Interim Financial Information Cimento Tupi S.A. and Subsidiaries

Transcription

1 Interim Financial Information Cimento Tupi S.A. and Subsidiaries March 31, 2012 with Independent Auditor s Report on Review of Interim Financial Information

2 Interim financial information March 31, 2012 Contents Independent auditor s report on review of interim financial information Unaudited interim financial information Balance sheets... 3 Income statements... 5 Statements of comprehensive income... 6 Statements of changes in equity... 7 Cash flow statements... 8 Statements of value added... 9 Notes to interim financial information... 10

3 A free translation from Portuguese into English of the independent auditor s report on interim financial information prepared in accordance with accounting practices adopted in Brazil Independent auditor s report on interim financial information To the Board of Directors, Shareholders and Officers Cimento Tupi S.A. Rio de Janeiro - RJ Introduction We have reviewed the balance sheet of Cimento Tupi S.A. ( and consolidated) at March 31, 2012 and the related individual and consolidated statements of income, comprehensive income, changes in equity and cash flows for the quarter ended March 31, 2012, including the summary of the significant accounting practices and other explanatory information. Management is responsible for the preparation and presentation of this interim financial information in accordance with the accounting practices adopted in Brazil. Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review Our review was carried out in accordance with the Brazilian and international standards on review engagements. A review of interim financial information consists of inquiries mainly of the professionals in charge of financial and accounting matters and of the application of analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and therefore we are not in a position to assure that we are aware of all significant matters which might be found in an audit. As a consequence, we did not express an audit opinion thereon. Conclusion Based on our review, we are not aware of any fact which makes us believe that the individual and consolidated interim financial information does not present fairly, in all material respects, the financial position of Cimento Tupi S.A. as at March 31, 2012, the performance of its operations and cash flows for the quarter ended March 31, 2012, in accordance with the accounting practices adopted in Brazil. 1

4 Other matters Interim information on value added We have also reviewed the individual and consolidated interim information on value added (SVA) for the quarter ended March 31, 2012, the presentation of which in the interim financial information is required by the Brazilian legislation for publicly-held companies and as supplementary information for privately-held companies. This information was submitted to the same review procedures as those described above and, based on our review, we are not aware of any fact which makes us believe that such information has not been prepared, in all material respects, in accordance with the individual and consolidated interim accounting information taken as a whole. Rio de Janeiro, May 4, 2012 ERNST & YOUNG TERCO Auditores Independentes S.S. CRC - 2SP /O-6 - F - RJ Gláucio Dutra da Silva Accountant CRC - 1RJ /O-4 Claudio Camargo Accountant CRC - 1PR /O-1 - S - RJ 2

5 A free translation from Portuguese into English of interim financial information prepared in accordance with accounting practices adopted in Brazil Cimento Tupi S.A. and Subsidiaries Balance sheets (In thousands of reais) Mar/2012 Dec/2011 Mar/2012 Dec/2011 Assets Current assets Cash and cash equivalents (Note 4) 98,440 8,947 99,120 9,984 Marketable securities (Note 5) 7,369 25,988 14,561 42,001 Derivatives (Note 20.6) - 5,005-5,005 Trade accounts receivable (Note 6) 29,500 27,010 35,708 33,196 Inventories (Note 7) 35,319 37,836 37,433 39,371 Taxes recoverable (Note 8) 8,915 12,025 10,322 13,328 Notes receivable (Note 9) 53,384 52,722 53,384 52,722 Advances to suppliers 8,990 6,715 9,679 7,285 Receivables from third parties (Note 25) 55,282 63,770 55,367 63,770 Other Total current assets 297, , , ,541 Non-current assets Taxes recoverable (Note 8) 2,513 2,599 2,513 2,599 Inventories (Note 7) ,404 12,404 Related parties (Note 14) Deferred income and social contribution taxes (Note 17) 19,739 15,674 19,739 15,674 Judicial deposits 4,229 3,850 4,229 3,850 Investments Subsidiaries (Note 10) 66,692 66, Other investments 1,121 2,082 1,170 2,130 Property, plant and equipment (Note 11) 249, , , ,026 Intangible assets (Note 12) 94,803 94, , ,164 Total non-current assets 439, , , ,847 Total assets 736, , , ,388 3

6 Mar/2012 Dec/2011 Mar/2012 Dec/2011 Liabilities and equity Current liabilities Trade accounts payable 13,597 11,917 14,190 11,972 Payroll and social charges 4,945 4,740 5,264 5,038 Loans and financing (Note 13) 64,632 41,505 66,132 43,005 Related parties (Note 14) 11,555 2, Taxes payable 17,349 16,561 17,651 16,789 Interest on equity and dividends 1,047 9,916 1,047 9,916 Other payables 2,970 6,474 4,655 8,400 Total current liabilities 116,095 93, ,939 95,120 Non-current liabilities Loans and financing (Note 13) 277, , , ,869 Taxes and social contributions in installments (Note 15) 31,703 32,347 31,768 32,450 Provision for contingencies (Note 18) 3,159 3,159 3,159 3,159 Total non-current liabilities 311, , , ,478 Equity (Note 16) Capital 279, , , ,891 Capital reserves 11,685 11,685 11,685 11,685 Profit reserve 45,654 45,654 45,654 45,654 Equity valuation adjustment Accumulated losses (2,765) - (2,765) - Treasury stock (25,999) (25,999) (25,999) (25,999) Total equity attributable to controlling shareholders 308, , , ,597 Non-controlling interests Total equity 308, , , ,790 Total liabilities and equity 736, , , ,388 See accompanying notes. 4

7 Income statements Quarters ended March 31, 2012 and 2011 (In thousands of reais, except earnings per share, which are expressed in reais) Mar/2012 Mar/2011 Mar/2012 Mar/2011 Net operating revenue (Note 22) 75,492 82,144 75,687 82,031 Cost of sales (57,633) (64,944) (57,763) (64,658) Gross profit 17,859 17,200 17,924 17,373 Operating expenses Selling expenses (1,482) (1,940) (1,482) (1,940) General and administrative expenses (6,377) (4,394) (6,848) (4,754) Management fees (Note 21) (1,627) (896) (1,627) (896) Equity results (Note 10) (128) (153) - - Other operating income (expenses), net (Note 23) (7,324) (787) (7,265) (742) Operating income before financial income 921 9, ,041 Financial income (expenses) (Note 24) Financial expenses (8,479) (4,124) (8,484) (4,129) Financial income 727 1,196 1,062 1,196 (7,752) (2,928) (7,422) (2,933) Income before income and social contribution taxes (6,831) 6,102 (6,720) 6,108 Income and social contribution taxes (Note 17) 4,066 (1,662) 3,965 (1,668) Income attributed to shareholders (2,765) 4,440 (2,755) 4,440 Non-controlling interest - - (10) - Net income (loss) for the quarter (2,765) 4,440 (2,765) 4,440 Basic and diluted earnings (loss) per share (Note 16) Preferred shares Common shares See accompanying notes. 5

8 Statements of comprehensive income Quarters ended March 31, 2012 and 2011 (In thousands of reais) Mar/2012 Mar/2011 Mar/2012 Mar/2011 Net income (loss) for the quarter (2,765) 4,440 (2,765) 4,440 Comprehensive income Equity results (Note 10) - - (81) (51) Total comprehensive income, net of taxes (2,765) 4,440 (2,846) 4,389 Attributable to Controlling shareholders (2,765) 4,440 (2,836) 4,389 Non-controlling shareholders - - (10) - See accompanying notes. 6

9 Statements of changes in equity Quarters ended March 31, 2012 and 2011 (In thousands of reais) Capital Premium on share subscription Capital reserve Tax incentive reserve Profit reserve Equity valuation adjustment Retained earnings (accumulated losses) Treasury stock Controlling interest Non-controlling interest Total At December 31, ,891 65,325 2, (6,351) - 341, ,411 Downstream merger of CP Cimento e Participações S.A. - (53,640) (2,380) (56,020) - (56,020) Net income for the quarter ,440-4,440-4,440 Equity valuation adjustment (51) - - (51) - (51) At March 31, ,891 11, (51) (1,911) - 289, ,780 At December 31, ,891 11,685-45, (25,999) 311, ,790 Equity valuation adjustment (81) - - (81) - (81) Loss for the quarter (2,765) - (2,765) (10) (2,765) Non-controlling interest (4) (14) At March 31, ,891 11,685-45, (2,765) (25,999) 308, ,930 See accompanying notes. 7

10 Cash flow statements Quarters ended March 31, 2012 and 2011 (In thousands of reais) Mar/2012 Mar/2011 Mar/2012 Mar/2011 Operating activities Income (loss) before income and social contribution taxes (6,831) 6,102 (6,720) 6,108 Adjustments to reconcile pretax income to cash from operating activities Depreciation/amortization 1, , Income from disposal of property, plant and equipment Property, plant and equipment disposed of (5,230) - (5,230) - Loss on equity investments Tax contingencies - 2,499-2,499 Foreign exchange variation on intercompany loans 29 (31) - (49) Foreign exchange variation on foreign loans 2,665-2,665 - Penalties and interest on assets and liabilities 7,758 2,727 7,758 2,825 Equity valuation adjustments - (51) - (51) Allowance for doubtful accounts 29 (35) 29 (35) Adjusted net income (loss) (349) 12,378 (367) 12,329 (Increase)/decrease in assets Trade bills receivable (2,518) (756) (2,541) (845) Taxes recoverable (12,883) (163) (12,987) (154) Inventories 2,517 3,093 1,938 3,025 Advances to suppliers (2,275) (2,615) (2,394) (3,111) Judicial deposits (379) (127) (379) (127) Receivables from third parties (998) (146) Other receivables - 1,213-1,095 Increase/(decrease) in liabilities Suppliers 1, ,218 (1,275) Taxes payable 15,215 (3,505) 15,152 (4,449) Salaries and social charges 205 (323) 226 (204) Interest on loans (1,543) (1,900) (1,541) (1,900) Non-controlling interest - - (14) - Other liabilities (3,504) (4,020) (3,759) (4,006) Cash flow from (used in) operating activities (4,832) 4,808 (4,594) 916 Investing activities Acquisition of PPE (41,475) (2,828) (41,584) (2,893) Disposal of PPE 13,734-13,734 - Acquisition of investments (174) - (173) - Disposal of investments 961-1,053 - Acquisition of intangible assets - - (300) (194) Marketable securities 23,624-32,445 - Cash flow from (used in) investment activities (3,330) (2,828) 5,175 (3,087) Financing activities Payment to related parties - (6,173) - (1,910) Receipt from related parties 9, Loans and financing paid (11,004) - (11,004) - Loans and financing received 108,428 4, ,428 4,775 Payment of interest on equity (8,869) - (8,869) - Cash flow from financing activities 97,655 (1,398) 88,555 2,865 Increase in cash and cash equivalents 89, , Cash and cash equivalents at the beginning of the year 8,947 7,653 9,984 7,786 Cash and cash equivalents at the end of the year 98,440 7,697 99,120 7,942 See accompanying notes. 8

11 Statements of value added Quarters ended March 31, 2012 and 2011 (In thousands of reais) Mar/2012 Mar/2011 Mar/2012 Mar/2011 Revenue Gross operating income 102, , , ,757 Sales returns (97) (57) (97) (57) Allowance for doubtful accounts 312 (35) 312 (35) Other operating expenses, net (14,166) - (14,095) 51 88, ,526 88, ,716 Input products acquired from third parties Cost of sales (43,491) (43,967) (43,605) (43,662) Materials, energy, third-party services and others (22,551) (29,449) (22,984) (29,759) Loss of asset value 6,716-6,716 Gross value added (29,095) 32,110 (29,049) 32,295 Retentions Depreciation and amortization (1,103) (960) (1,131) (978) Net value added produced by the entity 27,992 31,150 27,918 31,317 Value added received on transfer Equity results (128) (153) - - Financial income 727 1,196 1,062 1,196 Deferred income and social contribution taxes 4, , Total value added to be distributed 32,657 32,555 33,046 32,555 Controlling shareholders 32,657 32,555 33,036 32,555 Non-controlling shareholders Distribution of value added Personnel and social charges 9,917 8,093 9,934 8,112 Taxes, charges and contributions 16,283 15,275 16,643 15,566 Interest and rentals 9,222 4,747 9,234 4,757 Retained earnings (2,765) 4,440 (2,765) 4,440 32,657 32,555 33,046 32,555 See accompanying notes. 9

12 Notes to interim financial information 1. Operations Cimento Tupi S.A. ( ), located at Avenida Presidente Wilson, 231, 29 floor, Downtown, Rio de Janeiro, is engaged in the manufacturing of cement of all types at the plants located in Volta Redonda State of Rio de Janeiro, Pedra do Sino State of Minas Gerais and Mogi das Cruzes State of São Paulo. Its corporate purpose includes exploitation of mineral deposits and use of extracted products for cement and mortar manufacturing; provision of concrete services; and holding of ownership interests in other companies. Corporate restructuring In a Special Shareholders Meeting held on March 21, 2011, the downstream merger of CP Cimento e Participações S.A. ( CP Cimento ) into the was approved. The objective of the merger was to simplify the operational structure of CP Cimento and the, resulting in operating, administrative and financing costs reduction. As a result of the Shareholder Restructuring, the became the successor of all the rights and obligations of CP Cimento.. The book value of CP Cimento s net assets on December 31, 2010 were R$287,292, based on an appraisal report prepared and issued by an independent appraisal company, as summarized below: Assets Cash and cash equivalents 44 Notes receivable 6,369 Receivables from related parties 28,309 Investments 398,148 Fixed assets 165 Other assets 74,249 Total merged assets 507,284 Liabilities Payables to related parties 184,151 Taxes payable 25,131 Other liabilities 10,710 Total assumed liabilities 219,992 Net assets merged 287,292 10

13 1. Operations (Continued) Corporate restructuring (Continued) The investment, related party receivable and related party payable balances between CP Cimento and the were eliminated upon the merger. The premium on share subscription and the tax incentive balances of R$53,640 and R$2,380, respectively, were realized during the merger process. Additionally, the assumed goodwill of R$93,563, previously recognized by CP Cimento, recording it as an intangible asset subject to annual impairment analyses by Management. 2. Presentation of interim financial information and significant accounting practices This unaudited interim financial information for the quarter ended March 31, 2012 was approved by the s board on May 4, The interim financial information was prepared considering different assessment bases used in accounting estimates. The accounting estimates involved in the preparation of the financial information were based on objective and subjective factors, based on Management's judgment to determine the appropriate amounts to be recorded in the financial statements. Significant items subject to estimates include: allowance for doubtful accounts; provision for obsolete inventory; estimated life of property, plant and equipment; deferred income and social contribution taxes; provision for contingencies; and fair value measurement of financial instruments. Settlement of transactions involving these estimates may result in amounts significantly different from those recorded in the financial statements due to the uncertainties inherent in the estimating process. The reviews its estimates and underlying assumptions at least on an annual basis. The interim financial information was prepared and is presented in accordance with accounting practices adopted in Brazil, which comprise technical pronouncements of the Brazilian FASB (Comitê de Pronunciamentos Contábeis - CPC). 11

14 2. Presentation of financial information and significant accounting practices (Continued) The s accounting practices have been designed in accordance with the standards consistently applied in all periods disclosed, except when stated otherwise. For a proper understanding of these practices, this interim financial information must be read in conjunction with the financial statements issued at December 31, interim financial information The interim consolidated financial information was prepared in accordance with the accounting practices adopted in Brazil and includes the financial information about Cimento Tupi S.A. and subsidiaries below: Equity interest - % Capital Voting capital Mar/2012 Dec/2011 Mar/2012 Dec/2011 Cimento Touro Ltda Cimento Tupi do Nordeste Ltda Cimento Tupi Overseas Inc CP Cimento Overseas Co Suape Granéis do Nordeste Ltda Sandra Mineração Ltda Tupi Rio Transportes S.A Tupimec - Indústria Mecânica Ltda Mape Incorporação e Empreendimentos Ltda Tupi Mineradora de Calcário Ltda The consolidation of the balance sheet and P&L accounts corresponds to the sum of the balances of assets, liabilities, revenues and expenses, according to their nature, supplemented by the following eliminations: Equity interest, reserves and accumulated results; Balances of current accounts and other asset and/or liability accounts held between the companies whose balance sheets were consolidated; Balances of revenues and expenses from business transactions between consolidated companies; and Effects from significant transactions carried out between these companies. The business years of subsidiaries included in the consolidation coincide with those of the parent company, and the accounting policies were applied consistently in all consolidated companies. 12

15 4. Cash and cash equivalents Mar/2012 Dec/2011 Mar/2012 Dec/2011 Cash and banks 98,440 8,947 99,120 9, Marketable securities Mar/2012 Dec/2011 Mar/2012 Dec/2011 Time deposits - CDB DI 1 2,369 2,311 2,369 2,311 FIC Referenciado DI - 8,665-8,665 Public debt securities 5,000 15,012 12,192 31,025 7,369 25,988 14,561 42,001 The investments held at Banco ABC Brasil on December 31,2011 consisted of interbank deposit certificate index funds ( fundos DI ) whose yield approximate the change in Interfinancial Deposit Certificates (CDI), and with balances available for daily withdrawal in exchange for receivables. These investments were pegged to a minimum balance of funds to be held at each bank. The investment in public debt securities ( títulos públicos-di ) was held at Banco Santander and Banco Alfa. 6. Accounts receivable Mar/2012 Dec/2011 Mar/2012 Dec/2011 Trade bills receivable 39,986 37,467 46,194 43,653 Allowance for doubtful accounts (10,486) (10,457) (10,486) (10,457) 29,500 27,010 35,708 33,196 13

16 6. Accounts receivable (Continued) The change in the allowance for doubtful accounts for the quarter ended March 31, 2012 was as follows: Balance at December 31, 2011 (10,457) (+) Supplementary allowance for doubtful accounts (29) (-) Write-offs - Balance at March 31, 2012 (10,486) The balance of the allowance for doubtful accounts includes expected losses of R$ 8,665 relating to a specific customer, in a foreign market transaction held in the past. The aging of the balance of consolidated accounts receivable is as follows: Mar/2012 Dec/2011 Mar/2012 Dec/2011 Current 28,068 25,366 34,276 31,551 Past due up to 90 days 1,355 1,567 1,355 1,567 Past due between 91 an 180 days Past due for more than 181 days 10,486 10,456 10,486 10,457 39,986 37,467 46,196 43,653 14

17 7. Inventories Mar/2012 Dec/2011 Mar/2012 Dec/2011 Current Finished products 1,671 2,015 1,779 1,482 Work in process 1,815 3,363 3,041 4,832 Raw material - slag 6,828 9,355 6,828 9,355 Raw material - coke 11,717 9,067 11,717 9,067 Other raw materials 2,947 3,530 3,451 3,885 Materials for maintenance and consumption 9,852 9,999 10,128 10,243 Inventories in transit ,319 37,836 37,433 39,371 Non-current Land for sale (i) ,404 12, ,404 12,404 (i) Inventories of land for sale, owned by subsidiary Mape Incorporação e Empreendimentos Ltda. The entered into an agreement with Companhia Siderúrgica Nacional (CSN) on December 2009 to end a dispute over past slag prices, whereby CSN agreed to provide the with 850 thousand tons of wet granulated slag ( new slag ). Until March 31, 2012, 809,132 tons had been delivered. Slag is recorded into inventory when received, matched with other operating income (See Note 23). Once it is used, the related value is transferred to production costs. 8. Taxes recoverable Mar/2012 Dec/2011 Mar/2012 Dec/2011 Current assets State Value Added Tax - VAT (ICMS) 1,453 1,483 1,513 1,483 Income Tax (IRPJ) 1,633 5,239 1,646 5,247 Social Contribution Tax (CSLL) 1,383 1,350 1,784 1,742 Contribution Tax on Gross Revenue for Social Security Financing (COFINS) 2,607 2,634 3,348 3,362 Other 1,839 1,319 2,031 1,494 8,915 12,025 10,322 13,328 Non-current assets State Value Added Tax - VAT (ICMS) 2,490 2,575 2,490 2,575 Other ,513 2,599 2,513 2,599 State VAT tax recoverable, classified as a non-current asset, is related to acquisition of property, plant and equipment, and is recovered after a 12-month period from each acquisition. 15

18 9. Notes receivable Mar/2012 Dec/2011 Mar/2012 Dec/2011 CAL Itaú Participações S.A. (i) 26,491 25,829 26,491 25,829 Cimento Brasilia Ltda.( previously named Chausey Mineração e Participações Ltda.) (ii) 26,893 26,893 26,893 26,893 53,384 52,722 53,384 52,722 (i) Refers to the balance receivable from the sale of shares of Companhia de Cimento Ribeirao Grande maturing on December 1, The balance is subject to interest of 10.65% per annum. (ii) Refers to notes receivable maturing on July 30, These credits have a real guarantee (mineral deposit rights) with realization amount higher than the referred credits. Accordingly and due to the Compan y relationship history with debtor and negotiations in progress no losses are expected by Management on this credit. 16

19 10. Investments in subsidiaries a) Information on the main subsidiaries Mape Incorporação e Empreendimentos Ltda. Tupimec Indústria Mecânica Ltda. Mar/2012 Dec/2011 Tupi Cimento Mape Tupimec Tupi Mineradora Tupi do Incorporação e Indústria Mineradora de de Calcário Nordeste CP Cimento Empreendimentos Mecânica Calcário Ltda. Ltda. Overseas CO Ltda. Ltda. Ltda. Cimento Tupi do Nordeste Ltda. CP Cimento Overseas CO Interest held - % Equity 34,455 1,974 22, ,217 34,199 2,259 22, ,125 Income (loss) for the year 268 (285) - (58) (2) 1,803 (943) - (4,705) - b) Changes in investments Mape Incorporação e Empreendimentos Tupimec Indústria Mecânica Tupi Mineradora de Calcário Mar/2012 Dec/2011 Cimento Tupi do CP Cimento Nordeste Overseas Ltda. Ltda. Ltda. Ltda. CO. Others Total Total At the beginning of the year 34,179 2,259 22, ,125 4,164 66,727 42,042 Payments Acquisition of investments ,602 Dividends received (37,489) Equity results 268 (285) - (58) (2) (41) (118) 37,770 Capital gains (losses) (11) (1) - (10) - FX changes on investments (81) - (81) 366 Reversal of provision for losses (4,275) Investee s equity adjustment due to write-off of intercompany loans ,554 At the end of the period 34,436 1,974 22, ,217 4,123 66,692 66,727 17

20 10. Investments in subsidiaries (Continued) b) Changes in investments (Continued) Mape Incorporação e Empreendimentos Ltda. Mape is primarily engaged in development, administration, purchase and sale of real estate. Tupimec Indústria Mecânica Ltda. Tupimec Indústria Mecânica Ltda. s corporate purpose is to manufacture, sell and export mechanical parts and equipment, and to provide related services. Tupi Mineradora de Calcário Ltda. Tupi Mineradora de Calcário Ltda s corporate purpose is to exploit mineral deposits in all Brazilian territory. Cimento Tupi do Nordeste Ltda. Cimento Tupi do Nordeste Ltda. s corporate purpose is to produce, sell, transport and export cement, and to exploit mineral deposits. 11. Property, plant and equipment Mar/2012 Dec/2011 Annual Accumulated depreciation Accounts Cost depreciation Net Net rates Land 5,076-5,076 3,345 Buildings 30,335 (17,610) 12,725 12,931 2% Machinery, equipment and industrial facilities 209,845 (174,836) 35,009 38, % Furniture and fixtures 2,971 (2,733) % Vehicles 4,180 (1,264) 2,916 2,394 20% Railway wagons 1,908 (898) 1,010 1, % Leasehold improvements 2,198 (1,956) (*) Uninstalled machinery and equipment 29,360-29,360 33,123 Other assets 4,816 (4,112) to 20% Work in progress 104, ,672 73,839 (**) Advances to suppliers 36,017-36,017 20,506 Limestone mines 21,858 (95) 21,763 21,786 (***) 453,236 (203,504) 249, ,057 18

21 11. Property, plant and equipment (Continued) Accounts Cost Mar/2012 Dec/2011 Accumulated depreciation Net Net Annual depreciation rates Land 9,992-9,992 8,260 Buildings 31,278 (18,361) 12,917 13,132 2% Machinery, equipment and industrial facilities 211,187 (175,714) 35,473 39, % Furniture and fixtures 3,055 (2,809) % Vehicles 4,350 (1,379) 2,971 2,453 20% Railway wagons 1,908 (898) 1,010 1, % Leasehold improvements 2,198 (1,955) (*) Uninstalled machinery and equipment 29,360-29,360 33,123 Other assets 7,215 (4,816) 2,399 2,487 20% Work in progress 105, ,642 74,723 (**) Advances to suppliers 36,766-36,766 21,242 Limestone mines 21,858 (95) 21,763 21,786 (***) 464,809 (206,027) 258, ,026 (*) Depreciation in accordance with lease agreements. (**) Includes capitalized financial charges for R$ 6,095 (R$ 4,160 on December 31, 2011) (***) Limestone mines are amortized taking into account reserves and expected exhaustion of mineral deposits. For the quarter ended March 31, 2012, depreciation amounting to R$ 1,027 (R$ 909 for the quarter ended March 31, 2011) was recorded under cost of sales. Uninstalled machinery and equipment represents items to be used in future projects for expansion of the s activities. Management revises the net carrying amount of the s assets in order to find indications of impairment, but no such indication has been found. 19

22 11. Property, plant and equipment (Continued) Changes in property, plant and equipment for the quarter ended March 31, 2012 are as follows: Cost of property, plant and equipment Land Buildings Machinery, equipment and industrial facilities Furniture and fixtures Vehicles Railway wagons Leasehold improvements Uninstalled machinery and equipment Other Work in progress Advances to suppliers Limestone mines Total Balance at December 31, ,345 30, ,056 2,955 3,690 1,908 2,198 33,123 4,825 73,840 20,505 21, ,638 Acquisitions 1, ,315 15,512-50,282 Disposals - - (3,236) - (193) - - (3,763) (9) (1,483) - - (8,684) Balance at March 31, ,076 30, ,845 2,971 4,180 1,908 2,198 29,360 4, ,672 36,017 21, ,236 Cost of property, plant and equipment Land Buildings Machinery, equipment and industrial facilities Furniture and fixtures Vehicles Railway wagons Leasehold improvements Uninstalled machinery and equipment Other Work in progress Advances to suppliers Limestone mines Total Balance at December 31, ,260 31, ,392 3,038 3,860 1,908 2,198 33,123 7,222 74,723 21,241 21, ,101 Acquisitions 1, ,402 15,525-50,391 Disposals - - (3,236) - (193) - - (3,763) (8) (1,483) - - (8,683) Balance at March 31, ,992 31, ,187 3,055 4,350 1,908 2,198 29,360 7, ,642 36,766 21, ,809 20

23 12. Intangible assets - and consolidated Goodwill Mining rights Other Total Goodwill Mining rights Other Total Balance at December 31, ,563 1, ,803 93,563 21, ,164 Acquisitions Amortization Balance at March 31, ,564 1, ,803 93,563 21, , Loans and financing - and consolidated Mar/2012 Dec/2011 Non- Non- Current current Current Current Local currency BDMG and others - interest of 4.5% to 7% per year (4.5% to 7% in Dec/10) and monetary indexation based on official basket of rates, maturing up to ,704 18,237 2,497 18,330 Working capital Santander, Fibra, Alfa, ABC Brasil and Sofisa, other banks - with average charges of 17% per year (17% in Dec/10) maturing up to January/ ,293-36, ,997 18,237 38,761 18,885 Foreign currency - US$ 150,000. Senior Unsecured Notes - interest of 9.75% a year with semi-annual payments. Principal matures in May , ,315 2, ,580 Debt issuance cost - (14,473) - (11,596) 10, ,842 2, ,984 64, ,079 41, ,869 Other 1,500-1,500-66, ,079 43, ,869 21

24 13. Loans and financing - and consolidated (Continued) a) Local currency Financing is secured by mortgage of part of the assets of Pedra do Sino plant and by the financed items themselves in the case of FINAME (Special Industrial Finance Agency). b) Foreign currency On May 6, 2011, the issued unsecured debt securities (9.75% Senior Unsecured Notes) totaling US$ 100,000, equivalent to R$ 161,780, due on May 11, 2018 and subject to nominal interest of 9.75% per year (effective rate of 10.68% per year), payable semi-annually on November 11 and May 11 of each year, as from The intends to use the resources to expand the Pedra do Sino plant, to prepay certain outstanding debts and for general corporate purposes. On February 7, 2012 the issued US$ 50,000 in additional debt securities bearing the same characteristics of the initial issuance in the foreign market. Total cost of the debt issuance as of March 31, 2012, was R$ 14,473. This amount includes commissions paid to financing agents (coordinating banks), lawyers, external auditors, consultants, registration costs, expenses to prepare and prospectus and reports. This amount was recorded as a reduction of loans for the year, as debt issuance costs, net of tax effects. These costs will be amortized in the same period of their corresponding debits , to , ,473 22

25 13. Loans and financing - and consolidated (Continued) c) Debt repayment schedule Loans and financing recorded as non-current liabilities as of March 31, 2012 mature as follows: d) Covenants , , thereafter 269, ,079 Under the terms of the Senior Unsecured Notes, the is subject to certain financial covenants, such as: (i) increase in debt provided certain financial indices are observed; (ii) payment of dividends in amount higher than mandatory, provided certain conditions are observed and (iii) disposal of operating assets, except for reinvestment into the. As of March 31, 2012 the is in compliance with all existing covenants. 23

26 14. Related parties - Current assets and liabilities and transactions Sandra Mineração Ltda. Tupi Mineradora Ltda. Cimento Tupi do Nordeste Ltda. Mar/2012 Dec/2011 Mape Tupimec Incorporação e Indústria Empreend. Mecânica CP Cimento Ltda. Ltda. Overseas CO. Others Total Total Non-current assets Current accounts Current liabilities Current accounts ,100-2,455-11,555 2,427 Transactions Cost of products sold (1,085) - - (1,085) (9,258) 24

27 14. Related parties - (Continued) Current assets and liabilities and transactions (Continued) Other transactions with related parties refers primarily to current account balances and the supply of services and products for the production and operation of the entities. Cost of sales and services rendered corresponds mainly to the purchase of maintenance materials. 15. Taxes and social contributions in installments These refer to installment payments under PAES, ICMS and INSS and Law No /2009, obtained principally by the from Federal and State agencies since Mar/2012 Dec/2011 Mar/2012 Dec/2011 Current liabilities 5,834 5,926 5,906 5,926 Non-current liabilities 31,703 32,347 31,768 32,450 The current portion is included in taxes payable. Non-current balances as of March 31, 2012 mature as follows: ,067 4, ,942 4, ,215 3, thereafter 19,479 19,479 31,703 31,768 25

28 16. Equity - a) Capital stock As of March 31, 2012, fully subscribed and paid-in capital was represented by 107,336,023 common shares and 107,336,023 preferred shares, with no par value. Preferred shareholders do not have voting rights and are not entitled to minimum or fixed dividends. b) Capital reserves The premium on share subscription reserve represents the excess paid in the share issuance, as related to the basic value of the shares issued in The tax incentive reserve represents investments in tax incentives related to prior years. c) Legal reserve The legal reserve is recorded based on the allocation of 5% of the net income for the year, up to the limit of 20% of capital, as provided for in the corporation law, and may be used to absorb accumulated losses. d) Profit reserve The income reserve shall be set up by retaining a portion of net income for the year. Such retention shall be based on a capital budget to support future investment plans prepared by Management, to be submitted for approval by the shareholders at an annual general meeting. e) Dividends Shareholders are entitled to minimum mandatory dividends of 25% of annual net income, adjusted pursuant to legal provisions. 26

29 16. Equity - (Continued) f) Treasury stock Shareholders of CP Cimento e Participações S.A. who dissented from its merger into the, as approved at the Special Shareholders Meeting held on March 21, 2011, exercised their withdrawal right. As a result of such withdrawal, the acquired 19,426,917 preferred shares from these shareholders for a total consideration of R$ 25,999. These shares are currently held in treasury. g) Earnings per share Pursuant to the requirements of CPC 41, the presents information on earnings per share for the quarters ended March 31, 2012 and Earnings per share are determined by dividing net profit for the year, attributed to holders of parent company s common and preferred shares, by the weighted average number of outstanding common and preferred shares during the year. The following tables reflect the income and share data used in the basic and diluted earnings per share computations: Common shares 03/31/ /31/2011 Preferred Common Preferred shares Total shares shares Total Net income for the period (1,455) (1,310) (2,765) 2,114 2,326 4,440 Weighted average of the number of shares (in thousands of shares) 107,336 87, , , , ,672 Basic and diluted earnings per share (0.0136) (0.0149) For the quarters ended on March 31, 2012 and 2011, there is no difference between the computation method used for basic and diluted earnings per share. 27

30 17. Income and social contribution taxes a) Reconciliation of expenses with income and social contribution taxes Income tax Social contribution tax Mar/2012 Mar/2011 Mar/2012 Mar/2011 Pretax income (loss) (6,831) 6,102 (6,831) 6,102 Write-off of the provision for property, plant and equipment (6,716) - (6,716) - Depreciation (10,263) - (10,263) - Other additions and exclusions, net (3,224) 2,412 (3,224) 2,646 Tax loss offsetting - (2,626) - (2,626) Adjusted profit (loss) (27,034) 5,888 (27,034) 6,122 Applicable rates 25% 25% 9% 9% Current income and social contribution taxes - (1,472) - (551) Tax debits setup on goodwill tax benefits (1,169) - (421) - Deferred income and social contribution tax credits on tax loss carryforward and temporary differences 4, , Income and social contribution taxes on P&L 2,990 (1,207) 1,076 (455) Income tax Social contribution tax Mar/2012 Mar/2011 Mar/2012 Mar/2011 Pretax income (loss) (6,720) 6,108 (6,720) 6,108 Write-off of the provision for property, plant and equipment (6,716) - (6,716) - Depreciation (10,263) - (10,263) - Other additions and exclusions, net (3,224) 2,422 (3,224) 2,662 Tax loss offsetting - (2,626) - (2,626) Adjusted profit (loss) (26,923) 5,904 (26,923) 6,144 Applicable rates 25% 25% 9% 9% Current income and social contribution taxes - (1,476) - (553) Assumed profit (77) - (24) - Tax debits setup on goodwill tax benefits (1,169) - (421) - Deferred income and social contribution tax credits on tax loss carryforward and temporary differences 4, , Expenses (income) with income and social contribution taxes 2,913 (1,211) 1,052 (457) 28

31 17. Income and social contribution taxes (Continued) b) Deferred income and social contribution taxes breakdown Tax losses 42,151 31,369 Provision for contingencies 1,074 1,074 Deferred income and social contribution tax assets 43,225 32,443 Deferred income tax and social contribution on temporary differences (10,485) (5,356) Taxable transactions on a cash basis (6,470) (6,470) Goodwill tax amortization (6,531) (4,943) Deferred income tax and social contribution payable (23,486) (16,769) 19,739 15,674 Considering taxable profits during the past three years and the expectation of taxable profits in coming years, the recorded deferred income and social contribution tax assets on past tax losses carry-forward and temporary differences. Past income and social contribution tax losses have no expiration dates, but the may only compensate up to 30% of the taxable profit per year. Total tax credits ( and consolidated) are expected to be realized as follows as of March 31, 2012: ,741 7, ,667 10, ,579 14, ,238-43,225 32,443 29

32 18. Provision for contingencies On March 31, 2012 the recorded provision for contingencies arising from labor claims, with losses deemed probable, amounting to R$ 3,159 (R$ 3,159 on December 31, 2011). On March 31, 2012 the had judicial deposits of R$ 4,229 (R$ 3,850 on December 31, 2011). Additionally, the is a defendant in civil, labor, and tax-related suits involving risk of loss classified as possible by Management and the s legal counsel. No provision has been recorded for these contingencies. The amount of such contingencies as of March 31, 2012 was R$ 64,458 (R$ 64,458 in December 2011), as follows: Nature Mar/2012 Tax 51,396 Labor 13,062 64, Insurance coverage The and subsidiaries entered into insurance contracts to cover their respective inventories and property, plant and equipment against operational risks. When assessing risks, the following factors were considered: (a) location of the industrial plants (Minas Gerais, Rio de Janeiro and São Paulo) and decentralization of production; (b) nature of the activities; and (c) preventive measures against accidents. The maximum limit of indemnity/coverage is R$ 90,000 for the industrial plants and R$ 10,000 for the other units. The total amont insured takes into account estimates made to cover losses in locations with high concentration of risk and the maximum claim possible in a single event. The risk assumptions adopted, given their nature, were not part of the scope of the audit/review engagement and, as such, were neither audited nor reviewed by our independent auditors. 30

33 20. Financial instruments and risk management Analysis of financial instruments The and its subsidiaries evaluated their financial assets and liabilities in relation to the market value through available information and appropriate valuation methodologies. However, interpretation of market data and selection of valuation methods require extensive judgment and estimates to calculate the most appropriate realization value. Consequently, the estimates presented do not necessarily represent the amounts that may be realized in the market. The use of different market assumptions and/or methods may have a material effect on the estimated realization values Classification of financial instruments by category Financial assets of the and subsidiaries are classified as follows: Financial assets Receivables Mar/2012 Dec/ 2011 At fair value At fair value through profit or through profit or loss Total Receivables loss Total Cash and cash equivalents 98,440-98,440 8,947-8,947 Marketable securities - 7,369 7,369-25,988 25,988 Derivatives ,005 5,005 Trade accounts receivable 29,500-29,500 27,010-27,010 Taxes recoverable 11,428-11,428 14,624-14,624 Notes receivable 53,384-53,384 52,722-52,722 Related parties ,511 7, , ,303 30, ,296 Financial assets Receivables Mar/2012 At fair value through profit or loss Total Receivables Dec/2011 At fair value through profit or loss Total Cash and cash equivalents 99,120-99,120 9,984-9,984 Marketable securities - 14,561 14,561-42,001 42,001 Derivatives ,005 5,005 Trade accounts receivable 35,708-35,708 33,196-33,196 Taxes recoverable 12,835-12,835 15,927-15,927 Notes receivable 53,384-53,384 52,722-52, ,047 14, , ,829 47, ,835 31

34 20. Financial instruments and risk management (Continued) Classification of financial instruments by category (Continued) The major financial liabilities of the and its subsidiaries may be classified as loans and financing, as follows: Financial liabilities Mar/2012 Dec/2011 Suppliers 13,597 11,917 Loans and financing 341, ,374 Payables to related parties 11,555 2,427 Interest on equity and dividends 1,047 9, , ,634 Financial liabilities Mar/2012 Dec/2011 Suppliers 14,190 11,972 Loans and financing 343, ,874 Interest on equity and dividends 1,047 9, , ,762 On March 31, 2012, the and its subsidiaries did not record financial assets held to maturity. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate fair values. Cash and cash equivalents, trade accounts receivable, trade accounts payable and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. 32

35 20. Financial instruments and risk management (Continued) Classification of financial instruments by category (Continued) The fair value of receivables does not significantly differ from their carrying amount, as the monetary indexation is consistent with market rates and/or they are adjusted by a provision for impairment losses. Loans and financing are subject to variable interest rates consistent with observable market rates; as such, the reported carrying amounts approximate the related fair values Fair value measurement The table below shows an analysis of the financial instruments recognized at fair value after initial recognition. These instruments are grouped on three levels based on how their fair value is priced: a) Level 1: measurement at fair value is derived and prices quoted (not restated) in active markets, based on identical assets and liabilities; b) Level 2: measurement at fair value derives from other quoted inputs, included in Level 1, which are quoted through assets or liabilities, whether directly (i.e. as the prices) or indirectly (i.e. derived from prices); c) Level 3: fair value measurement derives from valuation techniques including assets or liabilities without an active market. Level 1 Level 2 Level 3 Marketable securities - 7,369 - Marketable securities - 14,561-33

36 20. Financial instruments and risk management (Continued) Risk management The financial operations of the and its subsidiaries are conducted by the finance department using conservative strategies that seek to maximize security, profitability and liquidity, as approved by the Board of Directors and shareholders. According to the s policy, protective mechanisms may be adopted against financial risks arising from contractual obligations, whether in local or foreign currency, so that risk exposures associated with foreign exchange and interest rate fluctuations can be managed. Derivative financial instruments to hedge against exchange rate variations may be contracted in relation to debt originating foreign exchange risk, following Management s analysis of the risk involved. Financial institutions are selected on criteria which obey parameters that consider the rating awarded by recognized risk analysis agencies, net equity and operation and resource concentration levels. The major market risk factors that could impact the s and its subsidiaries business are as follows: a) Currency risk due to foreign exchange variations Currency variation risk considers to the possibility that the may sustain losses due to fluctuations in foreign exchange rates. b) Credit risk Financial instruments subject to credit risk refer to cash and cash equivalents and accounts receivable. Operations are conducted with banks with recognized liquidity, thus minimizing risk. The risk of incurring losses with uncollectable amounts billed to customers is minimized, since sales are spread across a large customer base and conditioned on a defined per customer credit limit. The allowance for doubtful accounts as of is basically related to a specific customer. 34

37 20. Financial instruments and risk management (Continued) Risk management (Continued) c) Interest rate risk This risk arises from the possibility that the may incur losses due to interest rate fluctuations, which increase financial expenses, particularly from contracted loans. d) Liquidity risk Liquidity risk represents the risk of cash shortage and the difficulty in honoring debts. The and its subsidiaries seek to align the maturity of its debts with the period of cash generating, thus avoiding a mismatch and the need for a higher leverage Table with sensitivity analysis - effect on fair value variation The table below shows the sensitivity analysis based on hypothetical changes in risks considered significant by Management that could adversely impact the financial statements: Estimate effect on income before taxes for the quarter ended March 31, 2012 Sensitivity analysis (*) R$ Interest rate sensitivity 20% increase in the basic interest rate (1,414) 20% decrease in the basic interest rate 1,178 Sensibility in foreign currency 5% increase in connection with the change in U.S. rate (13,665) 5% decrease in connection with the change in U.S. rate 13,014 (*) Based on the actual effects for the first quarter of 2012, Management performed the sensitivity analyses above with all other variables held constant. 35

38 20. Financial instruments and risk management (Continued) Financial instruments At March 31, 2012 the and its subsidiaries did not engage in any transactions involving derivative financial instruments. 21. Management fees Fees paid to the s Management for the quarter ended March 31, 2012 amounted to R$ 1,627 (R$ 896 in March 2011). Related management fee charges are recorded under general and administrative expenses amounting to R$ 414 and R$ 242 as of March 31, 2012 and 2011, respectively. At the Special Shareholders Meeting held on June 28, 2011 the 's shareholders approved a stock option payment plan in accordance with Article 168, paragraph 3 of Law No. 6404/76 and Article 6 of the s articles of incorporation. The Special Shareholders Meeting has delegated to the Board of Directors the future implementation of stock option plans. No stock option plan has been implemented up to March 31, Net operating revenue Mar/2012 Mar/2011 Mar/2012 Mar/2011 Gross sales revenue Sale of products 102, , , ,757 Sales deductions (26,880) (23,474) (27,115) (23,726) Sales returns (97) (57) (97) (57) ICMS on sales (17,813) (18,554) (17,901) (18,685) PIS and COFINS on sales (8,970) (4,863) (9,107) (4,984) IPI on sales - - (10) - Net operating revenue 75,492 82,144 75,687 82,031 36

39 23. Other operating income (expenses), net Mar/2012 Mar/2011 Mar/2012 Mar/2011 Other operating expenses Provision for contingencies - (2,499) - (2,499) IOF on intercompany operation (1,880) - (1,880) - Permanent asset disposed of (14,165) - (14,165) - Other operating expenses (1,439) (747) (1,439) (747) (17,484) (3,246) (17,484) (3,246) Other operating income Impairment loss 6,716-6,716 - Other operating income Slag received (*) 2,599 1,826 2,599 1,826 10,160 2,459 10,219 2,504 (7,324) (787) (7,265) (742) (*) Slag received from CSN relating to an agreement executed in December See Note Financial income (expenses) Mar/2012 Mar/2011 Mar/2012 Mar/2011 Financial expenses Expenses with interest rate on loans (7,070) (1,917) (7,070) (1,917) FX variation on loans 2,069-2,069 - Short-term investment losses (2,909) - (2,909) - Other financial expenses (569) (2,207) (574) (2,212) (8,479) (4,124) (8,484) (4,129) Financial income Present value adjustment reversal (1,614) (40) (1,614) (40) Income from monetary indexation of notes receivable-cal Itaú Proceeds from investments 1, , Other financial income ,196 1,062 1,196 (7,752) (2,928) (7,422) (2,933) 37

40 25. Receivables from third parties Amounts deposited at Bank of America related to letters of credit issued in favor of the in connection to the acquisition of foreign equipment for the expansion of the Pedra do Sino plant. 26. Segment reporting Management groups entities into two different segments: a) Cement: its main corporate purpose is the production of cement and mortar of every type at the s manufacturing plants; and b) Real estate development: the main corporate purpose is the development and management of real estate. s Management separately monitors operating results of business units in order to make decisions on allocation of resources and performance evaluation. Performance is evaluated in view of the operating income and measured in a consistent manner to the operating income of the consolidated financial statements. Information on the 's segments is shown in the following table: Cement Mar/2012 Real estate development Other segments Exclusions Total consolidated Net income 75,492-1,280 (1,085) 75,687 Gross profit 17, ,924 Depreciation and amortization (1,103) (1,103) Operating income (losses) (401) (143) 702 Financial income (expenses) (7,752) 335 (5) - (7,422) Income before taxes (6,831) 369 (3,637) 3,379 (6,720) Income and social contribution taxes 4,066 (101) - - 3,965 Net income (2,765) 268 (3,637) 3,369 (2,765) Current assets 297,199 14,560 3,929 (114) 315,574 Non-current assets 439,588 22,768 30,635 (78,690) 414,301 Current liabilities 116,095 2,873 2,014 (12,043) 108,939 Non-current liabilities 311, ,006 38