MANAGEMENTS PROPOSAL ORDINARY AND EXTRAORDINARY GENERAL ASSEMBLY OF APRIL 25, 2012

Transcription

1 MANAGEMENTS PROPOSAL ORDINARY AND EXTRAORDINARY GENERAL ASSEMBLY OF APRIL 25, 2012 Identification: Duratex SA, a corporation, CNPJ / MF under No / , registered in JUCESP under NIRE , registered as a company with the CVM under No site Headquarters: Av. Paulista, 1938, 5th floor, São Paulo (SP) CEP Director of Investor Relations: Flavio Marassi Donatelli Av. Paulista, 1938, terrace, São Paulo (SP) CEP Phone: diretoria-ri@duratex.com.br Independent Auditors: PricewaterhouseCoopers Independent Auditors Bookkeeping Agent: Itaú Corretora de Valores S.A. Securities: Shares "DTEX3" traded on the BM&FBOVESPA Newspapers in which the Company discloses information: Diário Oficial do Estado de São Paulo and Diário do Comércio

2 Ordinary and Extraordinary General Assembly of April 25, 2012 In accordance with Article 21, section VI, of CVM Instruction 480/09, the Company communicates the information required by Article 9 of CVM Instruction 481/09 and by Article 133 of Law 6.404/76, for the year ended on were made available to shareholders as specified below: 1. MANAGEMENT REPORT The Management Report was approved by the Board of Directors at its meeting on February 16, 2012, and together with the Financial Statements, available at the Periodic and Occasional Information System (IPE) of the Securities and Exchange Commission (CVM) and the Company's website ( on February 17, 2012 and published on February 29, 2012 published in the Diário do Comércio (pages 55-61) and in Diário Oficial do Estado de São Paulo (pages 53-64). 2. FINANCIAL STATEMENTS The Financial Statements were approved by the Board of Directors at its meeting on February 16, 2012, which were the subject of: (i) recommendation for approval, as set forth in the Summary Report of the Audit Committee and Risk Management, (ii) without qualification, of the Independent Auditors, (iii) demonstration of the Board, who agreed with the views expressed in the Report of Independent Auditors and Financial Statements. The Financial Statements were disclosed on February 17, 2012 on the IPE and the Company's website and published in the Diário do Comércio on February 29, 2012 (pages 55-61) and in the Diário Oficial do Estado de São Paulo (pages 53-64). 3. DIRECTORS COMMENTS ON THE FINANCIAL SITUATION The comments of the directors, as specified in item 10 of Annex 24 of CVM Instruction 480/09, are in Annex I of this statement. 4. INDEPENDENT AUDITORS REPORT The Independent Auditors' Report, together with the Financial Statements, was released on February 17, 2012 on the IPE and the Company's website and published in the Diário do Comércio on February 29, 2012 (pages 55-61) and in the Diário Oficial do Estado de São Paulo (pages 53-64). This document was examined by the Board and the Board of Directors, at meetings held on 16.Feb FISCAL COUNCIL

3 The Company does not have a Fiscal Council. 6. STANDARD FORM OF FINANCIAL STATEMENTS - DFP Form of Financial Statements - DFP was released on the IPE and the Company's website on February 17, PROPOSED ALLOCATION OF INCOME FOR THE FISCAL YEAR The proposed allocation of net income for the fiscal year in the form specified in Annex 9-1-II of CVM Instruction 481/09, found in Annex II of this statement. 8. OPINION OF THE AUDIT COMMITTEE The Report of the Audit Committee and Risk Management, together with the Financial Statements, was released on February 17, 2012 on the IPE and the Company's website and published in the Diário do Comércio on February 29, 2012 (pages 55-61) and the Diário Oficial do Estado de São Paulo (pages 53-64). This report was assessed by the Board of Directors at its meeting on February 10, 2012.

4 ANNEX I DIRECTORS COMMENT Item 10 of the Reference Form, pursuant to CVM Instruction No. 480 of December 7, The Directors must comment on the following: a. General financial conditions and shareholders equity situation The balances presented below are in accordance with the new IFRS accounting standard, in compliance with CVM Instruction 485/10. The financial conditions and equity situation are analysed for the financial years ending , and The Company's gross consolidated debt showed the following balances at the close of the financial years ending 31.Dec.2009, 31.Dec.2010 and 31.Dec.2011: R$1,419.1 million, R$1,593.9 million and R$1,915.5 million, respectively. The variation in the debt refers to investments realised with a focus on expanding production capacity in the operational segments. Thus, in the years 2009, 2010 and 2011, the amounts of R$427.0 million, R$459.6 million and R$635.8 million were invested, respectively. Independently of the level of debt, the managers believe that the financial condition of the Company has improved, and is in equilibrium, because the increase in debt was accompanied by a rise in shareholders equity: R$3,141.9 million, R$3,452.5 million and R$3,692.8 million, for the respective periods. In this way, the ratio between total debt and shareholders' equity increased from 45.2% in 2009, to 46.2% in 2010 and finally to 51.9%, which, despite the increase, can still be considered low. In 2011, R$538.6 million in debt was paid down with R$675.1 million in new debt taken out. At the end of the period, there was a cash balance of R$726.1 million, a figure which was higher than the total short-term debt, which amounted to R$687.9 million. At the end of 2011, net debt, arrived at by taking total debt and subtracting the cash balance available, amounted to R$1,189.3 million, equivalent to 1.42x Ebitda (earnings before interest, tax, depreciation and amortisation) after the adoption of the IFRS standard, and adjusted to disregard non- cash events due to the appreciation in the forestry base and benefits to employees, which can be considered low. The management is of the opinion that, in a limited situation, this indicator could be increased to 2.5x or 3.0x, without adversely affecting the Company's solvency conditions. Furthermore, Current Liquidity in 2011, arrived at by the ratio of Current Assets to Current Liabilities, came to 1.69, indicating the amount in R$ (reais) available to cover each R$1.00 of short-term obligations. Independent of the possibilities for financial gearing, the Company's segments of operation (wood panels and finishing materials for the construction industry) are enjoying a buoyant moment in the market, which should provide sufficient liquidity to meet short and medium-term demands, as well as being sufficient for the implementation of the Company's long-term business plan. b. Capital structure and possibility of redemption of shares or quotas, indicating: There is no possibility of the Company's shares in circulation being redeemed, other than in those situations prescribed by law. Not applicable. i. redemption hypotheses ii. Not applicable. formula for the calculation of redemption value c. payment capacity with regard to financial commitments assumed

5 The indicator of Current Liquidity, of 1.69x in December 2011, indicates that for each real owed, over the short term, that there was R$1.69 to meet these obligations. By way of comparison, this ratio corresponded to 1.29x at the end of 2009, which represents an increase of 31.0% in terms of the solvency level represented by this indicator. By the same token, at the end of 2011, net current capital, resulting from the difference between current assets and current liabilities, showed a surplus of R$791.5 million in relation to shortterm obligations. The use of the Company's own capital is predominant, and can be seen from the ratio of shareholders equity to total assets. At the end of 2011, this indicator amounted to 54.2%. The management believes that these indicators appropriately reflect the Company's position of financial equilibrium and its solvency situation. d. sources of financing for working capital and for investment in non-current assets used The main sources of working capital finance, which the Company uses, consist of its own operational cash generation, as well as working capital credit lines from banks in the public and private sector. Investment in non-current assets is financed through specific credit lines (principally BNDES, Finame, Crédito Industrial and Nota de Crédito Rural), with financing also directly from suppliers, as well as from the Company's own cash generation. e. sources of financing for working capital for investment in non-current assets which are intended to be used for the covering of deficiencies in liquidity The Company has credit limits available for the financing of working capital with various banks, which due to its favourable solvency position are not being used. In addition to this, the Company has the practice of maintaining a minimum cash position equivalent to 60 days of sales, to meet any possible short-term demands. a. levels of debt and the characteristics of such debt, also describing: I Contracts for significant loans and financing The table below lists all the financial debts contracted, in accordance with the information provided in Note 15, which accompanies the audited financial statements for 2011:

6 MODALITY CHARGES AMORTISATION GUARANTEES SHORT LONG TOTAL TERM TERM BNDES TJLP + 2,3% p.a. Monthly and quarterly Endorsement - Itaúsa BNDES TJLP + 2,7% p.a. Monthly and quarterly Guarantor- Ligna BNDES TJLP + 2,8% p.a. Monthly and quarterly Endorsement - 70% Itaúsa - 30% Individual BNDES TJLP + 2,8% p.a. Monthly and quarterly BNDES REVITALIZA 9 % p.a. June 2013 Guarantor DCE FINAME TJLP + 2,1% p.a./ Pré 5,3 % p.a. Monthly and quarterly Chattel Mortgage e Promissory Note CREDITO INDUSTRIAL with Swap 12,1 % p.a. Until April 2015 Endorsement - Dx. Coml. Exportadora CREDITO INDUSTRIAL 98,5 % CDI Until June 2014 Endorsement - Dx. Coml. Exportadora CREDITO INDUSTRIAL Selic + 2% p.a. Until December 2011 Endorsement - Ligna CREDITO BANCARIO 105% CDI Until September FLOATING RATE NOTE 109,3% CDI Until December FUNDIEST 30 % IGP-M monthly Until November 2020 Guarantor - Ligna FUNDOPEM IPCA + 3% p.a. Until November 2024 Endorsement - 70% Itaúsa - 30% Individual PROIM / PROINVEST / PRO FLORESTA IGP-M + 4% p.a. / IPCA + 6% p.a. Until January 2018 Guarantor - Ligna e Hipoteca de bens DESCONTO NPR 6,75 % p.a. Until April 2012 Guarantor -Dx. Coml. Exportadora LEASING FINANCEIRO CDI + 1,6% p.a. Until September 2011 Promissory Note NACIONAL CURRENCY BNDES Cesta de Moeda + 2,2 % p.a. Monthly and quarterly Endorsement - Itausa BNDES Cesta de Moeda + 2,4 % p.a. Monthly and quarterly Guarantor - Ligna BNDES US$ + 1,6 % p.a. Monthly and quarterly Endorsement - Itausa BNDES US$ + 2 % p.a. Monthly and quarterly RESOLUÇÃO 2770 US$ + 6,6% p.a. Until September RESOLUÇÃO 2770 with Swap Libor + 1,75% p.a. Until March 2014 Endorsement - Ligna, Hipoteca e Alienação RESOLUÇÃO 4131 with Swap US$ + 1,99% p.a. Until March 2013 Endorsement - Duraflora S/A FINANC. IMPORT. Libor + 0,5% p.a. Until March 2012 Individual FINANC. IMPORT. Libor + 0,9% p.a. Until February 2012 Endorsement - Ligna e Caução de titulos FOREIGN CURRENCY TOTAL OF CONTROLLING COMPANY- DURATEX S/A NOTA DE CREDITO RURAL with Swap 11,5 % p.a. September 2013 Endorsement - Duratex NOTA CREDITO EXPORTAÇÃO 104,5% CDI September 2012 Endorsement - Duratex BNDES TJLP + 2,8 % p.a. Monthly and quarterly Endorsement - 70% Itaúsa - 30% Individual BNDES TJLP + 2,3 % p.a. Monthly and quarterly Endorsement - Itausa FINAME Pré 7,4 % p.a. Monthly Chattel Mortgage e Promissory Note FUNDAP 1 % p.a. Monthly Endorsement - Duratex Coml. Exportadora NATIONAL CURRENCY BNDES US$ + 1,7 % p.a. Monthly and quarterly Endorsement - Itausa FOREIGN CURRENCY TOTAL OTHER COMPANIES TOTAL-CONSOLIDATED The main loan and financing contracts that the Company had as at December 31, 2011, are with the following institutions: Banco do Brasil: The Company and its subsidiary Duraflora S.A. have several debt contracts with Banco do Brasil, totalling R$914.7 million, being R$453.3 million of short-term debt and R$461.4 million long-term. BNDES National Social and Economic Development Bank Banco: the Company has a total debt of R$580.1 million with the BNDES, with R$100.4 million of this falling due in the short term and R$479.7 million being long term. The balance in national currency (URTJLP) is R$527.8 million. The tranche due in foreign currency (basket of currencies and US$) comes to a total of R$52.3 million. BDMG Development Bank of Minas Gerais: The Company has loan contracts with the BDMG which come to a total of R$185.4 million, being: (a) R$ million referring to a contract for the financing of ICMS paid in the state of Minas Gerais (Fundiest), so that 70% of the ICMS paid is financed by the bank, with an interest rate of 30% of the IGP-M per month, falling due 10 years from when the payment is liberated; and (b) R$45.5 million referring to the financing lines Proim, Pró-Floresta and Pró-Invest, used for the financing of machinery and equipment at the Company's manufacturing plant operations and pine and eucalyptus plantations in its forestry operations. The cost of these lines varies between IGP-M + 4% p.a. and IPCA + 6% p.a.. Banco Santander: The Company has two debt contracts with Banco Santander totalling R$144.1 million, of which R$9.1 million falls due in the short-term and R$135.0 million is longterm. Banco Safra: The Company has one debt contract with Banco Safra, whose balance as at December 31, 2011, was R$57.9 million, falling due in the short term. Banco JP Morgan: The Company has one debt contract in dollars with JP Morgan, whose balance at the end of the year amounted to R$34.6 million, with R$234,000 falling due in the short-term, and the rest long-term. This contract carries an interest rate swap and currency swap, swapping the dollar for the CDI rate, with the aim of eliminating the risk of exchange rate variation. II - Other long-term relationships with financial institutions

7 The relationship that the Company maintains with financial institutions is of a commercial nature, in the form of service operations for the charging of its bills, the management of its employee payroll, Authorised Direct Debits (DDA), the payment of suppliers' invoices, exchange-rate operations, and the passing-on of loans and financing contracts. III - Degree of subordination between debts The Company does not have subordinated debt. IV - Possible restrictions imposed on the issuer, particularly in relation to debt limits and the contracting of new debt, the distribution of dividends, the sale of assets, the issue of new securities and the sale of corporate control The Company is obliged to maintain certain percentages of debt and equity in its contracts with the BNDES and Banco Santander. These percentages are measured annually, in accordance with the parameters below: Covenants Meta 31/12/2011 I. BNDES Ebitda / Net Fin. Exp. = ou > 3,00 6,89 Net Equity / Total Assets = ou > 0,45 0,54 Ebitda / ROL = ou > 0,20 0,28 Net Debt / Ebitda < ou = 3,50 1,42 Total Debt / Total Debt + Net Equity < ou = 0,75 0,34 II. Santader Net Debt / Ebitda < 3,50 1,42 Total Debt / Tangible Net Equity < 0,75 0,62 b. limits in the use of financing already contracted for The Company has various ongoing projects with the BNDES, with different fund destinations for the Wood Division (project for resin manufacture, the expansion of MDF production and forestry planting and maintenance) and the Deca Division (project for expansion in the manufacture of metal bathroom fittings and vitreous chinaware). The loan will be made available to the Company in instalments, in accordance with proof of expenditure related to the projects financed. c. significant alterations in each item in the financial statements

8 FINANCIAL STATEMENTS (in R$ '000) Vertical Horizontal Vertical Horizontal ASSETS 31/12/2011 analysis analysis 31/12/2010 analysis analysis 31/12/2009 CURRENT ,4 15, ,2 43, Cash and equivalents ,7 17, ,0 104, Client accounts receivable ,7 16, ,2 22, Stock ,0 13, ,9 38, Amounts receivable ,5 15, ,4 35, Recoverable taxes and contributions ,4 1, ,6-12, Other assets ,1-6, ,1-25, NON-CURRENT ,6 8, ,8 4, Linked deposits ,3 63, ,2 43, Amounts receivable ,1 81, ,6-8, Pension plan credits ,1 16, ,1 19, Recoverable taxes and contributions ,4-16, ,6-44, Deferred income tax and social contrib ,9-10, ,1-38, Other investments 772 0,0 18, ,0 0,0 652 Fixed assets ,1 8, ,7 4, Biological assets ,1 6, ,7 18, Intangible assets ,6 8, ,8-2, TOTAL ASSETS ,0 10, ,0 12, FINANCIAL STATEMENTS (in R$ '000) Vertical Horizontal Vertical Horizontal LIABILITIES 31/12/2011 analysis analysis 31/12/2010 analysis analysis 31/12/2009 CURRENT ,8 33, ,9-5, Loans and financing ,1 59, ,0-29, Suppliers ,3 26, ,0 16, Staff obligations ,5 21, ,4 14, Accounts payable ,8-5, ,9 37, Taxes and contributions ,0 16, ,0 165, Dividends and equity-on-interest payab ,0-30, ,6 138, NON-CURRENT ,1 6, ,2 30, Loans and financing ,0 5, ,8 44, Contingency provisions ,0-4, ,3-15, Deferred income tax and social contrib ,3 13, ,2 3, Other accounts payable ,7 1, ,9 478, SHAREHOLDERS' EQUITY ,1 7, ,9 9, Paid-up capital ,7 20, ,9 0, Cost of share issue (7.823) -0,1 0,0 (7.823) -0,1 0,0 (7.823) Capital reserves ,5 1, ,9 2, Re-valuation reserves ,3-14, ,7-7, Profit reserves ,9-0, ,0 30, Shares held in treasury (23.032) -0,3 159,1 (8.890) -0,1 308,4 (2.177) Adjustments in equity valuation ,1 1, ,7-0, Net Equity Attributed to Controlling Shareholders non-controlling shareholders TOTAL ASSETS ,8 10, ,1 12,

9 INCOME STATEMENT 31/12/ /12/ /12/2009 NET SALES REVENUE , , ,0 Variation in fair value of biological asse , , ,6 Cost of goods sold (COGS) ( ) -71,1 ( ) ,0 ( ) ,5 GROSS PROFIT , , ,0 Sales expenses ( ) ,0 ( ) -11,2 ( ) ,0 General and administrative expenses ( ) -3,6 ( ) ,2 ( ) -5,7 Management fees (13.581) -0,5 (10.115) 89940,2 (15.768) -0,8 Other operating results, net , ,3 (48.522) -2,5 OPERATING PROFIT BEFORE FINANCIAL RESULTS , , ,0 Financial revenues , , ,1 Financial expenses ( ) -7,4 ( ) ,3 (89.891) -4,7 PROFIT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION , , ,3 Income tax and social contribution - cur (59.421) -2,0 (98.930) -3,6 (33.003) -1,7 Income tax and social contribution - def (20.179) -0,7 (51.498) , ,2 NET EARNINGS FOR THE PERIOD , , ,8 Profit attributable to: Controlling Shareholders Non-controlling Shareholders Earning per share 0,6820 0,0197 0,4663 Earnings diluted per share 0,6688 1,0023 0,4575

10 COMPARATIVE ANALYSIS BETWEEN 2010 AND 2009 ASSETS: Current Cash and equivalents: As at , cash and equivalents totalled R$616.5 million, which compares with R$300.9 million at the end of 2009, representing an increase of R$315.6 million. The variation occurred as a function of cash generation as a result of operational activities and the contracting of new financing. Clients: The increase of R$105.0 million in the client account was because of the increase in volumes shipped at the Wood Division, of 15.8% and 9.3% at the Deca Division, in addition to an increase in net revenue of 56.1% by the Wood Division and 20.4% by the Deca Division due to an improvement in the economic environment and the consequent increase in demand. Stock: The increase of R$100.2 million was due to the rise in production and sales, increasing the level of stock in the following phases: R$51.1 million in increased raw material, R$5.2 million in finished products, R$26.0 million in products in the process of being manufactured, R$12.1 million in advances to suppliers of stock and R$5.8 million in storage. Taxes and contributions recoverable: The reduction of R$14.0 million basically refers to the use of ICMS/PIS/COFINS credit on the acquisition of goods under the heading of fixed assets. Non-current Credits to pension plan: The increase of R$11.0 million took place because of the updating of the credits to the Fundação Itaúsa Industrial pension fund, a credit which was originally booked as a result of the participants having opted for redemption or early retirement. Taxes and contributions recoverable: The reduction of R$28.5 million refers to the transfer to current assets of ICMS/ PIS/COFINS credits, on the acquisition of fixed assets. The recovery of these credits is based on the following schedule: for machinery and equipment the recovery of PIS and COFINS is carried out in 48 instalments, on goods acquired up to the end of May 2008, and 12 instalments for items acquired from May For the items that form part of the constructions, recovery will be over 24 months for purchases made after Before this date, recovery is a function of depreciation. ICMS is recoverable in 48 instalments. Deferred income tax and social contribution: The reduction of R$44.0 million took place because of the sale of assets, based on deferred income tax and social contribution, being: R$27.1 million from the SWAP results (cash vs. accrual), R$12.6 million for tax provisions and R$4.3 million for other provisions. Fixed assets: The variation in fixed assets of R$106.6 million refers to the application of funds, in accordance with the Company's expansion plan, of R$297.7 million and the amounts related to asset depreciation and write-offs, of R$191.1 million. Biological asset: The variation of R$160.3 million includes the application of funds, of R$149.9 million from exhaustion of R$168.3 million in the recognition of the fair value of the biological assets, in accordance with CPC 29, IAS 41, deducting the estimated sale costs at the time of harvest, of R$178.7 million. Intangible: The variation of R$12.3 million is represented by the realisation of the premium related to the value of the client portfolio, of R$24.3 million, and for the acquisition of software use rights, of R$12.0 million.

11 LIABILITIES: Current Loans and financing: The net reduction of R$183.7 million basically took place because of the liquidation of financing through Industrial Credit Certificates, Resolution 2770 and ACC - Advances on Foreign Exchange Contracts. Tax and contributions: The increase of R$37.0 million in referring to tax and contribution (income tax, social contribution, ICMS, IPI, PIS and COFINS), which occurred as a result of the Company's increased earnings. Non current Loans and financing: The increase in indebtedness of R$358.6 million took place because of the raising of finance through Industrial Credit Certificates, financing from the BNDES and Rural Promissory Notes, referring to the Company's ongoing investment plan. Provision for contingencies: The reduction of R$26.5 million took place because of the decision related to PIS - Semestralidade, there having been a positive ruling made on a case ongoing since As a result of this decision, the Company reversed a contingency provision of R$36.1 million. Deferred income tax and social contribution: The increase of R$12.9 million basically took place because of the provisions in the adjustments made in the CPCs/IFRS. Other accounts payable: The increase of R$94.5 million in the main referred to the investment by third parties in companies in the minority shareholding account of Duraflor S.A., the Company s subsidiary. FINANCIAL STATEMENT Net sales revenue: The net sales revenue of R$2,741.8 million in 2010, compared to R$1,930.1 million in 2009, is equivalent to a rise of 42.1%. This increase took place as a result of buoyant market conditions, a better pricing base and product sales mix, and a higher aggregate value. Furthermore, the comparison year only included sales from Satipel from September to December 2009, seeing that the merger took place on Variation in the fair value of biological assets: There was an increase on the year of R$86.9 million. This variation is explained by the acquisition of land containing forest already formed and the variation in the price of wood and forestry productivity. Cost of goods sold: The cost of goods sold showed an increase of R$445.6 million. This increase was thanks to the higher pace of economic activity and inflationary pressure from the second half of the year. Sales expenses: Sales expenses increased by R$77.0 million as a result of a higher rate of economic activity, the increase in the cost of domestic freight, higher expenditure on promotional material, sales bonuses and samples. In relation to net revenue, however, there was an improvement in the indicator, which amounted to 11.2% in 2010, compared to 12.0% in General and administrative expenses: In nominal terms, general and administrative expenses remained at the same level compared to the previous year, which meant that there was dilution in relation to Net Revenue from 5.7% in 2009 to 4.0% in Other operating results, net: In 2010, the positive figure of R$25.9 million, compared to the negative figure of R$48.5 million in 2009, is explained as follows: 2010: (i) Tax recovered as a result of the PIS Semestralidade Lei Complementar lawsuit No. 7/70 of R$36.4 million, (ii) the positive results of asset write-offs of R$8.0 million and (iii) the provision for employee profit-sharing and stock option plan of R$22.7 million, among others. 2009: (i) R$43.3 million in contingency provisions, impairment and other adjustments referring to the merger between Duratex and Satipel, (ii) R$18.5 million in employee profit-sharing and

12 stock option plan, (iii) R$2.1 million in tax recovered and gains as a result of adhesion to tax amnesty plans, (iv) R$11.1 million in positive results of asset write-offs, among others. Financial revenues: Financial revenue showed an increase of R$11.7 million compared to 2009, as a result of the increase in the cash and equivalents balance. Financial expenses: Financial expenses showed an increase of R$60.4 million due to the correction of financing balances in national currency, and the effect of exchange rate variation on financing. Income tax and social contribution current: Income tax and social contribution in 2010 and 2009 remained at the same level in relation to Profit before Income Tax and Social Contribution. Income tax and social contribution deferred: Deferred income tax and social contribution showed an increase of R$55.9 million compared to the previous year as a result of the adjustments in the application of CPCs/IFRS of R$12.3 million and R$43.2 million referring to the temporary differences between the tax bases for assets and liabilities, and their respective accounting values. COMPARATIVE ANALYSIS BETWEEN 2011 AND 2010 ASSETS: Current Cash and equivalents: as at , the Company's cash and equivalents balance totalled R$726.2 million, compared to the figure of R$616.5 million at the end of 2010, representing an increase of R$109.7 million. This variation occurred as a function of cash generated through operational activities, and the contracting of new financing, for a net amount of R$136.5 million. Client receivables: the increase of R$92.8 million in the client account was due to the rise in the level of segments at the Deca Division of 17.9%, which corresponded to an increase of 20.1% in net revenue, with the level of sales and shipments remaining stable in the Wood Division. Stock: the increase of R$49.1 million in the stock account took place in the following stages: (i) R$10.4 million in products; (ii) R$30.6 million in raw materials, and (iii) R$8.9 million in stock in storage and advances to suppliers. Receivables: Represented basically by amounts receivable referring to the sale of property and other credits which remained the same as in Taxes and contributions recoverable: the balance under this heading remained at the same levels as in 2010, thus comprising: (i) R$36.7 million in income tax and social contribution to offset; (ii) R$46.9 million in ICMS/PIS/COFINS on the acquisition of fixed assets; (iii) R$8.7 million in PIS and COFINS to offset, and (iv) R$6.1 million referring to ICMS and IPI. Other credits: represented by insurance premium to be appropriated and other advances, remaining at the same levels as in Non-current Indexed deposits: indexed deposits remained at the same levels as in Receivables: Represented basically by amounts receivable from the sale of properties and other credits, which remained at the same levels as in Credits to pension plan: the increase of R$11.3 million was due to the updating of the credit with Fundação Itaúsa Industrial, this credit being originally booked as a result of participants having opted for advanced redemption or early retirement.

13 Taxes and contributions recoverable: the reduction of R$5.8 million was because of the transfer of ICMS/PIS/COFINS on the acquisition of fixed assets due for refund, to short-term assets. Deferred income tax and social contribution: calculated on: (i) income tax losses and negative social contribution base; (ii) temporary differences between the calculation basis of tax on assets and liabilities, and (iii) on the application of CPCs and IFRS. This account remained the same as in Fixed assets: the variation in fixed assets of R$241.1 million is represented by the acquisition of assets of R$445.3 million, the incorporation of Deca Nordeste and DRI Resinas of R$29.7 million and R$233.9 million referring depreciation, write-offs and transfers. Biological asset: the forestry reserves have the function of guaranteeing supplies to the plants, as well as providing protection against the risk of future increases in the price of wood. This is a self-sustainable operation, integrated to the Company's industrial complexes, which in combination with a supply network, provides a high degree of self-sufficiency in the supply of wood. The variation of R$63.5 million is represented as follows: (i) R$16.1 million in variation in the fair price value in terms of price and volume; (ii) R$40.3 million in the variation in historic value; and (iii) R$7.1 million in acquisition. Intangible: the variation in intangible assets of R$43.2 million, net of amortizations, were because of: (i) the premium on future profitability referring to the portfolio of clients acquired as a result of the acquisition of Louças Elizabeth, of R$71.5 million, and (ii) R$31.4 million referring to amortisations in the period, and R$3.1 million in additions. LIABILITIES: Current Loans and financing: the variation of R$256.3 million was basically due to the reclassification of industrial credit certificates from long-term to short-term. Suppliers: the variation of R$33.0 million refers to the purchase of inputs and assets for the Company's operations. Obligations to personnel: the variation of R$18.8 million refers to provisions for holidays, payroll charges and sundry provisions. Accounts payable: Accounts Payable remained at the same levels as those in 2010, referring to: (i) the purchase of farms in instalments; (ii) the escrow account in the acquisition of Louças Elizabeth and Cerâmica Monte Carlo; and (iii) other Accounts Payable. Taxes and contributions: the balance of taxes and contributions payable remained at the same levels as those in 2010, referring to IPI, ICMS income tax and social contribution. Dividends and minority shareholder interests: the reduction of R$39.0 million compared to the previous year was as a result of the lower base for the calculation of dividends and minority interests, due to the fact that earnings were lower than in the previous year. Non-current Loans and financing: the variation of R$65.3 million was due to the raising of finance through BNDES REVITALIZA, Floating Rate Note and Resolution Contingency provision: the balance of contingency provisions of a labour-related, civil and tax nature remained the same as that in 2010.

14 Deferred income tax and social contribution: variation of R$57.6 million basically refers to income tax and social contribution in the form of tax obligations. FINANCIAL STATEMENT: Net sales revenue: the variation of R$228.6 million, is equivalent to an increase of 8.3% compared to This increase was due to a 17.9% rise in the volumes shipped at the Deca Division and the improvement in unit net revenue, both for the Deca Division as well as the Wood Division. Cost of goods sold: the cost of goods sold showed an increase of R$304.3 million, being due to the increase in variable costs at the Deca Division as a consequence of the higher volumes shipped, as well as the cost increases in the period, principally of those referring to labour and commodities, such as copper and resins. Sales expenses: although sales expenses increased by 11.5% compared to the previous year, net sales revenue remained practically stable. The increase of R$34.6 million in sales expenses referred to the cost of domestic freight, promotional material, and other items. General and administrative expenses: when compared with the previous year, general and administrative expenses were down 2.3%, with dilution in respect to net sales revenue. Financial revenues: financial revenues showed an increase of R$45.8 million compared to 2010, due to the higher balance of cash and equivalents. Financial expenses: financial expenses showed an increase of R$69.8 million compared to 2010, as a result of the correction applied to financing balances in national currency, and the effect of exchange rate variation on financing. Other operating results: the increase in "Other operating results" of R$2.8 million is not significant and the account balance at the end of 2011 was composed as follows: (i) (-) R$13.0 million in equity stakes and stock options; and (ii) R$41.7 million from the result of the sale of assets and other operations. Current and deferred income tax and social contribution: the reduction of R$70.8 million, compared to 2010, was due to the lower earnings base as well as the optimization of direct taxes The directors must comment on: d. the results of the issues operations, in particular: The 2009 result was impacted by the merger between Duratex and Satipel, which took place on Up to August 2009, the results were from the activities of the former Duratex engaged in the sale of MDF wood panels, fibreboard and MDP, as well as metal bathroom fittings and vitreous chinaware. From September, with the advent of the merger, the results began to reflect the operations of the two companies. Wood division: the performance indicators for the wood panels sector are dependent on levels of economic activity, employment rates, per capita income, salary levels among the population, and interest rate policy for the end-consumer. The Brazilian wood panel market grew at an average annual rate, between 2005 and 2011, of 13.8% per annum (MDF) and 6.0% per annum (MDP), a performance which was above the average GDP growth in the same period. This is due to the improved scenario in the consumer goods segment, as a result of increased credit access in the market, against a background of low unemployment with real gains in incomes among the population. Approximately 80% of the panels in Brazil are consumed by the furniture industry, which, in turn, sells its products through the Brazilian furniture retail segment (Casas Bahia, Lojas Cem,

15 Magazine Luiza, Marabrás, among others), through its partnerships with these companies in the distribution of finished products. The entire chain is inter-related with the construction market, seeing that it is a significant leveraging force for business as it increases the per capita consumption of wood panels, as for each new property the fitted furniture is replaced or purchased from new. The activity in the entire chain is dependent on macro-economic variables in Brazil, and the stability of the global economy. Duratex also has a line of High Resistance Laminated Flooring Durafloor, a product developed for the retail segment (specialist stores and distributors), in alignment with the strategy of adding value to the panel business. The percentage of exports has been falling as a result of the global crisis and the appreciation in the Brazilian Real, today representing approximately 5% of the net consolidated revenue of the Wood Division. The market segments in which we operate are characterised by free competition between solid companies, large and medium-sized, both in the Brazilian as well as the international market (generally large producers). There is a degree of seasonal variation in the sector, with a reduction in sales at the end of the year and the beginning of the next one, due to the concentration of holidays during this period and the commitment of family income to end-of-year expenditure. The prices are managed during the periods following a trend of margin rebuilding to cover increases in costs and adjusted for demand for products with a higher aggregate value, in keeping with our strategy of generating value for the shareholder. Duratex is the leader in terms of wood panel production capacity in Brazil, and our revenue is directly dependent on shipment volumes and alterations in product price and mix. The Wood Division ended 2011 showing an increase in Net Revenue of 2.5%, despite the retraction of 1.9% in volume shipped. This situation was possible due to the improvement in the pricing base and sales mix. Despite this, the increases achieved were not sufficient to overcome the pressure on costs, which squeezed Gross Margin to 31.6%, compared to 39.4% in 2010, and recurring EBITDA margin to 28.3%, compared to 31.7% in Deca division: The construction sector depends on various factors which determine its level of growth, the most important of which are: GDP growth, incomes among the working class, salary levels, the unemployment rate, interest-rate policy, the availability of real-estate financing lines, the housing shortage and the availability of credit to the consumer. The Abramat index, which measures the revenue performance of companies in the construction materials segment in the domestic market, grew at an average annual rate of 4.7% between 2005 and While Deca, in the same period, reported an average annual increase in revenue of 17.7%. This means that Deca reported a better performance than the sector, having also shown an increase in market share as a result of investment in organic growth and the acquisition of competitors in the vitreous chinaware segment, with two acquisitions in 2008: Ideal Standard, with two plants, one in Jundaí-SP and the other in Queimados-SP, and Cerâmica Monte Carlo with operations in Pernambuco,. In 2011, the Company made a further acquisition in the sector, the target being Elizabeth Louças Sanitárias, with its plant in João Pessoa-PB. The Brazilian construction sector is divided between the building of new homes (40%) and the refurbishment of existing units (60%). The participation of new construction as a percentage of total construction, varies as a function of credit and financing availability, the length of term of the financing offered, as well as interest rates and the level of employment. Refurbishment projects are basically served by the existing retail network throughout the Country, represented by stores for the sale of construction material, while new construction is

16 also served by the retail segment, but direct sales by manufacturers of bathroom fittings and vitreous chinaware to construction firms have increased. Deca operates throughout the domestic market through the retail chain, fulfilling all the demand for our products, from those of the more economic variety, to products retailed by more specialist boutiques, which serve consumers that are looking for products with a different level of design, sophistication and quality. For new constructions, Deca has adopted a policy of only serving the major construction firms, thus preserving its relationship with the distribution chain, and at the same time providing supplies for major building projects that need a differentiated level of service. Direct sales to construction firms today represent approximately 22% of Deca's total sales. The level of exports in this industry is relatively low with respect to the domestic market, fundamentally because of the difference in techniques and installations in the various countries. In addition to the technical aspect, in the last few years the appreciation of the Brazilian Real against the US Dollar has meant that there has been a significant loss in competitiveness in export price terms. Deca, which exports to more than 30 countries, has decided to continue to serve markets that have already been developed over the last few years, without, however, seeking to develop new clients at this time of lower pricing competitiveness. Exports represent approximately 4% of volume sold. Deca's operational segments are subject to free competition in Brazil, there being large, medium and small manufacturers of vitreous chinaware in this segment. The world's largest vitreous china manufacturer has operations in Brazil. In the metal fittings segment, Deca competes with more than 200 companies in Brazil, being generally small in size and regionally distributed, in addition to medium and large-size companies. The market is extremely competitive, making it difficult for foreign companies to participate in the domestic markets, so consequently the level of imports is low in this segment. Seasonal variation is low. Deca's prices are managed as a function of the price of the main inputs involved in the manufacturing processes, such as copper, energy, gas, and labour. Deca has a strong participation in the segment of products with a high added value, which generates greater and provides high visibility for the Deca brand name. Deca is the national leader in the production and sale of metal bathroom fittings, especially in the luxury segment, in keeping with its strategy of adding value, as well having a brand name that is a benchmark in the market. In the vitreous chinaware segment, Deca ranks second in terms of production volume, but is leader in the high added-value segments, which provides it with a richer shipment mix, and consequently greater profitability. Following the conclusion of the investments planned in 2012, together with the acquisition of Elizabeth, Deca will become the market leader in the vitreous chinaware segment, as well as bathroom fittings was a very difficult year, particularly in the first half as a result of the recession, and the price reductions needed to maintain, and even increase, the level of production and sales. While in the second half of that year, volumes and prices started to recover, with this trend continuing in Inflationary pressures, combined with sales mix with a lower added-value and margins, basically due to the acquisition of Elizabeth, all contributed to reducing Deca s margins. In 2011, Gross Margin amounted to 38.2%, compared to 43.5% in 2010, while Ebitda margin came to 24.6%, compared to 29.7% in the previous year. ii. description of any important revenue components Macro-economic conditions existing in the domestic market are important revenue components; these include, but are not limited to: employment levels, incomes, interest rates, availability of credit for the financing of consumer goods purchases and furniture, and the length of financing term. In addition to this, questions more directly linked to the Company, such as the volume of

17 products shipped, prices practised and sales mix can also be added to the main revenue components. iii. factors which materially affected operational results The year 2011 was affected by measures adopted by the monetary authorities as a way of controlling inflationary pressure triggered by the good performance of the economy the previous year, when there was a sharp increase in GDP growth, of the equivalent of 7.5%. The increase in interest rates, of taxes on financial transactions and the increased rate of compulsory deposit requirement, all contributed to reducing liquidity in the domestic market, slowing the rhythm of economic growth and bring inflation down to more acceptable levels. The slowdown in the economy is evidenced by the revision in GDP growth estimates for Brazil for The Focus Report published by Brazilian Central Bank on December 31, 2010 indicated GDP growth estimates for 2011 of 4.5%. In the final analysis, real growth amounted to 2.7%. This scenario was a determining factor in the modest performance shown by the Wood Division, in an environment of more restricted credit in retail furniture sales. Despite the slowdown in the economy, persistent inflation, principally in the price of commodities, such as urea, methanol and copper, as well as labour, contributed to reducing the operational margins of the businesses in both Divisions. iv. variations in revenues attributable to modifications in prices, exchange rates, inflation, alteration in volumes and the introduction of new products and services. The table below provides evidence that the Deca Division showed a lower correlation to the alteration in the economic environment than the Wood Division. This is due to the characteristics of Deca s products, which cater to the finishing stage of new constructions and refurbishment projects. With this, there is a delay in terms of the construction cycle. While the Wood Division, which saw a 1.9% drop in volume shipped, managed to increase its net revenue by 2.5%, basically as a result of increased pricing. Note that the unit net revenue showed an increase of 4.5% compared to Deca Division Wood Division Shipped volume (in '000 items/year) Net Revenue (in R$ '000) Unit Net Revenue (in R$/item) 42,91 42,13 38,24 Shipped volume (in '000 m³/year) Net Revenue (in R$ '000) Unit Net Revenue (in R$/m³) 826,85 791,59 782,29 v. impact of inflation, variation in the price of main inputs and products, the exchange rate and interest rates, on the operational and financial result of the issuer The first half of 2010 went by without any major inflationary pressure. In the second half of the year, however, inflationary pressure increased as a result of collective wage agreements and the increase in the cost of certain commodities such as metals (copper) and chemical resins (based on urea and methanol), with this pressure continuing in 2011, contributing to a comparative reduction in operating margins. In this way, consolidated Gross Margin came to 34.1% in 2011, compared to 40.8% in 2010, while consolidated recurring Ebitda margin amounted to 26.9%, lower than the figure reported of 31.0% in the previous year.

18 10.3. The directors must comment on the significant effects that the events below caused, or are expected to cause, on the financial statements of the issuer, and its results: a. additions or sales within the operational segment In the period, as part of its investment plan, the Company invested a total of R$635.8 million. Here are the highlights in the Wood Division: (i) down-payment on the purchase of equipment for the installation of two new MDF production lines, with a production capacity of 1.2 million m 3 ; (ii) construction works on the building which will receive the first of the two production lines planned, in Itapetininga (SP); (iii) completion of the assembly and operational start-up of a new low-pressure coating line in Agudos-SP; and (iv) completion of the assembly and operational start-up of a new laminate flooring production line in the same region. Here are the highlights in the Deca Division: (i) completion of the assembly and operational start-up of new electroplating equipment, in the metal bathroom fitting segment; (ii) the introduction of a new furnace with a firing capacity of 800,000 pieces of vitreous chinaware a year, at the unit at Cabo de Santo Agostinho - PE; and (iii) the acquisition of all the share quotas of Elizabeth Louças Sanitárias, located in the state of Paraíba, which has an estimated production capacity of 1.8 million pieces year, for the price of R$80 million. b. constitution, acquisition, or sell-off of equity stakes Under this heading, is included the acquisition of all the quotas in the paid-up capital of Elizabeth Louças Sanitárias on February 4, 2011 and its subsequent incorporation into Duratex on July 29 of that year. c. unusual events or operations There were no unusual events or operations in The directors must comment on: a. significant changes in accounting practices In 2011, there were no changes in accounting practices. b. significant effects of changes in accounting practices Not applicable. c. qualifications and highlights present in the auditor's report The highlight indicated in the report from the independent auditors was as a function of the evaluation of investment in subsidiaries, that is to say, the accounting practices adopted in Brazil applied to individual financial statements differ from those of the IFRS for the equity income result, seeing that under the IFRS system these would be at cost or fair value. The following is a transcription of the highlight indicated in the auditor's report: As described in Note 2.2.2, the individual financial statements were drawn up in accordance with the accounting practices adopted in Brazil. In the case of Duratex S.A., these practices differ from IFRS standards applicable to separate financial statements only in that they refer to the valuation of investment in subsidiaries in accordance with the equity income result method, whereas for IFRS purposes, these would be at cost or fair value. Our opinion is that this does not represent a Qualification to the accounts, as a result of this item.