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

Transcription

1 Duratex S.A. Listed company National Register of Corporate Taxpayers - (CNPJ) No / NIRE Financial Statements at December 31, 2017.

2 DURATEX S.A. CNPJ / A Publicly Listed Company NIRE SUMMARIZED MINUTES OF THE MEETING OF THE EXECUTIVE BOARD HELD ON FEBRUARY 5, 2018 DATE, TIME AND PLACE: on February 5, 2018 at 8:00 am, at Avenida Paulista, 1938, Terrace floor, in the city and state of São Paulo. PRESIDING: Antonio Joaquim de Oliveira (Chairman); and Carlos Henrique Pinto Haddad (Secretary). QUORUM: the totality of the elected members. RESOLUTIONS ADOPTED UNANIMOUSLY: following examination of the financial statements for the fiscal year ending December 31, 2017 as well as the report from Ernst & Young Auditores Independentes S/S, the Executive Board decided unanimously and pursuant to the provisions in Sub-items V and VI, Article 25 of CVM Instruction 480/09, as amended, to declare that: a) it has reviewed, discussed and agreed with the opinions expressed in the report issued by Ernst & Young Auditores Independentes S/S; and b) it has reviewed, discussed and agreed with the financial statements for the fiscal year ending December 31, CONCLUSION: with the work of the meeting concluded, these minutes were drafted, read, approved and signed by all. São Paulo (SP), February 5, (aa) Antonio Joaquim de Oliveira Chief Executive Officer; Raul Penteado de Oliveira Neto Vice President of the Deca Business Unit; Henrique Guaragna Marcondes Vice President of the Wood Business Unit; Bruno Basile Antonaccio, Carlos Henrique Pinto Haddad; José Ricardo Paraíso Ferraz, Marcelo Koji Tahara, Marco Antonio Milleo, Maria Julieta Pinto Rodrigues Nogueira and Nelson Ricardo Teixeira Officers. CARLOS HENRIQUE PINTO HADDAD Investor Relations Officer

3 DURATEX S.A. A Publicly Traded Company CNPJ: / REPORT OF THE AUDIT AND RISKS MANAGEMENT COMMITTEE Introduction Created in November 2009, the Audit and Risks Management Committee of Duratex S.A., has as its principal responsibilities: (i) to supervise the processes of internal controls, in accordance with laws, regulations and internal regulations, and management of the risks inherent to the activities of the Company and those of its subsidiaries as well as the work undertaken by the Internal and External Audits; and (ii) to assess the quality and integrity of the financial statements. Responsibilities Management is responsible for the correct preparation of the financial statements of Duratex S.A. and those of its subsidiaries and associates as well as the implementation and maintenance of internal controls and risks management systems appropriate to the size and structure of the Company. It is also incumbent on the Management to establish procedures for guaranteeing the quality and processes which generate the financial information. The duties of the Internal Audit are to evaluate the risks of the principal processes and controls used to mitigate these risks as well as to verify compliance with the policies and procedures determined by Management, including those policies and procedures relating to the preparation of the financial statements. Ernst & Young Auditores Independentes S.S. is responsible for the auditing of the financial statements and must ensure that these represent adequately in all material aspects the equity and financial standing of Duratex S.A. and its subsidiaries and that they are prepared in accordance with the current accounting practices in Brazil as established by the Brazilian Securities and Exchange Commission CVM. Pursuant to its duties, the Committee s analyses and evaluations were based on information received from Management, the Internal Audit, the external auditors and from the executives responsible for the management of risks and the internal controls in the various segments of the Organization. Committee s Activities During the course of 2017, the Audit and Risks Management Committee met on eleven occasions with the following objectives:» Review of the Indebtedness and of the Financial Financial Investments.» Analysis of financial, operational and environmental risks and principal mitigating internal risks controls in meetings with the Organization s officers.» To take cognizance of the work undertaken by the Risks Commission and verify compliance with the Risks Management Policy.» To take cognizance of measures adopted by Management to adjust the Company s processes and controls to the requirements of the Anti-corruption Law.» To take cognizance of the principal projects which involve the information technology area.» Discussion and analysis of the principal accounting practices used in the preparation of the quarterly financial statements and the annual balance sheet.» To take cognizance of the principal contingencies involving the Company.» Analysis of certain aspects of the Reference Form, principally those relating to risks, prior to its filing with the Brazilian Securities and Exchange Commission CVM.» Discussion and approval of the External Audit s work plan for the year 2017.» To take knowledge of the Internal Controls Report prepared by the External Audit as of the baseline date of » Discussion of points for attention or improvement noted in the course of the work of the External Audit with respect to internal controls and accounting considerations.» Approval of the Internal Audit s work plan for 2018.» Approval of the Internal Controls area works plan for 2018.» Analysis of the results of work conducted by the Internal Audit.» Monitoring of action plans in the light of the Internal Audit s recommendations through the intermediary of meetings with the Company s officers.» To take cognizance and to monitor the activities of the Internal Ombudsman.» Analysis and discussion of the main audit issues, which are part of the independent auditor s report.» To conduct of the evaluation of the external and internal audits and the self-evaluation of the Committee. The financial statements for were discussed and analyzed at a meeting held on February 5, Conclusion The Audit and Risks Management Committee recognizes and supports the initiatives of the Company in reviewing processes and implementing improvements in internal controls and in risks management practices, as well as initiatives to increase the performance of the Compliance area. Based on information received and activities undertaken during the period, and consideration having been given to its responsibilities and limitations due to the scope of the activities undertaken in the period, the Audit and Risks Management Committee is of the view that the individual and consolidated financial statements as of were prepared in accordance with accounting practices adopted in Brazil and with the international financial reporting standards (IFRS) published by the International Accounting Standards Board (IASB), and recommends their approval by the Board of Directors. São Paulo, February 5, The Audit and Risks Management Committee Tereza Cristina Grossi Togni President Juliana Rozenbaum Munemori Raul Calfat Ricardo Egydio Setubal Rodolfo Villela Marino Salo Davi Seibel CARLOS HENRIQUE PINTO HADDAD Investor Relations Officer

4 São Paulo Corporate Towers Av. Presidente Juscelino Kubitschek, Vila Nova Conceição São Paulo SP - Brasil Tel: ey.com.br A free translation from Portuguese into English of Independent Auditor s Report on Individual and Consolidated Financial Statements prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Standards (IFRS), issued by International Accounting Standards - IASB. Independent auditor s report on individual and consolidated financial statements To the Shareholders, Board of Directors and Officers of Duratex S.A São Paulo - SP Opinion We have audited the individual and consolidated financial statements of Duratex S.A. ( Company ), identified as Company and Consolidated, respectively, which comprise the statement of financial position as at December 31, 2017 and the related statements of profit or loss, of comprehensive income (loss), of changes in equity, and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting practices. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the individual and consolidated financial position of the Company as at December 31, 2017, its individual and consolidated financial performance and its individual and consolidated cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and international financial reporting standards (IFRS) issued by the International Accounting Standards Board (IASB). Basis for opinion We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities, under those standards, are further described in the Auditor s responsibilities for the audit of individual and consolidated financial statements" section of our report. We are independent of the Company and its subsidiaries and comply with the relevant ethical principles set forth in the Code of Professional Ethics for Accountants and the professional standards issued by the Brazil s National Association of State Boards of Accountancy (CFC) and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to support our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year. These matters were selected in the context of our audit of the overall individual and consolidated financial statement, and in forming our opinion thereon and, accordingly, we do not express a separate opinion on these matters.. 1 Uma empresa-membro da Ernst & Young Global Limited

5 For each matter below, a description of how our audit has addressed the matter, including any comments on the results of our procedures, is disclosed in the context of the financial statement taken as a whole. We have fulfilled the responsibilities described in the Auditor s responsibilities for the audit of individual and consolidated financial statements section, including those relating to these key audit matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement in the financial statements. The results of our procedures, including those performed to address the matters below, provide the basis for our audit opinion on the Company s financial statements. Measurement of the fair value of biological assets The Company accounts for its forests, named biological assets, in Noncurrent assets, which are measured at fair value. At December 31, 2017, the fair value of these assets, recognized in the Company s and its subsidiaries consolidated noncurrent assets amounted to R$1,698,855 thousand. The estimated fair value of biological assets was determined taking into consideration a number of assumptions, such as: forest growth rate, interest rates for cash flows discounts, estimated productivity and price of standing wood. This matter is disclosed in Notes 2, 3 and 15 to the individual and consolidated financial statements. This matter was considered a key audit matter due to the significance of the values of Company assets in connection with the usual uncertainties of this type of estimate and the judgment necessary which should be exercised by management when determining the assumptions of calculations of the fair value of the assets. How our audit addressed the matter: Our audit procedures included, among others, the use of subject matter experts to assist us in evaluating the assumptions and methodology used by Company, particularly those relating to the estimated forest growth rate, interest rates for cash flows discounts, estimated productivity and price of standing wood. We also evaluated the appropriateness of Company disclosures on the most sensitive key assumptions in the measurement of the fair value of the biological assets included in Notes 2, 3 and 15 to the financial statements. Based on the result of the audit procedures on the audit of the fair value of biological assets, which is consistent with the management evaluation, we considered that the criteria and assumptions used in management measurement of the fair value of biological assets, as well as the disclosures included in Notes 2, 3 and 15 are appropriate in the context of the overall financial statements. 2

6 Estimated realization of deferred taxes At December 31, 2017 the balance of deferred income and social contribution tax assets, recorded by the Company and its subsidiaries amounted to R$ 230,089 thousand (individual) and R$ thousand (consolidated), which are disclosed in Notes 2 and 11 to the individual and consolidated financial statements, together with the information that Company management considers this estimate to involve the need of a critical accounting judgment related to the accounting recognition of these assets and their future recoverability. This item was considered a key audit matter, since the estimated recoverability of these taxes is complex and involves the use of a number of assumptions to estimate such amount and the related year in which such deferred taxes will be recovered in the ordinary course of the Company s and its subsidiaries operations. These estimates rely on the studies of future profitability projection prepared by management, which includes forecasts of future market and business conditions regarding the business environment in which Company and its subsidiaries operate, which will allow recovering these deferred taxes in the coming years. How our audit addressed the matter: Our audit procedures included, among others, the review of projected future profitability prepared by management; the consistency of projected future profitability prepared by management when compared to the historical data related to prior year estimates. Furthermore, we engaged subject matter experts to assist us with the assumptions and methodology used by the Company and its subsidiaries when preparing these future profitability estimates. We also evaluated the fairness of Company disclosures of the estimated realization of deferred taxes in Notes 2 and 11 to financial statements. Based on the result of the audit procedures on the estimated recoverability of deferred taxes, which is consistent with the management evaluation, we considered that the criteria and assumptions used in management estimation of recoverability of deferred taxes, as well as the disclosures included in the Notes 2 and 11 are appropriate in the context of the overall financial statements. Recoverability of intangible assets - Goodwill In accordance with the accounting practices adopted in Brazil and international financial reporting standards, the Company is required to annually perform a test of recoverability of the amounts recorded as indefinite life intangible assets, including goodwill. At December 31, 2017 the goodwill balance was R$254,798 thousand and R$ 358,861 thousand, individual and consolidated respectively, as disclosed in Notes 2, 3, 16 and 17 to individual and consolidated financial statements. This item was considered a key audit matter, as the evaluation of the recoverability of these intangible assets is complex and involves a high degree of subjectivity, based on various assumptions such as: determination of cash generating units, discount rates, percentage of growth and profitability of the Company s and its subsidiaries business for a number of future years. Such assumptions may be significantly affected by market conditions or future economic scenarios in Brazil, which cannot yet be estimated accurately.

7 How our audit addressed the matter: Our audit procedures included, among others, the involvement of subject matter experts to assist us with evaluating the assumptions and methodologies used by the Company and its subsidiaries, especially those relating to future sales, growth rate, rate used in discounted cash flows, and profit margin of all cash generating units. We also evaluated the fairness of Company disclosures of key assumptions which are more sensitive when testing the recoverability of intangible assets (goodwill), included in Notes 2, 3, 16 and 17 to financial statements. Based on the result of the audit procedures on the recoverability of intangible assets (goodwill), which is consistent with the management evaluation, we considered that the criteria and assumptions used in management estimation of recoverability of intangible assets (goodwill), as well as the disclosures included in the Notes 2, 3, 16 and 17 are appropriate in the context of the overall financial statements. Other matters Statements of value added The individual and consolidated statements of value added for the year ended December 31, 2017, prepared under Company management responsibility, the presentation of which is required as supplementary information under IFRS, have been subject to audit procedures in conjunction with the audit of the Company s financial statements. In order to form our opinion, we analyzed whether these statements are reconciled to the financial statements and accounting records, as applicable, and whether their form and content meet the criteria defined in Accounting Pronouncement CPC 09 - Statements of Value Added. In our opinion, these statements of value added were fairly prepared, in all material respects, in accordance with the criteria defined in referred to Accounting Pronouncement and are consistent with the overall individual and consolidated financial statements. Other information accompanying the individual and consolidated financial statements and independent auditor s report Company management is responsible for other information included in the Management Report. Our opinion on the individual and consolidated financial statements does not encompass the Management Report; accordingly, we do not express any form of audit conclusion thereon. In connection with the individual and consolidated financial statements, we are responsible for reading the Management Report and, in so doing, considering whether such report presents significant inconsistency with the financial statements or with our knowledge obtained in the audit, or otherwise seems to present material misstatements. If, based on the work performed, we conclude that the Management Report presents material misstatements, we are required to communicate such fact. We have nothing to report in this regard.

8 Responsibilities of management and of those charged with governance for the individual and consolidated financial statements Management is responsible for the preparation and fair presentation of these individual and consolidated financial statements in accordance with accounting practices adopted in Brazil and international financial reporting standards issued by the International Accounting Standards Board (IASB), and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free of material misstatement, whether due to fraud or error. In preparing the individual and consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and its subsidiaries or to cease operations, or has no realistic alternative but to do so. Those charged with governance of Company and subsidiaries are responsible for overseeing the financial reporting process, which comprise the executive board of the Company and of its subsidiaries, the Audit and Risk Management Committee and the Board of Directors. Auditor s responsibilities for the audit of individual and consolidated financial statements Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International standards on auditing will always detect material misstatements when they exist. Misstatements can arise from fraud or error and are considered material if they could, individually or as a whole, reasonably be expected to influence the economic decisions of users made on the basis of these financial statements. As part of the audit conducted in accordance with Brazilian and International standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess risks of material misstatements of the individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud may involve override of internal controls, collusion, forgery, intentional omissions or misrepresentations.

9 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control of the Company and its subsidiaries. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast substantial doubt as to the ability of the Company and its subsidiaries to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Company and its subsidiaries to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the corresponding transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the individual and consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provided those charged with governance with a statement that we have complied with relevant ethical requirements, including those regarding independence, and communicated with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

10 From the matters communicated with those charged with governance, we are required to determine those matters that were of most significance in the audit of the individual and consolidated financial statements of the current period and are therefore the key audit matters. We are required to describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. São Paulo, February 5, ERNST & YOUNG Auditores Independentes S.S. CRC-2SP034519/O-6 Drayton Teixeira de Melo Contador CRC-1SP236947/O-3

11 Financial Statements Index for 2017 and 2016 Management Report Balance Sheet Statement of Income Statement of Comprehensive Income Statement of Cash Flows Statement of Value Added Statement of Changes in Stockholders Equity Statement of Changes in Stockholders Equity Note 1 Operations Note 2 Summary of significant accounting policies Basis of preparation Consolidation Preparation of segmented information Foreign currency translation Cash and cash equivalents Financial assets Derivative financial instruments and hedging activities Trade accounts receivable Inventory Intangible assets Property, plant and equipment Impairment of non-financial assets Biological assets Loans and financing Accounts payable to suppliers and provisions Current and deferred income tax and social contributions Employee benefits Capital Revenue recognition Variation in the fair value of biological assets Leases Distribution of dividends and interests on capital 28 Note 3 Critical Accounting Judgments and Estimates Note 4 Financial Risk Management Financial Risk Factors Capital Management Fair Value Estimates Note 5 Cash and Cash Equivalents Note 6 Securities Note 7 Trade Accounts Receivable Note 8 Inventory Note 9 Other Receivables Note 10 Recoverable Taxes and Contributions Note 11 Deferred Income Tax and Social Contribution Note 12 Related Parties Note 13 Investments in Subsidiaries Note 14 Property, Plant and Equipment Note 15 Biological Assets (Forest Reserves) Note 16 Intangible Assets Note 17 Impairment testing of goodwill Note 18 Loans and Financing Note 19 Accounts Payable Note 20 Taxes and contributions Note 21 Contingencies Note 22 Rural Leases Note 23 Stockholders Equity Note 24 Insurance Coverage Note 25 Net Sales Revenue Note 26 Expenses, by Nature Note 27 Financial Income and Expenses Note 28 Other Operating Income (Expenses), Net Note 29 Sales of farms Note 30 Income Tax and Social Contribution Note 31 Stock Option Plan Note 32 Private Pension Plan Note 33 Medical Assistance Plan Post-Employment. 63 Note 34 Earnings Per Share Note 35 Business Segments Note 36 Subsequent events

12 MARKET AND BUSINESS SCENARIO MANAGEMENT REPORT 2017 The fourth quarter of 2017 has brought the consolidation of economic recovery in Brazil, reflecting positively on our operations. Inflation below the target s lower band, along with the downward path of interest rates and the return of credit and consumption have provided the necessary foundations for the recovery of activity in the Wood and Deca divisions. One of the propellers behind the return of activity in our business has been the recovery of demand, driven mainly by an increase in consumption by part of Brazilian families which, after undergoing a tough period of deleveraging, have now started to take credit once again. The Brazilian Institute for Geography and Statistics (IBGE) has registered a net increase of 9.8% in the consumption of furniture and electric appliances up to November, after two consecutive downturns in 2015 and In the wood panel segment, the Brazilian Institute of Trees (Instituto Brasileiro de Árvores - IBÁ) has registered an increase in domestic demand of 13% in the fourth quarter and 4% in the year. The demand in the foreign market has increased 21% in the year and 6% in the quarter. The demand for wood panels has grown 6% in the year when considering both internal and foreign markets. The Brazilian Institute of Construction Materials (Associação Brasileira da Indústria de Materiais de Construção - ABRAMAT), which is responsible for measuring evolution in the construction sector, points towards a fall in revenues of 4% in the year, in line with their projections, and a decrease of 5.7% in employment within the industry. The institute estimates a discreet growth of 1.5% in 2018, which is in line with our assumption of gradual recovery in demand. The Brazilian economy is expected to stabilize in 2018, and GDP to grow at 2.66%, according to the average of estimates in the FOCUS report published by the Central Bank on 01/26/2017. We remain cautiously optimistic with the recovery of our sectors of activity which have been negatively impacted by the politic and economic crises of the past few years. STRATEGIC MANAGEMENT & INVESTMENT Total investments totaled BRL 82.6 million within the last three months of the year, of which BRL 39.0 million have been directed to forest OPEX and BRL 43.6 million to factory maintenance and projects. In 2017, investments have represented BRL million, below our original estimate of BRL 420 million. This result illustrates Duratex s commitment to maximizing cash generation and financial deleveraging. The results of recently acquired Ceusa, a reference in the ceramic tiles industry, have been consolidated into Duratex in October, after CADE s- Conselho Administrativo de Defesa Econômica approval. As previously disclosed, Ceusa was acquired for BRL million (before the debt acquisition and variance in working capital) and marked the Duratex s entrance into the ceramic tiles industry, thus complimenting the Company s solution portfolio. We expect to integrate operations, thus further leveraging the businesses returns, in One of the highlights of 2017 was the consolidation of the Duratex Management System (Sistema de Gestão Duratex SGD), encompassing all of the company s efforts in terms of gains in efficiency, productivity, cost management and asset returns. An office with a dedicated team was created specifically for the management and dissemination of this project, besides the structuring of a methodology to measure progress. These initiatives, with the objective of offsetting the slow economic recovery, closed the year with a saving of BRL 76 million. The result reflects the Company s commitment and discipline to a more effective cost and expenses management. The Company has reached an important landmark in its journey towards cultural transformation, where all leaderships have been capacitated and dissemination for 100% of the Company. It has been two years since we embarked on this transformation, and one can already take notice of a more rejuvenated and innovative company, ever committed to the return of its operations. In addition, we completed the assessment of Great 2

13 Place to Work s, and were recognized for our good environment for employees, in their opinion. Regarding the next periods, the commitment and accountability of everyone, especially the leadership, is going to be fundamental in encouraging the development of teams in terms of performance and behavior, thus ensuring Duratex s prominence in its sectors of activity and as an employer. We have disclosed on January 31, 2018, as a subsequent event, the disposal of installations and equipment dedicated to the production of Thin Wood Fiber Boards (hardboard) located in the city of Botucatu. The evolution of the wood panel market in Brazil, and the decision to resume activities in the Itapetininga unit, has made these lines, which are directed mainly towards exports, small within Duratex s portfolio of solutions. This product has therefore lost relevance within the Company s strategy. The transaction refers to the swap of installation and equipment for a production farm located in the city of Capão Bonito, in the State of São Paulo, strategically closer to our unit in Itapetininga, at the base amount of BRL 60 million. The remaining lines of Thick and Thin Wood Fiber Board (MDF and HDF) continue to be operated as usual by Duratex. As legally required, this operation is being forwarded to CADE and will be finalized as soon as approval is received. The management of these lines remain with Duratex in the regular production standards for the time being. Being the search for higher returns and greater efficiency central objective in our strategy, we have announced on February 5th, 2018, the sale of land and forests located in the the state of São Paulo to Suzano Papel e Celulose. The evolution of forest management and technology within the last six decades has allowed the Duratex to increase its productivity, and therefore, to hold a volume of land and forests that exceeds the current and projected needs of its wood panel factories. Duratex has opted for the sale of such exceeding assets. The transaction foresees the sale of land and forests in the the central region of the state of São Paulo, and is structured in two parts, being: (i) Acquisition of about 9,500 (nine thousand and five hundred) hectares of rural property and forests assets in the total value of BRL million. (ii) Exclusive option for Suzano to purchase an additional 20,000 (twenty thousand) hectares of land and forests assets in the total amount of BRL million, to be exercised until 07/02/2018. This operation is subject to the conditions usual to this type of transaction and to approval by the Conselho Administrativo de Defesa Econômica - CADE. The values received will be directed towards the significant reduction of net debt, thus reducing financial costs and positioning the company at a strategic level of competitiveness. These movements take place in the direction of increasing productivity, efficiency and of improving the use of our assets and reduce financing costs, and thus contribute to a higher return on operations. DIVIDENDS Duratex s dividend policy requires a minimum dividend distribution of 30% of the adjusted net earnings. According to the proposal addressed by the Board, it was considered BRL 60.8 million as dividends, as interest on equity, equivalent to BRL per share. CONSOLIDATED FINANCIAL HIGHLIGHTS 3

14 BRL '000 4Q17 4Q16 % 3Q17 % % Highlights Volume shipped Deca ( 000 items) ,7% ,1% ,9% Volume shipped Deca ( 000 m2) Volume shipped wood (m3) ,2% ,3% ,4% Consolidated net revenue ,2% ,2% ,1% Gross profit ,3% ,5% ,3% Gross margin 33,5% 25,8% 29,1% 28,7% 25,8% EBITDA according to CVM No. 527/12(1) ,3% ,3% ,5% EBITDA Margin CVM No. 527/12 25,4% 28,1% 29,0% 24,7% 23,0% Adjustments for non-cash events (93.915) (44.041) 113,2% (43.709) 114,9% ( ) ( ) 36,7% Non-recurring events (28.146) (46.821) -191,6% (6.587) (59.133) Recurring and adjusted EBITDA(2) ,4% ,7% ,6% Recurring and adjusted EBITDA margin 20,8% 21,1% 20,1% 19,0% 17,4% Net income ,7% ,8% ,4% Recurring net income ,4% ,2% (12.966) -1493,4% Recurring net margin 10,2% 0,6% 5,1% 4,5% -0,3% INDICATORS Current ratio(3) 1,95 2,69-27,4% 2,08-6,1% 1,95 2,69-27,4% Net debt(4) ,9% ,5% ,9% Net debt/ebitda LTM(5) 2,76 2,997-7,8% 2,77-0,1% 2,76 2,997-7,8% Average net equity ,8% ,3% ,4% ROE (6) 7,2% 2,2% 7,2% 4,0% 0,6% Recurring ROE 9,6% 0,6% 4,5% 3,9% -0,3% SHARES Basic net earning per share (BRL)(7) 0,1227 0, ,4% 0,1205 1,8% 0,2682 0, ,1% Closing share price (BRL) 9,20 6,80 35,3% 9,47-2,9% 9,20 6,80 35,3% Net equity per share (BRL) 6,84 6,63 3,2% 6,79 0,8% 6,84 6,63 3,2% Shares held in treasury (shares) ,3% ,0% ,3% Market Value (BRL1.000) ,3% ,9% ,3% 1. EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization): Measure of operational performance in accordance with CVM Instruction 527/ EBITDA adjusted for non-cash events arising from variation in the fair value of biological assets and combination of businesses, in addition to extraordinary events. 3. Current liquidity: Current Assets Divided by Current Liabilities. Indicates the amount available in BRL to cover each BRL of short-term obligations. 4. Net Indebtedness: Total Financial Debt ( ) Cash balance. 5. Financial leverage calculated on the rolling EBITDA over the last 12 months, adjusted for events of a purely accounting and non-cash nature. 6. ROE (Return on Equity): measure of performance obtained by taking the Net Earnings over the period, annualized, by Average Net Equity. 7. Net earnings per share is calculated by dividing the earnings attributable to the Company s shareholders by the average weighted number of ordinary shares issued during the period, excluding the ordinary shares held by the Treasury. ADDED VALUE The Added Value for the quarter totaled BRL 479.6m. Of this amount, BRL 133.6m, equivalent to 27.9% of the total Value Added, was destined for the federal, state and municipal governments in the form of taxes and contributions. In 2017, the added value distributed was BRL 1,749.3 million. Regarding this distribution, 28% or BRL million was destined for government remuneration, in all of its aspects. 4

15 OPERATIONS Wood Division HIGHTLIGHTS 4Q17 4Q16 % 3Q17 % % SHIPMENTS (IN M3) STANDARD ,4% ,6% ,5% COATED ,0% ,2% ,9% TOTAL ,2% ,3% ,4% FINANCIAL HIGHLIGHTS (BRL '000) NET REVENUE ,0% ,3% ,0% DOMESTIC MARKET ,6% ,2% ,0% EXPORT MARKET ,8% ,5% ,4% Net unit revenue (BRL/m3 shipped) 1030, ,64-4,9% 1059,04-2,7% 1048, ,29-1,7% Unit cash cost (1) (BRL/m3 shipped) (629,31) (649,63) -3,1% (644,27) -2,3% (671,00) (680,64) -1,4% Gross profit ,0% ,7% ,1% Gross margin 37,2% 24,6% - 28,5% - 27,8% 24,9% - Sales expenses ( ) (90.667) 12,3% (96.584) 5,4% ( ) ( ) 3,6% General and administrative expenses (18.320) (18.538) -1,2% (17.711) 3,4% (73.597) (77.571) -5,1% Operating profit before financial results ,0% ,3% ,9% Depreciation, amortization and depletion ,8% ,5% ,0% Depletion tranche of biological assets ,6% ,0% ,5% EBITDA according to CVM No. 527/12(1) ,8% ,6% ,3% EBITDA margin according to CVM No. 527/12 30,1% 35,7% - 37,0% - 28,8% 28,0% - Variation in fair value of biological assets (93.603) (43.135) 117,0% (40.027) 133,8% ( ) ( ) 36,1% Employee benefits (63) (626) -89,9% (1.632) -96,1% (1.297) (2.675) -51,5% Extraordinary event(2) (28.146) -252,4% (46.821) -191,6% (6.587) (62.269) -89,4% Recurring and adjusted EBITDA ,2% ,3% ,4% Recurring and adjusted EBITDA margin 22,7% 25,3% - 23,4% - 20,0% 19,4% - (1) EBITDA (Earnings Before Interest,Taxes, Depreciation and Amortization): Measure of operational performance according to Instruction CVM527/12. (2) Extraordinary events, including: 3Q16: (i) result from the sale of lands from the subsidiary Duratex Florestal (-) BRL 30,814 K ; (ii) devolution of excess from the private pension plan (-) BRL K; 4Q16: result from the sale of lands from the subsidiary Duratex Florestal (-) BRL 30,939 K; results from the sale of furniture line pertaining to da Duratex Colômbia: (+) BRL K; 1Q17: result from the sale of lands from the subsidiary Duratex Florestal (-) BRL 2,672 K; 3Q17: result from the sale of lands from the subsidiary Duratex Florestal (-) BRL 46,821 K ; 4Q17: result from the sale of lands from the subsidiary Duratex Florestal (-) BRL 7,890 K; provision for non-recovered assets BRL (+) 50, ended on a positive tone for the Wood Division, reflecting Duratex s new positioning in wood panels and a gradual improvement of demand. Several initiatives were successfully implemented throughout the year, including price increases, and commercial and product development actions aimed at stimulating demand and improving the mix, along with efforts in cost reduction, as previously stated. As registered by IBÁ, the positive scenario in demand propelled the volume of wood panels marketed, which, along with the normalization of market share, lead to an expedition of thousand m³. This quarter registered the best expedition of the year, 5.2% above We have noticed a slight deterioration of the mix in this quarter, due to the fact that most of the growth in volume was concentrated in the standard lines that have a smaller added value. This deterioration was offset by a more efficient cost dilution, a consequence of operational leveraging. The result was a fourth quarter EBITDA of BRL million, and a margin of 22.7%, in line with the results registered in the previous quarter. Efforts related to cost reduction and gains in efficiency within the scope of the SGD will continue to be our focus in We have the opportunity to rearrange the mix of our production by exploring our logistic system and the competitive advantage of each of our five wood panel production units. We are taking measures to stimulate the demand for wood panels and the fidelity of clients, by offering high quality services while maintaining prices at levels that benefit the return of our operations. 5

16 Deca Division HIGHLIGHTS 4Q17 4Q16 % 3Q17 % % SHIPMENTS (IN 000 ITEMS) BASIC PRODUCTS ,3% ,0% ,6% FINISHING PRODUCTS ,2% ,5% ,1% TOTAL ,7% ,1% ,9% SHIPMENTS (in m2) FINISHING PRODUCTS FINANCIAL HIGHLIGHTS (BRL1,000) NET REVENUE (sales in items) ,9% ,4% ,2% DOMESTIC MARKET ,9% ,2% ,4% EXPORT MARKET ,0% ,2% ,7% Net unit revenue (BRL per item shipped) 58,85 56,64 3,9% 54,40 8,2% 54,92 53,49 2,7% Net unit revenue (BRL per m2 shipped) 83, ,21 - Unit cash cost (BRL per item shipped) (39,95) (36,71) 8,8% (34,29) 16,5% (34,81) (34,88) -0,2% Unit cash cost (BRL per m2 shipped) (45,24) (45,24) - Gross profit ,4% ,8% ,6% Gross margin 27,4% 28,2% - 30,3% - 30,2% 27,6% - Sales expenses (71.107) (63.403) 12,2% (69.277) 2,6% ( ) ( ) 14,8% General and administrative expenses (18.797) (15.780) 19,1% (18.546) 1,4% (69.711) (63.981) 9,0% Operating profit before financial results ,2% ,6% ,5% Depreciation and amortization ,4% ,6% ,1% EBITDA according to CVM No. 527/12(1) ,2% ,6% ,5% EBITDA margin according to CVM No. 527/12 17,5% 12,5% - 14,8% - 17,8% 13,2% - Employees benefits (249) (280) -11,1% (2.050) -87,9% (3.961) (442) 796,2% Extraordinary event (2) Recurring and adjusted EBITDA ,7% ,2% ,0% Recurring and adjusted EBITDA margin 17,4% 12,4% - 14,2% - 17,5% 13,4% - (1) EBITDA (Earnings Before Interest,Taxes, Depreciation and Amortization): Measure of operational performance according to Instruction CVM527/12. (2) Extraordinary Events: 3Q16: (i) devolution of excess from the private pension plan (-) BRL 4,443 K; (ii)non-recurring employee restitutions (+) BRL 7,579 K. The civil construction materials industry registered a quarter of mild contraction, and we now begin to glimpse at a discreet growth of the sector in Despite this challenging scenario, Deca presented a growth of 2.4% in volumes in comparison to Net revenue was positively affected in the quarter by the incorporation of the results of the recently-acquired Ceusa, which recorded an expedition of thousand m² in the quarter. When excluding this effect, Deca s net revenue presented an increase of 8.8% in comparison to the same period of We have noticed a positive expansion in Deca s sales this year, reflecting the strength and recognition of the brand and quality of portfolio products that are instrumental in the development of our activities in this difficult moment. We have also noticed a mild deterioration of mix of sold products, which is natural due to the seasonality of Deca s products that show a lighter participation of finished products. This effect is mainly due to the smaller expedition of electric shower heads due to the higher temperatures this time of the year. The gross margin, however, increased from 28.2% to 27.4%, mainly a consequence of the incorporation of Ceusa into the results. Additionally, there were planned stops within Deca s production units. These stops resulted in a negative impact of approximately BRL 10 million in the costs of the division. The investments in advertising and promotions were intensified during the last months of the year, due mainly to efforts in the positioning of the brand and more aggressive competition. In addition to this effect, there was an increase in freight costs and larger administrative expenses resulting from adjustments made throughout the second semester. With regards to Ceusa, there was the recognition of BRL 25.4 million as revenue resulting from the adhesion to the REFIS PERT program. This amount was accounted as other operational results, and had a positive impact on Deca this quarter. 6

17 As a result, Deca s Adjusted and Recurring EBITDA was BRL 71.5 million and BRL million in the year, respectively, with a margin of 17.5%. The annual result presented an evolution of 46% in comparison to This improvement is a reflection of all the adjustments made in this division, even in a period of crisis. Considering the slow and gradual recovery of the sector, we continue to focus on the differentiated positioning of the division, brought forth by the brands Deca, Hydra, and the recently-acquired Ceusa, along with the emphasis on relationships with clients, consumers and specifiers, allied with consistent cost-management, as the main proponents of results in CAPITAL MARKETS AND CORPORATE GOVERNANCE Duratex closed 2017 with a Market Cap of BRL 6,341.6 million, based on a closing share price of BRL There were thousand trades in DTEX3 at the B3 spot market within the fourth quarter. This represents a trading volume equivalent to BRL 1,639.9 million, or a daily trading volume of BRL 27.8 million. In 2017, there were 1,330.5 thousand trades in at the B3 sport market, which represented a financial volume of BRL 4,372.0 million or a daily average trading volume of BRL 17.8 million. Our shares are listed on the Novo Mercado sections of B3 which brings together companies with the highest standards of corporate governance. We also have a differentiated dividend policy, with the distribution of 30% of adjusted net earnings to shareholders, while also adhering to the Abrasca Code for Self-Regulation and Good Practices for Listed Companies. SOCIAL AND ENVIRONMENTAL RESPONSIBILITY There was an increase in our headcount once Ceusa was incorporated into Duratex. We closed 2017 with 11,400 employees. It is worth mentioning that, despite the increase in headcount, the amount dedicated to employee remuneration varied with less intensity in 2017, thus reflecting our efforts in adjusting processes and capturing cost cuts in the Duratex Management system (SGD). (BRL'000) 4Q17 4Q16 % 3Q17 % % Employees (quantity) ,1% ,2% ,1% Remuneration ,9% ,6% ,5% Obligatory legal charges ,0% ,6% ,4% Differentiated benefits ,1% ,2% ,8% INDEPENDENT AUDITORS CVM INSTRUCTION nº 381 Procedures adopted by the Company and its subsidiaries The Company's policy for procuring non-external audit services from its independent auditors is based on internationally accepted principles that preserve the independence of the auditors, and consists of the following principles: (a) the auditor should not audit their own work, (b) the auditor should not carry out management functions within the client, and (c) the auditor must not promote the interests of the client. During 2017, the independente auditors Ernst & Young Auditores Independentes S.S. provided the following services not related to external auditing: Review of accounting and tax accounting records (in Portuguese, ECF), hired on April 11, 2017, for the total amount of BRL 99 thousand. Advisory services on the renewal of visas for foreigners and their families, hired on August 4, 2017 for the total amount of BRL 4 thousand. 7