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Earnings Conference 4th Quarter/2017
Consolidated Results and Highlights
More favorable economic environment: improvement in demand and stable price environment
Gains in biological assets: adequation of the cost of capital in measuring biological assets
Duratex Management system: structured iniatives resulted in savings of BRL 76 million in 2017, in addition to the initial plan
Subsequent Events: sale of non-strategic assets
Net Revenue Recurring EBITDA Net Profit
Gross Margin EBITDA Margin
33.5% 25.8% 28.7%
In millions of BRL
Focus on S u s t a i n a b l e R e s u l t s
2
25.8% 20.8% 21.1% 19.0% 17.4%
4Q17 2017
1.103
3.991
229
760
85 25
185
4Q16 2016
1.029
3.910
217
2017 4Q16 2016 4Q17
681
2017 4Q16 2016 4Q17
26
Free Cash Flow and Debt
Reaping benefits of the S&OP: reduction in inventory levels in both divisions
Investments focused on sustaining: investments totaled BRL 366 million in 2017, below initial forecast
Deleveraging on course: gradual decrease in the financial leverage indicator
Subsequent Events: expect to significantly reduce indebtedness with the demobilization of exceeding assets
In millions of BRL
EBITDA Working Capital
CAPEX Taxes Others Financial
Flow Free
Cash Flow
2017 2016
Gross
Debt
Gross
Debt Cash Net
Debt
Cash Net
Debt
3,457
2,041
1,416
3,175
2,100
1,074
Net Debt/EBITDA 2.8x Net Debt/EBITDA 2.9x
4Q17 4Q16
3
Focus on S u s t a i n a b l e R e s u l t s
760
59 (366)
(46)
(262) (157) (11)
681
(381)
(48) (15)
(193) (70)
(26)
Days Payable
Outstanding
56 40
Cash Conversion
Cycle
105 123
Days Inventory
Outstanding
92 93
Working Capital and Investments
4
Reduction in inventory during the 2H17
Longer payment deadlines
Improvement in cash conversion cycle 2017
Opportunities for improvement in 2018
Forest OPEX
179 191
Maintenance
187 190
CAPEX
366
381
Rationalization of investments with focus on
sustaining of operations
Investments in sustaining in 2017 below initial
forecast (BRL 420 mn)
Despite idle capacity, we remain committed to the
maintenance of our long term operations
Focus on S u s t a i n a b l e R e s u l t s
Days Sale
Outstanding
69 70
2017 2016
In millions of BRL
2017 2016
Wood Division
3.2 3.0 2.5 2.5 2.6
3.9 4.0 3.6 3.5 3.7 MDF
MDP
Brazilian Panel Market Source: IBÁ – in millions of m³
2013 2014 2015 2016 2017
Idle Capacity Exports Domestic Market
0.2 0.3 0.4 0.6 0.7
0.2 0.3 0.1 0.3 0.4
EBITDA Margin 4Q16
In millions of BRL
Expansion of Operations: increase in sales and market share back to normal standards
Price increases as a leverage of results : increase in panels in Jan/18
Reduction of inventory and service level: capture of gains in new S&OP model
Biological Asset: smaller cost of capital, recognition of gains in BRL
Volume (‘000 m³)
Recurring EBITDA
Capacity Utilization
MDF 64%
MDP 59%
Wood 61%
4Q17
Gross Margin 37.2% 24.6%
Net Revenue
5
Total
Total
4.1 4.3 4.0 4.1 4.4
3.4 3.3 2.6 2.8 3.0
2017 2016
4Q16 2017 2016 2017 2016
27.8% 24.9% 22.7% 25.3% 20.0% 19.4%
Focus on S u s t a i n a b l e R e s u l t s
4Q17
672 639
2,433
157 175 502
2,399
692
2,515 2,594
692 504
4Q17 4Q16
Deca Division
ABRAMAT Index Source: ABRAMAT
In millions of BRL
Growth in a challenging market : construction still at low levels, focus on retail
Incorporation of Ceusa: transaction approved by CADE, results consolidated into 4Q17
Improvement in returns: better volumes and Duratex Management System as main leverages
Capacity
Utilization
Metals 65%
Ceramics 52%
Deca 61%
1.1%
-5.9% -12.5% -11.5%
-4.0%
1.5%
2013 2014 2015 2016 2017 2018e
Revenue for the construction materials industry in the domestic market vs previous year
4Q16
Volume (‘000 items)
4Q17
Gross Margin 27.4% 28.2%
Net Revenue
2017 2016
4Q16 2017 2016
30.2% 27.6%
EBITDA Margin 4Q16
Recurring EBITDA
2017 2016
17.4% 12.4% 17.5% 13.4%
Focus on S u s t a i n a b l e R e s u l t s
6
4Q17
6,224 5,944
24,590 26,053
410
1,475 1,315
337
4Q17
71 42
258 177
MarCo. Época Negócios Award
2nd place in “Construction Materials”
Merco
Antonio Joaquim as one of the 100
Most Influent Leaders of Brasil
Época Negócios 360 Award
1st place in “Construction
and Decoration Materials”
Abrasca Award
Honorable Mention in
Socio-environmental Aspects
Pró-Ética
Recognition for the 3rd
consecutive year
ISE
Duratex is part of the Index
for the 10th consecutive year
Prêmio Valor Inovação
1st place in “Construction
and Decoration Materials”
” Institutional Investor
Best IR Professional, 3rd Best CFO
and 3rd Best IR team
As Melhores da Dinheiro
1st place in
“Construction Materials”
Troféu Transparência
Recognition for the
2nd consecutive year
Great Place to Work
Seal for good
working environment
As Melhores do Agronegócio
1º plase in
“Sustainability”
Guia Exame de Sustentabilidade
Model company of the sector
for the 3rd time
7
Duratex in the SPOT LIGHT
Recognized by various STAKEHOLDERS
2007
to
2014
2015 2016 2017 2018
Growth Cycle
• Demand boom
• 2x capacity in both
business divisions
• Geographical and product
diversification
• Consolidation of Corporate
Governance
• Increase in market share
Management Excelency (SGD)
• Definition of an internal
agenda
• Duratex Management System
as main tool
• Definition of gaps / priorities,
goal – oriented management
and discipline
• EVA as performance metric
Jeito de Ser e de Fazer
• Strategic review of Duratex
personnel
• Culture is rejuvenated and
adapted to new challenges
• High performance teams
• Active and engaged
leadership
A New Duratex
• Value Proposition is revisited
• Duratex 2025 and Avenues for
Growth
• Client in the center of the
strategy
• Digital Transformation
• Welcome: Ceusa and Viva
Decora
Returns and Cash Generation
• Focus on generation of value
• Revision of asset base
• Exchange of lines of Thin
Fiber Wood
• Sale of exceeding land
• Company is more asset light
and with less financial debt
2018 8
Booming
Economy Economic Crisis Rebound of Economic Activity
Development of the Strategy
Events
Strategic Rationale
Evolution of the Brazilian wood panel market
Production technology from the 50’s
Focus on rationalizing the use of assets
Swap of Installation and Equipments for a
production farm
The remaining lines of thick and thin fiber wood
(MDF and HDF) production will continue to be
operated by Duratex
Transaction subject to approval by CADE
Lines will conitnue to be operated regularly by Duratex until approval is obtained
9
Sale of Installations and Equipment Dedicated to the Production of Thin Fiber Wood (Hardboard)
Operation Details
Subsequent
Expectation of resuming activities in the
Itapetininga unit in April / 2018
Evolution of forest management technology
Duratex expertise in forest plantation
Exceeding land and forests
Aquisition of land and forests in the amount of
BRL 308 million
Exclusive option to purchase an additional lot of
land and forests, in the value of BRL 749
million, to be excercised until 07/02/2018
Transaction subject to approval by CADE
Sale of Land and Forests
The amount received from this operation will be
used towards Duratex’s deleveraging, with the
reduction of net debt and financial expenses
10
Events Subsequent
Strategic Rationale Operation Details
Focus on rationalizing the use of assets
Message from the Administration
A leaner, more productive Duratex, with better returns for shareholders
Duratex Management System, Cultural Transformation, Sustainability
Strategy, Digital and Innovation as strategic foundation
Value Proposition, Duratex 2025 and Avenues for Growth directing
the capital allocation
Closer relationship to clients, initiatives to stimulate demand
and a focus on a mix of products with higher added value
Integration of new business, our brands as leverages for growth,
and caputring synergies
Efficient cash management, deleveraging, and the constant
search for returns above the costs of capital 11
The information herein has been prepared by Duratex S.A. and does not
represent any form of prospectus regarding the purchase or subscription to the
company’s shares or securities. This material contains general information
relating to Duratex and the markets the company operates in. No
representation or guarantee, expressed or implied, is made herein, and no
reliance should be placed on the accuracy, justification or completeness of the
information provided.
Duratex does not offer any assurances or guarantees regarding the fulfilment
of expectations described.
February, 2018
1) Recurring EBITDA: EBITDA adjusted for events not arising from the fluctuation in the fair value of biological assets,
a combination of extraordinary business and events
2) Recurring EBITDA UDM: Sum of Recurring EBITDA from the previous 12 months
Disclaimer and Glossary
12