Fertilizantes Heringer S.A. Quarterly Information (ITR) at June 30, 2017 and report on review of quarterly information

Transcription

1 Fertilizantes Heringer S.A. Quarterly Information (ITR) at June 30, 2017 and report on review of quarterly information

2 Report on review of quarterly information To the Board of Directors and Stockholders Fertilizantes Heringer S.A. Introduction We have reviewed the accompanying interim accounting information of Fertilizantes Heringer S.A. ("Company"), included in the Quarterly Information Form (ITR) for the quarter ended June 30, 2017, comprising the balance sheet as at that date and the statements of income and comprehensive income for the quarter and six-month period then ended, and the statements of changes in equity and cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory information. Management is responsible for the preparation of the interim accounting information in accordance with the accounting standard CPC 21 (R1), Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC) and International Accounting Standard (IAS) 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of the review We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the interim information Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by (CVM). 2 PricewaterhouseCoopers, Rua José Pires Neto 314, 10 o, Campinas, SP, Brasil , Caixa Postal 3136 T: (19) , F: (19) ,

3 Fertilizantes Heringer S.A. Other matters Statements of Value Added We have also reviewed the statements of value added for the six-month period ended June 30, These statements are the responsibility of the Company's management, are required to be presented in accordance with standards issued by the CVM applicable to the preparation of Quarterly Information (ITR) and are considered supplementary information under IFRS, which do not require the presentation of the statement of value added. These statements have been submitted to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they have not been prepared, in all material respects, in a manner consistent with the interim accounting information taken as a whole. Prior-year information The Quarterly Information (ITR) mentioned in the first paragraph includes the accounting information corresponding to the statements of income and of comprehensive income (loss) for the quarter and sixmonth period ended June 30, 2016, and changes in equity, cash flows and value added for the six-month period then ended, obtained from the quarterly information as at that date, and to the balance sheet for the year ended December 31, 2016, obtained from the financial statements as at December 31, 2016, presented for comparison purposes. The review of the Quarterly Information Form - ITR for the quarter ended June 30, 2016 and the audit of the financial statements for the year ended December 31, 2016 were conducted under the responsibility of another firm of auditors, that have issued their review and audit reports dated August 4, 2016 and March 2, 2017, respectively, without qualification. Campinas, August 10, 2017 PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 "S" ES Eduardo Dias Vendramini Contador CRC 1SP220017/O-4 "S" ES 3

4 Contents Company information Capital composition 1 Quarterly information Balance sheet - assets 2 Balance sheet - liabilities and equity 3 Statement of income 4 Statement of comprehensive income 5 Statement of cash flows 6 Statement of changes in equity 1/1/2017 to 6/30/ /1/2016 to 6/30/ Statement of value added 9 Comments on company performance 10 Notes to the quarterly information 29 Opinions and Representations Report on Review - Without Exceptions 67 Officers' Representation on the Quarterly Information 69 Officers' Representation on the Report on Review 70

5 Company information/capital composition Number of shares Current quarter (in thousands) 6/30/2017 Paid-up capital Common shares 53,857,284 Preferred shares 0 Total 53,857,284 Treasury shares Common shares 0 Preferred shares 0 Total 0 Page 1 of 70

6 Quarterly Information /Balance Sheet - Assets (R$ thousand) 1 - Code 2 - Description Current quarter 6/30/2017 Prior year 12/31/ Total assets 2,914,920 2,850, Current assets 1,606,566 1,575, Cash and cash equivalents 86,859 64, Receivables 390, , Trade receivables 390, , Inventories 793, , Taxes recoverable 144, , Current taxes recoverable 144, , Taxes recoverable 128, , Income tax and social contribution recoverable 15,524 53, Other current assets 191, , Non-current assets for sale 191, , Other receivables 40,182 38, Derivative financial instruments 6, Bonuses on purchases 6,764 11, Tax credits acquired 138, , Non-current assets 1,308,354 1,274, Long-term receivables 770, , Trade receivables 3, Accounts receivable 3, Deferred taxes 232, , Deferred income tax and social contribution 232, , Other non-current assets 534, , Income tax and social contribution recoverable 205, , Taxes recoverable 264, , Tax credits acquired 30,390 29, Judicial deposits 26,167 24, Other assets 7,705 11, Property, plant and equipment 531, , Property, plant and equipment in use 502, , Construction in progress 28,694 27, Intangible assets 6,740 6, Intangible assets 6,740 6, Intangible assets in use 6,740 6,904 Page 2 of 70

7 Quarterly Information/Balance Sheet - Liabilities and Equity (R$ thousand) 1 - Code 2 - Description Current quarter 6/30/2017 Prior year 12/31/ Total liabilities and equity 2,914,920 2,850, Current liabilities 2,599,976 2,344, Social and labor charges 33,234 23, Labor obligations 33,234 23, Trade payables 885, , Domestic suppliers 149, , Foreign suppliers 736, , Tax liabilities 1,248 8, Federal tax liabilities 1,248 8, Taxes payable 1,248 8, Borrowings 1,037, , Borrowings 1,037, , Local currency 399, , Foreign currency 637, , Other liabilities 642, , Other 642, , Advances from customers 393, , Other financial instruments 2,989 12, Other payables 52,719 58, Forfait 192, , Non-current liabilities 118, , Borrowings 93, , Borrowings 93, , Local currency 93, , Provisions 24,389 22, Tax, social security, labor, and civil provisions 24,389 22, Provisions for contingencies 24,389 22, Equity 196, , Paid-up capital 585, , Accumulated deficit -429, , Carrying value adjustments 41,006 41,492 Page 3 of 70

8 Quarterly Information/Statement of Income (R$ thousand) 1 - Code 2 - Description Current quarter 4/1/2017 to 6/30/2017 Accumulated - current year 1/1/2017 to 6/30/2017 Same quarter of prior year 4/1/2016 to 6/30/2016 Accumulated - prior year 1/1/2016 to 6/30/ Gross sales/services revenue 813,771 1,820, ,776 2,309, Cost of sales - goods and services -771,488-1,652, ,489-2,108, Gross profit 42, ,783 75, , Operating expenses -94, ,774-98, , Selling -69, ,275-71, , General and administrative -25,318-49,034-23,641-45, Other operating income 3,051 4,551 1,188 3, Other operating expenses -2,765-4,016-4,411-7, Profit before finance result and taxes -52,293-20,991-22, Finance result -98, ,578-27,580-50, Finance income 32,461 70,799 34,167 76, Finance income 32,461 70,799 34,167 76, Finance costs -131, ,377-61, , Financial expenses -68, , , , Foreign exchange variation, net -62,483-17, , , Profit before taxes on net income -150, ,569-50,512-49, Income tax and social contribution on net income 51,402 49,017 17,233 18, Current 2, ,377-18, Deferred 48,957 49,017 4,856 36, Net results from continuing operations -99,544-92,552-33,279-31, Loss for the period -99,544-92,552-33,279-31, Earnings per share - (reais / share) Basic earnings per share Common shares Page 4 of 70

9 Quarterly Information/Statement of Comprehensive Income (Loss) (R$ thousand) Current quarter 4/1/2017 to 6/30/2017 Accumulated - prior year 1/1/2016 to 6/30/2016 Same quarter of prior year 4/1/2016 to 6/30/2016 Accumulated - prior year 1/1/2016 to 6/30/ Code 2 - Description 4.01 Loss for the period -99,544-92,552-33,279-31, Comprehensive income (loss) for the period -99,544-92,552-33,279-31,737 Page 5 of 70

10 Quarterly Information/Statement of Cash Flows - Indirect Method (R$ thousand) 1 - Code 2 - Description Accumulated - current year 1/1/2017 to 6/30/2017 Accumulated - prior year 1/1/2016 to 6/30/ Net cash used in operating activities -2, , Cash flow from operating activities -42, , Profit (loss) before taxation, net -141,569-49, Provision for impairment of trade receivables 5,402 1, Provision for inventory losses 2,433 7, Depreciation and amortization 26,896 25, Gains on disposal of property, plant and equipment 1, Provision (reversal) for adjustment of assets for sale to market value Reversal of provision for negative goodwill of taxes recoverable Unearned interest on debentures 0 8, Provision for vacation pay, 13th month salary and profit sharing 7,878 6, Provision (reversal of) for contingencies, net 2,388-1, Interest and financial charges on non-current assets -2, Unearned interest and foreign exchange variations - trade receivables, imports in progress, trade payables 71, , Unrealized swaps -15, , Changes in assets and liabilities 87,691 10, Trade receivables 70,188 7, Inventories -92, , Taxes recoverable , Other assets 2,810-5, Judicial deposits , Purchase bonuses 5,590 41, Recovery of tax credits, court-order debts and court deposits 0 1, Trade payables -123,448-7, Forfait 4,023-32, New import financing 569, , Repayment of principal - import financing -514,351-1,189, Salaries and charges 1,500-1, Taxes payable -7, Advances from customers 178, , Other liabilities -6,252-6, Others -48,284-85, Payment of interest on borrowings -48,284-85, Net cash provided by (used in) investing activities -2, Additions to investments Purchase of property, plant and equipment -6,163-13, Proceeds from disposal of property, plant and equipment 3,861 14, Additions to intangible assets Net cash provided by financing activities 27, , New borrowings 913, , Repayment of principal of borrowings -885, , Increase in cash and cash equivalents 22,309 56, Cash and cash equivalents at the beginning of the period 64,550 69, Cash and cash equivalents at the end of the period 86, ,813 Page 6 of 70

11 Quarterly Information/Statement of Changes in Equity - 1/1/2017 to 6/30/2017 (R$ thousand) 1 - Code 2 - Description Capital reserves, options granted, and treasury shares Retained earnings/ accumulated deficit Other comprehensive income (loss) Revenue Paid-up capital reserves Equity 5.01 Opening balances 585, ,803 41, , Adjusted opening balances 585, ,803 41, , Total comprehensive income , , Loss for the period , , Internal changes in equity Taxes on realization of revaluation reserve Closing balances 585, ,869 41, ,655 Page 7 of 70

12 Quarterly Information/Statement of Changes in Equity - 1/1/2016 to 6/30/2016 (R$ thousand) 1 - Code 2 - Description Capital reserves, options granted, and treasury shares Retained earnings/ accumulated deficit Other comprehensive income Revenue Paid-up capital reserves Equity 5.01 Opening balances 585, ,960 42, , Adjusted opening balances 585, ,960 42, , Total comprehensive income (loss) , , Loss for the period , , Internal changes in equity Taxes on realization of revaluation reserve Closing balances 585, ,212 41, ,277 Page 8 of 70

13 Quarterly Information/Statement of Value Added (R$ thousand) 1 - Code 2 - Description Accumulated - current year 1/1/2017 to 6/30/2017 Accumulated - prior year 1/1/2016 to 6/30/ Revenue 1,847,256 2,347, Sales of goods, products and services 1,845,079 2,339, Other revenues 3,722 2, Revenues from the construction of own assets 3,577 7, Provision (reversal) for impairment of trade receivables -5,122-1, Inputs acquired from third parties -1,802,278-2,291, Cost of sales - products, goods and services -1,623,939-2,094, Materials, energy, third-party and other services -171, , Loss/recovery of asset amounts -6,754-9, Other Gross value added 44,978 55, Retentions -26,896-25, Depreciation, amortization and depletion -26,896-25, Net value added generated 18,082 29, Value added received in transfer 177, , Finance income 176, , Other Total value added to be distributed 195, , Distribution of value added 195, , Personnel 92,963 88, Direct compensation 67,473 64, Benefits 21,037 20, Government Severance Indemnity Fund for Employees (FGTS) 4,453 4, Taxes and contributions -88,578-62, Federal -55,373-23, State -34,117-40, Municipal Remuneration of third-party capital 283, , Interest 271, , Rental 4,829 4, Other 7,678 10, Remuneration of own capital -92,552-31, Accumulated deficit for the period -92,552-31,737 Page 9 of 70

14 Viana, August 10, 2017 Fertilizantes Heringer S.A. (FHER3) announces today its results for the second quarter of 2017 (2Q17) and first half of 2017 (1H17). 2Q17 and 1H17 Conference Call - August 11, 2017 Portuguese English 11:00 a.m. BR (10:00 a.m. U.S. ET) 11:00 a.m. BR (10:00 a.m. U.S. ET) Phone: +55 (11) / Phone: +1 (516) Code: Fertilizantes Heringer Code: Fertilizantes Heringer Replay for one week: Replay for one week: +55 (11) (11) Password: Password: Investor Relations Phone: +55 (19) ri@heringer.com.br 2Q17 and 1H17 HIGHLIGHTS Delivery volume totaled 761 thousand metric tons of fertilizers in 2Q17, 9.2% lower than the 838 thousand metric tons in 2Q16. Delivery volume totaled 1,617 thousand metric tons of fertilizers in 1H17, 10.9% lower than the 1,816 thousand metric tons in 1H16; Net revenue came to R$813.8 million in 2Q17, 18.2% lower than the R$994.8 million recorded in 2Q16; net revenue fell by 21.2% in 1H17, from R$2,309.3 million in 1H16 to R$1,820.1 million; EBITDA was a negative R$38.9 million in 2Q17, versus a negative EBITDA of R$10.2 million in 2Q16. EBITDA totaled R$5.9 million in 1H17, less than the R$26.6 million in 1H16; Net loss came to R$99.5 million in 2Q17, which was also impacted by the depreciation of the real in the period, versus a net loss of R$33.3 million in 2Q16. The net loss recorded in 1H17 totaled R$92.6 million, which was worse than the net loss of R$31.7 million recorded in 1H16; The deliveries of specialty products fell in both periods, by 22.3% in 2Q17 and 17.3% in 1H17, over the same periods in In 2Q17, the delivery of specialty products totaled 338 thousand metric tons, while in 1H17 it reached 755 metric tons. The net debt/ebitda ratio fell to 4.6x on June 30, 2017, versus 5.8x on June 30, 2016; The Company recorded positive free cash flow of R$63.5 million in 2Q17, versus a negative R$5.2 million in 2Q16; Page 10 of 70

15 BRAZILIAN FERTILIZER MARKET According to the National Fertilizer Association (ANDA), fertilizer deliveries in Brazil totaled 6.7 million metric tons in 2Q17, 3.9% less than in 2Q16. Deliveries totaled 13.1 million metric tons in 1H17, a slight decrease of 0.4% over 1H16. Deliveries of nitrogen and potassium fertilizers fell by 0.9% and 5.6%, respectively, in 1H17, while phosphate fertilizers increased slightly by 0.5%. The state of Mato Grosso maintained leadership of deliveries, concentrating the highest period volume, reaching 2.0 million metric tons, followed by São Paulo, with 1.7 million metric tons, Paraná, with 1.7 million metric tons, Goiás, with 1.4 million metric tons and Minas Gerais, with 1.3 million metric tons. The Brazilian fertilizer market began the second quarter with a strong decline in sales and, as a result, April deliveries fell by 16% year over year. Sales and deliveries did not recover in May and June 2017 and deliveries remained flat compared with the same months in 2016, with a reduction of 3.9% year to date. Sluggish demand strongly pressured margins in this period when deliveries have historically fallen due to the seasonality of the Brazilian agricultural calendar. As the market grew 3.5% in 1Q17, 1H17 deliveries edged down by 0.4% over the same period last year. The reduction in fertilizer deliveries in the Brazilian market in was due to lower deliveries for grain (soybean and corn) and winter crops, especially wheat, with a reduction in terms of both area and technological level, with less fertilizer per hectare. The Company also expects a decrease in demand for fertilizers for the 2017/2018 summer corn crop, due to current corn prices in the Brazilian market. The decline observed in 2Q17 was related to lower grain productivity and worse barter ratios, which, nevertheless, are at historically favorable levels. The Company expects to deliver 34.5 million metric tons of fertilizers in Brazil in 2017, 1% more than the record level of 34.1 million metric tons in Domestic production fell by 6.0% in 2Q17 and 5.9% in 1H17. It is worth noting that this was the lowest firsthalf domestic production in the past five years. Domestic production of nitrogen and phosphate fertilizers fell by 22.9% and 2.0%, respectively, while potassium fertilizer production edged up by 1.1%. Domestic production of fertilizer raw materials has been consistently decreasing in recent years. Fertilizer imports increased by 14.9% in 2Q17 over 2Q16, below the 31.0% growth recorded between 1Q16 and 1Q17. As a result, 1H17 imports moved up by 21.7%, with imports of nitrogen, phosphate and potassium fertilizers climbing by 24.0%, 38.6% and 11.5%, respectively. Page 11 of 70

16 BRAZILIAN FERTILIZER MARKET DELIVERIES Source: ANDA BRAZILIAN FERTILIZER MARKET DOMESTIC PRODUCTION Source: ANDA Page 12 of 70

17 BRAZILIAN FERTILIZER MARKET IMPORTS Source: ANDA DELIVERIES BY CROP HERINGER Heringer s delivery volume fell by 9.2% between 2Q16 and 2Q17 and 11% between 1H16 and 1H17. Deliveries for soybean and corn fell substantially by 47.6% and 18.5%, respectively, in 2Q17. Due to the decline in soybean and corn prices in the period, farmers used barter as a source of financing, leading to a proportionally higher decline in our volumes compared with those of some of our competitors, who have entered into fertilizer financing contracts with traders that offer this type of service. The volumes delivered for coffee (+29.2%), sugarcane (+14.3%) and other crops (+12.9%) increased in 2Q17 over 2Q16. Source: Heringer/ANDA - * including exports Page 13 of 70

18 The volumes delivered by the Company fell by 11% between 1H16 and 1H17, as deliveries for soybean and corn fell substantially, while deliveries for sugarcane increased and deliveries for coffee and other crops remained flat. Source: Heringer/ANDA - * including exports In line with market expectations, the Company believes in a natural recovery of delivery volumes in 2H17. The second quarter is historically the weakest for the Company in terms of deliveries, due to the Brazilian agricultural calendar and the crops Heringer focuses on. Due to delivery seasonality, the Company s business model should be analyzed on an annual basis. SPECIALTY PRODUCTS The share of specialty products in total sales fell from 52% in 2Q16 to 44% in 2Q17, and from 50% in 1H16 to 47% in 1H17. The delivery volume of specialty products fell by 22.3% in 2Q17, from 435 thousand metric tons to 338 thousand metric tons. Volume fell by 17.3% in 1H17, from 913 thousand metric tons to 755 thousand metric tons. Specialty products are fertilizers that are mostly produced exclusively by Heringer and whose agronomic characteristics are superior to market standards. They currently meet the nutritional needs of all crops. The decline in the share of specialty products in 2Q17 was due to low prices in the fertilizer market, mostly as a result of the delay in sales for grain and the subsequent 3.9% decline in deliveries for this segment between 2Q16 and 2Q17. Given the low fertilizer prices, the price difference between conventional and specialty fertilizers increased which, together with the lower yield obtained by grain farmers, led to a 17.3% decline in Page 14 of 70

19 specialty product deliveries in 2Q17, while conventional product deliveries fell by 4.5%. The company expects specialty product volumes to recover in 2H17. Heringer continues intensifying its efforts to publicize its specialty product portfolio by participating in the main Brazilian agribusiness fairs and implementing, together with its clients, several demonstration fields, thus proving the superior quality of its specialty products compared with the conventional products available in the market. The Company has also stepped up the promotion of its product portfolio by delivering lectures together with specialized advisors in different Brazilian regions, presenting the agricultural potential of these products to a large number of clients. Heringer has been intensifying the training of both its internal sales team and the sales teams of its distributors in all regions. Heringer continues to invest in R&D to develop new technologies and products that can be added to its three specialty product lines: Solo (specially FH Humics, FH Micro total and FH Nitro Mais ), Ferti and Foliar. It has one of the largest such portfolios in the market, most of which developed using proprietary technology. Page 15 of 70

20 AGRICULTURAL COMMODITIES AND BARTER RATIOS (AGRICULTURAL PRODUCTS FOR FERTILIZERS) The barter ratio (agricultural products vs. fertilizers) for crops that represent the highest fertilizer demands in Brazil, especially for soybean, corn and sugarcane, deteriorated in 1H17, but still in favorable levels and within historic averages. Source: Agroconsult/sc* = bags INTERNATIONAL RAW MATERIAL PRICES Potassium fertilizer prices continued increasing gradually in 2Q17 quarter-over-quarter, while phosphate and nitrogen fertilizer prices fell, due to the end of the main period of demand in the North hemisphere, as shown below: Source: Siacesp/FOB Brasil Page 16 of 70

21 BRAZILIAN FERTILIZER MARKET AND SEASONALITY The Company expects the seasonality observed in Brazil s fertilizer market to be slightly higher than in the past two years. Due to lower sales and deliveries in 2Q17, seasonality is expected to reach 38% of the year volumes delivered in 1H17 and 62% in 2H17. Heringer estimates that the Brazilian fertilizer market will grow by 1.0% in 2017, to 34.5 million metric tons. Source: ANDA / 2017E Heringer Estimate GRAIN PRODUCTION AND PLANTED AREA According to CONAB, the 2016/2017 Brazilian grain crop should total million metric tons (an absolute record grain production in Brazil), with planted area of 60.6 million hectares and a yield of 3.91 t/ha. Despite the decline in prices of the main types of grain (soybean and corn), the current record crop will lead to an increase in agricultural income, causing the demand for fertilizers to remain strong, with a slight yearover-year upturn. According to the Ministry of Agriculture, Livestock and Food Supply (MAPA), the gross value of Brazil s agricultural production should reach R$536 billion in 2017, 4.3% up on 2016, thanks to productivity gains, including those obtained through the use of fertilizers. Page 17 of 70

22 Grain: corn, soybean, rice, beans, sorghum, castor bean, cotton, sunflower, barley, rye, canola, oat, peanut, wheat and triticale Total Brazil (all crops) Source: CONAB - 10th estimate July 2017 FINANCIAL RESULTS 2Q17 and 1H17 Income Statements Delivery volume totaled 761 thousand metric tons of fertilizers in 2Q17, 9.1% lower than the 838 thousand metric tons in 2Q16. Second-quarter net revenue came to R$813.8 million, 18.2% less than the R$994.8 million in 2Q16. Sales per ton prices fell from R$1,187 to R$1,069 in 2Q17. Gross profit amounted to R$42.3 million in 2Q17, down on the R$75.3 million recorded in 2Q16, while the gross margin stood at 5.2%, less than the 2Q16 figure of 7.6%, reflecting the period lower demands. Freight and commissions fell by 17.6% in 2Q17, to R$38.4 million, due to lower volumes delivered, corresponding to 4.7% of net revenue, versus R$46.6 million in 2Q16, or 4.7% of net revenue as well. S&A expenses (excluding freight and commissions) increased by 16.7% in 2Q17, to R$56.4 million (representing 6.9% of net revenue), versus R$48.4 million in 2Q16 (4.9% of net revenue), essentially due to higher selling expenses, as a result of increased allowance for doubtful accounts. EBITDA was negative by R$38.9 million in 2Q17, with a negative margin of 4.8% of net revenue, versus R$10.2 million in 2Q16, with a negative margin of 1.0% of net revenue. The 2Q17 net financial result was an expense of R$98.6 million, versus R$27.6 million in 2Q16. This line comprises net interest, discounts granted and expenses related to adjustment to present value, among others, totaling a negative R$39.1 million, a negative exchange variation of R$62.5 million to be realized and gain from hedge operations amounting to R$3.0 million. Page 18 of 70

23 Net loss totaled R$99.5 million in 2Q17, worse than the negative R$33.3 million recorded in 2Q16, which was impacted by the period foreign exchange variation. Delivery volume came to 1.6 million metric tons in 1H17, 10.9% down from the 1.8 million metric tons recorded in 1H16. Net revenue came to R$1,820.1 million in 1H17, 21.2% less than the R$2,309.3 million reported in 1H16. The price per ton came to R$1,126 in 1H17, versus R$1,272 in 1H16, due to the year-over-year decline in delivery volume and the lower average exchange rate recorded in the period, resulting in a lower average price per metric ton. Gross profit amounted to R$167.8 million in 1H17, with a margin of 9.2%, versus R$200.6 million in 1H16, with a margin of 8.7%. As a result of lower delivery volume, freight and commissions fell by 16.4% in 1H17 to R$87.1 million, representing 4.8% of net revenue, versus R$104.1 million, or 4.5% of net revenue, in 1H16. S&A expenses (excluding freight and commissions) increased by 11.5% in 1H17, to R$102.2 million (representing 5.6% of net revenue), versus R$91.7 million in 1H16 (4.0% of net revenue). EBITDA came to R$5.9 million in 1H17, with a margin of 0.3% of net revenue, versus R$26.6 million in 1H16, with a margin of 1.2%. The net financial expenses increased year-on-year, to R$120.6 million in 1H17 (6.6% of net revenue), versus R$50.6 million in 1H16 (2.2% of net revenue). This line comprises net interest, discounts granted and expenses related to adjustment to present value, among others, totaling a negative R$75.2 million, a negative exchange variation of R$17.8 million and net expenses from hedge operations amounting to R$27.5 million. Net loss came to R$92.6 million in 1H17, down on the R$31.7 million in 1H16, due to the strong exchange variation and low margins observed in 2Q17. Heringer manages its financial risks using hedges in order to mitigate the impact of foreign exchange risk on its dollar-denominated liabilities arising from raw material imports. On June 30, 2017, Heringer s total hedge Page 19 of 70

24 position formed through NDFs and swaps came to US$201.0 million (NDFs of US$68.7 million, with a weighted average rate of R$3.32 and swaps of US$132.3 million, with an exchange variation of -1.72% p.a.). Despite the continuation of the temporary stoppage of the SSP and sulfuric acid units, their maintenance is at adequate levels. The adjustment to the provision for labor lawsuits in 1Q17 led to a year-over-year reduction in EBITDA of the SSP production unit. Regarding the public civil lawsuit of Paranaguá - PR, the evidentiary stage has been concluded and the case is pending a decision by the judge of first instance. WORKING CAPITAL MANAGEMENT Heringer s working capital reflects the seasonality of its business. Therefore, comparisons with the same quarters in the previous year provide a clearer understanding of its business model. The Company maintains a working capital policy designed to maintain operations with a cash position that is appropriate for its needs. It also maintains a strict credit policy in order to keep accounts receivable periods as low as possible through short-term sales and effective credit analysis, thereby reducing the risk of default and losses. Therefore, accounts receivable days stood at 42 days in 2Q17, lower than the 48 days in 2Q16. Inventory days stood at 47 days in 2Q17, higher than the 30 days in 2Q16, in order to comply with the higher demand for fertilizers in the second half, however, lower than the other equivalent quarters. Through synergies between the commercial, supply and logistics areas, Heringer seeks to maintain an adequate level of inventories in each period, to meet its clients needs in a timely manner and with quality. Accounts payable days, including import financing operations (FINIMP), closed 2Q17 at 200 days, versus 154 days in 2Q16, but in line with equivalent quarters. Heringer finances its working capital by drawing on credit lines from banks and local and international suppliers, in order to manage its cash flow effectively. Page 20 of 70

25 2Q17 ECONOMIC AND POLITICAL SCENARIO IN BRAZIL In 2Q17, several accusations against Brazil s President led to a reversal of the macroeconomic expectations, which had been improving until then. The change in the scenario caused a strong of depreciation the real as of May 18, momentarily suspending the trading of shares listed in B3 (BM&FBovespa). The deepening of the political crisis delayed labor and social security reforms that were being discussed in the Congress. The labor reform has been approved and sanctioned, while discussions on the social security reform are progressing at a slow pace in the Brazilian Congress. These situations are causing major economic uncertainty for the country. The strong depreciation of the real jeopardized the Company s results in 2Q17, as the exchange rate climbed from R$3.13 to approximately R$3.40 per dollar on a single day, an increase of more than 8% over the previous day. In July, however, after the political crisis was somewhat defused, markets began stabilizing and the exchange rate started to decrease. The market expects GDP to increase slightly in 2017, after two consecutive years of strong decline. In addition, Brazil s external accounts are solid, with major trade surplus, current account deficits and high foreign exchange reserves. The inflation rate is currently at a 19-year low, allowing a faster reduction in the SELIC rate, from the current level to approximately 8% p.a. at the end of For the Company, the lower SELIC rate, lower real interest rates and a possible easing of the political crisis make up a very positive scenario that should reduce currency volatility. Page 21 of 70

26 LEVERAGE The net debt/ebitda ratio, which reached 6.0x in June 2015, fell to 5.8x in June 2016 and 4.6x in June The improvement between 2016 and 2017 was due to the net debt decline to R$1.04 billion on June 30, 2017, from R$1.17 billion on June 30, * Net debt: Excluding Forfait ** LTM EBITDA CAPEX CAPEX is estimated at up to R$20 million in 2017, substantially lower than in 2014 and In 1H17, CAPEX totaled R$2.3 million only. Page 22 of 70

27 CASH FLOW Heringer s cash and cash equivalents closed 2Q17 at R$86.9 million. The main items leading to this difference were: a) Loss before income and social contribution taxes of R$150.9 million; b) Non-cash net revenue of R$62.0 million, basically comprising interest and unrealized exchange variation; c) Net increase of R$138.5 million in asset accounts, basically in inventory formation; d) Net increase of R$290.4 million in liability accounts, whose amounts are concentrated in the contracting of import financing and advances from customers; e) Net divestments of R$0.4 million; f) Positive net cash flow from financing activities of R$39.1 million, basically due to the payment of loans and financing. HERINGER OWNERSHIP BREAKDOWN Heringer is currently the only fertilizer company listed on the São Paulo Securities, Commodities and Futures Exchange (BM&FBOVESPA), which makes it an attractive investment opportunity. Heringer s shares have been listed in the Novo Mercado, the BM&FBOVESPA s highest corporate governance trading segment, since April 2007 under the ticker FHER3. Some of Heringer s solid fundamentals are: significant growth potential in a competitive market, geographically evenly distributed sales, diversified client base, focus on retail sales, effective logistics and distribution structure, highly recognized brand, broad portfolio of specialty products and solid management. Due to delivery seasonality, the Company s business model should be analyzed on an annual basis. Page 23 of 70

28 Page 24 of 70

29 APPENDIX I BALANCE SHEET Page 25 of 70

30 APPENDIX II 2Q17 INCOME STATEMENT Page 26 of 70

31 APPENDIX II 1H17 INCOME STATEMENT Page 27 of 70

32 EBITDA (earnings before interest, tax, depreciation and amortization) is presented as additional information, given our belief that it is an important indicator of our operating performance, as well as useful for comparing our performance with that of other companies in the sector. However, no single figure should be considered a substitute for net income calculated in accordance with Brazilian Corporate Law (BR GAAP) or even as a measure of Heringer s profitability. Moreover, our calculations may not be comparable with similar measures adopted by other companies in the sector. We make forward-looking statements about future events that are subject to risks and uncertainties. These forward-looking statements are based on the beliefs and assumptions of Heringer s management and on information currently available. Forward-looking statements include information about our current plans, beliefs or expectations, as well as those of Heringer's Board of Directors and Executive Officers. The reservations related to forward-looking statements and information also include information on possible or presumed operating results, as well as any statements preceded, followed or including words, such as «believe», «may», «will», «expect», «intend», «plan», «estimate» or similar expressions. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they refer to future events and, therefore, depend on circumstances that may or may not occur. Future results and value creation for shareholders may differ materially from those expressed or suggested by said forward-looking statements. Many factors that may determine these results and figures are beyond Heringer s control or ability to predict. Page 28 of 70

33 1. General information Fertilizantes Heringer S.A. ("Heringer" or "Company"), headquartered in the city of Viana, in the State of Espírito Santo, is mainly engaged in industrial production and sale of fertilizers. The Company currently owns 19 mixing units distributed over the Southeastern, Mid-Western, Southern and Northeastern regions of Brazil, as well as two sales offices located in the States of Bahia and Goiás. In the state of Paraná, in addition to the mixing unit mentioned above, the Company also has a sulfuric acid production unit and a single super phosphate ("SSP") production unit. Common shares issued by the Company are traded in the special segment of the São Paulo Futures, Commodities and Securities Exchange - BM&FBOVESPA named Novo Mercado (New Market), under ticker symbol FHER3. Approval of the financial statements The presentation of the quarterly information was approved and authorized by the Company's Board of Directors on August 7, 2017, for disclosure on August 10, Accounting policies 2.1. Basis of preparation The Quarterly Information (ITR) has been prepared in accordance with accounting practices adopted in Brazil (BR GAAP), including the standards issued by the Brazilian Securities Commission (CVM) and the pronouncements issued by the Brazilian Accounting Pronouncements Committee (CPC), as well as according to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and disclose all (and only) the applicable significant information related to the financial statements, which is consistent with the information utilized by management in the performance of its duties. Going concern With the forecast of a growth in Brazil's GDP of about 0.35% in 2017, the Company expects an actual increase of its turnover, in all its revenues. With the cuts in expenses already made in 2016, the effects of which will be felt as from this year, the Company hopes to achieve an operational result higher than those previously achieved, and a higher level of efficiency. Also, as implemented in 2016, the CAPEX volume is expected to remain low and without affecting the Company's operations. In addition, with the improvement of the political and local economic scenario and the known expected volume for the 2017/18 harvest, the Company should continue to generate resources for the reduction of the level of indebtedness, establishing a more profitable growth for the subsequent years Summary of significant accounting practices The accounting practices adopted in the preparation of this quarterly information are consistent with those disclosed in Note 2.2 to the financial statements at December 31, 2016, except for the reclassification of the Judicial deposits linked to the "Provision for contingencies" described below: Page 29 of 70

34 For a best presentation of the financial statements, during the period ended June 30, 2017, the amounts of Judicial deposits linked to the Provision for contingencies, originally recorded as Judicial Deposits, in the amount of R$ 5,528 at December 31, 2016, were reclassified to Provision for Contingencies. The reclassification also impacted on the cash flows by R$ 877 during the six-month period ended June 30, 2016, in the accounts Judicial deposits and Provision (reversal of) for contingencies, net in operating activities. There were no impacts on the Statements of changes in equity, operations, comprehensive income (loss) and value added for the six-month period ended June 30, The Company adopted all standards, amendments to standards and interpretations issued by the CPC, CVM, IASB and other regulatory agencies, that were effective. Standards, amendments and interpretations to standards In the period ended June 30, 2017, no new standards, amendments and interpretations to standards were issued in addition to those already disclosed in Note 2.3 to the Company's financial statements for the year ended December 31, Furthermore, there were no changes in relation to the estimated impacts disclosed in those financial statements that could affect the quarterly information for this period. 3. Cash and cash equivalents The Company considers cash equivalents as short-term investments readily convertible into a known amount of cash and subject to insignificant risk of change in value. They are held by the Company with the purpose of meeting short-term cash commitments rather than for investment or any other purposes, and refer to investments in Bank Deposit Certificates (CDB) and repurchase agreements (operations subject to a repurchase agreement by the financial institution), redeemable within 90 days from the investment date. Average rate June 30, 2017 December 31, 2016 Cash - bank current account 74,893 54,852 Financial investments Bank Deposit Certificates (CDB) (i) 94.0% of CDI 11,966 2,633 Debentures - repurchase agreements (ii) - - 7,065 86,859 64,550 (i) These are represented by Interbank Deposit (DI) fund quotes. These investments were contracted with prime financial institutions and are remunerated based on percentages of variation in the Interbank Deposit Certificate (CDI) rates, with immediate liquidity. (ii) They refer to transactions with prime financial institutions, with immediate liquidity, and repurchase agreements of the financial institutions. Page 30 of 70

35 4. Trade receivables Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method, less provision for impairment of trade receivables. The provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due from customers. Impairment testing is based on an individual analysis of delinquent customers, taking into consideration their ability to pay, the collateral provided and the evaluation of legal advisors and collection companies. June 30, 2017 December 31, 2016 Domestic trade receivables 437, ,511 Foreign trade receivables 499 1,284 Adjustment to present value (4,453) (6,744) 433, ,051 Provision for impairment of trade receivables (39,385) (33,983) 393, ,068 Current (390,664) (466,987) Non-current 3, At June 30, 2017 and December 31, 2016, the adjustment to present value was calculated based on all sales with a collection term of more than 30 days, with nominal interest of 1.80% per month (1.80% at December 31, 2016), using discounted cash flows. The reversal of the adjustment to present value is recorded in the statement of income for the year under "Finance income". The balances of foreign trade receivables are denominated in U.S. dollars. At June 30, 2017 and December 31, 2016, none of the Company's customers represented more than 10% of the Company's total revenue or balances receivable. At June 30, 2017, trade receivables of R$ 66,265 (R$ 96,063 - December 31, 2016) were past due. The Company did not record a provision for impairment of trade receivables, since these amounts refer to a number of independent customers who have no recent history of default, with no expected losses thereon, or for which the Company holds real guarantees. The ageing analysis of these trade receivables is as follows: June 30, 2017 December 31, 2016 Up to 3 months 4,741 24,592 3 to 6 months 2,125 7,505 Over 6 months 59,399 63,966 66,265 96,063 At June 30, 2017, the Company has a provision for impairment of trade receivables amounting to R$ 39,385 (R$ 33,983 at December 31, 2016), whose maturity analysis is as follows: Page 31 of 70

36 June 30, 2017 December 31, 2016 Up to 6 months Over 6 months 38,941 33,601 39,385 33,983 During the six-month periods ended June 30, 2017 and 2016, changes in the provision for impairment of trade receivables were as follows: Six-month period ended 6/30/2017 Six-month period ended 6/30/2016 Opening balance 33,983 39,264 Constitution (reversal) of provision (i) 5,402 1,649 Closing balance 39,385 40,913 (i) They are recorded in the statement of income for the period under "Selling expenses". The maximum exposure to credit risk at the balance sheet date is the carrying value of each class of receivable mentioned above. At June 30, 2017, the advance from customers amounting to R$393,986 (R$215,122 at December 31, 2016) derives from purchases made by the customers in advance, and it is amount is lower than in the same period of 2016 (R$433,168 at June 30, 2016). 5. Inventories Inventories are stated at the lower of cost and net realizable value. Costs incurred to transfer each product to its current location and condition are accounted for as follows: (i) raw material and packaging materials - average cost of purchase, using the weighted moving average method; and (ii) cost of finished products and work in process comprises raw materials, direct labor, other direct costs and related general production expenses, always based on the normal operating capacity. Imports in transit are stated at the accumulated cost of each import. June 30, 2017 December 31, 2016 Raw and packaging materials 600, ,231 Imports in transit 161, ,332 Advances to suppliers 21,319 3,717 Warehouse 12,678 12,790 Provision for inventory losses (2,433) - Provision for adjustment to market value (i) - (1,690) 793, ,380 (i) This provision refers to raw material residues, whose average inventory cost was higher than replacement cost or realizable values. Page 32 of 70

37 At June 30, 2017, certain inventory items, representing 9% of the account, were provided as guarantee for operations with suppliers (9% at December 31, 2016). 6. Taxes recoverable June 30, 2017 December 31, 2016 Social Contribution on Revenues (COFINS) (i) 239, ,919 Value-added Tax on Sales and Services (ICMS) (ii) 91,885 89,724 Social Integration Program (PIS) (i) 59,144 55,424 Withholding Income Tax (IRRF) on derivative financial instruments 2,723 2,372 Other , ,604 Current (128,680) (101,341) Non-current (iii) 264, ,263 (i) They will be recovered partially through the Company's transactions and partially through reimbursement requests, for the total original amount of R$ 283,407, filed in the Federal Revenue Secretariat of Brazil between August 2009 and June 2017, as well as via request for offsetting with other taxes administered by the Brazilian Federal Revenue Service. (ii) They will be used in the acquisition of property, plant and equipment and inputs for production, in addition to being used in the normal operations of the Company. At June 30, 2017, the Company had approval to transfer credits with the São Paulo state authority amounting to R$ 456 and with the Minas Gerais state authority amounting to R$ 19,470, and awaits approval to transfer credits with São Paulo state authorities amounting to R$ 15,115. (iii) This refers substantially to PIS and COFINS credits, which should be realized between 2018 and Income tax and social contribution Current tax assets and liabilities for the period and prior years are measured at the expected amount recoverable from or payable to the tax authorities. The tax rates and tax laws used to calculate the amount are those enacted or substantively enacted at the end of the reporting period. Current income tax and social contribution related to items recognized directly in equity are recognized in equity. Management periodically assesses the tax position of situations in which tax regulation requires interpretation, and records provisions therefor when appropriate. There are uncertainties related to the interpretation of complex tax regulations and to the amount and period of future taxable profits. Page 33 of 70