Coated boards DM % 4% % Coated boards EM % -12% % Total Coated boards % -3% % Total Paper % -10% % R$ million Kraftliner % -18% % Coated boards % -8% 968 1,061-9% Total Paper % -11% 1,304 1,507-13% The tendencies seen in the first months of the year for the Brazilian market continued in the second quarter with no signs of recovery. Data published by the Brazilian Tree Industry (IBÁ) (which does not include coated boards used for liquids) reveals domestic sales declining year-on-year by 1.4% between January to May. Thanks to the diverse nature of products, Klabin has allocated higher sales volume more especially to the food processing segment, reporting domestic market growth of 4%. With higher sales to the Brazilian market, export volumes fell 12%. Klabin s sales of coated boards in the period were 154 thousand tons, 3% lower in relation to 2Q16. CONVERSION UNIT BUSINESS Volume (1.000 tonnes) 2Q17 1Q17 2Q16 2Q17/1Q17 2Q17/2Q16 1H17 1H16 1H17/1H16 Total conversion % 8% % R$ million Total conversion % 10% 1,273 1,142 12% Brazilian Corrugated Boxes Association (ABPO) data for corrugated box shipments again showed signs of recovery in 2Q17, reporting growth of 1.3% in relation to 2Q16. The segment ended first half 2017 with a 3.2% increase in 12

13 relation to the same period in The Company posted even stronger year-on-year growth in sales volume, driven by recent acquisitions in the conversion products business and penetration in the agricultural products sector, notably the tobacco and apple segments. 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 8.8% from the cement industry in the first half of 2017 according to 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 an 8% year-on-year growth in conversion volume in 2Q17 and 10% in 1H17. Despite the negative effect of currency rates on exports of industrial bags, revenues also rose year-onyear by 10% and 12% respectively, once more demonstrating the Company s adaptability and competitiveness in different markets and under adverse circumstances. INVESTMENTS R$ million 2Q17 1Q17 1H17 Forestry Maintenance Special projects and growth Puma Project Total Klabin invested R$ 209 million in 2Q17, most notably R$ 43 million of which dedicated to remaining investments at the Puma Unit. Of the total invested in the quarter, R$ 64 million was allocated to forestry operations, R$ 87 million to investments in operational continuity at the plants and R$ 15 million to special and expansion projects, more particularly those with a high return for improving performance in all the segments in which the Company operates. Approximately R$ 50 million remains to be disbursed to the Puma Unit in New Technology Center 13

14 Klabin inaugurated by June s end the new Technology Center in Telêmaco Borba, Paraná. With laboratories capable of producing a wide range of forestry products and conducting simultaneous simulations of the production lines at industrial units, the center seeks to anticipate trends and to develop new technologies and sustainable applications. Its construction is part of a plan to invest R$70 million in Research, Development and Innovation (R&D+I) over three years (through 2017), which also includes the acquisition of equipment, the revamping of forestry research labs and the training and recruiting of technicians and researchers. Klabin s Technology Center will focus on five research fields: wood quality; development of new products and applications for pulp; development of new products and applications for packaging paper; new forestry technological routes; and the environment and sustainability. To support the center s work, Klabin also structured a local and international network of partnerships with technology incubators, universities and prominent research centers. The forestry and industrial R&D teams will have over 100 specialized professionals dedicated to research and innovation. The team is formed by forestry, chemical and industrial engineers specializing in the industry. Klabin also has invested heavily in training and recruiting technicians and researchers. ASSETS INCORPORATION The General Shareholder meeting held on April 28 approved the incorporation of Vale Corisco forest assets in the amount of R$ 483 million, substantially corresponding to the biological assets, which will be used to supply Klabin s timber demand. Vale do Corisco remains operational with its forest land asset. CAPITAL MARKETS Equity Markets In the second quarter of 2017, Klabin s units (KLBN11) reported an appreciation of 7% compared with a decline of 3% in the IBOVESPA. Trading on every day B3 was open for business, the Units registered 557 thousand transactions involving 167 million securities and an average daily trading volume of R$44 million at the end of the period. Klabin s capital stock comprises 4,733 million shares, of which 1,849 million are common shares and 2,884 million, preferred. 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 includes shares of companies that are outstanding in the high degree of commitment to sustainability of the businesses and the country as a whole. The participating companies are selected annually, based on the criteria of the Sustainability Studies Center of the Fundação Getúlio Vargas (GVces). 14

15 US$/note Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Performance KLBN11 x Brazilian Index (Ibovespa) KLBN11 Ibovespa Index Dividends In the second quarter of 2017, R$ 108 million were paid out on May, 12 th. Further dividend payments of R$ 119 million were announced in a Notice to Shareholders of July 26, reflecting a payout of R$ per lot of a thousand shares and R$ per lot of a thousand Units, to be paid on August 11, % 2.2% 2.8% 3.2% LTM Dividends payed (R$ million) Dividend Yield Fixed Income Klabin s securities representing debt (notes) maturing in July 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 July. Klabin has an investment grade rating of BB+ from Fitch Ratings and Standard & Poors Notes Klabin ,

16 CONFERENCE CALL Portuguese Friday, July 28, :00 a.m. (Brasília). Password: Klabin Phone: (11) or (11) Replay: (11) or (11) Password: # The conference call will also be broadcasted by internet. Access: English (simultaneous translation) Friday, July 28, :00 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$ thousands) (R$ thousands) 2Q17 1Q17 2Q16 2Q17/1Q17 2Q17/2Q16 1H17 1H16 1H17/1H16 Gross Revenue 2,241,657 2,240,192 1,965,221 0% 14% 4,481,849 3,680,563 22% Net Revenue 1,984,195 1,866,692 1,698,628 6% 17% 3,850,887 3,162,105 22% Change in fair value - biological assets 101, , ,442-79% -63% 585, ,889 74% Cost of Products Sold (1,738,226) (1,527,849) (1,255,645) 14% 38% (3,266,075) (2,259,805) 45% Gross Profit 347, , ,425-58% -51% 1,169,963 1,238,189-6% Selling Expenses (152,008) (155,369) (127,481) -2% 19% (307,377) (232,745) 32% General & Administrative Expenses (136,726) (125,071) (111,129) 9% 23% (261,797) (211,166) 24% Other Revenues (Expenses) 11,131 (7,047) 952 n/a 1069% 4,084 (4,098) n/a Total Operating Expenses (277,603) (287,487) (237,658) -3% 17% (565,090) (448,009) 26% Operating Income (before Fin. Results) 70, , ,767-87% -85% 604, ,180-23% Equity pickup (1,177) 6,589 16,685 n/a n/a 5,412 23,779-77% Financial Expenses (339,952) (325,421) (317,765) 4% 7% (665,373) (534,776) 24% Financial Revenues 228, , ,101-14% -41% 493, ,204-8% Net Foreign Exchange Losses (557,367) 378,272 1,225,910 n/a n/a (179,095) 2,305,448 n/a Net Financial Revenues (669,196) 318,393 1,296,246 n/a n/a (350,803) 2,308,876 n/a Net Income before Taxes (600,162) 859,644 1,790,698 n/a n/a 259,482 3,122,835-92% Income Tax and Soc. Contrib. 222,579 (257,619) (522,572) n/a n/a (35,040) (781,197) -96% Net income (377,583) 602,025 1,268,126 n/a n/a 224,442 2,341,638-90% Depreciation and amortization 625, , ,868 39% 94% 1,076, ,647 88% Change in fair value of biological assets (101,845) (483,306) (272,442) -79% -63% (585,151) (335,889) 74% Vale do Corisco 538 8,586 10,411-94% -95% 9,124 22,814-60% Adjusted EBITDA 594, , ,604 10% 11% 1,133,311 1,049,752 15% 17

18 Appendix 2 Consolidated Balance Sheet (R$ thousands) Assets Jun-17 Mar-17 Liabilities and Stockholders' Equity Jun-17 Current Assets 10,257,144 10,412,206 Current Liabilities 3,557,326 3,821,190 Cash and banks 22,870 17,964 Loans and financing 2,066,774 2,473,948 Short-term investments 6,316,867 6,634,545 Debentures 272, ,169 Securities 614, ,068 Suppliers 615, ,044 Receivables 1,400,592 1,312,855 Taxes payable 52,818 42,416 Inventories 932, ,998 Salaries and payroll charges 246, ,400 Recoverble taxes and contributions 738, ,651 Dividends to pay 101,000 50,000 Other receivables 230, ,125 REFIS Adherence 69,142 68,073 Noncurrent Assets 19,121,331 19,605,362 Other accounts payable 133, ,140 Long term Noncurrent Liabilities 18,692,213 18,514,270 Taxes to compensate 1,493,877 1,702,029 Loans and financing 15,702,566 15,217,097 Judicial Deposits 87,167 89,704 Debentures 660, ,216 Other receivables 349, ,343 Deferred income tax and social contribution 1,459,751 1,684,751 Other investments 170, ,763 Other accounts payable - Investors SCPs 169, ,672 Property, plant & equipment, net 12,747,566 12,788,101 REFIS Adherence 325, ,498 Biological assets 4,178,530 3,982,277 Other accounts payable 374, ,036 Intangible assets 93,217 85,145 Mar-17 Stockholders Equity 7,128,936 7,682,108 Capital 2,384,484 2,384,484 Capital reserve 1,319,553 1,313,689 Revaluation reserve 48,704 48,704 Profit reserve 2,558,404 3,118,479 Valuation adjustments to shareholders'equity 1,023,831 1,022,792 Treasury stock (206,040) (206,040) Total 29,378,475 30,017,568 Total 29,378,475 30,017,568 18

19 Appendix 3 Loan Maturity Schedule 06/30/17 R$ million 3Q17 4Q /26 Total BNDES ,931 Others ,821 Debentures Interests Local Currency , , ,686 Trade Finance ,354 1,281 1,490 1, ,811 Fixed Assets ,479 Bonds ,650-1,689 ECA's ,037 Foreign Currency ,453 1,860 1,773 1,965 1,998 1,131 2, ,016 Gross Debt ,424 2,505 2,839 2,547 3,307 1,524 2, ,702 R$ million 2,424 1,453 2,505 1,860 2,839 1,773 2,547 1,965 3,307 1,998 2,347 2,057 Foreign Currency 13,016 Average Cost Average Tenor Local Currency 8.3% p.y. 39 months Foreign Currency 4.8% p.y. 46 months Gross Debt 44 months 1, ,309 1,131 1, Q17 4Q /26 Local Currency 5,686 Gross Debt 18,702 Local currency : R$ 5.7 billion Average tenor: 39 months Foreign currency: R$ 13.0 billion Average tenor : 46 months 19

20 Appendix 4 Consolidated Cash Flow Statement (R$ thousands) 2Q17 2Q16 1H17 1H16 Cash flow from operating activities Operating activities Net income ( ) Depreciation and amortization Depletion in biological assets Change in fair value - biolgical assets ( ) ( ) ( ) ( ). Equity results (23.159) (22.715). Results on Equity Pickup (16.685) (5.412) (23.779). Deferred income taxes and social contribution ( ) (83.825) Income taxes and social contribution (1.938) (2.251) (3.979) (13.981). Interest and exchange variation on loans and financing ( ) ( ). Interest, exchange variation and profit sharing of debentures ( ) (10.013) (72.589) Variation of the present value of debentures Payment of interest on loans ( ) ( ) ( ) ( ). REFIS Reserve Others Variations in Assets and Liabilities ( ) ( ). Receivables (87.737) ( ) Inventories (16.649) (78.007) (55.671) ( ). Recoverable taxes ( ) ( ). Marketable Securities (8.494) (19.215) (23.259) (37.142). Other receivables (82.382) (69.753). Suppliers (17.908) Taxes and payable (6.061) (8.947). Salaries, vacation and payroll charges (11.535) Other payables ( ) (45.380) (53.585) (64.628) Net Cash Investing Activities ( ) ( ) ( ) ( ). Purchase of property, plant and equipment ( ) ( ) ( ) ( ). Cust biological assets planting (ex taxes) (64.822) (35.476) ( ) (61.082). Income of assets sale Net Cash Financing Activities ( ) ( ) New loans and financing Debentures interest payment (78.980) ( ) ( ) ( ). Loan amortization ( ) ( ) ( ) ( ). Minority shareholders entry Minority shareholders exit (3.974) (17.361) (35.324) (17.361). Dividends payed (49.929) ( ) ( ) ( ). Stocks repurchase - (6.601) (11.468) (6.601). Stocks disposal Increase (Decrease) in cash and cash equivalents ( ) (88.676) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period