4Q17 Results. CONFERENCE CALL ON RESULTS February 09, :00 p.m. (Brazil) / 10:00 a.m. (US-EST)

Transcription

1 4Q17 Results CONFERENCE CALL ON RESULTS February 09, :00 p.m. (Brazil) / 10:00 a.m. (US-EST) Access in Portuguese: Access in English: Password: Lojas Renner Replay: Password in English: Access webcast here. *The Conference Call will be held in Portuguese only but with simultaneous translation in English.

2 February 8, 2018 LOJAS RENNER S.A. (B3: LREN3; USOTC: LRENY), the largest fashion retailer in Brazil, announces its results for the fourth quarter 2017 (4Q17). MANAGEMENT COMMENTS Consolidated Information 4Q17 4Q16 Var Var. Net Revenue from Merchandise Sales 2, , % 6, , % Growth in Same Store Sales (%) 8.7% -0.8% - 9.2% -0.2% - Gross Profit from Merchandise Sales 1, , % 3, , % Gross Margin from Retailing Operation (%) 57.0% 55.8% 1.2p.p. 55.7% 55.7% 0.0p.p. Operating Expenses (SG&A) (687.7) (560.2) 22.8% (2,402.8) (2,068.6) 16.2% SG&A as a % of Net Revenue from Merchandise Sales (%) 30.9% 29.2% 1.7p.p. 36.4% 36.2% 0.2p.p. Ajusted EBITDA from Retailing Operation % 1, , % Ajusted EBITDA Margin from Retailing Operation (%) 23.7% 26.3% -2.6p.p. 17.3% 19.0% -1.7p.p. Financial Products Result % % Ajusted Total EBITDA (Retail + Financial Products) % 1, , % Ajusted Total EBITDA Margin (%) 27.2% 29.6% -2.4p.p. 22.4% 23.4% -1.0p.p. Net Income % % Net Margin (%) 14.9% 15.6% -0.7p.p. 11.1% 10.9% 0.2p.p. ROIC (%) 8.4% 9.5% -1.1p.p. 20.6% 21.4% -0.8p.p. Businesses Breakdown 4Q17 4Q16 Var Var. Stores in Operation Openings Selling Area (thousand m²) % % Net Revenue 2, , % 6, , % Gross Margin (%) 56.9% 55.8% 1.1p.p. 55.7% 55.8% -0.1p.p. Stores in Operation Net Openings Selling Area (thousand m²) % % Net Revenue % % Gross Margin (%) 55.2% 54.3% 0.9p.p. 54.1% 52.8% 1.3p.p. Stores in Operation Openings Selling Area (thousand m²) % % Net Revenue % % Gross Margin (%) 63.7% 59.8% 3.9p.p. 60.3% 59.6% 0.7p.p. The fourth quarter 2017 saw a continuing good performance in sales throughout the year, reflecting the correct execution of operations, improved store traffic and year-end holiday sales in line with company forecasts. A combination of these factors produced a growth of 15.7% in Net Revenue from Merchandise Sales and 8.7% on a Same Store Sales basis. Gross Profit from the Retailing Operation rose 18.1% year-on-year while Gross Margin increased by 1.2 p.p. due to the commercial strategy adopted as well as the positive effect of the exchange rate hedge contracted on imported products. Even after adjusting for the effects of the exclusion of ICMS from the calculation base for PIS and Cofins charges, there was still an improvement in Gross Margin. Operational Expenses reported an increase of 22.8%, this the result of a higher concentration in 4Q17 of expenses relating to ongoing projects at the Company in addition to a greater allocation of marketing funds. Sales, General & Administrative Expenses rose proportionally more than Net Revenue from Merchandise Sales, reaching 30.9% of sales against 29.2% in 4Q16. These expenses, plus Employee Profit Sharing and a reduced Recovery of Tax Credits, produced a lower Total Adjusted EBITDA Margin from Retailing Operations, declining from 26.3% to 23.7% in the quarter. Página 2 de 11 Release 4Q17

3 The Financial Products Result recorded an increase of 20.5% in relation to 4Q16, principally due to the generation of better revenue flows. Total Adjusted EBITDA rose 6.3%, equivalent to a Margin of 27.2%. Equally, Net Income was 10.7% higher than 4Q16 while the Net Margin was 14.9% against 15.6% in 4Q16. In line with its expansion plan, in the quarter, the Company opened 22 stores, 12 of them under the Renner banner, including two stores in Uruguay. Worthy of note is that with the rollout of the Renner store in the JK Iguatemi mall, the company reached the landmark figure of 500 stores in operation if the full range of store formats is taken into consideration. During the period, a further 2 Camicado and 8 Youcom stores were unveiled. Investments totaled R$ million, against R$ million in 4Q16. OPERATING PERFORMANCE NET REVENUE Net Revenue from Merchandise Sales posted growth of 15.7% in 4Q17 relative to the same period in 2016 while Same Stores Sales rose 8.7%. Sales performance in the quarter reflected the correct execution of operations, the adequate assortment of inventory as well as improved customer traffic through the stores. The Christmas period, which is critical to sales figures for the final quarter, was good and in line with the Company s forecasts. In addition, the macroeconomic environment, which showed signs of recovery over the year, was another factor contributing to sales in the period. Camicado and Youcom continued to make a positive contribution to overall sales reporting increases of 24,0% and 38.9%, respectively. GROSS PROFIT Gross Profit from Merchandise Sales in 4Q17 represented an 18.1% improvement while the Gross Margin from the Retailing Operation was 1.2p.p. greater than 4Q16, a consequence of commercial strategy and the positive effect of the exchange rate hedge for imported products. Gross Margin improved 0.3p.p. quarter-onquarter even when adjusted for the effects of excluding the ICMS sales tax from the calculation base for PIS and Cofins charges. OPERATING EXPENSES Operating Expenses 4Q17 4Q16 Var Var. Operating Expenses (SG&A) (687.7) (560.2) 22.8% (2,402.8) (2,068.6) 16.2% % Over Net Revenue from Merchandise Sales 30.9% 29.2% 1.7p.p. 36.4% 36.2% 0.2p.p. Selling Expenses (509.8) (424.7) 20.0% (1,792.0) (1,547.5) 15.8% General and Administrative Expenses (177.9) (135.5) 31.3% (610.7) (521.1) 17.2% Other Operating Expenses (50.9) (6.9) 633.7% (131.0) (28.7) 356.9% Management Remuneration (3.0) (2.6) 14.5% (12.2) (9.8) 24.7% Tax Expenses (11.7) (8.9) 32.3% (49.5) (43.1) 15.0% Employee Profit Sharing (36.0) (29.9) 20.2% (77.5) (47.3) 64.1% Recovery of Tax Credits % % Other Operating Revenues/ (Expenses) (4.5) % (5.2) % Total Operating Expenses (738.6) (567.2) 30.2% (2,533.7) (2097.3) 20.8% Operating Expenses (SG&A) increased 22.8%, representing 30.9% of Net Revenue from Merchandise Sales in 4Q17, versus 29.2% in the same period of the preceding year. This increase largely reflects a greater concentration of expenses involving projects with work in progress as well as a greater allocation of the marketing funds relative to the Company s commercial decisions. The comparative effect between 4Q16 and 4Q17 also impacted this participation: due to lower sales, in the preceding year, there was a greater containment of expenses and a reduced volume of items both transacted as well as in inventory. Selling Expenses represented 22.9% of Revenue from Merchandise Sales against 22.1% in 4Q16. In turn, General and Administrative Expenses corresponded to 8.0% of Revenue from Merchandise Sales against 7.1% in the same period for the preceding year. Other Operating Expenses totaled R$ 50.9 million versus R$ 6.9 million in 4Q16. This increase is due to the impact of noncomparable items which positively influenced the result in 4Q16 but were not repeated in the same proportion in 2017, notably the reduced Recovery in Tax Credits and the normalization of provisioning for Employee Profit Sharing in the light of the Company s operating performance during the year. Página 3 de 11 Release 4Q17

4 ADJUSTED EBITDA FROM THE RETAILING OPERATION Adjusted EBITDA from the Retailing Operation was 4.5% higher than reported in 4Q16, albeit on a Margin of 23.7% against 26.3% in the preceding year, principally due to Other Operating Expenses, which in the previous year had benefited from the effect of non-recurring tax credits and due to the concentration of operating expenses booked in 4Q17. FINANCIAL PRODUCTS RESULT Financial Products Result Breakdown 4Q17 4Q16 Var Var. Revenues, Net of Funding and Taxes % % Renner Card (Private Label) % % Co-branded Card Meu Cartão % % Quick Withdrawal and Insurances % % Credit Losses, Net of Recoveries (78.8) (65.7) 19.9% (255.8) (262.2) -2.4% Renner Card (Private Label) (33.7) (34.0) -0.7% (109.3) (126.2) -13.4% Co-branded Card Meu Cartão (45.2) (26.3) 72.0% (139.1) (103.6) 34.3% Quick Withdrawal 0.1 (5.4) - (7.4) (32.4) -77.2% Operating Expenses (Cards and Other Products) (70.1) (54.8) 27.8% (234.8) (177.9) 32.0% Financial Products Result % % % of Company's Total Adjusted EBITDA 12.5% 11.1% 1.4p.p. 22.5% 18.8% 3.7p.p. Financial Products Result totaled R$ 75.7 million, an increase of 20.5% when compared with the preceding year and representing 12.5% of the Company s Total EBITDA. This was largely a reflection of improved revenues generated by the business. Revenues Net of Funding and Taxes in the quarter were 22.5% higher than 4Q16, driven by the Co-Branded Meu Cartão business and by lower funding costs. This result was achieved despite the reduction in late payment fees on Meu Cartão and Saque Rápido operations as from October following the publication of Central Bank of Brazil Resolution The increase in revenues from Meu Cartão reflects the greater use of this product as well as the incorporation of revenues from purchases with the payment booklet and from withdrawals, which are now included in this portfolio. Consequently, revenues from Private Label and Saque Rápido business were lower in the period. Credit Losses, Net of Recoveries increased 19.9% in relation to 4Q16 due principally to the higher level of provisioning for Meu Cartão, reflecting the increase in the portfolio for the period. Nevertheless, this result was achieved thanks to the measures adopted in recent years with corresponding improvements in the quality of the concession of new credits, management of limits and more efficient collection. Operating Expenses rose 27.8% year-on-year due largely to Meu Cartão processing costs in the light of increased volumes, higher credit recoveries and operating overheads at Realize CFI. At the end of December, Renner Cards issued by the Company totaled 28.8 million, accounting for a 44.3% share of merchandise sales in 4Q17 compared with 47.3% in 3Q16, 37.1% being from sales via the interest-free 0+5 installment plan and 7.2% using the interest-bearing 0+8 installment credit plan. The average Renner Card sales ticket reached R$ in 4Q17, 1.3% greater than 4Q16. The Company s average ticket was R$ , 2.4% higher year-on-year. The Renner Card portfolio amounted to R$ 1,181.2 million at the end of December 2017, 6.0% less than in December This result is largely a reflection of purchases using Meu Cartão at Renner with the booklet-based payment model, these having become part of the Meu Cartão portfolio since February. 28.4% 27.3% 4Q17 7.2% Payment Conditions (%) 37.1% 27.7% 25.0% 4Q16 8.5% Renner Cards (Private Label and Co-branded) Renner Cards (Private Label and Co-branded) Third Party Cards Cash 38.8% Cartão Renner Losses Net of Recoveries were 2.9% of the total portfolio in 4Q17, up from 4Q16 s 2.7%. Past-due payments over the Total portfolio were up 0.7 p.p. from the same period in the previous year. The greater losses and delinquencies figures are a consequence of the portfolio s reduction, with lower representativeness of production of new credits. Página 4 de 11 Release 4Q17

5 In December 2017, Meu Cartão reached 3.4 million cards issued with a total portfolio of R$ 1,063.4 million versus R$ million in the same period in This growth is due partially to the recognition in this portfolio of all sales and withdrawals transacted with Meu Cartão. The portfolio was also impacted by the extension of duration for financing invoices in installments following Central Bank Resolution 4549, which since April 2017, resulted in changes to revolving credit lines. Business was also impacted by a greater use of the Meu Cartao product overall, after the unification of credit limits. Losses from Meu Cartão, Net of Recoveries were 4.3% of the total portfolio in 4Q17, a reduction in relation to the 5.0% in 4Q16 following the adoption of measures taken to improve credit quality, already mentioned, and growth in the portfolio. Conversely, the Percentage of Past Dues over the Total Portfolio increased to 21.6%, as from 3Q17, the write offs of this product - previously after 180 days overdue - has now been extended to 360 days, according to Central Bank s resolution. The total Saque Rápido (Quick Withdrawal) portfolio reached R$ 71.9 million at the end of December 2017 (R$ 42.5 million when adjusted to present value), 50.3% lower than in the same period in 2016 (R$ million in December 2016) a result of more stringent restrictions on the granting of credit introduced in 2015, improved collection efficiency and the migration of withdrawals via Meu Cartão, already mentioned. Also worthy of mention is that as from November 2017, new Personal Loan agreements are the responsibility of Realize CFI. Losses from the Saque Rápido product, Net of Recoveries in 4Q17, were negative at 0.2% of the portfolio, principally due to the larger recovery of credits written off relative to a portfolio significantly larger than previously. The increase in past dues as a percentage of total portfolio is above all the result of the reduction of total outstandings in the portfolio, with a lesser representativeness of production of new credits. Accounts Receivable Dec.17 Sep.17 Dec.16 Renner Card (Private Label) - Total Portfolio (Adjusted to Present Value) 1, ,256.8 Renner Card (Private Label) - Net Portfolio 1, ,138.7 On Due Receivable 1, ,148.9 Overdue Receivable Present Value Adjustment (34.3) (23.1) (39.2) Allowance for Losses to the Realizable Value (53.1) (48.8) (57.9) Others (49.3) (39.1) (60.2) Meu Cartão (Co-Branded) - Total Portfolio (Adjusted to Present Value) 1, On December 31, 2017, Accounts Receivable from Customers totaled R$ 2,644.3 million, 19,7% greater than the position in This increase reflects sales growth in the period and the increase in the Meu Cartão portfolio. Accounts Receivable comprises R$ 1,078.9 million for the Renner Card (Private Label), R$ million, Meu Cartão (Co-Branded), R$ 60.3 million for the Saque Rápido as well as transactions with Third Party Cards and Other Accounts, a further R$ million. Meu Cartão (Co-Branded) - Net Portfolio On Due Receivable Overdue Receivable Present Value Adjustment (7.8) (5.5) - Allowance for Losses to the Realizable Value (145.5) (85.7) (24.1) Quick Withdrawal - Total Portfolio Quick Withdrawal - Net Portfolio Dec.17 Fees and Transactions Receivable Allowance for Losses to the Realizable Value (11.6) (15.0) (35.0) Total Third-Party Credit Card Companies Other Accounts Receivable Total Credit Portfolio, Net 2, , , Página 5 de 11 Release 4Q17

6 TOTAL ADJUSTED EBITDA: RETAIL + FINANCIAL PRODUCTS EBITDA Reconciliation 4Q17 4Q Net Income ( + )Income and Social Contribution Taxes ( + )Financial Result, Net ( + )Depreciation and Amortization Total EBITDA , ,287.0 ( + ) Stock Option Plan ( + ) Statutory Participation ( + ) Result on Write-Off and Provision for Impairment of Fixed Assets Total Adjusted EBITDA* , ,339.1 Total Adjusted EBITDA Margin* 27.2% 29.6% 22.4% 23.4% *Pursuant to Article 4 of CVM Instruction 527, the Company has chosen to show its Adjusted EBITDA as in the above table in order to provide the information that best reflects the gross operational cash generation from its activities. These adjustments are based on: a) the Stock Option Plan corresponding to the fair value of the respective financial instruments recorded pro rata temporis, during the period services are rendered and offset by the Equity Capital Reserve and thus not representing a cash outflow; b) Statutory Participations are of a contingent nature and are related to the generation of profits pursuant to Article 187 of Law 6.404/76; and c) the Write-off and Provision for Impairment of Fixed Assets refer to results accounted for this end, therefore having no cash impact. In 4Q17, Total Adjusted EBITDA reported growth of 6.3%, although, the Total Adjusted EBITDA Margin was 27.2%, versus 29.6% in 4Q16, due to a lower EBITDA Margin from Retailing and in spite of the improved results for Financial Products. FREE CASH FLOW Cash Flow 4Q17 4Q16 Var Var. Total Adjusted EBITDA , , (+/-) Income and Social Contribution Taxes/Others (70.3) (26.0) (44.2) (292.1) (165.9) (126.2) Operating Cash Flow (8.5) 1, , (+/-) Changes in Working Capital 3.3 (197.0) (189.9) (176.3) (13.6) Accounts Receivable (619.3) (507.8) (111.5) (435.0) (90.0) (345.0) Operating Financing (22.6) (98.1) (0.8) (97.3) Inventories (140.9) (159.7) 18.8 Suppliers Other Accounts Receivable/Payable (52.0) In 4Q17, the company generated a positive Free Cash Flow of R$ million, an increase of R$ million against 4Q16. This variation is largerly due to the improvement in the allocation of commercial working capital and also drawdown of funds from Realize CFI for financing the credit portfolios. (-) Capex (230.2) (160.2) (70.0) (550.4) (477.2) (73.2) (=) Free Cash Flow (76.3) FINANCIAL RESULT, NET Financial Result, Net 4Q17 4Q16 Var Var. Financial Revenue % % Gains on Cash Equivalents % % Other finance revenues % % Financial Expenses (25.4) (40.4) -37.3% (134.9) (166.9) -19.1% In 4Q17, the Financial Result, Net was negative at R$ 14.4 million, a reduction of 44,3%, relative to 4Q16, due above all to lower financial expenses following the decline in the cost of financing and lower indebtedness. Interest on Loans, Borrowings and SWAP (21.3) (33.6) -36.7% (112.5) (142.7) -21.2% Other Finance Expenses (4.1) (6.9) -40.3% (22.4) (24.1) -7.1% Exchange Variation, Net % 0.3 (0.1) - Hedge Operations (NDF), Net 0.0 (2.2) - (3.8) (6.9) -44.6% Financial Result, Net (14.4) (25.9) -44.3% (83.1) (103.3) -19.6% Página 6 de 11 Release 4Q17

7 NET DEBT Net Debt Dec.17 Sep.17 Dec.16 Borrowings and Financing (1,104.5) (1,112.9) (1,008.3) Current (379.6) (385.2) (615.4) Noncurrent (725.0) (727.7) (392.9) Operational Financing (697.5) (592.0) (795.6) Current (127.4) (173.1) (378.3) Noncurrent (570.1) (418.8) (417.4) Cash and Cash Equivalents and Financial Investments 1, Net Debt (659.8) (842.1) (909.0) Net Debt / Total Adjusted EBITDA (LTM) 0.45x 0.58x 0.68x As of December 31, 2017, the Company reported Net Debt of R$ million, 27.4% less than at December 31, 2016, the result of positive cash generation in the quarter. Corporate debt reflects capital management decisions and is made up of debentures, loans from the Brazilian Development Bank - BNDES, Banco do Nordeste and FINEP as well as working capital lines. Operational financing is used for funding the Financial Products portfolios and its variation reflects changing levels in the financed volumes of these products. Debt servicing charges related to capital management are booked to the Net Financial Result. Conversely, the costs of Operating Financing - a reflection of the volume of Financed Products - are incorporated in the Operating Result. INVESTMENTS (CAPEX) CAPEX Summary 4Q17 4Q New Stores Remodeling of Installations IT Equipament & Systems Distribution Centers Others Total In 4Q17, Investments in fixed assets amounted to R$ million. Of this amount, 39% was dedicated to the opening of new stores, 24% to store modernization, 32% to IT Systems and Equipment and the remaining 5% to Distribution Centers and Others. During the quarter and in line with the expansion plan, 22 stores were opened, 12 of these in the Renner format and a further 2 and 8, Camicado and Youcom stores, respectively. At month-end December 2017, Renner was operating 330 stores and Youcom, 84 units, with total selling areas of thousand m 2 and 13.1 thousand m 2, respectively. In turn, the Camicado network had a total of 98 stores, with a combined selling area of 42.1 thousand m 2. Overall, the Company now has a total of 512 stores and a sales area of 655,0 mil m². Depreciation and Amortization expenses were R$ 87.5 million in 4Q17, a year-on-year increase of 6.2%. This increase largely reflects the continued implementation of the expansion plan. NET INCOME The Company posted an increase in 4Q17 Net Earnings of 10.7% compared with 4Q16 and, greater than the growth in Total Adjusted EBITDA, largely due to the better Financial Result and lower effective tax rate. The Net Margin was 14.9%, 0.7 p.p. lower than 4Q16, principally due to the Company s lower Total Adjusted EBITDA Margin. DIVIDENDS In 4Q17, Lojas Renner credited shareholders with dividends in the form of Interest on Capital in the amount of R$ 52.9 million, equivalent to R$ per share, considering the amount of 711,735,331 common shares, of which those held as treasury stock have been excluded. Página 7 de 11 Release 4Q17

8 ABOUT LOJAS RENNER S.A. The Company was incorporated in 1965 and has been listed since A pure, widely held company since 2005, with a 100% free float, Lojas Renner was deemed the first Brazilian corporation. Renner s equities are traded under the LREN3 symbol on B3 s Novo Mercado, the highest level of Corporate Governance, and via ADRs on the US OTC market under the LRENY symbol. As of December 28, 2017, the closing price of the LREN3 share was R$ 35.49, the Company reporting a market capitalization of R$ 25.3 billion. Lojas Renner is the largest fashion retailer in Brazil, in December 2017 with 330 Renner stores (including three stores in Uruguay), 98 Camicado units and 84 Youcom stores, the large majority of which are located in shopping malls, in addition to its online platforms and the e-commerce exclusive brand Ashua. Renner designs and sells quality apparel, footwear and underwear for women, men, adolescents and children under 17 private labels of which 6 represent the Lifestyle concept, each one reflecting a style of being and dressing. Renner also sells accessories and cosmetics under two proprietary brands as well as offering specific items bearing third party labels. Camicado, acquired in May 2011 is a company in the home decor segment and Youcom, launched in 2013, is a new business model focused on the younger generation in a specialized store environment. The Company also owns Realize CFI, a financial institution which supports Renner s retail business, through the management of the financial products offered. The target customers of Renner and Camicado are women between the ages of 18 and 39 who are in the mediumhigh consumption groups in Brazil. Youcom also caters for the medium income class, but with focus on the younger consumer between the ages of 18 and 35. Lojas Renner offers its customers fashion products in various styles with quality and competitive prices in practical and pleasant shopping environments. LEGAL NOTICE This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of Lojas Renner S.A. and are merely projections and, as such, are based exclusively on the expectations of the Company s management concerning the future of the business. Such forward-looking statements depend substantially on changes in market conditions, the performance of the Brazilian economy, the sector and the international markets and are therefore subject to change without prior notice. All variations as well as roundings up/down presented herein are calculated on the basis of numbers in thousands of reais. INVESTOR RELATIONS CONTACTS Laurence Gomes CFO and IRO laurence.gomes@lojasrenner.com.br Paula Picinini Investor Relations Tel paula.picinini@lojasrenner.com.br Carla Sffair Investor Relations Tel carla.sffair@lojasrenner.com.br Felipe Gaspar Investor Relations Tel felipe.gaspar@lojasrenner.com.br Diva Freire Corporate Governance Tel diva.freire@lojasrenner.com.br Página 8 de 11 Release 4Q17

9 CONSOLIDATED INCOME STATEMENT Income Statement (in R$ '000) 4Q17 4Q16 Var % Var % Net Operating Revenues 2,451,472 2,110, % 7,444,305 6,451, % Net Revenues from Sales of Goods 2,222,355 1,920, % 6,600,073 5,721, % Net Revenue from Financial Products and Services 229, , % 844, , % Costs of Sales and Services (960,765) (855,368) 12.3% (2,944,913) (2,575,083) 14.4% Cost of Goods (956,227) (848,461) 12.7% (2,922,882) (2,536,630) 15.2% Cost of Financial Products and Services (4,538) (6,907) -34.3% (22,031) (38,453) -42.7% Gross Profit 1,490,707 1,255, % 4,499,392 3,876, % Operating Expenses (1,008,141) (790,639) 27.5% (3,412,154) (2,900,805) 17.6% Selling (509,804) (424,735) 20.0% (1,792,022) (1,547,462) 15.8% General and Administrative (177,929) (135,497) 31.3% (610,734) (521,149) 17.2% Losses on Receivables, Net (78,784) (65,692) 19.9% (255,835) (262,203) -2.4% Other Operating Results (241,624) (164,715) 46.7% (753,563) (569,991) 32.2% Financial Products Expenses (70,069) (54,845) 27.8% (234,771) (177,899) 32.0% Other Operating Results (171,555) (109,870) 56.1% (518,792) (392,092) 32.3% Operating profit before Financial Results 482, , % 1,087, , % Total Financial Result, Net (14,419) (25,885) -44.3% (83,101) (103,310) -19.6% Financial Revenue 11,917 17, % 59,058 87, % Financial Expense (26,336) (43,040) -38.8% (142,159) (190,782) -25.5% Profit Before Income & Soc. Cont. Taxes 468, , % 1,004, , % Income and Social Contribution Taxes (136,346) (139,079) -2.0% (271,458) (247,322) 9.8% Profit for the Period 331, , % 732, , % Earnings per Share - Basic R$ % % Earnings per Share - Diluted R$ % % Number of shares outstanding at End of Year (in thousands) 713, , , , Página 9 de 11 Release 4Q17

10 CONSOLIDATED BALANCE SHEET Balance Sheet (in R$ '000) Assets Dec.17 Sep.17 Dec.16 TOTAL ASSETS 7,547,658 6,486,567 6,475,212 Current Assets 4,907,941 4,010,903 4,085,477 Cash and Cash Equivalents 1,059, , ,881 Financial Investments 82,360 91,875 - Trade Accounts Receivable 2,644,258 2,024,917 2,209,271 Inventories 923, , ,266 Recoverable Taxes 140, , ,841 Derivative Financial Instruments 6, Other Assets 45,818 39,413 56,654 Prepaid Expenses 5,266 10,109 6,198 Non-current Assets 2,639,717 2,475,664 2,389,735 Judicial Deposits 10,615 10,521 10,444 Recoverable Taxes 80,331 73,126 66,624 Prepaid Expenses Other Assets 9,299 9,798 10,692 Deferred Income Tax and Social Contribution 199, , ,616 Investments Fixed assets 1,813,627 1,716,613 1,645,069 Intangible 526, , ,244 Liabilities and Shareholders' Equity Dec.17 Sep.17 Dec.16 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,547,658 6,486,567 6,475,212 Current Liabilities 2,941,712 2,331,216 2,917,751 Borrowings, Financing and Debentures 379, , ,384 Financing - Financial Services Operations 127, , ,266 Finance Lease 9,890 6,466 2,521 Suppliers 842, , ,721 Taxes and Contributions Payable 470, , ,760 Social Charges and Labor Legislation Obligations 233, , ,470 Rentals Payable 59,393 47,610 55,608 Statutory Obligations 180, , ,679 Provision for Civil and Labor Risks 35,996 36,028 33,656 Obligations with Credit Card Administrators 524, , ,891 Derivative Financial Instruments 3,137 15,066 57,530 Other Obligations 74,252 69,159 62,265 Non-current Liabilities 1,382,500 1,236, ,665 Borrowings, Financing and Debentures 724, , ,883 Financing - Financial Services Operations 570, , ,369 Finance Lease 58,896 61,358 69,497 Taxes Obligations Provision for Tax Risks 26,083 26,096 37,356 Other Accounts Payable 2,429 2,698 3,508 Shareholders' Equity 3,223,446 2,918,668 2,636,796 Capital 2,556,896 2,553,723 1,178,368 Treasury Stocks (27,857) (27,857) (19,021) Capital Reserves 94,285 86, ,289 Profit Reserves 596,022 60,168 1,216,985 Retained Value Adjustments 4,100 (10,478) (37,825) Retained Earnings Accumulated - 256, Página 10 de 11 Release 4Q17

11 CONSOLIDATED CASH FLOW Statement of Cash Flows - Indirect Method (in R$ '000) 4Q17 4Q Cash Flows from Operating Activities Profit for the Year 331, , , ,058 Adjustment to Reconcile Net Income to Cash and Cash Equivalents Provided by Operating Activities Depreciation and amortization 87,459 82, , ,261 Loss on write-off of fixed assets, net 1,298 8,130 6,337 21,677 Gross costs of debentures structuring (deferral) Interest expense on loans, debentures and lease 23,246 35, , ,897 Share purchase option plan ans restricted share plan 10,046 6,625 39,727 27,330 (Reversal) Provision for tax, civil and labor risks (45) 997 (8,933) 6,298 Income and social contributions taxes 136, , , ,322 Loss on derivative financial instruments ,824 Net foreign exchange variation (221) (238) (892) 86 Provision for adjustment to net realizable value 24,645 22,935 8,759 8,855 Provision (Reversals) for loss on assets 96,255 (5,715) 130,635 (22,539) Changes in Assets and Liabilities 711, ,057 1,630,271 1,389,893 (Increase) in Trade Accounts Receivable (704,824) (524,015) (535,420) (80,505) Reduction (Increase) in Inventories 4,290 6,590 (166,320) (156,662) (Increase) Reduction in Other Assets (16,326) (52,751) 4,240 (72,560) Increase (Reduction) in Financing - Financial Services Operations 105,535 (22,599) (98,130) (830) Increase in Suppliers 197, , , ,774 Increase in Taxes and Contribution Payable 193, ,604 36,188 1,086 Increase in Social Charges and Labor Legislation Obligations 13,651 14,613 47,990 3,436 Increase in Rent Payable 11,783 12,645 3,785 4,456 Increase (Reduction) in Statutory Obligations 10,550 6,600 3,816 (3,074) Increase in Obligations with Card Administrators 88,742 48, ,690 50,805 Increase (Reduction) in Other Liabilities 4,822 (3,528) 10,908 (5,325) Cash Provided by Operating Activities, before Financial Investments 620, ,399 1,334,636 1,257,494 Reduction (Increase) in Financial Investments 9,515 - (82,360) - Cash Generated Operating Activities 630, ,399 1,252,276 1,257,494 Payment of Income Tax and Social Contribution (74,938) (28,010) (304,639) (193,074) Payment of Interest on Borrowings, Financing and Debentures (9,109) (18,077) (102,047) (150,212) Net cash provided by Operating Activities 545, , , ,208 Cash Flow from Investing Activities Purchases of Fixed Assets (179,213) (110,569) (440,280) (340,541) Purchases of Intangible Assets (50,969) (49,652) (110,083) (136,653) Proceeds from Disposal of Fixed Assets 4, , Net Cash Used in Investing Activities (225,848) (159,975) (545,516) (476,917) Cash Flows from Financing Activities Capital increase 3,173 8,176 60,678 42,244 Buyback Shares - (8,881) (8,836) (13,005) Borrowings Obtained 14,150 11, , ,038 Amortization (36,603) (9,439) (782,630) (263,024) Payment of Structuring Costs of Borrowings and Debentures - - (1,360) - Lease Consideration (102) (11,544) (8,283) (21,093) Interest on capital and dividends paid (7,348) (6,510) (253,337) (240,448) Net Cash Generated (Applied) by Financing Activities (26,730) (16,788) (129,232) (279,288) Effect of exchange rate changes on cash and cash equivalents (4,492) (443) (5,850) (649) Increase (Reduction) in Cash and Cash Equivalents 288, , , ,354 Cash and Cash Equivalents at the Beginning of the Quarter 770, , , ,527 Cash and Cash Equivalents at the End of the Quarter 1,059, ,881 1,059, ,881 Página 11 de 11 Release 4Q17