Companhia Brasileira de Alumínio Parent company and consolidated condensed interim financial statements at September 30, 2017 and independent

Transcription

1 and consolidated condensed interim financial statements at September 30, 2017 and independent auditors' review report

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4 (A free translation of the original in Portuguese) Contents and consolidated financial statements Balance sheet...3 Statement of income...4 Statement of comprehensive income (loss)...5 Statement of changes in equity...6 Statement of cash flow General information Main transactions occurred in the nine-month period ended in September 30, Presentation of the parent company and consolidated financial statements Basis of presentation Main companies included in the consolidated financial statements Changes in accounting policies and disclosures Critical accounting estimates and judgments Financial risk Management Foreign Exchange risck Liquidity risk Derivative financial instruments Sensitivity analysis Capital Management Credit quality of financial assets Cash and cash equivalents Financial investments Trade receivables Inventory Taxes recoverable Related parties Investments Property, plant and equipment Intangible assets Borrowing Current and deferred income tax and social contribution Provision Equity Revenue Expenses by nature Employee benefit expenses Other operating income, net Finance results, net Insurance... 41

5 Condensed interim of balance sheet Periods ended September 30 (A free translation of the original in Portuguese) Assets Note 12/31/ /31/2016 Liabilities and equity Note 12/31/ /31/2016 Current assets Cash and cash equivalents Financial investments Derivative financial instruments Trade receivables Inventory Taxes recoverable Dividends receivable Financial instruments - firm commitment Other assets Current liabilities 7 38,503 76,605 38,627 77,040 Borrowing , , , , ,128, ,312 1,209, ,800 Derivative financial instruments 5.3 (a) 139,979 18, ,979 18, (a) 75,082 62,141 75,082 62,141 Trade payables 464, , , , , , , ,168 Confirming payable 5,334 1,115 5,334 1, , , , ,494 Salaries and social charges 124, , , , , , , ,045 Taxes payable 18,690 17,110 54,788 30, ,205 44,430 16,995 6,713 Customer advances 11,134 7,059 12,144 7, , , , ,020 Dividends payable 12 10,323 10,323 10,323 10,371 43,715 52,725 48,866 60,402 Use of public assets 28,145 28,230 30,731 31,141 Related parties , , , ,857 2,915,000 2,394,404 3,005,007 2,572,823 Other liabilities 40,804 46,068 51,785 72,126 1,281,209 1,089,958 1,316,644 1,138,763 Non-current assets Non-current liabilities Long-term receivables Borrowing 16 2,394,243 2,572,974 2,516,006 2,650,949 Financial investments ,334 Derivative financial instruments 5.3 (a) 10, , Derivative financial instruments 5.3 (a) 5,712 3,945 5,712 3,945 Related parties ,368 2,096, ,368 2,096,983 Taxes recoverable , , , ,857 Provisions , , , ,069 Financial instruments - firm commitment , , , ,216 Use of public assets 491, , , ,511 Deferred income tax and social contribution 17 (b) 860, , , ,309 Other liabilities 43,599 65,182 50,155 74,523 Related parties , , , ,176 Judicial deposits 18 (b) 54, ,216 60, ,680 4,052,187 5,870,626 4,227,185 6,011,212 Other assets 19,074 18,771 28,526 38,471 Total liabilities 5,333,396 6,960,584 5,543,829 7,149,975 2,579,818 2,498,530 2,553,744 2,556,988 Investments ,363 1,091, , ,176 Equity 19 Property, plant and equipment 14 4,191,190 4,420,354 4,756,669 5,069,811 Share capital 5,637,299 4,399,676 5,637,299 4,399,676 Intangible assets , , , ,142 Accumulated profit (deficit) (38,107) (513,509) (38,107) (513,509) Carrying value adjustments (31,941) 34,798 (31,941) 34,798 7,985,647 8,487,145 8,106,073 8,498,117 Total equity 5,567,251 3,920,965 5,567,251 3,920,965 Total assets 10,900,647 10,881,549 11,111,080 11,070,940 Total liabilities and equity 10,900,647 10,881,549 11,111,080 11,070,940 3 de 41

6 Condensed interim of income statement Periods ended September 30 (A free translation of the original in Portuguese) Note 7/1/2017 to 7/1/2016 to 7/1/2017 to 7/1/2016 to Net revenue from products sold and services rendered 20 1,136,961 1,036,682 3,273,840 3,036,369 1,249,606 1,098,259 3,599,334 3,207,150 Cost of products sold and services rendered 21 (983,037) (945,912) (2,846,183) (2,668,246) (1,057,626) (949,007) (3,024,579) (2,687,286) Gross profit 153,924 90, , , , , , ,864 Operating income (expenses) Selling 21 (16,385) (22,634) (51,861) (69,073) (16,420) (24,324) (51,999) (71,958) General and administrative 21 (48,382) (43,263) (133,625) (118,727) (50,719) (43,037) (139,038) (122,693) Other operating income, net ,247 (70,055) 203,832 (160,609) 174,539 (70,880) 202,107 (161,534) 111,480 (135,952) 18,346 (348,409) 107,400 (138,241) 11,070 (356,185) Operating profit (loss) before equity interest and finance result 265,404 (45,182) 446,003 19, ,380 11, , ,679 Results from equity interest Equity in the results 13 31,529 44, , ,889 8,455 8,867 9,948 59,085 31,529 44, , ,889 8,455 8,867 9,948 59,085 Finance income and costs 24 Finance income 41,096 45, , ,125 44,018 51, , ,170 Finance costs (98,761) (113,915) (294,691) (343,732) (99,707) (123,216) (305,797) (370,211) Derivative financial instruments (69) 583 (84) 2,720 (69) 583 (84) 2,720 Foreign exchange variations, net 105,165 (43,342) 120, , ,502 (42,686) 120, ,884 47,431 (111,636) (32,695) 244,962 49,744 (113,387) (27,052) 236,563 Profit (loss) before income tax and social contribution 344,364 (112,135) 518, , ,579 (93,509) 568, ,327 Income tax and social contribution 17 (a) Current 1,100 63,849 (12,805) (12,114) (18,626) 13,260 (49,262) Deferred 166,163 47,430 (106,646) (106,272) 166,162 47,430 (106,579) (116,577) Profit (loss) for the period 511,627 (64,705) 475, , ,627 (64,705) 475, ,488 Total number of shares - thousand 1,610,129 1,205,677 1,343,458 1,087,819 1,610,129 1,205,677 1,343,458 1,087,819 Basic and diluted earnings (loss) per share (in reais) 0.32 (0.05) (0.05) de 41

7 Statement of comprehensive income (loss) Periods ended September 30 All amounts in thousands of Reais (A free translation of the original in Portuguese) and consolidated Note 7/1/2017 to 7/1/2016 to Profit (loss) for the quarter 511,627 (64,705) 475, ,488 Other components of comprehensive income to be subsequently reclassified to the statement of income Operating hedge accounting 19 (b) (2,504) (10,420) (66,739) 21,894 (2,504) (10,420) (66,739) 21,894 Total comprehensive income (loss) for the period 509,123 (75,125) 408, ,382 5 de 41

8 Statement of changes in equity Periods ended September 30 All amounts in thousands of Reais (A free translation of the original in Portuguese) Note Share capital Accumulated profit (deficit) Carrying value adjustments Total At January 1, ,772,290 (296,709) 5,523 3,481,104 Total comprehensive income for the period Profit for the quarter 293, ,488 Other comprehensive income 19 (b) 21,894 21, ,488 21, ,382 Total contributions to stockholders Capital increase 19 (a) 627, ,386 4,399,676 (3,221) 27,417 4,423,872 At September 30, ,399,676 (3,221) 27,417 4,423,872 At January 1, ,399,676 (513,509) 34,798 3,920,965 Total comprehensive income (loss) for the period Profit for the period 475, ,402 Other comprehensive income 19 (b) (66,739) (66,739) 475,402 (66,739) 408,663 Total contributions to stockholders Capital increase 19 (a) 1,237,623 1,237,623 1,237,623 1,237,623 At September 30, ,637,299 (38,107) (31,941) 5,567,251 6 de 41

9 Statement of cash flow Periods ended September 30 All amounts in thousands of Reais (A free translation of the original in Portuguese) Note 7/1/2017 to 7/1/2016 to 7/1/2017 to 7/1/2016 to Cash flow from operating activities Profit before income tax and social contribution 344,364 (112,135) 518, , ,579 (93,509) 568, ,327 Adjustments of items that do not represent changes in cash and cash equivalents Interest and monetary and foreign exchange variations (32,280) 48,602 (25,308) (259,957) (29,092) 40,800 (28,852) (262,796) Equity in the results 13 (31,529) (44,683) (104,891) (147,889) (8,455) (8,867) (9,948) (59,085) Depreciation and amortization 14 e 15 51,572 91, , ,130 59, , , ,264 ACR - Realization financial instrument firm commitment 23 43,161 52, , ,947 43,161 52, , ,947 ACL - Realization financial instrument firm commitment 23 2,423 (6,067) 7,412 2,402 2,423 (6,067) 7,412 2,402 ACL - Recognition financial instrument firm commitment 23 (3,843) (2,637) 849 (56,928) (3,843) (2,637) 849 (56,928) ACR - Reduction of the volume of the financial instrument firm commitment 23 (17,224) 6,246 82,059 6,246 (17,224) 6,246 82,059 6,246 Gain (loss) on sales of investments (789) 1,844 (3,171) 486 (848) 1,844 (3,230) Gain (loss) on sales of property, plant and equipment 23 (210,202) (378,213) 24,119 (210,202) (378,213) Provision for impairment of assets 23 (7,957) (29,941) (7,957) (29,941) Provisions 9, 10 e 18 9,291 25,635 (8,282) 36,021 9,590 30,015 (7,430) 41, ,262 58, , , , , , ,729 Decrease (increase) in assets Financial investments (126,413) 28,396 (297,624) 155,671 (71,410) 1,881 (263,608) 136,821 Trade receivables (225,078) (2,947) (262,845) 53,722 (222,972) 7,925 (260,415) 121,622 Inventory (34,075) 23,510 (52,985) (56,740) (33,515) 27,712 (38,962) (48,896) Taxes recoverable 14,642 23,170 29,001 46,954 12,750 21,468 16,888 40,381 Derivative financial instruments (35,465) 5,439 (14,708) (8,515) (35,465) 5,439 (14,708) (8,515) Other receivables (58,067) (14,011) (66,122) (12,267) (62,910) (9,450) (67,742) (11,927) Increase (decrease) in liabilities Trade payables 44,470 (37,613) 88, ,949 34,156 (50,978) 76,503 36,089 Confirming payable (33) (372) 4,219 (46,708) (33) (372) 4,219 (46,708) Salaries and social charges 32,365 11,475 7,844 4,521 32,570 11,656 8,105 4,567 Taxes payable 4,201 (2,079) 65,429 2, ,846 2,961 Use of public assets (3,027) (3,027) (9,081) (9,082) (2,726) (6,257) (9,081) (12,312) Derivative financial instruments 47,340 5, ,240 (34,674) 47,340 5, ,240 (34,674) Other liabilities 37,961 (40,863) (56,653) (142,768) 39,188 (26,863) (66,859) (131,025) Cash from operations (152,917) 55,174 (56,843) 462,644 (66,202) 107, , ,113 Interest paid (16,524) (18,872) (111,937) (119,785) (17,569) (22,864) (119,112) (130,865) Income tax and social contribution (149) (16,295) (19,609) (39,910) Net cash provided by operating activities (169,441) 36,302 (168,780) 342,859 (83,920) 68,662 (5,379) 411,338 7 de 41

10 Note 7/1/2017 to 7/1/2016 to 7/1/2017 to 7/1/2016 to Cash flow from investment activities Purchases of property, plant and equipment 14 e 15 (51,631) (24,522) (126,625) (91,869) (52,576) (25,340) (128,969) (92,749) Net cash provided by incorporated companies 47,122 47,122 47,058 47,058 Proceeds from sale of property, plant and equipment and intangible assets 38 1,051 18,341 7, ,093 18,450 7,346 Proceeds from sale of investments 1.1(d) 197, , , ,000 Capital decrease in investee 13 44,692 44,692 Related parties (48,358) (999) 148,642 (999) (3,279) 193,721 Dividends received 195, ,847 69,747 9, ,630 31,869 Net cash provided by (used in) investment activities 337,689 22, ,897 31, ,289 22, ,832 (6,476) Cash flow from financing activities New borrowing 16 (c) 83,437 9,923 94, ,212 83, ,135 94,588 Repayment of borrowing 16 (c) (32,103) (34,189) (199,017) (216,370) (82,487) (46,849) (274,772) (252,337) Dividends paid (12) Related parties (107,736) (41,684) (234,125) (206,008) (107,736) (60,604) (234,229) (200,239) Net cash provided by (used in) financing activities (139,839) 7,564 (423,219) (327,790) (38,011) (24,016) (346,866) (358,000) Increase (decrease) in cash and cash equivalents 28,409 66,539 (38,102) 46,357 28,358 67,479 (38,413) 46,862 Cash and cash equivalents at the beginning of the period 10,094 49,378 76,605 69,560 10,269 49,596 77,040 70,213 Cash and cash equivalents at the end of the period 38, ,917 38, ,917 38, ,075 38, ,075 Main non-cash transactions Capital increase in Nazca Participações Ltda. 24,321 24,321 Capital increase - Merger of Votorantim Metais S.A. 627, ,386 Lieu of payment 1.1 (b) 1,237,623 1,237,623 Capital increase 1.1 (d) 277, , , ,460 8 de 41

11 1 General information Companhia Brasileira de Alumínio (the Company or CBA ) is a subsidiary of Votorantim S.A. ( VSA ), with its head office in São Paulo, State of São Paulo. It mainly extracts and processes bauxite ore in Brazil and produces and sells primary and processed aluminum in the Brazilian and foreign markets, through a wide range of products, such as ingots, billets, rods, plates, coils, tiles, sheets and extruded products. The Company also sells its power surplus in Brazil. Due to the merger of Votorantim Metais S.A. ( VMSA ), from July 2016 the Company began to have control of nickel and electrolytic cobalt operations. The Company is self-sufficient in the production of bauxite, which it extracts from its own reserves located in Poços de Caldas, Itamarati de Minas and Mirai in Minas Gerais. The Company also has an interest in Mineração Rio do Norte S.A. (bauxite), in Trombetas, Pará, in Alunorte - Alumina do Norte S.A. (alumina), in Barcarena, Pará, in Metalex Ltda. (transformed), in Araçariguama, São Paulo, in Campos Novos Energia S.A. (generation of electric power) in Campos Novos, Santa Catarina and in Energética Barra Grande S.A (generation of electric power) in Anita Garibaldi, Santa Catarina. The Company owns its own hydroelectric power plants and participates in consortia, enabling it to reduce the electrical power consumed during the primary alumina production process. 1.1 Main transactions occurred in the nine-month period ended in September 30, 2017 (a) Transfer of export prepayment In February 2017, Companhia Brasileira de Alumínio ( CBA ) transferred its Export Prepayments of US$ 100,000 (R$ 312,410) and US$ 290,000 (R$ 905,989) to Votorantim Metais Zinco S.A., with the consent of the counterparties, VM Holding S.A. and Votorantim GmbH, respectively, deducting funding costs of USD 931 (R$ 2.910). As a result of the transfer, CBA is now a debtor of VMZ to the amount of R$ 1,215,489, which was liquidated on June 30, 2017 as detailed in note (1.1 (c)). (b) Capital increase On June 30, 2017, the parent company Votorantim S.A. increased the capital of the Company by the amount of R$ 1,237,623, by transferring 25.80% of its stake in Votorantim Investimentos Latino- Americanos S.A. (VILA). (c) Lieu of payment On June 30, 2017, the related party balances between CBA and VMZ were offset, including prepayment debt in the amount of R$ 1,215,489 (Note 1.1 (a)) and other related party balances with VMZ in the amount of R$ 33,889. In consideration for this payment, the Company assigned its interest of 25.80% in VILA in the amount of R$ 1,237,623 (Note 1.1 (b)), as well as property, plant and equipment in the amount of R$ 9,487 and intangible assets in the amount of R$ 2,268. The net assets transferred were valued at book value. (d) Purchase and sale of the common shares of Pollarix On June 30, 2017, the Company carried out a capital increase in the investee Pollarix SA in the amount of R$ 283,240 through the transfer of a 20.98% interest in the jointly-owned subsidiary Enercan - Campos Novos Energia SA After this transaction, the Company continued to hold a 23.78% stake in Enercan - Campos Novos Energia SA, which continued to be proportionally consolidated. Also on June 30, 2017, the Company sold to VMZ 100% of its common shares related to the investee Pollarix SA, which represents 33.33% of the total shares of this investee, for the amount of R$ 270,000, of 9 of 41

12 which R$ 197,000 was paid in national currency on June 30, 2017 and the remaining balance is to be settled in the second half of This operation generated a net gain of R$ 168,011, recorded under "Other operating income (expenses), liquid ". With the sale of the common shares to VMZ on June 30, 2017, the company ceased to consolidate the investee Pollarix S.A., as it no longer held control of this investee. In September 2017, the Company sold to Votorantim Geração de Energia S.A. ("VGE"), shares preferred shares of the investee Pollarix S.A., which represented 66.67% of the total invested, for the amount of R$ 420,000, which will be settled up to September This operation generated a net gain of R$ 210,202, recorded in "Other operating income (expenses) liquid ". (e) Capital increase in the investee CBA Energia Participações S.A. (formerly called MSDC Participações S.A.) In July 2017, the Company carried out a capital increase in the investee CBA Energia Participações S.A. in the amount of R$ 154,497, through the contribution of all of the fixed assets related to the Machadinho Consortium. In September 2017, the Company increased the capital in the investee CBA Energia Participações S.A., in the amount of R$ 120,990, through contribution of the entire investment held (15%) in the investee Barra Grande Energética S.A. ("BAESA"). 2 Presentation of the parent company and consolidated financial statements 2.1 Basis of presentation (a) Interim parent company and consolidated condensed financial statements The financial statements have been prepared and are being presented in accordance with Technical Pronouncement CPC 21 - (R1) Interim Financial Reporting, and with the international accounting standard IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board ( IASB ) and show all relevant information pertinent to the interim financial statements, which is consistent with that used by Management. The interim parent company and consolidated condensed financial statements as at September 30, 2017 do not contain all of the accompanying notes and disclosures required of the annual financial statements by the accounting standards, since their purpose is to provide an update on the significant activities, events and circumstances compared to the annual financial statements. Therefore, they should be read together with the financial statements at December 31, 2016, approved on February 17, 2017 and publicly disclosed on April 25, 2017 on the Diário Oficial of the State of São Paulo. 10 of 41

13 (b) Approval of the financial statements The Board of Directors approved these consolidated financial statements for issue on November 7, Main companies included in the consolidated financial statements During the period ended September 30, 2017 the following changes ocurred to the participations in subsidiaries and joint operations included in the consolidation, in relation to the information disclosed in Note 2.2 (c) of the last annual financial statements. Ownership interest % 12/31/2016 Headquarters Main activities Campos Novos Energia S.A Santa Catarina - Brazil Electricity generation Energética Barra Grande S.A Rio Grande do Sul - Brazil Electricity generation Participation in energy generation companies Pollarix S.A São Paulo - Brazil 3 Changes in accounting policies and disclosures (a) New standards not yet adopted The standards, amendments to and interpretations of standards issued, but not adopted at the date of issue of the Company's interim condensed financial statements, are presented in the financial statements at December 31, Critical accounting estimates and judgments In the period ended in September 30 of 2017, there have been no changes in estimates and assumptions that present a significant risk, with probability of causing a material adjustment to the carrying amounts of assets and liabilities for the current fiscal year, compared to those detailed in Note 4 to the latest annual financial statements. 5 Financial risk Management 5.1 Foreign Exchange risck 12/31/ /31/2016 Assets in foreign currency Cash and cash equivalents 38,398 43,727 38,398 43,727 Derivative financial instruments 79,742 64,706 79,742 64,706 Trade receivables 49,216 37,338 49,216 37, , , , ,771 Liabilities in foreign currency Borrowing (i) 2,088,637 2,133,141 2,092,424 2,147,487 Derivative financial instruments 150,254 17, ,254 17,546 Trade payables 92,385 50,110 92,385 50,110 Related parties 274,628 1,552, ,628 1,552,692 2,605,904 3,753,489 2,609,691 3,767,835 Net exposure (2,438,548) (3,607,718) (2,442,335) (3,622,064) (i) Funding costs are not considered in these amounts. 11 of 41

14 5.2 Liquidity risk The table below separates the Company's non-derivative financial liabilities and the main derivative financial assets and liabilities to be settled by the Company by maturity (the remaining period from the balance sheet up to the contractual maturity date). Derivative financial liabilities are included if their contractual maturities are essential to understanding the timing of cash flow. The amounts disclosed in the table represent the undiscounted cash flow, which include interest to be incurred, and, accordingly, do not reconcile directly with the amounts in the balance sheet for borrowing and the Use of Public Assets. Up to 1 year 1 to 3 years 3 to 5 years 5 to 10 years Over 10 years Total At September 30, 2017 Borrowing 373, ,012 1,129,510 1,480,159 3,506,875 Derivative financial instruments 142, ,255 Trade payables 405, ,066 Confirming payable 5,334 5,334 Related parties 223, , ,939 Use of public assets 42,076 90, , , ,121 1,428,052 Dividends payable 10,323 10,323 1,202,260 1,308,406 1,231,481 1,793, ,121 6,415,844 At December 31, 2016 Borrowing 452, ,215 1,152,770 1,603,100 3,810,413 Derivative financial instruments 18, ,014 Trade payables 328, ,563 Confirming payable 1,115 1,115 Related parties 346,436 1,444,137 58, ,461 2,483,979 Use of public assets 42,236 92, , , ,469 1,556,730 Dividends payable 10,371 10,371 1,199,886 2,138,928 1,315,862 2,558, ,469 8,210, of 41

15 5.3 Derivative financial instruments (a) Effects of the derivatives on the balance sheet The table below summarizes the derivative financial instruments and the underlying hedged items: Principal amount Fair value and consolidated 12/31/2016 Program 12/31/2016 Unit Purchase/ Sale Average rate/fwd Average period (days) Current assets Current liabilities Total (net between assets and liabilities) Total (net between assets and liabilities) Hedging for mismatches of quotation periods Aluminum forward 4,880 1,497 metric ton P/S (393) (371) (393) (371) 10 Hedging for the operating margin of metals US$/ton Aluminum forward 18,750 5,165 metric ton S 3,53 R$/US$ 1 (24,843) (24,843) (1,939) US dollar forward 31,542 8,344 USD S 1 12,428 12,428 5,604 12,428 (24,843) (12,415) 3,665 Hedging for debts Fixed rate in reais vs. CDI floating rate swaps 100,000 BRL 0 (1,041) TJLP vs. CDI floating rate swaps 28,000 28,000 BRL mil 97% CDI 289 1,052 1, ,052 1,052 (87) 13,502 (25,236) (11,734) 3,588 Principal amount Program 12/31/2016 Unit Purchase/ Sale Average rate/fwd Average period (days) Current assets Non-current assets Current liabilities and consolidated Fair value 12/31/2016 Total (net Total (net between between Non-current assets and assets and liabilities liabilities) liabilities) Hedge accounting - cash flow hedge Protection of Metal's operational result Aluminum forward 221, ,000 ton S US$/ton 232 (114,742) (10,275) (125,017) (10,570) US dollar forward 429, ,200 USD S 3,41 R$/US$ ,580 5,712 (1) 67,291 54,054 61,580 5,712 (114,743) (10,275) (57,726) 43, of 41

16 (b) Maturity profile and consolidated Fair value per maturity Programs Total Hedging for mismatches of quotation period Aluminum forward (297) (74) (371) Hedging for the operating margin of metals Aluminum forward (24,843) (24,843) US dollar forward 12,428 12,428 (12,415) (12,415) Hedging for debts TJLP vs. CDI floating rate swaps ,052 (12,619) 959 (11,734) Hedge accounting - cash flow hedge Aluminum forward (44,615) (77,854) (2,548) (125,017) US dollar forward 22,911 42,893 1,487 67,291 (21,704) (34,961) (1,061) (57,726) (34,323) (34,002) (1,061) (69,460) 14 of 41

17 (c) Effect of derivative financial instruments on financial results and cash flow Program Unit Principal amount Fair value adjustment and consolidated Realized gain Principal Fair value Realized gain (loss) Total amount adjustment (loss) Total Hedging for mismatches of quotation period Aluminum forward metric ton 4,880 (381) (2,101) (2,482) 1,550 (48) (2,794) (2,842) (381) (2,101) (2,482) (48) (2,794) (2,842) Hedging for the operating margin of metals Aluminum forward metric ton 18,750 (22,904) (110,063) (132,967) 5, ,138 10,635 US dollar forward USD 31,542 6,824 92,551 99,375 9,388 6,690 (14,305) (7,615) (16,080) (17,512) (33,592) 7,187 (4,167) 3,020 Hedging for debts Fixed rate in reais vs. CDI floating rate swaps BRL 1,041 (875) ,000 (983) (2,591) (3,574) TJLP vs. CDI floating rate swaps BRL 28, (348) (250) (15,322) (20,836) (36,158) 6,156 (9,552) (3,396) 15 of 41

18 5.3.1 Sensitivity analysis Presented below is a sensitivity analysis of the main risk factors that affect the pricing of the outstanding financial instruments relating to cash and cash equivalents, financial investments, borrowing, and derivative financial instruments. The main risk factors are exposure to the fluctuations of the US Dollar, LIBOR and CDI interest rates, US Dollar coupons and commodity prices. The scenarios for these factors were prepared using market and specialized sources, following the Company's systems of governance. The scenarios at September 30, 2017, are described below: Scenario I - is based on the market forward curves and quotations at September 30, 2017, and represents a probable scenario in Management's opinion as at December 30, Scenario II - considers a stress factor of + / 25% applied to the market forward curves and quotations as at September 30, Scenario III - considers a stress factor of + / 50% applied to the market forward curves and quotations as at September 30, and consolidated Impacts on profit (loss) Impacts on comprehensive income (loss) Scenario I Scenarios II & III Scenario I Scenarios II & III Risk factors Cash and cash equivalents Borrowing Derivative financial instruments Unit Impact on curves for Results of Scenario I -25% -50% +25% +50% Results of Scenario I -25% -50% +25% +50% Foreign exchange rate USD 38,398 2,082, ,119 USD 1.01% (21,292) 526,973 1,053,946 (526,973) (1,053,946) (14,366) 355, ,129 (355,565) (711,129) Interest rate BRL - CDI 1,370, ,786 1,488,824 BRL -115 bps (12,137) (21,538) (43,077) 21,538 43,077 4,070 14,243 28,955 (13,798) (27,171) USD - LIBOR 516,819 USD 21 bps (4) 6 12 (6) (12) (1,568) 3,133 6,288 (3,111) (6,201) US dollar coupon 461,119 USD -29 bps (2,376) (5,247) (10,550) 5,193 10,333 Price - commodities Aluminum 244,880 ton -5.24% 1,036 4,945 9,890 (4,945) (9,890) 77, , ,113 (368,056) (736,113) Firm commitment - Electric energy Purchase and sale contract 258,885 BRL (3,677) (7,236) 3,801 7,731 (i) The balances presented in this note do not reconcile with the notes on cash and cash equivalents, financial investments, borrowing and related parties as the analysis convers only the most significant currencies. 16 of 41

19 5.3.2 Capital Management The Company's objectives when managing capital are to safeguard its ability to continue as a going concern in order to consistently provide returns to stockholders and benefits for other stakeholders, as well as maintaining an optimal capital structure to reduce the cost of capital. In order to maintain or adjust its capital structure, the Company can make, or propose to the Board of Directors when their approval is required, adjustments to the amounts of dividends paid to stockholders, return capital to stockholders, issue new shares or sell assets. 17 of 41

20 6 Credit quality of financial assets The table below summarizes the credit quality of issuers and counterparties in transactions involving cash and cash equivalents, financial investments and derivatives: Local rating 12/31/ /31/2016 Global rating Total Local rating Global rating Total Local rating Global rating Total Local rating Global rating Total Cash and cash equivalents AA AA A+ 32,554 32,554 32,554 32,554 A BB No rating (i) 68 38,398 38, ,727 43, ,398 38, ,727 43, ,398 38,503 32,878 43,727 76, ,398 38,627 33,313 43,727 77,040 Financial investments AA+ 14,709 14,709 A AA- 1,074,432 1,074, , ,181 1,140,469 1,140, , ,848 BB 22,270 22,270 No rating (ii) 54,435 54,435 10,195 10,195 54,436 54,436 10,194 10,194 1,128,867 1,128, , ,376 1,209,614 1,209, , ,134 Derivative financial instruments AA AA- 77,764 77,764 38,927 38,927 77,764 77,764 38,927 38,927 A , , , ,486 A 1,716 1,716 3,974 3,974 1,716 1,716 3,974 3,974 A- 1,380 16,319 17,699 1,380 16,319 17,699 79,075 1,719 80,794 45,504 20,582 66,086 79,075 1,719 80,794 45,504 20,582 66,086 1,208,047 40,117 1,248, ,758 64, ,067 1,288,918 40,117 1,329,035 1,034,951 64,309 1,099,260 The local and global ratings were obtained from ratings agencies (Standard&Poor s, Moody's and Fitch). The Company considered the ratings of S&P and Fitch for presentation purposes. (i) Refers mainly to amounts invested in an overseas bank that has no rating with rating agencies. (ii) Refers mainly to the Credit Right Investments Fund ( FIDC ) exclusive of the Votorantim Group that has no rating with rating agencies. 18 of 41

21 7 Cash and cash equivalents 12/31/ /31/2016 Local currency Cash and banks Repurchase agreements 32,529 32, , ,313 Foreign currency Cash and banks 38,398 43,727 38,398 43,727 38,503 76,605 38,627 77,040 Cash and cash equivalents are highly liquid, readily convertible into a known amount of cash and have an insignificant risk of changes in value if early redemption is requested. Investments in local currency comprise government and financial institution bonds, indexed to the interbank deposit rate. Investments in foreign currency are mainly composed of fixed income financial instruments (time deposits). 8 Financial investments 12/31/ /31/2016 Held for trading Investment fund quotas (i) 403, , , ,351 Repurchase agreements - Federal securities 57, ,829 57, ,829 Bank Deposit Certificate ("CDB") 54, , ,168 Credit Rights Investment Fund ("FIDC") 54,371 24,982 54,371 24,982 Financial Treasury Bills ("LFT") 558, , , ,470 1,128, ,312 1,209, ,800 Held to maturity Bank Deposit Certificate ("CDB") 22,270 Others ,128, ,376 1,209, ,134 Current 1,128, ,312 1,209, ,800 Non-current ,334 1,128, ,376 1,209, ,134 The financial investments have, for the most part, immediate liquidity. Investments in local currency comprise government and financial institution bonds, indexed to the interbank deposit rate. (i) The Company has investment fund quotas in an exclusive fund of Votorantim Group: 12/31/ /31/2016 Financial investments Repurchase agreements - Federal securities 365,652 77, , ,366 Financial Treasury Bills ("LFT") 3,235 1,139 3,462 1,465 Repurchase agreements 34,734 26,573 37,119 34,045 Credit Rights Investment Fund ("FIDC") 5 7 Bank Deposit Certificate ("CDB") 16, , , , , , of 41

22 9 Trade receivables Breakdown 12/31/ /31/2016 Domestic 289, , , ,296 Foreign 49,216 37,226 49,216 37,226 Related parties (Note 12) 115, , , , , , , ,801 Impairment of trade receivables (50,456) (50,633) (50,456) (50,633) 403, , , , Inventory (a) Breakdown 12/31/ /31/2016 Finished products 187, , , ,003 Semi-finished products 343, , , ,221 Raw materials 27,779 38,337 40,998 65,284 Auxiliary and consumption materials 100, , , ,693 Imports in transit 26,644 5,485 26,644 5,485 Other 3, , Provision for losses (i) (61,850) (61,239) (61,850) (61,239) 627, , , ,494 The Company had no inventory pledged as collateral for any of its liabilities (i) Mainly refers to the obsolescence of inventory the value of which has a limited expectation of realization. 11 Taxes recoverable Breakdown 12/31/ /31/2016 Income tax and social contribution 433, , , ,354 Value-added Tax on Sales and Services (ICMS) 362, , , ,376 Social Contribution on Revenue (COFINS) 144, , , ,237 Social Integration Program (PIS) 28,548 26,480 28,666 26,583 ICMS on property, plant and equipment 16,349 19,622 16,349 19,622 Corporate Income Tax (IRPJ)/Social Contribution on Net Income (CSLL) tax credit - Plano Verão (i) 50,671 50,671 Others 35,225 26,458 37,638 27,059 1,020,896 1,049,897 1,032,122 1,051,902 Current 441, , , ,045 Non-current 578, , , ,857 1,020,896 1,049,897 1,032,122 1,051,902 (i) On March 23, 2016, the Company obtained the approval of the tax credit habilitation application recognized by the court s final decision, concerning the recognition of the index applicable to the restatement of the financial statements of the base year 1989, for the purpose of calculating the basis of the calculation of Corporate Income Tax ( IRPJ ) and CSLL Plano Verão. This credit was compensated with tax debts of the company under the Management of the Internal Revenue Service of Brazil. 20 of 41

23 12 Related parties (a) Statement of operations Current and non-current Current and non-current Trade receivables Dividends receivable assets Trade payables liabilities Dividends payable Sales Purchase Finance income and costs 12/31/ /31/ /31/ /31/ /31/ /31/2016 Votorantim S.A. (i) 3,678 3, , ,859 6,074 1,300 75,090 75,090 10,244 10,246 5 Subsidiaries BAESA - Energética Barra Grande S.A ENERCAN - Campos Novos Energia S.A. 7,145 37,652 44,709 Metalex Ltda. 8,817 13,342 3, ,317 45,489 6,494 4,684 92,755 88, ,496 89,331 Associates Alunorte - Alumina do Norte S.A. 505 Mineração Rio do Norte S.A. 16,995 6,713 Votener - Votorantim Comercializadora de Energia Ltda. (ii) 76,797 93, , ,237 76,681 75, , , , , , ,718 (67,969) (67,969) Votorantim Cimentos S.A. (iii) , ,082 3,103 1,361 Votorantim Energia Ltda ,499 1,499 2,281 Votorantim Finco GmbH (iv) 274, ,429 (6,168) (1,661) Votorantim Geração de Energia (v) 420,000 Votorantim GmbH (vi) ,240 (2,684) (11,341) Nexa Resources S.A. (vi) 328,023 (810) Votorantim Metais Zinco S.A. (vii) 24,081 45,127 73, , ,921 68,381 Votorantim Siderurgia S.A. 2,749 - Others 713 2,079 4,317 1, ,648 1, , , ,690 24,205 44,430 1,192, , , , ,714 2,318,002 10,323 10, , ,605 1,123, ,948 (77,631) (80,971) Current 115, ,690 24,205 44, , , , , , ,019 10,323 10,323 Non-current 1,061, , ,368 2,096, , ,690 24,205 44,430 1,192, , , , ,714 2,318,002 10,323 10, of 41

24 (b) Statement of operations Current and non-current Current and non-current Trade receivables Dividends receivable assets Trade payables Purchase liabilities Dividends payable Sales Finance income and costs 12/31/ /31/ /31/ /31/ /31/ /31/2016 Votorantim S.A. (i) 3,678 3, , ,859 6,074 1,300 75,090 75,090 10,244 10,246 Associates Mineração Rio do Norte S.A. Alunorte - Alumina do Norte S.A. 505 Mineração Rio do Norte S.A. 16,995 6,713 Votener - Votorantim Comercializadora de Energia Ltda. (ii) 76,797 93, , ,237 76,681 75, , , , , , ,718 (67,969) (67,969) 782 1,082 3, Votorantim Cimentos S.A. (iii) , ,499 2,281 Votorantim Energia Ltda. 1,499 Votorantim Finco GmbH (iv) 274, ,429 (6,168) (1,661) Votorantim Geração de Energia (v) 420,000 Nexa Resources S.A. (vi) 328,023 (810) Votorantim GmbH (vi) ,240 (2,684) (11,341) Votorantim Metais Zinco S.A. (vii) 24,081 45,127 73, , ,921 31,302 Votorantim Siderurgia S.A. 2, Others 1,303 1,338 4,168 1, ,583 1, , , ,279 16,995 6,713 1,148, ,412 83, , ,497 2,317,840 10,323 10, , , , ,002 (77,631) (80,971) 106, ,279 16,995 6, , ,020 83, , , ,857 10,323 10,371 Current Non-current 1,016, , ,368 2,096, , ,279 16,995 6,713 1,148, ,412 83, , ,497 2,317,840 10,323 10,371 (i) Refers to the balance arising from the merger of VMSA, substantially related to the accounts receivable originating from the sale of deferred tax on tax losses. This tax was used by related parties to pay to Tax Recovery Programa ( REFIS ). (ii) Current and non-current assets relate to a financial instrument, consisting of a firm commitment for the sale of surplus energy. Current and non-current liabilities relate to the advance receipt, in 2014 and 2015, of the rights originating from the free ambient commercialization of electric energy contracts. The sales and purchases relate to sales of own and/or third parties energy, where Votener acts as ultimate commercialization vehicle in the regulated market. Financial expenses relate to interest to appropriate the power supply sales credit assignment operation by December 2019, and interest is recognized pro-rata as income over the term of the contract. (iii) (iv) Refers to the sale of tax losses on income tax and social contribution for the payment of tax debts through REFIS by the related company. The realization will be made according to the approval of the credit by the Federal Revenue. Relates to prepayment transactions, split off from Votorantim GmbH to Votorantim Finco GmbH. (v) Sale of the preferred shares in relation to the investee Pollarix S.A., in the percentage of 66.67%, as detailed in Note 1.1 (d). (vi) Transfer of export prepayments, in which the Company received the anticipation of receivables in the transactions brokered by Nexa Resources S.A. and Votorantim GmbH. In February 2017, the prepayments were transferred to VMZ and in June 2017, the settlements of the balances of related parties occurred, as detailed in note 1.1 (a), as detailed in Note 1.1 (a). (vii) Residual balance on the sale of the common shares of Pollarix S.A., as detailed in Note 1.1 (d). 22 of 41

25 (c) Guarantees of the indebtedness of the Company and its consolidated entities granted by related parties Instrument Guarantor 12/31/2016 BNDES Hejoassu S.A./VSA 427, ,189 Development promotion agency BRL VSA (100%) 43,926 48,701 Eurobonds - USD (Voto 21) VSA (100%) e VCSA (50%) 785, ,855 Eurobonds - USD (Voto 24) VSA (100%) 1,284,422 1,305,876 2,541,535 2,649,621 (d) Guarantees of the indebtedness of related parties granted by the Company and its subsidiaries Instrument Debtor Guarantor Eurobonds - USD (Voto 19) VSA Percentage guaranteed by the Company 12/31/2016 Amount guaranteed Amount guaranteed Debt Debt VSA (100%), VCSA (50%) e CBA (50%) 50% 655, , , , of 41

26 13 Investments (a) Breakdown Information on investees at September 30, 2017 Equity in the results Investment balance Equity Profit (loss) for the quarter Voting ownership interest and total (%) 12/31/2016 Investments valued under the equity method Subsidiaries Metalex Ltda. 66,896 19, ,910 18,937 66,896 72,986 Nazca Participações Ltda. (1,369) CBA Energia Participações S.A. 278,098 (1,742) , ,098 1,008 Associates Alunorte - Alumina do Norte S.A. 4,481,490 76, ,335 21, , ,284 Mineração Rio do Norte S.A. 855,119 76, ,621 37,894 85, ,168 Others (8) 1,671 1,670 Joint operations ENERCAN - Campos Novos Energia S.A. 421, , ,649 66, , ,025 BAESA - Energética Barra Grande S.A. 785,140 47,775 3,774 4, ,605 Goodwill Metalex Ltda. 49,430 49,430 ENERCAN - Campos Novos Energia S.A. 30,501 57,408 BAESA - Energética Barra Grande S.A. 6,612 Pollarix S.A. 1, , , ,363 1,091,795 Information on investees at September 30, 2017 Equity in the results Investment balance Equity Profit (loss) for the quarter Voting ownership interest and total (%) 12/31/2016 Investments valued under the equity method Subsidiaries Alunorte - Alumina do Norte S.A. 4,481,490 76, ,335 21, , ,284 Mineração Rio do Norte S.A. 855,119 76, ,621 37,894 85, ,168 Others (8) 1,704 1,724 9,948 59, , , of 41

27 (b) Changes in investments At the beginning of the period 1,091, , , ,215 Equity in the results 104, ,889 9,948 59,085 Capital decrease in investee (44,692) Disposal by sales of investment (Nota 1.1 (d)) (311,787) Disposal with increase of investment (Nota 1.1 (e)) (120,990) Ownership interest increase - Enercan 151,155 Nazca incorporation 1,165 Increase of investiment (Nota 1.1 (e)) 275,487 24,321 Dividends eceivable (252,169) (52,041) (43,912) (26,041) Loss in capital increase in investee with negative equity (24,119) Others 5,828 2,883 (10) 1,537 At the end of the period 748,363 1,076, , , of 41

28 14 Property, plant and equipment (a) Breakdown and changes Land and improvements Buildings and constructions Machinery, equipment and facilities Vehicles Furniture and fittings Construction in progress ARO (i) Other Total Total At the beginning of the period Cost 104,967 2,425,991 5,851, ,424 26, , , ,105 9,208,587 8,228,217 Accumulated depreciation (1,781) (832,028) (3,488,728) (102,798) (15,041) (66,576) (281,281) (4,788,233) (3,703,753) Net balance 103,186 1,593,963 2,362,817 11,626 11, ,690 36,559 45,824 4,420,354 4,524,464 Purchases , , ,625 91,840 Disposals (220) (473) (19,362) (130) (20,185) (4,116) Depreciation (40,278) (147,913) (3,525) (1,632) (5,449) (190) (198,987) (231,480) Lieu of payment (note 1.1(c)) (5,548) (859) (936) (2,144) (9,487) Increase of assets (note 1.1 (e)) (5,324) (49,986) (96,565) (2,622) (154,497) VMSA incorporation Nazca incorporation 381 Reversal (provision) for impairment of fixed assets 2,184 29, (2,141) 6 29,935 Revision of cash flow Transfers ,363 46,779 1, (62,210) (2) (3,027) (253) At the end of the period 97,862 1,516,685 2,181,225 6,323 9, ,692 31,569 45,639 4,191,190 5,063,055 Cost 99,643 2,376,318 5,765, ,843 24, , , ,822 9,104,793 9,683,286 Accumulated depreciation (1,781) (859,633) (3,583,978) (99,520) (15,484) (72,024) (281,183) (4,913,603) (4,620,231) Net balance at the end of the period 97,862 1,516,685 2,181,225 6,323 9, ,692 31,569 45,639 4,191,190 5,063,055 Annual average depreciation rate - % of 41

29 Land and improvements Buildings and constructions Machinery, equipment and facilities Vehicles Furniture and fittings Construction in progress ARO (i) Other Total Total At the beginning of the period Cost 115,710 3,028,435 6,162, ,495 27, , , ,108 10,135,575 8,979,902 Accumulated depreciation (2,865) (1,003,850) (3,593,041) (102,810) (15,341) (66,576) (281,281) (5,065,764) (3,901,565) Net balance 112,845 2,024,585 2,569,797 11,685 11, ,689 36,559 45,827 5,069,811 5,078,337 Purchases , , ,932 92,719 Disposals (220) (473) (19,471) (130) (20,294) (4,116) Depreciation (95) (56,496) (157,078) (3,532) (1,649) (5,588) (190) (224,628) (255,551) Lieu of payment (note 1.1(c)) (5,548) (859) (936) (2,144) (9,487) Participation of subsidiary excluded from consolidation (ii) (1,267) (123,002) (90,465) (2,643) (24) 2,341 (215,060) Reversal (provision) for impairment of fixed assets 2,184 29, (2,141) 6 29,935 VMSA incorporation 682,219 Ownership interest increase - Enercan 126,378 Revision of cash flow Transfers ,557 49,776 1, (65,519) 139 (2) (2,999) (261) At the end of the period 111,483 1,858,267 2,388,160 6,361 9, ,899 31,569 45,641 4,756,669 5,719,725 Cost 113,900 2,859,789 6,074, ,894 25, , , ,824 9,914,944 10,608,589 Accumulated depreciation (2,417) (1,001,522) (3,685,873) (99,533) (15,723) (72,024) (281,183) (5,158,275) (4,888,864) Net balance at the end of the period 111,483 1,858,267 2,388,160 6,361 9, ,899 31,569 45,641 4,756,669 5,719,725 Annual average depreciation rate - % (i) Asset Retirement Obligation (ii) Refers to the exclusion of 20.98% of the proportionate consolidated stake of Campos Novos Energia S.A., which was contributed to the subsidiary Pollarix S.A., as described in Note 1.1 (d). 27 of 41

30 (b) Construction in progress The balance of construction in progress consisted mainly of the expansion and optimization projects of the Company's industrial units, as follows: Gross balance Provision for asset impairment 12/31/2016 Net balance Gross balance Provision for asset impairment Net balance Ferro Níquel Project 568,550 (568,550) 568,550 (568,550) Alumina Rondon Project 109, , , ,366 Renovation of furnace 92,096 (86,759) 5,337 92,096 (86,759) 5,337 Tijuco Alto Project 52,066 (52,066) 52,066 (52,066) Plastic Transformation and Casting Projects 18,453 18,453 19,385 19,385 Alumina Factory Project 30,098 (12,595) 17,503 23,505 (12,595) 10,910 Renovation of furnace 78,087 (31,369) 46,718 44,066 (28,839) 15,227 Furnace room VIII 29,120 (26,246) 2,874 29,120 (26,246) 2,874 Revitalization and adaptation of plant 46,004 46,004 39,208 39,208 Modernization of Automation System 31,396 31,396 25,404 25,404 Furnace room Projects 13,345 13,345 15,114 15,114 Mining Projects 5,272 5,272 4,691 4,691 Safety, Health and Environment Projects 3,718 3,718 1,622 (398) 1,224 Other 13,582 (7,655) 5,927 19,288 (9,339) 9,949 1,091,139 (785,240) 305,899 1,041,481 (784,792) 256,689 The balances above are presented net of provision for impairment. The Company assesses its assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Halted projects are continuously assessed, and if there is any indication of impairment, provision is recognized. As regards the remaining balance presented above, which was not provided for as an impairment loss, the Company believes that it will resume the project and/or use this asset in other production lines. During the period ended in September 30, 2017, borrowing charges capitalized as part of construction in progress totaled R$ 5,744 (September 30, R$ 7,059). The capitalization rate used was 0.53% per month (September 30, % per month). 28 of 41

31 15 Intangible assets (a) Breakdown and changes Goodwill Rights over natural resources Softwares Use of public assets Other Total Total At the beginning of the period Cost 79, ,066 67, ,829 9, , ,624 Accumulated amortization (37,409) (57,008) (66,728) (1,882) (163,027) (124,217) Net balance 79, ,657 10, ,101 7, , ,407 Addition 29 Amortization and depletion (33) (2,807) (8,105) (10) (10,955) (11,541) Lieu of payment (note 1.1(c)) (2,268) (2,268) VMSA incorporation 220,296 Reversal (provision) for impairment of fixed assets 6 6 Transfers 3,027 3, At the end of the period 79, ,624 8, ,996 7, , ,444 Cost 79, ,566 24, ,829 9, , ,094 Accumulated amortization (36,942) (16,516) (74,833) (1,892) (130,183) (224,650) Net balance at the end of the period 79, ,624 8, ,996 7, , ,444 Annual average amortization rate - % of 41

32 Goodwill Rights over natural resources Softwares Use of public assets Other Total Total At the beginning of the period Cost 194, ,066 67, ,581 41, , ,188 Accumulated amortization (37,409) (57,279) (72,441) (29,890) (197,019) (155,033) Net balance 194, ,657 10, ,140 11, , ,155 Addition Amortization and depletion (33) (2,839) (8,821) (59) (11,752) (12,604) Lieu of payment (note 1.1(c)) (2,268) (2,268) Participation of subsidiary excluded from consolidation (i) 0 (14) (2,145) (41) (2,200) Disposal by sale of goodwill (note 1.1 (d)) (28,506) (28,506) Reversal (provision) for impairment of fixed assets 6 6 VMSA incorporation 243,876 Ownership interest increase - Enercan 1,389 Transfers 2, , At the end of the period 166, ,624 8, ,174 11, , ,107 Cost 166, ,565 25, ,774 38, ,414 1,097,164 Accumulated amortization (36,941) (16,773) (80,600) (27,641) (161,956) (258,057) Net balance at the end of the period 166, ,624 8, ,174 11, , ,107 Annual average amortization rate - % (i) Refers to the exclusion of 20.98% of the proportionate consolidated stake of Campos Novos Energia S.A., which was contributed to the subsidiary Pollarix S.A., as described in Note 1.1 (d). 30 of 41