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(A free translation of the original in Portuguese) (Unaudited) Quarterly information (ITR) - 9/30/2018 - GRENDENE SA Version : 1

Contents Company Information Composition of Capital 1 Dividends 2 Parent Company Financial Statements Balance Sheet – Assets 3 Balance Sheet – Liabilities and Equity 4 Statement of Income 6 Statement of Comprehensive Income 7 Statement of Cash Flows 8 Statement of Changes in Equity Statement of Changes in Equity – 1/1/2018 to 9/30/2018 10 Statement of Changes in Equity – 1/1/2017 to 9/30/2017 11 Statement of Value Added 12 Consolidated Financial Statements Balance Sheet – Assets 13 Balance Sheet – Liabilities and Equity 14 Statement of Income 16 Statement of Comprehensive Income 17 Statement of Cash Flows 18 Statement of Changes in Equity Statement of Changes in Equity – 1/1/2018 to 9/30/2018 19 Statement of Changes in Equity – 1/1/2017 to 9/30/2017 20 Statement of Value Added 21 Comments on Performance 22 Explanatory Notes 45 Comment on the Behavior of Business Projections 80 Other Information Considered Relevant by the Company 81 Reports and Declarations Report of the Special Review – Unqualified 83 Officers' Declaration on the Financial Statements 84 Officers' Declaration on the Independent Auditor's Report 85


Page: 1 of 85

Company Information / Composition of Capital Number of shares Current quarter (In thousands) 9/30/2018 Paid-up capital Common shares 902,160 Preferred shares 0 Total 902,160 Treasury shares Common shares 1,905 Preferred shares 0 Total 1,905


Page: 2 of 85

Company Information / Dividends Event Date approved Description Initial date of payment Type of share Class of share Amount per share (Reais/share) Board of Directors' Meeting 2/22/2018 Dividend 5/16/2018 Common 0.06530 Board of Directors' Meeting 2/22/2018 Interest on equity 5/16/2018 Common 0.43230 Board of Directors' Meeting 4/26/2018 Dividend 5/23/2018 Common 0.30170 Board of Directors' Meeting 7/26/2018 Dividend 8/22/2018 Common 0.03740


Page: 3 of 85

Parent Company Financial Statements / Balance Sheet – Assets (R$ thousand) Account Code

Account Description Current quarter 9/30/2018

Prior year 12/31/2017

1 Total assets 3,607,175 3,572,444 1.01 Current assets 2,697,913 2,815,397 1.01.01 Cash and cash equivalents 7,245 18,240 1.01.02 Financial investments 1,471,206 1,537,477 1.01.02.03 Financial investments measured at amortized cost 1,471,206 1,537,477 1.01.03 Accounts receivable 829,614 934,684 1.01.03.01 Trade receivables 770,217 857,931 1.01.03.02 Other receivables 59,397 76,753 1.01.04 Inventories 311,502 258,317 1.01.06 Taxes recoverable 52,241 51,365 1.01.06.01 Current taxes recoverable 52,241 51,365 1.01.06.01.01 Tax credits 29,046 47,553 1.01.06.01.02 Income tax and social contribution recoverable 23,195 3,812 1.01.07 Prepaid expenses 4,044 1,221 1.01.08 Other current assets 22,061 14,093 1.01.08.03 Other 22,061 14,093 1.02 Non-current assets 909,262 757,047 1.02.01 Long-term receivables 427,027 275,876 1.02.01.03 Financial investments measured at amortized cost 405,512 213,049 1.02.01.04 Accounts receivable 0 150 1.02.01.04.02 Other receivables 0 150 1.02.01.07 Deferred taxes 10,617 54,869 1.02.01.07.01 Deferred income tax and social contribution tax 10,617 54,869 1.02.01.08 Prepaid expenses 898 159 1.02.01.09 Receivables from related parties 8,101 5,623 1.02.01.09.02 Receivables from subsidiaries 8,101 5,623 1.02.01.10 Other non-current assets 1,899 2,026 1.02.01.10.03 Judicial deposits 1,040 1,244 1.02.01.10.04 Taxes recoverable 859 782 1.02.02 Investments 45,228 47,181 1.02.02.01 Equity interests 44,816 46,769 1.02.02.01.02 Interests in subsidiaries 44,816 46,769 1.02.02.02 Investment property 412 412 1.02.03 Property, plant and equipment 408,769 406,950 1.02.03.01 Property, plant and equipment in service 381,359 377,767 1.02.03.03 Construction in progress 27,410 29,183 1.02.04 Intangible assets 28,238 27,040 1.02.04.01 Intangible assets 28,238 27,040


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Parent Company Financial Statements / Balance Sheet – Liabilities and Equity (R$ thousand) Account Code



2 Total liabilities 3,607,175 3,572,444 2.01 Current liabilities 298,469 320,602 2.01.01 Social and labor obligations 87,558 59,256 2.01.01.01 Social obligations 14,933 10,127 2.01.01.02 Labor obligations 72,625 49,129 2.01.02 Trade payables 48,011 35,387 2.01.02.01 Domestic suppliers 47,807 35,301 2.01.02.02 Foreign suppliers 204 86 2.01.03 Tax obligations 23,300 43,820 2.01.03.01 Federal tax obligations 18,610 39,638 2.01.03.01.01 Income tax and social contribution tax payable 793 6,402 2.01.03.01.02 Taxes and contributions 17,817 33,236 2.01.03.02 State tax obligations 4,653 4,151 2.01.03.03 Municipal tax obligations 37 31 2.01.04 Borrowings 69,923 89,666 2.01.04.01 Borrowings 69,923 89,666 2.01.04.01.01 In local currency 10,825 10,834 2.01.04.01.02 In foreign currency 59,098 78,832 2.01.05 Other obligations 65,848 86,169 2.01.05.02 Other 65,848 86,169 2.01.05.02.04 Contractual obligations – Licensing 13,014 13,063 2.01.05.02.05 Commissions payable 37,765 41,686 2.01.05.02.06 Advances from clients 11,139 31,152 2.01.05.02.07 Other payables 3,930 268 2.01.06 Provisions 3,829 6,304 2.01.06.01 Tax, social security, labor and civil provisions 3,829 824 2.01.06.01.01 Tax provisions 2,362 0 2.01.06.01.02 Social security and labor provisions 1,467 824 2.1.06.02 Other provisions 0 5,480 2.01.06.02.04 Provision for losses in subsidiary 0 5,480 2.02 Non-current liabilities 28,852 34,233 2.02.01 Borrowings 28,564 33,961 2.02.01.01 Borrowings 28,564 33,961 2.02.01.01.01 In local currency 28,564 33,961 2.02.04 Provisions 288 272 2.02.04.01 Tax, social security, labor and civil provisions 288 272 2.02.04.01.02 Social security and labor provisions 288 272 2.03 Equity 3,279,854 3,217,609 2.03.01 Share capital 1,231,302 1,231,302 2.03.02 Capital reserves -8,086 8,251 2.03.02.04 Stock options 7,478 8,385 2.03.02.05 Treasury shares -15,564 -134 2.03.04 Revenue reserves 1,990,225 1,965,609 2.03.04.01 Legal reserve 156,968 147,934 2.03.04.02 Reserve under the bylaws 16,035 23,862 2.03.04.07 Tax incentive reserve 1,817,222 1,663,683


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Parent Company Financial Statements / Balance Sheet – Liabilities and Equity (R$ thousand) Account Code



2.03.04.08 Additional dividend proposed 0 19,630 2.03.04.10 Interest on equity 0 110,500 2.03.05 Retained earnings 47,225 0 2.03.07 Cumulative translation adjustments 19,188 12,447


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Parent Company Financial Statements / Statement of Income (R$ thousand) Account Code Account Description

Current quarter 7/1/2018 to 9/30/2018

Accumulated of current year

1/1/2018 to 9/30/2018

Prior quarter 7/1/2017 to 9/30/2017

Accumulated of prior year

1/1/2017 to 9/30/2017 3.01 Revenue from sale of goods and/or services 590,679 1,557,819 587,230 1,511,467 3.02 Cost of goods and/or services sold -320,157 -848,821 -303,714 -798,846 3.03 Gross profit 270,522 708,998 283,516 712,621 3.04 Operating expenses -174,077 -429,942 -171,693 -432,897 3.04.01 Selling expenses -135,483 -334,375 -134,000 -335,336 3.04.02 General and administrative expenses -21,985 -65,125 -21,518 -64,141 3.04.04 Other operating income 1,413 7,767 1,450 6,075 3.04.05 Other operating expenses -6,582 -13,267 -8,357 -23,958 3.04.05.01 Other operating expenses -6,582 -13,267 -7,368 -20,819 3.04.05.02 Provision for losses in subsidiary 0 0 -989 -3,139 3.04.06 Equity in the results of investees -11,440 -24,942 -9,268 -15,537 3.05 Profit before finance result and taxes 96,445 279,056 111,823 279,724 3.06 Financial result 29,270 101,666 55,060 190,746 3.06.01 Financial income 86,035 247,046 69,744 238,991 3.06.02 Finance expenses -56,765 -145,380 -14,684 -48,245 3.07 Profit before taxes on income 125,715 380,722 166,883 470,470 3.08 Income tax and social contribution on income -13,362 -46,507 -20,156 -59,994 3.08.01 Current -15,661 -2,255 -21,484 -15,766 3.08.02 Deferred 2,299 -44,252 1,328 -44,228 3.09 Profit for the period from continuing operations 112,353 334,215 146,727 410,476 3.11 Profit for the period 112,353 334,215 146,727 410,476 3.99 Earnings per share - (reais /share) 3.99.01 Basic earnings per share 3.99.01.01 Common shares 0.12480 0.37100 0.16260 0.45520 3.99.02 Diluted earnings per share 3.99.02.01 Common shares 0.12450 0.36990 0.16210 0.45380


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Parent Company Financial Statements / Statement of Comprehensive Income (R$ thousand) Account Code Account Description



1/1/2018 to 9/30/2018

Prior quarter 7/1/2017 to 9/30/2017


1/1/2017 to 9/30/2017 4.01 Profit for the period 112,353 334,215 146,727 410,476 4.02 Other comprehensive income 1,321 6,741 -1,268 7,337 4.02.01 Cumulative translation adjustments 1,321 6,741 -1,268 -437 4.02.02 Exchange losses on investments 0 0 0 7,774 4.03 Comprehensive income for the period 113,674 340,956 145,459 417,813


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Parent Company Financial Statements / Statement of Cash Flows – Indirect Method (R$ thousand) Account Code

Account Description Accumulated of current year

1/1/2018 to 9/30/2018


1/1/2017 to 9/30/2017 6.01 Net cash provided by operating activities 450,116 431,181 6.01.01 Cash generated from operations 388,050 407,951 6.01.01.01 Profit for the period 334,215 410,476 6.01.01.02 Equity in the results of investees 24,942 15,537 6.01.01.03 Depreciation and amortization 47,023 43,615 6.01.01.04 Deferred income tax and social contribution tax 44,252 44,228 6.01.01.05 Exchange losses on investments 0 7,774 6.01.01.06 Result on sale and write-off of investment 55 2,663 6.01.01.07

Residual value after write-down the property, plant and equipment and intangible 3,833 3,386

6.01.01.08 Stock option or subscription plan 4,934 4,777 6.01.01.09 Estimated losses on doubtful receivables -5,557 3,843 6.01.01.10 Punctuality discounts estimated 687 -511 6.01.01.11 Estimated losses for obsolete inventories 2,145 -403 6.01.01.12 Provision for labor and tax risks 3,021 -728 6.01.01.13 Provision for losses in subsidiaries 0 3,139 6.01.01.14 Interest expenses on borrowings 1,367 2,270 6.01.01.15 Interest income on financial investments -101,711 -134,107 6.01.01.16 Foreign exchange variation, net 28,844 1,992 6.01.02 Changes in assets and liabilities 62,066 23,230 6.01.02.01 Trade receivables 92,584 54,467 6.01.02.02 Inventories -55,330 -45,957 6.01.02.03 Other receivables 5,227 -19,669 6.01.02.04 Trade payables 12,624 -1,369 6.01.02.05 Salaries and social charges payable 28,302 29,180 6.01.02.06 Tax obligations 4,589 5,095 6.01.02.07 Income tax and social contribution tax -5,609 -3,011 6.01.02.08 Advances from clients -20,013 699 6.01.02.09 Other payables -308 3,795 6.02 Net cash provided by (used in) investing activities -102,615 84,622 6.02.01 In investment -21,783 -15,559 6.02.02 Purchases of property, plant and equipment and intangible -53,873 -68,610 6.02.03 Financial investments -2,554,060 -2,175,357 6.02.04 Redemption of financial investments 2,417,724 2,105,123 6.02.05 Interest received 111,855 244,626 6.02.06 Loan to subsidiary 5,623 1,107 6.02.07 Advance against future capital increase in subsidiary -8,101 -6,708 6.03 Net cash used in financing activities -358,496 -322,845 6.03.01 New borrowings 298,217 229,951 6.03.02 Repayments of borrowings -352,378 -243,385 6.03.03 Interest paid -1,190 -1,790 6.03.04 Dividends paid -144,047 -143,256 6.03.05 Interest on equity paid -130,000 -160,000 6.03.06 Purchase of treasury shares -35,148 -9,837 6.03.07 Sale of treasury shares through exercise of purchase option 6,050 5,472


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Parent Company Financial Statements / Statement of Cash Flows – Indirect Method (R$ thousand) Account Code


1/1/2018 to 9/30/2018


1/1/2017 to 9/30/2017 6.05 Increase (decrease) in cash and cash equivalents -10,995 192,958 6.05.01 Cash and cash equivalents at the beginning of the period 18,240 8,184 6.05.02 Cash and cash equivalents at the end of the period 7,245 201,142


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Parent Company Financial Statements / Statement of Changes in Equity – 1/1/2018 to 9/30/2018 (R$ thousand) Account Code

Account Description Paid-up share capital

Capital reserves, stock options and

treasury shares

Revenue reserves Retained earnings (accumulated deficit)

Other comprehensive income (loss)

Equity

5.01 Opening balances 1,231,302 8,251 1,965,609 0 12,447 3,217,609

5.03 Adjusted opening balances 1,231,302 8,251 1,965,609 0 12,447 3,217,609

5.04 Capital transactions with owners 0 -16,337 -137,957 -124,417 0 -278,711

5.04.02 Share issue expenditures 0 7,827 -7,827 0 0 0

5.04.03 Stock options 0 4,934 0 0 0 4,934

5.04.04 Treasury shares purchased 0 -35,148 0 0 0 -35,148

5.04.05 Treasury shares sold 0 6,050 0 0 0 6,050

5.04.06 Dividends 0 0 -19,630 -124,417 0 -144,047

5.04.07 Interest on equity 0 0 -110,500 0 0 -110,500

5.05 Total comprehensive income 0 0 0 334,215 6,741 340,956

5.05.01 Profit for the period 0 0 0 334,215 0 334,215

5.05.02 Other comprehensive income 0 0 0 0 6,741 6,741

5.05.02.04 Translation adjustments for the period 0 0 0 0 6,741 6,741

5.06 Internal changes in equity 0 0 162,573 -162,573 0 0

5.06.01 Transfer to reserves 0 0 162,573 -162,573 0 0

5.07 Closing balances 1,231,302 -8,086 1,990,225 47,225 19,188 3,279,854


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Parent Company Financial Statements / Statement of Changes in Equity – 1/1/2017 to 9/30/2017 (R$ thousand) Account Code



treasury shares



Equity

5.01 Opening balances 1,231,302 5,311 1,682,354 0 3,031 2,921,998

5.03 Adjusted opening balances 1,231,302 5,311 1,682,354 0 3,031 2,921,998

5.04 Capital transactions with owners 0 1,463 -130,145 -154,662 0 -283,344

5.04.02 Share issue expenditures 0 1,051 -1,051 0 0 0

5.04.03 Stock options 0 4,777 0 0 0 4,777

5.04.04 Treasury shares purchased 0 -9,837 0 0 0 -9,837

5.04.05 Treasury shares sold 0 5,472 0 0 0 5,472

5.04.06 Dividends 0 0 -18,594 -124,662 0 -143,256

5.04.07 Interest on equity 0 0 -110,500 -30,000 0 -140,500

5.05 Total comprehensive income 0 0 0 410,476 7,337 417,813

5.05.01 Profit for the period 0 0 0 410,476 0 410,476

5.05.02 Other comprehensive income 0 0 0 0 7,337 7,337

5.05.02.04 Translation adjustments for the period 0 0 0 0 -437 -437

5.05.02.06 Exchange losses on investments 0 0 0 0 7,774 7,774

5.06 Internal changes in equity 0 0 182,333 -182,333 0 0

5.06.01 Transfer to reserves 0 0 182,333 -182,333 0 0

5.07 Closing balances 1,231,302 6,774 1,734,542 73,481 10,368 3,056,467


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Parent Company Financial Statements / Statement of Value Added (R$ thousand) Account Code


1/1/2018 to 9/30/2018


1/1/2017 to 9/30/2017 7.01 Revenue 1,798,987 1,716,209 7.01.01 Sale of goods and services 1,795,647 1,734,346 7.01.02 Other revenue -2,217 -14,294 7.01.02.01 Other revenue/expenses -2,217 -11,155 7.01.02.02 Provision for losses in subsidiary 0 -3,139 7.01.04 Change in provision for impairment of trade receivables 5,557 -3,843 7.02 Inputs acquired from third parties -864,120 -822,287 7.02.01 Cost of sales and services -459,752 -440,953 7.02.02 Materials, energy, outsourced services and other -402,223 -381,737 7.02.03 Impairment/recovery of assets -2,145 403 7.03 Gross value added 934,867 893,922 7.04 Retentions -45,763 -42,387 7.04.01 Depreciation, amortization and depletion -45,763 -42,387 7.05 Net value added generated by the Company 889,104 851,535 7.06 Value added received by transfer 222,210 223,545 7.06.01 Equity in the results of investees -24,942 -15,537 7.06.02 Financial income 247,046 238,991 7.06.03 Other 106 91 7.07 Total value added to distribute 1,111,314 1,075,080 7.08 Distribution of value added 1,111,314 1,075,080 7.08.01 Personnel 418,019 387,696 7.08.01.01 Salaries and wages 344,203 319,446 7.08.01.02 Benefits 41,504 38,541 7.08.01.03 Employee time of service guarantee fund (FGTS) 32,312 29,709 7.08.02 Taxes and contributions 216,542 233,004 7.08.02.01 Federal 179,832 198,584 7.08.02.02 State 35,922 33,707 7.08.02.03 Municipal 788 713 7.08.03 Remuneration of third parties' capital 142,538 43,904 7.08.03.01 Interest 140,127 41,599 7.08.03.02 Rentals 2,411 2,305 7.08.04 Remuneration of own capital 334,215 410,476 7.08.04.01 Interest on equity 0 30,000 7.08.04.02 Dividends 124,417 124,662 7.08.04.03 Profits reinvested 209,798 255,814


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Consolidated Financial Statements / Balance Sheet – Assets (R$ thousand) Account Code

Account Description Current year 9/30/2018


1 Total assets 3,617,780 3,576,008 1.01 Current assets 2,735,855 2,846,838 1.01.01 Cash and cash equivalents 19,851 30,119 1.01.02 Financial investments 1,471,206 1,537,477 1.01.02.03 Financial investments measured at amortized cost 1,471,206 1,537,477 1.01.03 Accounts receivable 831,648 927,173 1.01.03.01 Trade receivables 772,129 850,345 1.01.03.02 Other receivables 59,519 76,828 1.01.04 Inventories 327,324 279,267 1.01.06 Taxes recoverable 55,384 54,651 1.01.06.01 Current taxes recoverable 55,384 54,651 1.01.06.01.01 Tax credits 32,090 50,810 1.01.06.01.02 Income tax and social contribution recoverable 23,294 3,841 1.01.07 Prepaid expenses 8,018 3,888 1.01.08 Other current assets 22,424 14,263 1.01.08.03 Other 22,424 14,263 1.02 Non-current assets 881,925 729,170 1.02.01 Long-term receivables 425,363 277,116 1.02.01.03 Financial investments measured at amortized cost 405,512 213,049 1.02.01.04 Accounts receivable 0 150 1.02.01.04.02 Other receivables 0 150 1.02.01.07 Deferred taxes 10,509 54,627 1.02.01.07.01 Deferred income tax and social contribution tax 10,509 54,627 1.02.01.08 Prepaid expenses 7,369 7,192 1.02.01.10 Other non-current assets 1,973 2,098 1.02.01.10.03 Judicial deposits 1,114 1,316 1.02.01.10.04 Tax credits 859 782 1.02.02 Investments 412 412 1.02.02.02 Investment property 412 412 1.02.03 Property, plant and equipment 425,201 422,361 1.02.03.01 Property, plant and equipment in service 397,791 393,178 1.02.03.03 Construction in progress 27,410 29,183 1.02.04 Intangible assets 30,949 29,281 1.02.04.01 Intangible assets 30,949 29,281


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Consolidated Financial Statements / Balance Sheet – Liabilities and Equity (R$ thousand) Account Code



2 Total liabilities and equity 3,617,780 3,576,008 2.01 Current liabilities 307,012 322,074 2.01.01 Social and labor obligations 89,248 59,942 2.01.01.01 Social obligations 15,253 10,299 2.01.01.02 Labor obligations 73,995 49,643 2.01.02 Trade payables 49,051 36,705 2.01.02.01 Domestic suppliers 47,885 35,994 2.01.02.02 Foreign suppliers 1,166 711 2.01.03 Tax obligations 23,426 44,022 2.01.03.01 Federal tax obligations 18,718 39,719 2.01.03.01.01 Income tax and social contribution tax payable 793 6,425 2.01.03.01.02 Taxes and contributions 17,925 33,294 2.01.03.02 State tax obligations 4,671 4,272 2.01.03.03 Municipal tax obligations 37 31 2.01.04 Borrowings 69,923 89,666 2.01.04.01 Borrowings 69,923 89,666 2.01.04.01.01 In local currency 10,825 10,834 2.01.04.01.02 In foreign currency 59,098 78,832 2.01.05 Other obligations 71,530 90,906 2.01.05.02 Other 71,530 90,906 2.01.05.02.04 Contractual obligations – Licensing 18,281 17,618 2.01.05.02.05 Commissions payable 37,927 41,622 2.01.05.02.06 Advances from clients 11,370 31,384 2.01.05.02.07 Other payables 3,952 282 2.01.06 Provisions 3,834 833 2.01.06.01 Tax, social security, labor and civil provisions 3,834 833 2.01.06.01.01 Tax provisions 2,362 0 2.01.06.01.02 Social security and labor provisions 1,472 833 2.02 Non-current liabilities 30,914 36,325 2.02.01 Borrowings 28,564 33,961 2.02.01.01 Borrowings 28,564 33,961 2.02.01.01.01 In local currency 28,564 33,961 2.02.02 Other obligations 1,882 1,912 2.02.04 Provisions 468 452 2.02.04.01 Tax, social security, labor and civil provisions 468 452 2.02.04.01.02 Social security and labor provisions 468 452 2.03 Consolidated equity 3,279,854 3,217,609 2.03.01 Share capital 1,231,302 1,231,302 2.03.02 Capital reserves -8,086 8,251 2.03.02.04 Stock options 7,478 8,385 2.03.02.05 Treasury shares -15,564 -134 2.03.04 Revenue reserves 1,990,225 1,965,609 2.03.04.01 Legal reserve 156,968 147,934 2.03.04.02 Reserve under the bylaws 16,035 23,862 2.03.04.07 Tax incentive reserve 1,817,222 1,663,683 2.03.04.08 Additional dividend proposed 0 19,630


Page: 15 of 85

Consolidated Financial Statements / Balance Sheet – Liabilities and Equity (R$ thousand) Account Code



2.03.04.10 Interest on equity 0 110,500 2.03.05 Retained earnings 47,225 0 2.03.07 Cumulative translation adjustments 19,188 12,447


Page: 16 of 85

Consolidated Financial Statements / Statement of Income (R$ thousand) Account Code

Account Description Current quarter 7/1/2018 to 9/30/2018


1/1/2018 to 9/30/2018



1/1/2017 to 9/30/2017 3.01 Revenue from sale of goods and/or services 599,092 1,591,032 596,329 1,546,583 3.02 Cost of goods and/or services sold -323,233 -859,669 -307,395 -812,675 3.03 Gross profit 275,859 731,363 288,934 733,908 3.04 Operating expenses -179,481 -452,348 -177,472 -455,550 3.04.01 Selling expenses -151,511 -379,639 -148,088 -371,636 3.04.02 General and administrative expenses -22,901 -67,817 -23,136 -68,941 3.04.04 Other operating income 1,518 8,511 3,707 8,412 3.04.05 Other operating expenses -6,587 -13,403 -9,955 -23,385 3.05 Profit before finance result and taxes 96,378 279,015 111,462 278,358 3.06 Financial result 29,115 101,481 55,347 191,841 3.06.01 Financial income 86,222 247,688 70,323 241,993 3.06.02 Finance expenses -57,107 -146,207 -14,976 -50,152 3.07 Profit before taxes on income 125,493 380,496 166,809 470,199 3.08 Income tax and social contribution on income -13,140 -46,281 -20,082 -59,749 3.08.01 Current -15,491 -2,163 -21,518 -15,821 3.08.02 Deferred 2,351 -44,118 1,436 -43,928 3.09 Profit for the period from continuing operations 112,353 334,215 146,727 410,450 3.11 Consolidated profit for the period 112,353 334,215 146,727 410,450 3.11.01 Attributable to owners of the parent company 112,353 334,215 146,727 410,476 3.11.02 Attributable to non-controlling interests 0 0 0 -26 3.99 Earnings per share - (Reais / share)


Page: 17 of 85

Consolidated Financial Statements / Statement of Comprehensive Income (R$ thousand) Account Code

Account Description Current quarter 7/1/2018 to 9/30/2018


1/1/2018 to 9/30/2018



1/1/2017 to 9/30/2017 4.01 Consolidated profit for the period 112,353 334,215 146,727 410,450 4.02 Other comprehensive income 1,321 6,741 -1,268 7,291 4.02.01 Cumulative translation adjustments 1,321 6,741 -1,268 -437 4.02.02 Exchange losses on investments 0 0 0 7,774 4.02.03 Loss on disposal of investment 0 0 0 -46 4.03 Consolidated comprehensive income for the period 113,674 340,956 145,459 417,741 4.03.01 Attributable to owners of the parent 113,674 340,956 145,459 417,813 4.03.02 Attributable to non-controlling interests 0 0 0 -72


Page: 18 of 85

Consolidated Financial Statements / Statement of Cash Flows – Indirect Method (R$ thousand) Account Code

Account Description Accumulated of current quarter

1/1/2018 to 9/30/2018


1/1/2017 to 9/30/2017 6.01 Net cash provided by operating activities 426,967 427,639 6.01.01 Cash generated from operations 368,516 389,560 6.01.01.01 Profit for the period 334,215 410,450 6.01.01.02 Depreciation and amortization 49,112 45,079 6.01.01.03 Deferred income tax and social contribution tax 44,118 44,150 6.01.01.04 Exchange losses on investments 0 7,774 6.01.01.05 Residual value after write-down the property, plant and equipment and

intangible 3,878 11,202 6.01.01.06 Provision for losses / Reversals 0 -4,461 6.01.01.07 Stock option plan 4,934 4,777 6.01.01.08 Estimated losses on doubtful receivables -5,579 3,112 6.01.01.09 Punctuality discounts estimated 675 -495 6.01.01.10 Estimated losses for obsolete inventories 2,145 -707 6.01.01.11 Provision for labor and tax risks 3,017 -1,272 6.01.01.12 Interest expenses on borrowings 1,367 2,667 6.01.01.13 Interest income on financial investments -101,711 -134,107 6.01.01.14 Foreign exchange variation, net 32,345 1,391 6.01.02 Changes in assets and liabilities 58,451 38,079 6.01.02.01 Trade receivables 83,120 56,178 6.01.02.02 Inventories -50,202 -33,619 6.01.02.03 Other receivables 4,383 -18,897 6.01.02.04 Trade payables 12,346 -1,186 6.01.02.05 Salaries and social charges payable 29,306 29,651 6.01.02.06 Tax obligations 4,536 5,162 6.01.02.07 Income tax and social contribution tax -5,632 -2,982 6.01.02.08 Advances from clients -20,014 524 6.01.02.09 Other payables 608 3,248 6.02 Net cash provided by (used in) investing activities -78,739 97,234 6.02.01 Purchases of property, plant and equipment and intangible -54,258 -77,112 6.02.02 Financial investments -2,554,060 -2,175,357 6.02.03 Redemption of financial investments 2,417,724 2,105,123 6.02.04 Interest received 111,855 244,626 6.02.05 Loss on disposal of investment 0 -46 6.03 Net cash used in financing activities -358,496 -331,056 6.03.01 New borrowings 298,217 246,791 6.03.02 Repayments of borrowings -352,378 -268,039 6.03.03 Interest paid -1,190 -2,187 6.03.04 Dividends paid -144,047 -143,256 6.03.05 Interest on Equity paid -130,000 -160,000 6.03.06 Purchase of treasury shares -35,148 -9,837 6.03.07 Sale of treasury shares through exercise of purchase option 6,050 5,472 6.05 Increase (decrease) in cash and cash equivalents -10,268 193,817 6.05.01 Cash and cash equivalents at the beginning of the period 30,119 20,663 6.05.02 Cash and cash equivalents at the end of the period 19,851 214,480


Page: 19 of 85

Consolidated Financial Statements / Statement of Changes in Equity – 1/1/2018 to 9/30/2018 (R$ thousand) Account Code



treasury share



Equity Non-controlling interests

Consolidated equity

5.01 Opening balances 1,231,302 8,251 1,965,609 0 12,447 3,217,609 0 3,217,609

5.03 Adjusted opening balances 1,231,302 8,251 1,965,609 0 12,447 3,217,609 0 3,217,609

5.04 Capital transactions with owners 0 -16,337 -137,957 -124,417 0 -278,711 0 -278,711

5.04.02 Share issue costs 0 7,827 -7,827 0 0 0 0 0

5.04.03 Stock options 0 4,934 0 0 0 4,934 0 4,934

5.04.04 Treasury shares purchased 0 -35,148 0 0 0 -35,148 0 -35,148

5.04.05 Treasury shares sold 0 6,050 0 0 0 6,050 0 6,050

5.04.06 Dividends 0 0 -19,630 -124,417 0 -144,047 0 -144,047

5.04.07 Interest on equity 0 0 -110,500 0 0 -110,500 0 -110,500

5.05 Total comprehensive income 0 0 0 334,215 6,741 340,956 0 340,956

5.05.01 Profit for the period 0 0 0 334,215 0 334,215 0 334,215

5.05.02 Other comprehensive income 0 0 0 0 6,741 6,741 0 6,741

5.05.02.04 Translation adjustments for the period 0 0 0 0 6,741 6,741 0 6,741

5.06 Internal changes in equity 0 0 162,573 -162,573 0 0 0 0

5.06.01 Constitution of reserves 0 0 162,573 -162,573 0 0 0 0

5.07 Closing balances 1,231,302 -8,086 1,990,225 47,225 19,188 3,279,854 0 3,279,854


Page: 20 of 85

Consolidated Financial Statements / Statement of Changes in Equity – 1/1/2017 to 9/30/2017 (R$ thousand) Account Code



treasury share



Equity Non-controlling interests

Consolidated equity

5.01 Opening balances 1,231,302 5,311 1,682,354 0 3,031 2,921,998 72 2,922,070

5.03 Adjusted opening balances 1,231,302 5,311 1,682,354 0 3,031 2,921,998 72 2,922,070

5.04 Capital transactions with owners 0 1,463 -130,145 -154,662 0 -283,344 0 -283,344

5.04.02 Share issue costs 0 1,051 -1,051 0 0 0 0 0

5.04.03 Stock options 0 4,777 0 0 0 4,777 0 4,777

5.04.04 Treasury shares purchased 0 -9,837 0 0 0 -9,837 0 -9,837

5.04.05 Treasury shares sold 0 5,472 0 0 0 5,472 0 5,472

5.04.06 Dividends 0 0 -18,594 -124,662 0 -143,256 0 -143,256

5.04.07 Interest on equity 0 0 -110,500 -30,000 0 -140,500 0 -140,500

5.05 Total comprehensive income 0 0 0 410,476 7,337 417,813 -72 417,741

5.05.01 Profit for the period 0 0 0 410,476 0 410,476 -26 410,450

5.05.02 Other comprehensive income 0 0 0 0 7,337 7,337 -46 7,291

5.05.02.04 Translation adjustments for the period 0 0 0 0 -437 -437 0 -437

5.05.02.06 Exchange losses on investments 0 0 0 0 7,774 7,774 0 7,774

5.05.02.07 Loss on disposal of investment 0 0 0 0 0 0 -46 -46

5.06 Internal changes in equity 0 0 182,333 -182,333 0 0 0 0

5.06.01 Constitution of reserves 0 0 182,333 -182,333 0 0 0 0

5.07 Closing balances 1,231,302 6,774 1,734,542 73,481 10,368 3,056,467 0 3,056,467


Page: 21 of 85

Consolidated Financial Statements / Statement of Value Added (R$ thousand) Account Code

Account Description Accumulated of current quarter

1/1/2018 to 9/30/2018


1/1/2017 to 9/30/2017 7.01 Revenue 1,833,869 1,750,238 7.01.01 Sale of goods and services 1,829,875 1,770,420 7.01.02 Other revenue -1,629 -16,216 7.01.04 Change in provision for impairment of trade receivables 5,623 -3,966 7.02 Inputs acquired from third parties -897,897 -849,912 7.02.01 Cost of sales and services -469,940 -454,005 7.02.02 Materials, energy, outsourced services and other -425,812 -401,091 7.02.03 Impairment/recovery of assets -2,145 5,184 7.03 Gross value added 935,972 900,326 7.04 Retentions -47,853 -43,839 7.04.01 Depreciation, amortization and depletion -47,853 -43,839 7.05 Net value added generated by the Company 888,119 856,487 7.06 Value added received through transfer 247,794 242,084 7.06.02 Financial income 247,688 241,993 7.06.03 Other 106 91 7.07 Total value added to distribute 1,135,913 1,098,571 7.08 Distribution of value added 1,135,913 1,098,571 7.08.01 Personnel 427,221 396,603 7.08.01.01 Salaries and wages 353,194 328,059 7.08.01.02 Benefits 41,668 38,689 7.08.01.03 Employee time of service guarantee fund (FGTS) 32,359 29,855 7.08.02 Taxes and contributions 219,064 235,635 7.08.02.01 Federal 180,252 199,416 7.08.02.02 State 36,578 34,190 7.08.02.03 Municipal 2,234 2,029 7.08.03 Remuneration of third parties' capital 155,413 55,883 7.08.03.01 Interest 140,932 43,439 7.08.03.02 Rentals 14,481 12,444 7.08.04 Remuneration of own capital 334,215 410,450 7.08.04.01 Interest on equity 0 30,000 7.08.04.02 Dividends 124,417 124,662 7.08.04.03 Profits reinvested 209,798 255,814 7.08.04.04 Non-controlling interests 0 -26

(A free translation of the original in Portuguese) (Unaudited) Quarterly information (ITR) - 9/30/2018 - GRENDENE SA Version : 1 COMMENTS ON PERFORMANCE

Page: 22 of 85

Results: 3Q18 and 9M18

B3 ticker: GRND3

http://ri.grendene.com.br

Number of shares: Common: 902,160,000

Price (Sep. 30, 2018): R$ 6.73 per share

Market value: R$ 6.1 billion US$1.5 billion

Conference call – Brazil: Oct. 26, 2018: 10.30 a.m. Connect on – Brazil: +11-3193-1001 or +11-2820-4001

Conference call – International: Oct. 26, 2018, 10:30 a.m. (Simultaneous translation)

Connect on: +1-646-828-8246 (USA) +44-20-7442-5660 (UK)

Contacts: Francisco Schmitt CFO & IRO [email protected]

Tel: +55-54 -2109-9022

Fax: +55-54 -2109-9991

9M18: Net revenue up 3% YoY

Sobral, October 25, 2018 – This release publishes consolidated 3Q18 and 9M18 results of GRENDENE (BM&FBovespa Novo Mercado – GRND3), in accordance with IFRS.

Highlights of results: 3Q18 and 9M18

Main figures

R$ mn 3Q17 3Q18 Change, %

3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

Gross revenue 723.9 732.8 1.2% 1,880.8 1,940.9 3.2% Domestic market 597.2 599.5 0.4% 1,482.1 1,522.1 2.7% Exports 126.7 133.3 5.2% 398.7 418.8 5.0% Net revenue 596.3 599.1 0.5% 1,546.6 1,591.0 2.9% COGS (307.4) (323.2) 5.2% (812.7) (859.6) 5.8% Gross profit 288.9 275.9 (4.5%) 733.9 731.4 (0.3%) Operational expenses (177.5) (179.5) 1.1% (455.5) (452.4) (0.7%) Ebit 111.4 96.4 (13.5%) 278.4 279.0 0.2% Ebitda 126.7 112.9 (10.9%) 323.4 328.1 1.5% Net fin. rev. (exp.) 55.3 29.1 (47.4%) 191.8 101.5 (47.1%) Net profit 146.7 112.4 (23.4%) 410.5 334.2 (18.6%) Profit per share – R$ 0.16 0.12 (23.5%) 0.46 0.37 (18.6%) Volume – million pairs 45.2 44.0 (2.5%) 116.4 117.4 0.9% Domestic market 36.5 36.8 1.1% 87.4 91.0 4.1% Exports 8.7 7.2 (17.7%) 29.0 26.4 (8.8%) Gross revenue per pair (R$) 16.02 16.64

3.9% 16.16 16.53

2.3%

Domestic market 16.39 16.27 (0.7%) 16.95 16.72 (1.4%) Exports 14.51 18.55 27.8% 13.76 15.84 15.1% Margins – % 3Q17 3Q18 Change,

pp 9M17 9M18 Change, pp

Gross 48.5% 46.0% (2.5) 47.5% 46.0% (1.5) Ebit 18.7% 16.1% (2.6) 18.0% 17.5% (0.5) Ebitda 21.3% 18.9% (2.4) 20.9% 20.6% (0.3) Net 24.6% 18.8% (5.8) 26.5% 21.0% (5.5) Highlights, 9M18 vs. 9M17: Net revenue: Up 2.9% YoY.

Net profit: R$ 334.2 million (18.6% below 9M17).

Ebit: Up 0.2% YoY, at R$ 279.0 million.

Gross margin: 46.0% = 1.5 p.p. lower.

Net margin: 21.0% = 5.5 p.p. lower.

Volume of pairs: Up 0.9% YoY, at 117.4 million.

Dividend payments for 3Q: R$ 47.2mn. Ex-dividend Nov. 6, 2018; paid from Nov. 21, 2018. Total of dividends in 9M18: R$ 171.6mn.

Leader in exports: Grendene maintains its leadership in Brazilian footwear exports for the 16th year running – exporting 33.5% of the total of all Brazilian footwear exported in 9M18.


Page: 23 of 85

Management discussion and analysis

Gross revenue, Net revenue and volumes Results in 3Q18 were not good; as a consequence, our results for 9M18 were in line with those of 9M17. Compared to the first half of 2018, all operational lines in 3Q18 sustained the trend of solid results of 1H18, except net profit – which continued a decline that was caused by the fall in interest rates. Compared to 9M17: Net revenue in 9M18 was up 2.9%, Ebit was up 0.2%, and volume of pairs sold was up 0.9%; but as a result of financial revenue being 47.1% lower, final net profit was 18.6% lower YoY.

The exchange rate had a very strong positive impact in 3Q18, seen in the higher export revenue per unit in Reais – up 27.8% YoY – while in dollars this increase was only 2.2%. On the other hand, the strong impact on gross margins and Ebit was not enough to offset the effect of costs 5.2% higher, the small growth of 1.1% in volume of pairs sold in the domestic market, and 3Q18 export volume being 17.7% lower than in 3Q17. As a result, net profit for 3Q18 was 23.4% lower than in 3Q17.

In the domestic market, the expected recovery in demand was not intense as we had assumed: we saw higher than normal levels of retailers’ inventories, which slowed placements of orders to the industry, adversely affecting the number of pairs shipped. Even so, we achieved a small growth in comparison to 3Q17.

In spite of the low growth in the number of pairs, over 9M18 as a whole we believe we are still ahead of the growth in the domestic market.

Also in exports, in spite of the considerable reduction, of 8.8%, in the number of pairs shipped when compared to 9M17, our share of Brazilian exports has increased from 32.8%, in 9M17, to 33.5% in 9M18.

In net financial revenues, the trend that was already set in 1H18 was confirmed and continued. The Central Bank kept interest rates unchanged, and as a result our net financial revenues in 9M18 were lower than in 9M17 – by R$ 90.3 million – the determining factor in 9M18 net profit, at R$ 334.2mn, being R$ 76.3mn, lower than in 9M17 (R$ 410.5mn). Of this total reduction, R$ 45.5 million was the consequence of hedge transactions.

On these figures, operational cash flow in 9M18 was R$ 427 million, increasing the net cash position to R$ 1.8 billion, and the gross cash position to R$ 1.9 billion – these numbers being respectively up 8.5% and 6.5% from December 31, 2017.

On the other hand, in spite of the overall weak level of demand in 3Q18, Children’s Day was very good for our products, and this encourages us to expect a more favorable market in the last quarter of this year. Retailers too reacted to the good sales in that period, with increased confidence in buying for the year-end season.

We also have confidence in our new collections that are arriving in the market; we expect that after the elections are over market uncertainties should diminish and finally demand should show some sign of recovery.

723.9 706.1 732.86.7 (4.4) (22.4) 2.3 26.7

Grossrevenue -

3Q17

Volumeeffect - DM

Mix andgross

revenue perpair effect -

DM

Volumeeffect - EM

Mix andgross


EX

Grossrevenue

without FXeffect

FX effect -EM

Grossrevenue -

3Q18

R$ m

illio

n

Change in gross revenue, domestic market (DM) and exports (EM) - analyzed by effect of volume, mix and gross revenue per pair

1,880.8 1,891.0 1,940.959.8 (19.8) (35.0) 5.2 49.9

Grossrevenue -

9M17

Volumeeffect - DM

Mix andgross


DM

Volumeeffect - EM

Mix andgross


EX

Grossrevenue

without FXeffect

FX effect -EM

Grossrevenue -

9M18

R$ m

illio

n

Change in gross revenue, domestic market (DM) and exports (EM) - analyzed by effect of volume, mix and gross revenue per pair


Page: 24 of 85

Comparison of performance with targets Note that the guidance that we publish is for complete years, not individual quarters – but for optimum transparency and analysis we include comparisons of quarters in this chart:

Performance: CAGR, in the third quarters of the years 2008–2018: R$ mn 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 CAGR Gross revenue 457.9 475.5 546.4 511.3 613.0 739.0 730.1 734.5 654.0 723.9 732.8 4.8% YoY change 3.9% 14.9% (6.4%) 19.9% 20.6% (1.2%) 0.6% (11.0%) 10.7% 1.2% Net profit 73.3 65.6 104.8 83.5 119.4 122.1 126.0 133.5 150.9 146.7 112.4 4.4% YoY change (10.5%) 59.7% (20.3%) 43.0% 2.2% 3.2% 5.9% 13.1% (2.8%) (23.4%)

R$ mn 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 CAGR Advertising expenses

32.3 33.9 44.4 46.3 42.9 45.7 53.4 54.9 36.1 37.7 40.6 2.3%

% of NOR 9.0% 9.0% 10.2% 11.2% 8.6% 7.6% 8.9% 8.9% 6.7% 6.3% 6.8%

Performance: CAGR, in first nine months of year, 2008–2018: R$ mn 9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 9M17 9M18 CAGR Gross revenue 1,076.1 1,218.7 1,394.0 1,210.6 1,521.1 1,847.3 1,834.2 1,835.1 1,719.8 1,880.8 1,940.9 6.1% YoY change 13.2% 14.4% (13.2%) 25.6% 21.4% (0.7%) (0.05%) (6.3%) 9.4% 3.2% Net profit 156.7 187.2 189.7 183.9 261.0 290.6 294.9 357.1 387.5 410.5 334.2 7.9% YoY change 19.5% 1.4% (3.1%) 41.9% 11.4% 1.5% 21.1% 8.5% 5.9% (18.6%)

R$ mn 9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 9M17 9M18 CAGR Advertising expenses

69.5 72.3 82.6 85.0 101.3 105.2 105.9 100.1 83.6 84.8 85.9 2.1%

% of NOR 8.2% 7.4% 7.4% 8.7% 8.3% 7.1% 7.1% 6.6% 5.9% 5.5% 5.4%

In 2008 we published the following parameters as our targets for the 10 years from 2008 through 2018:

Compound average growth rate (CAGR) of gross revenue: between 8% and 12%.

CAGR of net profit: between 12% and 15%.

Objective for average advertising expenses in the period 8% to 10% of net revenue.

What has happened so far this year has been less positive than our initial expectations for the year, and contrary to our forecast, consumption did not recover during the year even though interest rates were kept very low.

The lower interest rates resulted in our financial revenue being lower, and we did not achieve the growth in the operational result that would have offset this effect.

This resulted in net profit being lower year-on-year, rather than slightly higher as we initially expected.

Information in this release may contain statements about future outcomes. Such statements reflect the present perception and outlook of the Company's Executive Officers on the development of the business, based on developments in the macroeconomic environment, industry conditions, performance of the Company and financial results. Any outcomes that are different from such expectations and factors could cause the Company’s results to be materially different from current expectations. Such statements and potential outcomes thus include various risks and uncertainties.


Page: 25 of 85

Highlights

On September 30, 2018 the Clube Melissa franchise network had a total of 291 stores – basically distributed all over Brazil – compared to 256 on September 30, 2017. The figure includes 11 'mini-clubs’.

Our Ipanema sandals brand launched a campaign in which Anitta, together with the influencers Arielle Macedo, Isabella Trad, Gabb Cabo Verde and Jana Rosa,

showed the new models of the Sempre Nova line.

Our Zaxy brand presented its new digital campaign with music co-created by a group of YouTubers and singers:

Luiza Sonza, Gigi Grigio, Rayza Nicácio, Priscila Alcantara, Mari Maria, Camilla de Lucas, RayNeon (Raissa Azevedo), Nina Gabriella, Preta Araujo (Jéssica Araújo) and Megamahlu (Maria Luisa).

On August 5, the Grendene Kids ‘Organics Fair’ (Feira de Orgânicos), held at the Villa-Lobos Park in São Paulo, publicized our new Moranguinho sandal, which comes with a gardening kit – and a selection of organic products.

– Some junior ‘exhibitors’ at the fair offered small saplings in exchange for kindly and cheerful reactions.

Our Grendha brand held a meeting with a range of consumers for them to become familiar with the new collection in partnership with Ivete Sangalo. As well as presenting the campaign’s video, Ivete herself presented the new products to the consumers that were invited.

To celebrate Father’s Day, Grendene’s Cartago brand launched its first film, with actor Juliano Cazarré (from Rio Grande do Sul) and his two children. The campaign included digital media, TV, outdoor billboards, airline in-flight entertainment displays, and a feature in Avianca’s inflight magazine.


Page: 26 of 85

+

Our Melissa and Rider brands joined up in an unprecedented collaboration, for a re-launch of two of our iconic sandal models – the Melissa Rider Slide, and the Melissa Rider Papete. The launch – on August 4 – brought together more than 2,000 people, at the Galleria Melissa São Paulo.

A highlight of the trade fairs in this quarter was our participation in the 86th MICAM Milano International Footwear Fashion and Business Fair – in Milan, Italy, on September 16–19. The MICAM ShoEvent is the world’s leading footwear trade fair for high-fashion products.

Awards

August 20, 2018: Grendene was recognized with the Valor 1000 Award for the fifth year running, with first place in the Textile, leather and Apparel category.

These awards are promoted by Valor Econômico newspaper, based on technical criteria researched by market auditors who evaluate the largest companies in the country with the best performance in 25 sectors of the Brazilian Economy.

Sep. 13, 2018: Grendene won the 2018 Estadão Empresas Mais award in the Textile and Clothing category.

This award recognizes companies with the best results and positive impact on the economy in 23 sectors. To rank the top three companies in each segment, a total of 3,600 Brazilian companies were analyzed, in partnership with the FIA (Management Institute Foundation) and Austin Rating.

August 29, 2018: Grendene Kids won the prize in the ‘Success Story’ category with Paw Patrol at the 2018 Nickelodeon Event.

A feature of the event was the year’s Biggest and Best awards, recognizing outstanding partners over the year.


Page: 27 of 85

Operational results for 3Q18 and 9M18 (consolidated figures, IFRS) Gross revenue

Gross revenue was higher, mainly reflecting higher gross revenue per pair due to the effect, on export revenue, of the depreciation of the Real against world currencies.

Total (Domestic market + exports) 3Q17 3Q18 Change, %

3Q17–3Q18 9M17 9M18 Change, % 9M17–9M18

Gross revenue (R$ mm) 723.9 732.8 1.2% 1,880.8 1,940.9 3.2% Volume (million pairs) 45.2 44.0 (2.5%) 116.4 117.4 0.9% Gross revenue per pair (R$) 16.02 16.64 3.9% 16.16 16.53 2.3%

723.9 732.8

3Q17 3Q18

Gross sales revenue (R$ mn)

45.2 44.0

3Q17 3Q18

Volume (million pairs)

16.02 16.64

3Q17 3Q18

Gross revenue per pair (R$)

82.5%

17.5%

Share of gross revenue3Q17

Domestic market Exports

81.8%

18.2%

Share of gross revenue3Q18


80.7%

19.3%

Share sales volume3Q17


83.7%

16.3%

Share sales volume3Q18



Page: 28 of 85

Domestic market

Domestic market 3Q17 3Q18 Change, 3Q17–3Q18 9M17 9M18 Change, %

9M17–9M18 Gross revenue, domestic market ( R$ mn) 597.2 599.5 0.4% 1,482.1 1,522.1 2.7% Volume – exports (million pairs) 36.5 36.8 1.1% 87.4 91.0 4.1% Gross revenue per pair, exports (R$) 16.39 16.27 (0.7%) 16.95 16.72 (1.4%)

1,880.8 1,940.9

9M17 9M18

Gross sales revenue (R$ mn)

116.4 117.4

9M17 9M18

Volume (million pairs)

16.16 16.53

9M17 9M18

Gross revenue per pair (R$)

78.8%

21.2%

Share of gross revenue9M17


78.4%

21.6%

Share of gross revenue9M18


75.1%

24.9%

Share of sales volume9M17


77.5%

22.5%

Share of sales volume9M18



Page: 29 of 85

597.2 599.56.7 (4.4)

Gross revenue DM - 3Q17 Volume effect - DM Mix and gross revenue perpair effect - DM

Gross revenue DM - 3Q18

R$

miil

lion

Change in gross revenue from domestic market - effect of volume, mix and gross revenue per pair

36.5 36.8

3Q17 3Q18

Volume - DM (million pairs)

16.39 16.27

3Q17 3Q18

Gross revenue per pair - DM (R$)

1,482.1 1,522.159.8 (19.8)

Gross revenue DM - 9M17 Volume effect - DM Mix and gross revenue perpair effect - DM

Gross revenue DM - 9M18

R$ m

illio

n

Change in gross revenue from domestic market - effect of volume, mix and gross revenue per pair

87.4 91.0

9M17 9M18

Volume - DM (million pairs)

16.95 16.72

9M17 9M18

Gross revenue per pair - DM (R$)


Page: 30 of 85

Export market The increase in average gross revenue per pair exported, from US$4.59 to US$4.69 in 3Q18, reflects the lower proportion of lower-priced product in the export mix – these are also the products with the highest volume.

Exports 3Q17 3Q18 Change, 3Q17–3Q18 9M17 9M18 Change, %

9M17–9M18 Gross revenue – exports ( R$ mn) 126.7 133.3 5.2% 398.7 418.8 5.0% Gross revenue, exports (US$mn) 40.0 33.7 (15.9%) 125.6 116.2 (7.5%) Volume – exports (million pairs) 8.7 7.2 (17.7%) 29.0 26.4 (8.8%) Gross revenue per pair, exports (R$) 14.51 18.55 27.8% 13.76 15.84 15.1% Gross revenue per pair, exports (US$) 4.59 4.69 2.2 % 4.34 4.40 1.4%

126.7 106.6 133.3(22.4) 2.3 26.7

Gross revenue -3Q17

Volume effect -EM

Mix and grossrevenue per pair

effect - EM

Gross revenuewithout FX effect

FX effect - EM Gross revenue -3Q18

R$ m

illio

n

Change in gross revenue from export market - effect of volume, mix and gross revenue per pair

40.0 33.7(7.0) 0.7

Gross revenue - 3Q17 Volume effect - EM Mix and gross revenue perpair effect - EM

Gross revenue - 3Q18

US$

mill

ion

Change in gross revenue from exports market in US$ - effect of volume, mix and gross revenue per pair

8.7 7.2

3Q17 3Q18

Volume - EM (million pairs)

14.5118.55

3Q17 3Q18

Gross revenue per pair - EM (R$)

398.7 368.9 418.8(35.0) 5.2 49.9

Gross revenue -9M17

Volume effect -EM

Mix and grossrevenue per pair

effect - EM

Gross revenuewithout FX effect

FX effect - EM Gross revenue -9M18

R$ m

illio

n

Change in gross revenue from export market in US$ - effect of volume, mix and gross revenue per pair


Page: 31 of 85

Figures from the trade ministry, Secex and Abicalçados show Brazilian footwear exports in 9M18 as 1.6% lower in average price per pair in US dollars than in 9M17, 12.1% lower in revenue in dollars, and 10.7% lower in number of pairs exported.

By contrast, Grendene’s average price per pair exported was 1.4% higher in US dollars, with total export revenue in dollars 7.5% lower, and the number of pairs billed 8.8% lower.

In spite of the fall in exports, Grendene's share of total Brazilian footwear exports remained significant at 33.5% in 9M18 (32.8% in 9M17).

Net sales revenue

R$ mn 3Q17 3Q18 Change, % 3Q17–3Q18 9M17 9M17 Change, %

9M17–9M18 Net sales revenue 596.3 599.1 0.5% 1,546.6 1,591.0 2.9%

Cost of goods sold COGS showed a higher percentage growth (5.2%) in 3Q18 than the growth in net revenue (0.5%), reflecting an increase in costs of raw materials, and other inputs such as freight – this can be seen in the 7.9% growth in COGS per pair, and in the chart below which shows growth in the price of resins and plasticizing oils.

125.6 116.2(11.0) 1.6

Gross revenue - 9M17 Volume effect - EM Mix and gross revenue perpair effect - EM

Gross revenue - 9M18

US$

mill

ion

Change in gross revenue from export market in US$ - effect of volume, mix and gross revenue per pair

29.0 26.4

9M17 9M18

Volume - EM (million pairs)

13.76 15.84

9M17 9M18

Gross revenue per pair - EM (R$)

596.3 599.1

3Q17 3Q18

Net sales revenue (R$ mn)

1,546.6 1,591.0

9M17 9M18

Net sales revenue (R$ mn)


Page: 32 of 85

R$ mn 3Q17 3Q18 Change, 3Q17–3Q18 9M17 9M18 Change, %

9M17–9M18 COGS 307.4 323.2 5.2% 812.7 859.6 5.8% COGS per pair (R$) 6.80 7.34 7.9% 6.97 7.32 5.0%

The chart below shows the movement in market prices (ICIS-LOR) in dollars, converted to Reais, of Grendene’s principal raw materials, and the change in Grendene’s average cost per pair, for the quarters of 2016 to 2018.

Thousands of pairs 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

34,906 33,599 44,558 50,494 37,860 33,361 45,181 54,944 40,442 32,961 44,041

Sources: Petrochemicals prices from ICIS-LOR; Grendene quarterly data.

As can be seen, there was an increase in the international prices of resins and also of plasticizing oils. Both effects were amplified by the weakening of the Brazilian currency, with an adverse effect on gross margin – which was 2.5 p.p. lower YoY in 3Q18 and 1.5% lower YoY in 9M18.

307.4 323.2

3Q17 3Q18

COGS (R$ mn)

812.7 859.6

9M17 9M18

COGS (R$ mn)

6.80 7.34

3Q17 3Q18

COGS per pair (R$)

6.97 7.32

9M17 9M18

COGS per pair (R$)

7.256.60

6.09 5.976.95 7.21 6.80

6.167.09 7.58 7.34

- 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00

- 1,0 2,0 3,0 4,0 5,0 6,0 7,0 8,0

Jan-

16

Feb-

16

Mar

-16

Apr-1

6

May

-16

Jun-

16

Jul-1

6

Aug-

16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

Feb-

17

Mar

-17

Apr-1

7

Jun-

17

Jul-1

7

Aug-

17

Sep-

17

Oct

-17

Nov

-17

Dec

-17

Jan-

18

Feb-

18

Mar

-18

Apr-1

8

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

R$ / par

R$

thou

sand

/ to

n.

Plastifying oils / ton. (FOB ) - R$ PVC resin / ton. (CFR) - R$ COGS per pair - R$

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.


Page: 33 of 85

Gross profit In comparing 9M18 and 9M17 we need to take into account that: (i) last year the Proapi export incentive subsidy made a contribution of R$ 11mn to gross profit in the first quarter; (ii) this effect no longer existed in the third quarter; and (iii) in the last month of the second quarter of this current year (2Q18) we had the reduction of the Reintegra tax credit on exports, from 2% to 0.1%, which will also effect 4Q18.

On the Reintegra tax credit, Grendene has filed a challenge in the administrative sphere, since the 90-day legal implementation period that we understood to be obligatory was not obeyed.

However, the main effect on gross profit was an increase in costs. We had higher costs of energy, depreciation, freight and inputs in general – these are costs we can do little to manage. At the same time, we also had lower productivity, which translates into a higher unit cost of labor. We will be seeking to reduce these costs.

R$ mn 3Q17 3Q18 Change, %, 3Q17–3Q18 9M17 9M18 Change, %

9M17–9M18 Gross profit 288.9 275.9 (4.5%) 733.9 731.4 (0.3%) Gross margin, % 48.5% 46.0% (2.5 p.p.) 47.5% 46.0% (1.5 p.p.)

Selling expenses Selling expenses have been kept under control, rising less than inflation, at around the same rate as sales:

R$ mn 3Q17 3Q18 Change, %, 3Q17–3Q18 9M17 9M18 Change, %

9M17–9M18 Selling expenses 148.1 151.5 2.3% 371.6 379.6 2.2% % of net revenue 24.8% 25.3% 0.5 p.p. 24.0% 23.9% (0.1 p.p.)

165.8 149.0 214.0 192.4 249.6 281.2 286.6 310.1 264.5 288.9 275.9

46.0%39.7%

49.0% 46.5% 50.3% 47.0% 47.7% 50.4% 49.3% 48.5% 46.0%

3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18

Gross profit (R$ mn) Gross margin (%)

335.6 375.3 420.8 397.3 556.2 671.5 655.3 717.1 672.1 733.9 731.4

39.8% 38.5% 37.7% 40.8% 45.5% 45.2% 43.9% 46.9% 47.4% 47.5% 46.0%

9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 9M17 9M18

Gross profit (R$ mn) Gross margin (%)


Page: 34 of 85

Advertising expenses With the increase in online marketing, as use of less traditional media is increased, advertising expenses have fallen as a proportion of net revenue, and are below the range that we indicated in the past, of between 8% and 10% of net revenue.


9M17–9M18 Advertising expenses 37.7 40.6 7.4% 84.8 85.9 1.3% % of net revenue 6.3% 6.8% 0.5 p.p. 5.5% 5.4% (0.1 p.p.)

General and administrative (G&A) expenses

We continued to make progress in optimization of expenses:


9M17–9M18 G&A 23.1 22.9 (1.0%) 68.9 67.8 (1.6%) % of Net revenue 3.9% 3.8% (0.1 p.p.) 4.5% 4.3% (0.2 p.p.)

148.1 151.5

24.8% 25.3%

3Q17 3Q18

Selling expenses (R$ mn)

% of net revenue

371.6 379.6

24.0% 23.9%

9M17 9M18

Selling expenses (R$ mn)

% of net revenue

37.7 40.6

6.3% 6.8%

3Q17 3Q18

Advertising expenses (R$ mn)

% of net revenue

84.8 85.9

5.5% 5.4%

9M17 9M18

Advertising expenses (R$ mn)

% of net revenue

23.1 22.9

3.9% 3.8%

3Q17 3Q18

G&A expenses (R$ mn) % of net revenue

68.9 67.8

4.5% 4.3%

9M17 9M18

G&A expenses (R$ mn) % of net revenue


Page: 35 of 85

Ebit and Ebitda Ebit Ebit (Earnings before interest and taxes) can be seen as operational profit before financial effects. Grendene believes that because it has a high cash position which generates significant financial revenues, the operational profit of its activity characterized by Ebit is a better indicator of its operational performance.

Reconciliation of Ebit and Ebitda*


9M17–9M18 Net profit for the period 146,727 112,353 (23.4%) 410,476 334,215 (18.6%) Non-controlling stockholders - - - (26) - (100.0%) Taxes on profit 20,082 13,140 (34.6%) 59,749 46,281 (22.5%) Net financial revenue (expenses) (55,347) (29,115) (47.4%) (191,841) (101,481) (47.1%) Accounting Ebit 111,462 96,378 (13.5%) 278,358 279,015 0.2% Depreciation and amortization 15,274 16,553 8.4% 45,079 49,112 8.9% Accounting Ebitda 126,736 112,931 (10.9%) 323,437 328,127 1.5%

Ebit margin (formal accounting) 18.7% 16.1% (2.6 p.p.) 18.0% 17.5% (0.5 p.p.)

Ebitda margin (formal accounting) 21.3% 18.9% (2.4 p.p.) 20.9% 20.6% (0.3 p.p.) * Stated as per CVM Instruction 527 of October 4, 2012.

Ebitda: Our business is low capital-intensive: Depreciation was approximately 3% of net revenue in both 9M17 and 9M18. Grendene regularly invests an amount equivalent to its depreciation to keep its production capacity updated. It also maintains positive net cash, and has no costs of interest that need to be paid with funds from operations. As a result we believe that assessing Ebit makes more sense as an indicator for the Company’s management.

111.4 96.4

18.7%16.1%

3Q17 3Q18

Ebit (R$ mn) Ebit margin (%)

278.4 279.0

18.0% 17.5%

9M17 9M18

Ebit (R$ mn) Ebit margin (%)

126.7 112.9

21.3%18.9%

3Q17 3Q18

Ebitda (R$ mn) Ebitda margin (%)

323.4 328.1

20.9% 20.6%

9M17 9M18

Ebitda (R$ mn) Ebitda margin (%)


Page: 36 of 85

Net financial revenue (expenses) For 9M18 Grendene reports Net financial revenues of R$ 101.5mn, but this is R$ 90.3mn lower than the Net financial revenues for 9M17, as shown:

R$ ’000 3Q17 3Q18 Change, %

3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

Interest received from clients 505 577 14.3% 1,618 1,697 4.9% Revenue from cash investments 40,267 32,971 (18.1%) 137,067 102,638 (25.1%) Other financial revenues 200 1,073 436.5% 1,979 4,374 121.0% Subtotal 40,972 34,621 (15.5%) 140,664 108,709 (22.7%) Costs of financings (2,489) (2,515) 1.0% (7,632) (7,857) 2.9% Cofins and PIS tax on Financial revenues (1,899) (1,693) (10.8%) (6,713) (5,275) (21.4%) Other financial expenses (854) (1,183) 38.5% (2,782) (3,259) 17.1% Subtotal (5,242) (5,391) 2.8% (17,127) (16,391) (4.3%) Net financial revenues (expenses)(1) 35,730 29,230 (18.2%) 123,537 92,318 (25.3%) Op. revenue on FX derivatives (BM&FBovespa) 5,707 25,214 341.8% 22,489 35,954 59.9% Foreign exchange gains 7,079 15,341 116.7% 25,848 63,626 146.2% Subtotal 12,786 40,555 217.2% 48,337 99,580 106.0% Op. expenses on FX derivatives (BM&FBovespa) (584) (34,568) 5,819.2% (7,432) (68,604) 823.1% Expenses of FX variation (9,150) (17,148) 87.4% (25,593) (61,212) 139.2% Subtotal (9,734) (51,716) 431.3% (33,025) (129,816) 293.1% Net gain (loss) on FX variations (2) 3,052 (11,161) (465.7%) 15,312 (30,236) (297.5%) Adjustments to present value (APV) 16,565 11,046 (33.3%) 52,992 39,399 (25.7%) Financial result – APV (3) 16,565 11,046 (33.3%) 52,992 39,399 (25.7%) Net financial revenue: (1) + (2) + (3) 55,347 29,115 (47.4%) 191,841 101,481 (47.1%)

Average interest rates (as measured by the average Selic rate) were 40.4% lower in 9M18 (at 6.5% p.a.) than in 9M17 (10.9% p.a.).

Net profit Net profit in 9M18 was R$ 90.3mn lower than in 9M17 – this difference was much greater than the small increase in operational profit (Ebit), of R$ 0.7mn. As we have said before, overall there was low demand in the domestic market and the same happened in several export destinations, especially in Latin America. The weakening of the Real against world currencies; the transport strike; and the political uncertainties were translated into an increase in prices of various inputs, preventing us from achieving our objective of offsetting the fall in financial revenues with an equal or better improvement in the results of operation.


9M17–9M18 Net profit 146.7 112.4 (23.4%) 410.5 334.2 (18.6%) Net margin, % 24.6% 18.8% (5.8 p.p.) 26.5% 21.0% (5.5 p.p.)

146.7 112.4

24.6%18.8%

3Q17 3Q18

Net profit (R$ mn) Net margin (%)

410.5 334.2

26.5%21.0%

9M17 9M18

Net profit (R$ mn) Net margin (%)


Page: 37 of 85

Capex (fixed and intangible investment) Our investments in 9M18 were in: maintenance of industrial buildings and facilities; replacement of fixed assets; and acquisition of new equipment for modernization of the manufacturing plant and various projects to improve the company’s efficiency.


9M17–9M18 Capex investment 25.5 16.5 (35.1%) 77.1 54.3 (29.6%)

Cash generation In 9M18, cash from operations, of R$ 427.0mn, was allocated to payment of: (i) loans in the net amount of R$ 55.4mn; (ii) capital expenditure on PP&E and intangible assets, R$ 54.3mn; (iii) cash investments, in the net amount of R$ 24.5mn; (iv) dividends and Interest on Equity, totaling R$ 274.0mn; and (v) a net loss of R$ 29.1mn on sale of treasury shares for exercise of stock options. This resulted in a reduction of R$ 10.3mn in the amount held in current account and very short term cash investments. The complete cash flow is shown in Appendix IV.

Net cash and cash equivalents Grendene continues to have a solid financial situation. Net cash (cash, cash equivalents and short and long-term financial investments, less short and long-term loans and financings) on Sep. 30, 2018 totaled R$ 1.8 billion, or 8.5% more than at Dec. 31, 2017 (R$ 1.7 billion).

The proportion of 12-month net revenue held in cash and cash equivalents and cash investments increased from 79.1% at Dec. 31, 2017 to 82.6% at Sep. 30, 2018.

Changes in the cash position (cash, cash equivalents and short and long-term financial investments), loans and financings and net cash are as follows:

1,873.5 1,781.4 1,742.9 1,780.6 2,054.4 1,932.6 1,896.6

(193.3) (120.4) (106.6) (123.6) (203.5) (143.3) (98.5)

1,680.2 1,661.0 1,636.3 1,657.0 1,850.9 1,789.3 1,798.1

(500)

500

1500

2500

31-Mar-17 30-Jun-17 30-Sep-17 31-Dec-17 31-Mar-18 30-Jun-18 30-Sep-18

R$

milli

on

Loans and financings (short-term and long term)Cash and cash equivalents plus cash investments (short-term and long term)Net cash


Page: 38 of 85

Structure of Assets and Liabilities; value indicators Assets

Sep. 30, 2017

Dec. 31, 2017

Sep. 30, 2018

Cash and cash equivalents plus cash investments

Working capital (excluding Cash and cash equivalents and cash investments)

Non-current assets

Liabilities: Current and non-current liabilities

Sep. 30, 2017

Dec. 31, 2017

Sep. 30, 2018

Liabilities – Financial

Liabilities – Operational

Consolidated Stockholders’ equity Value indicators

* Sep. 30, 2018. / ** Last 12 months.

56.1%29.0%

14.9%

54.7%29.4%

15.9%

57.3%28.3%

14.4%

3.2% 6.5%

90.3%

3.5% 6.6%

89.9%

2.7% 6.6%

90.7%

2.10 2.693.64

0.65

6.73

10.35

Cash and cashequivalents pluscash investments

per share *

Net working capitalper share *

Book value pershare *

Profit per share ** Share price * Share price * / Profitper share **


Page: 39 of 85

Dividends In 3Q18 Grendene paid interim dividends totaling R$ 47.2mn, 35.7% less than the dividends distributed in 3Q17 (R$ 73.5mn) – bringing the total in 9M18 to R$ 171.6mn, 24.8% less than in 9M17 (R$ 228.1mn).

Under Grendene’s by-laws, the minimum obligatory dividend is calculated as 25% of the net profit remaining for the year after payments to the reserves specified by law. Based on the results at Sep. 30, 2018, maintaining the policy of quarterly interim dividends and in accordance with the policy published on February 13, 2014, the Company is making advance payment of the third tranche of interim dividends, subject to ratification by the Annual General Meeting of Stockholders that approves the accounts for the year 2018, in the amount of R$ 47,225,071.31, equivalent to R$ 0.052457439 per share, excluding the shares in treasury, to be paid from November 21, 2018. This will be payable to holders of Grendene shares (GRND3) in the company’s records at November 5, 2018 (cut-off date). The (GRND3) will be traded ex-dividend on the São Paulo stock exchange (B3) on November 6, 2018.

Basis for the distribution of dividends1 – September 30, 2018 Grendene S.A. (Holding company) R$ Net profit for the period 334,214,940.77 ( – ) Tax Incentives reserve (153,539,102.77) Basis for calculation of the Legal reserve 180,675,838.00 ( – ) Constitution of Legal reserve (9,033,791.90) Basis of the dividend for the profit reported up to September 30, 2018 171,642,046.10 ( – ) 1st advance distribution (dividends plus Interest on Equity), paid May 23, 2018 90,731,045.64 ( – ) 2nd advance distribution (dividends), paid August 22, 2018 33,685,929.15 Balance available for 3rd advance distribution of dividends 47,225,071.31

Mandatory minimum dividend – 25% 42,910,511.53

Dividend proposed in excess of the obligatory minimum dividend 128,731,534.57

Dividends Date approved Ex-date Date of start

of payment Gross value

R$ Gross value per share R$ Net value R$ Net value per

share R$ Dividend 1, 2 April 26, 2018 May 8, 2018 May 23, 2018 90,731,045.64 0.100570903 90,731,045.64 0.100570903

Dividend 1 July 26, 2018 August 8, 2018 August 22, 2018 33,685,929.15 0.037418208 33,685,929.15 0.037418208

Dividend 1 October 25, 2018

November 6, 2018

November 21, 2018 47,225,071.31 0.052457439 47,225,071.31 0.052457439

Total 171,642,046.10 0.190446550 171,642,046.10 0.190446550 1 Dividends approved subject to ratification by the AGM that considers the financial statements for the 2018 business year. 2 Value per share adjusted for the stock split approved at the EGM of April 23, 2018.

(*) Payout: Dividend plus net Interest on Equity, divided by (net profit after constitution of the legal reserves).

(**) Dividend yield: Dividend per share + net Interest on Equity per share, divided by weighted average price of the share in the annualized period.

R$ 0.225R$ 0.253

R$ 0.190

52.6% 56.1% 52.8%

8.0% 4.1% 3.0%

9M16 9M17 9M18

%R

$ pe

r sha

re

Dividend per share (R$) Payout, % (*) Dividend yield, % (**)


Page: 40 of 85

Corporate events July 26, 2018 – Notice to stockholders: This noticed stated August 22, 2018 as start date of payment of the second interim dividend, of R$ 33,685,929.15 (R$ 0.037418208 per share), for the 2018 business year. The shares traded ex-dividend on August 7, 2018.

October 25, 2018 – Meeting of the Board of Directors: This meeting approved: the financial information for the third quarter of 2018; the third interim dividend, of R$ 47,225,071.31, based on the profit to September 30, 2018; and Internal Regulations of the Board of Directors. Capital markets In the first nine months of 2018 the price of Grendene’s shares (GRND3) depreciated by 26.5%, when reinvestment of dividends is included, while the Bovespa index rose by 3.8% over the same period. Average daily trading volume was R$ 6.2mn (R$ 8.5mn in 9M17).

The table below shows the number of shares traded, financial volume, and daily average trading. (The figures are adjusted to reflect the stock split approved at the EGM of April 23, 2018.)

Period No. of trading

sessions No. of trades

No. of shares Volume R$

Price R$ Average number of shares Average volume, R$

Weighted average Close Per

trade Daily Per trade Daily

9M17 187 291,554 195,321,600 1,588,778,902 8.13 8.91 670 1,044,501 5,449 8,496,143

9M18 186 331,847 134,504,800 1,154,675,893 8.58 6.73 405 723,144 3,479 6,207,934

The lowest market price for GRND3 in the 52 weeks to the end of September was R$ 6.73, on September 29, 2018. The highest market price for the 12-month period was R$ 10.50 on February 8, 2018. The dividend yield calculated on the basis of the weighted average price of the share in 9M18 was 3.0% p.a. (4.1% p.a. in 9M17).

This chart shows the performance of Grendene ON shares compared to the Bovespa index (Base: Dec. 31, 2017 = 100), and daily trading volume.

0

50

100

150

- 5

10 15 20 25 30

31-Dec-17 31-Mar-18 30-Jun-18 30-Sep-18

Base: D

ec. 31, 2017 = 100Vo

lum

e -R

$ m

n

Daily trading volume and GRND3 vs. Ibovespa

Daily trading volume, R$ GRND3 - with reinvest. of dividends IBOVESPA


Page: 41 of 85

Appendix I – Consolidated gross revenue, volumes, gross revenue per pair and market share

Gross revenue – R$ ’000 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Change, % 3Q17–

3Q18 9M17 9M18

Change, % 9M17–

9M18

Domestic market 470,696 414,185 597,202 624,466 506,142 416,469 599,522 0.4% 1,482,083 1,522,133 2.7% Exports 150,260 121,803 126,681 222,382 157,609 127,923 133,271 5.2% 398,744 418,803 5.0% Exports (US$) 47,809 37,901 40,040 68,478 48,588 35,479 33,668 (15.9%) 125,648 116,250 (7.5%) Total 620,956 535,988 723,883 846,848 663,751 544,392 732,793 1.2% 1,880,827 1,940,936 3.2%

Volume (thousands of pairs) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

Change, 3Q17–3Q18

9M17 9M18 Change, % 9M17–

9M18 Domestic market 26,844 24,133 36,448 38,950 29,451 24,705 36,856 1.1% 87,425 91,012 4.1% Exports 11,016 9,228 8,733 15,994 10,991 8,256 7,185 (17.7%) 28,977 26,432 (8.8%) Total 37,860 33,361 45,181 54,944 40,442 32,961 44,041 (2.5%) 116,402 117,444 0.9%

Gross revenue per pair (R$) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Change, % 3Q17–

3Q18 9M17 9M18

Change, % 9M17–

9M18 Domestic market 17.53 17.16 16.39 16.03 17.19 16.86 16.27 (0.7%) 16.95 16.72 (1.4%) Exports 13.64 13.20 14.51 13.90 14.34 15.49 18.55 27.8% 13.76 15.84 15.1% Exports (US$) 4.34 4.11 4.59 4.28 4.42 4.30 4.69 2.2% 4.34 4.40 1.4% Total 16.40 16.07 16.02 15.41 16.41 16.52 16.64 3.9% 16.16 16.53 2.3%

US dollar (USD 1.00 = R$) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Change, % 3Q17–

3Q18 9M17 9M18

Change, 9M17–9M18

Dollar at end of period 3.1684 3.3082 3.1680 3.3080 3.3238 3.8558 4.0039 26.4% 3.1680 4.0039 26.4% Average US dollar 3.1429 3.2137 3.1639 3.2475 3.2438 3.6056 3.9584 25.1% 3.1735 3.6026 13.5%

% of Gross revenue 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 9M17 9M18 Domestic market 75.8% 77.3% 82.5% 73.7% 76.3% 76.5% 81.8% 78.8% 78.4% Exports 24.2% 22.7% 17.5% 26.3% 23.7% 23.5% 18.2% 21.2% 21.6% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

% of total volumes 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 9M17 9M18 Domestic market 70.9% 72.3% 80.7% 70.9% 72.8% 75.0% 83.7% 75.1% 77.5% Exports 29.1% 27.7% 19.3% 29.1% 27.2% 25.0% 16.3% 24.9% 22.5% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%


Page: 42 of 85

Appendix II – Consolidated Statement of financial position, IFRS (R$ ’000)

Assets Dec. 31, 2017 % Sep. 30, 2018 % of total % of previous

Current 2,846,838 79.6% 2,735,855 75.6% 96.1% Cash and cash equivalents 30,119 0.8% 19,851 0.5% 65.9% Cash investments

Securities at amortized cost 1,537,477 43.0% 1,471,206 40.7% 95.7% Accounts receivable from clients 850,345 23.8% 772,129 21.3% 90.8% Inventories 279,267 7.8% 327,324 9.0% 117.2% Tax credits 50,810 1.4% 32,090 0.9% 63.2% Income and Social Contribution taxes recoverable 3,841 0.1% 23,294 0.6% 606.5% Other receivables 76,828 2.1% 59,519 1.6% 77.5% Prepaid costs and expenses 3,888 0.1% 8,018 0.2% 206.2% Other credits 14,263 0.4% 22,424 0.6% 157.2%

Non-current 729,170 20.4% 881,925 24.4% 120.9% Non-current assets 277,116 7.7% 425,363 11.8% 153.5%

Cash investments Securities at amortized cost 213,049 6.0% 405,512 11.2% 190.3%

Escrow deposits 1,316 - 1,114 - 84.7% Tax credits 782 - 859 - 109.8% Deferred income tax and Social Contribution tax 54,627 1.5% 10,509 0.3% 19.2% Other credits 7,342 0.2% 7,369 0.2% 100.4%

Investments 412 - 412 - 100.0% Property, plant and equipment 422,361 11.8% 425,201 11.8% 100.7% Intangible assets 29,281 0.8% 30,949 0.9% 105.7%

Total assets 3,576,008 100.0% 3,617,780 100.0% 101.2%

Liabilities and Stockholders’ equity Dec. 31, 2017 % Sep. 30, 2018 % % of previous

Current 322,074 9.0% 307,012 8.5% 95.3% Loans and financings 89,666 2.5% 69,923 1.9% 78.0% Suppliers 36,705 1.0% 49,051 1.4% 133.6% Contractual obligations – Licenses 17,618 0.5% 18,281 0.5% 103.8% Commissions payable 41,622 1.2% 37,927 1.0% 91.1% Taxes 37,597 1.1% 22,633 0.6% 60.2% Income tax and Social Contribution tax payable 6,425 0.2% 793 - 12.3% Salaries and related charges payable 59,942 1.7% 89,248 2.5% 148.9% Provision for labor and tax risks 833 - 3,834 0.1% 460.3% Advances from clients 31,384 0.9% 11,370 0.3% 36.2% Other accounts payable 282 - 3,952 0.1% 1,401.4%

Non-current 36,325 1.0% 30,914 0.9% 85.1% Loans and financings 33,961 0.9% 28,564 0.8% 84.1% Provision for employment-law litigation risk 452 - 468 - 103.5% Other debits 1,912 0.1% 1,882 0.1% 98.4%

Stockholders’ equity 3,217,609 90.0% 3,279,854 90.7% 101.9% Share capital 1,231,302 34.4% 1,231,302 34.0% 100.0% Capital reserves 8,385 0.2% 7,478 0.2% 89.2% Shares in treasury (134) - (15,564) (0.4%) 11,614.9% Profit reserves 1,965,609 55.0% 1,990,225 55.0% 101.3% Retained earnings - - 47,225 1.3% - Other comprehensive income 12,447 0.3% 19,188 0.5% 154.2%

Total liabilities and Stockholders’ equity 3,576,008 100.0% 3,617,780 100.0% 101.2%


Page: 43 of 85

Appendix III – Consolidated Profit and loss account (R$ ’000)

R$ ’000 3Q17 % 3Q18 % Change, % 3Q17–3Q18

Domestic market 597,202 100.1% 599,522 100.1% 0.4% Exports 126,681 21.2% 133,271 22.2% 5.2% Gross revenue from sales and services 723,883 121.4% 732,793 122.3% 1.2% Sales returns and sales taxes (98,601) (16.5%) (105,477) (17.6%) 7.0% Discounts given to clients (28,953) (4.9%) (28,224) (4.7%) (2.5%) Deductions from sales (127,554) (21.4%) (133,701) (22.3%) 4.8% Net sales revenue 596,329 100.0% 599,092 100.0% 0.5% Cost of goods sold (307,395) (51.5%) (323,233) (54.0%) 5.2% Gross profit 288,934 48.5% 275,859 46.0% (4.5%) Operational revenues (expenses) (177,472) (29.8%) (179,481) (30.0%) 1.1% Selling expenses (148,088) (24.8%) (151,511) (25.3%) 2.3% G&A (23,136) (3.9%) (22,901) (3.8%) (1.0%) Other operational revenues 3,707 0.6% 1,518 0.3% (59.1%) Other operational expenses (9,955) (1.7%) (6,587) (1.1%) (33.8%) Profit before fin. rev. (exp.) and taxes (Ebit) 111,462 18.7% 96,378 16.1% (13.5%) Financial revenues 70,323 11.8% 86,222 14.4% 22.6% Financial expenses (14,976) (2.5%) (57,107) (9.5%) 281.3% Net financial revenue (expenses) 55,347 9.3% 29,115 4.9% (47.4%) Pretax profit 166,809 28.0% 125,493 20.9% (24.8%) Income and Social Contribution tax: Current (21,518) (3.6%) (15,491) (2.6%) (28.0%) Deferred 1,436 0.2% 2,351 0.4% 63.7% Net profit for the period 146,727 24.6% 112,353 18.8% (23.4%) Depreciation and amortization 15,274 2.6% 16,553 2.8% 8.4% Ebitda 126,736 21.3% 112,931 18.9% (10.9%)

R$ ’000 9M17 % 9M18 % Change, %

9M17–9M17 Domestic market 1,482,083 95.8% 1,522,133 95.7% 2.7% Exports 398,744 25.8% 418,803 26.3% 5.0% Gross revenue from sales and services 1,880,827 121.6% 1,940,936 122.0% 3.2% Sales returns and sales taxes (262,385) (17.0%) (275,159) (17.3%) 4.9% Discounts given to clients (71,859) (4.6%) (74,745) (4.7%) 4.0% Deductions from sales (334,244) (21.6%) (349,904) (22.0%) 4.7% Net sales revenue 1,546,583 100.0% 1,591,032 100.0% 2.9% Cost of goods sold (812,675) (52.5%) (859,669) (54.0%) 5.8% Gross profit 733,908 47.5% 731,363 46.0% (0.3%) Operational revenues (expenses) (455,550) (29.5%) (452,348) (28.4%) (0.7%) Selling expenses (371,636) (24.0%) (379,639) (23.9%) 2.2% G&A (68,941) (4.5%) (67,817) (4.3%) (1.6%) Other operational revenues 8,412 0.5% 8,511 0.5% 1.2% Other operational expenses (23,385) (1.5%) (13,403) (0.8%) (42.7%) Profit before fin. rev. (exp.) and taxes (Ebit) 278,358 18.0% 279,015 17.5% 0.2% Financial revenues 241,993 15.6% 247,688 15.6% 2.4% Financial expenses (50,152) (3.2%) (146,207) (9.2%) 191.5% Net financial revenue (expenses) 191,841 12.4% 101,481 6.4% (47.1%) Pretax profit 470,199 30.4% 380,496 23.9% (19.1%) Income and Social Contribution tax: Current (15,821) (1.0%) (2,163) (0.1%) (86.3%) Deferred (43,928) (2.8%) (44,118) (2.8%) 0.4% Minority interests 26 - - - - Net profit for the period 410,476 26.5% 334,215 21.0% (18.6%) Depreciation and amortization 45,079 2.9% 49,112 3.1% 8.9% Ebitda 323,437 20.9% 328,127 20.6% 1.5%


Page: 44 of 85

Appendix IV – Consolidated Statement of cash flows (R$ ’000)

Statements of cash flow Sep. 30, 2017 Sep. 30, 2018 Cash flow from operations Net profit for the period 410,450 334,215 Adjustments reconciling profit to cash from ops

Depreciation and amortization 45,079 49,112 Deferred income tax and Social Contribution tax 44,150 44,118 FX loss on investments 7,774 - PP&E and Intangible – residual value after write-down 11,202 3,878 Provision for losses / Reversals (4,461) - Stock options plan 4,777 4,934 Provision for doubtful receivables 3,112 (5,579) Punctuality discounts – estimated (495) 675 Provision for obsolete inventory (707) 2,145 Provision for labor and tax risks (1,272) 3,017 Interest expenses on financing 2,667 1,367 Interest revenue on cash investments (134,107) (101,711) FX variations, net 1,391 32,345

389,560 368,516 Variations in assets and liabilities:

Accounts receivable from clients 56,178 83,120 Inventories (33,619) (50,202) Other accounts payable (18,897) 4,383 Suppliers (1,186) 12,346 Salaries and related charges payable 29,651 29,306 Taxes 5,162 4,536 Income tax and Social Contribution tax payable (2,982) (5,632) Advances from clients 524 (20,014) Other accounts payable 3,248 608

Net cash from operational activities 427,639 426,967 Cash flow from investment:

Acquisition of PP&E and intangible (77,112) (54,258) Cash investments (2,175,357) (2,554,060) Redemption of cash investments 2,105,123 2,417,724 Interest received 244,626 111,855 Loss on disposal of investment (46) -

Net cash flow from (used in) investment activities 97,234 (78,739) Cash flow in financing activities:

Loans obtained 246,791 298,217 Payment of loans (268,039) (352,378) Interest paid (2,187) (1,190) Dividends paid (143,256) (144,047) Interest on Equity paid (160,000) (130,000) Acquisition of treasury shares (9,837) (35,148) Sale of treasury shares: exercise of stock options 5,472 6,050

Net cash used in financing activities (331,056) (358,496) Increase (reduction) in Cash and cash equivalents 193,817 (10,268) Statement of variation in cash and cash equivalents

At start of period 20,663 30,119 At end of period 214,480 19,851

Increase (reduction) in Cash and cash equivalents 193,817 (10,268)

A (A free translation of the original in Portuguese) (Unaudited)

Quarterly information (ITR) - 9/30/2018 - GRENDENE SA Version : 1

Explanatory Notes

Notes to the quarterly information September 30, 2018 and December 31, 2017 (All amounts in thousands of reais)

Page: 45 of 85

1. General information

a) Operational Context Mercado segment, trading under the ticker GRND3, on the São Paulo stock exchange (B3 S.A. – Brasil, Bolsa, Balcão). It began trading in 1971. Its head office is at Av. Pimentel Gomes 214, Sobral, Ceará State, Brazil. Grendene S.A. is controlled by Alexandre G. Bartelle S.A. The Company and its subsidiaries (‘the Group’) have the following principal activities: development, production, distribution and sale of plastic footwear for all the socio-economic classes, in the women’s, men’s and children’s market segments. The Group currently has five industrial plants, in three States of Brazil: Ceará, Bahia and Rio Grande do Sul. It owns the brands Melissa, Grendha, Zaxy, Rider, Cartago, Ipanema, Pega Forte and Grendene Kids.

b) Authorization for issuance of the quarterly information

Issuance of the Company’s Quarterly Information for the period ended September 30, 2018, was authorized by the Executive Board on October 24, 2018.

2. Basis of preparation and presentation of the quarterly information

a) Statement of compliance

The individual and consolidated Quarterly Information has been prepared in accordance with: CPC 21 (R1) – Interim Reporting (Demonstração Intermediária), issued by the Brazilian Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis, or CPC); and IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB); and in accordance with the rules issued by the Brazilian Securities Commission (Comissão de Valores Mobiliários, or CVM) applicable to preparation of Quarterly Information (ITR). All the material information in the Interim accounting information, and only that information, is being presented, and is the information used by the Company in its management. The individual and consolidated quarterly information should be considered in conjunction with the full financial statements for the business year ended December 31, 2017.



Explanatory Notes

Notes to the quarterly information--Continued September 30, 2018 and December 31, 2017 (All amounts in thousands of reais)

Page: 46 of 85

2. Basis of preparation and presentation of the quarterly information--Continued

a) Statement of compliance--Continued

The list below shows the explanatory Notes that were presented in the annual financial statements at December 31, 2017, but which are not presented in the same degree of detail in this individual and consolidated quarterly information, due to the absence of any significant changes in this quarter: Notes

i. Basis of preparation and presentation of the financial statements Note 2 ii. Consolidated financial statements Note 3 iii. Accounting policies Note 4 iv. Accounting estimates and consumptions Note 5 v. Cash and cash equivalents Note 6 vi. Tax credits Note 10 vii. Stockholders’ equity Note 16 viii. Stock options plan Note 21 ix. Other operational revenues and expenses Note 25 ix. Insurance Note 27

3. The consolidated quarterly information

The consolidated financial statements include the operations of the Company and its subsidiaries, as shown in this table:

Principal characteristics Country of head office

Stake

Percentage interest (%)

9/30/18 12/31/17

MHL Calçados Ltda. Manufacture and sale of footwear. Brazil Direct 99.998% 99.998% Grendene USA, Inc. Commercial representative, selling and distributing our

products in the US market. This is the parent company of Grendene New York L.L.C., which has head office in United States and operates in the same market segment.

USA Direct 100.00%

100.00%

Grendene UK Limited. Commercial representative, selling and distributing our products. Parent company of Grendene Italy S.R.L., a company with head office in Italy which operates in the same market segment.

United Kingdom

Direct 100.00%

100.00%

A3NP Indústria e Comércio de Móveis S.A.

Manufacture, sale, import and export of furniture and complimentary items based on plastic. Parent company of Z Plus EUR Company S.R.L., a company with head office in Italy which operates in the same market segment.

Brazil Direct -

100.00%

Grendene New York, L.L.C. (through Grendene USA, Inc.)

Commercial representative, selling and distributing our products in the US market.

USA Indirect 100.00% 100.00%

Grendene Italy, S.R.L. (through Grendene UK Limited)

Commercial representative, selling and distributing our products.

Italy Indirect 100.00% 100.00%

Z Plus EUR Company S.R.L. (through A3NP Indústria e Comércio de Móveis S.A.)

Manufacture, sale, import and export of furniture and complimentary items, based on plastic.

Italy Indirect - 100.00%



Explanatory Notes


Page: 47 of 85

4. Accounting policies

The methods of measurement adopted in the preparation of the individual and consolidated Quarterly Information have not changed in relation to the financial statements at December 31, 2017. Of the accounting policies presented at December 31, 2017, those that have undergone change, as a result of new rules, are listed here: a) Recognition of revenue

Revenue is recognized in the Profit and loss account when its amount can be reliably measured and reflects the consideration that the entity expects to have the right to an exchange for transfer of products to clients. Revenue is measured based on fair value of the consideration received, excluding discounts, deductions and taxes or charges on the sale. The Company evaluates revenue transactions in accordance with the specific criteria for determining whether it is acting as agent or principal and, in the last analysis, has concluded that it is acting as principal in all its revenue contracts. A revenue is not recognized if there is significant uncertainty of its realization.

a.1) Revenue from sale

Revenue from sale of products is recognized in the Profit and loss account, when the control of the product is transferred to the client and the Company and its subsidiary have no further control or responsibility over the merchandise sold.

a.2) Financial revenue

Interest income is recognized using the effective interest rate. Interest revenues are included in the account line financial revenues, in the profit and loss account.

b) Financial instruments

Financial instruments are measured at amortized cost or at fair value and classified in one of the following three categories: 1. Financial instruments at amortized cost. 2. Financial instruments measured at fair value through Comprehensive income. 3. Financial instruments measured at fair value through Profit or loss.



Explanatory Notes


Page: 48 of 85

4. Accounting policies--Continued

b) Financial instruments--Continued

Subsequent measurement Their subsequent measurement takes place at each recording date in accordance with the rules established for each type of classification of financial assets and liabilities.

The Company and its subsidiaries have classified their financial assets and liabilities in the category of amortized cost, in accordance with the purpose for which they were acquired or issued:

a) Financial assets at amortized cost: These are measured in a business model

the objective of which is to receive contractual cash flows where the contractual terms give rise to cash flows which are, exclusively, payment of the principal and/or interest on it.

b) Financial assets: The entity should classify all financial liabilities as measured

at amortized cost, except in the case of: (a) financial liabilities measured at fair value through Profit or loss; (b) financial liabilities that arise when the transfer of the financial asset does not qualify for derecognition, or when the continuing involvement approach is applicable; (c) a financial guarantee contract; (d) undertakings to grant loans with interest rates below market; or (e) a contingent consideration recognized by an acquiring party in a business combination to which CPC 15 should be applied.

The Company and its subsidiaries have assessed the classification of their financial instruments at January 1, 2018, based on the adoption of IFRS 9 / CPC 48, and have carried out the following re-classifications:

Parent company

12/31/17 – IAS 39/ CPC38 1/1/18 – IFRS 9/CPC 48

Loans and receivables

Financial assets at fair value through profit or loss

Held-to-maturity Amortized cost Amortized cost

Financial assets Cash and cash equivalents 18,240 - - - 18,240 Financial investments (*) - 836,254 914,272 - 1,750,526 Trade receivables 857,931 - - - 857,931 Derivatives - - - 407 407

Financial liabilities Borrowing - - - 123,627 123,627 Trade payables - - - 35,387 35,387 Commissions payable - - - 41,686 41,686



Explanatory Notes


Page: 49 of 85

4. Accounting policies--Continued

b) Financial instruments--Continued

Consolidated

12/31/17 – IAS 39/ CPC 38 1/1/18 – IFRS 9/CPC48

Loans and receivables

Financial assets at fair value through profit or loss

Held-to-maturity Amortized cost Amortized cost

Financial assets Cash and cash equivalents 30,119 - - - 30,119 Financial investments (*) - 836,254 914,272 - 1,750,526 Trade receivables 850,345 - - - 850,345 Derivatives - - - 407 407

Financial liabilities Borrowing - - - 123,627 123,627 Trade payables - - - 36,705 36,705 Commissions payable - - - 41,622 41,622

5. Financial investments Financial investments are represented by Bank Deposit Certificates (CDBs), Debentures (Committed Transactions), Real-denominated Bank Debt Notes (LFINs), Government Debt Securities (NTNs-B) and Letter Leasing Mercantile (LAM), and are classified as "Securities at amortized cost", according to the Company's investment strategy. The Company’s financial investments comprise the following components:

Parent company / Consolidated

Index Average rate of return 9/30/18 12/31/17 Indexed CDI 102.93% and 101.51% 1,484,622 1,456,395 Fixed-rate and indexed IPCA + 6.09 and 6.43% p.y. 392,096 294,131

1,876,718 1,750,526 Current assets 1,471,206 1,537,477 Non-current assets 405,512 213,049

6. Trade receivables

Parent company Consolidated

9/30/18 12/31/17 9/30/18 12/31/17

Not yet due 781,028 870,991 781,115 860,988 Overdue for up to 30 days 15,509 13,776 15,947 13,999 Overdue from 31 to 60 days 2,007 2,827 2,162 3,719 Overdue from 61 to 90 days 657 541 897 822 Past due for more than 91 days 13,482 20,685 14,839 22,106 812,683 908,820 814,960 901,634 Estimated losses on doubtful receivables (4,629) (10,186) (4,970) (10,549) Punctuality discounts estimated (28,594) (27,907) (28,618) (27,943) Adjustment to Present Value (AVP) (9,243) (12,796) (9,243) (12,797) 770,217 857,931 772,129 850,345



Explanatory Notes


Page: 50 of 85

6. Trade receivables--Continued At September 30, 2018 and December 31, 2017, the average collection periods for the domestic market are 96 and 89 days, respectively, and for the foreign market are 90 and 75 days, respectively.

There are no liens, pledges and/or restrictions to the trade receivables amounts.

The constitutions of estimated losses for doubtful accounts on securities due by maturity were as follows: Parent company

9/30/18 12/31/17 Balance Provision Balance Provision

Not yet due 781,028 - 870,991 - Overdue for up to 30 days 15,509 - 13,776 - Overdue from 31 to 60 days 2,007 - 2,827 (4) Overdue from 61 to 90 days 657 (8) 541 (30) Past due for more than 91 days 13,482 (4,621) 20,685 (10,152) 812,683 (4,629) 908,820 (10,186) Consolidated

9/30/18 12/31/17 Balance Provision Balance Provision

Not yet due 781,115 - 860,988 - Overdue for up to 30 days 15,947 - 13,999 - Overdue from 31 to 60 days 2,162 - 3,719 (4) Overdue from 61 to 90 days 897 (8) 822 (30) Past due for more than 91 days 14,839 (4,962) 22,106 (10,515) 814,960 (4,970) 901,634 (10,549) The changes in the estimated losses on doubtful receivables were as follows:


9/30/18 12/31/17 9/30/18 12/31/17

Balance at the beginning of the period (10,186) (6,896) (10,549) (7,934) Additions (3,329) (11,887) (3,378) (12,272) Realizations 8,052 7,647 8,129 7,861 Reversals 1,079 1,285 1,117 2,170 Exchange variation (245) (335) (289) (374)

Balance at the end of the period (4,629) (10,186) (4,970) (10,549)



Explanatory Notes


Page: 51 of 85

6. Trade receivables--Continued The changes in the punctuality discounts estimated were as follows: Parent company Consolidated

9/30/18 12/31/17 9/30/18 12/31/17

Balance at the beginning of the period (27,907) (25,085) (27,943) (25,110) Additions (69,661) (94,773) (69,733) (94,897) Realizations 59,769 77,785 59,848 77,901 Reversals 9,205 14,166 9,210 14,163

Balance at the end of the period (28,594) (27,907) (28,618) (27,943) 7. Inventories


9/30/18 12/31/17 9/30/18 12/31/17

Footwear 83,950 47,599 99,273 68,242 Inputs and components 43,200 51,880 43,290 51,965 Raw materials 92,322 72,863 92,377 72,921 Packaging materials 17,362 14,262 17,376 14,279 Intermediate and other materials 30,806 30,124 30,893 30,222 Goods for resale 885 761 1,138 810 Molds and tooling 21,216 19,698 21,216 19,698 Advances to suppliers 10,758 11,606 10,758 11,606 Imports in transit 7,306 7,792 7,306 7,792 Inventories held by third parties 19,427 15,317 19,427 15,317 Estimated losses for obsolete inventories (15,730) (13,585) (15,730) (13,585) 311,502 258,317 327,324 279,267

The changes in the estimated losses for obsolete inventories were as follows: Parent company Consolidated

9/30/18 12/31/17 9/30/18 12/31/17

Balance at the beginning of the period (13,585) (11,977) (13,585) (12,471) Additions (34,800) (51,233) (34,800) (51,233) Realizations 3,428 10,167 3,428 10,688 Reversals 29,227 39,458 29,227 39,458 Exchange variation - - - (27)

Balance at the end of the period (15,730) (13,585) (15,730) (13,585)

There are no liens, pledges and/or restrictions to the full utilization of the inventories.



Explanatory Notes


Page: 52 of 85

8. Investments

a) Breakdown of investments

The Company's investments are as follows:


9/30/18 12/31/17 9/30/18 12/31/17

Subsidiaries 47,756 50,707 - - Unrealized profits in subsidiaries (2,940) (3,938) - - Other investments 412 412 412 412 45,228 47,181 412 412

b) Changes in investments

The changes in investments are as follows:

Grendene Argentina S.A. (a) (c)

MHL Calçados

Ltda.

Grendene USA, Inc. (a) (b)

Grendene UK Limited

(a) (b)

A3NP Indústria e Comércio de

Móveis S.A. (b) (d)

Outros

Total

Balances at 12/31/16 1,362 13,701 19,917 10,171 - 412 45,563

Addition 734 - - - - - 734 Capital increase in subsidiary - - 19,850 7,030 - - 26,880 Equity in the results of subsidiaries

(507)

296 (18,485) (7,356)

1,231

-

(24,821)

Exchange differences on subsidiaries abroad

(3)

- 355 1,290

-

-

1,642 Exchange differences on subsidiaries abroad

-

- - -

(1,231)

-

(1,231) Disposal of investment (1,586) - - - - - (1,586)

Balances at 12/31/17 - 13,997 21,637 11,135 - 412 47,181

Capital increase in subsidiary - - 16,167 - 5,616 - 21,783 Equity in the results of subsidiaries

-

349 (16,525) (8,685)

(81)

-

(24,942) Exchange differences on subsidiaries abroad

-

- 5,383 1,358

-

-

6,741 Realization for provision for losses in subsidiary

-

- - -

(5,480)

-

(5,480) Disposal of investment - - - - - (55) - (55)

Balances at 9/30/18 - 14,346 26,662 3,808 - 412 45,228

c) Summarized financial information of direct and indirect subsidiaries

(consolidated)

MHL Calçados Ltda. Grendene USA,

Inc. (a) (b) Grendene UK Limited (a) (b)



9/30/18 12/31/17 9/30/18 12/31/17 9/30/18 12/31/17 12/31/17

Current assets 14,474 13,823 22,097 27,455 10,381 10,536 144 Non-current assets 567 651 17,072 16,478 8,389 7,986 -

Total assets 15,041 14,474 39,169 43,933 18,770 18,522 144 Current liabilities 515 288 9,174 18,078 5,372 5,755 10 Non-current liabilities 180 189 988 910 8,995 1,002 5,614

Total liabilities 695 477 10,162 18,988 14,367 6,757 5,624

Equity of subsidiaries 14,346 13,997 29,007 24,945 4,403 11,765 (5,480) Percentage of interest 99.998% 99.998% 100.00% 100.00% 100.00% 100.00% 100.00% Interest in equity (investment) 14,346 13,997 29,007 24,945 4,403 11,765 -



Explanatory Notes


Page: 53 of 85

8. Investments--Continued

c) Summarized financial information of direct and indirect subsidiaries (consolidated)--Continued

Grendene

Argentina S.A. (a) (c)

MHL Calçados Ltda.

Grendene USA, Inc. (a) (b)

Grendene UK Limited (a) (b)



9/30/17 9/30/18 9/30/17 9/30/18 9/30/17 9/30/18 9/30/17 9/30/18 9/30/17

Revenue 31 2,742 3,215 35,287 35,751 12,459 12,188 - 4,850 Costs and expenses (564) (2,393) (2,988) (52,775) (48,454) (21,179) (17,839) (81) (6,912) Profit (loss) of the subsidiaries for the year

(533) 349 227 (17,488) (12,703) (8,720) (5,651)

(81)

(2,062)

Percentage of interest 95.00% 99.998% 99.998% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Equity in the results of subsidiaries

(507) 349 227 (17,488) (12,703) (8,720) (5,651) (81) 1,077

Unrealized profits - - - 963 1,785 35 235 - - Total equity in results of subsidiaries

(507) 349 227 (16,525) (10,918) (8,685) (5,416) (81) 1,077

Losses in subsidiary - - - - - - - - (3,139) Net cash provided by (used in) operating activities

- 1,067 675 (15,650) (6,796) (8,225) (5,390) - 655 Net cash provided by (used in) investing activities

- (10) (7) (365) (8,439) (10) (56) - -

Net cash provided by (used in) financing activities

-

-

- 16,168 14,825 8,101 6,708 - (1,107)

Increase (decrease) in cash and cash equivalents

- 1,057 668 153 (410) (134) 1,262 - (452)

a) Review by other independent auditors. b) Amount consolidated in the subsidiary Grendene USA Inc, and indirect subsidiary Grendene New York L.L.C.; Amount consolidated in the subsidiary Grendene UK Limited and indirect subsidiary Grendene Italy, S.R.L.; and Amount consolidated in the subsidiary A3NP Indústria e Comércio de Móveis S.A. and indirect subsidiary Z Plus

EUR Company S.R.L.. c) On April 27, 2017 a meeting of the Board of Directors approved the sale of the Company’s interest in subsidiary

Grendene Argentina S.A. On June 9, 2017, a Share purchase and sale agreement was executed, assigning and transferring all of its interest in the Company’s capital for a total agreed price of R$778, resulting in a loss in P&L for the period of R$808.

d) On February 21, 2018 a meeting of the Executive Board approved sale of the subsidiary A3NP Indústria e Comércio de Móveis S.A. On the same date a share purchase agreement was signed, assigning and transferring the total of the Company’s equity A3NP Indústria e Comércio de Móveis S.A., for the agreed total price of R$55.



Explanatory Notes


Page: 54 of 85

9. Property, plant and equipment Parent Company

9/30/18 12/31/17 Land, buildings,

facilities and leasehold

improvements

Machinery, equipment, tools

and parts and replacement sets

Furniture and

fittings

Data

processing equipment

PPE in progress Other Total

Total Cost of PPE At the beginning of the period 339,920 387,733 28,513 36,438 29,183 5,282 827,069 762,904 Purchases 249 20,743 1,316 6,258 17,645 245 46,456 89,314 Disposals - (11,970) (171) (1,061) (793) - (13,995) (15,467) Transfers 13,692 4,512 435 (26) (18,625) 12 - - Loss on impairment - - - - - - - (9,682) At the end of the period 353,861 401,018 30,093 41,609 27,410 5,539 859,530 827,069 Accumulated depreciation 4%, 10% and 20% 10% and 20% 10% 20% - 5% and 10% At the beginning of the period (181,238) (197,106) (14,269) (24,289) - (3,217) (420,119) (386,764) Depreciation (13,377) (21,598) (1,756) (3,639) - (435) (40,805) (49,297) Disposals - 9,097 92 974 - - 10,163 10,993 Transfers 119 (119) (4) 4 - - - -

Loss on impairment - - - - - - - 4,949 At the end of the period (194,496) (209,726) (15,937) (26,950) - (3,652) (450,761) (420,119) Net book value At 12/31/17 158,682 190,627 14,244 12,149 29,183 2,065 406,950 406,950 At 9/30/18 159,365 191,292 14,156 14,659 27,410 1,887 408,769

Consolidated

9/30/18 12/31/17 Land, buildings,

facilities and leasehold

improvements

Machinery, equipment, tools

and parts and replacement sets

Furniture and

fittings

Data

processing equipment

PPE in progress Other Total

Total Cost of PPE At the beginning of the period 357,022 389,998 30,951 39,099 29,183 5,482 851,735 783,157 Purchases 275 20,750 1,603 6,280 17,645 245 46,798 98,500 Disposals (27) (13,183) (171) (1,061) (793) - (15,235) (25,699) Transfers 13,692 4,512 435 (26) (18,625) 12 - - Foreign exchange variation 3,214 - 491 501 - 36 4,242 1,378 Provision for losses - - - - - - - 4,081

Loss on impairment - - - - - - - (9,682) At the end of the period 374,176 402,077 33,309 44,793 27,410 5,775 887,540 851,735 Accumulated depreciation 4%, 10% and 20% 10% and 20% 10% 20% - 5% and 10% At the beginning of the period (185,348) (199,200) (15,941) (25,645) - (3,240) (429,374) (396,086) Depreciation (14,920) (21,644) (1,924) (3,896) - (461) (42,845) (51,303) Disposals 1 10,291 92 974 - - 11,358 13,377 Transfers 119 (119) (4) 4 - - - - Foreign exchange variation (856) - (361) (254) - (7) (1,478) (311)

Loss on impairment - - - - - - - 4,949 At the end of the period (201,004) (210,672) (18,138) (28,817) - (3,708) (462,339) (429,374) Net book value At 12/31/17 171,674 190,798 15,010 13,454 29,183 2,242 422,361 422,361 At 9/30/18 173,172 191,405 15,171 15,976 27,410 2,067 425,201

Certain property, plant and equipment items are pledged in guarantee of borrowings, as disclosed in Note 11.e.



Explanatory Notes


Page: 55 of 85

10. Intangible assets

Parent Company

9/30/18 12/31/17

Software Trademarks and patents Goodwill Technology

Development of software Total

Total

Cost of intangible assets At the beginning of the period 54,300 20,720 4,374 9,500 5,855 94,749 85,888 Purchases 1,942 1,091 - - 4,384 7,417 8,891 Disposals - - - - (1) (1) (30) Transfers 569 - - - (569) - - At the end of the period 56,811 21,811 4,374 9,500 9,669 102,165 94,749 Accumulated amortization 20% 10% 20% 20% - At the beginning of the period (44,708) (13,204) (4,374) (5,423) - (67,709) (58,414) Amortization (4,105) (1,016) - (1,097) - (6,218) (9,295) At the end of the period (48,813) (14,220) (4,374) (6,520) - (73,927) (67,709) Net book value At 12/31/17 9,592 7,516 - 4,077 5,855 27,040 27,040 At 9/30/18 7,998 7,591 - 2,980 9,669 28,238

Consolidated

9/30/18 12/31/17

Software Trademarks and patents Goodwill Technology

Development of software Total

Cost of intangible assets At the beginning of the period 55,054 22,889 4,374 9,500 5,855 97,672 90,398

Specific reversal 1,985 1,091 - - 4,384 7,460 8,983 Purchases - - - - (1) (1) (88) Disposals 569 - - - (569) - - Foreign exchange variation 167 452 - - - 619 55 Provision for losses - - - - - - (1,676) At the end of the period 57,775 24,432 4,374 9,500 9,669 105,750 97,672 Accumulated amortization 20% 10% 20% 20% - - - At the beginning of the period (45,373) (13,221) (4,374) (5,423) - (68,391) (59,956)

Specific reversal (4,153) (1,017) - (1,097) - (6,267) (9,336) Amortization - - - - - - 51 Disposals (143) - - - - (143) (15) Foreign exchange variation - - - - - - 865 At the end of the period (49,669) (14,238) (4,374) (6,520) - (74,801) (68,391) Net book value At 12/31/17 9,681 9,668 - 4,077 5,855 29,281 29,281 At 9/30/18 8,106 10,194 - 2,980 9,669 30,949

At September 30, 2018 and December 31, 2017, the Company does not have internally generated intangible assets.



Explanatory Notes


Page: 56 of 85

11. Borrowings

Obligations under loans and financings are as follows:


9/30/18 12/31/17

Index

Interest rate (p.y.)

Current liabilities

Non-current

liabilities Total

Current

liabilities

Non-current

liabilities Total

In local currency

Property, plant and equipment

Fixed 4.31%

10,825 23,283 34,108 10,834 31,390 42,224

Provin and Proapi

Long-term Interest

Rate (TJLP) -

- 5,281 5,281 - 2,571 2,571

10,825 28,564 39,389 10,834 33,961 44,795 In foreign currency

Working capital - ACE US Dollar +

1.76% and 2.30%

59,098 - 59,098 78,832 - 78,832 59,098 - 59,098 78,832 - 78,832 69,923 28,564 98,487 89,666 33,961 123,627

a) Fixed assets

These obligations refer to the financing contracted by the Company with Banco do Nordeste do Brasil S.A., through the FNE (Fundo Constitucional de Financiamento do Nordeste), for construction of a distribution center at the principal industrial plant; and financing for acquisition of industrial machines and equipment.

b) Financing – Provin and Proapi

The Company has the benefit of tax incentive advantages arising from financing granted by the FDI – Fundo de Desenvolvimento Industrial – of Ceará State, through the financial agent established by that Fund, applicable to ICMS tax payable (the Provin incentive), and products exported (the Proapi incentive), to be settled within periods of 36 to 60 months after their release. The financing shown here correspond to the non-incentive-bearing portions of those subsidies. The benefit of reduction of the amount payable is recognized at the moment of obtaining the financings, as this more appropriately reflects the accrual method of reporting for the period – since the cost of the ICMS tax and of the exports relating to the incentive-bearing transaction are also recorded at the same time as the benefits.

c) Working capital – ACEs The Company has contracted funding for financing of its exports in the modality, known as Advances on Delivered Shipping Documents, or ACEs.



Explanatory Notes


Page: 57 of 85

11. Borrowings--Continued

d) Payment schedule

Maturities of the long-term portions are as follows: Long-term portions

Maturities 2019 2020 2021 2022 2023 Total

Property, plant and equipment 2,601 10,341 10,341 - - 23,283 Proapi - - - 4,010 - 4,010 Provin - 52 316 140 763 1,271 Total 2,601 10,393 10,657 4,150 763 28,564

e) Guarantees

The amounts financed are covered by fiduciary liens on the goods acquired, and by a surety guarantee given by the majority stockholders of the Company.

12. Provisions for labor, tax, civil and environmental risks

a) Probable loss risk – Provided for

The Company is a defendant in certain labor claims and tax. The estimated loss was provisioned based on the opinion of the legal advisors, in an amount considered sufficient to cover probable losses that could arise in the event of unfavorable court decisions. The changes in the provision for labor risks and tax were as follows:


9/30/18 12/31/17 9/30/18 12/31/17 Labor Tax Labor Labor Tax Labor

Balance at the beginning of the period

1,096

- 2,462 1,285

- 3,195

Additions 1,464 2,370 1,824 1,468 2,370 1,844 Realizations (760) - (2,954) (767) - (3,517) Reversals (45) (8) (236) (46) (8) (237)

Balance at the end of the period

1,755

2,362 1,096 1,940

2,362 1,285

Current liabilities 1,467 2,362 824 1,472 2,362 833 Non-current liabilities 288 - 272 468 - 452



Explanatory Notes


Page: 58 of 85

12. Provisions for labor, tax, civil and environmental risks--Continued

b) Possible loss risk – Not provided for

The Company has labor, tax, civil and environmental contingencies involving risks classified by management as possible losses, based on the evaluation of the legal advisors, for which no provision was recognized. The analysis and the estimates are as follows: Parent company Consolidated

9/30/18 12/31/17 9/30/18 12/31/17

Labor 6,616 8,957 7,723 10,120 Tax PIS and COFINS - 1,050 - 1,050 INSS 519 891 519 891 Civil 33,463 33,280 33,463 33,280 Environmental 500 500 500 500 Labor 41,098 44,678 42,205 45,841

13. Equity

a) Capital

On April 23, 2018 an Extraordinary General Meeting of Stockholders approved a share split, without alteration in the share capital. Accordingly, since June 1, 2018 each common share became 3 common shares of the same type, the share capital now comprising 902,160,000 nominal common shares without par value. On September 30, 2018 the share capital, which is fully subscribed and paid up, comprised 902,160,000 common shares, each with market value of R$ 1.36 (this compares with 300,720,000 common shares, each with market value of R$ 4.09, on December 31, 2017). The shares are all of the same class as regards their holders’ rights, and all have equal right to vote, subject to the conditions of law.



Explanatory Notes


Page: 59 of 85

13. Equity--Continued

a) Capital--Continued This table shows the Company's ownership structure: Ownership structure

9/30/18 12/31/17

Common

Shares % Common Shares (*) %

Alexandre G. Bartelle Participações S.A. 279,900,036 31.03% 93,300,012 31.03% Alexandre Grendene Bartelle 91,791,771 10.17% 30,597,257 10.17% Pedro Grendene Bartelle 125,312,376 13.89% 41,770,792 13.89% Maria Cristina Nunes de Camargo 17,523,840 1.94% 5,841,280 1.94% Giovana Bartelle Veloso 37,132,797 4.12% 12,377,599 4.12% Pedro Bartelle 36,465,557 4.04% 12,155,199 4.04% André de Camargo Bartelle 29,201,277 3.24% 9,733,759 3.24% Gabriella de Camargo Bartelle 28,912,677 3.20% 9,637,559 3.20% Executive Board and Boar of Directors’

Members 2,876,302

0.32%

732,236

0.25%

Treasury shares 1,905,000 0.21% 7,543 0.00% Outstanding shares 251,138,327 27.84% 84,566,764 28.12%

902,160,000 100.00% 300,720,000 100.00% (*) 300,720,000, equivalent to 902,160,000 common shares, after the split.

b) Treasury shares

In order to comply with the stock option or subscription plan (Note 19), the program for acquisition of until 2,000,000 registered common shares was approved at the 71th Board of Directors Meeting held on July 27, 2017, without capital reduction. This amount of registered common shares corresponds to 2.38% of the shares outstanding.

The maximum term for the program is than 18 months, as of the approval by the Board of Directors. The changes in treasury shares, taking into account the effects of the share split, were as follows: Parent company

Common shares R$

Balance at the beginning of the period 22,629 134 Repurchases 3,937,029 35,148 Exercise of share purchase options (Note 19) (2,054,658) (19,718)

Balance at the end of the period 1,905,000 15,564

For the year ended September 30, 2018, the average purchase cost of these shares was R$8.93 (R$5.99 at December 31, 2017), the lowest cost being R$7.92 (R$5.75 at December 31, 2017) and the highest cost R$10.00 (R$6.20 at December 31, 2017).



Explanatory Notes


Page: 60 of 85


c) Income reserves

Legal reserve

This reserve is credited with 5% of the profit for the period, less the amount of tax incentives, and is limited to 20% of the company’s share capital. The balance is R$156,968 at September 30, 2018 (R$147,934 at December 31, 2017).

Reserve for acquisition of shares

This is the balance of R$ 16,035 on September 30, 2018 (R$ 23,862 on December 31, 2017), used for repurchase or acquisition of shares in the Company, in compliance with the share-based remuneration offered to participants in the Company’s stock options plan. The reserve is limited to a total value equal to 20% of the share capital; it may be made up of up to 100% of the net profit remaining after the deductions required by law and by the by-laws.

Tax incentives

This reserve is established in reference to the tax benefits received by the company under governmental subsidies to encourage investment, as shown in Note 14.


9/30/18 12/31/17

ICMS and

Exports Income tax Tax

incentives ICMS and Exports Income

tax Tax incentives

Balance at the beginning of the period

1,076,879 586,804 1,663,683 909,055 500,938 1,409,993

Incentives generated by the operation

110,172 43,367 153,539 167,824 85,866 253,690

Balance at the end of the period

1,187,051 630,171 1,817,222 1,076,879 586,804 1,663,683

d) Dividends and interest on equity

The 73rd Meeting of the Board of Directors, held at February 22, 2018, approved payment of an additional dividend proposed at December 31, 2017 by the management in the amount of R$ 19,630, and Interest on Equity in the amount of R$ 130,000 (R$ 110,500, net of income tax withheld at source), which will be paid from May 16, 2018. The table below shows the allocation of the interim dividends distributed in relation to the period of 2018.



Explanatory Notes


Page: 61 of 85


d) Dividends and interest on equity--Continued Parent company

2018 Description of proceeds Date

approved Date of payment Per share R$

Interim dividends paid

Dividends 4/26/2018 5/23/2018 0.3017 90,731

Dividends 7/26/2018 8/22/2018 0.0374 33,686

124,417 Interim dividend not paid

Dividends 0.0524 47,225

Total amounts relative to the 2018 business year 171,642

e) Earnings per share

Reconciliation of net income to the amounts used to calculate basic and diluted earnings per share (all amounts in thousands of Reais, except earnings per share), are as follows:

Parent company

9/30/18 9/30/17

Numerator Profit for the year 334,215 410,476

Denominator Weighted average number of common shares 902,160,000 902,160,000 Weighted average number of common treasury shares (1,251,849) (388,990)

900,908,151 901,771,010

Basic earnings per common share 0.3710 0.4552

Weighted average number of outstanding common shares 900,908,151 901,771,010 Potential increase in common shares due to the stock option or subscription plan

2,541,894

2,801,888

903,450,045 904,572,898

Diluted earnings per common share 0.3699 0.4538 The basic and diluted profit per share at September 30, 2017 is being re-presented to include the effect of the share, split which took place on June 1, 2018, so as to enable comparability between the periods.



Explanatory Notes


Page: 62 of 85

14. Government grants for investments

The government subsidies received by the Company and its subsidiary MHL Calçados Ltda. have the nature of a subsidy for investment, and are as follows: (i) tax incentives applying to ICMS tax, relating to its operational activities located in the states of Ceará and Bahia; and (ii) reduction, of 75%, in the ICMS tax payable on profits of enterprises established in the state of Ceará calculated on the operational profit. Government subsidies are recognized when there is reasonable certainty that the conditions established in the agreements governing them have been complied with.

a) Incentives – Provin and Proapi

Provin – Program of Incentive to the Industrial Development Fund of Ceará (FDI), which consists of the deferral equivalent to 81% of the effectively paid ICMS, levied on the Company's production. Of the amount of each portion of the benefit, the equivalent to 1% will be paid at once, on the last day of the maturity month, after 60 months and will be dully restated, from the date of the disbursement up to the maturity date, by applying the Long-Term Interest Rate (TJLP).

Units benefited by the incentive Percentage reduction Expiration date

Sobral – CE 81% Up to Feb/2019 75% Mar/2019 to Apr/2025 Crato – CE 81% Up to Sep/2022 75% Oct/2022 to Apr/2025 Fortaleza – CE 81% Up to Apr/2025

Proapi – Program of Incentives for the Port and Industrial Activities of Ceará, consists of the financing for manufacturing companies, mainly exporting companies of footwear and artifacts of fur and leather, except for "wet blue", headquartered in the state, through use of funds arising from the returns on FDI operations while not credited to the State treasury account (Note 11). This incentive was in effect up to March 31, 2017, at the Sobral Unit, in the state of Ceará. For the period ended September 30, 2018 the Company had amounts securities receivable recognized in Assets, for the Proapi incentives, totaling R$57,088 (R$70,502 at December 31, 2017).



Explanatory Notes


Page: 63 of 85

14. Government grants for investments--Continued

b) Incentives – Procomex and Probahia Procomex – Program of Incentive of Foreign Trade, with the purpose of stimulating exports of products manufactured in the State of Bahia and the financing of the tax on import of products for sale and manufacture promoted by industrial units headquartered in the state, Subsidiary MHL Calçados Ltda. has ICMS tax credit equivalent to 11% of the FOB value of the transactions of exports of footwear and its components. The incentive is valid up to December, 2021. Probahia – Program for the Development of Bahia, with the purpose of promoting diversification, and stimulating the transformation and industrial processes of the state. Subsidiary MHL Calçados Ltda. has ICMS tax credit of 90% of the incurring tax on transactions of output and footwear and its components and deferral of the ICMS paid in relation to the differential of rate by the acquisition of property, plant and equipment and in the imports and internal operations with inputs, packages and components, for the moment in which the output of their products occurs. The incentive is valid up to November, 2021.

The balances of the incentive amounts are reported in the Profit and loss account of the Holding company and in the Consolidated accounts, under Net sales revenue, as shown in Note 20. These amounts were allocated to the Tax incentives reserve account in Profit reserves. The amounts arising from the incentives given by States may be allocated differently, as specified in Law 12.973 of May 13, 2014.

c) Federal fiscal tax incentive

The Company is beneficiary of the following tax incentive: reduction of 75% in income tax on the profits of undertakings located in the industrial units headquartered in the area of activity of Sudene, as shown in the table below:

Units benefited by the incentive Project Percentage reduction Expiration date

Fortaleza – CE Modernization 75% Dec/2020 Sobral – CE Modernization 75% Dec/2022 Modernization 75% Dec/2023 Crato – CE Modernization 75% Dec/2026

The balances of this incentive are posted in the Company’s Profit and loss account, under Current income tax, as shown in Note 15. In counterpart, these amounts were posted in the Tax incentives reserve account, in Profit reserves, in Stockholders’ equity.



Explanatory Notes


Page: 64 of 85

15. Income tax and social contribution tax

a) Current income tax and social contribution tax

Current income tax and social contribution tax amounts recorded in the expense for the year, net of tax incentives, are as follows: Parent company

9/30/18 9/30/17 Income

tax Social

contribution

Total Income

tax Social contribution

Total

Amount due (33,316) (12,306) (45,622) (47,376) (17,574) (64,950) Tax incentives 43,367 - 43,367 49,184 - 49,184 10,051 (12,306) (2,255) 1,808 (17,574) (15,766)

Consolidated

9/30/18 9/30/17 Income

tax Social

contribution

Total Income

tax Social contribution

Total

Amount due (33,202) (12,328) (45,530) (47,422) (17,583) (65,005) Tax incentives 43,367 - 43,367 49,184 - 49,184 10,165 (12,328) (2,163) 1,762 (17,583) (15,821)

b) Deferred income tax and social contribution tax

Deferred income tax and social contribution tax are comprised as follows:


9/30/18 12/31/17 9/30/18 12/31/17

Estimated losses on doubtful receivables

837 1,684 837 1,684

Punctuality discounts estimated 4,360 4,255 4,364 428 4,261 Adjustment to Present Value (AVP) 1,410 1,952 1,410 1,952 Estimated losses for obsolete inventory 2,399 2,072 2,399 2,072 Provision for labor risks and tax 628 168 656 196 Interest on equity (counted as part of total dividends

- 44,200 - 44,200

Other 983 538 843 262 10,617 54,869 10,509 54,627



Explanatory Notes


Page: 65 of 85

15. Income tax and social contribution tax--Continued

c) Estimate for realization of deferred income tax and Social Contribution tax.

Realization of deferred income tax and Social Contribution tax is supported by technical feasibility studies, which show an estimate of the realization of the differed assets. Below is the timetable of the estimated periods for realization of the tax credits which exist at September 30, 2018:

Party company Consolidated

2018 5,255 5,033 2019 4,169 4,256 2020 1,188 1,215 2021 5 5 10,617 10,509

d) Reconciliation of tax expense to statutory rates

The amounts of income tax and Social Contribution tax, calculated at nominal rates, reported in the Profit and loss account, are reconciled as follows:

Party company Consolidated

9/30/18 9/30/17 9/30/18 9/30/17

Pretax income 380,722 470,470 380,496 470,199

Income tax and social contribution tax (at nominal rates of 25% and 9% respectively)

(129,445) (159,960) (129,369) (159,868)

Adjustments to show effective rate Equity in the results of subsidiaries (8,820) (5,969) - - Non-deductible costs and expenses (174) (907) (174) (908) Adjustments to present value – AVP 666 440 666 440 Stock options plan (1,677) (1,624) (1,677) (1,624) Special System for Refund of Tax Amounts to

Exporting Companies (Reintegra)

1,471 2,353 1,471 2,353 State tax incentives 37,459 41,188 37,481 41,226 Technological innovation incentive 8,518 8,419 8,518 8,419

Corporate tax incentive deductions – Income tax 850 1,422 852 1,422 Interest on equity counted as part of total dividends - 10,200 - 10,200 Exchange losses on investments - (3,285) - (3,285) Other additions and exclusions 1,278 (1,455) (7,416) (7,308) Amount before deduction of corporate tax incentives

(89,874) (109,178) (89,648) (108,933)

Tax incentive reductions of corporate income tax (calculated on operational profit)

43,367 49,184 43,367 49,184

Total taxes posted in profit and loss account (46,507) (59,994) (46,281) (59,749) Current taxes (2,255) (15,766) (2,163) (15,821) Deferred taxes (44,252) (44,228) (44,118) (43,928)

Effective rate 12.2% 12.8% 12.2% 12.7%



Explanatory Notes


Page: 66 of 85

16. Financial instruments

The Company has transactions with financial instruments, the risks of which are managed through financial position strategies and exposure limit systems. All transactions are fully recognized in the accounting records. The table below gives the classification of the principal financial assets and liabilities of the Company and its subsidiary. Party company Consolidated

9/30/18 12/31/17 9/30/18 12/31/17

Financial assets at amortized cost Cash and cash equivalents 7,245 18,240 19,851 30,119 Financial investments (*) 1,876,718 1,750,526 1,876,718 1,750,526 Trade receivables 770,217 857,931 772,129 850,345 Derivatives - 407 - 407

Financial liabilities at amortized cost Borrowings 98,487 123,627 98,487 123,627 Trade payables 48,011 35,387 49,051 36,705 Commissions payable 37,765 41,686 37,927 41,622 Derivatives 3,509 - 3,509 -

(*) The company measures its financial instruments at amortized cost, in accordance with Level 1 of the hierarchy, that is to say they are valued at the quoted prices (without adjustments), in active markets, for identical assets or liabilities. a) Foreign exchange rate hedging transactions

The strategy when contracting these transactions is to hedge the sales revenue and financial assets of the Company and its subsidiaries that are subject to foreign exchange exposure. These instruments are used for the specific purpose of hedging, and the portfolio includes sale of U.S. dollar futures through financial instruments used for this purpose such as: sales on the São Paulo Futures, Commodities and Securities Exchange – BM&F and advances on future exports (ACE). In transactions involving BM&F sales, the impact on the cash flow of the Company and its subsidiaries is assessed through the calculation of daily adjustments to the U.S. dollar exchange rate until the settlement of the contracts.



Explanatory Notes


Page: 67 of 85

16. Financial instruments--Continued

a) Foreign exchange rate hedging transactions--Continued To reduce the net effects of exposure of its business the managers may negotiate future contracts for sale of USD on the BM&F up to the maximum limit defined by the sum of the following items: (i) bank balances in foreign currency held outside Brazil; (ii) financial investments held outside Brazil; (iii) balances of accounts receivable (denominated in USD) of exchange transactions to be contracted; (iv) up to 25% of the forecasts of annual exports equivalent to approximately 90 days of forecast exports (normally corresponding to orders in the order book and negotiations for sales in progress), less: (i) balances of suppliers held in foreign currency; (ii) imports in progress; and (iii) ACCs (Advances against exchange contract). These risks are monitored daily and administered through internal controls aimed to demonstrate the limits of exposure and adapt them to the Company’s risk management policy.

Other forms of foreign exchange hedges without the express authorization of the Company's officers are not permitted, Up to date, the Company has not authorized the use of foreign exchange hedges other than those disclosed in the previous paragraph.

Foreign exchange hedging transactions are usually made with the BM&F through specialized brokers, without the need to deposit margin. The guarantee amounted to R$55,287 at September 30, 2018 (R$52,236 at December 31, 2017) and usually comprises the Company's investments in government securities, considering the limits and exposures to foreign exchange risk, as defined in the policy for management of counterparty risk. The table below shows the positions at September 30, 2018 and December 31, 2017, with the notional and fair value.

Notional value – US$ Notional value – R$ Amount receivable

(payable)

9/30/18 12/31/17 9/30/18 12/31/17 9/30/18 12/31/17 Futures contracts

Sell commitment 75,250 64,500 304,640 213,864 (3,509) 407

It should be noted that these transactions are linked to sales and financial assets in foreign currency, which are also subject to foreign exchange rate changes, offsetting any gains or losses. The balance payable of the fair value presented at September 30, 2018, in the amount of R$3,509, is classified in other payables and the balance receivable at December 31, 2017 in the amount of R$407 is classified in securities receivable



Explanatory Notes


Page: 68 of 85

17. Financial risk management

The activities of the Company and its subsidiaries are exposed to financial risks, including: credit risk, liquidity risk, and market risk. The financial instruments affected by risks include: deposits, securities available for sale, loans and financings, and derivative financial instruments.

The risk management activities follow the Company's risk management policy, which is administered by its officers. The management of these risks is effected based on a control policy, which establishes monitoring techniques, measurement and ongoing accompanying of exposure. The Company does not have transactions with speculative derivative financial instruments or any other type of speculative transactions.

a) Risk factors that could affect the business

a.1) Credit risk

The company and its subsidiaries are exposed to credit risk from the possibility of not receiving amounts receivable from clients or credit amounts with financial institutions.

The Company and its subsidiaries adopt the following risk management practices: (i) Analysis of credits granted to clients, and setting of sales limits, No single client represented more than 5% of the total Company’s accounts receivable at September 30, 2018 and December 31, 2017; and (ii) selectiveness in choice of financial institutions that are considered by the market to be first-tier (the country’s 10 largest banks by total assets), and diversification of financial instruments in investment of the company’s funds, Cash investments are made in a basket of indicators comprising the CDI rate, fixed rates and inflation-indexed investments.

a.2) Liquidity risk

The Company monitors the policy on cash generated by its activities, to avoid mismatch between accounts receivable and accounts payable, thus ensuring liquidity for compliance with its obligations. The principal source of funds used by the company is the volume of proceeds from the sale of its products. One characteristic of the strong cash flow generation is low default. The Company, additionally, holds balances in cash investments that may be redeemed at any moment, and has solid financial and equity conditions, for complying with its short and medium term obligations. This table shows the requirements for contractual payments arising from the Company’s financial liabilities:



Explanatory Notes


Page: 69 of 85

17. Financial risk management--Continued

a) Risk factors that could affect the business--Continued

a.2) Liquidity risk--Continued


9/30/18 12/31/17 Up to 1

year From 1

to 9 years

Total

Up to 1 year

From 1 to 9 years

Total

PP&E financing 10,825 23,283 34,108 10,834 31,390 42,224 Working capital and ACE 59,098 - 59,098 78,832 - 78,832 Financing – Proapi and Provin - 5,281 5,281 - 2,571 2,571 69,923 28,564 98,487 89,666 33,961 123,627


Projection including future interest

9/30/18 12/31/17 Up to 1

year From 1

to 9 years

Total

Up to 1 year

From 1 to 9 years

Total

PP&E financing 12,020 24,541 36,561 12,363 33,577 45,940 Working capital and ACE 59,892 - 59,892 79,531 - 79,531 Financing – Proapi and Provin - 6,434 6,434 - 3,241 3,241 71,912 30,975 102,887 91,894 36,818 128,712

a.3) Market risk

These market risks principally involve the possibility of variation in interest rates, foreign exchange rates and prices of commodities.

a. Interest rate risk

This risk arises from the possibility that the Company may incur losses due to fluctuations in interest rates that lead to an increase in its finance costs related to borrowings, or a decrease in its earnings on financial investments. The Company continuously monitors the volatility of market interest rates. The Company's policy is to keep its funds invested in instruments indexed to the CDI rate, at fixed rates or rates adjusted by inflation – since this ensures reduction of the impacts arising from variations in market interest rates.



Explanatory Notes


Page: 70 of 85


a) Risk factors that could affect the business--Continued

a.3) Market risk--Continued

b. Exchange rate risk

The Company’s risk in this case arises from transactions in accounts receivable originating from exports, or from financial or other investments outside Brazil – which form a natural hedge against exchange rate variations. Management values its assets and liabilities that are subject to foreign exchange risk, and if necessary contracts additional derivative financial instruments. The Company maintains coverage for its exposure to fluctuations in exchange rates for conversion to Reais at maturity of its export contracts. On September 30, 2018, these totaled USD14,372 million and EUR336 million (vs. total USD23,835 million on December 31, 2017). There are no financings or loans contracted in or indexed to any foreign currency.

c. Commodity price risk

This risk refers to the possibility of fluctuations in the price of raw materials and other inputs used in the production process, As the Company uses commodities as raw materials, its cost of sales can be affected by fluctuations in the international prices of these materials. In order to minimize this risk, the Company maintains ongoing monitoring of price fluctuations in the domestic and foreign markets and, if necessary, maintains strategic inventories to support its commercial activities.

b) Interest rate fluctuation sensitivity analysis

In order to verify the sensitivity of indices of financial investments and loans to which the Company was exposed on September 30, 2018, three different scenarios were defined and a sensitivity analysis of the fluctuation of the indices of these instruments was prepared, Based on the projection of the index of each contract for 2018 (probable scenario), decreases of 25% and 50% for financial investments and increases of 25% and 50% for loans were calculated. The scenarios do not consider the probable cash flow related to loan repayments and investment redemptions.



Explanatory Notes


Page: 71 of 85


b) Interest rate fluctuation sensitivity analysis--Continued

Earnings from financial investments as well as financial costs related to the Company's borrowings are affected by fluctuations in interest rates, such as TJLP, Amplified Consumer Price Index (IPCA), IGPM and CDI. The table below shows the outstanding positions at September 30, 2018, with the notional values and interest of each contracted instrument: Reduction of finance

income Increase in finance

costs

Reference for finance income

Interest on financial

investments

Reference financial liabilities

Cost of Proapi

and Provin financings

CDI rate

IPCA index

TJLP rate

Probable scenario – Book value 6.39% 4.19% 71,365 6.56% 346 Possible scenario – 25% 4.79% 3.14% 59,303 8.20% 433 Remote scenario – 50% 3.20% 2.10% 47,194 9.84% 520

c) Sensitivity analysis of contracted derivative financial instruments

c.1) Foreign exchange rate hedge

The Company has projected the effect of the transactions designed for Exchange rate protection in three scenarios, considering the transactions would be settled, on the basic of the position becoming due on October 31, 2018, as follows:

Notional value

Short position in US$ FX rate – R$ Amount – R$ Impact – R$

Probable scenario – Book value 75,250 4.0484 304,640 (3,509) Possible scenario – 25% 75,250 5.0605 380,803 (76,163) Remote scenario – 50% 75,250 6.0726 456,963 (152,323)

d) Capital management

Management has the objective of ensuring continuity of the Company’s business, protecting its capital from economic changes and conditions, so as to support reduction of costs of capital and maximize return to stockholders. To maintain or adjust the capital structure, the Company may, among other possible actions, make adjustments to its dividend payment policy, or contract loans, or issue securities in the financial markets.



Explanatory Notes


Page: 72 of 85


d) Capital management--Continued

The Company’s policy of a low level of leverage is monitored through the financial leverage index, as shown below.


9/30/18 12/31/17 9/30/18 12/31/17

Current and non-current borrowings 98,487 123,627 98,487 123,627 (-) Cash and cash equivalents (7,245) (18,240) (19,851) (30,119) Net debt 91,242 105,387 78,636 93,508 Equity 3,279,854 3,217,609 3,279,854 3,217,609 Gearing ratio 2.8% 3.3% 2.4% 2.9%

On September 30, 2018, the leverage ratio had been reduced from its level at December, 31, 2017, mainly due to settlement of loans and financings.

18. Balances and transactions with related parties

During the periods, the Company carried out the following transactions with related parties:

a) Amounts and transactions receivable and payable – Related parties

Parent company /Consolidated

9/30/18 12/31/17

Other receivables

Other payables

Accounts receivable from sales

and services Trade

payables Other receivables

Other payables

Accounts receivable from sales

Trade payables

Direct subsidiaries MHL Calçados Ltda. - 242 18 9 9 21 - Grendene USA, Inc. - - 3,364 239 - - 12,621 537 Grendene UK Limited. 8,101 - 1,264 - - - 849 - A3NP Indústria e Comércio de Móveis S.A. - - - - 5,614 5,480 - -

Indirect subsidiary Grendene Italy SRL. - - 1,287 157 - - 3,287 -



Explanatory Notes


Page: 73 of 85

18. Balances and transactions with related parties--Continued

a) Amounts and transactions receivable and payable – Related parties--Continued

Parent company /Consolidated

9/30/18 9/30/17 Sales of

goods and PPE

Purchases of goods

and services

Finance income

Finance costs

Sales of goods and

PPE Purchases of goods

and services

Finance income

Finance costs

Direct subsidiaries Grendene Argentina S.A. - - - - - - 39 88 MHL Calçados Ltda. 665 642 - - 776 25 - - Grendene USA, Inc. 6,554 755 3,393 1,139 7,809 648 1,009 1,057 Grendene UK Limited. 1,229 - 1,297 568 525 - 801 447

Indirect subsidiary Grendene Italy SRL. 796 2,193 765 262 1,320 - 141 294

Companies controlled by stockholders of Grendene S.A.

Vulcabrás|azaléia – CE, Calçados e Artigos Esportivos S.A.

520

-

-

- 33

-

-

-

Vulcabrás|azaléia –BA, Calçados e Artigos Esportivos S.A.

-

-

-

- 717

-

-

-

b) Nature, terms and conditions of transactions

Related parties Nature of transactions Average

terms

Direct subsidiaries MHL Calçados Ltda.

Sale of inputs for the production of shoes Purchase of inputs for the production of shoes

43 days 81 days

Grendene USA. Inc.

Sale of shoes Purchases of services and referred to commissions

198 days 11 days

Grendene UK Limited. Sale of shoes 203 days

Indirect subsidiary Grendene Italy S.R.L. Sale of shoes 192 days Purchase of advisory services 21 days

Companies controlled by stockholders of Grendene S.A. Vulcabrás|azaleia – CE, Calçados e Artigos Esportivos S.A.

Sale of inputs and molds for the production of shoes Sales of fixed assets Rentals Indemnities to representatives

21 days 21 days 40 days 2 days

Vulcabrás|azaleia – BA, Calçados e Artigos Esportivos S.A Sale molds for the production of shoes 33 days

There are no other transactions, except dividends paid, between the Company and the subsidiary, for the periods ended September 30, 2018 and December 31, 2017.

c) Key management compensation

Salaries and social charges for key management personnel are as follows:

Parent company

9/30/18 9/30/17 Board of Directors 858 833 Statutory Audit Board 328 319 Statutory Directors 3,192 3,104 4,378 4,256



Explanatory Notes


Page: 74 of 85

18. Balances and transactions with related parties--Continued

c) Key management compensation--Continued

The Company offers a stock option plan as variable compensation, as described in Note 19, having recognized as an expense the amount corresponding to the option premium at September 30, 2018 of R$4,934 (R$4,777 at September 30, 2017). The Company did not pay its key management personnel compensation in the categories of: a) long-term benefits; b) employment contract termination benefits and c) post-employment benefits.

d) Other related parties

The Company uses travel agency and consultancy services provided by companies that are the property of a related party, as follows: Parent company

9/30/18 9/30/17 Dall’Onder Viagens & Turismo Ltda. 187 391 Mailson da Nóbrega Consultoria S/C Ltda. 54 54 Ochman, Real Amadeo Advogados Associados 88 98 329 543 The transactions with related parties are carried out on a commutative basis and in accordance with the criteria for evaluation and selection of suppliers. The amounts spent on these services total approximately 0.02% of the Company's general expenses. There were no outstanding balances at September 30, 2018 and December 31, 2017.

19. Stock option or subscription plan

The information is being presented taking into account the number of shares after the split, to enable comparability with the current period.

For compliance with exercises of stock options, a total of 3,937,029 shares were acquired in 2018, at an average cost of R$ 8.93, totalling an amount of R$ 35,148. In first quarter 2018, options for a total of 2,054,658 shares were exercised, at an average price of R$ 2.94, totaling R$ 6,050. The difference between the average exercise price of the options and the average cost of the shares acquired for compliance with the exercise of stock options resulted in recognition of R$ 7,827. This was posted in Stockholders’ equity, since settlement of the stock option plans takes place with equity instruments.



Explanatory Notes


Page: 75 of 85

19. Stock option or subscription plan--Continued

a) Bases for recognition of expenses on share-based remuneration

Shares are valued at fair value on the date of the grant, and expenses recognized in the Profit and loss account as Personnel expenses, over the period in which the right to the exercise of the option is acquired, with counterpart in Stockholders’ equity. The fair value of the options granted was estimated using the Black & Scholes options pricing model. The economic parameters used were: i) expected dividends, obtained on the basis of the average of dividend payments per share, in relation to the market value of the shares in the last 12 months; ii) volatility, based on the historic average variation of the share price in the 18 months prior to the date of the grant; and iii) the risk-free interest rate, assumed to be the projected average of the Selic rate, published by the Central Bank. This table gives this information in detail:

8th Plan 9th Plan 10th Plan 11th Plan

Grant date 2/12/2015 2/25/2016 2/16/2017 2/22/2018 Total purchase options granted 1,939,662 2,675,538 2,181,456 1,524,825 Exercise price 2.81 2.96 3 3.27 5.16 Estimated volatility 26.51% 29.89% 20.16% 15.58% Expected dividends 5% 6% 6% 4% Weighted average risk-free interest rate 12.75% 14.25% 9.50% 6.75% Maximum maturity 6 years 6 years 6 years 6 years Average maturity 2.5 years 2.5 years 2.5 years 2.5 years Option premium 2.02 2.58 3.16 4.43 The Company has no commitment to re-purchase such shares as are acquired by the beneficiaries.

b) Movement stock options plan

This table shows the changes arising from the transactions of purchase or subscription of shares:



Explanatory Notes


Page: 76 of 85

19. Stock option or subscription plan--Continued

b) Movement stock options plan--Continued

4th Plan 7th Plan 8th Plan 9th Plan 10th Plan 11th Plan Final Balance

Total at 12/31/2016 24,147 338,712 1,216,968 2,649,240 - - 4,229,067 Granted - - - - 2,181,456 - 2,181,456 Exercised (24,147) (338,712) (599,376) (869,559) - - (1,831,794) Canceled - - (41,607) (107,931) (90,072) - (239,610) Total at 12/31/2017 - - 575,985 1,671,750 2,091,384 - 4,339,119 Granted - - - - - 1,524,825 1,524,825 Exercised - - (562,107) (812,784) (679,767) - (2,054,658) Canceled - - (13,878) (59,016) (74,241) (23,688) (170,823) Total at 9/30/2018 - - - 799,950 1,337,376 1,501,137 3,638,463 Options exercisable in 2019 - - - 799,950 668,688 500,379 1,969,017 Options exercisable in 2020 - - - - 668,688 500,379 1,169,067 Options exercisable in 2021 - - - - - 500,379 500,379 - - - 799,950 1,337,376 1,501,137 3,638,463 Result of options granted, recognized on 9/30/2017

(14)

(685)

(1,278)

(2,334)

(38)

-

(4,349)

Result of options granted, recognized on 9/30/2018

- - (1,208) (2,236) (2,371) (26) (5,841)

20. Net sales and services revenue

Net sales and services revenue is comprised as follows: Parent company Consolidated

9/30/18 9/30/17 9/30/18 9/30/17

Gross sales and services revenue 1,903,932 1,841,758 1,940,936 1,880,827 Domestic market 1,552,987 1,528,031 1,553,844 1,530,128 Adjustment to Present Value (AVP) (31,711) (48,045) (31,711) (48,045) Foreign market 382,464 346,280 418,611 383,252 Adjustment to Present Value (AVP) (4,134) (2,601) (4,134) (2,601) Tax incentives – Proapi/Procomex - 11,174 - 11,174 Special System for Refund of Tax Amounts to Exporting Companies (Reintegra)

4,326 6,919 4,326 6,919

Sales returns (35,845) (33,967) (37,170) (34,988) Financial discounts (73,171) (69,823) (74,745) (71,859) Taxes on sales and services (320,098) (314,556) (321,026) (315,520) ICMS tax incentives – Provin/ Development Promotion Program of the State of Bahia (Probahia)

110,172 109,967 110,238 110,076 INSS (22,246) (19,505) (22,269) (19,535) State Fiscal Balance Fund (FEEF) (4,925) (2,407) (4,932) (2,418) 1,557,819 1,511,467 1,591,032 1,546,583

21. Segment reporting

The Group operates in the following market segments: (i) production and sale of synthetic footwear for the domestic and external markets; and (ii) sale, import and export of plastic-based furniture and associated products.



Explanatory Notes


Page: 77 of 85

21. Segment reporting--Continued Sales volume in the footwear market may show variation over the period: a higher volume is expected in the second half of each year. In Management’s judgment, the Company’s operations have no significant impact that calls for additional disclosures. Although the Company’s footwear products are designed to serve the various publics and socio-economic groups, management does not monitor and manage them as independent market segments: the Company’s results are accompanied, monitored and evaluated as an integrated whole. This table shows consolidated sales in the domestic and export markets, and non-current assets: Parent company Consolidated

9/30/18 9/30/17 12/31/17 9/30/18 9/30/17 Gross

sales Non-current

assets Gross sales

Non-current assets Gross

sales Gross sales

Footwear

Domestic market 1,521,276 14,346 1,479,986 13,997 1,522,133 1,481,114 Foreign market 382,656 30,470 361,772 32,772 418,803 398,744

Furniture Domestic market - - - - - 969

1,903,932 44,816 1,841,758 46,769 1,940,936 1,880,827

Non-current assets outside Brazil refers to the investments in the Company’s direct and indirect subsidiaries, and represents approximately 3% of the total of the Company’s non-current assets. The summarized financial information of these subsidiaries is presented in Note 8. The information on gross sales of products in the export market by geographical segment has been itemized by country of origin of the revenue, as follows: Consolidated

9/30/18 9/30/17

Brazil 374,069 352,073 USA 34,535 35,098 Italy 6,654 9,127 United Kingdom 3,545 2,446

418,803 398,744 No customer individually represented more than 5% of sales in the domestic or foreign market.



Explanatory Notes


Page: 78 of 85

22. Costs and expenses by nature

The Company presents the Profit and loss account itemized by function. The classification of operational costs and expenses by type is as follows: Parent company Consolidated

9/30/18 9/30/17 9/30/18 9/30/17

Cost of goods sold Raw materials (359,952) (349,681) (364,014) (354,455) Personnel expenses (323,604) (306,782) (328,333) (312,284) Depreciation and amortization (38,501) (34,699) (38,552) (34,863) Outsourced services (20,074) (13,981) (20,102) (14,002) Electricity (18,027) (16,112) (18,202) (16,290) Other costs (88,663) (77,591) (90,466) (80,781) (848,821) (798,846) (859,669) (812,675)

Selling expenses Commissions (82,027) (83,107) (83,619) (84,909) Freight (77,700) (71,089) (79,992) (72,868) Copyrights (35,547) (34,014) (35,547) (34,014) Advertising and publicity (73,068) (75,264) (85,856) (84,764) Personnel expenses (27,478) (24,647) (35,354) (30,804) Depreciation and amortization (1,911) (2,069) (3,890) (3,220) Outsourced services (7,249) (6,053) (8,878) (7,810) Travel and accommodation (4,841) (4,573) (5,141) (4,843) Congresses (4,576) (5,470) (4,576) (5,470) Rentals (2,216) (2,167) (14,062) (12,090) Other expenses (17,762) (26,883) (22,724) (30,844) (334,375) (335,336) (379,639) (371,636)

General and administrative expenses Personnel expenses (46,065) (43,232) (47,391) (46,161) Depreciation and amortization (5,351) (5,619) (5,411) (5,756) Outsourced services (5,867) (6,609) (6,743) (7,842) Travel and accommodation (808) (927) (820) (950) Tax expenses (4,079) (3,922) (4,114) (4,003) Other expenses (2,955) (3,832) (3,338) (4,229) (65,125) (64,141) (67,817) (68,941)

(1,248,321) (1,198,323) (1,307,125) (1,253,252)



Explanatory Notes


Page: 79 of 85

23. Finance result


9/30/18 9/30/17 9/30/18 9/30/17

Financial income Interest received from customers 1,696 1,618 1,697 1,618 Gains on foreign exchange hedge – BM&F 35,954 22,489 35,954 22,489 Income from financial investments 102,157 136,278 102,638 137,067 Foreign exchange gains 63,476 23,657 63,626 25,848 Adjustment to Present Value (AVP) 39,399 52,992 39,399 52,992 Other financial income 4,364 1,957 4,374 1,979

247,046 238,991 247,688 241,993 Financial expenses

Losses on foreign exchange hedge – BM&F (68,604) (7,432) (68,604) (7,432) Financing expenses (7,857) (7,235) (7,857) (7,632) Foreign exchange losses (60,955) (24,709) (61,212) (25,593) PIS and COFINS tax on financial revenues (5,253) (6,646) (5,275) (6,713) Other finance expenses (2,711) (2,223) (3,259) (2,782) (145,380) (48,245) (146,207) (50,152)

101,666 190,746 101,481 191,841

(A free translation of the original in Portuguese) (Unaudited)


Comment on the behavior of business projections

Page: 80 of 85

Comparison of performance with targets

Note that the guidance that we publish is for complete years, not individual quarters – but for optimum transparency and analysis we include comparisons of quarters in this chart:

Performance: CAGR, in the third quarters of the years 2008–2018: R$ mn 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 CAGR Gross revenue 457.9 475.5 546.4 511.3 613.0 739.0 730.1 734.5 654.0 723.9 732.8 4.8% YoY change 3.9% 14.9% (6.4%) 19.9% 20.6% (1.2%) 0.6% (11.0%) 10.7% 1.2% Net profit 73.3 65.6 104.8 83.5 119.4 122.1 126.0 133.5 150.9 146.7 112.4 4.4% YoY change (10.5%) 59.7% (20.3%) 43.0% 2.2% 3.2% 5.9% 13.1% (2.8%) (23.4%)

R$ mn 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 CAGR Advertising expenses

32.3 33.9 44.4 46.3 42.9 45.7 53.4 54.9 36.1 37.7 40.6 2.3%

% of NOR 9.0% 9.0% 10.2% 11.2% 8.6% 7.6% 8.9% 8.9% 6.7% 6.3% 6.8%

Performance: CAGR, in first nine months of year, 2008–2018: R$ mn 9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 9M17 9M18 CAGR Gross revenue 1,076.1 1,218.7 1,394.0 1,210.6 1,521.1 1,847.3 1,834.2 1,835.1 1,719.8 1,880.8 1,940.9 6.1% YoY change 13.2% 14.4% (13.2%) 25.6% 21.4% (0.7%) (0.05%) (6.3%) 9.4% 3.2% Net profit 156.7 187.2 189.7 183.9 261.0 290.6 294.9 357.1 387.5 410.5 334.2 7.9% YoY change 19.5% 1.4% (3.1%) 41.9% 11.4% 1.5% 21.1% 8.5% 5.9% (18.6%)

R$ mn 9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 9M17 9M18 CAGR Advertising expenses

69.5 72.3 82.6 85.0 101.3 105.2 105.9 100.1 83.6 84.8 85.9 2.1%

% of NOR 8.2% 7.4% 7.4% 8.7% 8.3% 7.1% 7.1% 6.6% 5.9% 5.5% 5.4%

In 2008 we published the following parameters as our targets for the 10 years from 2008 through 2018:

Compound average growth rate (CAGR) of gross revenue: between 8% and 12%.

CAGR of net profit: between 12% and 15%.

Objective for average advertising expenses in the period 8% to 10% of net revenue.

What has happened so far this year has been less positive than our initial expectations for the year, and contrary to our forecast, consumption did not recover during the year even though interest rates were kept very low.

The lower interest rates resulted in our financial revenue being lower, and we did not achieve the growth in the operational result that would have offset this effect.

This resulted in net profit being lower year-on-year, rather than slightly higher as we initially expected.



Other information considered relevant by the company

Page: 81 of 85

We hereby inform that the number of shares of Grendene SA at September 30, 2017 was adjusted for comparability purposes as a result of the stock split approved at the Annual and Extraordinary Shareholders' Meeting held on April 23, 2018, where each one common share it will be represented by 3 (three) shares following the split. As a result, GRENDENE's share capital increased from 300,720,000 (three hundred million, seven hundred and twenty thousand) common shares to 902,160,000 (nine hundred and two million one hundred sixty thousand) common shares. The shares were ex-split on June 1, 2018.

We state below the stockholding structure of the group on September 30, 2018 and 2017, down to the level of beneficial ownership by individuals:

1. Stock Ownership of Grendene S.A.

Shareholders September 30, 2018 September 30, 2017

Quantity ON Shares Participation % Quantity ON Shares Participation %

Alexandre G. Bartelle Particip. S/A 279,900,036 31.025543% 279,900,036 31.025543%

Pedro Grendene Bartelle (1) 125,312,376 13.890261% 9,202,620 1.020065%

Alexandre G. Bartelle (1) 91,791,771 10.174666% 91,791,771 10.174666%

Giovana Bartelle Veloso 37,132,797 4.115988% 8,229,120 0.912157%

Pedro Bartelle 36,465,597 4.042032% 7,561,920 0.838202%

André de Camargo Bartelle 29,201,277 3.236818% 0 0.000000%

Gabriella de Camargo Bartelle 28,912,677 3.204828% 0 0.000000%

Maria Cristina Nunes de Camargo 17,523,840 1.942431% 17,523,840 1.942431%

Verona Neg. e Particip. S/A 0 0.000000% 231,599,964 25.671717%

Maílson Ferreira da Nóbrega (1) 27 0.000003% 27 0.000003%

Oswaldo de Assis Filho (1) 27 0.000003% 27 0.000003%

Renato Ochman (1) 27 0.000003% 27 0.000003%

Walter Jansen Neto (1) 9,000 0.000998% 9,000 0.000998%

Executive Board 2,867,221 0.317817% 2,204,427 0.244350%

Free float (2) 251,138,327 27.837449% 254,114,592 28.167354%

Treasury stocks 1,905,000 0.211160% 22,629 0.002508%

Total 902,160,000 100.000000% 902,160,000 100.000000%

1) Member of the Board of Directors; 2) Shareholders holding less than 5% of the company´s voting capital;

1.1. Stock Ownership of Alexandre G, Bartelle Participações S.A.



Alexandre G, Bartelle 3,285,062 100.00000% 3,285,062 100.000000%

Total 3,285,062 100.00000% 3,285,062 100.000000%

1.2. Stock Ownership of Verona Negócios e Participações S.A.



Pedro Grendene Bartelle 0 0.000000% 2,915,290 50.080000%

André de Camargo Bartelle 0 0.000000% 726,494 12.480000%

Gabriella de Camargo Bartelle 0 0.000000% 726,494 12.480000%

Giovana Bartelle Velloso 0 0.000000% 726,494 12.480000%

Pedro Bartelle 0 0.000000% 726,494 12.480000%

Total 0 0.000000% 5,821,266 100.000000%

2. Controlling shareholders, management and free float – Grendene S.A.



Controlling shareholders 646,240,371 71.632567% 645,809,271 71.584781%

Members of the Board of Directors 9,081 0.001007% 9,081 0.001007%

Members of the Audit Committee 0 0.000000% 0 0.000000%

Executive Officers 2,865,221 0.317596% 2,204,427 0.244350%

Free float 251,140,327 27.837670% 254,114,592 28.167354%

Treasury stocks 1,905,000 0.211160% 22,629 0.002508%



Other information considered relevant by the company

Page: 82 of 85

3. Free-Float – Grendene S.A.

Shareholders profile Individuals

September 30, 2018 September 30, 2017

Quantity # Nominal

common Shares Participation % Quantity

# Nominal common Shares

Participation %

Individuals 24,612 40,766,473 16.24% 12,585 25,562,949 10.06%

Institutional investors

Insurance companies 0 0 0.00% 0 0 0.00%

Pensions funds and security 10 835,157 0.33% 14 1,901,445 0.75%

Mutual funds 128 68,791,499 27.39% 139 55,456,056 21.82%

Total 138 69,626,656 27.72% 153 57,357,501 22.57%

Foreign investors 218 131,528,903 52.37% 304 162,343,095 63.89%

Public and private companies 138 8,986,895 3.58% 116 8,842,647 3.48%

Financial institutions

Commercial and multiple banks, financial companies 0 0 0.00% 0 0 0.00%

Investment Banks, securities dealers and brokers 2 229,400 0.09% 1 2,800 0.00%

Total 2 229,400 0.09% 1 2,800 0.00%

Total 25,108 251,138,327 100.00% 13,159 254,114,592 100.00%

The definition of shares outstanding is in accordance with the provision of section 4, § 2 of Law 6.404/76.

The amount of shares in outstanding was computed according to the provision of B3's Listing Regulation in force since January 2nd 2018.

(A free translation of the original in Portuguese) (Unaudited) Quarterly information (ITR) - 9/30/2018 - GRENDENE SA Version : 1 Reports and Declarations/ Officers' Declaration on the Financial Statements

Page: 83 of 85

INDEPENDENT AUDITOR’S REVIEW REPORT ON QUARTERLY INFORMATION The Shareholders, Board of Directors and Officers Grendene S.A. Sobral - CE Introduction We have reviewed the accompanying individual and consolidated interim financial information, contained in the Quarterly Information Form (ITR) of Grendene S.A. (the “Company”) for the quarter ended September 30, 2018, comprising the statement of financial position as of September 30, 2018 and the related statements of profit or loss and of comprehensive income for the three and nine-month periods then ended, and of changes in equity and of cash flows for the nine-month period then ended, including the explanatory notes. Management is responsible for preparation of the individual and consolidated interim financial information in accordance with Accounting Pronouncement CPC 21 (R1) – Interim Financial Reporting and IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the fair presentation of this information in conformity with the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and international standards on review engagements (NBC TR 2410 and ISRE 2410 - 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 auditing standards 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 individual and consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the individual and consolidated interim financial information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to the preparation of Quarterly Information (ITR), and presented consistently with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Other matters Statements of value added We have also reviewed the individual and consolidated statements of value added (SVA) for the nine-month period ended September 30, 2018, prepared under the Company responsibility, whose presentation in the interim financial information is required by rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to preparation of Quarterly Information (ITR), and as supplementary information by the International Financial Reporting Standards (IFRS), which do not require SVA presentation. These statements have been subject to the same review procedures previously described and, based on our review, nothing has come to our attention that causes us to believe that they were not prepared, in all material respects, consistently with the overall interim financial information. Porto Alegre, October 24, 2018. ERNST & YOUNG Auditores Independentes S.S. CRC 2SP015199/O-6 Guilherme Ghidini Neto Accountant CRC RS-067795/O-5

(A free translation of the original in Portuguese) (Unaudited) Quarterly information (ITR) - 9/30/2018 - GRENDENE SA Version : 1 Reports and Declarations/ Officers' Declaration on the Financial Statements

Page: 84 of 85

Officers' representation on the quarterly information In conformity with CVM Instruction 480, of December 7, 2009, Subsection III – Financial Statements, item VI of Article 25, the Executive Officers of Grendene S.A. have reviewed, discussed and agreed with the Quarterly Information of the Company and its subsidiaries (Consolidated) and they state that such Information fairly presents the financial position for the reported periods. Sobral – CE, October 24, 2018. Rudimar Dall Onder

Chief Executive Officer

Gelson Luis Rostirolla

Deputy Chief Executive Officer

Francisco Olinto Velo Schmitt

Chief Officer Investor Relations, Finance and Administration

(A free translation of the original in Portuguese) (Unaudited) Quarterly information (ITR) - 9/30/2018 - GRENDENE SA Version : 1 Reports and Declarations/ Officers’ statement on the independents auditor’s review report

Page: 85 of 85

Officers' statement on the independent auditor's review report In conformity with CVM Instruction 480, of December 7, 2009, Subsection III – Financial Statements, item V of Article 25, the Executive Officers of Grendene S.A., based on the information in the audit results provided by the auditors and clarifications received during the period, state that they have reviewed, discussed and agreed with the contents and conclusion expressed in the Special Review Report on the Quarterly Information of the Company and its subsidiaries (Consolidated), without qualifications, issued by Ernst & Young Auditores Independentes S.S. Sobral – CE, October 25, 2018. Rudimar Dall Onder

Chief Executive Officer

Gelson Luis Rostirolla

Deputy Chief Executive Officer

Francisco Olinto Velo Schmitt

Chief Officer for Investor Relations, Finance and Administration

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