1Q09 EARNINGS RELEASE

Transcription

1 1Q09 EARNINGS RELEASE EBITDA and Net Income growth of 151% and 250% on 1Q08, respectively Sales-Over-Supply Ratio of 13% in 1Q09 and 20% YTD São Paulo, May 14, Klabin Segall S.A. (BOVESPA: KSSA3), one of Brazil's largest real estate developers, with a focus on intelligent residential projects, announces its results for the first quarter of 2009 (1Q09). The Company s financial statements are presented in accordance with Brazilian Corporate Law and all amounts are in Brazilian Real. The analysis and comments that follow refer to the Company s consolidated performance. KSSA3 (05/14/2009): R$2.08 # Shares: 61,498,250 Market cap: R$127.9 million CONFERENCE CALLS Portuguese 05/18/ :00 am Phone: +55 (11) Code: Klabin Segall English 05/18/ :00 pm Phone: +1 (973) Code: Live webcast 1Q09 HIGHLIGHTS Sales-over-supply (VSO) of 13% in 1Q09. Considering sales through May 1, the sales-over-supply ratio was 20%. The Company did not launch any projects, with contacted sales in the quarter coming exclusively from units in inventory. Net revenue in 1Q09 of R$220.9 million, 88% higher than in 1Q08. Gross profit grows 53% to R$67.2 million, with gross margin of 30.4%. EBITDA of R$55.0 million, with EBITDA margin of 24.9%, expanding 6.2 p.p. from 1Q08. As already mentioned in the 4Q08 earnings release, given the percentage of completion of construction in 1Q09, revenue recognition led to strong dilution of selling expenses (1.3% of contracted sales in 1Q09). Subject INDEX Page Net income of R$29.7 million, with net margin of 13.4%, 2.8 p.p. higher than in 1Q08. Key Indicators 02 Recent Events 03 Operating Highlights 06 Income Statement 08 Balance Sheet 11 Glossary 13 Appendix I: construction projects 14 Appendix II: assets 15 Appendix III: liabilities 16 Appendix IV: income statement 17 Appendix V: cash flow 18 Land bank with potential sales value (PSV) of R$5.3 billion (R$4.3 billion Klabin Segall stake) distributed across 19 cities, of which 50% were acquired through financial swaps. Klabin Segall entered into an investment agreement with Agra and Veremonte to create a strategic partnership to strengthen the company s positioning in the new market environment and bolster its capital structure. On April 26, 2009, we sold 50% of our interest in the project 106 Seridó for R$49.7 million. Delinquency remains stable at 1.5% of total loans, with no losses in the period due to the contractual guarantees. INVESTOR RELATIONS Carolina Burg +55 (11) carolinaburg@klabinsegall.com.br 1

2 1Q09 EARNINGS RELEASE Key Indicators Disclaimer: This release contains forward-looking statements referring to the Company s business prospects, estimates of earnings and financial results and growth outlook. These are merely projections and as such are based exclusively on the expectations of management regarding the future and the Company s continued access to capital in order to finance its business plan. These projections are subject to changes in market conditions, government regulations, the performance of the industry and the Brazilian economy, among other factors, and therefore are subject to change without prior notice. Summary of economic and operational indicators Consolidated 1Q09 1Q08 Net Revenues (R$ 000) 220, ,426 88% Gross Income (R$ 000) 67,186 43,806 53% Gross Margin (%) 30.4% 37.3% -6.9 p.p. EBITDA (R$ 000) (*) 55,016 21, % EBITDA Margin (%) 24.9% 18.7% 6.2 p.p. Net Income (R$ 000) 29,697 8, % Net Margin (%) 13.4% 7.2% 6.2 p.p. Adjusted Net Income (R$ 000) 29,697 12, % Adjusted Net Margin (%) 13.4% 10.6% 2.8 p.p. Net Debt (R$ 000) 557, , % 1Q09x 1Q08 Launches (R$000)(100%) - 280,921 - Launches (R$000)(Consolidated - Klabin Segall) - 280,921 - Launches (R$000)(Exclusive - Klabin Segall) - 254,916 - Launches ( Units) - 1,646 - Useful area launched (m2) - 130,056 - Average price per launched project (R$/m2) (100%) - 2,160 - Contracted sales (R$000)(Total- Klabin Segall) 169, , % Contracted sales (R$000)(Consolidated - Klabin Segall) 129, , % Contracted sales (R$000)(Exclusive- Klabin Segall) 116, , % Contracted sales (units) 524 1, % Useful area sold (m2) 51, , % Average price per sale (Consolidated - Klabin Segall) - (R$/m2) 3,286 2,504 31% (1) EBITDA = Earnings before net financial expenses (income), depreciation and amortization, tax expenses, non-operating income, taxes (income and social contribution) and minority interest. (2) Adjustment of R$4.0 million in 1Q08 related to the reversal of goodwill from the Setin acquisition. Except where stated otherwise, the financial statements were prepared and are presented in accordance with Brazilian GAAP and in Brazilian real (R$). Only the financial information taken from the Company s accounting system and included in this document was subject to special review by the independent auditors. The operating, financial and statistical information not directly linked to the accounting system (e.g. launches, contracted sales, average sales price (R$/m2), land bank, PSV) or non-br GAAP measures (e.g. EBITDA) were not reviewed by the independent auditors. Additionally, the financial statements and operating information consolidate the numbers of Klabin Segall and its subsidiaries and refer to Klabin Segall s interest in its projects. The quarterly information related to the 3-month period ended March 31, 2009 of the parent company as well as the consolidated result is presented in thousands of Brazilian real and was prepared in accordance with the accounting practices generally accepted in Brazil, in accordance with Law 6,404, of December 15, 1976, as amended by Law 9,249 of December 26, 1995, Law 11,638 of November 28, 2007 and Executive Order 449 of December 3, The 1Q08 results do not include the new accounting practices introduced by Law 11,638/07 and the Accounting Notices issued by the Accounting Standards Committee (CPC). 2

3 1Q09 EARNINGS RELEASE Recent Events Strategic Partnership with Agra and Veremonte On April 27, 2009, Klabin Segall entered into an investment agreement with Agra and Veremonte to create a strategic partnership to strengthen its position in the new market environment and bolster its capital structure, seeking to generate value for shareholders over the long term. Structure of the Operation Operation Rationale Bolster the capital structure Achieve scale gains and in turn strengthen business units Capture synergies with the potential creation of a shared services area The table below shows the Company s Net Debt/Equity ratio (pro-forma) considering the conclusion of the strategic partnership with Agra and Veremonte in 1Q09. The operation results in an adjustment in Klabin Segall s capital structure that leads to a reduction in financial leverage (Net Debt/Equity ratio = 0.55x) and lower risks. R$ million Actual Post Deal Gross Debt (-) SFH Gross Debt w/o SFH Cash & Cash Equivalents Net Debt w/o SFH Shareholders' Equity (w/o minority interest) * Dívida Líquida / PL 0.99x 0.55x * Covenant calculation 3

4 1Q09 EARNINGS RELEASE Sale of Interest in 106 Seridó Project With the objective of strengthening the Company s capital structure and improving liquidity, on April 26, 2009 we sold 50% of our interest in the 106 Seridó project to Golden Tree Insite Partners for R$49.7 million. Under the transaction, Klabin Segall still holds an interest in the project, of 25%. Contracted Sales and Sales-Over-Supply Ratio As of May 1, 2009, Klabin Segall s own contracted sales totaled R$178 million, with 100% from the sale of units in inventory. The Company maintains its commitment to create value for shareholders by prioritizing lower risk exposure, efficient cash management and the sale of units in inventory. The Sales-Over-Supply ratio (Klabin Segall s own contracted sales over the supply of units) in the year to date is presented below: VSO YTD Klabin Segall Stake Initial inventory on 12/31/ ( + ) Inventory adjustment (INCC) 53 ( - ) Sale of interest in projects (120) Initial adjusted inventory on 12/31/ Launches - Contracted sales up to 05/01/ ( - ) Sale of interest in projects (14) Adjusted contracted sales up to 05/01/ VSO 20% Final adjusted inventory on 05/01/ Klabin Segall s Sales-Over-Supply ratio in the year through May 1, 2009 was 20%. The Company maintains its strategy of operating in all income segments and its experience in crises shows that the characteristics and fundamentals of projects are the determinant factors for the success of their launches. In this light, Klabin Segall will continue to monitor the economic environment and the evolution of credit and demand indicators, adjusting its launch plans to better meet the demands of consumers. As of today s date, the Company had finished units in inventory with PSV of only R$1.7 million, which compares with total PSV of R$643.3 million, demonstrating the excellent sales potential of its products. In addition, of the R$452.3 million in PSV under construction, R$390.1 million is more than 18 months away from the delivery date. Inventory (PSV - R$ MM) Inventory Evolution Finished units Units under construction Launching period units 1,7 452,3 A djusted inventory in D ec/ 08 Launches A djusted sales YTD A djusted final invento ry YT D 189,0 4

5 1Q09 EARNINGS RELEASE Progress of Projects The chart below shows the status of sales and percentage of completion of the Company s projects. Note that 59% of projects have already registered sales of more than 75%, which means that revenue recognition now depends entirely on the percentage of completion of construction. In relation to 4Q08, we observed a substantial increase in the percentage of completion of construction, with 17 projects advancing by more than 10%. Note that a large portion of projects has already secured construction financing (SFH system). As already mentioned in the 4Q08 earnings release, EBITDA margin improved in 1Q09 due to the increase in the percentage of completion of construction, which consequently accelerated revenue recognition and the dilution of selling expenses. (%) S O 100% 80% 60% Alpha Vita Cielo Villa Carioca Celebration Portes Du Soleil Horizontes Parque do Liv Sol Springs São José Luau Spasso Mooca Etage Plato Flamboyant Arena Allegri Ventanas Giardino Reference Arboris Exuberance Jardins de Monet Ápice Oceano Cores da Lapa Grand Life Botafogo Ápice Sphera Art Boa Viagem Glam > 70% sold >50% <70% sold L D 40% Space Corporate Mareas Oasis Vitality Contemporanium Up to 50% sold 20% Novitá Cena Golf Seridó 0% 0% 20% 40% 60% 80% 100% PSV (R$MM) PoC (%) In 2009, Klabin Segall plans to deliver four projects with total PSV estimated at R$360.0 million. 5

6 1Q09 EARNINGS RELEASE Operating Highlights Launches The Company did not launch any projects in the first quarter of Contracted Sales Klabin Segall s own contracted sales totaled R$116.8 million in 1Q09. Bear in mind that the Company continued its strategy focused on selling the units held in inventory, as well as its commitment to create value for shareholders by prioritizing lower risk exposure and efficient cash management. Contracted Sales (PSV - R$ million) Exclusive: -59% Consolidated: -61% Q08 1Q09 Consolidated Exclusive The following charts present a breakdown of contracted sales by year of launch and income segment: Segmentation - 1Q09 Segmentation - 1Q08 0.5% 4.4% 5.5% 9.6% 23.7% Premium 15.9% Premium 28.3% High Medium High Medium 35.3% High Medium High Medium 37.9% Economic / Popular 38.9% Economic / Popular 6

7 1Q09 EARNINGS RELEASE The following tables present a breakdown of contracted sales by year of launch and income segment: Contracted Sales (Klabin Segall - consolidated) Launching Acumulated (R$ 000) 1Q09 % 1Q08 % Launches , % 76, % Launches , % 233, % Other 17, % 25, % Total 129, % 335, % Contracted Sales (Klabin Segall - consolidated) (R$ 000) 1Q09 1Q08 1Q09x 1Q09 By Segment High - over R$ 500,000 30,626 53,327-43% Middle-High - R$ 300,000 to R$ 499,000 49, ,558-62% Middle - R$ 120,000 to R$ 299,000 36, ,526-69% Middle-Low - R$ 90,000 to R$ 120,000 12,388 14,683-16% Popular - less than R$ 90, ,315-97% Total 129, ,409-61% Contracted Sales (Klabin Segall - exclusive) Acumulated (R$ 000) Launching 1Q09 % 1Q08 % Launches , % 73, % Launches , % 197, % Other 11, % 16, % Other 116, % 288, % Contracted Sales (Klabin Segall - exclusive) (R$ 000) 1Q09 1Q08 1Q09x 1Q09 High - over R$ 500,000 29,832 46,577-36% Middle-High - R$ 300,000 to R$ 499,000 39, ,227-63% Middle - R$ 120,000 to R$ 299,000 34, ,530-67% Middle-Low - R$ 90,000 to R$ 120,000 12,383 14,623-15% Popular - less than R$ 90, ,350-97% Total 116, ,308-59% Sales-Over-Supply Ratio The Sales-Over-Supply Ratio, which demonstrates the pace of sales, was 13% in 1Q09, as the following table shows: VSO 1Q09 Klabin Segall Stake Initial inventory on 12/31/ ( + ) Inventory adjustment (INCC) 53 ( - ) Sale of interest in projects (120) Initial adjusted inventory on 12/31/ Launches - Contracted sales up to 03/31/ ( - ) Sale of interest in projects (11) Adjusted contracted sales up to 03/31/ VSO 13% Final adjusted inventory on 03/31/ Projects Delivered and Under Construction On March 27, the Company delivered the Cores da Lapa project in Rio de Janeiro, which represented a case study in successful sales, with 688 units sold with 2 hours of launch, as well as an important mark in the revitalization of the Lapa district in the center of Rio de Janeiro. The transfer of projects is still underway (with the portfolio gaining from benefits for timely payment) and the amounts of financing for construction to be settled using funds from the project s accounts receivable (non-cash payment). At the end of the quarter, the Company had approximately R$140 million in performing receivables, a portion of which is being transferred and with the other portion held in the portfolio. Land Bank On March 31, 2009, the land bank had a PSV of R$5.3 billion (R$4.3 billion pertaining to Klabin Segall), which was distributed across 19 cities and represented the potential construction of 15,004 units. Of the current land bank, 70% was acquired through exchange agreements (50% through financial exchange agreements and 20% through physical exchange agreements). Klabin Segall is confident in its strategy of maintaining a land bank sufficient for approximately two years of future launches, which gives it the flexibility to operate with a balanced product mix in tune with market developments. 7

8 1Q09 EARNINGS RELEASE The Company remains alert to developments related to the international financial crisis and the potential repercussions on Brazil s economy, especially those related to income levels and credit. Klabin Segall believes that its land bank is sufficient to assure the execution of its business plan, and therefore does need to make substantial additions over the coming quarters. Moreover, Klabin Segall continues to observe declines in demand for land, which should give it better bargaining power with regard to payment terms and conditions. Through the Olá brand, Klabin Segall plans to continue expanding its operations in lower-income segments, supported by a strategic land bank of approximately R$450.0 million targeting projects with units priced up to R$120,000. The Company considers this segment as strategic for the medium and long terms, given its growth potential following the set of measures implemented by the federal government aimed at stimulating the building segment. However, we believe this segment will still take more time to reach its full potential. The following table presents a breakdown of the Company s land bank: Land Bank in March 31, 2009 Estimated PSV Estimated PSV % % % R$ % Number of Units Exclusive (%KS) KS High class Over R$ 500,000 1,864 35% 1,161 8% 1,587 85% Middle-High Class R$ 300,000 to R$ 499,000 1,642 31% 4,325 29% 1,225 75% Middle Class R$ 120,000 to R$ 299,000 1,333 25% 4,959 33% 1,080 81% Middle-Low Class R$ 90,000 to R$ 119, % 1,248 8% % Popular Less than R$ 89, % 3,311 22% % Total 5, % 15, % 4,252 Highlights from the Income Statement The quarterly information related to the 3-month period ended March 31, 2009 of the parent company as well as the consolidated result is presented in thousands of Brazilian real and was prepared in accordance with the accounting practices generally accepted in Brazil, in accordance with Law 6,404, of December 15, 1976, as amended by Law 9,249 of December 26, 1995, Law 11,638 of November 28, 2007 and Executive Order 449 of December 3, The 1Q08 results do not include the new accounting practices introduced by Law 11,638/07 and the Accounting Notices issued by the Accounting Standards Committee (CPC). The effects on results were as follows: Adjusted by Law nº 11,638/07 R$ 000's Reported net income for the period 8,486 NPV adjustment (a) (7,617) Sales expenses (b) (7,801) Minority interest (derived from changes introduced by Law nº 11,638/07) (c) 1,616 Adjusted net loss for the period (5,316) Revenue Gross operating revenue in 1Q09 came to R$227.9 million, for growth of 87% in relation to 1Q08. Revenue from real estate projects is recognized based on the costs incurred in relation to the total budgeted cost of the project, which includes the land and construction costs. The contracted sales portfolio is recognized in future periods even if the project is already completely sold. This is known as the Percentage of Completion (PoC) method. The table below presents detailed information on contracted sales and revenue apportioned by launch year: 8

9 1Q09 EARNINGS RELEASE Contacted Sales (Klabin Segall - Consolidated) X Revenues (Quarterly) 1Q09 1Q08 Projects / Year of Launch Contracted Sales Allocated Revenues Contracted Sales Allocated Revenues (R$ 000) (%) R$ 000 (%) R$ 000 (%) R$ 000 (%) Launched ,460 37% 77,394 23% 76, ,502 6% Launched ,746 50% 67,431 69% 233, % 50,446 44% Launched ,079 12% 72,525 7% 23, % 32,126 28% Launched % 520 1% 2, % 24,436 21% Launched ,213 1% (223) 0% - 0.0% 591 1% Previous years - 0% (4) 0% % 962 1% Total 129, % 217, % 335, % 115, % Gross Profit Gross profit in 1Q09 was R$67.2 million, 53% higher than in 1Q08. Gross margin was 30.4%. Selling, General and Administrative Expenses Selling expenses totaled R$1.7 million in 1Q09, equivalent to 1.3% of contracted sales, declining by 1.6 p.p. against 1Q08. Expenses with advertising and publicity, which previously were booked under Deferred Assets and recognized in the results according to the same criteria as the recognition of revenue from real estate development, are now fully recognized in the results as they are incurred (except in the case of sales stands that remain open for more than 12 months, which are recognized under fixed assets). As already mentioned in the 4Q08 earnings release, given the percentage of completion of construction in 1Q09, revenue recognition led to the strong dilution of selling expenses. (R$ 000) 1Q09 1Q08 1Q09X1Q08 Contracted Sales 129, ,409-61% Sales expenses 1,687 9,765-83% Sales expenses / contracted sales 1.3% 2.9% -1.6 p.p. General and administrative expenses in 1Q09 were equivalent to 6.3% of net operating revenues, down 4.6 p.p. from 1Q08. As mentioned in the 4Q08 earnings release, the project to integrate the Engineering and Corporate departments has already begun to reduce these expenses, with the capture of important operational synergies. (R$ 000) 1Q09 1Q08 1Q09X1Q08 Net operating revenue 220, ,426 88% G&A expenses 13,900 12,743 9% G&A expenses / NOR 6.3% 10.9% -4.6 p.p. Financial Result Financial revenue increased by 26% to R$7.9 million in 1Q09. Meanwhile, financial expenses rose by 169% to R$18.1 million, primarily due to the payment of interest on the debentures. Taxes Income and social contribution taxes totaled R$8.3 million in the quarter, compared with R$2.4 million in 1Q08. Net Income 9

10 1Q09 EARNINGS RELEASE Adjusted net income in 1Q09 grew by 138% to R$29.7 million (for adjusted net margin of 13.4%), compared with R$8.5 million in 1Q08 (with adjusted net margin of 7.2%). EBITDA and EBITDA Margin EBITDA totaled R$55.0 million (EBITDA margin of 24.9%), 151% higher than the R$21.9 million (EBITDA margin of 18.7%) in 1Q08. The following table presents a reconciliation of the Company s EBITDA: EBITDA (R$ 000) 1Q09 1Q08 1Q09x 1Q08 Net income for the period 29,697 8, % Net financial expenses (income) 10, % Income and social contribution taxes 8,304 2, % Tax Expenses % Depreciation and amortization 1,158 4,326-73% Amortization of goodwill in investments - 4,179 - Non-operating income - (3) - Minority interest 5,573 2, % EBITDA 55,018 21, % % EBITDA Margin 24.9% 18.7% 6.2 p.p. Revenue and Earnings to be Recognized The following table shows the evolution of revenue and gross margin to be recognized. Gross margin to be recognized in 1Q09 was 37.1%. 1Q09x 1Q09x 1Q09 1Q08 4Q08 Revenues to be recognized (R$ 000) 1Q08 4Q08 Revenues to be recognized at the beginning of the period 1,311, , % 682, % Sales recognized in the period 229, , % 1,171, % Revenues recognized in the period (227,926) (115,062) 98.1% (588,533) -61.3% Revenues to be recognized at the end of the period 1,313,052 1,002, % 1,265, % Costs to be recognized (826,298) (624,578) 32.3% (803,078) 2.9% Earnings to be recognized 486, , % 462, % Gross margin to be recognized 37.1% 37.7% -.6 p.p. 36.5%.5 p.p. Highlights from the Balance Sheet 10

11 1Q09 EARNINGS RELEASE Cash and Cash Equivalents Cash, banks and investments totaled R$120.5 million on March 31, Cash was mainly used to acquire land and to develop real estate projects. Loans and Financing Total debt on March 31, 2009 stood at R$677.9 million, compared with R$366.5 million on March 31, We are advancing in our efforts to adjust the Company s capital structure to reflect the strategic direction taken in view of the current market scenario. The strategic partnership with Agra and Veremonte was a step forward towards meeting this goal. The Company also sold a 50% interest in the 106 Seridó project, which generated proceeds of approximately R$50 million. The breakdown of the Company s net debt follows: Breakdown of net debt (in R$ 000) 03/09x 03/09x 03/31/ /31/ /31/ /08 12/08 Financing and Loans 201, , ,245 71% 20% Housing Finance System 121,554 28,189 86, % 40% Resolution ,885 31,762 23,232 (0) 0 BNDES 3,940-3,714 0% 6% Bank Credit Certificates 49,721 57,664 53,592 Debentures % 0% Debentures 476, , ,824 92% 3% Total Debt 677, , ,069 85% 8% Cash and Banks 120,479 92, ,305 30% 10% Net Debt 557, , , % 7% Consolidated Net Equity 439, , ,429 0% 8% Klabin Segall SA Net Equity 377, , ,084-6% 9% Non Controlling Stockholders Interest 61,889 38,495 59,345 61% 4% % of Net Equity 126.8% 62.2% 127.6% 64.6 p.p. -.8 p.p. The following table shows the Company s current debt profile: SFH Working Capital BNDES Current balance: 121,554 Current balance: 75,606 Current balance: 3,940 Index: TR Index: CDI Index: TJLP Avg. interest per year: 10.71% Avg. interest per year: 115.5% of the CDI Avg. interest per year: TJLP + 3.8% p.a. Creditor: Several Creditor: Bradesco and Safra Creditor: BNDES Duration: 18 months Duration: - Duration: - Coupon: monthly Coupon: monthly Coupon: - Principal to due date Monthly amortization / principal to due date Monthly payments Debentures - Second Emission Debentures - First Emission Debentures - First Emission Current balance: 246,805 Current balance: 41,709 Current balance: 189,459 Index: CDI Index: CDI Index: IPCA Avg. interest per year: CDI + 2.0% p.a. Avg. interest per year: CDI + 3.0% p.a. Avg. interest per year: IPCA % p.a. Creditor: Several Creditor: Several Creditor: Several Duration: - Duration: - Duration: - Coupon: every 6 months Coupon: every 6 months Coupon: annual Principal in 5 installments begining in 2011 Principal in 5 installments begining in 2010 Principal in 3 installments begining in 2010 Note that part of this debt is being renegotiated, which is a condition precedent for concluding the strategic partnership agreement with Agra and Veremonte. Account Receivable from Customers 11

12 1Q09 EARNINGS RELEASE This line corresponds to credits generated from the sale of units, with the value of each contract restated according to the respective contractual clauses. Accounts Receivable - R$000 3/31/ /31/2008 3/31/2008 Mar/09X Dec/08 Mar/09X Mar/08 Current Assets Trade Accounts receivable -% Realized 276, , , % 92.2% Trade Accounts receivable -% Unrealized 268, , , % 60.6% Total trade accounts receivable 544, , ,629 Non Current Assets Trade Accounts receivable -% Realized 319, , , % 108.1% Trade Accounts receivable -% Unrealized 993,309 1,021, , % 19.0% Total trade accounts receivable 1,313,052 1,265, ,581 Total 1,857,278 1,734,545 1,299,210 Inventory (Properties for Sale) Inventories totaled R$470.3 million on March 31, 2009, of which 41% involved land properties. Units concluded and under construction at the end of March 2009 totaled R$9.9 million. The inventory of lots contracted by 11% compared to 1Q08. Inventory (R$ 000) 1Q09 1Q08 Units Concluded 9,852 12,126 Units Under Construction 266, ,404 Land for Construction New Projects 194, ,676 Total 470, ,205 Glossary 12

13 1Q09 EARNINGS RELEASE Result from the Development and Sale of Properties (PoC Method) In accordance with the accounting practices adopted in Brazil (BRGAAP), revenue and expenses related to development operations are recognized in the results during the period of construction in accordance with the percentage of completion (POC method), based on the costs incurred in relation to the total cost budgeted for the project. Therefore, a substantial portion of the development revenue related to a period reflects the recognition of contracted sales from previous periods. Result from Property Sales to be Recognized Due to the recognition of revenue and costs, which occurs in accordance with the percentage of completion of construction rather than upon the signing of the agreements, we recognize development revenue from contracts signed in future periods. Therefore, the balance of Revenue from Sales to be Recognized corresponds to contracted sales less the budgeted construction cost of these same units, which is recognized in future periods. Revenue from Sales to be Recognized Revenue to be recognized refers to contracted sales whose revenues will be recognized only in future periods under the PoC method, and not upon the signing of the contract. Margin to be Recognized Equivalent to the Result from the Development and Sale of Properties " divided by the Property Sales to be Recognized. Land Bank Land that Klabin Segall holds for future development paid either in Cash or through exchange agreements. Each decision to acquire land is analyzed by our investment committee and approved by our Board of Directors. Contracted sales The aggregate amount of sales resulting from all agreements for the sale of units entered into during a certain period, including new units and units in inventory. Contracted sales are recognized as revenue in accordance with the percentage of completion of construction. High income Luxury residential buildings targeting the high-income segment, with prices usually above R$3,600/m 2. Mid-High Income Residential buildings targeting the upper-middle income segment, with prices ranging from R$2,800/m 2 to R$3,600/m 2. Mid-Low Residential buildings targeting the lower-middle income segment, with prices ranging from R$2,300/m 2 to R$2,800/m 2. Low Income / Entry level Residential buildings with prices below R$1,800/m2. SFH Funds Funds from SFH are derived from the Employee Severance Fund (FGTS) and from savings deposits. Commercial banks are required to invest 65% of the total savings deposits in the housing sector, either to final customers or developers, at below-market interest rates. Exchange Agreements A system through which the land-owner receives a certain number of units to be built on the land or a percentage of the proceeds from the sale of units of the development as payment for the land. By acquiring land through this system, we seek to reduce our cash requirements and increase our returns. PSV Potential Sales Value. ANNEX I CONSTRUCTION PORTFOLIO 13

14 1Q09 EARNINGS RELEASE Portfolio - Mar/2009 Project Year of Launch mar-09 mar-08 mar-09 mar-08 mar-09 mar-08 Le Grand Klabin % 100% 100% 100% % 30% Terraço Klabin % 100% 100% 100% % 100% Project Home % 100% 100% 100% % 100% Espaço Contemporâneo % 100% 100% 100% % 100% Ville Cap Ferrat % 100% 96% 92% % 100% Cores da Barra % 100% 100% 100% % 100% Terraço Ibirapuera % 100% 100% 100% % 50% Singolare % 100% 100% 99% % 100% Atelier % 100% 100% 100% - (1) 70% 100% Supreme % 100% 100% 100% - (5) 69% 100% Alive % 100% 100% 100% (8) % 50% Essenza % 100% 100% 100% % 100% Vitrine Klabin % 100% 100% 100% % 100% Acervo Alto de Pinheiros % 100% 100% 100% (45) % 35% Art Boa Viagem % 100% 92% 71% % 50% Evidence % 100% 100% 100% (0) (203) 42% 42% Grand Life Botafogo % 100% 100% 79% (178) % 50% Cores da Lapa % 91% 100% 98% 160 8,886 31% 75% Cult % 97% 100% 99% (29) 5,469 95% 100% Glam Moema % 95% 99% 72% (8) 4,217 97% 100% Sphera % 76% 100% 100% 398 5, % 100% Ápice % 40% 100% 100% 4,389 1,283 20% 50% Arbóris % 38% 95% 77% 12,502 5,663 80% 100% Arena Park % 20% 66% 57% 7,586 5,377 80% 100% Espaço Raposo % 22% 84% 72% 21,632 6,747 33% 33% Jardins de Monet % 41% 87% 67% 10,687 4, % 100% Oceano % 25% 91% 89% 4,736 2,724 50% 50% Reference % 47% 100% 91% 4,032 2,556 39% 100% Collina % N/A 92% N/A 5,171 3,210 40% 40% Porto da Ponta % N/A 96% N/A 1, % 20% Vitality % 22% 51% 22% 3,715 1,231 80% 100% Celebration % 20% 90% 45% 5,747 6,787 70% 100% Exuberance % 20% 83% 51% 8,376 2,472 80% 100% Icaraí Village % 34% 66% 66% 4,487 1,325 80% 100% Allegri % 24% 66% 27% 2,958 1,268 70% 100% Luau % 28% 59% 19% 13,861 1, % 100% Spasso Mooca % 24% 55% 45% 1,708 1, % 100% Mareas % 15% 40% 21% 2,491 1, % 100% Conquista % 17% 92% 55% 2,946 4, % 100% Springs % 15% 75% 60% 1,860 1, % 100% Portes du Soleil % 21% 85% 62% 3, % 50% Etage % 37% 89% 37% 2,236 5, % 100% Spasse % 22% 37% 17% 904 1,008 50% 50% Platô Flamboyant % 17% 80% 51% 2,191 5, % 100% Cena Golf % N/A 22% N/A 72-33% 33% Porto Cidade % N/A 55% N/A % 20% Liv Barra Funda % 14% 99% 97% 2, % 45% Horizontes % 17% 94% 82% 3,237 7,560 40% 50% Ventanas % N/A 65% N/A 3,930 6, % 42.5% Villa Carioca % 14% 91% 30% % 100% Cielo % 30% 65% 21% % 100% Parque do Sol % 16% 86% 13% 7,341 1, % 100% Alpha Vita % 11% 94% 22% 1,692 4, % 100% Residencial São José % N/A 30% N/A 2,781-50% 100% Giardino Bothanic % N/A 27% N/A 26-50% 50% Giardino Solare % N/A 29% N/A % 50% Giardino Terrae % N/A 24% N/A 1,025-50% 50% Giardino Vereda % N/A 43% N/A % 50% Novitá % N/A 20% N/A 2, % 100% Oásis Park % N/A 29% N/A 1,124-50% 50% Conteporanium - Praia Icarai % N/A 42% N/A 22,672-60% 100% Seridó % N/A 21% N/A 37,464-50% 50% Total Real Estate Project Revenues Note: Swapped units are considered inventory % of Project Progress % Sales Allocated Revenue - R$ , ,062 ANNEX II CONSOLIDATED BALANCE SHEET ASSETS (R$ 000 s) % Klabin Segall % Consolidation 14

15 1Q09 EARNINGS RELEASE ASSETS 31/03/09 31/12/08 31/03/08 Current assets 821, , ,129 Cash and cash equivalents 21,356 35,470 16,175 Securities 94,523 69,384 76,384 Cash in transit 4,600 4,451 2,797 Receivables from Clients 276, , ,596 Real Estate for sale 380, , ,500 Taxes recoverable 9,286 8,783 4,255 Developers current account Prepaid expenses 10,242 10,498 41,153 Others 24,977 34,039 20,269 Non current assets 599, , ,595 Long term assets 488, , ,926 Receivables from Clients 319, , ,614 Securities - - 6,653 Real estate for sale 89, ,601 52,705 Developers current account 9,506 3,180 - Credits with related parties 14,650 5, Prepaid tax 1,463 2,038 - Prepaid expenses ,469 Others 53,130 44,283 36,252 Permanent assets 111, , ,669 Investments Amortization of Goodwill in subsidiary and affiliate ,413 Property, plant and equipment 24,723 25,121 1,752 Intangible 86,758 86,890 1,150 Deferred ,354 TOTAL ASSETS 1,421,300 1,326,421 1,058,724 ANNEX III CONSOLIDATED BALANCE SHEET LIABILITIES (In thousands of R$) 15

16 1Q09 EARNINGS RELEASE LIABILITIES AND SHAREHOLDER'S EQUITY 31/03/09 31/12/08 31/03/08 Current liabilities 280, , ,762 Loans and financing 97,081 67, ,767 Debentures 32,073 23,762 5,920 Suppliers 40,544 38,137 18,051 Land payable 37,136 36,908 52,328 Tax payable 6,073 7,712 3,996 Social obligations payable 1,876 2,053 3,149 Advances from customers 25,484 34,347 6,794 Other payables 25,394 9,838 16,418 Liabilities for acquisition of ownership stakes 3,443 8,027 22,625 Proposed dividends - - 6,968 Deferred taxes 10,924 13,372 8,746 Non current liabilities 701, , ,529 Loans and financing 104,019 99,989 6,848 Debentures 444, , , Land payable 3,386 4,451 69,690 Deferred taxes 24,032 14,748 9,584 Other payables 906 1,330 17,503 Liabilities for acquisition of ownership stakes 2,834 2,824 2,824 Provision for contingent liabilities Due to Investors 5,729 3,550 6,319 59,101 78,450 Debt with Related Parties 56,049 33,453 6,082 Minority interest 61,889 59,345 38,495 Shareholders equity 377, , ,938 Share capital 353, , ,846 Legal reserves - - 3,377 Statutory reserves ,407 Future earnings reserves - - 2,308 Retained Earnings 23,935 (5,762) - TOTAL LIABILITIES 1,421,300 1,326,421 1,058,724 ANNEX IV INCOME STATEMENT (In thousands of R$) 16

17 1Q09 EARNINGS RELEASE Income Statement (R$ 000) 1Q09 1Q08 1Q09X 1Q08(%) Gross operating revenue 227, , Revenue from real estate projects 217, , Revenue from services 10,282 6, Deductions from operating revenue (7,010) (4,622) 51.7 Net revenue from sales and services 220, , Cost of projects and services (153,730) (73,620) Gross operating income 67,186 43, Operating expenses (24,809) (26,689) (7.0) Commercial and selling expenses (1,687) (9,765) (82.7) Administrative expenses (13,900) (12,743) 9.1 Tax expenses (5) (19) (73.7) Operating provisions expenses Depreciaton and amortization (1,158) (4,326) (73.2) Financial expenses (18,131) (6,743) (-) Financial income 7,851 6, Revenue from client loans 2, Managers and employees profit sharing Other operating revenues / expenses 1,196 (4,179) - Equity result Amortization of goodwill in subsidiary and affiliate - (4,179) - (-) Initial Public Offering - IPO Expenses Accrual Reversals 1, Net operating income 43,573 12, Non-operating income (loss) Income before taxes 43,573 12, Income tax and social contribution (8,304) (2,388) Current taxes (6,060) (852) Deferred taxes (2,244) (1,536) 46.1 Net income before minority interest 35,269 10, Minority interest (5,572) (2,067) Net income for the period 29,697 8, Adjusted net income for the period 29,697 12, EBITDA 55,016 21, EBITDA Margin % 24.9% 18.7% 6.2 p.p. ANNEX V CASH FLOW STATEMENT (R$ 000 s) POST ADJUSTMENTS FOR LAW 11,638 17

18 1Q09 EARNINGS RELEASE R$ Cash Flow Parent 1Q09 Consolidated 1Q09 Flow of operations Net income for the period 29,697 29,697 Net income adjustments with the cash generated by operational activities Amortization of goodwill in investments - - Depreciation 628 1,158 Deferred withholding tax and social contribution (118) 8,304 Deferred amortization - - Monetary variance 4,393 4,393 Equity (52,933) - Minority interest - 5,572 (Increase) reduction in operational assets Receivables from clients (84) (120,833) Real estate for sale (5,453) 51,186 Prepaid expenses Related parties - (15,286) Taxes recoverable (15) 72 Cash and cash equivalents - - Other assets 16, (Decrease) in operating libilities Clients advances 37 (28,212) Suppliers (236) 2,407 Deferred taxes and contributions 143 (1,468) Labor and Tax obligations (191) (1,816) Lands payable - (837) Other liabilities ,132 Cash generated in operating activities (6,201) (49,905) Flow of investments activities Contributions invested in companies (2,065) - Goodwill from investments - - Received dividends - - Deferred additions - - Adjustment from previous periods - - PP&E acquisition (1,105) (628) Cash generated by investment activities (3,170) (628) Cash flow of financing activities Increase (decrease) of equity - - Interest acquisition obligation - (4,574) Debentures obligations 15,026 15,072 Increase (decrease) of minority investors - (3,028) Related parties 19,328 24,775 Proposed dividends - - Debt (2,505) 29,462 Cash generated in financing activities 31,849 61,707 Increase (decrease) of cash 22,478 11,174 INITIAL PERIOD 8, ,305 FINAL PERIOD 30, ,479 (B)-(A) 22,478 11,174 18

19 Klabin Segall S.A. e Controladas Interim Financial Statements for the Quarter Ended March 31, 2009 and Independent Accountants Review Report Deloitte Touche Tohmatsu Auditores Independentes

20 (Convenience Translation into English from the Original Previously Issued in Portuguese) INDEPENDENT ACCOUNTANTS REVIEW REPORT To the Shareholders and Management of Klabin Segall S.A. São Paulo - SP 1. We have performed a review of the accounting information contained in the accompanying interim financial statements of Klabin Segall S.A., consisting of the balance sheet as of March 31, 2008, the related statements of income, changes in shareholders equity and cash flows for the quarter then ended, the performance report and the notes to the interim financial statements, all expressed in Brazilian reais and prepared in accordance with Brazilian accounting practices under the responsibility of the Company s Management. 2. Our review was conducted in accordance with specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), together with the Federal Accounting Council, and consisted principally of: (a) inquiries of and discussions with certain officials of the Company who have responsibility for accounting, financial and operating matters about the criteria adopted in the preparation of the interim financial statements; and (b) review of the information and subsequent events that had or might have had material effects on the financial position and results of operations of the Company. 3. As mentioned in note 31, on March 31, 2009, certain agreed-upon ratios on which the issuance of debentures was contingent has not been met. The Company s management, based on future earnings projections and alternatives currently existing, proposed, in conjunction with trustees, to the Debentureholders Meeting held on April 23, 2009 an extension of the accelerated debt maturity date, and, for this reason, is presenting such debentures in the accounting information contained in the interim financial statements for the quarter ended March 31, 2009 considering their originally shceduled maturity date, as mentioned in note Based on our review, except for the effects that might result from the matter mentioned in paragraph 3, we are not aware of any material modifications that should be made to the accounting information included in the interim financial statements referred to in paragraph 1 for them to be in conformity with Brazilian accounting practices and standards established by the Brazilian Securities and Exchange Commission (CVM) applicable to the interim financial statements, including CVM/SNC/SEP Circular Letter 2/09.

21 Deloitte Touche Tohmatsu 5. As mentioned in note 2, the Brazilian accounting practices were changed in 2008 and the effects of the first-time adoption of new accounting practices were only recorded by the Company during the fourth quarter of 2008 and disclosed in the financial statements as of December 31, The statements of income, changes in shareholders equity and cash flows for the quarter ended March 31, 2008, presented together with this quarterly information, have not been adjusted for comparability purposes, as permitted by CVM/SNC/SEP Circular Letter 02/ As described in note 31 c), on April 27, 2009, an Investment Agreement was made whereby the controlling interest in Klabin Segall S.A. will be held by Holding Agra Veremonte. Said transaction was contingent on the Company s restructuring, through: (a) renegotiation of financial liabilities, in order to reduce indebtedness and extend the average maturity of the remaining financial liabilities; (b) increase in the Company s capital, and (c) change of management model. 7. The accompanying interim financial statements have been translated into English for the convenience of readers outside Brazil. São Paulo, May 13, 2009 DELOITTE TOUCHE TOHMATSU Auditores Independentes Walter Dalsasso Engagement Partner The sheets related to the interim financial statements reviewed by us are marked for identification purpose only. 2

22 (Convenience Translation into English from the Original Previously Issued in Portuguese) KLABIN SEGALL S.A. AND SUBSIDIARIES BALANCE SHEETS AS OF MARCH 31, 2009 AND DECEMBER 31, 2008 (In thousands of Brazilian reais - R$) Company Consolidated Company ASSETS 03/31/09 12/31/08 03/31/09 12/31/08 LIABILITIES AND SHAREHOLDERS EQUITY 03/31/09 12/31/08 03/31/09 12/31/08 CURRENT ASSETS CURRENT LIABILITIES Cash and banks ,356 35,470 Trade accounts payable 2,467 2,703 40,544 38,137 Short-term investments 29,728 6,770 94,523 69,384 Loans and financing 25,885 24,012 97,081 67,256 Cash in transit ,600 4,451 Payables related to debentures 38,788 23,762 32,073 23,762 Trade accounts receivable 5,085 4, , ,189 Payroll charges ,876 2,053 Real estate for sale 25,783 20, , ,887 Taxes payable ,073 7,712 Recoverable taxes 5,643 5,628 9,286 8,783 Advances from customers ,484 34,347 Prepaid expenses ,242 10,498 Other payables 1, ,394 9,838 Other receivables 8,417 8,965 24,977 34,039 Payables for acquisition of subsidiaries 2,995 2,995 3,443 8,027 Total current assets 75,529 47, , ,701 Proposed dividends Accounts payable for land acquisition ,136 36,908 NONCURRENT ASSETS Deferred taxes ,924 13,372 Long-term assets: Total current liabilities 73,511 56, , ,412 Cash investments Trade accounts receivable 4,518 5, , ,762 NONCURRENT LIABILITIES Real estate for sale , ,601 Loans and financing 3,940 3, ,019 99,989 Receivables from investors 16,962 16,962 9,506 3,180 Payables related to debentures 432, , , ,062 Intercompany receivables ,650 5,690 Allowance for investment losses 10,890 9,452 - Prepaid expenses Accounts payable for land acquisition - - 3,386 4,451 Recoverable taxes - - 1,463 2,038 Payables to investors ,729 3,550 Other receivables 20,657 37,102 53,130 44,283 Advances from customers 28-59,101 78,450 Investments 722, , Other payables ,330 Goodwill on acquisition of investments - 79, Payables for acquisition of subsidiaries 2,824 2,824 2,834 2,824 Property and equipment 8,194 8,185 24,723 25,121 Reserve for contingencies Intangible assets 81,026 1,422 86,758 86,890 Intercompany payables 26,259 6,920 56,049 33,453 Deferred charges Deferred taxes ,032 14,748 Total noncurrent assets 853, , , ,720 Total noncurrent liabilities 477, , , ,580 Consolidated MINORITY INTEREST ,889 59,345 SHAREHOLDERS EQUITY Capital 353, , , ,846 Accumulated losses 23,935 (5,762) 23,935 (5,762) Total shareholders' equity 377, , , ,084 TOTAL ASSETS 929, ,255 1,421,300 1,326,421 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 929, ,255 1,421,300 1,326,421 The accompanying notes are an integral part of these financial statements. 3

23 (Convenience Translation into English from the Original Previously Issued in Portuguese) KLABIN SEGALL S.A. AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE PERIODS ENDED MARCH 31, 2009 AND 2008 (In thousands of Brazilian reais - R$, except for earnings per share) GROSS REVENUE Company Consolidated 03/31/09 03/31/08 03/31/09 03/31/08 Revenue from real estate sales , ,062 Revenue from services 326 2,131 10,282 6,986 Total gross revenue 326 2, , ,048 DEDUCTIONS Taxes (155) (22) (7,010) (4,622) Total deductions (155) (22) (7,010) (4,622) NET REVENUE 171 2, , ,426 COST OF SALES AND SERVICES (7) (24) (153,730) (73,620) GROSS PROFIT 164 2,361 67,186 43,806 OPERATING EXPENSES (INCOME) Selling expenses 2 (148) (1,687) (9,765) Administrative expenses (7,589) (6,502) (13,900) (12,743) Tax expenses - - (5) (19) Depreciation and amortization (628) (125) (1,158) (4,326) Equity in subsidiaries 52,933 16, Amortization of goodwill on subsidiaries - (4,179) - (4,179) Other operating income (expenses) 1, , ,895 5,506 (15,554) (31,029) INCOME FROM OPERATIONS BEFORE FINANCIAL INCOME (EXPENSES) 46,059 7,867 51,632 12,777 FINANCIAL INCOME (EXPENSES) Financial income 121 4,942 7,851 6,248 Income from customer financing , Financial expenses (17,344) (4,479) (18,131) (6,743) (16,480) 622 (8,059) 164 INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION 29,579 8,489 43,573 12,941 Current income tax and social contribution (6,060) (1,536) Deferred income tax and social contribution - (3) (2,244) (852) INCOME BEFORE MINORITY INTEREST 29,697 8,486 35,269 10,553 Minority interest - - (5,572) (2,067) NET INCOME 29,697 8,486 29,697 8,486 EARNINGS PER SHARE - R$ The accompanying notes are an integral part of these financial statements. 4

24 (Convenience Translation into English from the Original Previously Issued in Portuguese) KLABIN SEGALL S.A. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (COMPANY) FOR THE PERIOD ENDED MARCH 31, 2009 AND YEAR ENDED DECEMBER 31, 2008 (In thousands of Brazilian reais - R$) Capital Retained reserve - Unrealized earnings Treasury subscription Legal Bylaws earnings (accumulated Capital shares premium reserve reserve reserve losses) Total BALANCES AS OF DECEMBER 31, , (5,762) 348,084 Net income ,697 29,697 BALANCES AS OF MARCH 31, , , ,781 Treasury shares - 54,797 (50,000) - (4,797) Absorption of accumulated losses with reserves (3,377) (33,921) (2,308) 39, ,697 29,697 BALANCES AS OF DECEMBER 31, , (3,377) - (2,308) 73, ,478 The accompanying notes are an integral part of these financial statements. 5

25 (Convenience Translation into English from the Original Previously Issued in Portuguese) KLABIN SEGALL S.A. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED MARCH 31, 2009 AND 2008 (In thousands of Brazilian reais - R$) Company Consolidated 03/31/09 03/31/08 03/31/09 03/31/08 CASH FLOW FROM OPERATING ACTIVITIES Net income 29,697 8,486 29,697 8,486 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Amortization of goodwill - 4,179-4,179 Depreciation and amortization ,158 4,326 Deferred income tax and social contribution (118) 3 Amortization of deferred charges - - 8, Financial expenses, interest payable and inflation adjustment 4,393 1,648 4,393 6,743 Equity in subsidiaries (52,933) (16,459) - - Minority interest - - 5,572 2,067 (Increase) decrease in operating assets: Trade accounts receivable (84) (1,718) (120,833) (55,900) Real estate for sale (5,453) - 51,186 25,928 Prepaid expenses - (7,859) 411 (7,590) Due to related parties - (7,808) (15,286) 739 Recoverable taxes (15) (195) 72 (596) Other assets 16,993 (2,511) 215 (20,887) (Decrease) increase in operating liabilities: Advances from customers (28,212) 2,799 Trade accounts payable (236) (5,110) 2,407 (4,812) Deferred taxes (1,468) - Taxes payable and payroll taxes (191) - (1,816) - Accounts payable for land acquisition - - (837) (20,768) Other payables ,132 (1,117) Net cash (used in) provided by operating activities (6,201) (26,237) (49,905) (55,551) CASH FLOW FROM INVESTING ACTIVITIES Capital contributions to investees (2,065) (25,079) - 95 Goodwill on investments (11,087) Dividends received Purchase of property and equipment and intangible assets (1,105) (838) (628) (866) Net cash used in investing activities (3,170) (25,917) (628) (11,858) CASH FLOW FROM FINANCING ACTIVITIES Capital increase from shareholders - (10,516) (4,574) (15,884) Treasury shares - - Payables related to debentures 15,026 5,356 15,072 11,095 Increase (decrease) in minority interest - - (3,028) 8,746 Due to related parties 19, ,775 5,872 Proposed dividends Loans and financing (2,505) (688) 29,462 2,615 Net cash provided by financing activities 31,849 (5,551) 61,707 12,444 DECREASE IN CASH AND CASH EQUIVALENTS 22,478 (57,705) 11,174 (54,965) At beginning of year 8, , , ,321 At end of year 30,601 56, ,479 95,356 DECREASE IN CASH AND CASH EQUIVALENTS 22,478 (57,705) 11,174 (54,965) The accompanying notes are an integral part of these financial statements. 6