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Page 1: Merrill Lynch ? Brazil Conference

March 2015

Corporate Presentation

Page 2: Merrill Lynch ? Brazil Conference

Executive Summary

Page 3: Merrill Lynch ? Brazil Conference

He

avy

Co

nstr

uctio

n

• Market leader, extensive track record, with more than 60 years of experience

• Focus on: large and complex infrastructure projects

• Products: engineering solutions and rental of formwork and shoring

• Services: planning, design, technical supervision, equipment and related services

• Main clients:

Re

al E

sta

te

• Market leader; acquired in 2008

• Focus on: residential and commercial constructions

• Products: engineering solutions and rental of formwork, shoring and suspended access

• Services: planning. design. technical supervision. equipment and related services

• Clients: real estate companies. such as:

Renta

l

• Market leader; started in 2008

• Focus on: civil construction. Industry, retail e others

• Products: rental and sale of motorized access equipment, such as aerial work platforms and telescopic handlers

• Cross-selling with all other Mills’ business units

• Elected "Best Company for Access of the Year" by the International Awards for Powered Access (IAPA Awards) for the year of 2011

Mills - Business Units

2

Page 4: Merrill Lynch ? Brazil Conference

3

Mills – 3Q14LTM¹ Financial highlights per business unit

¹ Excluding the Industrial Services business unit.

In R$ million

384.0

219.5

221.2

61.1

217.1

101.9

822.3

382.4

Receita Líquida EBITDA

Heavy Construction

Real Estate

Rental

27%

47%

27%

16%

57%

26%

EBITDA margin ROIC

46.9% 13.3%

27.6% 2.1%

57.2% 14.5%

46.5% 9.4%

Page 5: Merrill Lynch ? Brazil Conference

Estamos presentes em 16 estados no Brasil com 56 unidades

Geographic Presence

4

Branches locationAs of September 30. 2014

Minas Gerais

Rio Grande do Sul

Santa Catarina

São Paulo

Mato Grosso do Sul

Rio de Janeiro

(headquarters)

Espirito Santo

Bahia

Distrito

Federal

Goias

Sergipe

Paraiba

Rio Grande Ceará

Piaui

Maranhão

Tocantins

Pará

Rondônia

Acre

Roraima Amapá

Amazonas

Mato Grosso

Parana

Alagoas

States with Mills' presence

Pernambuco

do Norte

Rental

Heavy Construction

Real Estate

Page 6: Merrill Lynch ? Brazil Conference

5Source: The Conference Board Total Economy Database, January 2014

Brazil presents a low level of productivity compared to other

developing countries

17.2%

34.0%

8.1%

17.1%

28.2%

34.5%

31.4%

Brazil Russia India China South Africa Chile Mexico

GDP per person employed. % of U.S. 2013

Productivity growth is essential for higher sustainable GDP growth

Page 7: Merrill Lynch ? Brazil Conference

The potential penetration of our services for increasing

productivity enables us to grow more than the overall

economy

60%

35%

31%

44%

25%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

2009 2010 2011 2012 2013

Mills GDP Industrial GDP Civil Construction GDP

Source: Mills and Bacen

Mills revenue1 versus GDP

yoy variation (%)

6¹ Excluding the Industrial Services business.

Page 8: Merrill Lynch ? Brazil Conference

354.5

462.8

665.5

832.3 822.3 822.3

168.4

217.4

339.0

403.1382.4 394.8

103.3 92.2

151.5172.6

116.1 124.1

47.5% 47.0%

50.9%

48.4%46.5%

48.0%

21.0%

12.3%

14.7% 14.1%

9.4% 9.9%

2010 2011 2012 2013 LTM3Q14 LTM3Q14¹

188.4

211.8222.0

210.1 207.8 213.0

191.5 191.5

95.7 98.9106.1 102.4 107.5 105.9

66.779.0

39.348.1

39.645.6

33.9 33.4

3.211.3

50.8%

46.7% 47.8% 48.7%51.7%

49.7%

34.8%

41.3%

14.7% 14.8% 14.4% 14.1% 13.8% 12.3%9.4% 9.9%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 3Q14¹

Net revenue EBITDA Net earnings EBITDA margin (%) ROIC²

7

Financial Performance3

¹ Excluding Easy-set effect.

² ROIC: Return on Invested Capital. Until 2010, ROIC was calculated considering the effective income tax rate for the period, while from 2011 onwards ROIC was calculated considering a

theoretical 30% income tax rate.

³ Reclassified excluding the Industrial Services business unit, for comparison

In R$ million

3Q14¹/3Q13 3Q14¹/2Q14 LTM3Q14¹/LTM3Q13 CAGR 10-13

Net revenue -14% -10% 2% 33%

EBITDA -26% -25% 3% 34%

Net earnings -72% -66% -26% 19%

Page 9: Merrill Lynch ? Brazil Conference

7447 51

106

35

104185

60

90

15

131

163

161

267

105

15

18

20

36

21

324

413

292

499

177

2010 2011 2012 2013 9M14

Rental

Real Estate

HeavyConstruction

In R$ million

Capex ¹

Realized 9M14 /

2014 Capex

budget (%)

96%

60%

62%

Mills invested R$ 155.3 million in rental equipment in 9M14, of

which R$ 13.8 million in 3Q14

8

¹ Reclassified excluding Industrial Services business unit, for comparison.

Total 76%

Rental equipment

Page 10: Merrill Lynch ? Brazil Conference

Positive cash flow of R$ 74 million in 3Q14

9

(340)

(219)

(31)

(154)

(13)

11

74

(400)

(350)

(300)

(250)

(200)

(150)

(100)

(50)

-

50

100

2010 2011 2012 2013 1Q14 2Q14 3Q14

Free cash flow1

1 Net cash generated by the operating activities minus net cash applied in investment activities

Page 11: Merrill Lynch ? Brazil Conference

72 5734 38

31 34

134 174

150106 106

31

161

205230

184

144 137

65

Cashposition

2015 2016 2017 2018 2019 2020

Interest Principal

92%

8%Debentures

Borrowings andfinancing

3%

83%

17% TJLP

CDI

IPCA

Debt Profile

Mills’ total debt was R$ 746.2 million and net debt was R$ 585.1 million in September 30, 2014.

Leverage, as measured by net debt/ LTM EBITDA, was 1.5x.

Debt amortization schedule, as of Sep 30, 2014

in R$ million

Debt profile (%)

By index

By type

10

Credit lines available¹ As of Sep 30, 2014

Used R$ 62.1 million

Not used R$ 486.9 million

¹ Unsecured overdraft account + Secured bank credit lines

Page 12: Merrill Lynch ? Brazil Conference

1,0x

1,6x 1,6x

1,4x

1,3x

1,2x 1,2x 1,2x

1,4x

1,3x

1,5x 1,5x

1,6x

1,5x

2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Debt indicators

11

Net debt-to-EBITDA

Debentures Covenants:

(1) EBITDA-to-net financial result equal to or more than two; and

(2) Net debt-to-EBITDA ratio equal to or less than three.

23,0x

9,6x

7,5x6,8x 6,9x

8,3x

10,4x9,8x

10,2x9,6x

8,5x7,6x

5,1x5,9x

2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

EBITDA-to-net financial result

Page 13: Merrill Lynch ? Brazil Conference

Business Units

Page 14: Merrill Lynch ? Brazil Conference

Castelão stadium – Fortaleza. CE

Rental

Page 15: Merrill Lynch ? Brazil Conference

14

Growth drivers in the motorized access equipment market:

safety and productivity

Source: Mills

Market penetration

through

substitution of less

secure and

efficient access

methods

Recent safety standards (NR-18 and NR-35) oblige the use of aerial platforms to lift people,

increasing safety and productivity in the work site

Page 16: Merrill Lynch ? Brazil Conference

Modest rental penetration of 15% in Brazil. Rental penetration is approximately 50% in the USA,

60% in Japan and 80% in England.

Rental penetration in the USA increased to approximately 50% in 2014 from 5% in 1993: 20

years of continuous penetration growth.

Growth drivers in the motorized access equipment market:

low penetration

15Source: Goldman Sachs and United Rentals

20%

35%

40%43%

50%

-20%

0%

20%

40%

60%

1993 1998 2004 2009 2011 2014E

Rental penetration in the USA

Page 17: Merrill Lynch ? Brazil Conference

16

21%

13%

28%

24%

0%

5%

10%

15%

20%

25%

30%

2010 2011 2012 2013

Penetration of use has enabled the branches opened prior to the IPO to have an average annual

growth of 22% in the last four years¹.

Growth drivers in the motorized access equipment market:

low penetration

¹ Growth rates considering only branches which were opened until 2010

Page 18: Merrill Lynch ? Brazil Conference

Revenue Breakdown

69%

42%38%

31%

31%

58%62%

69%

2009 2010 2011 2012 2013

New branches¹

Established branches

Growth drivers in the motorized access equipment market:

geographic expansion

17

1 Branches opened since January 2010

Page 19: Merrill Lynch ? Brazil Conference

Revenues per type of use

Construction sector is the major user of motorized access in

Brazil

18Source: Mills – 2013. United Rental – 2011 and Ramirent – 1Q14

58%69% 73%

60% 63%

25%

23% 16%35%

19%

17%8% 11%

5%18%

Brazilian Market Mills United Rentals(pre-merger RSC)

United Rentals(post-merger RSC)

Ramirent

Others

Spot

Industry

Construction

Page 20: Merrill Lynch ? Brazil Conference

Rental – Financial Performance

19

1 ROIC: Return on Invested Capital. Until 2010. ROIC was calculated considering the effective income tax rate for the period. while from 2011 onwards ROIC was calculated considering a

theoretical 30% income tax rate.

In R$ million

3Q14/3Q13 3Q14/2Q14 LTM3Q14/LMT3Q13 CAGR 10-13

Net revenue -3% -8% 15% 55%

EBITDA -4% -9% 21% 58%

95.1

175.4

253.5

357.3

384.0

51.0

93.6

141.2

201.2219.5

53.6% 53.4%55.7%

56.3%

57.2%

19.2%16.5% 18.2% 18.2%

14.5%

2010 2011 2012 2013 LMT3Q14

76.1

90.193.9

97.2 97.3 98.6

91.0

43.649.3

52.356.0 58.4

55.150.0

57.3%54.7% 55.7%

57.7%60.1%

55.8%54.9%

18.0%18.5% 18.1% 18.2% 17.8% 16.2%

14.5%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Net revenue EBITDA EBITDA margin (%) ROIC¹

Page 21: Merrill Lynch ? Brazil Conference

Heavy Construction

Cinta costeira - Panamá

Page 22: Merrill Lynch ? Brazil Conference

1.00

0.33

0.36

0.48

0.62

- 0,50 1,00

USA

Brazil

Russia

India

China

Infrastructure

0.50 1.00

Infrastructure quality ranking for BRIC countries (2011-12)Index EUA = 1.0

1.00

0.11

0.38

0.51

0.73

- 0,50 1,00

USA

Brazil

Russia

India

China

Ports

0.50 1.00

1.00

0.42

0.93

0.97

0.99

- 0,50 1,00

USA

Brazil

Russia

India

China

Railways

0.50 1.00

1.00

0.33

0.36

0.48

0.62

- 0,50 1,00

USA

Brazil

Russia

India

China

Highways

0.50 1.00

Brazil is behind other BRIC countries quality of infrastructure

Source: World Economic Forum. The Global Competitiveness Report 2012-2013

21

Page 23: Merrill Lynch ? Brazil Conference

Investments in infrastructure and industry in Brazil should

amount R$ 1.5 trillion in the 2015-2018 period, with 24%

growth compared to the 2010-2013 period

22

358

44 20 22 20

303

767

191

10253 62 23 15 11

111

457509

4012 22 21

307

911

192141

87 8045 36 16

177

598

Oil

an

d G

as

Min

ing

Ste

el

Ch

em

ica

l

Pulp

an

d P

ape

r

Oth

ers

Tota

l In

du

str

y

Ele

tric

ity

Tele

com

Sanitation

Ro

ads

Ra

ilways

Port

s

Airpo

rts

Tota

l L

ogis

tics

Tota

l In

frastr

uctu

re

2010-2013 2015-2018

Investment per sectorR$ billion

2015-2018 / 2010-2013 Growth rate(%)

42,2% -9,1% -40% 0,0% 5% 1,3% 18,8% 0,5% 38,2% 64% 29% 95,7% 140% 45,5% 59,5% 30,8%

Source: BNDES – December 2014

1

1 Logistics is the sum of roads, railways, ports and airports

Page 24: Merrill Lynch ? Brazil Conference

New logistic investment program

23

18.5

23.5

- 20 40 60

Up to 20 years

In the first 5 years

HighwaysIn R$ billion

53.5

133.7

- 30 60 90 120 150

Up to 20 years

In the first 5years

TotalIn R$ billion

Total: R$ 42 billion

(7,500 km)

Total: R$ 91 billion

(10,000 km)

Total: R$ 187 billion

54.2

- 20 40 60

Colunas2

Colunas3

PortsIn R$ billion

Total: R$ 54 billion

Source: Programa de investimento em Logística, August 2012 and O Globo newspaper

35.0

56.0

- 20 40 60

Colunas3

Colunas2

RailwaysIn R$ billion

Page 25: Merrill Lynch ? Brazil Conference

Of the R$ 104 billion investments planned, approximately R$

74 billion have been successfully auctioned

24

Lucas do Rio Verde railroad

Curitiba subway

Ports - 2th stage - 18 contracts

Ports - 1th stage - 31 contracts

BR 262 (MG/ES)

BR 116 (MG)

BR 101 (BA)

Tamoios highway

São Paulo subway line 18

BR 153 (GO/TO)

BR 040 (DF-MG)

BR 163/267/262 (MS)

BR 060/153/262 (DF/GO/MG)

BR 163 (MT)

Goiânia VLT

Confins airport

Galeão airport

São Paulo subway line 6

BR 262 (MG/ES)

BR 050 (MG/GO)

Salvador subway line 2

InvestimentsIn R$ billlion

2013

×

2014

Source: Mills, Goldman Sachs and Credit Suisse

Page 26: Merrill Lynch ? Brazil Conference

• Cafezal mountain

• Tamoios highway

outline

• Fortaleza subway

• Joá Elevated road

duplication - RJ

• Comperj refinery*

•Transoceânica

highway - BA

• Sanitation projects–

CE

•BR-040 highway –

MG/MT/GO

•BR- 163 highway –

MT

•Gerdau expansion –

MG

• BR-381 highway

duplication – MGEvo

luti

on

of

reve

nu

eg

en

era

tio

n

(Ba

sis

10

0=

Ma

xim

um

mo

nth

ly r

eve

nu

e in t

he

life

of co

nstr

uctio

n)

Length of time of Mills participation in the construction work – average cycle is 24 months

• Belo Monte

hydroelectric power

plant

•Jirau hydroelectric

power plant*

• Vale’s S11D project

•Transnordestina

railroad

•Oeste-Leste railroad

• North beltway

• Subway line 5 – SP

• Salvador subway

• Olympic Park

• Reduc-Comperj

Pipeline

• Silver monorail line -

SP

• Colíder and Teles Pires

hydroelectric power plants

• Comperj refinery

• Companhia Siderúrgica do

Pecém steel mill

• Norte-Sul railroad

• Transposition of the São

Francisco river

• Vale projects

• Gold monorail line- SP

• Subway line 4 – RJ

• Olympic Park

• Subway line 4 – SP

• Cuiabá light rail

• Paraguaçu shipyard

• Jirau hydroelectric power plant

• Viracopos airport.

• Goiânia airport.

• BRT Transcarioca

• Metropolitan Arch – RJ

• Vale projects

• Pulp mill expansion- RS

New

contracts*

Contracts with growing

volume of equipment

Contracts with high volume

of equipmentContracts in the process of

demobilization

* New stretches

Important contracts per stage1 in the evolution of monthly

revenue from projects

25

1 In 3Q14

Page 27: Merrill Lynch ? Brazil Conference

1 in 3Q14

26

Characteristics of the major projects in progress

Private54%

PPP15%

Public31%

Source of funds¹

Industry36%

Infrastructure

56%

Others8%

Per sector¹

Page 28: Merrill Lynch ? Brazil Conference

47.5

55.1 55.7 55.758.6

51.0

55.551.9

24.3 25.1

29.4 28.2 29.325.6 25.6

21.4

51.3%

45.5%

52.8%50.6%

49.9%50.2%

46.2%41.2%

17.8% 17.7% 18.1% 18.1% 19.2%17.9%

16.3%13.3%

1Q13 2Q13 3Q13 3Q13* 4Q13 1Q14 2Q14 3Q14

Net Revenue EBITDA EBITDA Margin (%) ROIC¹

In R$ million

3Q14/3Q13 3Q14/2Q14 LTM3Q14/LTM3Q13 CAGR 10-13

Net Revenues -7% -7% 0% +12%

EBITDA -27% -17% -6% +14%

Heavy Construction – Financial Performance

27

* Excluding the positive effect of tax reversal in the amount of R$ 1.5 million in 3Q13.

1 ROIC: Return on Invested Capital. Until 2010.,ROIC was calculated considering the effective income tax rate for the period,while from 2011 onwards ROIC was calculated considering a

theoretical 30% income tax rate.

154.3

131.6

174.1

217.0 217.1

73.6

57.8

84.3

108.1101.9

47.7%

43.9%

48.5% 49.8%46.9%

19.2%

13.3%

2010 2011 2012 2013 LTM3Q14

Page 29: Merrill Lynch ? Brazil Conference

Real Estate

Mast climbing platform

Page 30: Merrill Lynch ? Brazil Conference

Growth drivers of the residential market: housing financing

29

2.6%

3.5%

7.4%

11.5%

14.4%

24.0%

45.3%

76.1%

83.7%

Russia¹

India¹

Brazil³

Chile²

China¹

South Africa¹

Germany¹

USA¹

UK¹

Housing financing relative to GDP (%)

3.1%

4.1%

5.4%

6.8%

7.4%

2009 2010 2011 2012 2013

Housing financing relative to GDP (%)in Brazil

¹ In 2011; ² In 2010; ³ In 2013.

Source: Valor Econômico Newspaper, with data from Abecip and Secovi

Page 31: Merrill Lynch ? Brazil Conference

In million families

% of families per social class Number of families per income range

Growth drivers of the residential market: higher purchasing

power

30

31.729.1

27.2

60.4

1.4

5.9

2007 2030E

< R$ 1,000

>= R$ 1,000 and<= R$ 8,000

> R$ 8,000

-0.4%

+3.9%

+7.1%

+33.2 million families with income

between

R$ 1,000 to 8,000

Growth rate

(%. p.a.)

10.76.8 3.6

38.2

28.0

20.1

37.0

49.7

58.4

8.1 9.8 11.7

6.0 5.7 6.2

2002 2009 2014E

Class A

Class B

Class C

Class D

Class E

Source: IBGE and FGV

Page 32: Merrill Lynch ? Brazil Conference

The major challenge for the sector: labor

31Source: Sondagem Especial Construção Civil. April 2011. CBIC. CNI. and Mills

89% of companies from the construction industry stated that

lack of qualified labor is a problem for the company

94% of companies from the construction industry facing

shortages of skilled manpower have difficulty finding workers

for basic construction activities, such as bricklayers and

laborers

Solution: Industrialization of the construction process

Only 7% of companies from the construction industry plan to

deal with the shortage of skilled labor by changing the

building process to an industrial assembly model

Page 33: Merrill Lynch ? Brazil Conference

Stages of industrialization of the construction process

32

1 Approximately 800 m2

Source: Téchne Magazine. June 2012 and Mills

System Traditional with wood Traditional with steel Deck type Flying table

Cycle between

concreting activities15 days 7-10 days 6-8 days 4-7 days

Labor required1 30 people 20 people 12 people 10 people

Page 34: Merrill Lynch ? Brazil Conference

33

17.9

21.6

13.8 13.8 13.1

20.2%

-36.0%

0.2%

-5.4%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

0

5

10

15

20

25

9M10 9M11 9M12 9M13 9M14

Var.

(%

)

Lauunches

(In R

$ m

illio

n

1 PDG, Cyrela, MRV, EVEN, Helbor, Eztec, Direcional, Rodobens, Gafisa and Tecnisa

Source: Operational reports from companies and Mills

Total launches1

in R$ billion

Launches and sales declined 5.4% and 13.9% respectively in

9M14

18.2

19.9

16.7 16.8

14.5

9.3%

-15.8%

0.7%

-13.9%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

0

5

10

15

20

25

9M10 9M11 9M12 9M13 9M14

Var.

(%

)

Sale

s (

In R

$ m

illio

n)

Total sales1

in R$ billion

Page 35: Merrill Lynch ? Brazil Conference

64.9 66.5

72.4

54.2

59.5 58.8

48.6 48.6

27.724.6 24.4

17.1

23.525.2

-4.7

7.7

42.8%

37.0% 33.7% 31.5%

39.4%42.8%

-9.6%

15.8%15.0% 13.4%10.6%

8.1% 6.7% 6.5%

2.1%3.8%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 3Q14¹

Net revenue EBITDA EBITDA margin (%) ROIC²

Real Estate – Financial Performance

34

¹ Excluding Easy Set effect.

² ROIC: Return on Invested Capital, Until 2010. ROIC was calculated considering the effective income tax rate for the period. while from 2011 onwards ROIC was calculated considering a

theoretical 30% income tax rate.

In R$ million

105.1

155.8

238.0

258.0

221.2 221.2

43.9

66.0

113.4

93.8

61.173.4

41.7% 42.4%

47.7%

36.4%

27.6%

33,2%

23.5%

14.3% 15.7%

8.1%

2.1%2.1%

2010 2011 2012 2013 LTM3Q14 LTM3Q14¹

3Q14¹/3Q13 3Q14¹/2Q14 LTM3T14¹/LMT3T13 CAGR 10-13

Receita Líquida -33% -17% -18% 35%

EBITDA -69% -70% -29% 29%

Page 36: Merrill Lynch ? Brazil Conference

Mills – Investor Relations

Tel.: +55 21 2123-3700

E-mail: [email protected]

www.mills.com.br/ri