Duratex S.A. Listed company National Register of Corporate Taxpayers - (CNPJ) No / NIRE

Transcription

1 Duratex S.A. Listed company National Register of Corporate Taxpayers - (CNPJ) No / NIRE Interim Financial Information on the Third Quarter of 2018

2 DURATEX S.A. CNPJ / A Publicly Listed Company NIRE SUMMARIZED MINUTES OF THE MEETING OF THE BOARD OF OFFICERS HELD ON NOVEMBER 5, 2018 DATE, TIME AND PLACE: on November 5, 2018 at 7:30 a.m, at Avenida Paulista, 1938, Terraço floor, in the city and state of São Paulo. PRESIDING: Antonio Joaquim de Oliveira (Chairman) and Carlos Henrique Pinto Haddad (Secretary). QUORUM: the totality of the elected members. RESOLUTIONS ADOPTED: following examination of the Company s individual and consolidated interim financial information for the quarter ended September 30, 2018, the Board of Officers decided, unanimously and pursuant to the provisions in Sub-items V and VI, Article 25 of CVM Instruction 480/09, as amended, to declare that: a) it has reviewed, discussed and agreed with the opinions expressed in the review report issued by Ernst & Young Auditores Independentes S/S; and, b) it has reviewed, discussed and agreed with the Company's individual and consolidated interim financial information for the quarter ended September 30, CONCLUSION: with the work of the meeting concluded, these minutes were drafted, read, approved and signed by all. São Paulo (SP), November 5, (aa) Antonio Joaquim de Oliveira Chief Executive Officer; Marcelo José Teixeira Izzo Vice President of the Deca Business Unit; Henrique Guaragna Marcondes Vice President of the Wood Business Unit; Bruno Basile Antonaccio, Carlos Henrique Pinto Haddad; José Ricardo Paraíso Ferraz, Marcelo Koji Tahara, Marco Antonio Milleo and Maria Julieta Pinto Rodrigues Nogueira Officers. CARLOS HENRIQUE PINTO HADDAD Investor Relations Officer

3 DURATEX S.A. CNPJ / A Publicly Traded Company NIRE OPINION OF THE FISCAL COUNCIL The members of Fiscal Council of DURATEX S.A. have proceeded to examine the Company s individual and consolidated interim financial information for the quarter ended September 30, 2018, which were reviewed by Ernst & Young Auditores Independentes S/S ( E&Y ), as an independent auditor. The Fiscal Councilors have verified the exactness of the elements examined and in view of the unqualified review report issued by E&Y, understand that these documents adequately reflect the equity situation, the financial position and the activities of the Company in the period. São Paulo (SP), November 5, (signed) Flávio César Maia Luz President; Carlos Eduardo de Mori Luporini and Guilherme Tadeu Pereira Júnior Councilors. CARLOS HENRIQUE PINTO HADDAD Investor Relations Officer

4 (A free translation from Portuguese into English of Interim Financial Information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS), issued by International Accounting Standards Board IASB) and consistently with the standards issued by the Brazilian Securities Commissions (CVM). Report on review of quarterly information To the Shareholders, Board of Directors and Officers of Duratex S.A. São Paulo - SP Introduction We reviewed the accompanying individual and consolidated interim financial information of Duratex S.A. and its subsidiaries ( the Company ), included in the Quarterly Information Form (ITR) for the quarter ended September 30, 2018, which comprise the balance sheet as of September 30, 2018, the related statement of profit or loss and comprehensive income for the three and nine-month period then ended, and the statement of changes in equity and cash flows for the nine month period then ended, including other explanatory information. Management is responsible for the preparation of individual and consolidated interim financial information in accordance with Accounting Pronouncement CPC 21 (R1) - Demonstração Intermediária ( CPC 21 (R1) ) and International Accounting Standard IAS 34 - Interim Financial Reporting ( IAS 34 ), issued by the International Accounting Standards Board (IASB), as well as for the presentation of this information in a manner consistent with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of the Quarterly Information Form (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR 2410 Revisão de Informações Intermediárias Executada pelo Auditor da Entidade) and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the individual and consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated interim financial information included in the quarterly information referred to above is not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34, applicable to the preparation of Quarterly Information Form (ITR), consistently with the rules issued by the CVM. Other matters Statements of value added We have also reviewed the individual and consolidated statements of value added for the nine month period ended September 30, 2018, prepared under the responsibility of the Company s

5 management, the presentation of which in the interim financial information is required by rules issued by the Brazilian Securities Commission (CVM) applicable to the preparation of Quarterly Financial Information (ITR), and considered as supplementary information under IFRS - International Financial Reporting Standards, which does not require the presentation of the statement of value added. These statements have been subjected to the same review procedures previously described and, based on our review, nothing has come to our attention that causes us to believe that they are not prepared, in all material respects, in accordance with the overall individual and consolidated interim financial information. São Paulo, November 05 th, ERNST & YOUNG Auditores Independentes S.S. CRC-2SP034519/O-6 Drayton Teixeira de Melo Accountant CRC-1SP236947/O-3

6 Interim Financial Information Index on the third quarter of 2018 Management Report Balance Sheet Statement of Income Statement of Comprehensive Income Statement of Cash Flows Statement of Value Added Statement of Changes in Stockholders Equity Statement of Changes in Stockholders Equity Note 1 Operations Note 2 Basis of preparation and significant accounting practices Accounting policies Consolidation of the interim financial information New accounting standards, amendments and interpretations Presentation of segmented information Note 3 Critical Accounting Judgments and Estimates Note 4 Financial Risk Management Financial Risk Factors Capital Management Fair Value Estimates Note 5 Cash and Cash Equivalents Note 6 Securities Note 7 Trade Accounts Receivable Note 8 Inventories Note 9 Other Receivables Note 10 Recoverable Taxes and Contributions Note 11 Non-current assets available for sale Note 12 Deferred Income Tax and Social Contribution Note 13 Related Parties Note 14 Investments in Subsidiaries Note 15 Property, Plant and Equipment Note 16 Biological Assets (Forest Reserves) Note 17 Intangible Assets Note 18 Loans and Financing Note 19 Accounts Payable Note 20 Taxes and contributions Note 21 Contingencies Note 22 Rural Leases Note 23 Stockholders Equity Note 24 Insurance Coverage Note 25 Net Sales Revenue Note 26 Expenses, by Nature Note 27 Financial Income and Expenses Note 28 Other Operating Income (Expenses), Net Note 29 Income Tax and Social Contribution Note 30 Stock Option Plan Note 31 Private Pension Plan Note 32 Medical Assistance Plan Post-Employment. 49 Note 33 Earnings Per Share Note 34 Business Segments Note 35 Subsequent events

7 MARKET AND BUSINESS SCENARIO MANAGEMENT REPORT 3Q2018 The Brazilian economy continues to recover, although at a more gradual pace than envisaged early this year. In the third quarter of 2018, considering the demand side, there was a reduction in investment spending and a slowdown in household consumption, in line with the downtrend in consumer and business confidence indexes. According to the Brazilian Association of the Building Materials Industry (ABRAMAT, its acronym in Portuguese), the deflated revenue of the industry grew 1.2% year-to-date. The estimate of the association is a slight growth in the last quarter of the year versus the previous year; therefore, they maintain their forecast of 1.5% growth in In addition, the employment level in the industry dropped 0.7% year-to-date. In the wood panels industry, the Brazilian Tree Institute (IBÁ, its acronym in Portuguese) registered a 5% increase in demand for wood panels in the local market during the first nine months of the year in comparison with the same period from previous year. On one hand, domestic sales of MDF lines grew 4%; on the other hand, MDP lines grew 8%. In the export markets, the institute has registered a growth of 2% compared to The Brazilian Association of Manufacturers of Ceramic Tiles, Sanitary Ware and Related Products (ANFACER, its acronym in Portuguese) has recorded the sale of million of square meter of ceramic tiles during January to September 2018, which represents an increase of 0.8% compared to the previous year. In the local market, sales have grown 0.3% and in the export market the growth was 4.3% during this time. Even though estimates continue to suggest growth in economic activity, they indicate a gradual pace. STRATEGIC MANAGEMENT AND INVESTMENTS In the third quarter this year, consolidated investments totaled BRL million. Investments were towards mainly to sustaining manufacturing and forestry operations, of which BRL 59.0 million were directed to property, plant and equipment and intangible assets, and BRL 49.7 million towards the biological assets formation. Investments were BRL million year-to-date. This amount is lower than the planned for the time, reinforcing our commitment to cash generation and diligent management of capital allocation. The Duratex Management System, known as SGD, remained on the spotlight during the quarter and continued to improve. This management system, based on discipline and its own methodology, is incorporating new KPIs in its scope, such as ESG aspects and health and safe indicators. We believe SGD is the main tool to leverage our operations to a superior level of performance. We continue dedicating efforts in our Journey of Cultural Transformation, and have experienced improvements in consolidating a new corporate culture. During the quarter, there was the progression of rituals to strengthen the culture and develop the leadership of the company. As a consequence of this cultural transformation, we have sustained the certification GPTW (Great Place to Work), that shows workplaces with high-trust cultures. As a subsequent event, according to the Market Notice of November 1st, 2018, we are shutting down the electronic showers manufacturing operations in Tubarão/SC. The production lines will be relocated to Hydra unit in Aracaju/SE. This initiative is part of the Company s strategy of manufacturing consolidation, in order to improve the industrial and logistics productivity of its footprint. The logistics operation through a distribution center in the same city will continue in order to sustain the service level in the distribution to the South Region of the country. As a consequence of this restructuring and optimization of the footprint, we expect to improve the productivity of the business. All the implemented initiatives and the on-going projects will be key to consolidate a new organization, with a better focus on value generation and higher return to shareholders. 2

8 CONSOLIDATED FINANCIAL HIGHLIGHTES In BRL '000 3Q18 3Q17 % 2Q18 % 9M18 9M17 % Highlights Volume shipped Deca ( 000 items) ,3% ,5% ,9% Volume shipped Ceramic Tiles (m2) ,4% ,0% Volume shipped Wood (m3) ,0% ,2% ,8% Consolidated Net Revenue ,4% ,6% ,6% Gross profit ,0% ,9% ,7% Gross margin 28,3% 29,1% 26,5% 27,4% 26,8% EBITDA according to CVM No. 527/12 (1) ,6% ,0% ,5% EBITDA Mg CVM No. 527/12 59,7% 29,0% 43,0% 44,2% 24,5% Adjustments for non-cash events (47.390) (43.709) 8,4% (28.248) 67,8% ( ) ( ) -6,2% Non-recurring events ( ) (46.821) 1279,4% ( ) 155,0% ( ) (49.493) 1716,7% Adjusted and Recurring EBITDA (2) ,3% ,8% ,2% Adjustred and Recurring EBITDA margin (3) 16,4% 20,1% 19,8% 18,0% 18,4% Net earnings ,6% ,9% ,5% Recurring net earnings ,8% ,9% ,0% Recurring net margin 4,8% 5,1% 2,5% 3,5% 2,3% INDICATORS Current ratio(4) 2,51 2,08 21,0% 2,86-12,1% 2,51 2,08 21,0% Net debt(5) ,8% ,9% ,8% Net debt/ebitda LTM(6) 2,32 2,77-16,2% 2,59-10,4% 2,32 2,77-16,2% Average Shareholder's equity ,0% ,3% ,9% ROE (7) 29,0% 7,2% 13,6% 15,4% 2,9% Recurring ROE 4,7% 4,5% 2,3% 3,2% 2,0% SHARES Earnings per share (BRL) (8) 0,5459 0, ,0% 0, ,0% 0,8321 0, ,9% Closing share price (BRL) 9,03 9,47-4,6% 8,70 3,8% 9,03 9,47-4,6% Net equity per share (BRL) 7,82 6,79 15,2% 7,25 7,9% 7,82 6,79 15,2% Treasury Shares ,7% ,0% ,7% Market Cap (BRL1.000) ,6% ,8% ,6% (1) EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization): Measure of operational performance in accordance with CVM Instruction 527/12. (2) EBITDA adjusted for non-cash events arising from variation in the fair value of biological assets and combination of businesses, in addition to extraordinary events. (3) For better understanding, the Adjusted and Recurring EBITDA margin calculation does not consider: 3Q18: net revenue related to the sale of biological assets in the second tranche of the transaction with Suzano Papel e Celulose (-) BRL million; 2Q18: net revenue related to the sale of biological assets in the first tranche of the transaction with Suzano Papel e Celulose BRL million. (4) Current liquidity: Current Assets Divided by Current Liabilities. Indicates the amount available in BRL to cover each BRL of short-term obligations. (5) Net Indebtedness: Total Financial Debt ( ) Cash balance. (6) Financial leverage calculated on the rolling EBITDA over the last 12 months, adjusted for events of a purely accounting and non-cash nature. (7) ROE (Return on Equity): measure of performance obtained by taking the annualized Net Earnings over the period, annualized, and dividing by Average Net Equity. (8) Net earnings per share is calculated by dividing the earnings attributable to the company s shareholders by the average weighted number of ordinary shares issued during the period, excluding the ordinary shares held by the Treasury. ADDED VALUE Value Added in the quarter totaled BRL million. Of this amount, BRL million, equivalent to 34,3% of total Added Value, was allocated to the federal, state and municipal governments in the form of taxes and contributions. 3

9 OPERATIONS Wood Division HIGHTLIGHTS 3Q18 3Q17 % 2Q18 % 9M18 9M17 % SHIPMENTS (IN M³) STANDARD ,4% ,3% ,6% COATED ,8% ,3% ,8% TOTAL ,0% ,2% ,8% FINANCIAL HIGHLIGHTS (BRL '000) NET REVENUE ,3% ,5% ,0% DOMESTIC MARKET ,1% ,9% ,2% FOREIGN MARKET ,8% ,7% ,8% Net revenue per unit (BRL/m3 shipped) (1) 1061, ,04 0,2% 1125,19-5,7% 1076, ,69 1,9% Cash cost per unit (BRL/m3 shipped) (701,28) (644,27) 8,8% (679,82) 3,2% (682,75) (687,21) -0,6% Gross profit ,1% ,5% ,0% Gross margin 27,5% 28,5% - 25,4% - 26,7% 24,2% - Selling expenses ( ) (96.584) 26,8% (93.811) 30,6% ( ) ( ) 12,5% General and administrative expenses (27.712) (17.711) 56,5% (22.014) 25,9% (67.752) (55.277) 22,6% Operating profit before financial results ,4% ,8% ,4% Depreciation, amortization and depletion ,3% ,9% ,5% Depletion tranche of biological assets ,7% ,1% ,6% EBITDA according to CVM No. 527/12 (2) ,8% ,5% ,5% EBITDA margin according to CVM No. 527/12 79,1% 37,0% - 59,6% - 59,5% 28,3% - Variation in fair value of biological assets (49.083) (40.027) 22,6% (29.271) 67,7% ( ) ( ) -0,3% Employee benefits 553 (1.632) -133,9% ,0% (1.234) -215,9% Non Recurring events (3) ( ) (46.821) - ( ) - ( ) (49.493) 1716,7% Adjusted and Recurring EBITDA ,7% ,6% ,5% Adjusted and Recurring EBITDA margin (4) 16,7% 23,4% - 23,7% - 19,9% 18,9% - (1) For better understanding, the net revenue per unit calculation does not consider: 3Q18: net revenue related to the sale of biological assets in the second tranche of the transaction with Suzano Papel e Celulose (-) BRL million; 2Q18: net revenue related to the sale of biological assets in the first tranche of the transaction with Suzano Papel e Celulose BRL million. (2) EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization): Measure of operational performance in accordance with CVM Instruction 527/12. (3) Non-recurring events: 3Q18: result from the sale of land of subsidiary Duratex Florestal in the second tranche of transaction with Suzano Papel e Celulose (-) BRL million; result from the sale of timber of subsidiary Duratex Florestal in the second tranche of transaction with Suzano Papel e Celulose (-) BRL million; Non recurring expenses in transaction with Eucatex (+) BRL million; provision for non-recovered assets (+) BRL million. 2Q18: result from the sale of land of subsidiary Duratex Florestal in the first tranche of transaction with Suzano Papel e Celulose (-) BRL million; result from the sale of timber of subsidiary Duratex Florestal in the first tranche of transaction with Suzano Papel e Celulose (-) BRL million. 2017: result from the sale of land of subsidiary Duratex Florestal (-) BRL million. (4) For better understanding, the Adjusted and Recurring EBITDA margin calculation does not consider: 3Q18: net revenue related to the sale of biological assets in the second tranche of the transaction with Suzano Papel e Celulose (-) BRL million; 2Q18: net revenue related to the sale of biological assets in the first tranche of the transaction with Suzano Papel e Celulose BRL million. The result recorded in the wood division in the third quarter of the year reinforces the positive recovery trend of the wood panels industry and the payback of important strategic initiatives developed on the previous quarters. The volumes grew 25.0% in relation to the 3Q17, totaling a shipment of thousand cubicle meters. This increase was strongly influenced by the growing demand for wood panels in the local market, an increase in market share in a few lines of products and a good performance in foreign markets. Nonetheless, there was a slight deterioration in the mix of products, as a consequence of a greater concentration of panels sold to the manufacturers of low end furniture. Net Revenue was BRL 1,050.2 million, an increase of 61.3% over the same period last year. This figure includes BRL million regarding the sale of timber in the second tranche of the transaction with Suzano, according to the Material Fact released on February 5th, Disregarding this non-recurring sale, the net revenue would record an increase of 25.2% compared to the 3Q17. 4

10 We have noticed the continuing trend of increase in the cost of the Division, such as the hike in commodities prices and BRL depreciation. In addition, there was a lower sale of timber to third parties during the quarter due to the reduction in forest surplus. Thus, the combination of a less profitable mix of products, higher costs and lower sale of timber have driven the gross margin in the Division to 27.5%. Disregarding the effects of the transaction with Suzano, the gross margin would be 26.6% in the quarter. Selling Expenses have increased to BRL million due to higher volumes sold and a slight increase in freight costs. Furthermore, General and Administrative Expenses also increased in the quarter, mainly due to the investments in innovation and technology and the advisory services to support strategic projects. As a result, Adjusted and Recurring EBITDA was BRL million, which represents an EBITDA margin of 16.7%. The recurring EBITDA disregards the results of the sale of land and forest to Suzano. In the nine months of the year, EBITDA totaled BRL million, which represents an increase of 23.5% compared to the last year. We expect the continuity of the recovery path of the division as the level of demand continues to grow and we are able to capture the benefits of all improvement initiatives implemented in the Wood Business. Deca Division HIGHLIGHTS 3Q18 3Q17 % 2Q18 % 9M18 9M17 % SHIPMENTS (IN 000 ITEMS) BASIC GOODS ,2% ,0% ,0% FINISHING GOODS ,8% ,2% ,1% TOTAL ,3% ,5% ,9% FINANCIAL HIGHLIGHTS (BRL1,000) NET REVENUE ,5% ,7% ,7% DOMESTIC MARKET ,3% ,2% ,9% EXPORTS ,2% ,4% ,7% Net revenue per unit (BRL per item shipped) 58,76 54,40 8,0% 54,88 7,1% 55,70 53,69 3,7% Cash cost per unit (BRL per item shipped) (38,39) (34,29) 11,9% (36,36) 5,6% (36,79) (33,20) 10,8% Gross profit ,1% ,1% ,4% Gross margin 28,5% 30,3% - 27,2% - 27,4% 31,3% - Selling expenses (62.019) (69.277) -10,5% (61.490) 0,9% ( ) ( ) -8,6% General and administrative expenses (19.590) (18.546) 5,6% (18.722) 4,6% (56.160) (50.914) 10,3% Operating profit before financial results ,7% ,2% ,1% Depreciation and amortization ,7% ,5% ,5% EBITDA according to CVM No. 527/12(1) ,6% ,8% ,6% EBITDA margin according to CVM No. 527/12 14,3% 14,8% - 12,4% - 13,5% 17,9% - Employee benefits (2.050) -155,6% ,7% (3.712) -129,7% Non-recurring events Adjusted and Recurring EBITDA ,9% ,6% ,4% Adjusted and Recurring EBITDA margin 14,6% 14,2% - 12,6% - 13,6% 17,5% - (1) EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization): Measure of operational performance in accordance with CVM Instruction 527/12. During the quarter, Deca has started a recovery trend of its results, despite the still gradual pace of recovery in the building materials industry. The increase in the volumes sold suggests the beginning in capturing the benefits of several initiatives on going in the Division. Deca s volumes sold increased to the level of 6.9 million itens shipped. The highlight of this increase was the growth in sales of basic goods lines. In comparison with the same quarter last year, there was a hike of 2.3%. Due to the price hikes, that were implement twice a year for the first time, and an improvement in the mix of products in the finishing goods lines, Deca s net revenues grew more than the growth in volumes. In the quarter, Deca recorded net revenues of BRL million, a 10.5% increase over the third quarter last year and 8.7% over the previous one. In the year-to-date comparison, net revenues grew 4.7%, reinforcing Deca s ability to react in an adverse scenario, due to its attributes of strong branding, high quality goods, strong networking with architects and construction professionals, penetration in distribution channels and an extensive after sales program. 5

11 However, the division s costs remain pressured due to the hike in raw materials noticed in the previous quarters. The main commodities acquired by the division, especially the non-ferrous categories, pressured the costs of Deca s metal fittings lines of goods. In the ceramic sanitary ware lines of products, we have experienced a productivity level below the optimal one, despite a slight improvement in the quarter compared to the previous ones. Higher costs have been offset by a better mix of products in the finishing goods lines and the successful price hike in the metal lines implemented in the beginning of the quarter. This combination have driven Deca s gross margin by 136 bps up to the level of 28.5%. Even though the sales have grown, we have recorded a reduction in the selling expenses compared to the 3Q18 and stability versus the previous quarter. As a highlight, selling fixed expenses were flat in nominal levels and there was a decrease in investments in promotion and advertising. The general and administrative expenses recorded a growth trend mainly due to greater investments in technology and innovation. Therefore, Deca s Adjusted and Recurring EBITDA totaled BRL 59.3 million in the quarter, with an EBITDA margin of 14.6%. This figure represents an increase of 12.9% over the 3T17 and 25.6% over the 2T18. The initiatives implemented, with the support of Duratex Management System, suggested the beginning of a recovery in the Division s performance, which was below its full potential during the first half of Ceramic Tiles Division HIGHLIGHTS 3Q18 2Q18 % 9M18 SHIPMENTS (IN M²) FINISHING GOODS ,4% TOTAL ,4% FINANCIAL HIGHLIGHTS (BRL1,000) NET REVENUE ,4% DOMESTIC MARKET ,8% EXPORTS ,6% Net revenue per unit (BRL per m² shipped) 36,91 36,90 0,0% 36,36 Cash cost per unit (BRL per m² shipped) (21,26) (20,88) 1,8% (20,73) Gross profit ,7% Gross margin 39,6% 40,2% - 39,9% Selling expenses (9.284) (8.478) 9,5% (25.139) General and administrative expenses (1.374) (1.817) -24,4% (4.745) Operating profit before financial results ,1% Depreciation and amortization ,1% EBITDA according to CVM No. 527/12(1) ,8% EBITDA margin according to CVM No. 527/12 25,6% 20,9% - 23,3% Employee benefits Non-recurring events Adjusted and Recurring EBITDA ,8% Adjusted and Recurring EBITDA margin 25,6% 20,9% 23,3% (1) EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization): Measure of operational performance in accordance with CVM Instruction 527/12. The Ceramic Tiles Division s performance, which operates with the brand Ceusa, was one of the main highlights of the third quarter The increase in sales due to the recovery of volumes not shipped in previous quarters and the consistent management of operations have leveraged the results of the business. 6

12 It was shipped 1.5 million of square meters of ceramic tiles during the quarter, an increase of 21.4% over the previous quarter. The growth in net revenues was in line with the growth in volumes sold, totaling BRL 55.4 million, which represents a high level considering the limited production capacity of the operations. Although the Ceramic Tiles business has experienced a slight increase in costs, Ceusa was able to leverage its margins on an efficient SG&A expenses dilution. Selling expenses grew on a slower pace compared to the growth in sales and general and administrative expenses recorded a nominal reduction compared to the 2Q18. Lastly, EBITDA of the business division was BRL 14.2 million in the quarter, representing an EBITDA margin of 25.6%. Considering operational aspects, this was the best performance of Ceusa since its incorporation on Duratex s results, which has occurred in the fourth quarter of last year, reinforcing the perceived value in the acquisition. CAPITAL MARKETS AND CORPORATE GOVERNANCE At the end of the third quarter of 2018, the market cap was equivalent to BRL 6.225,0 million as a result of a final share price of BRL During this period, there were 256,078 trades with our shares in the spot market of B3. It represented a trading volume of BRL million or an average daily trading volume of BRL 14.0 million. Our shares are listed on the Novo Mercado, a segment of B3 that brings together companies with the highest corporate governance standards. We also have a differentiated dividend distribution policy, with a payout ratio equivalent to 30% of adjusted net income. Lastly, we adhered to the Abrasca Code of Self-Regulation and Good Practices of Publicly-held Companies. SOCIAL AND ENVIRONMENTAL RESPONSABILITY In the third quarter of this year, the headcount presented stability compared to the previous quarter, ending the period with 11,443 employees. Comparing to the 3T17, there was a slight increase of 2.6% in the workforce mainly due to the acquisition of Ceusa operations in the second half of (BRL'000) 3Q18 3Q17 % 2Q18 % 9M18 9M17 % Headcount (quantity) ,6% ,1% ,6% Remuneration ,5% ,5% ,0% Obligatory legal charges ,8% ,6% ,0% Differentiated benefits ,8% ,6% ,0% INDEPENDENT AUDITORS CVM INSTRUCTION Nº 381 Procedures adopted by the Company and its subsidiaries The Company's and its subsidiaries' policy of contracting services not related to external auditing with our independent auditors is based on internationally accepted principles that preserve the independence of these auditors and consist of: (a) the auditor should not audit their own work (b) the auditor should not perform managerial duties on his client and (c) the auditor should not promote the interests of his client. In the period from January to September 2018, the independent auditors Ernst & Young Auditores Independentes S.S. provided the following services not related to external auditing: Review of accounting and tax accounting records - ECF, date of hiring on May 16, 2018, for the total amount of BRL million. 7

13 The amount represents 5.2% of the total audit fees for the 2018 financial statements. Explanation from the Independent Auditors - Ernst & Young Auditores Independentes S.S. The professional services described above do not affect the independence or the objectivity in conducting the external audit examinations provided to the Company and its subsidiaries. The policy of providing the Company and its subsidiaries in services not related to external auditing is based on the principles that preserve the independence of the Independent Auditor and all the services are in compliance with this policy. ACKNOWLEDGEMENTS We are grateful for all the support received from shareholders, the dedication and commitment of our employees, the partnerships we have with our suppliers and the confidence placed on us by our clients and consumers. The Management 8

14 Duratex S.A. - Listed company National Register of Corporate Taxpayers - (CNPJ) No / BALANCE SHEET (In thousands of Reais) (A free translation of the original in Portuguese) ASSETS PARENT COMPANY CONSOLIDATED LIABILITIES AND STOCKHOLDERS' EQUITY PARENT COMPANY CONSOLIDATED 09/30/ /31/ /30/ /31/ /30/ /31/ /30/ /31/2017 CURRENT ASSETS Note 2,153,363 2,022,042 3,857,967 3,023,458 CURRENT LIABILITIES Note 1,209,365 1,219,308 1,536,603 1,551,576 Cash and cash equivalents 5 279, ,698 1,041,579 1,074,364 Loans and financing , , , ,824 Securities 6-57, Suppliers 299, , , ,372 Trade accounts receivable 7 887, ,188 1,283, ,917 Related parties suppliers 13 24,723 22, Related parties accounts receivable 7 89,664 53,307 19,917 35,146 Personnel 117,804 95, , ,037 Inventories 8 645, , , ,093 Accounts payable 19 94,298 92, , ,704 Other receivables 9 25,921 25, ,377 63,529 Related parties accounts payable 13 2,050 2,050 2,640 2,640 Related parties other receivables 65, Taxes and contributions 20 29,613 32,390 75, ,726 Recoverable taxes and contributions ,976 87, , ,878 Dividends and interest on capital , ,273 Other credits 12,148 9,336 18,515 13,023 Non current assets available for sale 11 44,863 5,508 53,898 5,508 NON-CURRENT ASSETS 6,227,447 5,753,996 6,115,672 6,442,116 NON-CURRENT LIABILITIES 1,782,099 1,841,365 3,046,310 3,197,679 Related parties 16, Loans and financing 18 1,452,611 1,541,038 2,263,265 2,410,000 Restricted deposits 49,551 48,183 54,863 51,343 Contingencies ,827 82, , ,432 Other receivables 9 60,818 53,544 99, ,493 Deferred income tax and social contribution , , , ,338 Pension plan credits 31 93,645 96, , ,740 Accounts payable 19 51,348 49, , ,989 Recoverable taxes and contributions 10 11,155 10,999 13,815 13,215 Related parties 13 4,611 6,149 5,940 7,920 Deferred income tax and social contribution , , , ,146 Investments in subsidiaries and associates 14 3,022,285 2,397,310 9,384 6,260 Other investments ,446 1,638 Property, plant and equipment 15 2,271,399 2,435,529 3,305,367 3,490,141 STOCKHOLDERS' EQUITY 23 5,389,346 4,715,365 5,390,726 4,716,319 Biological assets ,566,124 1,698,855 Capital 1,970,189 1,970,189 1,970,189 1,970,189 Intangible assets , , , ,285 Costs on issue of shares (7,823) (7,823) (7,823) (7,823) Capital reserves 347, , , ,300 Capital transactions with partners (18,731) (18,731) (18,731) (18,731) Revaluation reserves 45,678 57,344 45,678 57,344 Revenue reserves 2,557,979 1,980,082 2,557,979 1,980,082 Treasury shares (27,087) (27,851) (27,087) (27,851) Carrying value adjustments 521, , , ,855 Equity attributable to equity holders of the parent company 5,389,346 4,715,365 5,389,346 4,715,365 Noncontrolling interests - - 1, TOTAL ASSETS 8,380,810 7,776,038 9,973,639 9,465,574 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 8,380,810 7,776,038 9,973,639 9,465,574 9

15 Duratex S.A. - Listed company National Register of Corporate Taxpayers - (CNPJ) No / STATEMENT OF INCOME (A free translation of the original in Portuguese) PARENT COMPANY CONSOLIDATED Note 09/30/ /30/ /30/ /30/2017 NET SALES REVENUE 25 2,679,975 2,398,227 3,685,984 2,888,234 Variations in the fair value of biological assets , ,330 Cost of products sold (2,123,027) (1,936,825) (2,795,370) (2,235,357) GROSS PROFIT 556, ,402 1,011, ,207 Selling expenses (403,748) (378,246) (508,134) (465,616) General and administrative expenses (83,462) (78,344) (128,657) (106,191) Management fees (11,564) (10,981) (12,404) (11,564) Other operating income (expenses), net 28 (34,063) 42, ,941 95,684 Equity in the results of investees 645, , OPERATING PROFIT BEFORE FINANCIAL RESULT AND TAXES 669, , , ,520 Financial income 27 60,302 68, , ,431 Financial expenses 27 (159,688) (172,217) (224,437) (287,259) PROFIT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION 569,749 80, , ,692 Income tax and social contribution - current 29 (2,849) (7,963) (326,510) (50,304) Income tax and social contribution - deferred 29 6,688 28,056 48,273 16,009 NET INCOME FOR THE PERIOD 573, , , ,397 Net income attributable to: Owners of the company 573, , , ,311 Noncontrolling interests Net income per share (R$): Basic: Diluted:

16 Duratex S.A. - Listed company National Register of Corporate Taxpayers - (CNPJ) No / Periods ended September 30 (In thousands of Reais) STATEMENT OF COMPREHENSIVE INCOME (A free translation of the original in Portuguese) 09/30/ /30/ /30/ /30/2017 NET INCOME FOR THE PERIOD 573, , , ,397 Other components of comprehensive income PARENT COMPANY CONSOLIDATED Items that will not be reclassified for net income Equity of investees on comprehensive of subsidiaries (122) - (122) (291) Adjustments from CPC 47 and 48 transition (4,833) - (4,833) - Equity of investees reflex on transition adjustments CPC 47 and 48 (2,048) - (2,048) - Items that will be reclassified for net income Accumulated conversion adjustments 104,640 4, ,004 4,610 COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX 671, , , ,716 Attributable to: Owners of the company 671, , , ,921 Noncontrolling interests (205) 11

17 Duratex S.A. - Listed company National Register of Corporate Taxpayers - (CNPJ) No / STATEMENT OF CASH FLOWS PARENT COMPANY (A free translation of the original in Portuguese) CONSOLIDATED 09/30/ /30/ /30/ /30/2017 OPERATING ACTIVITIES: PROFIT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION 569,749 80, , ,692 ADJUSTMENTS: Depreciation, amortization and depletion 233, , , ,389 Variations in the fair value of biological assets - - (120,933) (121,330) Interest, foreign exchange and monetary variations, net 111, , , ,512 Equity in the results of investees (645,024) (147,919) - - Allowance for doubtful accounts 3,964 10,127 6,899 9,960 Provisions, disposal of assets 69,585 3,149 (590,168) 26,444 (Increase)/Decrease in Assets Trade accounts receivable (169,513) (91,949) (339,924) (124,897) Inventories (25,090) 4,133 (59,742) (32,782) Other assets (42,798) (70,112) (3,490) (79,729) Increase (Decrease) in Liabilities Suppliers 85,000 25,984 91,554 38,160 Personnel liabilities 22,266 35,831 28,882 45,652 Accounts payable (1,008) 2,457 5,836 (4,783) Taxes and contributions (26) (1,301) (80,494) (60,054) Other liabilities (16,572) (27,209) (20,473) (36,631) Cash provided by operations 195, , , ,603 Income tax and social contribution paid (5,600) (4,257) (317,814) (16,348) Interests paid (65,356) (125,778) (102,296) (189,705) CASH PROVIDED BY OPERATING ACTIVITIES 124,837 86, , ,550 INVESTMENT ACTIVITIES: Other financial assets 57,925 (49,171) - (49,171) Investments in fixed assets (92,946) (101,837) (149,582) (138,692) Investments in intangible assets (15,513) (4,758) (15,643) (4,800) Investments in biological assets - - (140,074) (139,798) Receipt by sale of property, plant and equipment ,996 - Dividends received from subsidiaries 199, , Advance for future capital increase in subsidiaries (144,762) (9,410) - - Capital increase in associate (4,000) - (4,000) - CASH USED IN INVESTMENT ACTIVITIES ,824 84,697 (332,461) FINANCING ACTIVITIES: Financing 385,000 15, ,850 20,343 Amortization of financing (574,093) (428,866) (628,647) (453,600) Interest on capital and dividends (60,773) (6,046) (60,773) (6,084) Treasury shares NET CASH FLOW FROM FINANCING ACTIVITIES (249,102) (419,588) (298,806) (439,261) Exchange variations on cash and cash equivalents - - 9, INCREASE (DECREASE) IN CASH FOR THE PERIOD (123,562) (248,417) (32,785) (498,152) OPENING BALANCE 402, ,923 1,074,364 1,416,360 FINAL BALANCE 279, ,506 1,041, ,208 12

18 Duratex S.A. - Listed company National Register of Corporate Taxpayers - (CNPJ) No / STATEMENT OF VALUE ADDED (Required by accounting practices adopted in Brazil and supplementary information under IFRS) (A free translation of the original in Portuguese) (In thousands of Reais) PARENT COMPANY CONSOLIDATED 09/30/ /30/ /30/ /30/2017 REVENUE 3,391,748 3,118,157 5,189,475 3,757,351 Gross sales revenue 3,392,027 3,052,084 4,548,557 3,636,936 Other revenue 3,685 76, , ,375 Allowance for doubtful accounts (3,964) (10,127) (6,899) (9,960) Inputs acquired from third parties (2,468,200) (2,195,140) (2,636,566) (2,202,678) Cost of sales (2,089,697) (1,853,785) (2,158,242) (1,783,319) Materials, energy, outsourced services and others (378,503) (341,355) (478,324) (419,359) Gross value added 923, ,017 2,552,909 1,554,673 Depreciation, amortization and depletion (233,927) (225,478) (657,940) (420,389) Net value added 689, ,539 1,894,969 1,134,284 Value added received through transfer 705, , , ,431 Financial income 60,302 68, , ,431 Equity in the results of investees 645, , Value added to be distributed 1,394, ,838 2,000,105 1,269,715 DISTRIBUTION OF VALUE ADDED Personnel compensation 420, , , ,685 Direct compensation 332, , , ,596 Benefits 62,548 60,728 84,877 79,298 Severance indemnity fund (FGTS) 23,774 23,350 29,822 27,846 Other , Government taxes 241, , , ,042 Federal 221, , , ,975 State 14,079 22,633 30,368 22,766 Municipal 6,084 5,745 7,406 12,301 Financing remuneration (interest) 159, , , ,591 Stockholders' remuneration 573, , , ,397 Retained earnings 573, , , ,311 Noncontrolling interests Total value added distributed 1,394, ,838 2,000,105 1,269,715 13

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) Note Capital Costs on issue of shares Capital reserves Capital transactions with partners Revaluation reserves Revenue reserves Carrying value adjustments Treasury shares Retained earnings Total Noncontrolling interests Total Stockholders' equity BALANCES AS AT DECEMBER 31, ,970,189 (7,823) 342,212 (18,731) 60,903 1,852, ,161 (27,931) - 4,569,507 1,145 4,570,652 COMPREHENSIVE INCOME FOR THE YEAR Net Income for the year , , ,015 Accumulated conversion adjustments , , ,205 Actuarial net gain (loss) (1,305) - - (1,305) - (1,305) TOTAL COMPREHENSIVE INCOME FOR THE YEAR , , , ,915 Noncontrolling interest acquisition (246) (246) Ceusa acquisition - non controlling interest (291) (291) Share options granted - - 3, ,088-3,088 Realization of revaluation reserve (3,559) , Sale of treasury shares (39) Interests on capital (60,840) (60,840) - (60,840) APPROPRIATION OF NET INCOME FOR THE YEAR Allocated to the legal reserve , (9,244) Appropriation of tax incentives article 195-A Law 6.404/ , (26,786) Appropriation to reserves , (91,525) BALANCES AS AT DECEMBER 31, ,970,189 (7,823) 345,300 (18,731) 57,344 1,980, ,855 (27,851) - 4,715, ,716,319 14

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) Note Capital Costs on issue of shares Capital reserves Capital transactions with partners Revaluation reserves Revenue reserves Carrying value adjustments Treasury shares Retained earnings Total Noncontrolling interests Total Stockholders' equity BALANCES AS AT DECEMBER 31, ,970,189 (7,823) 345,300 (18,731) 57,344 1,980, ,855 (27,851) - 4,715, ,716,319 COMPREHENSIVE INCOME FOR THE PERIOD Net Income for the period , , ,755 Accumulated conversion adjustments , , ,004 Equity of investees reflex (122) (122) - (122) Transition adjustments CPC 47 and (4,833) (4,833) - (4,833) Equity of investees reflex on CPC 47 and (2,048) (2,048) - (2,048) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD , , , ,756 Noncontrolling interest acquisition (105) (105) Share options granted - - 2, ,346-2,346 Sale of treasury shares (354) Realization of revaluation reserve (11,666) , APPROPRIATION OF NET INCOME FOR THE PERIOD Allocated to the legal reserve , (28,679) Appropriation to reserves , (549,218) BALANCES AS AT SEPTEMBER 30, ,970,189 (7,823) 347,646 (18,731) 45,678 2,557, ,495 (27,087) - 5,389,346 1,380 5,390,726 15

21 NOTES TO THE INTERIM FINANCIAL INFORMATION AS AT SEPTEMBER 30, 2018 Note 1 Operations a) General information (All amounts in thousands of Brazilian Reais, unless otherwise indicated) Duratex S.A. ( the Company ) is a publicly-traded corporation headquartered in the city of São Paulo, SP, Brazil. Its controlling stockholders 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 and distribution of civil construction and woodworking materials, and in property construction and rental. The main activities of Duratex and its subsidiaries (collectively Group ) comprise the manufacture of wood panels (Wood Division), and ceramics, sanitary metals and showers (Deca Division) and Ceramic Tiles Division. Duratex presently has seventeen industrial plants in Brazil and three industrial plants in Colombia, through of its subsidiary Duratex S.A. (current name of Tablemac S.A.), maintaining branches in the main Brazilian cities and commercial subsidiaries in the United States, Belgium and Peru. The Wood Division operates five industrial plants in the country and three in Colombia, responsible for the production of hardboard, medium density particle (MDP) panels, medium and high density fiberboard (MDF and HDF) panels, laminate flooring of Durafloor trademark and semi-finished components for furnitures. The Deca Division operates with ten industrial plants in the country, responsible for the production of sanitary ceramic, metal products and showers under the trademarks Deca, Hydra, Belize, Elizabeth and Hydra Corona. The Ceramic Tiles Division operates with two industrial plants in the country, responsible by production of ceramic tiles, with the brand Ceusa. b) Celebration s agreement with Austrian group LENZING On June 21, 2018, the Company celebrated with LENZING AG, Austrian group world leader in the cellulosic fiber production, an agreement to establish a joint venture for production and commercialization of dissolving wood pulp (type viscose). Duratex will participate with 49% and Lenzing with 51% from the New Company. The results of the New Company will be recognized in the Duratex s results by equity in the results of investees. Besides establishing the joint venture s governance, the Agreement also assures the sale of the totality of dissolving wood pulp production to Lenzing, in the standard market condition will be strategically located in the state of Minas Gerais, within the Triângulo Mineiro region, close to São Paulo. The annual capacity of this project might be 450,000 tons of dissolving wood pulp and the initial estimated investment will be approximately USD 1.0 billion. The investment by Duratex in the New Company s capital will be 43 thousand hectares of eucalyptus forests that it holds in the region, in addition to cash disbursements. The New Company will have its own capital structure, and it will fund part of the investment in order to optimize its cost of capital. The Agreement will not affect Duratex s capacity to supply its wood panel business, nor does it affect the costs of its operations of own timber, at the same time it will optimize its forest assets which are currently idle, thus improving the returns of its recurring operations and will diversify the Company s risk exposure as it broadens the Company s range of activities to include the dissolving wood pulp market, which has lower exposure to Brazilian domestic activity. The final decision relating to the implementation of the project will occur in the 2 nd semester 2019 and the beginning of the production is planned to There are no accounting impacts relating to this transaction until the moment. Interim Financial Information of Duratex S.A. and its subsidiaries as at September 30,