!! " #!$ %$&' ()*"+*)", " " '! ' "!! (,! --*"$ % & " --* $ $)/ 0$ % &,!$ $",!. - -1(", #!$ $& 2,!,

Transcription

1 !"#$

2 "#$!!! " #!$ %$&' ()*"+*)", " " '! ' "!! (,! --*"$ % & ". ---" --* $ $)/ 0$ % &,!$ $",!. - -1(", #!$ $& 2,!, "#$. $ & $ % $ 3-&/*+0&$ % $,!$ 4! $&4/*+0&$ % $,!$ 4!"! 5 '"!, "!!,!. $ '!,,,,!"

3 %&"" ",! '!,, " " --*, #!$ ",! -1( %&&!! ",! '!,, " " --* $ )/, #!$ ",!-1( '& &&#!!!! ' ()*"+*),!-!6 " ',,!-1(, #!$ $&! $%&" ',,,, ", ",!, " "! 5 7 "+*) - $ -&-+++*8+920: -, - -&-*&;+:8:8*920<<

4 MANAGEMNT REPORT 1T2013 SCENARIO AND MARKETS The first quarter of 2013 got underway at a faster pace than that normally seen in previous years. Despite the low economic growth in 2012, the year began at a pace that was in line with our expectations, for a GDP growth of around 3.0% YoY, with no change in the level of employment and incomes growing in real terms. Growth in the panel segment amounted to 1.5% in terms of volumes shipped, compared to the same period a year earlier. Price increases implemented in April and October 2012, and January 2013, cause a discrepancy when carrying out a comparative sales analysis compared to the immediately preceding period and the previous year, because of the advance buying that took place in March and December The domestic panel market, according to data from ABIPA (Brazilian Panel Industry Association), presented a growth in volume shipped of around 6.3%. In this period the IPI tax rate increased from 0% in January, to 2.5% in February. The performance of the construction sector, in which the Deca division is inserted, presented positive activity. The ABRAMAT Index, which measures the sales performance of the construction sector in the domestic market showed annual growth of 1.7%, while Deca s net revenue in the domestic market, rose by 15.7% (7.9% disregarding the net revenue from the acquisitions made - Mipel and Thermosystem). A combination of an improved product mix and additional sales from the recently acquired operations, contributed to this performance. In the domestic scenario the main debate continues as to what monetary policy direction is likely to be followed by the Brazilian Central Bank. Government stimulus measures seem to have contributed more to feeding inflationary pressure, which is already threatening to break through the upper limit of the inflation target band system, than contributing to revitalizing the economy. A possible increase in interest rates, desirable at the moment, may adversely affect economic expansion over the short term, but could contribute to lending credibility to the Brazilian monetary authority in its difficult task of creating the conditions for sustainable long-term economic performance. On the international front, there was more of the same. Europe seems to be drowning in its own problems with continuing repercussions from the credit crisis of Problem economies like Greece, Portugal and Spain continue to suffer from heavy adjustments while new victims continue to appear, it now being the turn of Cyprus. The delay in achieving a solution to the solvency situation of these economies continues to contribute to postponing the moment of economic recovery on the European continent, while provoking a high degree of uncertainty and volatility in financial markets. STRATEGIC MANAGEMENT In the first quarter of 2013, Duratex invested R$ million in previously announced expansion projects, as well as the acquisition of Thermosystem, the figures of which were consolidated into Duratex's numbers from the first quarter of this year.

5 This acquisition is in line with the Company's strategy of expanding in segments with synergy to its core businesses. The contract to acquire all the shares of the company was signed in January 2013, for R$56.4 million. With this acquisition, Duratex now has a production capacity of 1.5 million pieces a year, of electronic showers, which represents an approximate market share of 7%. Duratex began, in April 2013, the process of restructuring the industrial activities of its Argentinian subsidiary Deca Piazza S.A. Despite the rigorous efforts made to preserve its competitiveness in the region, the company proved unable to revert a series of financial losses as a result of the highly-regulated business environment in that country, unfavorable to private enterprise, and so decided on this course of action. R$660 million of investment is planned for 2013, to be spent on maintaining and sustaining the Company s production plants and forestry base, as well as the conclusion of ongoing investments, as follows: Panel Division: i) New MDF plant in the implementation phase at the Itapetininga unit SP, with operational start-up planned for the beginning of the second half of 2013, with an effective production capacity of 520,000 m³ a year. ii) Additional investment in the Taquari unit - RS to bring it up to its full capacity utilisation rate on the MDP production line, with completion planned for mid Deca Division: i) Expansion to capacity at the Jundiaí unit /SP, from 17.0 million to 18.2 million pieces/year of metal bathroom fittings, and ii) Investment at the Queimados unit /RJ, with an annual capacity of 2.4 million pieces year, corresponding to an increase of 25% in total vitreous chinaware production capacity, with operational start-up planned for the 2Q13. CONSOLIDATED FINANCIAL SUMMARY (in IFRS and R$ 000) 1Q13 4Q12 1Q12 DESTAQUES Volume shipped: Deca ( 000 pieces) 6,553 6,606 6,024 Volume shipped: Panels (m 3 ) 613, , ,123 Consolidated net revenue 869, , ,785 Gross profit 340, , ,594 Gross margin 39.2% 35.4% 34.5% EBITDA (1) 345, , ,206 EBITDA margin 39.8% 37.8% 32.8% EBITDA adjusted from no cash events (2) 300, , ,832

6 Adjusted EBITDA margin 34.6% 31.6% 28.3% Extraordinary events (3) 22,005 10,028 0 Recurring Adjusted EBITDA 278, , ,832 Recurring Adjusted EBITDA margin 32.1% 30.5% 28.3% Net Income 148, ,400 86,247 Recurring Net Income 140, ,301 86,247 Recurring net margin 16.2% 14.0% 11.7% INDICATORS Current liquidity (4) Net indebtedness (5) 1,505,599 1,369,710 1,196,102 Net indebtedness/ EBITDA UDM Average net equity 4,091,839 3,984,562 3,737,294 ROE (6) 14.6% 15.00% 9.20% Recurring ROE 13.7% 13.20% 9.2% SHARES Basic Net earnings per share (R$) (7) Closing share price (R$) Net equity per share (R$) Shares held in Treasury (shares) 690, ,677 1,889,486 Market value (R$1.000) (8) 8,954,622 8,155,997 6,309,159 (1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): a measure of operational performance pursuant to CVM Instruction 527/12. See complete reconciliation details of this indicator on page 7 of this report. (2) EBITDA adjusted for non-cash events arising from the variation in the fair value of biological assets, and combination of businesses, principally. (3) EBITDA adjusted for non-cash events and disregarding extraordinary items, as follows: 1Q13 (+) R$42,318 thousand referring to the reversion of a surplus in the defined benefit, closed pension plan of Fundação Itaúsa, (-) R$16,306 thousand in provisions referring to the deactivation of Deca Piazza - Argentina, (-) R$1,728 thousand in exchange rate variation on the reclassification of the restructuring charges of the Argentinian operation and (-) R$2,279 thousand referring to other adjustments. (4) Current ratio: Current Assets, divided by Current Liabilities. Indicates the availability in R$ to cover each R$ of short-term obligations. (5) Net indebtedness: Total Debt ( ) Cash. (6) ROE (Return-on-Equity): measure of performance arrived at by dividing Net Earnings in the period, annualized in the quarter by, average Shareholders Equity.

7 (7) Net earnings per share is calculated by dividing the earnings attributed to the Company's shareholders by the average weighted quantity of ordinary shares in issue during the year, excluding ordinary shares held in treasury. (8) Market Capitalization was calculated based on the share price at the end of the period, multiplied by the number of shares (550,054,081 shares for 1Q13), net of shares held in treasury. EBITDA The table below shows the reconciliation of EBITDA, in accordance with the system as set out in CVM Instruction 527/12. Taking this result, and as a way of better portraying the Company's operational cash generation, two adjustments have been made, (1) stripping out events of an accounting and non-cash nature from EBITDA and (2) disregarding events of an extraordinary nature. In this way, and in keeping with the best practices, we seek to provide a clearer picture of the Company's operational cash generation. 1Q13 4Q12 % 1Q12 % Net Income 148, , % 86, % Income Tax and Social Contribution 48,744 37, % 21, % Net Financial Result 24,862 29, % 28, % EBIT 222, , % 135, % EBITDA according to CVM527/12 345, , % 242, % EBITDA margin according to CVM527/ % 37.8% % - Change in Fair Value of Biological Assets (1) (43,240) (39,933) 8.3% (32,923) 31.3% Business Combination / Other Adjustments (1) (1,691) (18,282) - (451) - EBITDA adjusted for non-cash Events 300, , % 208, % Extraordinary Events (2) (22,005) (10,028) Recurrent Adjusted EBITDA 278, , % 208, % Recurring Adjusted EBITDA margin 32.1% 30.5% % - EBITDA in the quarter, in accordance with the methodology defined by CVM Instruction 527/12 totalled R$345.8 million, with EBITDA margin of 39.8%. Disregarding events of an accounting and non-cash nature, the adjusted result would be R$300.9 million, being equivalent to an EBITDA margin of 34.6%, representing a year-on-year increase

8 of 44.1%. Contributing to this result was an extraordinary item, referring to the reversal of the surplus in the reserves of the defined benefit pension plan of Fundação Itaúsa Industrial, partially offset by provisions related to the closure of industrial activities in Argentina, which, when disregarded, show a recurring result for the quarter of R$278.9 million, a significant year-on-year increase of 33.6%, with an EBITDA margin of 32.1%. This result reflects the annual increase in volume shipped of 1.5% at the Wood Division and 8.8% at the Deca Division. In conjunction with this, there was a respective increase in Net Unit Revenue, of 16.7% and 7.3%, together with lower cost pressure at the Wood Division and a better shipment mix at Deca. OPERATIONS Wood Division 1Q13 4Q12 % 1Q12 % 369, , % 354, % 243, , % 249, % 613, , % 604, %! " # $ 554, , % 467, % 522, , % 443, % 31,570 25, % 23, % $ % & ' ( ) * ' ' % % $! ) *! ) ' ( ) * ' ' + (454.37) (469.79) -3.3% (444.41) 2.2% (53,813) (52,969) 1.6% (46,786) 15.0% (15,739) (15,550) 1.2% (13,594) 15.8% ' (, (-. -( ) & ) 156, , % 78, %! "# $ % (43,240) (39,933) 8.3% (32,923) 31.3% % & "# $ % 45,406 47, % 34, % % ' ( 61,538 72, % 56, % ) # " (1,026) (5,185) -80.2% (149) 588.6% & 958 4,

9 # *! " +% & 220, , % 136, % ),-. (15,803) (6,224) & ((, + /& ) + 204, , % 136, % & ((, + /& ) + (, 36.9% 35.6% % - (¹) 1Q13 (+)R$18,060 thousand refers to the reversion of the surplus in the defined benefit closed pension plan of Fundação Itaúsa and (-) R$ 2,278 thousand referring to other adjustments; in 4Q12: the reversion of a tax contingency provision; The performance by the Wood Division continues to reflect the buoyant moment being experienced in the retail furniture segment, reflecting favorable credit conditions and the rise in the real incomes. Adjustments carried out to the pricing base implemented in April 2012 and January 2013, contributed to raising the level of shipments in the first and fourth quarters of For this reason, the shipment levels in 1Q13, as compared with these two periods, are not entirely comparable. While shipment levels in the period increased by 1.5% compared to 1Q12, they were down 12.4% compared to the previous quarter, bearing in mind that the first quarters of the year tend to be weaker, due to seasonal variation, than the other quarters. Even with this marginal growth in shipment volumes, net revenue for this Division was up 18.5% compared to the same period a year earlier, due to the improved pricing base and the better product mix in the period. Duratex's shipment performance was below that of the industry as a whole as a result of adjustments made to the pricing base, and scheduled maintenance shutdowns in the first quarter. The fact that Net Unit Revenue increased by more than the cash cost, contributed to achieving an operational result, as measured by EBITDA, of R$220.0 million in the quarter, with an EBITDA margin of approximately 40%. It should be borne in mind that this result was boosted by an extraordinary item, referring to the reversion of the surplus in Duratex's defined benefit pension plan for its employees, which has been closed since Even disregarding this extraordinary item, the EBITDA result of R$204.2 million and associated margin of 36.9%, can be considered as unprecedented for the period. At the end of the first half of 2013, two important investments should be concluded, which will enable the Company to take a significant leap forward in operational terms. Investment should be completed at the unit in Taquari/RS with the removal of the production bottleneck in the MDP line. As a consequence, additional capacity of approximately 230,000 m 3 will be added, raising the total production capacity at that unit to 670,000 m 3. The second investment to be concluded is at the new MDF unit, being installed at Itapetininga/SP, with an annual production capacity of 520,000 m 3.

10 Tablemac's performance was recognized in Duratex's figures under equity income result. At the end of the quarter, Duratex had a stake of 37% in this Colombian company. As a way of creating a closer relationship with our customers and the market as a whole, and publicizing the launching of new products, the Wood Division participated at two important events: FIMMA Brasil - the fifth largest trade fair in the world for the furniture and wood production chain, and Revestir - the main event for construction finishing solutions in Latin America, at which the Company displayed innovative materials and solutions for engineering, architectural and decoration projects. In the first quarter, the Wood Division won the Top Marca Projeto Design Durafloor Award - in the flooring category survey, in a ranking research carried out among readers of the magazine Projeto Design and users of the portal arcoweb. The Wood Division also was awarded the Fornecedores destaques da Hotelaria (outstanding suppliers to the hotel segment) prize, which recognizes companies that have been outstanding in the supply of products and services to the hotel market. 25 new product designs were launched, including 5 Duraplac designs and 14 Durafroor LVT (Luxury Vinyl Tile). Deca Division 1Q13 4Q12 % 1Q12 % $! 0 ' ) # / 2,200 2, % 1, % 0 / 4,353 4, % 4, % 6,553 6, % 6, %! " # $ 315, , % 270, % 301, , % 260, % 13,621 11, % 9, % $ % & ' (' ) * ' ' % % $! ) *! ) ' (' ) * ' ' + (27.26) (28.58) -4.6% (24.84) 9.7% (45,490) (45,554) -0.1% (37,329) 21.9% (15,292) (13,544) 12.9% (10,561) 44.8%

11 ' (, (-. -( ) & ) 66,133 68, % 57, % % ( 16,476 2, % 14, % ) 1 " (1,728) (2,321) -25.5% (108) % + /& ) + -(1) * % ) 80,881 68, % 71, % + /& ) + (, 25.6% 21.6% % - ),-. 6,203 3, & ((, + /& ) + 74,678 64, % 71, % & ((, + /& ) + (, 23.7% 20.4% % - (¹) 1Q 13: net effect of the reversal of the surplus in the defined benefit pension plan for employees of Duratex, and the recognition of losses related to restructuring activities in Argentina. 4Q12: reversal of half-yearly PIS tax contingency provision. The year began at the Deca Division with a year-on-year increase in shipment volume of approximately 8.8%, with a drop of 0.8% compared to the immediately preceding period. This performance reflects the consolidation of the operations of Mipel and Thermosystem on an annual comparison. Compared to the immediately preceding quarter, the negative performance is explained by seasonal factors. The Division s Net Revenue showed a YoY increase of 16.8%, which would be 8.9% if the net revenue from the recently acquired units, Mipel and Thermosystem, were to be disregarded. Although these acquisitions add products with a lower margin than that of Deca's main products, the combination of an improved product mix, and a better pricing base, contributed to this positive performance. The operational performance reflects the dynamics of revenue performance against costs. While there was an annual increase in Net Unit Revenue of 7.3%, the Unit Cash Cost rose by 9.7% reducing recurring adjusted EBITDA margin from the figure of 26.6% in the previous year, to 23.7% in the quarter. Compared to the immediately preceding period, however, revenue showed an increase of 0.9%, but costs fell by 4.6%, resulting in an improvement in margins. When analyzing these results, the following should be taken into account: incorporation of the units of Mipel, consolidated into the Company's figures from 4Q12, and the incorporation of Thermosystem, consolidated into the figures from 1Q13. Therefore a year-on-year comparison is not entirely valid, seeing that both operations have margins that are below Deca s average margin. Thus the recurring EBITDA of R$74.7 million is the best result since 3Q10, representing a record for the Division, reflecting the buoyant moment in this area of the business, despite a less robust business scenario in the remodelling segment, which accounts for approximately 60% of sales. Uncertainties as a result of the more challenging macroeconomic scenario mean that the situation in the property remodelling segment is less buoyant.

12 Deca continues to stand out in the segment of construction materials. The performance of its net revenue compared to the sector s indicator was better, given by ABRAMAT Index, which measures the performance of the sales in the domestic market. While this index showed an increase of 1.7% in the year, sales of division showed growth of 16.8%. This performance reflects the strength of Deca s brand and rewards the movement of geographical diversification of plants, started in 2008, bringing the Company even closer to its consumers, in addition to acquisitions made in 2012 and early These acquisitions, Mipel and Thermosystem should contribute to a greater differentiation of Deca as the company implements the necessary steps to adjust these operations, raising them to " Deca s standard". As a way of fortifying its market presence, Deca participated at the Expo Revestir trade fair, held at the Transamerica Expo Center. The event is focused on specifiers as a target audience, principally clients and construction firms, and had 48,000 visitors. Deca also participated at the International Construction Trade Fair (Feicon), held at the Anhembi Conventions Pavilion, the main target audience of which is the retail public and consumers in general, which had more than 120,000 visitors. Deca was notified in March that it had won the 2012 Good Design Award. This is an international prize, organized by the Chicago Museum for Architecture and Design and the European Centre for Architecture, Art, Design and Urban Studies, in recognition of the Dot metal bathroom fittings product line. With the aim of providing assistance to professionals in the construction chain, Deca is the first Brazilian vitreous chinaware and metal bathroom fittings company to provide a library of products modelled by BIM (Building Information Modeling). VALUE ADDED Value Added for the year to date amounted to R$516.6 million, up 17.6% compared to that of a year earlier. Of this total, R$175.9 million, equivalent to 15.6% of the revenues obtained and 34.1% of the total Value-Added, went to Federal, State and Municipal governments in the form of taxes and contributions. Distribution of Value Added in 1Q13 Remuneration for Labour: 28.9% Remuneration to Government: 34.1% Remuneration for Financing: 8.2% Remuneration to Shareholders: 28.8%

13 CAPITAL MARKETS AND CORPORATE GOVERNANCE At the end of 1Q13, Duratex had a Market Capitalization of R$8,954.6 million based on a closing share price of R$ The shares appreciated by 9.8% year to date, while the Bovespa Index reduced by 7.5%. In the first quarter trades were recorded in Duratex s shares on the spot market on BM&FBovespa, with million shares changing hands, representing a trading volume equivalent to R$2, million, or an average daily trading volume of R$35. million. This level of liquidity ensured the continuing presence of the Company's shares in the Ibovespa portfolio (Bovespa Index), which is composed of approximately 60 shares, the most important inclusion criteria for which is share liquidity. In 2012, Duratex gained important market recognition with its shares being chosen to form part of the Dow Jones Sustainability World Index DJSWI. Definition for inclusion in this share index involves a rigorous analysis process, including external verification by Deloitte. 34 criteria were evaluated from an Environmental, Social and Economic perspective. In the evaluation process, the Company obtained an absolute score of 79, positioning it among the best 10% with an overall score of 93% and the best score in the sector in 5 criteria, of which we draw particular attention to Crisis and Risk Management, Stakeholder Engagement and International Production Standards. Duratex was the first company in Latin America, in the Construction Materials sector, to be included in the index. Another important recognition was the inclusion of Duratex s shares in the BM&FBovespa - ISE (Corporate Sustainability Index) index for the fifth year running. Having a presence in the index lists since the 2008/2009 version, the Company s shares are part of the index that came into force on January 7, 2013, and which will remain valid to January 3, This index is composed of 51 shares of companies that are outstanding in terms of the application of the international concept of Triple Bottom Line sustainability, which evaluates social, environmental and economicfinancial aspects in an integrated manner, incorporated into practices related to corporate governance, business characteristics, product nature, as well as climate change. Duratex s shares are also listed on the BM&FBovespa Novo Mercado, a differentiated segment of the market which includes those companies which have shown themselves to be exceptional by voluntarily adopting the highest standards of corporate governance. In this segment of the market, the Company is committed to accepting rulings by the BM&FBovespa Novo Mercado arbitration chamber in the resolution of any and every dispute which may arise between the Company, its shareholders and its managers. In addition to the prerequisites of the Novo Mercado, the Company also has a differentiated dividend policy, which involves the distribution of 30% of adjusted net earnings, while committing itself to one third of its board members being independent, as well as adhering to the Abrasca code for self-regulation and good practices.

14 Shareholding structure as at the end of March 2013 Itaúsa and Families: 40.0% Ligna and Family: 20.0% Pension funds: 0.1% Foreign investors: 27.6% Others: 12.2% Treasury: 0.1% SOCIAL AND ENVIRONMENTAL RESPONSIBILITY At the end of the period, the Company had 11,630 employees, who received remuneration of R$87.7 million in the quarter. The increase in the workforce, of approximately 1000 employees, refers to the incorporation of staff from the companies recently acquired, Mipel and Thermosystem.,! Q13 4Q12 % 1Q12 % 2 3 & 4 11,630 10, % 10, %! 87,748 86, % 79, % 1 $ ) $ % & $ 46,558 48, % 41, % "" 1 " 18,343 17, % 17, % Between January and March 2013, the Company spent R$7.2 million on environmental initiatives, of particular note being the treatment of effluents, the collection of residues, and the maintenance of its forestry areas. This amount corresponds to an increase of 30.9% compared to investment of this nature carried out in the same period in A series of cultural and sporting projects are planned for In the first quarter of 2013, additional funds were earmarked to ongoing projects and the support of new cultural and sporting projects, with investment of approximately R$ 1,473,000 the most important of which were: (i) the "Community Library" project, which involves the installation of five libraries in municipal schools or community centres in Agudos-SP, Jundiaí-SP, Lençóis Paulista-SP, São Leopoldo-RS and Veríssimo-MG; (ii) Public Open-Air Gymnasiums and Bicycle Racks in Public Spaces, which involve the installation, in 2013, of six structured spaces in squares or other public locations, for the practice of organized physical activities, and five bicycle racks, with the aim of stimulating cycling as a sporting activity; and (iii) the Dynamic Library project, which

15 consists of the donation, to two schools in the public network in Jacareí, of cultural spaces which contain a library, a structure for putting on puppet theatre plays, storytelling and literary soirées, among other projects. INDEPENDENT AUDITORS In accordance with CVM Instruction 381, dated January 14, 2003, and the Circular Letter CVM/SNC/SEP nº 02/2006 of December 28, 2006, Duratex and its subsidiaries that they did not contract other services that are not related to the audit company, PricewaterhouseCoopers, responsible for the external audit of the Company for the period ended March 31, The Company's policy for procuring services from our independent auditors that are not related to external audits is based on internationally accepted principles that preserve the independence of auditors and mean that: (a) the auditor should not audit their own work, (b) The auditor should not provide management functions within the client, and (c) the auditor must not promote the interests of the client. ACKNOWLEDGMENTS We are deeply grateful for all the support received from our shareholders, the dedication and commitment of our employees, the partnerships we have with our suppliers and the confidence placed in us by our clients and consumers. The Management

16 #$%&''"()*+, -%./ %(.%01()$2$-$%%&-%/$)"3 456 ''!'7" 3.:#)%.*)2%()632$$%.)0%(.2:$(1(.%0(.4$#1#) !!!" # "! $!% &''! (!!" )! *!"+!",'%" (!! +!" # '%" "!!!!! *'! - - "!! *!' (!!" # "! )'! *!"+!" #!!. +!" #!!. +!" *'! - - $. "! (! (!.! )!'!%''. ' / - -! $" '!! *!! *!!!!%! !!%2. ;#(/%$(<#%<0;#(/:0*$) 2:-%$.+, -%./.+.$00(.1(.$)) " "!!!!. '%!!'!!.!.

17 #$%%&' ( ) *+,($()&-./ %01%21%23444&51 (A free translation of the original in Portuguese) 6 -/! " #$%$&$ ' $ ($$&!! ) $ # * & + &!,-. $ #!!!!!! /!! 0$ 0$!!! $% /! $% /!!! "!! ' 7#7* $$& ' (-9/ $ ! & &$ $

18 &$' (( ) *+,!" #$% $+$-.+ #$ $'#$% ) / 01 ( 23(43(4)53 Periods ended March 31 (In thousands of reais) STATEMENT OF COMPREHENSIVE INCOME (A free translation of the original in Portuguese) PARENT COMPANY CONSOLIDATED 148,970 86, ,917 86,247 Other components of comprehensive income Participation in the comprehensive income (loss) of subsidiaries (9,894) (40) (9,894) (40) 139,076 86, ,023 86,207 Attributable to:!" #$% 139,076 86, ,076 86,080! (53) 127 The accompanying notes are an integral part of this interim financial information

19 Duratex S.A - Listed company STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY National Register of Corporate Taxpayers - (CNPJ) No / (In thousands of Reais) (A free translation of the original in Portuguese) BALANCES AS AT DECEMBER 31, ,550,000 (7,823) 307,932 89,721 1,355, ,823 (23,032) - 3,689,209 3,601 3,692,810 COMPREHENSIVE INCOME FOR THE YEAR Net Income for the year , , ,711 Participation in the comprehensive income of subsidiaries , ,696-4,696 - TOTAL COMPREHENSIVE INCOME FOR THE YEAR , , , ,407 Share options granted , ,052-7,052 Sales of treasury shares 12,931 (1,998) 10,933 10,933 Adjustment of debentures convertible into shares , ,904-1,904 Capital increase Interest on capital complement (682) (682) - (682) Realization of revaluation reserve (6,389) , APPROPRIATION OF NET INCOME - - Allocated to the legal reserve , (22,963) Interest on capital 1st half-year 19 d (62,032) (62,032) (62,032) Interest on capital 2nd half-year 19 d (89,963) (89,963) (89,963) Dividends 2nd half-year 19 d (638) (638) - (638) Proposed additional dividend 19 d , (4,863) Appropriation to tax incentives (Article Law no /76) , (9,902) Appropriation to reserves , (273,286) - (432) (432) BALANCES AS AT DECEMBER 31, ,550,246 (7,823) 314,984 83,332 1,665, ,423 (10,101) - 4,019,981 3,624 4,023,605 The accompanying notes are an integral part of this interim financial information

20 Duratex S.A - Listed company STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY National Register of Corporate Taxpayers - (CNPJ) No / (In thousands of Reais) (A free translation of the original in Portuguese) BALANCES AS AT DECEMBER 31, ,550,246 (7,823) 314,984 83,332 1,665, ,423 (10,101) - 4,019,981 3,624 4,023,605 COMPREHENSIVE INCOME FOR THE PERIOD Net Income for the period , ,970 (53) 148,917 Participation in the comprehensive income of subsidiaries (9,894) - - (9,894) - (9,894) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD (9,894) - 148, ,076 (53) 139,023 Share options granted , ,833-1,833 Sales of treasury shares 1,682 (239) 1,443 1,443 Capital increase Interest on capital complement (5,833) (5,833) - (5,833) Realization of revaluation reserve (2,339) , APPROPRIATION OF NET INCOME Allocated to the legal reserve , (7,449) Appropriation to reserves , (143,621) BALANCES AS AT MARCH 31, ,550,247 (7,823) 316,817 80,993 1,811, ,529 (8,419) - 4,156,501 3,571 4,160,072 The accompanying notes are an integral part of this interim financial information

21 OPERATING ACTIVITIES: (A free translation of the original in Portuguese) NET INCOME FOR THE PERIOD 148,970 86, ,917 86,247 ITEMS NOT AFFECTING CASH: Duratex S.A. - Listed company National Register of Corporate Taxpayers - (CNPJ) No / STATEMENT OF CASH FLOWS Depreciation, amortization and depletion 60,140 57, , ,392 Variations in the fair value of biological assets - - (43,240) (32,923) Interest, foreign exchange and monetary variations, net 29,908 34,937 46,774 40,744 Equity in the results of investees (11,672) (26,683) (669) - Provisions, disposal of assets (625) 4,833 30,663 5,476 INVESTMENTS IN WORKING CAPITAL: (Increase)/Decrease in Assets Trade accounts receivable 1,940 (33,247) 3,983 (29,288) Inventory (35,123) (1,707) (45,874) 558 Other assets (67,130) 1,523 (71,257) 6,427 Increase (Decrease) in Liabilities Suppliers (2,367) 5,855 (11,887) 3,304 Personnel liabilities (11,645) (10,515) (11,068) (12,279) Accounts payable (7,531) 4,960 11,458 42,073 Taxes and contributions 44,823 12,835 53,414 16,091 Other liabilities 19,693 (6,487) (7,498) (3,118) Cash provided by operations 169, , , ,704 Income tax and social contribution paid (36,127) (7,835) (54,153) (16,500) Interest paid (27,996) (48,789) (29,188) (49,323) CASH PROVIDED BY OPERATING ACTIVITIES 105,258 73, , ,881 INVESTMENT ACTIVITIES: Investments in biological, fixed and intangible assets (93,491) (84,832) (137,007) (112,555) Acquisition of subsidiary (56,402) (33,855) Capital increase in subsidiaries (18) CASH USED IN INVESTMENT ACTIVITIES (149,911) (84,832) (170,862) (112,555) FINANCING ACTIVITIES: Financing 112,155 7, ,484 8,251 Debentures (6,288) 101,500 (6,288) 101,500 Amortization of financing (165,297) (51,766) (166,626) (52,206) Interest on capital/dividends (96,338) (60,234) (96,339) (68,241) Loans from subsidiaries (5) Treasury shares and others 1,443 1,443 CASH USED IN FINANCING ACTIVITIES (154,330) (3,424) (147,326) (10,696) Exchange variations on cash and cash equivalents - - (486) (185) INCREASE (DECREASE) IN CASH FOR THE PERIOD (198,983) (14,508) (174,984) 40,445 OPENING BALANCE 617, ,071 1,032, ,159 FINAL BALANCE 418, , , ,604

22 ! "#"" $ $!" # $% $% $% $% % $ $ $ & '( " " $$ $ &!'( ) *"+,* $ '( ('#!)# -""+ $$./( $ (!** +!(!"! ) ""+ * 0 1"+ (- 21 $ $ $$ &!'", - 1 & "* Duratex S.A. - Listed company National Register of Corporate Taxpayers - (CNPJ) No / STATEMENT OF VALUE ADDED $*7!)!38((" 7!"!-.% '5' : +5 ; $$ $ $ -)"!$%.!/#!(0"! ' $ $ & ( 3 3 $ $ 1!('(* 2""+ *(' '* + "

23 Note 1 Operations NOTES TO THE INTERIM FINANCIAL INFORMATION AS AT MARCH 31, 2013 a) General information (All amounts in Brazilian Reais (thousands), unless otherwise indicated) Duratex S.A. (the Company) is a publicly-traded corporation headquartered in the city of São Paulo - SP, Brazil. Its controlling shareholders are Itaúsa - Investimentos Itaú S.A., which has significant operations in the financial and industrial sectors, and Companhia Ligna de Investimentos, which operates principally in the retail market, the distribution of civil construction and woodworking materials, and in property construction and rental. The main activities of Duratex and its subsidiaries (collectively the Group) comprise the manufacture of wood panels (through its Wood Division), vitreous chinaware, sanitary ceramic, metal products and showers (the Deca Division). Duratex presently has fifteen industrial plants in Brazil and one in Argentina, and maintains branches in the main Brazilian cities. Duratex also has commercial subsidiaries in the United States and Europe. The Wood Division operates five industrial plants in Brazil, responsible for the production of hardboard, medium density particle (MDP) panels, medium, high and super density fiberboard (MDF, HDF and SDF) panels, Durafloor laminate flooring and components for the furniture industry, as well as one industrial resin production plant. The Deca Division operates ten industrial plants in Brazil, responsible for the production of sanitary ceramic and metal products under the trademarks Deca, Hydra, Belize, Elizabeth, Thermosystem and Deca Piazza (in Argentina). b) Approval of the Interim financial information The Condensed Interim Financial Information of Duratex S.A. and subsidiaries (Parent company and Consolidated) was approved by Duratex S.A's Board of Directors on April 22, Note 2 Basis of preparation and significant accounting practices The Condensed Interim Financial Information has been prepared in accordance with pronouncement no Interim Financial Reporting, issued by the Brazilian Accounting Pronouncements Committee (CPCs) as well as in accordance with International Accounting Standard (IAS) no Interim Financial Reporting, issued by the International Accounting Standards Board (IASB). The Condensed Interim Financial Information is being presented according to the applicable standards of the Brazilian Securities Commission (CVM). As described in CVM s Circular Letter CVM/SNC/SEP 03/2011, the Company has opted to present the explanatory notes in this Condensed Interim Financial Information in a summarized manner when the information is the same as that presented in the annual financial statements. Thus this Condensed Interim Financial Information should be read together with the annual financial statements for the year ended December 31, Accounting policies The accounting policies adopted in preparing the Condensed Interim Financial Information are the same as those used to prepare the annual financial statements for The following accounting practices are particularly relevant to this Condensed Interim Financial Information. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

24 2.2 Consolidation of the Condensed Interim Financial Information The consolidated condensed interim financial information includes the companies: Duratex S.A. and its direct subsidiaries: Duraflora S.A., Estrela do Sul Participações Ltda., Duratex Empreendimentos Ltda., Duratex Comercial Exportadora S.A., Thermosystem Indústria Eletro Eletrônica Ltda., Bale Comércio de Produtos para Construção S.A., Mykonos Administração e Participações Ltda., and its indirect subsidiaries: Duratex North America Inc., Duratex Europe NV., Duratex Belgium NV., TCI Trading S.A., and Deca Piazza S.A. In view of the fact that Tablemac S.A. is not controlled by any company of the Duratex Group, its net income was recognized on the equity method. Note 3 Critical accounting judgments and estimates During the preparation of the Condensed Interim Financial Information, accounting judgments, estimates and assumptions are utilized to record the amounts of certain assets, liabilities and other transactions. The estimates and accounting judgments adopted by management were based on the information available at the date when the financial information was prepared, based on experience of past events and forecasts for future events. The Condensed Interim Financial Information include several estimates, including the useful lives of property, plant and equipment items, the realization of deferred tax credits, the allowance for doubtful accounts, inventory losses, the evaluation of the fair value of biological assets, and provisions for contingencies and impairment losses. The following are the main estimates and assumptions that involve a substantial risk of requiring adjustments to asset and liability book values: a) Risk of variations in the fair value of biological assets The Company adopted several estimates in order to value its forestry reserves in accordance with the methodology established by CPC 29/IAS 41. These estimates were based on market references, and are subject to changes which could impact the Company's financial statements. Specifically, a 5% reduction in standing wood prices would result in a reduction in the fair value of biological assets by about R$ 37,747, net of tax effects. If the discount rate used were to be increased by 0.5%, this would result in a reduction in the fair value of biological assets of about R$ 7,497, net of tax effects. b) Estimated impairment of goodwill The Company and its subsidiaries test the possible impairment of goodwill on an annual basis. The balance could be impacted by changes in the economic or market scenario without, however, creating a significant effect in relation to stockholders equity. c) Pension plan benefits The current value of assets related to pension plans depends on a number of factors that are determined using actuarial calculations. These calculations involve a series of assumptions. Among the assumptions used in determining these values are the discount rate and current market conditions. Any changes in these assumptions will affect the corresponding book values. Note 4 Financial risk management 4.1 Financial risk factors Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

25 The Company and its subsidiaries are exposed to market risk in relation to fluctuations in interest, and also to exchange rates and credit risk. Consequently, risk management is based on the policies approved by the Board of Directors, and is monitored by the Audit and Risk Committee. The Company and its subsidiaries have procedures to manage these situations and can use hedging instruments to reduce the impact of the risks in this regard. These procedures include monitoring the level of exposure to each market risk, in addition to establishing decision-making levels. All hedging transactions entered into by the Group are intended to protect its debts and investments. The Group does not utilize leveraged financial derivatives. (a) Market risk (I) Exchange rate risk: Exchange rate risk arises from the risk that there will be a reduction in the values of the Group's assets or an increase in its liabilities due to changes in exchange rates. The Group has an exchange rate risk policy establishing the maximum amount in foreign currency to which it can be exposed in terms of exchange rate variations. In line with the risk management procedures, the objective of which is to minimize the foreign exchange exposure of the Company and its subsidiaries, hedging mechanisms are maintained, in order to mitigate, in large part, the foreign exchange exposure. (II) Derivatives: In terms of the derivative instruments, no verifications, monthly settlements or margin calls are made, and the contracts are settled upon maturity and recorded at fair value, considering the market conditions for terms and interest rates. The outstanding contracts as at March 31, 2013 were as follows: a - US$ vs. Interbank deposit certificate (CDI) swap agreements The Company had six agreements of this nature, with an aggregate notional amount of US$ 107,894,000, and varying maturities up to December 21, 2015, being an asset (purchase) position in US Dollars and a liability (sale) position in CDI. The Company made these agreements in order to convert its debts denominated in US Dollars into debts indexed to the CDI. b - Fixed rate vs. Interbank deposit certificate (CDI) swap agreements The Company had six agreements with an aggregate amount of R$ 184,225, maturing through February 5, 2016, being an asset position at a fixed rate and a liability position at a percentage of the CDI. The subsidiary Duraflora S.A. had two agreements with an aggregate amount of R$ 163,545, maturing on December 11, 2014, being an asset position at a fixed rate and a liability position at a percentage of the CDI. The Company made these agreements in order to convert its total fixed interest rate debts into CDI-indexed debts. c - Non-Deliverable Forward (NDF) Agreement The Company had one agreement of this type, the total contractual amount of which was US$ 7,000,000, maturing on April 30, 2013, with a purchase position in US Dollars. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

26 The Company made this agreement in order to convert its US Dollar liabilities into Brazilian Reais. The agreement will be settled on the maturity date, at the difference between the forward exchange rate (NDF) and the end-of-period exchange rate (Ptax). d - Calculation of the fair value of positions The fair value of the financial instruments was calculated by utilizing the estimated present value of both liability and asset positions, where the difference between the two represents the market value of the swap. The gains or losses on the transactions listed above were offset against the liability and asset positions in interest rates and foreign currency, the effects of which were recognized in the financial statements. e - Sensitivity analysis The table below sets out a sensitivity analysis of the Company s financial instruments, including derivatives, and describes the risk scenarios which could generate material losses for the Group. The analysis involves a Probable Scenario (Base Scenario) plus two other scenarios (under the terms determined by CVM 475/08) representing a 25% and 50% deterioration in the risk variables. For the rates of risk variables used in the probable scenario, BM&FBOVESPA (São Paulo Stock, Futures and Commodities Exchange)/ Bloomberg quotations for the respective maturity dates were used. (III) Cash flow or fair value risk associated with the interest rate Interest rate risk is the risk that an economic loss will be suffered due to adverse changes in interest rates. This risk is continually monitored in order to evaluate any possible need to contract derivative transactions to hedge against interest rate volatility. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

27 (a) Credit Risk The Group's sales policy is directly associated with the level of credit risk it is willing to accept in the course of its business. The measures adopted to minimize default or losses on accounts receivable include: the diversification of the Group's portfolio of receivables, the selection of its customers, and the monitoring of sales financing terms and individual position limits. In relation to temporary cash investments and all other investments, the Company follows the policy of working only with blue-chip institutions and not concentrating its investments in only one economic group. (b) Liquidity risk The Company and its subsidiaries have a debt policy which defines the limits and parameters for debt and the minimum funds which should be maintained, the latter being the higher of the following: an amount equivalent to 60 days of net revenue or the amount of the debt servicing expenses plus dividends and/or interest on capital forecast for the following six months. The liquidity position is managed on a daily basis, by means of monitoring the cash flow. Listed below are the maturities of the Company and its subsidiaries' contracted financial liabilities as presented in the Condensed Interim Financial Information: The budget projection for the next fiscal year, approved by the Board of Directors, if achieved, shows the Company will be able to generate sufficient cash to meet its obligations. 4.2 Capital management The Company and its subsidiaries manage their capital with the objective of ensuring the continuity of their operations, as well as providing shareholders with a return on their investment. This is achieved through capital cost optimization and control of the level of indebtedness as a result of monitoring the financial leverage index based on the ratio of net debt to total capital. The increase in financial leverage occurred due to the raising of funds for investments. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

28 4.3 Fair value estimates It is assumed that the book values of accounts receivable from customers and accounts payable to suppliers, less the provision for loss (impairment), are close to their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flow at the current market interest rate which is available to the Company and its subsidiaries for similar financial instruments. The Company and its subsidiaries apply CPC 40/IFRS 7 for financial instruments measured at fair value, which requires the disclosure of the measurement criteria used. As the Company has only Level 2 derivatives, it uses the following valuation techniques: The fair value of the interest rate swap is calculated as the present value of the estimated future cash flow based on the yield curves adopted by the market The fair value of foreign currency forward contracts is determined based on future exchange rates at balance sheet dates, with the resulting amount discounted to its present value. The financial instruments (by category/level) are presented below: (*) Value recorded in "Other accounts receivable", non-current assets. (**) Derivative financial instruments are presented at the net value, asset or liability, and are all Level 2 financial instruments. Note 5 Cash and cash equivalents The bank deposit certificates in Brazil earn interest with reference to the CDI rate, and deposits abroad in US Dollars earn a fixed interest rate. Although they have long-term maturities, bank deposit certificates can be redeemed at any time without loss of remuneration. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

29 Note 6 Trade accounts receivable The Company and its subsidiaries have a Credit Policy in place, the objective of which is to establish the procedures to be followed when granting credit in commercial operations, and sales of products and services, both domestically and abroad. The credit limit is determined on the basis of a credit analysis, considering the history of the customer, its capacity as a borrower, and market information. The credit limit is defined with reference to a percentage of net revenue and the stockholders equity, or a combination of these. Consideration is also given to the average volume of monthly purchases. The decision as to the credit limit is always supported by an evaluation of the economic and financial situation, an examination of the relevant documents and the customer's reputation. Customers are classified as A, B, C or D based on the length of the Company s relationship with them and their payment history. The maximum credit risk exposure at the date of this report is the book value of each class of trade accounts receivable listed above. The Group has not pledged any receivables as collateral for liabilities. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

30 Note 7 - Inventory Note 8 Recoverable taxes and contributions The Company has recoverable federal and state tax credits, the composition of which is as follows: (*) The recoverable amounts for State Value-Added Tax (ICMS), Social Integration Program (PIS) and Social Contribution on Revenue (COFINS) were mainly generated on the acquisition of property, plant and equipment items for the industrial plants. Under current legislation, the PIS/COFINS credits will be utilized within 12 and 24 months, and the ICMS credits within 48 months. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

31 Note 9 Deferred income tax and social contribution Deferred income tax and social contributions are calculated on income tax and social contribution losses, temporary differences between the tax and book bases of assets and liabilities, and adjustments made to comply with CPCs/ IFRS. The tax rates applied in this respect are 25% for income tax and 9% for social contributions. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available to utilize temporary differences, considering the projections of future income. These projections are prepared on the basis of internal assumptions and using future economic scenarios, and are, therefore, subject to change. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

32 Note 10 Related parties a) Balances and transactions with subsidiaries b) Transactions with other related parties (*) Refers to the costs of the rural leasing agreement with Ligna Florestal Ltda. (controlled by Ligna de Investimentos) entered into by the subsidiary Duraflora S.A. in connection with land used for reforestation. The monthly charges for this lease are R$ 1,161. The agreement will expire in July 2036, but may be renewed automatically for a further 15 years, and will be readjusted annually based on the Company's average price for the sale of MDP panels. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

33 The transactions with related parties correspond to trade purchases and sales, in the normal course of the Company's business, realized at market conditions. Financial investments in Banco Itaú S.A are made under normal financial market conditions, and within the limits set by the Company's management. The amounts presented as financial income represent earnings on investments, and financial expenses refer to fees for the collection of receivables. c) Management remuneration The remuneration paid or payable to the executives of the Company and its subsidiaries up to March 31, 2013 was R$ 3,675 in fees (R$ 3,108 - March 31, 2012), R$ 3,308 in the form of profit sharing (R$ 1,901 - March 31, 2012), and R$ 1,476 in the form of long-term remuneration based on stock options (R$ 1,015 - March 31, 2012). Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

34 Note 11 Investments in subsidiaries and associate a) Change in investments Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

35 b) Acquisition of subsidiary In January 2013 Duratex S.A. completed the acquisition of all of the capital quotas of Thermosystem Indústria Eletro Eletrônica Ltda, for a total of R$ 56.4 million, after price adjustment for variations in working capital according to the signed contract. This transaction is covered by CPC 15 R1 - Business combinations approved by CVM Resolution No. 665 of August 4, 2011 and therefore assets and liabilities were stated at their fair value. Details of the book value, fair value acquired and goodwill are as follow: In compliance with CPC 15 (R1) the Company has one year to adjust possible values involved in the calculation of goodwill. c) Deca Piazza Duratex has started the restructuring of operations of its subsidiary Deca Piazza S.A. by ceasing the industrial activities and maintaining the trademark Deca Piazza in the Argentine market. The ceasing of the industrial activities was due to the loss of competitiveness and recurring operation losses. The following adjustments were effected to the interim financial information, under Other net operating income (expenses) : Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

36 Note 12 Property, plant and equipment Assets in progress refer mostly to expansion of the industrial plants in Itapetininga-SP and Queimados-RJ. As at March 31, 2013 the Company and its subsidiaries have formalized contracts for the expansion of industrial plants in Itapetininga-SP and Queimados-RJ and for the acquisition of equipment and services totaling approximately R$ million. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

37 The annual depreciation rates are as follows: Note 13 Biological assets (forest reserves) Through its wholly-owned subsidiary Duraflora S.A., the Company is the owner of eucalyptus and pine forest reserves, which are primarily utilized as raw materials for producing wood panels, floors and components, and also for sale to third parties. These reserves guarantee supplies to the factories, and also protect the Company against the risk of future wood price increases. Integrated with the manufacturing facilities, these reserves, together with a supply network, provide the Company with a high degree of self-sufficiency in terms of wood supplies. As at March 31, 2013 Duraflora S.A. had roughly 141 thousand hectares of planted areas (December 31, 2012: 140 thousand hectares), in the States of São Paulo, Minas Gerais, and Rio Grande do Sul. a) Fair value estimate The fair value is calculated based on an estimate of the volume of wood ready for harvesting, at the current prices for standing wood. In this respect there is an exception for (i) forests which are up to one year old, which are stated at cost (because the cost approximates the fair value in such cases), and (ii) forests in formation, for which the discounted cash flow method is employed. Biological assets are measured at fair value, less selling costs at the time of harvesting. Fair value is determined by valuing the estimated ready-to-harvest volumes at current market prices, based on volume estimates. The assumptions utilized were: i. Discounted cash flow the estimated volume of ready-to-harvest wood at current market prices, net of costs still to be incurred and the capital costs of the respective land (brought to present value). ii. Prices the cubic meter prices in R$ obtained from market surveys carried out by specialized firms surveying regions and products similar to those of the Company, in addition to prices obtained from third-party transactions in active markets. iii. Differentiation - the volumes harvested were categorized and valued according to: (a) speciespine and eucalyptus, (b) region, (c) destination: sawmill and processing. iv. Volume the estimated volumes ready for harvesting (i.e. in the 6 th year for eucalyptus trees and in the 12 th year for pine) were based on the projected average productivity for each region and for the two species. Average productivity may vary based on age, rotation, climatic conditions, quality of seedlings, fires, and other natural risks. In the case of mature forests, the actual volumes of wood are utilized in arriving at the estimate. Rotating physical inventory is realized from the second year of a forest's life, and the effects are incorporated in the financial statements. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

38 v. Regularity - expectations regarding future wood prices and volumes are reviewed at least every quarter, or when the rotational physical inventory is concluded. b) Composition of Balance The biological assets balance is made up of the cost of forest formation and adjustments to fair value, as shown below: The forests are unencumbered by any third-party liens or pledges, including financial institutions. In addition, none of the Company's forests has a restricted legal title. c) Changes in balance The following are the changes in the balance from the beginning to the end of the period: The investments in forests in formation resulted from an increase in planted areas to support the expansion of the Company's operations. The adjustment related to the variation of the fair value results from higher prices in the present value of standing wood, and higher productivity. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

39 Note 14 Intangible assets Average annual amortization rate 20% 0% 0% 6.67% Average annual amortization rate 20% 0% 0% 6.67% The impairment testing was carried out by the Company s management, taking into consideration the cash-generating intangible asset. In this test consideration was given to long-term discounted cash flow projections and the nominal discount rate used was set at a rate of 14.2%, with no need for impairment, since the amounts are fully recoverable. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

40 Note 15 Loans and financing a) Sureties and letters of guarantee Sureties and letters of guarantee securing the borrowing of Duratex S.A. were granted by Itaúsa S.A., totaling R$ 429,697 (R$ 419,717 as at December 31, 2012), Companhia Ligna de Investimentos, amounting to R$ 267,189 (R$ 243,525 as at December 31, 2012), Duratex Comercial Exportadora S.A., totaling R$ 695,192 (R$ 654,328 as at December 31, 2012) and Duraflora S.A., totaling R$ 33,821 as at December 31, In the case of loans and financing obtained by subsidiaries, sureties were granted by Itaúsa S.A., totaling R$ 41,232 (R$ 41,623 as at December 31, 2012), Duratex S.A., totaling R$ 294,504 (R$ 289,609 as at December 31, 2012) and Duratex Comercial Exportadora S.A., totaling R$ 232 (R$ 65 as at December 31, 2012). b) Other guarantees Loans and financing obtained by the subsidiary Thermosystem Indústria Eletro Eletrônica Ltda, sureties were granted of machinery and equipments, totaling R$ 973 and of trade notes, totaling R$ 6,511. Restrictive clauses Loans from the National Bank for Economic and Social Development (BNDES) are subject to restrictive covenants in accordance with usual market practices. On March 31, 2013 these covenants were met. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

41 Loans and financing designated at fair value Certain loans and financing (identified in the table above as SWAPS) were designated at fair value through profit or loss. Note 16 Debentures convertible into shares As at February 8, 2012 the first private issue of debentures, with a floating guarantee, and convertible into common shares of the Company were approved. These were and are to be issued through private subscription. The proceeds from the debentures are to be allocated as follows: (i) (ii) Fixed investment at the Company's industrial unit in Itapetininga SP in a new production line for the manufacture of medium density reconstituted wood fiber panels (MDF), a new low pressure coating line, and a new low pressure line for the impregnation of laminated paper The acquisition by the Company of locally manufactured machinery and equipment needed for (i). Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

42 The fair value of the liability component, included in non-current borrowing, was calculated using the market interest rate for an equivalent bond without conversion rights. The residual amount, representing the subscription bonus, is included in the stockholders equity as a carrying value adjustment. Note 17 - Contingencies The Company and its subsidiaries are parties to judicial and administrative processes relating to labor, civil, and tax matters which arise in the normal course of business. The provision for contingencies in relation to these processes takes into consideration an evaluation of the likelihood of loss, performed by the Company's legal advisors. Based on the opinion of its legal advisors, the Company's management believes that the recorded provision for contingencies, presented below, is sufficient to cover any potential losses relating to these processes. Tax contingencies mainly relate to legal discussions with respect to the Plano Verão (Government economic plan) and refers to a lawsuit demanding the right to update the 1989 fiscal year balance sheet by utilizing the full IPC inflation index (gross rate) of 70.28%, thereby avoiding distortions to the Company s balance sheet and the related income tax due to the non-recognition of the actual inflation rate. A judgment was obtained acknowledging the right to adjust the balance sheet in accordance with the rate of 42.72%, which was effected in the fiscal years of 1994 to Though the Regional Federal Court (TRF) was opposed to the sentence, the Company obtained, by means of a writ of prevention, the suspension of the appeal in the Superior Court of Justice (STF), and the judgment was upheld. As at March 31, 2013 there was a provision of R$ 51,716 (R$ 51,485 at December 31, 2012) relating to the offsetting of income tax and social contributions on net income. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

43 a) Contingencies not subject to provision The Company and its subsidiaries are involved in other tax lawsuits which total R$ 88,853. Of this total, R$ 62,196 is related to the question of incidence and credit of State Value-added Tax (ICMS) which, in the opinion of the legal advisors, represents a possible chance of loss. No provision has, therefore, been constituted. b) Contingent Assets The Company and its subsidiaries have filed legal actions for the refunding of certain taxes and contributions. According to legal counsel the likelihood of success in these cases is high. Because the amounts, presented below, represent contingent assets, they have not been recognized in the Company's financial information: Note 18 Rural lease Amounts involved The rural lease is an agreement entered into by the subsidiary Duraflora S.A. with Ligna Florestal Ltda (controlled by Companhia Ligna de Investimentos), in connection with property in Minas Gerais and Rio Grande do Sul, where the Company s forests are located. The monthly charges for this lease are R$ 1,161. The agreement will expire in July, 2036, may be renewed automatically for a further 15 years, and will be readjusted annually with reference to the average price charged by the Company for the sale of MDP panels. The minimum future payments are as follows: In compliance with CPC 06 Leases, the subsidiary Duraflora S.A. records the costs of the rural lease agreements using the straight line method. Note 19 Stockholders equity a) Capital The Company's authorized capital is 920,000,000 (nine hundred and twenty million) shares and the fully subscribed and paid-up capital is R$ 1,550,247, represented by 550,054,081 registered common shares with no par value. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

44 In the first quarter of 2013 the capital was increased through the issue of common shares subscribed and paid-up by debenture holders, as shown below: b) Treasury Shares Based on the most recent market quotation as at March 28, 2013, the value of the Company's treasury shares is R$ 11,259 (R$ 12,306 as at December 31, 2012). c) Equity Reserves The amount presented in the Capital Reserves balance as a premium on the subscription of shares refers to the additional amount paid by the shareholders in relation to the nominal value per share at the time of the subscription for the shares. The amounts of Options Granted in the Capital Reserves balance represent the recognition of the awarding of the options on the grant date. As provided for in the bylaws, the balance appropriated to the statutory reserve will be utilized for: (i) the Reserve for Dividend Equalization, (ii) the Reserve for Increasing Working Capital, (iii) the Reserve for Capital Increases in Investees. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

45 Through a proposal to be effected by the Board of Directors, the excess of revenue reserves in relation to the capital will be capitalized in Note 20 Insurance coverage As at March 31, 2013, the Company and its subsidiaries had insurance coverage against fire and various risks relating to property, plant and equipment, inventory and civil liabilities totaling R$ 3,331 million. The Company does not have insurance coverage for its forests. To minimize the risk in this regard it maintains an internal fire brigade, fire trucks and motorized forest guards. The Company has not suffered losses in relation to forest fires. Note 21 Net sales revenue The reconciliation of gross and net sales revenue is as follows: Note 22 Expenses, by nature Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

46 Note 23 Financial income and expenses Note 24 Other operating income (expenses), net Note 25 Income tax and social contributions Reconciliation of income tax and social contribution expenses The reconciliation of income and social contribution tax expenses, at nominal and effective rates is as follows: Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

47 Note 26 Stock Option Plan As provided for in the bylaws, the Company has a Stock Option Plan, the objective of which is to integrate executives into the Company's medium- and long-term development process, enabling them to benefit from the value that their work and dedication brings to Duratex's shares. These options grant their owners the right, pursuant to the Plan's conditions, to subscribe to common shares of Duratex's authorized capital. The rules and operating procedures of the Plan are proposed by a Committee designated by the Company's Board of Directors. This Committee submits to the Board of Directors proposals regarding the implementation of the Plan. Options will only be granted for fiscal years during which sufficient profits are earned to permit the mandatory minimum dividend distribution to shareholders. The total quantity of options to be granted during each fiscal year should not exceed 0.5% (one half percent) of the total number of shares owned by the controlling and non-controlling shareholders at the end of that same fiscal year. The exercise price payable to Duratex will be defined by the Committee when granting the option. In order to define the exercise price, the Committee will consider the average price of Duratex's common shares in the BM&FBOVESPA trading sessions for a period of five to ninety days prior to the options' issue date. This will be at the discretion of the Committee, which may add or subtract an adjustment of up to 30%. The prices established will be readjusted until the month prior to the exercise of the options by the IGP-M index, or, in its absence, by an index specified by the Committee. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,

48 Statement of value and appropriation of the options granted: As at March 31, 2013, the Company had 690,748 treasury shares that could be utilized for the exercise of options. Note 27 Private pension plan The Company and its subsidiaries are part of a group of sponsors of Fundação Itaúsa Industrial, a non-profit organization which has as its objective the administration of private plans providing pensions or supplementary income benefits, similar to those of the National Social Security. The Fundação manages a Defined Contribution Plan (DC Plan) and a Defined Benefit Plan (DB Plan). On January 28, 2013 the National Superintendence of Pension Funds (Previc) approved the revision of the Defined Benefit Plan (DB Plan) solving the surplus and restoring the technical balance of the plan. The Company recognized in the Statement of income, under Other net operating income (expenses), a total of R$ 42,318, related to the special reserve in stockholders' equity. Note 28 Earnings per share (a) Basic The basic earnings per share are calculated by dividing the net income attributable to the Company s stockholders by the weighted average number of common shares outstanding during the period, excluding common shares purchased by the Company as treasury shares. Duratex S.A. Notes to the Condensed Interim Financial Information as at March 31,