FACT SHEET 2Q17 MARKET CAP (06/30/2017) BRL 5,631.6m CLOSING SHARE PRICE ON 06/30/2017 BRL 8.17 NUMBER OF SHARES IN ISSUE ATE THE END OF JUNE 691,784,501 TREASURY SHARES 2,485,759 FREE FLOAT 40% Duratex Investor Relations Director: Henrique Pinto Haddad Manager: Guilherme Setubal Souza e Silva investidores@duratex.com.br Teleconference/Webcast: Thursday, August 03, 2017 Portuguese: Time: 10am (Brasília time; 09:00 a.m. NYT) Thursday, August 03, 2017 English: Time: 11am, (Brasília time; 10:00 a.m. NYT) Support materials: www.duratex.com.br/ri To connect: Participants in Brazil: +55 11 3193-1001 or +55 11 2820-4001 CORPORATE GOVERNANCE Email for addressing matters related to Corporate Governance to senior management: governanca.corporativa@duratex.com.br. Shares listed on the Novo Mercado of B3. Only ordinary shares are in circulation, that is, each share confers the right to one vote at the General Shareholder Meetings. 100% Tag-Along rights for the shares. 3 independent members on the Senior Board of Directors. Advisory Committees to the Board: People, Nomination and Governance, Sustainability, Auditing and Risk Management, Trading and Disclosure, and Evaluation of Transactions with Related Parties. Dividend policy requiring a minimum distribution of 30% of adjusted net earnings. Policy in force for the disclosure of Material Events and Facts in the Trading of Securities. Compliance with the ABRASCA Code for Self-regulation and Good Practices in Publicly Traded Companies. Brokers that cover the company: Bradesco BBI, BTG Pactual, Citibank, Empiricus Research, HSBC, JP Morgan, Merrill Lynch, Morgan Stanley, Nau Securities, Safra, Santander. Participants in USA: Toll free: +1 786 924-6977 or +1 888 700-0802 (English only) Access code: Duratex Web conference: www.duratex.com.br/ri For those unable to accompany the conference calls live, full audio playback will be available via the Company s website (www.duratex.com.br) or via telephone +55 (11) 3193-1012 or +55 (11) 2820-4012 for both Portuguese and English versions, the access codes being, Portuguese: 2830518# and English: 8483154#.
Consolidated Financial Results BRL '000 2Q17 2Q16 % 1Q17 % 1H17 1H16 % HIGHLIGHTS Volume shipped Deca ( 000 items) 6,252 6,579-5.0% 6,806-8.1% 13,058 12,001 8.8% Volume shipped wood (m 3 ) 526,572 613,301-14.1% 585,986-10.1% 1,112,558 1,214,285-8.4% Consolidated net revenue 916,724 1,012,606-9.5% 951,989-3.7% 1,868,713 1,914,005-2.4% Gross profit 245,306 274,423-10.6% 232,092 5.7% 477,398 474,669 0.6% Gross margin 26.8% 27.1% - 24.4% - 25.5% 24.8% - EBITDA according to CVM No. 527/12 (1) 218,639 210,449 3.9% 192,868 13.4% 411,507 356,996 15.3% EBITDA Margin CVM No. 527/12 23.9% 20.8% - 20.3% - 22.0% 18.7% - Adjustments for non-cash events (40,542) (38,792) 4.5% (42,025) -3.5% (82,567) (79,050) 4.4% Non-recurring events - - - (2,672) - (2,672) - - Recurring and adjusted EBITDA (2) 178,097 171,657 3.8% 148,171 20.2% 326,268 277,946 17.4% Recurring and adjusted EBITDA margin 19.4% 17.0% - 15.6% - 17.5% 14.5% - Net income 24,767 723 3,325.6% (7,514) -429.6% 17,253 (28,833) -159.8% Recurring net income 24,767 723 3,325.6% (9,278) -367.0% 15,489 (28,833) -153.7% Recurring net margin 2.7% 0.1% - -1.0% - 0.8% -1.5% - INDICATORS Current ratio (3) 2.30 2.26 1.8% 2.59-11.3% 2.30 2.26 1.8% Net debt (4) 2,108,077 2,073,614 1.7% 2,034,415 3.6% 2,108,077 2,073,614 1.7% Net debt/ebitda LTM (5) 2.89 3.00-3.6% 2.81 2.7% 2.89 2.23 29.6% Average net equity 4,582,442 4,530,622 1.1% 4,569,075 0.3% 4,578,512 4,559,240 0.4% ROE (6) 2.2% 0.1% - -0.7% - 0.8% -1.3% - Recurring ROE 2.2% 0.1% - -0.8% - 0.7% -1.3% - SHARES Basic net earning per share (BR) (7) 0.0359 0.0007 5,028.6% (0.0109) -429.4% 0.0250 (0.0462) -154.1% Closing share price (BRL) 8.17 8.50-3.9% 9.20-11.2% 8.17 8.50-3.9% Net equity per share (BRL) 6.67 6.62 0.8% 6.63 0.7% 6.67 6.62 0.8% Shares held in treasury (shares) 2,485,759 2,485,759 0.0% 2,485,759 0.0% 2,485,759 2,485,759 0.0% Market Value (BRL '000) 5,631,571 5,859,039-3.9% 6,341,548-11.2% 5,631,571 5,859,039-3.9% (1) EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization): Measure of operational performance in accordance with CVM Instruction 527/1. (2) EBITDA adjusted for non-cash events arising from variation in the fair value of biological assets and combination of businesses, in addition to extraordinary events. (3) Current liquidity: Current Assets Divided by Current Liabilities. Indicates the amount available in BRL to cover each BRL of short-term obligations. (4) Net Indebtedness: Total Financial Debt ( ) Cash balance. (5) Financial leverage calculated on the rolling EBITDA over the last 12 months, adjusted for events of a purely accounting and non-cash nature. (6) ROE (Return on Equity): measure of performance obtained by taking the annualized Net Earnings over the period, annualized, and dividing by Average Net Equity. (7) Net earnings per share is calculated by dividing the earnings attributable to the company s shareholders by the average weighted number of ordinary shares issued during the period, excluding the ordinary shares held by the Treasury. 2
Market & Business Scenario The period continued to be impacted by political instability in Brazil, especially in the second half of the quarter. This backdrop of uncertainty combined with the continued high level of unemployment and reduced economic activity depressed demand for our products and negatively impacted our operations. Due to this reason, the expectations of the main players in the market were diminished as it remained unclear as to when things might improve. Due to this reason, the expectations of the main players in the market were diminished, suggesting a possible postponement in the recovery of the economy. Inflation continued to fall during the quarter, offering up an opportunity for a greater cut in interest rates. The possible acceleration in interest rate reductions may have a positive impact on our results, both through its effect on net debt and in stimulating demand for credit. According to the Brazilian Tree Industry, demand for wood panels in the domestic market fell 5.5% in relation to the second quarter of last year. Year to date for the first semester the fall in the sector was 1.6%. On the other hand, exports partially compensated for this fall, growing 25.7% in the second quarter, and 34.8% versus the same quarter last year. The ABRAMAT index (Brazilian Association of Construction Material Producers), the main measure of the construction materials segment, showed a fall of 7.1% in revenue adjusted for inflation in this sector and of 6.5% in jobs year to date. This result corroborates the perceived fall in activity in the sector. The Association has revised its projections for 2017, and the new projections show a fall of 5% in inflation-adjusted revenue for the sector, in comparison to the previously forecast stability. Strategic Management & Investment In the second quarter of 2017, we recorded consolidated investment of BRL98.4m. Of this total, BRL43.8m was allocated to forestry OPEX and BRL54.6m to maintenance and projects. Thus, the accumulated investment for the first six months of the year was BRL196.8m. We are expecting total investment for 2017 to reach BRL420m, mainly focused on sustaining operations, especially the development of new forests and factory maintenance. For the second quarter, we reinforced our commitment to actions and initiatives encompassed in the Duratex Management System, with a view to increasing productivity, reducing costs and optimizing working capital. The progress of these initiatives, begun at the end of 2014, is fundamental to compensating for the slow recovery of the economy and, in turn, our operations. As a result of the slower than expected recovery of our operations, and according to the guidelines of the Zero Based Budgeting (ZBB) program, additional cost reduction opportunities for the year of 2017 which were not in the initial planning were identified. Thus, this additional cost saving plan could benefit the result of the year. In the context of the cultural transformation, we reached an important project milestone in June this year. Throughout the month, the 11.5 thousand employees underwent immersion training, with dissemination of the new culture, supported by the corporation s leaders and executives. This process of cultural transformation will be fundamental to achieving our short and long term strategic objectives. The other highlight of the quarter was the restructuring of our IT management model. The position of IT and Digital Business Director was created, occupied by Marcelo Koji Tahara. In parallel, we have instituted the IT & Digital Innovation Committee with the objective of assisting the Senior Board in this activity. This new structure will provide better guidance and focus in prioritizing the digital transformation process, in addition to accelerating projects in progress. 3
Consolidated Financial Highlights (IFRS) NET INCOME The consolidated net income for 2Q17 was BRL916.7m, of which BRL160.2m arose from the external market through exports and from operations at Duratex Colombia. Income arising outside of Brazil represented 17.5% of the total. Lower volumes shipped in both of the business divisions were responsible for a fall of 9.5% in income in relation to the same period in the previous year. However, the increase in prices at the end of the first quarter of 2017 partially compensated for the lower volumes. In our external operation, through Duratex Colombia, we saw slightly lower volumes and some pricing pressures, arising mainly from the Colombian exchange rate and cooling of the civil construction industry in the country. BRL '000 - consolidated 2Q17 2Q16 % 1Q17 % 1H17 1H16 % Net revenue 916,724 1,012,606-9.5% 951,989-3.7% 1,868,713 1,914,005-2.4% Domestic market 756,489 802,306-5.7% 803,102-5.8% 1,559,591 1,522,395 2.4% Foreign Market 160,235 210,300-23.8% 148,887 7.6% 309,122 391,610-21.1% Duratex Colombia 79,115 116,724-32.2% 83,835-5.6% 162,950 222,273-26.7% Exports from Brazil 81,120 93,576-13.3% 65,052 24.7% 146,172 169,337-13.7% Net Income by area of operation (in % in 2Q2017) COST OF GOODS SOLD The Cash Cost, that is, the Cost of Goods sold net of Depreciation, Amortization and Exhaustion, and of the net variation in the Fair Value of Biological Assets closed out the second quarter of the year at BRL587.8m. 39 61 WOOD DECA The lower volumes shipped and the capture of benefits from the initiatives that make up the Duratex Management System contributed to this fall. However, on the other hand, we saw some pressure on the cost of some raw materials, such as resin, due to the increase in the commodities methanol and urea. The highlight of the quarter was the positive trend in the consolidated gross margin in relation to the first quarter of the year. The price increases in the two business units, a slightly improved mix in the Deca Division and a better cost structure contributed to this increase. 4
BRL 000 consolidated 2Q17 2Q16 % 1Q17 % 1H17 1H16 % Cash COGS (587,806) (653,957) -10.1% (629,377) -6.6% (1,217,183) (1,275,519) -4.6% Variation in fair value of biological assets* 38,582 40,427-4.6% 42,721-9.7% 81,303 76,435 6.4% Depletion tranche of biological assets (27,384) (23,022) 18.9% (34,078) -19.6% (61,462) (49,482) 24.2% Depreciation, amortization and depletion (94,810) (101,631) -6.7% (99,163) -4.4% (193,973) (190,770) 1.7% Gross profit 245,306 274,423-10.6% 232,092 5.7% 477,398 474,669 0.6% Gross margin 26.8% 27.1% 24.4% 25.5% 24.8% BRL 000 ex Duratex Colombia 2Q17 2Q16 % 1Q17 % 1H17 1H16 % Cash COGS (539,228) (584,541) -7.8% (580,818) -7.2% (1,120,046) (1,145,380) -2.2% Variation in fair value of biological assets* 38,801 40,407-4.0% 42,141-7.9% 80,942 76,617 5.6% Depletion tranche of biological assets (27,384) (23,022) 18.9% (34,078) -19.6% (61,462) (49,482) 24.2% Depreciation, amortization and depletion (90,907) (95,934) -5.2% (95,434) -4.7% (186,341) (180,775) 3.1% Gross profit 218,891 232,792-6.0% 199,965 9.5% 418,856 392,712 6.7% Gross margin 26.1% 26.0% 23.0% 24.6% 23.2% Net Income (in BRL million) ex Duratex Colômbia Cash Cost (in BRL million) and Gross Margin (in %) ex Duratex Colômbia 29.0 26.6 26.6 23.9 20.1 26.0 26.9 24.5 23.0 26.1 929.2 881.5 947.9 855.8 795.9 895.9 872.2 930.4 868.1 837.6 573.1 534.5 591.5 549.5 560.8 584.5 548.9 576.2 582.2 539.2 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Cash cost Gross margin Cost of Goods Sold Wood Division (in % no 2Q17) Cost of Goods Sold Deca Division (in % no 2Q17) 10 7 3 23 3 9 3 37 9 18 14 16 Other materials Resin Paper Wood* Labor Electricity Depreciation & Amortization Fuel 36 12 Other materials Metals Labor Electricity Depreciation & Amortization Fuel * Includes exhaustion of the amount invested related to the cost of wood. 5
SALES EXPENSES In the second quarter of 2017, our expenses related to sales totaled BRL153.0m, which represented 16.7% of net income. The increased export volumes negatively impacted this result, due to greater expenditure on overseas shipping. A number of initiatives to perfect the logistics model and improve client service levels also contributed to this increase. Within the scope of the Duratex Management System, we are constantly seeking alternatives to make our logistics operation ever more competitive and to offer a better service level to our clients. BRL 000 consolidated 2Q17 2Q16 % 1Q17 % 1H17 1H16 % Sales expenses (153,004) (152,714) 0.2% (146,751) 4.3% (299,755) (286,918) 4.5% Percentage of net revenue 16.7% 15.1% - 15.4% - 16.0% 15.0% - Sales Expenses (in BRL million) and % in Relation to Net Income ex Duratex Colômbia 13.6 14.6 15.0 16.0 15.3 126.1 128.2 141.8 137.0 121.8 138.3 138.3 142.3 137.3 143.8 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Cash cost Gross margin 15.4 15.9 15.3 15.8 17.2 GENERAL & ADMINISTRATIVE EXPENSES The total general and administrative expenses for the quarter was BRL35.2m. Despite an increase of 1% compared to the second quarter of 2016, we showed a nominal reduction in the general and administrative expenses accumulated year to date. In the first semester of 2017, general and administrative expenses showed a decrease of BRL3.5m, which represents a drop of 4.8%. This result is a reflection of gains made by the Duratex Management System and of restructuring carried out in the period. The discipline in managing the Zero Based Budget (ZBB) proved to be an important lever in achieving this improvement. We remain committed to improving the administration of costs and expenses to optimize expenditure and improve the efficiency of our company. BRL 000 consolidated 2Q17 2Q16 % 1Q17 % 1H17 1H16 % General and administrative expenses (35,198) (34,854) 1.0% (34,736) 1.3% (69,934) (73,495) -4.8% Percentage of net revenue 3.8% 3.4% - 3.6% - 3.7% 3.8% - 6
EBITDA In the second quarter, the Adjusted, Recurring EBITDA was BRL178.1m, with a margin of 19.4%. Although the volumes were lower, our operations are improving their levels of profitability, with more efficient cost bases and productivity and the implementation of price increases. EBITDA reconciliation in BRL 000 consolidated 2º tri/17 2º tri/16 % 1º tri/17 % 1H17 1H16 % Net income 24,767 723 3,325.6% (7,514) -429.6% 17,253 (28,833) -159.8% Income tax and social contribution 2,243 (3,820) -158.7% (5,513) -140.7% (3,270) (21,816) -85.0% Net financial result 59,084 79,165-25.4% 62,834-6.0% 121,918 147,831-17.5% EBIT 86,094 76,068 13.2% 49,807 72.9% 135,901 97,182 39.8% Depreciation, amortization and depletion Depletion tranche of biological assets EBITDA according to CVM No. 527/12 105,160 111,359-5.6% 108,983-3.5% 214,143 210,332 1.8% 27,385 23,022 19.0% 34,078-19.6% 61,463 49,482 24.2% 218,639 210,449 3.9% 192,868 13.4% 411,507 356,996 15.3% EBITDA margin CVM No. 527/12 23.9% 20.8% 14.8% 20.3% 17.7% 22.0% 18.7% 18.1% Change in fair value of biological assets (38,582) (40,427) -4.6% (42,721) -9.7% (81,303) (76,435) 6.4% Employee benefit (1,960) 1,635-219.9% 696-381.6% (1,264) (2,615) -51.7% Others - - - - - - - - Extraordinary events (1) - - - (2,672) -100.0% (2,672) - - Recurring and adjusted EBITDA 178,097 171,657 3.8% 148,171 20.2% 326,268 277,946 17.4% Recurring and adjusted EBITDA margin 19.4% 17.0% - 15.6% - 17.5% 14.5% - (1) Events of extraordinary nature: 1Q17: resulting from sale of Duratex Florestal controlled land (-) BRL2,672m. In May 2017, we succeeded in a lawsuit in the Supreme Court of Justice, granting us the right to compensation of IPI Premium Credit of 1984. This tax benefit was issued at the time due to the Program to Expand Exports BEFIEX, which was provided in full from 1976 to 1985. The tax compensation, in the total amount of BRL 33.7m, was accounted in this quarter as other operating results, and the cash compensation will be made in the monthly payment of IPI tax over the next few months. In the first half of the year, the EBITDA margin improved by 294 bps in relation to the same period in the previous year. Even with such an adverse scenario and continued uncertainty, our strategic positioning and related actions mean significant progress has been made in taking the company forward. Origin of Adjusted Recurring EBITDA (in % no 2Q17) 43 57 DECA WOOD 7
NET EARNINGS Our ongoing operations in the second quarter of the year have resulted in a profit of BRL24.8m, offsetting the loss that arose in the first quarter. Accumulated net earnings for the first half of 2017 were BRL15.5m. In addition to the operational improvement in the quarter, there has been a positive contribution from: (i) an IPI credit award for the amount of BRL22.3m after tax; and (ii) BRL3.4m arising from the early withdrawal from the PSDI program (an industrial development program sponsored by the state of Sergipe). BRL 000 consolidated 2Q17 2Q16 % 1Q17 % 1H17 1H16 % Net earnings 24,767 723 3,325.6% (7,514) -429.6% 17,253 (28,833) -159.8% Extraordinary events - - - (1,764) -100.0% (1,764) - - Recurring net earning 24,767 723 3,325.6% (9,278) -367.0% 15,489 (28,833) -153.7% ROE 2.2% 0.1% - -0.7% - 0.8% -1.3% - Recurrent ROE 2.2% 0.1% - -0.8% - 0.7% -1.3% - BRL 000 ex Duratex Colômbia 2Q17 2Q16 % 1Q17 % 1H17 1H16 % Net earnings 15,873 (14,193) -211.8% (17,363) -191.4% (1,490) (56,320) -97.4% Extraordinary events* - - - (1,764) -100.0% (1,764) - - Recurring net earning 15,873 (14,193) -211.8% (19,127) -183.0% (3,254) (56,320) -94.2% ROE 0.7% -1.3% - -1.5% - -0.1% -2.5% - Recurrent ROE 0.7% -1.3% - -1.7% - -0.1% -2.5% - * Net effect on the EBITDA of the events mentioned above. ADDED VALUE The Added Value for the quarter totaled BRL394.4m. Of this amount, BRL88.3m, equivalent to 22.4% of the total Value Added, was destined for the federal, state and municipal governments in the form of taxes and contributions. Distribution of Value Added in 2Q17 6.3 26.2 45.1 22.4 Workers remuneration Government remuneration Financing Shareholder remuneration 8
INDEBTEDNESS There was a one-off increase in net debt during the quarter arising mainly from a spike in working capital requirements. The initiatives aimed at reducing inventories were not sufficiently progressed to free up the additional working capital required mainly due to lower volumes shipped than forecast. The increase in working capital requirements was exacerbated by the recognition of the IPI credit award. However, this credit will be compensated by the end of the year. The leverage indicator for the quarter, measured by the ratio of Net Debt to EBITDA, showed a small increase. The main driver of this result was a BRL73.7m increase in net debt. The financial results for the period showed a deterioration in relation to comparable periods, boosted by BRL5.1m stemming from the early withdrawal from the tax benefit program PSDI (Programa Sergipano de Desenvolvimento Industria). Financing expenses fell, mainly due to the lower interest rates. We would like to reaffirm our commitment to improving cash flow through deleveraging the Company. The prospects for operational improvements combined with rigid control on investment, a reduction in working capital, more favorable financial results and the decommissioning of idle assets should combine to improve our overall debt position. BRL 000 06/30/17 06/30/16 Var. BRL 03/31/17 Var. BRL 12/31/16 Var. BRL Short-Term debt 698,675 819,797 (121,122) 620,034 78,641 681,110 17,565 Long-Term debt 2,444,927 2,625,998 (181,071) 2,633,860 (188,933) 2,775,931 (331,004) Total debt 3,143,602 3,445,795 (302,193) 3,253,894 (110,292) 3,457,041 (313,439) Cash and equivalent 1,035,525 1,372,181 (336,656) 1,219,479 (183,954) 1,416,360 (380,835) Net debt 2,108,077 2,073,614 34,463 2,034,415 73,662 2,040,681 67,396 Net debt/recurring and adjusted EBITDA 2.89 2.23-2.81-2.997 - Net debt/equity (in %) 45.9% 45.5% - 44.5% - 44.6% - FINANCIAL REVENUES AND EXPENSES BRL 000 2Q17 2Q16 % 1Q17 % 1H17 1H16 % Financial revenues 44,598 42,959 3.8% 41,670 7.0% 86,268 69,393 24.3% Financial expenses (103,682) (122,124) -15.1% (104,504) -0.8% (208,186) (217,224) -4.2% Net financial result (59,084) (79,165) -25.4% (62,834) -6.0% (121,918) (147,831) -17.5% Amortization Schedule (in BRL millions) 332.6 891.3 702.7 396.5 820.6 2017 2018 2019 2020 2021 & after 9
Gross Indebtedness as of the end of June, 2017 (in BRL million) Origin of Debt (%) 698.7 23.4 2,444.9 Short Term Long Term 76.6 Local Currency Foreign Currency (100% hedge to BRL) Operations Wood Division HIGHTLIGHTS 2Q17 2Q16 % 1Q17 % 1H17 1H16 % SHIPMENTS (IN M3) STANDARD 294,887 342,283-13.8% 313,456-5.9% 608,343 679,345-10.5% COATED 231,685 271,018-14.5% 272,530-15.0% 504,215 534,940-5.7% TOTAL 526,572 613,301-14.1% 585,986-10.1% 1,112,558 1,214,285-8.4% FINANCIAL HIGHLIGHTS (BRL '000) NET REVENUE 563,536 667,341-15.6% 608,926-7.5% 1,172,462 1,275,824-8.1% DOMESTIC MARKET 417,654 475,096-12.1% 470,921-11.3% 888,575 913,303-2.7% EXPORT MARKET 145,882 192,245-24.1% 138,005 5.7% 283,887 362,521-21.7% Net unit revenue (BRL/m 3 shipped) 1,070.20 1,088.11-1.6% 1,039.15 3.0% 1,053.84 1,050.68 0.3% Unit cash cost (BRL/m 3 shipped) (711.19) (701.36) 1.4% (710.73) 0.1% (710.95) (707.63) 0.5% Gross profit 129,925 176,725-26.5% 125,880 3.2% 255,805 299,622-14.6% Gross margin 23.1% 26.5% - 20.7% - 21.8% 23.5% - Sales expenses (86,805) (94,306) -8.0% (88,196) -1.6% (175,001) (179,409) -2.5% General and administrative expenses (18,403) (19,804) -7.1% (19,163) -4.0% (37,566) (40,681) -7.7% Operating profit before financial results 35,305 55,620-36.5% 19,865 77.7% 55,170 64,403-14.3% Depreciation, amortization and depletion 77,291 85,070-9.1% 81,905-5.6% 159,196 157,925 0.8% Depletion tranche of biological assets 27,385 23,022 19.0% 34,078-19.6% 61,463 49,482 24.2% EBITDA according to CVM No. 527/12 (1) 139,981 163,712-14.5% 135,848 3.0% 275,829 271,810 1.5% EBITDA margin according to CVM No. 527/12 24.8% 24.5% - 22.3% - 23.5% 21.3% - Variation in fair value of biological assets (38,582) (40,427) -4.6% (42,721) -9.7% (81,303) (76,435) 6.4% Employee benefits (743) 419 (3) 1,141-165.1% 398 (1,066) -137.3% Others 0 0-0 - 0 0 0.0% Extraordinary event (2) - - - (2,672) 0.0% (2,672) - 0.0% Recurring and adjusted EBITDA 100,656 123,704-18.6% 91,596 9.9% 192,252 194,309-1.1% Recurring and adjusted EBITDA margin 17.9% 18.5% - 15.0% - 16.4% 15.2% - (1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): measure of operational performance as set out in CVM Instruction No. 527/12. (2) Events of extraordinary nature: 1Q17: resulting from sale of Duratex Florestal controlled land (-) BRL 2,672m. 10
In the Wood Division, the second quarter was marked by a price increase introduced against a scenario of fierce competition and low levels of demand. This combination was reflected in the drop in volumes, driven mainly by the domestic market in which we saw a one-off fall in market share. However, our strategy of sustaining the price increases has paid off in generating improved profitability for the quarter compared to the previous quarter. Despite the adverse competitive scenario and the low level of demand, we are confident that all of the operational initiatives implemented relating to productivity and cost reduction, in addition to the improved logistics and production planning with the new S&OP system, will place us in a more competitive position within the wood panels sector. In the period the volume of wood panels shipped was 526,600m 3, which represents a fall versus previous quarters. For the half-year to date, volumes shipped are 8.4% lower than for the same period last year. The fall in volumes in the domestic market was partially offset by greater exports. In Duratex Colombia, volumes were slightly lower than for the same period last year, mainly due to a deceleration in the Colombian construction industry and greater competition from imported products. Wood Sales Segmentation 2Q2017 (%) 1.7 The profitability of our operation improved, raising the EBITDA margin to 17.9%, versus 15% for the previous quarter. There are still some significant challenges in a competitive market scenario, and the low level of capacity utilization continues to negatively impact our margins through a greater concentration of fixed costs. 53.3 45.0 Furniture Industry Resales Civil Construction/Others 11
Deca Division HIGHLIGHTS 2Q17 2Q16 % 1Q17 % 1H17 1H16 % SHIPMENTS (IN 000 ITEMS) BASIC PRODUCTS 1,621 1,654-2.0% 2,098-22.7% 3,719 3,473 7.1% FINISHING PRODUCTS 4,631 4,925-6.0% 4,708-1.6% 9,339 8,528 9.5% TOTAL 6,252 6,579-5.0% 6,806-8.1% 13,058 12,001 8.8% FINANCIAL HIGHLIGHTS (BRL1,000) NET REVENUE 353,188 345,265 2.3% 343,063 3.0% 696,251 638,181 9.1% DOMESTIC MARKET 338,835 327,210 3.6% 332,181 2.0% 671,016 609,092 10.2% EXPORT MARKET 14,353 18,055-20.5% 10,882 31.9% 25,235 29,089-13.2% Net unit revenue (BRL per item shipped) 56.49 52.48 7.6% 50.41 12.1% 53.32 53.18 0.3% Unit cash cost (BRL per item shipped) (34.12) (34.02) 0.3% (31.28) 9.1% (32.64) (34.69) -5.9% Gross profit 115,381 97,698 18.1% 106,212 8.6% 221,593 175,047 26.6% Gross margin 32.7% 28.3% - 31.0% - 31.8% 27.4% - Sales expenses (66,199) (58,408) 13.3% (58,555) 13.1% (124,754) (107,509) 16.0% General and administrative expenses (16,795) (15,050) 11.6% (15,573) 7.8% (32,368) (32,814) -1.4% Operating profit before financial results 50,789 20,448 148.4% 29,942 69.6% 80,731 32,779 146.3% Depreciation and amortization 27,869 26,289 6.0% 27,078 2.9% 54,947 52,407 4.8% EBITDA according to CVM No. 527/12 (1) 78,658 46,737 68.3% 57,020 37.9% 135,678 85,186 59.3% EBITDA margin according to CVM No. 527/12 22.3% 13.5% - 16.6% - 19.5% 13.3% - Employees benefits (1,217) 1,216-200.1% (445) 173.5% (1,662) (1,549) 7.3% Extraordinary event 0 - - - - - - - Recurring and adjusted EBITDA 77,441 47,953 61.5% 56,575 36.9% 134,016 83,637 60.2% Recurring and adjusted EBITDA margin 21.9% 13.9% - 16.5% - 19.2% 13.1% - (1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): measure of operational performance in line with the Instruction CVM527/12. Deca Division s second quarter continued within a scenario of decline in the civil construction materials sector, in keeping with data collected by ABRAMAT. Despite this context, once again the Division s operations presented a result that was better than the average for the market. Year to date for the semester, we have seen continued improvement in volumes shipped. In comparison to the previous year, volumes shipped increased by 8.8%, with the most significant rise in finishing products, with higher profitability. Volumes shrank 5.0% in comparison to the 2Q16, with a higher drop in finishing goods. Implementation of the price increase, added to a better product mix, leaner cost base and gains from the Duratex Management System, all resulted in a significant improvement in profitability for the business. The EBITDA margin for the quarter was 21.9%, exceeding the margins of 13.9% and 16.5% achieved during the same period of 2016 and in the previous quarter respectively. Year to date, Deca has improved its EBITDA by 60.2% in comparison to 2016, which highlights the importance of all of the initiatives relating to cost management and productivity, plus the adjustments made to capacity during the second semester of last year. The combination of a brand recognized by the consumer, a solid relationship with architects and specialists, the quality of the products, and the extensive portfolio once again illustrate the strength of the Deca name and brand, even despite the difficult period the industry is facing. Sales Segmentation 2Q2017 (%) 24 6 3 67 Resales/ Home Center Construction Companies Wholesale Others 12
Capital Markets and Corporate Governance At the end of the second quarter, Duratex had a Market value of BRL 5,631.6 m, based on a closing price per share of BRL 8,17 Shareholding Structure as of June 2017 During the quarter, there were 259,1 trades in the shares of Duratex on the BM&FBovespa spot market, representing a trading volume equivalent to BR 811 m, on average daily trading volume of BRL 13.3m. 5.5 0.4 Duratex s shares are listed on the Novo Mercado sections of BM&FBovespa which brings together companies with the highest standards of corporate governance. The Company also has a differentiated dividend policy, with the distribution of 30% of adjusted net earnings to shareholders, while also adhering to the Abrasca Code for Self-Regulation and Good Practices for Listed Companies. 1.3 32.9 20.0 40.0 Itaúsa and Families Ligna and Family Pension funds Foreign Investors Other local Investors Treasury Social and Enviromental Responsibility The size of our workforce decreased when compared to the same period last year, but was stable compared to the previous quarter. Commitment to the Duratex Management System and Zero Based Budgeting (ZBB) was essential in achieving this result. Year to date, the costs of remuneration, social security contributions and benefits have shown a nominal reduction of BRL3.6m when compared to 2016, contributing to our increased profitability. (BRL'000) 2Q17 2Q16 % 1Q17 % 1H17 1H16 % Employees (quantity) 11,510 11,702-1.6% 11,463 0.4% 11,510 11,702-1.6% Remuneration 106,925 107,278-0.3% 102,732 4.1% 209,657 210,532-0.4% Obligatory legal charges 58,504 57,340 2.0% 49,919 17.2% 108,423 112,501-3.6% Differentiated benefits 26,333 25,441 3.5% 25,620 2.8% 51,953 50,559 2.8% Since 2016, we have made a commitment to greater transparency in our environmental performance. The results of the months of January to March 2017 are presented for the aspects water, effluent, total energy, electric energy, waste and direct emissions. Tracking of environmental indicators has been carried out since 2004 and is part of the SEM, (SGA) (Environmental Management System environmental/environment-system) of the Company, which holds the certification ISO 14001 (www. duratex.com.br/sustentabilidade/compromisso/certificacoes). This practice is fundamental to ensure the assessment and continuous improvement of all processes and products. 13
Water consumption* Wastewater disposal* 2500000 2,010,118 1200000 1,110,700 2000000 1,760,807 1000000 981,938 m 3 water 1500000 1000000 12.4% 5.2% 65.4% 18.2% m 3 wastewater 800000 600000 400000 11.6% 13.7% 13.3% 55.5% 500000 0 148,927 162,741 162,741 141,157 133,127 56,329 Wood Forest Metals Sanitay panels ware 1H 2016 1H 2017 200000 0 73,100 82,807 2,126 2,418 73,100 32,535 Wood Forest Metals Sanitay panels ware 1H 2016 1H 2017 Total energy* Electric energy* energy GJ 5000000 4000000 3000000 2000000 1000000 0 4,321,195 3,842,665 11% 5.7% 79.7% 520,765 132,722 125,133 5.9% 520,765 551,526 105,551 Wood Forest Metals Sanitay panels ware 1H 2016 1H 2017 energy GJ 1400000 1200000 1000000 800000 600000 400000 200000 0 1,148,856 1,075,566 6.4% 26% 5.4% 0.7% 2,183 1,615 83,903 79,366 98,861 98,192 Wood Forest Metals Sanitay panels ware 1H 2016 1H 2017 Industrial Solid Waste in Landfill Areas* Direct emissions of greenhouse gases* industrial solid waste ton 8000 7000 6000 5000 4000 3000 2000 1000 0 5,940 5,409 9.8% 75.7% 7,111 7,100 7.53% 0.15% 6 2 171 158 Wood Forest Metals Sanitay panels ware 1H 2016 1H 2017 t CO 2 e 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 90,395.35 58,714.32 35% Duratex 1H 2016 1H 2017 Accidents frequency rate* Accumulated in the period 7,0 6,0 6.3 5,0 4,0 3,0 4.3 4.4 3.5 3.2 2.7 4.7 2.7 4.3 4.1 3.9 2,0 1,0 0 Deca Hydra Wood Panels YTD 2016 YTD 2017 Forest Headquartes Duratex *The environmental performances of Hydra and the Central Office were not shown in the graphs above, because together they are insignificant in the company totals (0.5% of total water consumption, 1% of effluent disposal, 0.1% of total energy consumption, 0.3% of electric energy consumption, 3.6% of total waste disposal in landfills). 14
Acknowledgements We are grateful for all the support received from our shareholders, the dedication and commitment of our employees, the partnerships we have with our suppliers and the confidence placed in us by our clients and consumers. The Management 15
Financial Statements CONSOLIDATED ASSETS (BRL '000) 06/30/17 AV% 06/30/16 AV% 03/31/17 AV% CURRENT 2,951,977 32.5% 3,207,218 34.2% 3,026,799 33.1% Cash and equivalents 1,035,525 11.4% 1,372,181 14.6% 1,219,479 13.3% Clients accounts receivable 784,546 8.7% 794,046 8.5% 826,586 9.0% Accounts receivable from related parties 38,249 0.4% 48,672 0.5% 41,547 0.5% Inventory 875,549 9.6% 826,438 8.8% 784,440 8.6% Ammounts receivable 49,870 0.5% 22,141 0.2% 49,015 0.5% Recoverable taxes and contributions 142,188 1.6% 127,124 1.4% 84,466 0.9% Other assets 18,497 0.2% 16,616 0.2% 15,758 0.2% Non current assets available for sale 5,508 0.1% - 0.0% 5,508 0.1% NON-CURRENT 6,133,271 67.5% 6,166,459 65.8% 6,115,386 66.9% Linked deposits 51,802 0.6% 45,657 0.5% 50,904 0.6% Amounts receivable 66,949 0.7% 53,668 0.6% 64,469 0.7% Pension plans credit 101,746 1.1% 99,981 1.1% 99,788 1.1% Recoverable taxes and contributions 14,506 0.2% 21,032 0.2% 14,354 0.2% Deffered income tax and contributions 260,798 2.9% 242,248 2.6% 250,944 2.7% Investments in subsidiaries and addiliates - 0.0% - 0.0% - 0.0% Other investments 921 0.0% 921 0.0% 921 0.0% Fixed assets 3,519,380 38.7% 3,651,890 39.0% 3,541,231 38.7% Biological assets 1,598,673 17.6% 1,508,121 16.1% 1,565,421 17.1% Intangible assets 520,541 5.7% 542,941 5.8% 527,354 5.8% TOTAL ASSETS 9,085,248 100.0% 9,373,677 100.0% 9,142,185 100.0% 16
CONSOLIDATED LIABILITIES (BRL '000) 06/30/17 AV% 06/30/16 AV% 03/31/17 AV% CURRENT 1,284,360 14.1% 1,421,274 15.2% 1,168,430 12.8% Loans and financing 698,675 7.7% 680,598 7.3% 620,034 6.8% Charge of debentures - 0.0% 139,199 1.5% - 0.0% Suppliers 289,648 3.2% 251,963 2.7% 260,182 2.8% Staff obligations 116,256 1.3% 119,578 1.3% 93,087 1.0% Accounts payable 135,691 1.5% 146,590 1.6% 130,103 1.4% Accounts receivable from related parties 2,640 0.0% - - 2,640 0.0% Taxes and contribution 40,951 0.5% 82,665 0.9% 61,844 0.7% Dividends and equity-on-interest payable 499 0.0% 681 0.0% 540 0.0% Liabilities of discontinued operations - 0.0% - 0.0% - 0.0% NON-CURRENT 3,203,502 35.2% 3,392,541 36.1% 3,406,257 37.2% Loans and financing 2,444,927 26.9% 2,625,998 28.0% 2,633,860 28.8% Charge of debentures - 0.0% - 0.0% - 0.0% Contigency provisions 110,272 1.2% 100,811 1.1% 111,122 1.2% Deffered income tax and social contribution 467,241 5.1% 488,765 5.2% 460,979 5.0% Other accounts payable 181,062 2.0% 161,983 1.7% 186,001 2.0% Taxes and contribution - 0.0% 14,984-14,295 0.2% SHAREHOLDERS'S EQUITY 4,597,386 50.6% 4,559,862 48.6% 4,567,498 50.0% Equity 1,970,189 21.7% 1,970,189 21.0% 1,970,189 21.6% Cost of share issued (7,823) -0.1% (7,823) -0.1% (7,823) -0.1% Capital reserves 343,439 3.8% 340,033 3.6% 342,543 3.7% Transactions between partner and partnership (18,731) -0.2% - - (18,731) -0.2% Re-evaluation reserves 59,894 0.7% 64,399 0.7% 60,394 0.7% Profit reserves 1,871,304 20.6% 1,789,221 19.1% 1,846,062 20.2% Adjusts in equity valuation 406,132 4.5% 410,906 4.4% 401,888 4.4% Shares held in treasury (27,931) -0.3% (27,931) -0.3% (27,931) -0.3% Participation of non-controlling shareholders TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY 913 0.0% 20,868 0.2% 907 0.0% 9,085,248 100.0% 9,373,677 100.0% 9,142,185 100.0% 17
CONSOLIDATED IN IFRS CONSOLIDATES PROFIT AND LOSS STATEMENT (BRL '000) 2Q17 2Q16 Var. % 1Q17 Var. % 2Q17 X 2Q16 2Q17 X QT17 NET SALES REVENUE 916,724 1,012,606-9.5% 951,989-3.7% Domestic market 756,489 802,306-5.71% 803,102-5.80% Export market 160,235 210,300-23.81% 148,887 7.62% Biological asset 38,582 40,427-4.56% 42,721-9.69% Cost of goods sold (587,806) (653,957) -10.12% (629,377) -6.61% Depreciation/amortization/depletion (94,810) (101,631) -6.71% (99,163) -4.39% Depletion of biological assets (27,384) (23,022) 18.95% (34,078) -19.64% GROSS PROFIT 245,306 274,423-10.6% 232,092 5.7% Sales Expenses (153,004) (152,714) 0.19% (146,751) 4.26% General and administrative expenses (35,198) (34,854) 0.99% (34,736) 1.33% Management fees (3,893) (3,564) 9.23% (3,790) 2.72% Other operating results, net 32,883 (7,223) -555.25% 2,992 999.03% Ownership equity result - - - - - OPERATING PROFIT BEFORE FINANCIAL RESULTS 86,094 76,068 13.2% 49,807 72.9% Financial revenues 44,598 42,959 3.82% 41,670 7.03% Financial expenses (103,682) (122,124) -15.10% (104,504) -0.79% PROFIT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION 27,010 (3,097) -972.1% (13,027) -307.3% Income tax and contribution - current (7,120) (38,284) -81.40% (17,567) -59.47% Income tax and contribution - deffered 4,877 42,104-88.42% 23,080-78.87% NET INCOME FOR THE PERIOD 24,767 723 3,325.6% (7,514) -429.6% 18
CONSOLIDATED CASH FLOW PROFIT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION Items with no cash effect: Depreciation/amortization/ depletion Variation in fair value of biological assets Interest, exchange rate and monetary variations, net 2Q17 2Q16 Var. 1Q17 Var. 1H17 1H16 Var. 2Q17x2Q16 2Q17x1Q17 1H17 x 1H16 27,010 (3,097) 30,107 (13,027) 40,037 13,983 (50,649) 64,632 132,545 134,391 (1,846) 143,061 (10,516) 275,606 259,833 15,773 (38,582) (40,427) 1,845 (42,721) 4,139 (81,303) (76,435) (4,868) 97,111 114,508 (17,397) 95,034 2,077 192,145 197,975 (5,830) Equity in earnings - - - - - - - - Provisions, asset write-offs 24,228 12,661 3,410 15,684 387 39,912 33,981 (2,226) INVESTMENT IN WORKING CAPITAL Increase (reduction) in assets (148,412) 51,775 (200,187) (7,585) (140,827) (155,997) 9,226 (165,223) Clients receivable accounts 4,028 (5,663) 9,691 (60,132) 64,160 (56,104) 3,604 (59,708) Inventories (97,764) (16,982) (72,625) 19,177 (108,784) (78,587) (34,711) (35,719) Other assets (64,864) (14,084) (50,780) 11,610 (76,474) (53,254) 3,250 (56,504) Increase (reduction) in liabilities Suppliers 28,843 83,058 (54,215) 46,265 (17,422) 75,108 50,288 24,820 Staff obligations 23,191 15,812 7,379 3,717 19,474 26,908 11,039 15,869 Accounts payable (756) (3,241) 2,485 (5,667) 4,911 (6,423) 8,844 (15,267) Taxes and contribution (37,939) (2,522) (35,417) (16,703) (21,236) (54,642) (14,951) (39,691) Other liabilities (11,308) (4,603) (6,705) (5,852) (5,456) (17,160) (18,137) 977 CASH FROM OPERATIONS 85,743 269,811 (184,068) 190,446 (104,703) 276,189 373,931 (97,742) Income tax and contribution paid (4,214) (6,156) 1,942 (7,424) 3,210 (11,638) (9,129) (2,509) Interest paid (46,373) (34,837) (11,536) (80,521) 34,148 (126,894) (122,682) (4,212) CASH GENERATED FROM OPERATIONAL ACTIVIES Investment activities 35,156 228,818 (193,662) 102,501 (67,345) 137,657 242,120 (104,463) Investiments in fixed assets (52,608) (50,217) (2,391) (42,142) (10,466) (94,750) (92,023) (2,727) Investiments in intangible assets (2,030) (3,800) 1,770 (1,738) (292) (3,768) (5,723) 1,955 Investiments in biological assets (43,761) (48,848) 5,087 (54,508) 10,747 (98,269) (90,674) (7,595) Acquisition of subsidiary - - - - - - (66,598) 66,598 Capital integration in invested - - - - - - - - CASH USED IN INVESTMENT ACTIVITIES Financing activities (98,399) (102,865) 4,466 (98,388) (11) (196,787) (255,018) 58,231 Tickets funding 1,143 709,259 (708,116) 14,940 (13,797) 16,083 851,375 (835,292) Tickets debentures - - - - - - (7,837) 7,837 Financing amortization (122,037) (224,305) 102,268 (210,137) 88,100 (332,174) (277,162) (55,012) Dividends and interest-on-equity (38) (2,521) 2,483 (6,046) 6,008 (6,084) (105,508) 99,424 Shares held in treasury and others Capital raise due to shares subscription CASH (USED) IN FINANCING ACTIVITIES Exchange rate variation o cash and equivalents INCREASE (REDUCTION) IN CASH IN THE PERIOD - - - - - - - - - 20,640 (20,640) - - - 20,640 (20,640) (120,932) 503,073 (624,005) (201,243) 80,311 (322,175) 481,508 (803,683) 221 (4,385) 4,606 249 (28) 470 (7,150) 7,620 (183,954) 624,641 (808,595) (196,881) 12,927 (380,835) 461,460 (842,295) Initial balance 1,219,479 747,540 471,939 1,416,360 (196,881) 1,416,360 910,721 505,639 Closing balance 1,035,525 1,372,181 (336,656) 1,219,479 (183,954) 1,035,525 1,372,181 (336,656) 19