Elekeiroz S.A. Financial statements in accordance with accounting practices adopted in Brazil and IFRS at December 31, 2011

Transcription

1 ( free translation of the original in Portuguese) Elekeiroz S.. Financial statements in accordance with accounting practices adopted in Brazil and IFRS at 2011

2 ( free translation of the original in Portuguese) Independent uditor's Report To the Board of Directors and Stockholders Elekeiroz S.. We have audited the accompanying financial statements of Elekeiroz S.. ("Company" or "Parent Company"), which comprise the balance sheet as and the statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. We have also audited the accompanying consolidated financial statements of Elekeiroz S.. and its subsidiary ("Consolidated"), which comprise the consolidated statements of income, comprehensive income and cash flows for the year ended 2011, and a summary of significant accounting policies and other explanatory information. Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of the parent company financial statements in accordance with accounting practices adopted in Brazil, and for the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) issued by the International ccounting Standards Board (ISB) and accounting practices adopted in Brazil, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. uditor's responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Brazilian and International Standards on uditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. n audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 the entity's internal control. n audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 2 PricewaterhouseCoopers, Rua José Pires Neto 314, 10 o, Campinas, SP, Brasil , Caixa Postal 3136 T: (19) , F: (19) ,

3 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on the parent company financial statements In our opinion, the parent company financial statements referred to above present fairly, in all material respects, the financial position of Elekeiroz S.. as, and its financial performance and cash flows for the year then ended, in accordance with accounting practices adopted in Brazil. Opinion on the consolidated financial statements In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial performance and cash flows of Elekeiroz S.. and its subsidiary as at 2010 in accordance with the International Financial Reporting Standards (IFRS) issued by the International ccounting Standards Board (ISB) and accounting practices adopted in Brazil. Emphasis of matter s discussed in note 2.1(b) to these financial statements, the parent company financial statements have been prepared in accordance with accounting practices adopted in Brazil. In the case of Elekeiroz S.., these practices differ from IFRS applicable to separate financial statements only in relation to the measurement of the investment in the subsidiary based on equity accounting, whereas IFRS requires measurement based on cost or fair value. Our opinion is not qualified in respect of this matter. Other matters Supplementary information - statements of value added We also have audited the parent company and consolidated statements of value added for the year ended 2011, which are the responsibility of the Company's management. The presentation of these statements is required by Brazilian corporate legislation for listed companies, but is considered supplementary information for IFRS. These statements were subject to the same audit procedures described above and, in our opinion, are fairly presented, in all material respects, in relation to the financial statements taken as a whole. udit of prior-year information The parent company and consolidated financial statements of the Company for the year ended December 31, 2010, presented for comparison purposes, were audited by another firm of auditors whose report, dated February 22, 2011, expressed an unqualified opinion on those statements. Campinas, February 14, 2012 PricewaterhouseCoopers uditores Independentes CRC 2SP000160/O-5 Francisco José Pinto Fagundes Contador CRC 1MG054755/O-4 "S" SP 3

4 Balance sheet ll amounts in thousands of reais ( free translation of the original in Portuguese) Parent Consolidated Parent Consolidated December 31, 2011 December 31, 2010 December 31, 2010 Liabilities and equity Note December 31, 2011 December 31, 2010 December 31, 2010 ssets Note Current assets Current liabilities Cash and cash equivalents 6 35,549 88,326 88,327 Trade payables 14 44,778 33,322 33,322 Held-to-maturity investments 6 1,190 Borrowings 15 29,120 32,968 32,968 vailable-for-sale financial assets 6 1,603 Personnel obligations 14 8,950 6,297 6,297 Trade receivables 7 154, , ,417 Other payables 14 4,541 4,314 3,642 Inventories 8 100,023 79,638 79,638 Taxes and contributions payable 3,272 5,624 5,624 Other receivables 11 1,792 11,100 11,100 Dividends and profit sharing 16 2,310 11,753 11,753 Taxes recoverable 9 25,269 24,962 24,962 Prepaid expenses ,971 94,278 93, , , ,115 Non-current liabilities Borrowings 15 36,712 11,234 11,234 Taxes and contributions payable 17 22,226 22,390 22,390 Non-current assets Provision for contingencies 18 19,658 35,748 35,748 Loans with subsidiary 399 Long-term receivables Other payables Trade receivables 7 1,864 Deferred taxes 10 4,849 3,250 3,250 Other receivables 11 12,683 11,445 11,445 Taxes recoverable 9 21,003 20,159 20,159 83,862 73,021 72,622 Deferred taxes 10 43,004 36,757 36,757 Total liabilities 176, , ,228 78,554 68,361 68,361 Investments 12 8,639 8,416 7,344 Equity Property, plant and equipment , , ,647 Share capital , , ,000 Intangible assets Capital reserves 19 8,327 37,084 37,084 Carrying value adjustments , , ,030 Revenue reserves , , ,732 Total equity 476, , ,917 a Total assets 653, , ,145 Total liabilities and equity 653, , ,145 The accompanying notes are an integral part of these financial statements. 1 of 45

5 Statements of income and comprehensive income Years ended December 31 ll amounts in thousands of reais, except for earnings per share ( free translation of the original in Portuguese) Parent Consolidated Statement of income Note a Net sales revenue , , , ,533 Cost of sales 21 (687,123) (703,648) (687,123) (703,648) Gross profit 89, ,885 89, ,885 Distribution costs 21 (37,762) (39,759) (37,762) (39,759) General and administrative expenses 21 (44,158) (40,485) (44,163) (40,490) Other expenses, net 22 (6,428) (14,750) (6,428) (14,750) Share of loss of subsidiary (5) (5) Operating profit 1,217 51,886 1,217 51,886 Finance income 23 28,212 31,043 28,212 31,043 Finance costs 23 (19,709) (24,257) (19,709) (24,257) Finance income, net 8,503 6,786 8,503 6,786 Profit before income tax and social contribution 9,720 58,672 9,720 58,672 Income tax and social contribution 25 5,107 (13,471) 5,107 (13,471) Profit for the year 14,827 45,201 14,827 45,201 a Basic and diluted earnings per share - R$ Statement of comprehensive income Profit for the year 14,827 45,201 14,827 45,201 Other comprehensive income djustment of financial instruments to market value 12 (296) 12 (296) Exchange variation of investee located abroad 191 (48) 191 (48) Write-off of exchange variation of investee located abroad due to termination of activities (125) (125) Other comprehensive income for the year 78 (344 ) 78 (344 ) Total comprehensive income for the year 14,905 44,857 14,905 44,857 The accompanying notes are an integral part of these financial statements. 2 of 45

6 Statement of changes in equity ll amounts in thousands of reais ( free translation of the original in Portuguese) a Share capital Special goodwill reserve Capital reserves Tax incentives Carrying value adjustments Tax incentives Revenue reserves Retained earnings Legal Special Total equity t January 1, ,000 28,757 8, ,959 6, , ,552 djustment of financial instruments to market value (296) (296) Exchange variation of investee located abroad (48) (48) Profit for the year 45,201 45,201 Total comprehensive income for the year (344) 45,201 44,857 llocation of profit for the year Legal reserve 2,260 (2,260) Tax incentives 4,140 (4,140) Dividends and interest on capital (11,492) (11,492) Special reserve 27,309 (27,309) Total allocation of profit for the year 2,260 4,140 27,309 (45,201) (11,492) t ,000 28,757 8, ,219 10, , ,917 The accompanying notes are an integral part of these financial statements. 3 of 45

7 Statement of changes in equity ll amounts in thousands of reais (continued) Share capital Capital reserves Special goodwill reserve Tax incentives Carrying value adjustments Tax incentives Revenue reserves Retained earnings Total equity Legal Special t January 1, ,000 28,757 8, ,219 10, , ,917 djustment of financial instruments to market value Exchange variation of investee located abroad Write-off of exchange variation of investee located abroad due to termination of activities (125) (125) Profit for the year 14,827 14,827 Total comprehensive income for the year 78 14,827 14,905 Total contributions by and distributions to owners of the Company Capital increase 100,000 (28,757 ) (71,243) llocation of profit for the year Legal reserve 748 (748) Tax incentives (125) 125 Dividends and interest on capital (4,118) (4,118) Special reserve 10,086 (10,086) Total allocation of profit for the year 100,000 (28,757) 748 (125) (61,157) (14,827) (4,118) t ,000 8, ,967 10, , ,704 The accompanying notes are an integral part of these financial statements. 4 of 45

8 Statement of cash flows Years ended December 31 ll amounts in thousands of reais ( free translation of the original in Portuguese) Parent Consolidated Cash flows from operating activities a Profit before income tax and social contribution 9,720 58,672 9,720 58,672 djustments for: Depreciation and amortization 25,577 28,963 25,577 28,963 Subsidiary's result recognized on equity accounting method 5 5 Loss on disposals of property, plant and equipment and investments Constitution (reversal) of provision for trade receivables, inventories, contingencies and adjustment to present value 2,658 5,068 2,658 5,068 Interest expenses 1,466 1,466 Other (income) expenses, net (1,319) 511 (1,319) 511 Changes in assets and liabilities Trade receivables (12,092) (45,059) (12,092) (45,058) Foreign exchange discount and vendor operations (8,043) (8,043) Inventories (24,725) 6,387 (24,725) 6,387 Judicial deposits (391) 364 (391) 364 Other receivables 7,677 9,652 7,677 9,652 Taxes recoverable - non-current (843) 13,062 (843) 13,062 mounts receivable - non-current (2,710) 5,109 (2,710) 5,109 Trade payables 11,454 (13,866) 11,454 (13,866) Taxes and labor obligations (267) 3,570 (267) 3,570 Provision for contingencies paid (14,303) (14,303) Other payables (1,945) 8,160 (1,940) 8,195 Cash generated from (used in) operations (7,784) 81,193 (7,784) 81,224 Income tax and social contribution paid 458 (6,183) 458 (6,183) Interest on borrowings paid (1,568) (1,568) Net cash (used in) provided by operating activities (8,894 ) 75,010 (8,894 ) 75,041 Cash flows from investing activities Equity investments (1,317) (1,317) (48) Purchases of property, plant and equipment (63,425) (16,153) (63,425) (16,153) Purchases of intangible assets (55) (123) (55) (123) Financial instruments (296) (296) Proceeds from the sale of assets Net cash used in investing activities (64,512) (16,490) (64,512) (16,538) Cash flows from financing activities Borrowings 33,920 (277) 33,920 (259) Borrowings paid (4,145) (4,146) Dividends and interest on capital paid (9,146) (11,492) (9,146) (11,492) Net cash provided by (used in) financing activities 20,629 (11,769 ) 20,628 (11,751 ) Net (decrease)/increase in cash and cash equivalents (52,777 ) 46,751 (52,778 ) 46,752 Cash and cash equivalents at the beginning of the year (note 6) 88,326 41,575 88,327 41,575 Cash and cash equivalents at the end of the year (note 6) 35,549 88,326 35,549 88,327 The accompanying notes are an integral part of these financial statements. 5 of 45

9 Statement of value added Years ended December 31 ll amounts in thousands of reais ( free translation of the original in Portuguese) Parent Consolidated (*) Revenue Sales of goods 976,481 1,049, ,481 1,049,348 Provision for impairment of trade receivables (269) (328) (269) (328) 976,212 1,049, ,212 1,049,020 Inputs acquired from third parties Cost of sales 819, , , ,350 Materials, electricity, outsourced services and others 71,890 80,059 71,895 80, , , , ,414 Gross value added 85, ,773 85, ,768 Depreciation and amortization (25,577) (28,963) (25,577) (28,963) Net value added generated by the entity 59, ,648 59, ,643 Value added received through transfer Subsidiary's result recognized on equity accounting method (5) (5) Finance income 28,212 31,043 28,212 31,043 Total value added to distribute 87, ,686 87, ,686 Distribution of value added Personnel Direct remuneration 49,777 46,049 49,777 46,049 Benefits 8,149 7,222 8,149 7,222 Government Severance Indemnity Fund for Employees (FGTS) 3,503 2,896 3,503 2,896 Taxes and contributions Federal 11,733 30,999 11,733 30,999 State (7,168) 3,621 (7,168) 3,621 Municipal Remuneration on third parties' capital Interest 6,241 7,827 6,241 7,827 Remuneration of own capital Interest on capital 3,778 11,492 3,778 11,492 Dividends Profits reinvested for the year 10,709 33,709 10,709 33,709 Value added distributed 87, ,686 87, ,686 (*) The consolidated statement of value added is not required by IFRS. The accompanying notes are an integral part of these financial statements. 6 of 45

10 ( free translation of the original in Portuguese) Elekeiroz S.. 1 General information Elekeiroz S.. ("Elekeiroz" or "Company") is a listed corporation whose shares are traded on the São Paulo Futures, Commodities and Stock Exchange (BM&F BOVESP). The Company is controlled by Itaúsa - Investimentos Itaú S.. and has two plants: one in Camaçari, State of Bahia, and the other in Várzea Paulista, State of São Paulo, where it is headquartered. The Company's main activities comprise the manufacture and sale of chemical and petrochemical products, including the resale of such products acquired from third parties, import and export, as well as the investment in other companies. The products manufactured by Elekeiroz are mainly used in the industrial sector, especially the civil construction, textile, automotive and food segments. The issue of these financial statements was authorized at a meeting of the Company's Board of Directors held on February 14, Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to the years presented, unless otherwise stated. 2.1 Basis of preparation The financial statements have been prepared under the historical cost convention, and adjusted to reflect the measurement of financial assets and financial liabilities at fair value through profit or loss. The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the parent company financial statements, are disclosed in note 3. (a) Consolidated financial statements The consolidated financial statements have been prepared and are being presented in accordance with accounting practices adopted in Brazil, including the pronouncements issued by the Brazilian ccounting Pronouncements Committee (CPC), as well as according to the International Financial Reporting Standards (IFRS) issued by the International ccounting Standards Board (ISB), as disclosed in note Up to 2010, the Company published consolidated statements including its wholly-owned subsidiary Castletown Trading S.. (referred to as "subsidiary"), located in Uruguay. On ugust 2, 2011, the termination of the activities of this company was approved by the Board of Directors of Elekeiroz. On October 5, 2011, at an Extraordinary General Meeting, the stockholders approved the liquidation of the company, transferring to the stockholder (Elekeiroz S..) all the rights and obligations. Consequently, the consolidated financial statements of Elekeiroz S.. and its subsidiaries ("Consolidated"), which comprise the consolidated statements of income, comprehensive income and cash flows for the year ended 2011, were consolidated up to October 5, The operations from October 5, 2011 to 2011 refer solely to the Company. 7 of 45

11 The Company is not presenting the consolidated balance sheet as, since at the end of 2011 there were no investments subject to consolidation. (b) Parent company financial statements The parent company financial statements have been prepared and are being presented in accordance with accounting practices adopted in Brazil issued by the CPC and are disclosed together with the consolidated financial statements. In the parent company financial statements, the subsidiary is recorded based on the equity accounting method. The same adjustments are made in the parent company and consolidated financial statements to reach the same profit or loss and equity attributable to the owners of the parent entity. In the case of Elekeiroz S.., the accounting practices adopted in Brazil applicable to the parent company financial statements differ from IFRS applicable to the separate financial statements only in relation to the evaluation of investments in subsidiaries and associates based on the equity accounting method, instead of cost or fair value in accordance with IFRS. The notes refer to the parent company financial statements and, when indicated, also to the consolidated financial statements. (c) Changes in accounting policies and disclosures There are no new CPCs/IFRS pronouncements or interpretations effective as from 2011 that would be expected to have a material impact on the Company's financial statements. 2.2 Consolidation The following accounting policies are applied in the preparation of the consolidated financial statements. (i) Subsidiary subsidiary is an entity in which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. subsidiary is fully consolidated from the date on which control is transferred to the Company. The consolidation was interrupted as from October 5, 2011, as detailed in note 2.1 (a). Up to the date on which the subsidiary was liquidated, the transactions, balances and unrealized gains on transactions between the companies were eliminated. Unrealized losses were also eliminated. The accounting policies of the subsidiary were altered, where necessary, to ensure consistency with the policies adopted by the Company. 2.3 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources, assessing the performance of the operating segments, and making the Company's strategic decisions, has been identified as the Company's Management, which comprises the Board of Directors and Executive Board. 8 of 45

12 2.4 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates ("the functional currency"). These financial statements are presented in Brazilian reais (R$), which is the Company's functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income. Foreign exchange gains and losses that relate to borrowings, trade receivables and trade payables are presented in the statement of income within "Finance income or costs". ll other foreign exchange gains and losses are presented in the statement of income within "Other income (expenses) - net". (c) Group companies with a different functional currency Up to October 5, 2011, the date on which the subsidiary was liquidated, the results and financial position of the Company's subsidiary (which did not have the currency of a hyper-inflationary economy), whose functional currency was different from the presentation currency, were translated into the presentation currency as follows: (i) (ii) (iii) assets and liabilities presented were translated at the closing rate at the date of that balance sheet. income and expenses in the statement of income were translated at average exchange rates (unless this average was not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses were translated at the rate on the dates of the transactions); and all resulting exchange differences were recognized as a separate component of equity, in the account "Carrying value adjustments". On consolidation, exchange differences arising from the translation of the net investment were taken to equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the statement of income as part of the gain or loss on sale. 2.5 Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less, with immaterial risk of change in value, and bank overdrafts, when applicable. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. 9 of 45

13 2.6 Financial assets Classification The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, held to maturity and available for sale. The classification depends on the purpose for which the financial assets were acquired. (a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. financial asset is classified in this category if acquired principally for realization in the short-term. ll financial assets in this category are classified as current assets. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period, which are classified as non-current assets. The Company's loans and receivables comprise "Cash and cash equivalents", "Trade receivables", "Other receivables" and "Marketable securities" in the balance sheet (notes 2.5, 2.7, 2.9 and 6). (c) vailable-for-sale financial assets vailable-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the previous categories. They are included in non-current assets unless management intends to dispose of them within 12 months of the balance sheet date. On the date of these financial statements, the available-for-sale financial assets basically comprised shares of Eletrobrás and are classified in current assets. (d) Held-to-maturity investments Investments held to maturity are non-derivatives financial assets, with fixed or determinable payments, and defined maturity. These assets are acquired with the intention and financial ability of being held up to their maturity. On the reporting date, they basically comprised held-to-maturity financial investments, for which the Company does not have the option of prepayment Recognition and measurement Normal purchases and sales of financial assets are recognized on the trade-date - the date on which the Company commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognized when the rights to receive cash flows have been realized or have been transferred and the Company has transferred substantially all the risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method. Gains or losses arising from changes in the fair value of the "Financial assets at fair value through profit or loss" category are presented in the statement of income within "Other income (expenses), net" in the period in which they arise. 10 of 45

14 The fair values of quoted assets and liabilities are based on current purchase prices. If the market for a financial asset is not active (and for unlisted securities), the Company establishes fair value by using valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognized in equity Impairment of financial assets (a) ssets carried at amortized cost The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Company uses to determine that there is objective evidence of an impairment loss include: (i) (ii) (iii) (iv) significant financial difficulty of the issuer or debtor; a breach of contract, such as a default or delinquency in interest or principal payments; the disappearance of an active market for that financial asset because of financial difficulties; or observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:. adverse changes in the payment status of borrowers in the portfolio; and. national or local economic conditions that correlate with defaults on the assets in the portfolio. The amount of any impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the statement of income. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor's credit rating), the reversal of the previously recognized loss is recognized in the statement of income. (b) ssets classified as available for sale The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Company uses the criteria referred to in (a) above. In the case of investments in equity securities classified as available for sale, a 11 of 45

15 significant or prolonged decline in the fair value of the security below its cost is also evidence that the asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss - is removed from equity and recognized in the statement of income. In the case of debt instruments, if, in a subsequent period, the fair value of this instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the statement of income. The impairment of trade receivables is described in note 2.7. (c) Held-to-maturity investments If there is evidence that the held-to-maturity investments are impaired, such investments are presented net of any provision for impairment. 2.7 Trade receivables Trade receivables are amounts due from customers for merchandise sold and are recorded at the nominal amount of the trade notes arising from sales of products, plus foreign exchange variations, when applicable. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less a provision for impairment of trade receivables. Usually, in practice, they are recognized at the amount billed, adjusted by the provision for impairment, when applicable. The provision for impairment of trade receivables is constituted based on the analysis of the risks involved in the realization of the receivables, in an amount considered sufficient by management to cover possible losses on the realization of these assets. t 2011, long-term receivables were measured at amortized cost using the effective interest method, with a discount rate of 0.92% per month. 2.8 Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined using the moving weighted average cost method. The costs of finished products comprise raw materials, direct labor, other direct costs and related general production overheads (based on normal operating capacity), except for borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less estimated conclusion costs and estimated selling expenses. Imports in transit are stated at the accumulated cost of each import. 2.9 Other receivables (current and non-current) Other receivables are stated at cost or realizable value including, when applicable, the income earned and monetary and exchange variations, adjusted to present value when applicable. Contingent assets are recognized only when there is evidence that realization is virtually certain, or favorable, final and unappealable court decisions have been obtained. 12 of 45

16 Judicial deposits refer to amounts deposited in court, and maintained up to the resolution of the related legal proceedings. Judicial deposits are measured at amortized cost. In the cases in which there is a provision for contingencies, the contingencies are presented net of the respective judicial deposits Intangible assets Computer software licenses are capitalized on the basis of the costs incurred and amortized over their estimated useful life of five years. Costs associated with maintaining computer software programs are recognized as an expense as incurred Investment properties The Company owns a property in the City of rujá, State of São Paulo, which it does not use. The Company's management opted to value the property at cost, its balance being presented at the historical cost of acquisition less the depreciation amount, when applicable. Depreciation is calculated using the straight-line method to reduce the asset's cost to its residual value over its estimated useful life, at an average rate of 4% per annum. On the date of these financial statements, the carrying amount of this asset did not exceed its recoverable value, estimated based on an appraisal report at market value. The balance of the investment property is presented in "Investments" (note 12) Property, plant and equipment Land and buildings comprise mainly factories and offices. Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items and finance costs related to the acquisition of qualifying assets. Subsequent costs, such as renovations and periodic inspections necessary to the operation, are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with these costs will flow to the Company and they can be measured reliably. The carrying amount of the replaced part is derecognized. ll other repairs and maintenance are charged to the statement of income during the financial period in which they are incurred. Land is not depreciated. Depreciation is calculated using the straight-line method at rates compatible with the useful lives of the assets. In the case of equipment and facilities used directly in the production process, the Company utilizes the produced units method taking into consideration the useful lives of the assets. The estimated useful lives of these assets are reviewed annually and, when necessary, adjusted. The estimated average useful lives of property, plant and equipment items by category are as follows: Years Constructions 25 Equipment and facilities 5 to 20 (on average 13) (*) Data processing equipment 5 Furniture and fittings 10 Vehicles 5 13 of 45

17 (*) The depreciation of equipment and industrial facilities varies according to the volume of production, with average rates ranging between 5% and 20% per annum. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The residual value of a property, plant and equipment item is written down immediately to its recoverable amount when the asset's residual value is greater than the recoverable amount (note 2.13). Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within "Other income (expenses), net" in the statement of income. On the date of these financial statements, the Company did not have finance lease operations Impairment of non-financial assets ssets that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. n impairment loss is recognized when the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that were adjusted due to impairment are subsequently reviewed for possible reversal of the impairment at the balance sheet date Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. ccounts payable are classified as current liabilities if payment is due in one year or less. If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. In practice, they are usually recognized at the amount of the related invoice Borrowings Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the total amount payable is recognized in the statement of income over the period of the borrowings, using the effective interest method. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period Provisions Provisions are recognized when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Provisions do not include future operating losses. 14 of 45

18 2.17 Current and deferred income tax and social contribution on net income The income tax and social contribution expenses for the period comprise current and deferred taxes. Income taxes are recognized in the statement of income, except to the extent that they relate to items recognized in comprehensive income or directly in equity. In such cases, the taxes are also recognized in comprehensive income or directly in equity. The current income tax and social contribution are calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions taken by the Company in income tax returns with respect to situations in which applicable tax regulation is subject to interpretation; and it establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. The current income tax and social contribution are presented net, separated by taxpaying entity, in liabilities when there are amounts payable, or in assets when the amounts prepaid exceed the total amount due on the reporting date. The income tax is calculated at the rate of 15% on taxable profit, plus a surcharge of 10%, and the existing tax losses are being offset. The social contribution on net income is calculated at the rate of 9% on the adjusted accounting profit, also taking into consideration the offset of social contribution losses. The Company is the beneficiary from the partial reduction of 75% in the income tax on the operating results of its production unit in Camaçari, State of Bahia up to The provision for income tax is recorded net of the portion relating to tax incentives. There are no conditions still to be complied with by the Company which could affect the recognition of this credit. Deferred income tax and social contribution are recognized on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In practice, the inclusion of expenses in the accounting profit, or the exclusion of revenues from the accounting profit, both temporarily non-deductible, generate deferred tax credits or debits. Deferred income tax and social contribution assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences and/or tax losses can be utilized. The projections of future taxable profit are prepared using internal assumptions and future economic scenarios and, therefore, are subject to alterations. The projected profit is adjusted to present value using the weighted average cost of the Company's capital. Deferred tax assets and liabilities are presented separately in assets and liabilities Employee benefits (a) Private pension plan The Company offers to all its employees a private pension plan of the defined contribution type, under which the Company pays fixed contributions to a separate entity (a pension fund) and has no legal or constructive obligations to pay further contributions if the fund lacks sufficient assets to pay all the benefits due. The contributions are recognized as expenses in the period in which they are incurred and are interrupted when the employment relationship of the employee with the Company is terminated. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. 15 of 45

19 (b) Profit sharing The Company recognizes a liability and an expense for profit-sharing based on a methodology that takes into consideration the profit attributable to its stockholders after certain adjustments. The profit-sharing plan is related to the achievement of specific targets which are established and approved at the beginning of each year. The Company recognizes a provision where contractually obliged or where there is a past practice that has created a constructive obligation. (c) Share-based payments The Company has an approved share-based compensation plan (stock options). Up to date of these financial statements no options were granted to the officers. (d) Other benefits The Company also offers other benefits, such as life insurance and health care, which are recorded in accordance with the accrual basis of accounting, and are interrupted when the employment relationship of the employee with the Company is terminated Share capital The Company's capital comprises common and preferred shares, with no par value. Common and preferred shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of products in the ordinary course of the Company's activities. Revenue is shown net of value-added tax, returns, rebates and discounts. The Company recognizes revenue when the amount of revenue can be reliably measured and when it is probable that future economic benefits will result from the transaction. Revenue is not recognized if its realization is not certain. (a) Sales of goods Revenue from sales of products is recognized in the statement of income when all the risks and rewards inherent to the product are transferred to the purchaser. In the case of Free on Board (FOB) sales, revenue is recognized when the purchaser collects the products in the Company's units and in the cases of sales under the Cost, Insurance and Freight (CIF) method, revenue is recognized only after the delivery of the products to the location established by the customer. (b) Interest income Interest income is recognized on the accrual basis, using the effective interest method. When a loan and receivable instrument is impaired, the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument. 16 of 45

20 (c) Dividend income Dividend income is recognized when the right to receive payment is established. (d) Other income and expenses 2.21 Leases Other income and expenses are recognized on the accrual basis. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of income on a straight-line basis over the period of the lease Distribution of dividends and interest on capital The distribution of dividends and interest on capital to the Company's stockholders is recognized as a liability at year-end, or in shorter periods as determined by the Board of Directors, based on the Company's bylaws. The tax benefit of interest on capital is recognized in the statement of income New standards, amendments and interpretations to existing standards that are not yet effective The following new standards, amendments and interpretations to existing standards were issued by ISB but are not effective for The early adoption of these standards, even though encouraged by ISB, has not been implemented in Brazil by the Brazilian ccounting Pronouncements Committee (CPC). IFRS 9, "Financial instruments" addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October It replaces the parts of IS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value and those measured at amortized cost. The determination is made at initial recognition. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial instruments. For financial liabilities, the standard retains most of the IS 39 requirements. The Company is yet to assess IFRS 9's full impact. The standard is applicable as from January 1, IFRS 13, "Fair value measurement" was issued in May IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GP. The Company is yet to assess IFRS 13's full impact. The standard is applicable as from January 1, Management's initial evaluation is that the other standards issued do not apply to the Company's current operations. 17 of 45

21 There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on these financial statements. 3 Critical accounting estimates and judgments Estimates and judgments are continually reassessed and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 3.1 Critical accounting estimates and assumptions Based on assumptions, the Company makes estimates concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next year are addressed below: (a) Income tax, social contribution and other taxes The Company records deferred income tax and social contribution assets on tax losses. The recognition of these assets takes into consideration the expectation of future taxable profit. The estimates of future results that will permit the offset of these assets are based on the Company's budget, which is reviewed and approved by the Board of Directors, taking into consideration economic scenarios, discount rates and other variables that may not materialize. (b) ICMS credits The Company has assets related to Value-added Tax on Sales and Services (ICMS) credits accumulated in its operations in the State of Bahia. The amount of these credits is reduced to the estimated amount of its effective benefit, based on projections. Changes in tax legislation, or even in the market conditions that are the basis of the projections, could result in changes in the fair value of these credits. Based on current projections, the accumulated credits present an impairment of R$ 6, Critical judgments in applying the entity's accounting policies The estimated realizable values of the Company's financial assets and liabilities were determined using information available in the market and adequate evaluation methodologies. Judgments were required in the interpretation of market data to produce the most adequate estimates of realizable values. s a consequence, the estimates could suffer changes in relation to the amounts that will be realized. The items in which the use of judgment may be considered to be more relevant refer to the determination of the useful lives of property, plant and equipment and provisions for labor and tax liabilities. 4 Financial risk management 4.1 Risk factors The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. 18 of 45

22 Risk management is carried out by the Executive Board under policies approved by the Board of Directors. The Executive Board identifies, evaluates and hedges financial risks in close co-operation with the Company's operating units. The Governance and Risks Committee, which advises the Board of Directors, is responsible for the policies of exposure and tolerance to risk, as well as for the evaluation of special situations, internal control processes and the Company's risk management structure. The management of the risk of financial instruments is carried out by the Company's management and follows operating strategies, aiming to obtain liquidity, profitability and safety. The control policy consists of the ongoing monitoring of the rates contracted and the comparison with those prevailing in the market. The Company does not have transactions involving speculative derivatives or any other risk assets. Market risk (i) Foreign exchange risk The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. The foreign exchange rate risk corresponds to the decrease in the amounts of assets or increase in liabilities due to changes in the foreign exchange rate. significant portion of revenue arises from exports and, consequently, the Company meets its working capital requirements through credit lines linked to the exports, since they have rates and conditions more attractive than the alternatives of working capital financing in local currency. The required sensitivity analysis is presented in note 4.1 (e). (ii) Derivative transactions In the period presented in these financial statements, the Company did not carry out transactions involving derivative instruments. (iii) Cash flow and fair value interest rate risk The interest rate risk arises from the possibility that the Company may incur economic losses due to adverse fluctuations in interest rates. This risk is continuously monitored in order to assess the need to contract new derivatives to hedge against the volatility risk of these rates. The required sensitivity analysis is presented in note 4.1 (e). (b) Credit risk The credit risk is managed by an Operating Credit Committee, comprising the Executive and Commercial Board and the Finance Executive Management. Credit risk arises from cash and cash equivalents and deposits with banks and other financial institutions, as well as credit exposures with domestic and foreign customers, including outstanding receivables. The Company's sales are not concentrated; no customer represents more than 10% of the net billings. The Company has a credit policy that establishes limits and terms, according to liquidity standards, determined using several rating instruments. In addition to the diversification in the domestic market, a significant portion of the products is intended for the foreign market, following the same risk assessment procedure. s regards financial and other investments, the Company's policy is to contract with prime institutions, and to avoid the concentration of investments in any single economic group. 19 of 45

23 No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: December 31, 2011 December 31, 2010 Trade receivables Counterparties without external credit rating Group 1 55, ,220 Group 2 86,025 12,912 Group 3 14,562 13,285 Total trade receivables 156, ,417 Cash at bank and short-term bank deposits (*) Low risk in the short-term 35,535 88,303. Group 1 - customers with no defaults in the past; 35,535 88,303. Group 2 - existing customers with some defaults in the past. ll defaults were fully recovered.. Group 3 - customers with some default, but with real guarantees for the receivables, and which are in compliance with the agreements entered into. None of the financial assets, which were fully performing, were renegotiated in the last year. Low risk in the short-term - risk rating (low liquidity risk) for financial institutions determined by Moodys, an agency specialized in this type of analysis. (*) The remainder of the balance sheet item "cash and cash equivalents" comprises cash on hand. (c) Liquidity risk Cash flow forecasting is realized by the Finance Department, which monitors rolling forecasts of the Company's liquidity requirements to ensure it has sufficient cash to meet operational needs. The Company has a low level of indebtedness. The control of the liquidity position is carried out daily through the monitoring of cash flows. The surplus cash held is monitored by the Finance Department. Surplus cash is usually invested in financial investments and marketable securities with appropriate maturities or sufficient liquidity to provide sufficient margins as determined by the aforementioned forecasts. t the balance sheet date, the Company had investments in Bank Deposit Certificates (CDB) of R$ 35,182 ( R$ 87,974) and in marketable securities of R$ 1,190 ( nil) that are expected to readily generate cash inflows for managing liquidity risk. 20 of 45

24 The table below presents the maturity of the financial liabilities and trade payables contracted by the Company at the financial statements closing date: Less than one year Between 1 and 3 years Between 4 and 5 years Over 5 years Total Trade payables 44,778 44,778 Financing 29,120 20,191 14,821 1,700 65,832 Other payables ,958 Total 78,439 20,608 14,821 1, ,568 The projections included in the budget approved by the Board of Directors for the next three-year period demonstrate the Company's capacity of generating cash and meeting its obligations, if the projections materialize. (d) Products and inputs price risk The Brazilian chemical segment is highly inserted in the global market and, therefore, the prices, in general, are strongly influenced by the international conditions of supply and demand. Consequently, the purchase and sale prices of raw materials present practically simultaneous high and low cycles, preserving an average margin that permits the sustainability of the business. (e) Sensitivity analyses - foreign exchange and interest rate risk Based on the balances of assets and liabilities exposed to foreign exchange rates, the Company prepared two simulations with increases in the foreign exchange rates (R$/US$) of 25% and 50%. The probable scenario considers the Company's projections for the foreign exchange rates at the maturity of the operations. s demonstrated in the table below, taking into consideration a low net exposure, foreign exchange variations within the simulated limits would not give rise to significant impacts on the Company's results. 21 of 45

25 FOREIGN EXCHNGE RISK Balance Effects in the results up to maturity Transaction 31/12/2011 Probable Possible Remote (+/- 25%) (+/- 50%) FINNCIL SSETS Exports receivable USD depreciation (9.939) (19.879) USD appreciation Other receivables USD depreciation (394) (787) USD appreciation Total financial assets FINNCIL LIBILITIES BNDES - rotating credit line (1.638) USD depreciation USD appreciation (2.110) (4.221) dvances gainst Exchange Contracts (CC) Foreign Exchange discount (41) USD depreciation USD appreciation (4.629) (9.258) Foreign suppliers (26) USD depreciation USD appreciation (2.385) (4.769) Total financial liabilities NET EXPOSURE (1.592) USD depreciation (1.209) (2.418) US$ appreciation The Company carried out two simulations regarding the interest rates of financing and the remuneration of financial investments at the Interbank Deposit Certificate (CDI) rate with increases and decreases of 25% and 50%. The results of these simulations are presented in the table below. SENSITIVITY OF INTEREST RTE Possible Remote Transaction (+/- 25%) (+/- 50%) Financial investments Decrease (1.175) (2.049) Increase Financing Decrease Increase (1.265) (2.515) NET EXPOSURE (94) of 45

26 (f) Dependency of basic inputs s is common in the production chain of the chemical industry, a single basic input could significantly influence the composition of a company's costs due to the volatility of the prices in international markets. In the case of Elekeiroz, this input is propane, acquired from Braskem and used in the manufacture of oxo alcohols, which are sold to the market or utilized by the Company in the manufacture of plasticizers. When it is not possible to transfer the price variations to the sales price, the Company's results may suffer a negative impact. 4.2 Capital management The Company's objective when managing capital is to safeguard its ability to continue as a going concern in order to provide returns for stockholders, as well as control the level of indebtedness through the monitoring of the gearing ratio. This ratio is calculated as net debt divided by total capital. In order to maintain or adjust the capital structure, the Company can make adjustments to the amount of dividends paid to stockholders, return capital to stockholders or even issue new shares or sell assets to reduce, for example, debt. The Company monitors capital on the basis of the gearing ratio. This ratio corresponds to the net debt expressed as a percentage of total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the balance sheet plus net debt. In 2011, the Company maintained a low indebtedness level. The gearing ratios and 2010 were as follows: Total borrowings (note 15) 65,832 44,202 B - (-) Cash and cash equivalents (note 6) (35,549) (88,326) C = ( - B) - Net debt 30,283 (44,124) D - Total equity 476, ,917 E = (C + D) - Total capital 506, ,793 C /E = Gearing ratio 6% -10% 4.3 Fair value estimation The carrying values of trade receivables, less impairment provision, and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments. The Company adopted CPC 40/IFRS 7 for financial instruments that are measured in the balance sheet at fair value, which requires disclosure of fair value measurements by level of the following hierarchy:. Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).. Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). 23 of 45

27 . Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The following table presents the Company's assets and liabilities that were measured at fair value at 2011 and 2010: Level ssets Financial assets at fair value through profit or loss vailable-for-sale financial assets 1,603 Financial investments held for trading 35,182 87,974 Total assets 36,785 87,974 5 Financial instruments by category vailablefor-sale financial assets ssets at fair value through profit or loss 2011 Loans and receivables Total ssets as per balance sheet Trade and other receivables, excluding prepayments 170, ,579 Cash and cash equivalents 35,535 35,535 Held-to-maturity investments 1,190 1,190 Financial assets held for trading 1,603 1,603 a 1,603 1, , ,907 Liabilities at amortized cost Other financial liabilities 2011 Total Liabilities as per balance sheet Borrowings 65,832 65,832 Other payables 4,958 4,958 Trade payables 44,778 44,778 65,832 49, , of 45

28 2010 Loans and receivables Total ssets as per balance sheet Trade and other receivables, excluding prepayments 164, ,962 Cash and cash equivalents 88,303 88, , ,265 Liabilities at amortized cost Other financial liabilities 2010 Total Liabilities as per balance sheet Borrowings 44,202 44,202 Other payables and loans payable 4,713 4,713 Trade payables 33,322 33,322 44,202 38,035 82,237 6 Cash and cash equivalents, marketable securities and available-for-sale financial assets (a) Cash and cash equivalents Cash at banks and on hand Short-term investments 35,182 87,974 35,549 88,326 The short-term investments were classified as held for trading and were mainly represented by floatingrate Bank Deposit Certificates (CDB), with prime financial institutions, remunerated at the CDI rate. t 2011, the average rate of return on the investments was % of the CDI rate (at % of the CDI rate). To preserve its capital, the Company invests its cash in selected institutions with low liquidity risk. (b) Held-to-maturity investments t 2011, the Company had a balance of R$ 1,190 ( nil) referring to financial investments realized with the intention of being held up to maturity. These financial investments are remunerated at 100% of the CDI rate. 25 of 45

29 (c) vailable-for-sale financial assets t 2011, the Company had a balance of R$ 1,603 ( nil) referring to 59,705 shares of Eletrobrás (Federal Power Company) adjusted to their fair value at the quotation of December 29, Trade receivables Local customers 117, ,881 Related parties Foreign customers 39,680 38,494 Provision for impairment of trade receivables (3,649) (3,524) Total current 154, ,417 Local customers 2,678 djustment to present value of long-term trade receivables (814) Total non-current 1,864 Total trade receivables 156, ,417 Trade receivables are amounts receivable from customers and reduced, through a provision, to their estimated realizable values. The provision for impairment of trade receivables is recorded in an amount considered sufficient by management to cover possible losses on their realization. The long-term portion refers to receivables from a customer under judicial reorganization. These receivables were adjusted to their fair value using the present value of the estimated cash flows. Up to the date of these financial statements, the customer has been meeting its obligations determined in the recovery plan. The fair values of trade receivables approximate their carrying amounts and t 2011 and 2010, none of the Company's customers represented more than 10% of total revenue. The Company has a credit policy with the objective of establishing procedures for the granting of credit in commercial transactions, compatible with the level of quality, agility and security required. The determination of the limit occurs through credit analyses, considering: corporate register information; financial and economic information; history of purchases and payments (historical status and instantaneous status); restricted information in the market; consultation of information systems; guarantees presented and visits to determine the credit (according to the relevance of the transaction). t 2011, trade receivables of R$ 33,462 ( R$ 12,978) were past due but not impaired. These related to a number of independent customers for whom there is no recent history of default or for which the Company has real guarantees. The ageing analysis of these trade receivables is as follows: 26 of 45

30 Up to 3 months 22,720 9,774 3 to 6 months 2, Over 6 months 8,608 2,808 33,462 12,978 The securities overdue for up to three months, amounting to R$ 22,720, refer to extensions, normal delays and paid exports with currency exchange operations which were not finalized by the Company. The securities overdue for more than three months in the amount of R$ 10,742, which are not impaired, refer to exports covered by credit insurance, a customer undergoing judicial reorganization that has been meeting the conditions established in the recovery plan or receivables with guarantees such as: mortgages, debt acknowledgment contracts and sureties. The amount of trade receivables with guarantees was R$ 10,422 and the amount of guarantees for these receivables was R$ 10,700. t 2011, trade receivables totaling R$ 3,649 ( R$ 3,524) were past due and fully provided for. The ageing analysis of these trade receivables is as follows: Up to 3 months 8 3 to 6 months 37 Over 6 months 3,604 3,524 The changes in the Company's provision for impairment of trade receivables were as follows: 3,649 3, Opening balance 3,524 3,197 Constitution of provision Realization of the provision (784) (139) Closing balance 3,649 3,524 The constitution and realization of the provision for impaired receivables have been included in "Distribution costs" in the statement of income. The Company's trade accounts receivable are denominated in the following currencies: 27 of 45

31 December 31, 2011 December 31, 2010 Real 120, ,447 U.S. dollar 39,680 38, , ,941 8 Inventories Finished products 39,919 34,712 Raw, auxiliary and packaging materials 51,997 34,946 General warehouse 11,912 10,046 Provision for losses on inventories (i) (3,805) (66) 100,023 79,638 (i) The provision for losses on inventories is constituted for those products that are considered obsolete at the reporting date and for those in respect of which the Company expects to incur losses on their realization. Inventories were stated at the average cost of purchase and 2010, which was lower than replacement cost or realizable values. The cost of inventories recognized as expenses and included in "Cost of sales" amounted to R$ 605,498 in 2011 (R$ 628,255 in 2010). 9 Taxes recoverable Taxes recoverable / to be offset Social Contribution on Net Income (CSLL) 1, Income tax (IRPJ) 2, Social Integration Program (PIS) and Social Contribution on Revenues (COFINS) 834 ICMS to be offset on acquisition of assets 1,639 1,769 Impairment of ICMS credits on acquisition of assets (209) (222) ICMS credit balance - state of Bahia 45,546 49,258 Impairment on accumulated ICMS credits - state of Bahia (6,372) (7,460) ccumulated PIS and COFINS credits on acquisition of property, plant and equipment Tax credit related to the Reintegra program 135 Other Total 46,272 45,121 Classified as: Current 25,269 24,962 Non-current 21,003 20, of 45

32 The Company accumulated ICMS credits at its production unit located in the state of Bahia arising from: (i) exports realized at that location, (ii) sales in the domestic market to companies benefiting from the deferral of this tax in that state, and (iii) sales to companies located outside that state with interstate rates lower than the internal rates paid on the purchase of inputs. In May 2008, the Government of the State of Bahia reduced the rate on the internal sales of some chemicals, among them the main raw materials used by the Company, permitting the utilization of some of the accumulated credits. In December 2008, the Company signed a settlement agreement with the Finance Department of the State of Bahia, with a schedule for the release of the accumulated ICMS credits, which were partially transferred to third parties during 2009, 2010 and The table below presents the gradual decrease of these accumulated credits: t ccumulated ICMS credits 82,986 64,102 49,258 45,546 The Company calculates the impairment of these credits based on the expected cash flows of future offsets discounted at the Weighted verage Cost of Capital (WCC). 10 Deferred taxes Deferred taxes are calculated on income tax (IRPJ) and social contribution (CSLL) losses and the temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The currently enacted tax rates of 25% for income tax and 9% for social contribution are used to calculate deferred taxes. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available to utilize temporary differences and/or tax losses, considering projections of future results based on internal assumptions and future economic scenarios, which could, therefore, suffer changes. The amounts for future offset are as follows: Deferred tax assets Deferred tax asset to be recovered within 12 months 4,715 7,750 Deferred tax asset to be recovered after 12 months 38,289 29,007 43,004 36,757 Deferred tax liabilities Deferred tax liability to be settled after 12 months (4,849) (3,250) (4,849) (3,250) Deferred tax assets (net) 38,155 33, of 45

33 The net changes in the deferred tax account were as follows: t 2011: 30 of 45 Opening balance Constitution Reversal Closing balance Deferred tax assets Income tax and social contribution losses 20,076 3,596 23,672 Provision for impairment of trade receivables 1, (282) 1,517 Provision for labor contingencies 3,693 1,930 (1,122) 4,501 Provision for tax contingencies 2,205 3,454 (1,722) 3,937 Sundry provisions 1,849 2,832 (204) 4,477 djustments due to the adoption of the Transitional Tax System (RTT) djustment to present value 2,844 (501) 2,343 mortized goodwill 2,819 (1,977) 842 Disposal of deferred charges 1,842 (469) 1,373 Research and projects Total deferred tax assets 36,757 12,524 (6,277) 43,004 Deferred tax liabilities Capital gain 1,143 (1,143) Sundry provisions 2,095 2,095 djustments due to the adoption of the Transitional Tax System (RTT) Surplus - pension plan contributions 2, ,754 Total deferred tax liabilities 3,250 2,742 (1,143) 4,849 t 2010: Opening balance Constitution Reversal Closing balance Deferred tax assets Income tax and social contribution losses 25,024 (4,948) 20,076 Provision for impairment of trade receivables 1, (47) 1,198 Provision for labor contingencies 2,813 2,194 (1,314) 3,693 Provision for tax contingencies 2, ,205 Sundry provisions 2,528 (679) 1,849 djustments due to the adoption of the Transitional Tax System (RTT) djustment to present value 3,723 (879) 2,844 mortized goodwill 4,796 (1,977) 2,819 Disposal of deferred charges 2,750 (908) 1,842 Research and projects Total deferred tax assets 44,752 2,757 (10,752) 36,757 Deferred tax liabilities

34 Opening balance Constitution Reversal Closing balance Capital gain 2,064 (921) 1,143 djustments due to the adoption of the Transitional Tax System (RTT) Surplus - pension plan contributions 1, ,107 Total deferred tax liabilities 3, (921) 3,250 Considering the Company's history and profitability and based on the projections of the results for the following years, the estimated realization of the tax credits on income tax and social contribution losses is as follows: , , , , ,986 43, Other receivables Securities receivable - sale of assets 7,200 Other receivables from foreign operations 1,557 2,748 djustment to present value - other receivables from foreign operations (311) (678) Restricted and judicial deposits 3,639 3,247 Participation in the pension fund - Plan CD 8,100 6,198 Other receivables 1,490 3,830 Total 14,475 22,545 Classified as: Current 1,792 11,100 Non-current 12,683 11, of 45

35 12 Investments Holding Castletown Trading S.. (i) 100% t January 1 1,072 1,125 Foreign exchange variations 191 (48) Equity in the results of investees (5) (5) Write-off of investment - termination (1,383) Foreign exchange variation recorded in the statement of income 125 t December 31 Total investment in subsidiary 1,072 Cetrel S.. 3% Investment at cost 5,464 5,464 TCI Trading S.. 9% Investment at cost 1, Investment properties (ii) Land and facilities, net of depreciation 1,524 1,546 Other investments 2 2 Total other investments 8,639 7,344 Total investments 8,639 8,416 (i) The activities of the wholly-owned subsidiary were terminated on October 5, 2011, as detailed in note 2.1 (a). (ii) The fair value of the investment properties was R$ 10,484. The other investments do not represent subsidiaries and/or associates, and their accounting balances are recorded at acquisition cost, net of impairment, when applicable. 32 of 45

36 13 Property, plant and equipment (a) Composition of property, plant and equipment: Equipment and facilities Furniture and fittings Data processing equipment and others Construction in progress Land Constructions Vehicles Total t January 1, 2010 Cost ccumulated depreciation (31.814) ( ) (5.034) (1.206) (2.438) ( ) Net book amount t 2010 Opening balance Purchases Disposals (25) (579) (61) (4) (3) (672) Depreciation (1.744) (26.255) (262) (403) (299) (28.963) Transfers (17.037) (146) Net book amount t Cost ccumulated depreciation (33.539) ( ) (5.210) (1.404) (2.566) ( ) Net book amount t 2011 Opening balance Purchases Disposals (16) (919) (7) (216) (5) (1.163) Depreciation (1.756) (22.725) (282) (471) (343) (25.577) Transfers (46.171) (58) Reversal of provision for losses on property, plant and equipment Net book amount t 2011 Cost ccumulated depreciation - (35.248) ( ) (3.721) (1.530) (2.336) - ( ) Net book amount The depreciation of equipment and industrial facilities varies according to the volume of production, with average rates ranging between 5% and 20% per annum. The balance of construction in progress principally refers to investments in the expansion, modernization and adaptation of the industrial units. On the conclusion of projects and the commencement of the operation of these assets, they are transferred to the respective accounts of property, plant and equipment in use. Depreciation is recognized from this moment on. Depreciation expense of R$ 25,577 ( R$ 28,963) has been charged in "Cost of sales', R$ 24,163 ( R$ 27,651) and R$ 1,414 ( R$ 1,312) in "General and administrative expenses". The Company capitalized the costs of borrowings directly attributable to the construction of qualifying assets, as follows: Equipment and industrial facilities 8,444 2,257 Cost of borrowings capitalized t 2011, the Company had property, plant and equipment items, mainly land, pledged as guarantee for lawsuits amounting to R$ 4, of 45

37 14 Trade payables, personnel obligations and other payables Trade payables 44,778 33,322 Personnel obligations 8,950 6,297 Other payables 4,958 4,314 58,686 43,933 Current 58,269 43,933 Non-current Borrowings Borrowings, referring to investments in the expansion and modernization of facilities and in working capital, are as follows: December 31, 2011 December 31, 2010 Type Charges - % Guarantees mortization Ending Current Current Noncurrent Noncurrent TJLP to 4.32 p.a. Surety - Itaúsa Monthly and quarterly 4/15/2017 8,016 31,300 2,970 9,584 BNDES MODERMQ - FINME 7.00 p.a. Statutory lien Monthly 9/15/ VENDOR 2/27/2012 1,238-1,049 - Total local currency 9,254 31,300 4,162 9,584 FOREIGN EXCHNGE VRITION to 2.12 p.a. Surety - Itaúsa Monthly and quarterly 4/15/2017 1,392 5, ,650 BNDES DVNCES GINST EXCHNGE CONTRCTS (CC) - FOREIGN EXCHNGE DISCOUNT 2.20 p.a. 6/26/ ,474-28,290 - Total foreign currency 19,866 5,412 28,806 1,650 Total 29,120 36,712 32,968 11,234 The sureties that collateralize the Company's financing were granted by the stockholder Itaúsa S.., amounting to R$ 46,120 (R$ 14,720 at 2010). Financing classified in non-current liabilities falls due as follows: 34 of 45

38 , ,718 3, ,473 2, , , onwards 1, ,712 11,234 To finance the future continuity of the modernization, rationalization and automation programs for the increase of productivity and decrease of operating costs, a long-term credit line was obtained with the National Bank for Economic and Social Development (BNDES), totaling R$ 116,681. R$ 47,653 was released up to Financing transactions are recorded at amortized cost, which approximates their fair value. Covenants In the normal course of its business, the Company obtains borrowings from financial institutions and enters into commercial agreements with other entities, which are contractually formalized with respective clauses of compliance, restrictions and/or guarantees (covenants). In general, the restrictions to which the Company is subject deal with, principally, as regards the borrowing contracts with the BNDES, the adequate allocation of funds from the bank, which are to be invested in: i) expansion of production capacity; ii)modernization of units; iii) environment; iv) acquisition of national machinery and equipment; and v) installations of production lines. The Company has been in compliance with the contract restrictions to which it is subject. 16 Dividends and profit sharing of employees and officers 2011 December 31, 2010 Dividends and interest on capital 2,154 7,749 Profit sharing - officers 156 1,853 Profit sharing - employees 2,151 2,310 11,753 The profit sharing of officers is limited to 10% of profit after tax and to the amount of their drawings, as described in the Company's bylaws. The profit sharing of employees is linked to the results, according to the agreement signed with the employees through a committee elected for this purpose. 35 of 45

39 17 Taxes and contributions payable The Company maintains in non-current liabilities, as taxes payable, 100% of the amount of taxes which were not paid due to judicial processes (monetarily restated) and their respective judicial deposits, as follows: PIS and COFINS - (i) 22,226 22,047 COFINS and education allowance - (ii) 9,361 16,097 Other Total before offset of judicial deposits 31,642 38,542 Judicial deposits (9,416) (16,152) Total after offset of judicial deposits 22,226 22,390 The unpaid taxes and contributions mainly involve judicial processes regarding the offset of PIS and COFINS - Decree 07/70 and increase of 1% in the COFINS rate. (i) PIS and COFINS The Company offset credits arising from a judicial claim challenging the constitutionality of Decree-laws 2445 and 2449 of 1988, which altered the basis of calculation of PIS and COFINS. The Company constituted provisions for these offsets, which, duly restated, amount to R$ 22,226, classified in noncurrent liabilities. (ii) COFINS and education allowance s a consequence of judicial processes challenging the legality of the collection of a rate difference of 1% for COFINS and education allowance, the Company deposited in court up to the year ended December 31, 2011 the amount of R$ 9,361 (at R$ 16,097), related to the increase in the COFINS rate. On February 17, 2011, the Company obtained an unfavorable decision in the process related to the education allowance, with the reversal of the judicial deposit in favor of the Federal Government and the write-off of this amount against the respective provision. t 2011, the amount of R$ 9,361 referring to the rate difference of 1% of COFINS was fully provided for in noncurrent liabilities ( R$ 16,097). 18 Provision for contingencies The Company is a party to labor, civil and tax lawsuits and administrative processes resulting from the normal course of its business. (a) Provisions for tax, labor and civil contingencies The provisions for labor, tax and civil contingencies are sufficient to cover eventual losses classified initially as probable. Management believes, based on the opinion of its legal advisors, that the provisions, presented below, are sufficient to cover probable losses arising from unfavorable decisions, and that the final and unappealable court decisions would not have significant impacts on the Company's financial and economic position. 36 of 45

40 Tax Labor Civil Total t January 1, ,324 10,862 4,562 35,748 Monetary restatement ,332 Constitution 1,805 5, ,050 Reversal (6,033) (2,728) (1,408) (10,169) Payments (13,453) (572) (278) (14,303) t ,983 13,238 3,437 19,658 (i) Tax The claims for which losses are probable basically refer to processes related to joint liability in relation to the social security contribution (INSS) for service providers of R$ 1,827 and the assessment notice regarding ICMS on imports of R$ 914. In June 2011, the Company settled the amount of R$ 13,453 referring to the assessment notice regarding the ICMS in the state of São Paulo. Because the Company's management understands that such payment was not due, it contracted an external legal advisor to evaluate the best judicial strategy to challenge in court the legality of the aforementioned assessment notice. (ii) Labor and civil The Company is a party to labor and civil lawsuits in progress at the judicial level. The provisions related to these lawsuits are recorded when the lawyers responsible for the lawsuits classify the losses as probable. The labor lawsuits mainly refer to claims of joint responsibility, occupational illnesses, salary equalization and overtime. On the reporting date, 82 lawsuits, totaling R$ 13,238, had their outcomes classified as probable losses. Individually, the amounts of the lawsuits do not represent a material risk to the Company's operations. The civil claims mainly refer to occupational accidents and environmental matters, which are fully provided for when a loss is considered probable by the lawyers responsible for the processes. (b) Contingent liabilities The Company is a party to other tax, labor and civil lawsuits, totaling R$ 57,529, whose outcomes were considered as possible losses in the opinion of its legal advisors, and therefore, are not provided for, as follows: Tax Labor Civil Total t ,456 16,983 3,090 57,529 (i) Tax Contingent liabilities comprise assessment notices mainly related to the following: (i) social security contributions of R$ 14,855; PIS and COFINS on finance income of R$ 5,450; (iii) ICMS credits on purchases of raw materials originated from the Manaus Free-Trade Zone of R$ 3,548; and (iv) other 37 of 45

41 processes amounting to R$ 13,603. (ii) Labor and civil Labor liabilities refer to 101 lawsuits in the amount of R$ 16,983, mainly related to: damages for pain and suffering, overtime and joint liability in relation to third parties. Civil claims principally refer to damages for pain and suffering and materials. (c) Contingent assets The Company is challenging in court the reimbursement of taxes and contributions, and it is also a party to civil claims, in which it has rights or expectation of rights receivable. ccording to the assessment of the legal advisors, these lawsuits are classified, based on the possibility of gains, as probable, possible or remote. Since they are contingent assets, the amounts below are not recorded in the financial statements. The table below presents the main processes in which the Company is the plaintiff, were the outcome of gains is considered probable: Tax ICMS - monetary adjustment on credit balance 13,163 IPI - credits on products acquired at zero rate 10,392 Other tax processes lower than R$ 10 million 7,233 11,888 Total tax 17,625 25,051 Civil Collection/execution of securities out of court 8,739 12,364 Other civil processes lower than R$ 10 million 3,877 3,887 Total civil 12,616 16, Equity (a) Share capital t 2011, subscribed and paid-up capital was R$ 320,000 ( R$ 220,000), comprising 31,485,170 book-entry shares, with no par value, of which 14,518,150 were common shares and 16,967,020 preferred shares without voting rights ( ,485,170 book-entry shares, with no par value, of which 14,518,150 were common shares and 16,967,020 preferred shares without voting rights). ccording to the Extraordinary and Ordinary General Meeting held on pril 28, 2011, share capital increased from R$ 220,000 to R$ 320,000, without the issue of new shares, through the capitalization of R$ 100,000 of the capital, special goodwill and special revenue reserves. 38 of 45

42 (b) Characteristics of the shares Preferred shares, without voting rights, have the following characteristics. (i) (ii) (iii) (iv) (v) (vi) (c) Priority, in relation to common shares, in the receipt of the mandatory minimum dividend. The dividend, per preferred share, is never to be inferior to that attributed to each common share. Participation in the increases of capital arising from the capitalization of reserves and profit. Priority, in relation to common shares, in capital reimbursement, without premium, in the event of liquidation of the Company. In the event of transfer of control, the right to be included in the public offer for the acquisition of shares, so that a unit price equivalent to 80% of the amount paid for voting share, included in the control block, is ensured. Minimum, annual and non-cumulative priority dividends of R$ 2.00 per thousand shares, which are adjusted in case of split or grouping. Legal reserve The legal reserve is credited annually with 5% of the profit for the year and cannot exceed 20% of the capital. The purpose of the legal reserve is to assure the adequacy of capital, and it can only be used to offset losses and increase capital. t 2011, the legal reserve totaled R$ 16,967 (December 31, R$ 16,219). (d) Special reserve The special reserve is constituted with the remaining balance of profit after the appropriation to the legal reserve and the distribution of dividends, and has the following purposes: a) exercise of the preferential right of subscription in capital increases of the investees; b) future inclusion of these funds in capital; c) payment of interim dividends distributable according to the decision of the Board of Directors, subject to approval at the General Meeting. t 2011, the special reserve totaled R$ 120,445 ( R$ 181,602). (e) Tax incentive reserve The tax incentive reserve is constituted with credits arising from the income tax incentive recorded in the results for the year, which are subsequently transferred to the tax incentive reserve and excluded from the calculation basis of the dividends, since, according to current tax legislation, they cannot be distributed to the stockholders. t 2011, this reserve totaled R$ 10,786 (at R$ 10,911). (f) Proposed dividends The proposal for the distribution of dividends is recorded in the Company's financial statements, subject to the approval of the stockholders at the General Meeting. The proposal, calculated under the provisions of the related law, especially as determined in articles 196 and 197 of Brazilian Corporation Law, is presented in note Revenue The reconciliation between gross and net sales revenue is as follows: 39 of 45

43 Gross sales revenue 976,481 1,049,348 Domestic market 881, ,590 Foreign market 95, ,758 Taxes on sales and returns (IPI, ICMS, PIS, COFINS) (199,788) (198,815) Net sales revenue 776, , Expenses by nature Raw and consumption materials 605, ,255 Remuneration, social charges and benefits to employees 71,287 59,917 Expenses with freight on sales 29,003 26,722 Depreciation 25,577 28,963 Expenses with maintenance 10,528 9,047 Services rendered by third-parties 9,529 9,578 Other expenses 17,621 21, , ,892 Cost of sales 687, ,648 Distribution costs 37,762 39,759 General and administrative expenses 44,158 40, , , Other expenses, net Tax provisions, net 2,497 (1,551) Labor provisions, net (3,304) (3,945) Civil and environmental provisions, net 847 (889) Provisions for losses on inventories (4,340) (679) Profit sharing of employees and officers (2,880) (7,048) Projects and research (1,014) (575 Variation in the pension plan of Fundação Itaúsa Industrial 1, Reversal of provision for losses on property, plant and equipment pproval of tax credits 1, Other expenses (1,797) (1,278) Other expenses, net (6,428) (14,750 ) 23 Finance income and costs The finance result comprises the following finance income and costs: 40 of 45

44 Finance income Income from financial investments 6,097 4,740 Foreign exchange gains 17,450 20,327 Interest and discounts obtained 2,442 3,022 Reversal of the adjustment to present value 1,455 2,538 Other Total finance income 28,212 31,043 Finance costs Charges on borrowings (1,894) (1,713) Foreign exchange losses (16,176) (20,497) Other (1,639) (2,047) Total finance costs (19,709) (24,257) Total finance income (costs), net 8,503 6, Foreign exchange gains (losses), net The exchange differences (charged)/credited to the statement of income are as follows: Gain with foreign exchange variations 17,450 20,327 Loss with foreign exchange variations (16,176) (20,497) 1,274 (170) The amounts above are recorded in the account "Finance income (costs)" in the statement of income. 25 Income tax and social contribution Reconciliation of the income tax and social contribution expense: Composition of the income tax (IRPJ) and social contribution (CSLL) expense Profit before income tax and social contribution 9,720 58,672 Offset against income tax and social contribution losses (2,916) (17,601) Income tax and social contribution at the rate of 34% (2,313) (13,964) Permanent additions (exclusions) (924 (1,254) Temporary additions and exclusions 6,285 (731) Interest on capital 1,285 3,907 Tax incentives 567 4,555 Deferred taxes on income tax and social contribution losses 207 (5,984) Total 5,107 (13,471) Current income tax and social contribution (6,183) Deferred income tax and social contribution 5,107 (7,288) 41 of 45

45 26 Segment information Management, adopting the principles presented by the pronouncement that addresses the segment information, defined the Company's reportable operating segments based on the reports utilized for strategic decision-making, analyzed by management, which is responsible for allocating resources and assessing performance by operating segment and also for the strategic decision-making. ccordingly, the operating segments were divided into two large product groups: Organic and Inorganic, which present distinct characteristics in relation to their markets. Organic products - include oxo alcohols, phthalic and maleic anhydrides, plasticizers, resins of unsaturated polyesters, formaldehyde, concentrated urea-formaldehyde and fumaric acid. Inorganic products - include sulfuric acid and some other resale activities. t 2011 Organic products Inorganic products Corporation Total Company Net revenue 690,949 85, ,693 Cost of sales (634,270) (52,853) (687,123) Distribution costs (32,298) (5,464) (37,762) Gross margin 24,381 27,427 51,808 dministrative expenses/other (50,591) (50,591) Finance result 8,503 8,503 Taxes on income 5,107 5,107 Profit 14,827 Property, plant and equipment (net value) 186,604 15,694 43, ,800 t 2010 Organic products Inorganic products Corporation Total Company Net revenue 745, , ,533 Cost of sales (620,643) (83,005) (703,648) Distribution costs (35,012) (4,747) (39,759) Gross margin 89,452 17, ,126 dministrative expenses/other (55,240) (55,240) Finance result 6,786 6,786 Taxes on income (13,471) (13,471) Profit 45,201 Property, plant and equipment (net value) 150,941 11,787 45, , of 45

46 The Company elected not to present profit and assets and liabilities separately for each of the operating segments in which it operates, since they share the structure of indirect costs, administrative expenses and distribution costs. The gross margin arises from the sales revenue, net of taxes, cost of sales and variable distribution costs, such as freight and commissions. 27 Earnings per share Profit attributable to the stockholders 14,827 45,201 Weighted average number of outstanding shares (in thousands) 31,485 31,485 Earnings per share in reais (basic and diluted) In the years presented, the Company did not have convertible instruments or other obligations with potential of dilution of the number of outstanding shares. 28 Dividends and interest on capital The stockholders are entitled to a mandatory dividend of 25% of the profit for the year, adjusted by the decrease or increase in the amounts specified in letters "a" and "b" of sub item I of article 202 of Law 6404/76 and in accordance with sub items II and III of the same legal instrument. The Company's management approved, at a Board of Directors Meeting held on June 27, 2011, ad referendum at the General Meeting, the distribution of dividends as interest on capital to the Company's stockholders in the amount of R$ 0.12 per share. Dividends were calculated as follows: Profit for the year 14,827 45,201 Income tax incentive recognized in the results 125 (4,140) Legal reserve (5%) (748) (2,260) Calculation basis 14,204 38,801 Mandatory minimum dividend - 25% 3,551 9,700 Interest on capital recorded in the year 3,778 11,492 Withholding Income Tax (IRRF) (567) (1,724) Dividends to be recorded 340 Net remuneration 3,551 9,768 s permitted by legislation and provided in the Company's bylaws, the amount referring to interest on capital, net of income tax, is being imputed to the mandatory minimum dividend. 43 of 45

47 29 Balances and transactions with related parties (a) Sales and purchases of products and services, dividends and financial investments The transactions with companies belonging to the parent company Itaúsa refer to purchases and sales of products and services and rentals, and are carried out at normal market prices, terms and conditions. Dec/2011 Dec/2010 Company Ref. Nature of the ssets Liabilities Result ssets Liabilities Result operation Itaú Seguros a Rendering of services - - (956) - - (871) Itaú Banco b Financial investments Itaú Corretora c Rendering of services - - (74) - - (81) de Valores Itaúsa Empreendi d Rendering of services and 8 (281) 8 (317) mentos dividends/interest on capital - Itautec e cquisition of hardw are/softw are - - (657) - - (306) Duratex f Sales of goods Itaúsa g Dividends/interest on capital (61) The financial investments in Banco Itaú S.. are effected at normal conditions of the financial market within the limits established by the Company's management. The earnings from financial investments are recognized in the statement of income. (i) (ii) (iii) (iv) (v) (vi) (vii) Itaú Seguros - contracting of insurance policies. Itaú Banco - cash and cash equivalents Itaú Corretora de Valores - rendering of services of custody of shares. Itaúsa Empreendimentos - rendering of services of financial and economic analyses; payment of dividends. Itautec - acquisition of hardware, software and services. Duratex - rental of proprieties and purchase of finished products. Itaúsa - payment of dividends and rental of proprieties. The sureties that collateralize the Company's financing were granted by the stockholder Itaúsa S.. in the amount of R$ 46,120 (R$ 14,720 at 2010), as stated in note 14. (b) Management compensation Key management includes the board members elected at the Ordinary General Meeting and the statutory directors. Management compensation includes fixed fees, profit sharing and benefits. The amounts incurred are fully recorded in the statement of income, as follows: Executive Board 3,303 5,903 - Fees 1,781 1,920 - Profit sharing 593 2,911 - Social security charges (INSS and FGTS) Short-term benefits Post-employment benefits Board of Directors 1,671 1,428 - Fees 1,320 1,130 - Social security charges (INSS) Post-employment benefits of 45

48 30 Employee benefits (a) Stock option plan With the purpose of integrating management and employees in the Company's process of development in the medium and long term, at the Extraordinary General Meeting held on July 31, 2003, the stockholders approved the creation of a stock options plan, in order that they could also benefit from the valuation of the Company's capital shares, which is a result of their work and dedication. Up to the balance sheet date, this plan had not generated any effects to be recognized in the Company's financial statements. (b) Defined contribution plan - private pension plan Elekeiroz S.. offers to all its employees a pension plan of the defined contribution type (PI-CD plan). The plan is managed by Fundação Itaúsa Industrial, a private, not for profit, closed pension entity, which is sponsored by the Company, among other entities. Due to the nature of the plan, there is no actuarial risk and the risk of the investments belongs to its participants. Current regulation determines that the employees contribute between 1% and 10% of their salary. The sponsor contributes 100% of the amount contributed by the employees. Up to 2011, the contributions totaled R$ 2,657 (R$ 1,859 at 2010). The PI-CD plan presents a pension fund, constituted by contributions of sponsors that remained in the plan, as a result of the participants having opted for the redemption of contributions or early retirement. ccording to the plan's regulation, this fund has been utilized to offset the contributions of the sponsors. Consequently, the Company recorded in its balance sheet an asset related to these credits (prepaid expenses - pension fund) taking into consideration the reduction of future payments that will occur due to the offsets against this fund. This asset was measured through the calculation of the present value of future contributions to be made by the Company, considering the employees enrolled in the plan at the reporting date, and amounted to R$ 8,100 (R$ 6,198 in 2010). 31 Insurance (unaudited) The Company has a risk management program to mitigate risks, contracting in the market coverage compatible with its size and operations. The insurance amounts are considered sufficient by management to cover possible losses, taking into account the nature of the activities, the risks involved in the operations and the advice of its insurance consultants. t 2011, insurance coverage and sundry risks for property, plant and equipment and inventories amounted to R$ 261,870 (R$ 261,869 at 2010). * * * 45 of 45

49 Management Report Years ended 2011

50 ( free translation of the original in Portuguese) Elekeiroz S.. Management Report Years ended 2011 SCENRIO OF THE SECTOR ccording to BIQUIM (Brazilian ssociation of the Chemical Industry), the apparent consumption in Brazil of chemicals for industrial use increased by 9.7% in 2011, but this increase was basically met by imports, which represented 34.1% of this consumption in 2011 against 29.8% in Because of the lower demand by the developed countries, the interruption in the supply of electric power to the Camaçari Petrochemical Complex (located in the State of Bahia) in February, the appreciation of the Brazilian real and the tax incentives for imports granted by some States, Brazil became an attractive destination for the world's excess production. s a result, the deficit in the trade balance of the chemical industry increased significantly, by 28.3%, as compared to 2010, and reached US$ 26.5 billion, a new historical record. US$ billion Imports Exports Deficit The sector of chemical products for industrial use, in which the Company operates, decreased by 4% in domestic sales and 3.8% in manufacturing activities in Because of the increase in input prices and the resulting average increase of 14.6% in domestic prices, profit margins were pressured during COMPNY'S OPERTIONS The year 2011 for the Company was marked by extraordinary events which took place, which prejudiced production and, consequently, the shipments of goods. The events were: the unexpected interruption in the supply of electric power that took place at the beginning of February at the Camaçari plant and the subsequent irregular supply of raw materials to the whole Complex; programmed maintenance stoppages of the plants of maleic anhydride, formaldehyde and sulfuric acid in Várzea Paulista/SP and 2 of 6