2015 Highlights. 6% growth in Sales Volume vs. 2014, despite slowdown in Domestic Market;

Transcription

1 Conference Call 2015 Highlights Date: 02/12/2016 Call in Portuguese with simultaneously translation to English 7:00 a.m. (EST) / 10:00 a.m. (Brasilia) Dial in USA: Dial in Brazil: Dial in Brazil: Code: Paranapanema 6% growth in Sales Volume vs. 2014, despite slowdown in Domestic Market; 14% growth in Net Revenues vs. 2014, driven by higher Sales Volume and exchange rate; 7% growth in Gross Profit vs. 2014, despite reduction in Gross Margin (-0.4 p.p.); Net Profit of R$134.8 million, up 9% vs. 2014; and Historical record of TC/RC in our results. Investor Relations ri@paranapanema.com.br (11) (r.7914/7945) Press Relations FSB Alessandra Carvalho Phone: alessandra.carvalho@fsb.com.br FSB Sabrina Daspett Phone: sabrina.daspett@fsb.com.br Sales Volume: thousand tons (+6% vs. 2014), being 49% from Domestic Market and 51% from Export Market; Net Revenues (NR): R$5.4 billion (+14% vs. 2014), being 42% from Domestic Market and 58% from Export Market; Adjusted EBITDA: R$360.2 million (+1% vs. 2014); Adjusted EBITDA Margin: 6.7% over NR (-0.9 p.p. vs. 2014); Net Profit: R$134.8 million (+9% vs. 2014); Net Margin: 2.5% over NR (in line with 2014); Net Debt/LTM Adjusted EBITDA: 2.85x vs. 0.77x in 2014; and Short Term/Long Term Debt: 49%/51%.

2 PARANAPANEMA S.A. ( Paranapanema or Company, BM&FBovespa: PMAM3), the largest nonintegrated Brazilian producer of refined copper and its products (rods, wires, rolled, bars, tubes, connections and its alloys), announces the results of 2015 fiscal year. The annual consolidated information are prepared in accordance with the international accounting standard established by the International Financial Reporting Standards IASB (IFRS), and are presented in Real, official Brazilian currency, and functional currency of the Company. The comparisons herein presented, unless otherwise stated, refer to 2014 fiscal year. It is recommended to read this report together with Notes to Financial Statements. All information was rounded to nearest million, unless otherwise stated, and therefore may differ immaterially. MAIN INDICATORS In R$ thd, except otherwise stated 4Q14 4Q15 % % Sales Volume (ton) 69,074 67,353-2% 266, ,952 6% Domestic Market 35,783 21,883-39% 147, ,309-24% Export Market 23,847 40,275 69% 76, ,437 86% Toll 9,444 5,195-45% 42,602 27,206-36% Net Revenues 1,313,096 1,457,135 11% 4,734,359 5,374,268 14% Domestic Market 684, ,670-29% 2,869,077 2,163,493-25% Export Market 602, ,280 59% 1,749,590 3,136,795 79% Toll 26,378 15,185-42% 115,693 73,980-36% Cost of Goods Sold (COGS) 1,189,960 1,359,201 14% 4,350,184 4,963,053 14% Gross Profit 123,136 97,934-20% 384, ,215 7% % Revenues 9.4% 6.7% -2.7 p.p. 8.1% 7.7% -0.4 p.p. Operating Expenses (62,354) (71,911) 15% (257,579) (267,822) 4% Financial Result 26,950 (52,092) -293% 21,665 28,074 30% Taxes (8,082) 8, % (24,380) (36,681) 50% Net Result 79,650 (17,636) -122% 123, ,786 9% % Revenues 6.1% -1.2% -7.3 p.p. 2.6% 2.5% -0.1 p.p. Adjusted EBITDA 119,675 86,465-28% 358, ,159 1% % Revenues 9.1% 5.9% -3.2 p.p. 7.6% 6.7% -0.9 p.p. DISCLAIMER Management makes statements about future events that are subject to risks and uncertainties. These statements are based on estimates and assumptions by Management and information, which the Company currently has access. Forward-looking statements include information about their intentions, beliefs or current expectations, as well as those of members of the Board of Directors and Executive Officers. Caveats in relation to statements and information about the future also include information on possible or presumed operating results, as well as statements preceded by, followed by or that include the words "believes", "may", "will", "continue", "expects", "anticipates", "intends", "plans", "estimates" or similar expressions. The statements and information are not guarantees of future performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Future results and value creation for the shareholder may differ materially from those expressed in or suggested by statements about the future. Many of the factors that will determine these results and values are beyond our ability to control or predict. 2

3 , 0% 5,0 % 0,0 % -5,0% -10,0% -15,0% -20,0% -25,0% MANAGEMENT COMMENTS 2015 was extremely challenging for the vast majority of Brazilian economic sectors. However, Paranapanema concluded important actions and achieved solid results in its industrial optimization and commercial efficiency plan, increasing the return on invested capital (ROIC). During 2015, we sought to offset the slowdown in domestic market demand for our products by exporting to other markets. This strategy allowed us to grow Sales Volume by 6% compared to 2014 and, benefited by the depreciation of Real (-47%), to grow Net Revenues by 14% during the period. In parallel to commercial operation, we intensively dedicated ourselves to recover and upgrade our industrial plants, especially the smelter in Dias d'ávila (BA). We invested R$153 million in this plant for the increase in wire production (commissioning of Trefila IV in January), to improve industrial availability in anode production, and to higher production efficiency in sulfuric acid (New Sulfuric Acid Plant UAS in October). On the financial front, it is important to mention that, in a credit restriction scenario and increasing interest rates, we were able to improve the quality of our indebtedness and reduce our funding costs, even with 21% growth in Selic 1 in the period. The Long Term Debt, which represented 44% of or Total Debt in 2014, has increased its share to 51% in 2015, contributing to our goal of improving debt profile. In addition to improving our debt profile, we were more selective when allocating resources. Working capital, for instance, was reduced by 87%, or R$206.2 million. With this and other positive factors, our ROIC increased from 9.9% in 2014 to 10.4% in 2015, an important improvement for our shareholders, as per chart below. 8.9% 9.9% 10.4% 2.1% Adjusted EBITDA (R$ m) Net Profit (R$ m) ROIC (%) In addition to better ROIC, Company reached Net Profit of R$134.8 million, registering accumulated profits of R$96.7 million after legal reserves deduction and accumulated losses compensation 2, which allocation will be made pursuant to applicable laws and submitted to Company s Annual General Shareholders Meeting (AGM) expected for April Selic: basic interest rate of the Brazilian economy determined by the Central Bank (Bacen). Dec/14: 11.75%, Dec/15: 14.25% (Bacen). 2 See note to financial statements 19.j. 3

4 DEVELOPMENTS AND ACHIEVEMENTS IN 2015 We present our 2015 main achievements as follows, all very important to Paranapanema s transformation into a company with industrial and commercial efficiency, with stable and predictable results. Operational Management The following points were significant in operations: Scheduled maintenance for the smelter recovery, together with the new UAS commissioning at Dias d Ávila plant; New straight tubes plant, implanted and 100% operational in Utinga plant (Santo André-SP); Cast & Roll line maximization (seamless tubes) just three months after a fire that damaged part of the foundry structure; Inauguration of Trefila IV at Dias d Ávila plant, increasing wire production capacity from 50 thousand tons to 80 thousand tons annually; Closing of Capuava plant, generating yearly savings of around R$9 million and release of a real estate of 140 thousand m² for sale, located in Santo André and Mauá - SP; Renegotiation of logistics contracts, as per example, copper concentrate transportation, with an economy of around US$5 million per year, effective from 4Q15; Renewal of energy supply contract with CHESF, guaranteeing electricity supply to Dias d Ávila plant until 2037 in competitive conditions; and Record processing of complex concentrates 3 (average of 11% versus 9% in 2014), allowing reduction in raw materials cost. Commercial Management The following points were significant in commercial front: Redesign of the commercial structure, with areas dedicated to specific markets and supported by the implementation of a market intelligence cell, analyzing markets potential and sales strategies; Development of new relationships in foreign markets, focused in the Americas, specifically in key markets such as Argentina, Colombia and Uruguay, among others; Review of the credit policy to standardize and adequate risk analysis, financing rates and terms; Arbitrage between markets, guaranteeing sales of our products, both in domestic and foreign markets; and Certification of a new cathode brand CBM(p) in the London Metal Exchange (LME). Financial and Corporate Management The following points were significant in finance and corporate fronts: Improvement of risk policy, specifically the hedge policy and hedge accounting; Improvement of debt profile, reducing funding costs in Reais and improving debt profile; Development of relationships with new financial institutions, capturing more efficient and innovative credit lines in Company's history; 3 Complex concentrate demands technologies and processes to refine this kind of material. Due to its complexity, the treatment and refining charges ( TC/RC ) of this kind of concentrate tend to be higher than the TC/RC of traditional concentrates, resulting in higher profitability in the process of copper refining. 4

5 Settlement of the Total Return Swap agreement without any loss to the share price, which appreciated 26% in the period of the settlement; Legal assurance on Company s rights over the real estate Loteamento Península, with 105 thousand m² at Guarujá - SP; and Monetization of R$46.5 million related to Reintegra credits and reimbursement of R$18.1 million of PIS/COFINS on imports. CAPITAL INVESTMENTS (CAPEX) IN 2016 We have strived, since 2013, to increase Company's industrial availability, especially in Dias d'ávila plant (smelter), which received most of our capital expenditures. In 2015, we invested R$256 million in capital assets and maintenance of operations, being 60% of this amount to the smelter (BA). These investments were necessary for the recovery and modernization of this plant, which will achieve 90% of capacity utilization in coming years, against 80% on average in previous years. 344 Capex (R$ million) E SP BA Total investments in 2015 were higher than the R$190 million guidance presented by the Company earlier that year, due to three factors: Fire in Cast & Roll plant, which required additional resources; Accelerated industrial deterioration of Dias d'ávila, which required the anticipation of investments scheduled for 2016 on; and Inflation in equipment prices, mainly imported, due to Real devaluation. For 2016, we estimate a total of R$156 million in capex, being 90% of this amount to maintenance of Dias d Ávila operation (smelter). Until the end of PMA 2018 Project, Company will continue investing in maintenance and modernization of its plants, and, for coming years, we expect capex to stabilize at annual depreciation level. 5

6 BUSINESS ENVIRONMENT Copper Sector Global refined copper consumption has been growing at a compound annual rate (CAGR) of 3.5% 4, mainly driven by increasing Chinese demand since However, latest figures have not been favorable to copper. In 2015, copper price recorded a 26% drop in the year, trading at US$4,705/ton at the end of December. Over the past five years, price has fallen steadily, losing 56% from its peak of US$10,148/ton in This scenario is influenced mainly by China, which accounts for 44% of global demand for refined copper. As demand growth in China slowed down in recent years, and there is still metal oversupply, the price of this commodity ended up pressured. Nevertheless, experts consider copper as a resilient commodity. Some market analysts point out that China's demand is still growing in absolute terms, and expect lower prices to end up with excess supply, which would be positive for prices. About 20% of the world's mines are not feasible with copper prices at these levels, so the current situation is not favorable for the high-cost operations. In addition, Wood Mackenzie expects a slight improvement in demand growth for refined copper in 2016 compared with 2015, with growth of 2.8% (compared to 1.6% in 2015), also derived from the copper consumption growth in China (3.4% in 2016 versus 3.0% in 2015). It must also mention the impact that oil prices at such low levels have in Global GDP and its industrial activity. It is expected that in the next six months, the global industrial activity feel the positive effects of consumption, due to the decline in oil prices also benefiting copper consumption in the world. TC/RC 6 In January 2016, Freeport McMoRan - the North American mining company - agreed TC/RC rates for 2016 of US$97.35/t and 9.735US$ cents/lb of copper content with counterparties that include Jiangxi Copper and Tongling Nonferrous 7. This agreement is in line with the agreement between Antofagasta and Jiangxi Copper in December 2015, and these values should be considered as 2016 benchmark for pricing Paranapanema long term contracts. Despite 2016 rates decreasing 9% in US dollars compared with 2015, we reached the historic high of TC/RC in Reais in The combined effect of TC/RC of US$97.35/t and 9.735US$ cents/lb and Real valued at R$4.00/US$ should ensure a margin of around R$2,300/ton of new copper in 2016, 4% decrease compared with 2015, but still in its highs. 4 WoodMackenzie; 5 Considering the price of US$4,505/ton on February 25, TC/RC (Treatment Charge/Refining Charge): miners provide a discount of TC/RC for smelters convert the ore concentrate into refined metal, with this fee being deducted from the purchase price. This rate usually rises when there is excess copper concentrate supply over installed refining capacity. 7 Source: Metal Bulletin, Jan-22. 6

7 TC/RC 2,389 2,296 1, E TC/RC (R$/ton) TC/RC (US$/ton) Brazilian Scenario Local economy slowdown, loss of investment grade, higher interest rates, political crisis and sharp devaluation of Brazilian currency create a scenario of great uncertainty and hamper decision making in corporate sector for These points represent another compression factor on companies profitability. External factors also hinder the evolution of Brazilian economy such as the eventual rise of US benchmark interest rate, which tends to raise worldwide funding rates, and the slowdown in China s activities, which negatively impact commodity prices. Industrial production performance has been declining for 21 consecutive months, recording a 2.4% decrease in November compared with October Main negative factors continue to be the downturn in automotive and capital goods sectors, as a result of declining domestic consumption and investments. Automotive industry has decreased 35.3% until November 2015 compared with same period in Capital goods sector, which depicts faithfully the industry crisis, had a slightly smaller decrease (31.2%) in November 2015 compared with same month in For the full year, the decrease is of 24.1% 8. The Sao Paulo Civil Construction Industry Union (Sinduscon-SP) estimates an 8% reduction in civil construction Gross Domestic Product (GDP) in 2015 and a contraction of 5% in According to Sinduscon, political crisis and the absence of new public and private investments will have a major impact on economic activity for this sector. The scenarios described above directly affect the copper industry in Brazil. Main sectors affected by the Brazilian political and economic crisis are also the main consumers of copper in its various forms: electro-electronics, machinery and equipment, automotive and civil construction, among others. In this way, copper companies are increasing sales to foreign markets to offset the slowdown in Brazil and decreasing commodity prices in international markets, benefiting from the Real devaluation. For 2016, expectations for political and economic outlook remain negative as in 2015, harming all sectors performance. 8 Sources: Estadão, FIESP and IBGE. 7

8 EXPECTATIONS FOR 2016 In 2016, we continue working intensively in industrial, commercial, people and financial management, with the following highlights: Increase in marketing efforts in foreign markets as an alternative for greater physic and cash liquidity, albeit with more modest value added than in domestic market; Transformation Costs will continue to suffer from inflation, affecting salaries, energy and services; Continue to reduce General and Administrative Expenses due to completion of several initiatives to improve productivity, greater process automation, and simplification of management structure; and Investment program kept at a necessary level to guarantee operational performance. Due to a persistent challenging macroeconomic environment, we expect 2016 to be another year of margin pressure, where volume growth should offset partially the reduction in premiums and lower Reintegra rate. We will focus our efforts on managing costs and expenses without prejudice to the diversification of our products portfolio even in exports. In parallel, special attention will be given to clients credit and liquidity management, using the necessary tools for cash management, increasing debt term, reducing working capital, and sales of nonoperating assets. Concluding, 2016 will be a year of results pressured by lower Brazilian demand and inflation on costs in Reais. The focus on volumes (exports) and liquidity should help mitigate the economic environment effects. 8

9 CONSOLIDATED ECONOMIC AND FINANCIAL PERFORMANCE PRODUCTION VOLUME In tons 4Q14 4Q15 % % Primary Copper 62,537 64,821 4% 238, ,469 1% Copper Products 67,071 46,239-31% 250, ,260-7% Rods, Wires and Others 52,952 38,356-28% 192, ,571 1% Bars/Profiles/Rolled/Tubes/Fittings 14,118 7,883-44% 58,038 38,688-33% Total Production 129, ,060-14% 488, ,728-3% Internal Consumption 41,367 19,501-53% 158, ,896-28% Production for Sale 88,241 91,559 4% 330, ,832 9% By-products 240, ,230-22% 983, ,179-19% % of capacity utilization Primary Copper 88.6% 91.8% 3.2 p.p. 85.2% 86.2% 1.0 p.p. Copper Products Rods, Wires and Others 78.1% 50.0% p.p. 71.5% 65.4% -6.1 p.p. Bars/Profiles/Rolled/Tubes/Fittings 65.8% 44.9% p.p. 67.6% 55.2% p.p. During 2015, we produced thousand tons between Primary Copper and Copper Products, 3% reduction compared with 2014, impacted mainly by the 7% reduction in Copper Products. In Primary Copper, we produced thousand tons, 1% increase compared with 2014, despite the scheduled maintenance and the new UAS commissioning in October 2015, which lasted about 20 days. This increase in production is due to all investments that have been made in Dias d'ávila plant. In Copper Products, we produced thousand tons, 7% decrease compared with 2014, mainly due to 33% decrease in Bars, Profiles, Rolled, Tubes and Fittings, as a consequence of domestic slowdown. In By-products, we produced thousand tons, 19% drop compared with 2014, as a result of maintenance processes occurred during 2015, which hampered sulfuric acid production. 9

10 SALES VOLUME In tons 4Q14 4Q15 % % Primary Copper 20,427 34,483 69% 77, ,835 49% Domestic Market 7,351 2,946-60% 36,869 13,728-63% Export Market 13,046 31, % 40, , % Toll 30 0 n.a % Copper Products 48,647 32,870-32% 189, ,117-12% Rods, Wires and Others 30,665 23,370-24% 120, ,733 1% Domestic Market 20,201 14,353-29% 82,305 81,413-1% Export Market 7,936 6,980-12% 26,296 32,548 24% Toll 2,529 2,038-19% 11,831 7,773-34% Bars/Profiles/Rolled/Tubes/Fittings 17,982 9,500-47% 68,689 44,384-35% Domestic Market 8,231 4,585-44% 28,445 17,168-40% Export Market 2,865 1,758-39% 9,515 7,826-18% Toll 6,885 3,157-54% 30,729 19,390-37% Total Sales Volume 69,074 67,353-2% 266, ,952 6% % of Total Production 78.3% 73.6% -4.7 p.p. 80.7% 78.4% -2.3 p.p. By-products 260, ,069-20% 1,059, ,257-10% Domestic Market 255, ,546-21% 1,048, ,484-11% Export Market 5,480 6,523 19% 10,770 19,773 84% Sales Volume reached thousand tons, 6% growth compared with 2014, as a result of higher sales volume in Primary Copper (+49%), due to higher cathode exports. In Primary Copper, we sold thousand tons in 2015, 49% growth compared with 2014, due to higher cathodes production, intended mostly for exports. Sales breakdown for this segment was 88% to export market and 12% to domestic market. Growth in exports is part of Company's strategy to offset the slowdown in domestic market through entrance into new international markets. We aim also to export higher value-added products in future. In Copper Products, we sold thousand tons, 12% drop compared with The 1% growth in Rods and Wires, even representing 73% over Copper Products, was not enough to offset the 35% decrease in sales of other Copper Products. Sales breakdown for this segment was 76% from domestic market (59% wholesale and 16% transformation/toll) and 24% from export market. In By-products, sales volume decreased 10% reaching thousand tons due to lower copper slag volume, used in cement production, reflecting the construction sector downturn. 10

11 NET REVENUES 9 In R$ thd, except otherwise stated 4Q14 4Q15 % % Primary Copper 448, ,175 62% 1,591,205 2,190,458 38% % of Revenues 34.2% 49.8% 15.6 p.p. 33.6% 40.8% 7.1 p.p. Domestic Market 132,567 58,564-56% 695, ,307-68% Export Market 316, , % 895,656 1,969, % Toll 33 0 n.a % Copper Products 738, ,016-21% 2,771,965 2,605,212-6% % of Revenues 56.2% 39.8% p.p. 58.5% 48.5% p.p. Rods, Wires and Others 498, ,697-14% 1,947,252 2,009,037 3% Domestic Market 348, ,579-19% 1,480,226 1,364,933-8% Export Market 146, ,512-2% 448, ,411 41% Toll 4,131 3,605-13% 18,451 12,694-31% Bars/Profiles/Rolled/Tubes/Fittings 239, ,319-37% 824, ,175-28% Domestic Market 165, ,382-38% 562, ,032-34% Export Market 52,574 38,357-27% 164, ,911-2% Toll 22,214 11,580-48% 97,226 61,232-37% By-products 125, ,944 21% 371, ,598 56% % of Revenues 9.6% 10.4% 0.9 p.p. 7.8% 10.8% 2.9 p.p. Domestic Market 38,832 45,144 16% 130, ,221 56% Export Market 86, ,800 23% 240, ,377 56% Total Net Revenues 1,313,096 1,457,135 11% 4,734,359 5,374,268 14% Domestic Market [%] 52% 33% 61% 41% Export Market [%] 46% 66% 37% 58% Toll [%] 2% 1% 2% 1% REINTEGRA 10 Contribution 13,223 5,304-60% 13,223 30, % Net Revenues totaled R$5.4 billion in 2015, 14% higher than 2014, due to higher Sales Volume (+6%) and Real devaluation during the year (-42% on average FX rate). Export Market represented 58% of total sales, followed by Domestic Market with 41%, and Transformation (toll) with 1%. In Primary Copper, Net Revenues reached R$2.2 billion, 38% higher than 2014 due to higher sales volume (+49%) as well as Real devaluation in the period. Export market represented 90% of total revenues followed by domestic market with 10%. In Copper Products, Net Revenues reached R$2.6 billion, 6% less than 2014, a result of lower sales volume in the period (-12%) partially offset by Real devaluation, considering that our domestic sales are also priced in US dollar. Domestic market represented 67% of revenues followed by export market with 30%, and transformation with 3%. In By-products, Net Revenues reached R$578.6 million, 56% higher than 2014, also due to Real devaluation on sulfuric acid and anodic slimes sales, even though volume decreased 10%. Domestic market represented 35% of total revenues and export market 65%. 9 Net Revenues consider hedge accounting. To analyze Net Revenues behavior without hedge accounting effects, see Attachment IV. 10 REINTEGRA: Special Regime for the Reimbursement of Tax related amounts to Exporting Companies. Tax incentive that allows Brazilian exporting industries to recover 0.1%-3% of revenues from exports. The Reintegra program aims to return part or all amount related to taxes credits remaining in the production chain of exported goods. These credits can be used in two ways: (i) by offsetting overdue or undue federal taxes; or (ii) by a cash reimbursement. During 2015 Reintegra contributed with R$30.9 million in results, 134% higher than in 2014 when Reintegra was in effect for the last quarter of the year. 11

12 Net Revenues Breakdown 2015 Domestic Market Revenues Segments Export Market Revenues Countries Others 14% Others 11% Enamelled 2% Cooling 2% Fertilizers 3% Mecanic 4% Resale 5% Metallurgy 6% Eletroelectronic 31% Belgium 8% Japão 9% UK 7% China 35% Energy 7% Civil Construction 26% Singapore 13% Argentina 17% COST OF GOODS SOLD (COGS) In R$ thd, except otherwise stated 4Q14 4Q15 % % Metal Cost (1,038,389) (1,201,317) 16% (3,797,543) (4,337,613) 14% Transformation Cost (151,571) (157,884) 4% (552,641) (625,440) 13% Total COGS (1,189,960) (1,359,201) 14% (4,350,184) (4,963,053) 14% COGS Total/ton sold % % Metal Cost/ton sold % % Transformation Cost/ton sold % % 2015 COGS reached R$5.0 billion, 14% increase compared with 2014 and in line with Net Revenues growth (+14%) in same period. Metal Cost in Reais grew 14% totaling R$4.3 billion, impacted by Sales Volume growth (+6%), but in higher proportion due to the devaluation of Real during 2015 (average FX rate from R$2.34 in 2014 to R$3.33 in 2015 (+42%)). Transformation Cost presented 13% growth in 2015 reaching R$625.4 million, due mainly to growth in Sales Volume, inflation in the period (mandatory salaries increase related to the unions agreement) and mainly by costs associated with the maintenance processes during Transformation Cost per ton sold grew 7% in comparison with 2014, below inflation in the period (10.7%). Components of Transformation Cost 2014 and 2015 Depreciation / Amortization 19% Other utilities 8% Others 4% Personnel 31% Depreciation / Amortization 17% Other utilities 8% Others 5% Personnel 27% Services 6% Consumption 8% Energy 10% Maintenance (materials and services) 14% Services 7% Consumption 10% Maintenance (materials and services) 16% Energy 10% 12

13 GROSS PROFIT In R$ thd, except otherwise stated 4Q14 4Q15 % % Net Revenues 1,313,096 1,457,135 11% 4,734,359 5,374,268 14% ( - ) Metal Cost (1,038,389) (1,201,317) 16% (3,797,543) (4,337,613) 14% TC/RC (reduces metal cost) 57,214 73,133 28% 205, ,002 32% Premiums 274, ,818-7% 936,816 1,036,655 11% ( - ) Transformation Cost (151,571) (157,884) 4% (552,641) (625,440) 13% Gross Profit 123,136 97,934-20% 384, ,215 7% % of Revenues 9.4% 6.7% -2.7 p.p. 8.1% 7.7% -0.4 p.p. Premium/Net Revenues [%] 20.9% 17.6% -3.3 p.p. 19.8% 19.3% -0.5 p.p. Premium/ton sold % % Gross Profit reached R$411.2 million, 7% growth compared with This increase was influenced mainly by growth in Net Revenues, resulting in a better premium levels compared with 2014 (+11%) due to favorable exchange rate. Gross Margin fell by 0.4 p.p., resulting in 7.7% of Net Revenues in 2015 due to lower sales volume in Copper Products in domestic market, which have higher added value. OPERATING EXPENSES In R$ thd, except otherwise stated 4Q14 4Q15 % % Total Operating Expenses (62,354) (71,911) 15% (257,579) (267,822) 4% Sales Expenses (8,380) (10,386) 24% (30,182) (39,070) 29% General and Administrative Expenses (28,219) (21,518) -24% (83,102) (92,045) 11% Employee Profit Sharing (5,060) (4,107) -19% (17,903) (22,841) 28% Other Operating, net (20,695) (35,900) 73% (126,392) (113,866) -10% Total Expenses/Net Revenues [%] 4.7% 4.9% 0.2 p.p. 5.4% 5.0% -0.4 p.p. Recurring Expenses*/Gross Profit [%] 27.2% 46.0% 18.8 p.p. 37.2% 42.2% 5.0 p.p. Recurring Expenses*/ton sold % % Non-recurring items: Capuava s partial closing (150) 0 n.a. (60,508) 0 n.a. " Polônia Project " write-off** 0 0 n.a. (26,154) 0 n.a. Provisions/gains (losses) several lawsuits** (29,876) (10,406) -65% (57,547) (59,274) 3% Other non-recurring (2,102) (16,408) 681% 6,099 (35,901) -689% Provisions/gains (losses) for lawsuits** 3,218 (59) -102% 23, % Total Non-Recurring Items (28,910) (26,873) -7% (114,760) (94,434) -18% *Total Expenses excluding Non-Recurring Items ** No cash impact during the period Total Expenses reached R$267.8 million, 4% increase compared with Recurring Expenses grew R$30.6 million (+21%). Non-Recurring Items decreased R$20.3 million (-18%). Total Expenses per ton sold fell by 2% (from R$ 0.97 thousand to R$ 0.95 thousand), and in relation to Net Revenues decreased by 0.4 p.p. (from 5.4% in 2014 to 5.0% in 2015). Sales Expenses grew 29% and reached R$39.1 million, above Net Revenues changes (+14%), due to: i) Company s initiatives to avert domestic market slowdown, besides efforts in developing new customers and markets; and (ii) commercial department restructuring during General and Administrative Expenses grew 11%, reaching R$92.0 million, in line with inflation in the period. Employee Profit Sharing grew 28%, due to the variable compensation provision related to long-term incentive program (ILP), established in

14 Other Net Operating Expenses decreased 10% compared with 18% reduction in Non-Recurring Items, due mainly to the absence of similar size 2014 expenses, such as closure of Capuava plant and write-off of Poland Project. FINANCIAL RESULT In R$ thd, except otherwise stated 4Q14 4Q15 % % Financial Income 42,024 46,935 12% 170, ,452-8% Financial Expenses (40,142) (52,857) 32% (164,368) (170,016) 3% FX Variance 9,897 (36,770) -472% 36,588 (80,850) -321% Other Financial Income/Expenses 8,641 (7,495) -187% 48,892 (18,673) -138% Hedge Operations: 6,531 (1,906) -129% (69,721) 140, % Metal Hedge 6,840 9,336 36% (6,547) 79, % Cash Flow Hedge (revenues and debt) (1,395) (15,285) 996% (21,950) 75, % Total Return Swap 2,367 1,583-33% (39,509) (10,259) -74% Other Derivatives (1,281) 2, % (1,714) (4,652) 171% Net Financial Result 26,950 (52,092) -293% 21,665 28,074 30% 2015 Net Financial Result was positive R$28.1 million, 30% increase compared with 2014 due mainly to the result of Hedge Operations. Financial Income decreased 8% reaching R$157.5 million, due to lower Cash and Cash Equivalents in Financial Expenses increased 3% totaling R$170.0 million, due mainly to the Real devaluation. Net FX Variance was an expense of R$80.9 million against revenue of R$36.6 million in 2014, due to FX variance on suppliers in foreign currency, offset by a positive FX variance on export receivables and sales of metal inventories marked with historical exchange rate (and lower than market FX rate). Hedge Operations result in 2015 was positive in R$140.2 million versus a negative result of R$69.7 million in 2014, and reflects metal prices and exchange rate performance. NET RESULT In R$ thd, except otherwise stated 4Q14 4Q15 % % Result before Taxes 87,732 (26,069) -130% 148, ,467 16% Income Tax and Social Contribution (8,082) 8, % (24,380) (36,681) 50% Net Result 79,650 (17,636) -122% 123, ,786 9% % of Revenues 6.1% -1.2% -7.3 p.p. 2.6% 2.5% -0.1 p.p. Due to the aforementioned factors, Net Result of 2015 was profit of R$134.8 million, 9% growth over

15 EBITDA and ADJUSTED EBITDA In R$ thd, except otherwise stated 4Q14 4Q15 % % Net Profit 79,650 (17,636) -122% 123, ,786 9% ( + ) Taxes 8,082 (8,433) -204% 24,380 36,681 50% ( - ) Net Financial Result (26,950) 52, % (21,665) (28,074) 30% EBIT 60,782 26,023-57% 126, ,393 13% ( + ) Depreciation and Amortization 29,983 33,569 12% 116, ,332 5% EBITDA 90,765 59,592-34% 243, ,725 9% % of Revenues 6.9% 4.1% -2.8 p.p. 5.1% 4.9% -0.2 p.p. ( + ) Non-Recurring Items 28,910 26,873-7% 114,760 94,434-18% Adjusted EBITDA ,675 86,465-28% 358, ,159 1% % of Revenues 9.1% 5.9% -3.2 p.p. 7.6% 6.7% -0.9 p.p. Adjusted EBITDA reached R$360.2 million in % increase compared with Adjusted EBITDA Margin was 6.7% versus 7.6% in 2014, down 0.9 p.p.. WORKING CAPITAL In R$ thd, except otherwise stated 3Q15 4Q15 % % Accounts Receivable 658, ,524-8% 466, ,524 30% Inventories 1,464,696 1,495,760 2% 1,370,249 1,495,760 9% Recoverable Tax 403, ,908-19% 370, ,908-12% Suppliers (1,897,883) (2,132,710) 12% (1,858,498) (2,132,710) 15% Advances from Clients (231,798) (265,039) 14% (111,833) (265,039) 137% Total Working Capital 397,277 30,443-92% 236,655 30,443-87% Change in Total Working Capital (247,768) (366,834) (497,591) (206,212) Employed Working Capital in operations in 2015 decreased R$206.2 million, or 87% compared with Lower capital employed in operations was a result of growth in Suppliers (+15%) and in Advances from Clients (+137%). Accounts Receivable grew 30% or R$141.4 million in 2015, due mainly to growth in exports in last days of the month. Inventories were R$125.5 million higher in the period (+9%), due to higher copper (LME) price in Reais. Recoverable Tax presented 12% decrease or R$45.8 million, due mainly to reimbursement of PIS/COFINS credits (on import process) and monetization of Reintegra. Suppliers grew 15% or R$274.2 million as a result of the Company's efforts to expand funding sources. Advances from Clients increased 137% or R$153.2 million as a result of more aggressive commercial policies. 11 Adjusted EBITDA correspond to EBITDA net of non-recurring and non-cash items, presenting a more precise measure of cash flow generation of the Company. EBITDA and respective margin are measures not used in Brazilian accounting practices or in international accounting standard established by the International Financial Reporting Standard (IFRS) and do not have a standard meaning. Therefore, it should not be considered as an alternative for net income, as an indicator of operational performance or as an alternative for cash flow in the form of an indicator of liquidity included in audited financial statements. Besides, EBITDA can be calculated differently from other companies, even in same operating segment. 15

16 INVESTMENTS (Fixed Assets) In R$ thd, except otherwise stated 3Q15 4Q15 % % Fixed Assets 1,260,597 1,346,599 7% 1,314,758 1,346,599 2% Intangible 8,879 8,815-1% 4,990 8,815 77% Others % 10, % Total Investments 1,270,122 1,356,060 7% 1,330,296 1,356,060 2% Depreciation 29,742 33,569 13% 120, ,332 1% Depreciation/Net Revenues 1.9% 2.3% 0.4 p.p. 2.6% 2.3% -0.3 p.p. Total Investments (Fixed Assets) in 2015 reached R$1.4 billion, 2% up compared with 2014, due to Fixed Assets (+2%) acquisition, recovery and modernization, and Intangible Assets (+77%) improvements in automation and information systems. INDEBTDENESS In R$ thd, except otherwise stated 3Q15 4Q15 % % Short Term 1,423, ,655-32% 749, ,655 29% Long Term 1,138, ,749-13% 583, ,749 69% Derivatives 355, ,644-31% 123, ,644 99% Total Indebtedness 2,918,684 2,197,048-25% 1,456,580 2,197,048 51% Cash and Cash Equivalents 687, ,713-63% 276, ,713-8% Financial Investments 633, ,690-36% 771, ,690-47% Derivatives 260, ,797 96% 134, , % Total Cash 1,582,549 1,170,200-26% 1,182,437 1,170,200-1% Net Debt 1,336,135 1,026,848-23% 274,143 1,026, % LTM Adjusted EBITDA 393, ,159-8% 358, ,159 1% Net Debt/LTM Adjusted EBITDA 3.40x 2.85x 0.77x 2.85x Total Debt at the end of 2015 reached R$2.2 billion, 51% growth compared with 2014, due mainly to FX variation on Company s debt (84% in US dollars). Total Cash at the end of 2015 reached R$1.2 billion, practically stable compared with 2014, mainly influenced by Derivatives mark-to-market on copper (LME) and dollar variations in the period. The Net Debt/LTM Adjusted EBITDA covenant for some financing contracts reached 2.85x, below the limit of 3.50x, grewing compared with 2014 due to change in Total Debt in Reais. Compared to 3Q15, the Net Debt/LTM Adjusted EBITDA was down 0.55 p.p., from 3.40x to 2.85x. 16

17 CASH FLOW In R$ thd, except otherwise stated 3Q15 4Q15 % % Cash and Cash Equivalents at the beginning of period 438, ,814 57% 79, , % Operating Activities (133,082) (115,203) -13% 673,139 (449,882) -167% Investments Activities (1,200) 107, % (464,508) 108, % Financing 54, , % (395,835) 365, % Capex (55,474) (120,712) 118% (68,673) (256,415) 273% Financing Activities 383,588 (426,252) -211% (11,276) 317, % Increase (Decrease) of Cash 249,306 (434,101) -274% 197,355 (23,159) -112% Cash and Cash Equivalents at the end of period 687, ,713-63% 276, ,713-8% Company employed R$449.9 million in Operating Activities throughout 2015, due to the variation in operating assets and liabilities, the increase in LME in Reais, and specially the growth in Financial Derivatives with the intermediate settlement of derivative contracts expired in the period, but that are being rolled for future periods and whose final effect will be known upon the exchange rate of the final settlement dates. Investment Activities generated R$108.9 million, with R$365.3 million coming from Financial Investments, and the remaining R$256.4 million, employed in additions to Fixed and Intangible assets. Financing Activities generated R$317.8 million due to new financing lines, net of interest and amortizations. The combination of these factors resulted in decrease in Cash and Cash Equivalents of R$23.2 million to R$253.7 million at the end of ******************************************** Company is subject to the rules of the Market Arbitration Panel of Novo Mercado, pursuant to its Bylaws. Paranapanema hired the independent auditing services of KPMG Auditores Independents since February 2012 to provide auditing services of its financial statements. In 2015 the Independent Auditors carried out only external auditing services. ******************************************** 17

18 ATTACHMENT I Income Statement [BRL thousand] 4Q14 4Q15 % % Net Revenues 1,313,096 1,457,135 11% 4,734,359 5,374,268 14% Domestic Market 684, ,670-29% 2,869,077 2,163,493-25% Export Market 602, ,280 59% 1,749,590 3,136,795 79% Transformation/Toll 26,378 15,185-42% 115,693 73,980-36% Cost of Goods Sold (1,189,960) (1,359,201) 14% (4,350,184) (4,963,053) 14% Gross Profit 123, % 384, ,215 7% % of Revenues 9.4% 6.7% -2.7 p.p. 8.1% 7.7% -0.4 p.p. Sales Expenses (8,380) (10,386) 24% (30,182) (39,070) 29% General and Administrative (20,056) (20,520) 2% (69,956) (85,042) 22% Management Compensation (8,163) (998) -88% (13,146) (7,003) -47% Employee Profit Sharing (5,060) (4,107) -19% (17,903) (22,841) 28% Other Operating, net (20,695) (35,900) 73% (126,392) (113,866) -10% Result before Financial Result and Taxes 60,782 26,023-57% 126, ,393 13% % of Revenues 4.6% 1.8% -2.8 p.p. 2.7% 2.7% 0.0 p.p. Financial Result 26,950 (52,092) -293% 21,665 28,074 30% Financial Income 111, , % 730,535 2,032, % Financial Expenses (84,461) (673,648) 698% (708,870) (2,004,824) 183% Result before Taxes 87,732 (26,069) -130% 148, ,467 16% % of Revenues 6.7% -1.8% -8.5 p.p. 3.1% 3.2% 0.1 p.p. Taxes (8,082) 8, % (24,380) (36,681) 50% IR and CSLL Current (1,939) 5, % (1,940) 0 n.a. IR and CSLL Deferred (6,143) 2, % (22,440) (36,681) 63% Net Result 79,650 (17,636) -122% 123, ,786 9% % of Revenues 6.1% -1.2% -7.3 p.p. 2.6% 2.5% -0.1 p.p. 18

19 ATTACHMENT II Balance Sheet [BRL thousand] % Assets 4,964,224 5,306,234 7% Current 3,097,096 3,453,792 12% Cash and cash equivalents 276, ,713-8% Financial Investments 699, ,065-46% Accounts receivable 463, ,770 30% Inventories 1,370,249 1,495,760 9% Tax recoverable 136, ,087 42% Anticipated expenses 4,493 7,013 56% Derivatives 134, , % Other current assets 11,263 10,587-6% Non-current 1,867,128 1,852,442-1% Financial investments at fair value 71,473 28,625-60% Accounts receivable 2,297 2,754 20% Deferred taxes 87,401 50,721-42% Tax recoverable 234, ,821-44% Legal deposits 48,182 47,314-2% Assets for sale 14, , % Other non-current assets 78, ,908 45% Prepaid expenses 0 12,030 n.a. Other investments 10, % Fixed assets 1,314,758 1,346,599 2% Intangible 4,990 8,815 77% Liabilities 3,759,992 4,961,758 32% Current 2,979,542 3,797,334 27% Local suppliers 99, ,060 35% Foreign suppliers 1,756,078 1,997,650 14% Salaries and social charges 45,192 51,657 14% Tax payable 18,451 11,711-37% Loans and financings 749, ,655 29% Dividends payable 0 24,186 n.a. Derivatives 123, ,644 99% Other payable 75, ,731 35% Advances of Customers 111, , % Non-current 780,450 1,164,424 49% Suppliers 2,547 0 n.a. Loans and financings 583, ,749 69% Contingencies provisions 193, ,923-9% Tax payable % Shareholders equity 1,204, ,476-71% Paid in capital 1,382,990 1,382,990 0% Capital reserves 37,005 (741) -102% Revaluation reserves 247, ,849-5% Profit reserves 14,294 77, % Accumulated profit (losses) (96,961) 0 n.a. Equity valuation adjustments (OCI) (380,913) (1,351,272) 255% Total Liabilities + Shareholders Equity 4,964,224 5,306,234 7% 19

20 ATTACHMENT III Cash Flow [BRL thousand] 4Q14 4Q15 % % Cash flow from operating activities 111,029 (115,202) -204% 673,139 (449,881) -167% Profit before taxes 87,732 (26,069) -130% 148, ,467 16% Adjustments to reconcile net income to cash flow from operating activities Residual value of asset write-off 5, % 31,292 9,637-69% Depreciation and amortization 29,983 33,569 12% 120, ,332 1% Provision for judicial losses 20,159 (7,805) -139% 41,988 28,535-32% (Reversion)/Provision recoverable value estimated loss (18,319) % (4,246) 13, % Residual value of asset write-off 1,619 (8,459) -622% 1,619 (8,616) -632% Long term financial expenses (46,384) (368,530) 695% (60,002) (542,176) 804% Present value adjustment - receivables and suppliers (386) (1,646) 326% 1,896 1,189-37% Equity valuation adjustments n.a. - - n.a. Change in operating assets and liabilities Accounts receivable (71,441) 52, % 142,356 (157,843) -211% Inventories 15,904 (30,938) -295% 4,860 (125,385) -2680% Tax recoverable (20,094) 78, % (32,360) 45, % Prepaid expenses 1,636 4, % (737) (2,520) 242% Legal deposits 10,154 2,097-79% 11,798 1,015-91% Derivatives (93,172) (190,097) 104% (115,038) (544,306) 373% Assets for sale (5,135) (198) -96% (11,852) (243) -98% Other assets 8,189 (1,213) -115% (52,299) (35,074) -33% Suppliers 110, , % 282, ,926 12% Current income tax and social contribution (6,731) - n.a. (6,731) - n.a. Tax payable 7,907 (13,285) -268% (385) (6,263) 1527% Legal deposits additions and reductions (10,447) (24,038) 130% (27,942) (45,280) 62% Payroll and social charges 2,157 (3,049) -241% (4,999) 6, % Derivatives 7,222 (110,225) -1626% 41, , % Other liabilities 73,792 (4,863) -107% 160, ,443 12% Cash flow from investing activities 14, , % (464,508) 108, % Financial investments 40, , % (395,835) 365, % Fixed assets and intangible additions (26,349) (120,712) 358% (68,673) (256,415) 273% Cash flow from financing activities (25,277) (426,252) 1586% (11,276) 317, % Raise (payment) of loans and financing (25,277) 177, % (11,130) 1,733, % Payment of loans and financing - (603,745) n.a. - (1,415,939) n.a. Dividends - - n.a. (146) - n.a. Increase (decrease) of cash and cash equivalents 99,897 (434,101) -535% 197,355 (23,159) -112% Cash and cash equivalents at the beginning of the period 176, , % 79, , % Cash and cash equivalents at the end of the period 276, ,713-8% 276, ,713-8% 20

21 ATTACHMENT IV Hedge Accounting adjustment over Net Revenues [BRL thousand] 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q Primary Copper (19,133) 12,073 4,081 (26,573) (28,423) (48.608) (2,445) (5,244) (29,552) (84,720) Domestic Market (7,717) 11,791 7,691 (16,357) (17,046) (32,477) (2,445) (5,244) (4,591) (57,213) Export Market (11,416) 282 (3,610) (10,216) (11,376) (16,131) - - (24,961) (27,508) Copper Products (16,459) 24,922 9,045 (36,657) (110,766) (102,790) (28,095) (21,742) (19,150) (263,393) Rods, Wires and Others (16,459) 24,922 9,045 (36,657) (110,766) (102,790) (28,095) (21,742) (19,150) (263,393) Domestic Market (13,584) 24,400 9,782 (35,421) (107,493) (101,922) (28,095) (21,742) (14,824) (259,252) Export Market (2,875) 522 (737) (1,236) (3,274) (867) - - (4,326) (4,141) By-products (2,361) (150) (1,398) (3,909) - Domestic Market Export Market (2,361) (150) (1,398) (3,909) - Total (37,953) 36,844 11,728 (63,230) (139,189) (151,398) (30,541) (26,985) (52,611) (348,113) 21