2
62 52
Recurring Net Profit
3Q17 3Q18
210
Recurring EBITDA
205
3Q17 3Q18
Net Revenues*
3Q17
1,020
1,513
3Q18
EBITDA Margin
16.4% 20.1%
Gross Margin
28.3% 29.1%
Higher volumes: Increase in volumes shipped in both three business divisions
Good performance in foreign markets: Higher exported volumes and improving performance in Colombia
Sale of assets: Second tranche of the deal with Suzano Papel e Celulose recorded in the quarter
Consolidated Results and Highlights BRL million
Pressure in Margins: Higher commodity prices and BRL depreciation
*Net revenues in 3Q18 includes BRL 235,1mn related to the sale of biological assets to Suzano
1,511
EBITDA Working Capital
CAPEX Tax Others Financial Flow
Free Cash Flow
(143) (305) (318)
(416)
(63)
266
YTD18 YTD17
Cash Net Debt
Cash and applications
3,037
2,070
967 2,991
1,949
1,042
Net Debt/EBITDA 2.3x Net Debt/EBITDA 2.8x
3Q18 3Q17
581
(283) (79) (16)
(107) (71)
25
Total Debt
Net Debt
Total Debt
Financial deleveraging: Continuing trend of deleveraging
Sale of assets: 2nd tranche of the transaction was partially collected, disbursement of the taxes
More favorable financial flow: Reduction on financial expenses
Diligent investment management: CAPEX lower than expected for the year
BRL million
Cash Flow and Indebtedness
3
DPO (days) Suppliers
62 49
Cash Conversion Cycle (days)
100
122
DIO (days) Inventory
91 105 YTD18
YTD17
Forestry OPEX (BRL million)
50 42
Maintenance and Projects (BRL million)
59 45 3Q18
3Q17 CAPEX
(BRL million)
109
87
Focus on sustaining CAPEX
Cash conversion cycle improved 22 days
The efficient inventory management has driven the working capital reduction
BRL million
Working Capital and Investments
4
The majority of Ceramic Tiles Expansion project will be invested in 2019
DSO (days) Trade Receivables
71 66
Low end furniture chain has driven demand increase: worse product mix
Pressure in margins: Higher commodity prices, BRL depreciation and maintenance stoppages
Capacity Utilization
MDF 73%
MDP 72%
Wood 72%
Gross Margin
27,5% 28,5%
EBITDA Margin
16,7% 23,4%
Increasing demand for wood panels: increase in sales as a consequence of better demand
Net Revenues*
3Q18 3Q17
1,050
651 136
Rec. EBITDA
152
3Q17 3Q18
Wood Division BRL million
5
Wood Panels Brazilian Industry Source: IBÁ – in m³ million
MDF 2015 2016 2017 YTD 2018
Domestic Market 3.6 3.5 3.7 2.8
Exports 0.4 0.6 0.7 0.6
Idle Capacity 19% 22% 18% 16%
MDP 2015 2016 2017 YTD 2018
Domestic Market 2.5 2.5 2.6 2.0
Exports 0.1 0.3 0.4 0.4
Idle Capacity 30% 27% 27% 23%
3Q18 3Q17
768 615
Volume (‘000 m³)
*Net revenues in 3Q18 includes BRL 235,1mn related to the sale of biological assets to Suzano
Differentiation is key in Wood’s Strategy
Being benchmark in production costs, supported by SGD and exploring initiatives such as factory vocation, S&OP, assets adjustments and lean manufacturing.
Accelerate the product life cycle, ensuring the position at the spotlight of innovation and design, generating value from differentiation.
Intensify digital initiatives in the Wood business, such as Marcenaria D. app
Strengthen the relationship with customers, exploring the customer committee which incorporates the main distribution channels.
Encourage higher stability in the furniture productivity chain, constantly increasing the service level.
Improve market intelligence, optimizing the commercial policy and execution and exploiting even more the market segmentation.
Consolidate the cultural transformation.
Continue export program, with a greater focus on long-term agreements and products with higher value added.
6
7
Gross Margin
28.5% 30.3%
3Q18 3Q17
368 407
Net Revenue
3Q18
59 52
EBITDA Rec.
3Q17
EBITDA Margin
14.6% 14.2%
ABRAMAT Index Source: ABRAMAT
Growth in an adverse scenario: increase in volumes and revenues
-5,9% -12,5% -11,5%
-4,0%
1,2% 1,5%
2016 2017 YTD18 2018e
Deflated net revenues of building materials industry vs previous year in the domestic market
Deca Division BRL million
2014 2015
Capacity Utilization
Metals 78%
Ceramic 66%
Deca 72%
6,924
Volume (‘000 itens)
6,771
3Q18 3Q17
Ongoing recovery: successfully implemented the second round of price hike and captured gains in initiatives among the Division
Costs are still pressured: increase on costs of non-ferrous commodities and productivity below the potential
8
Growth strategical agenda
Soluções Para Melhor Viver
Improve the industrial and logistic efficiency promoting productivity and logistic gains
Use innovation in a more assertive, efficient and effective way, getting relevant insights from our customers and partners to anticipate trends.
Develop new sources of revenues in different categories of products and services.
Optimize the market intelligence, capturing and analyzing the market dynamics and converting it into improvement actions.
Consolidate the excellence in commercial execution by capturing business synergies and optimizing the sales routine.
Attract and develop people and consolidate the cultural transformation.
Ceramic Tiles Division
Capacity Utilization
Ceusa 99%
Gross Margin
39.6% N/A
EBITDA Margin
25.6% N/A 9
3Q18 3Q17
55
Net Revenue
N/A
3Q18
14
EBITDA Rec.
3Q17
N/A
Record performance: best operational quarter since the acquisition
BRL million
1,502
Volume (m²)
N/A
3Q18 3Q17
Increase in sales: recovery in retained volumes
Ceramic Tiles Brazilian Industry Source: ANFACER – in m² million
2015 2016 2017 YTD 2018
Domestic Market 816 706 685 514
Exports 77 94 90 71
Idle Capacity 18% 28% 28% 26%
Growth horizon
Increase the productivity and consolidate the capacity expansion.
Lean manufacturing as a culture.
Strengthen the relationship with stakeholders and the improve in the digital marketing strategy.
Accelerate the digital transformation and implement a system of statistical process management.
Expand and complement the mix of products with different sizes and shapes and consolidate the differentials.
10
11
Cultural Transformation - Jeito de Ser e de Fazer
2015 Culture mapping and diagnosis o 582 participants representing the
entire organization.
2017 Leadership Development o Actions to align and strengthen the practices
of the new culture (Jeito de Ser e de Fazer). o Participation in GPTW research, obtaining
the certificate.
2018 Leadership Development and Culture Consolidation o Sustained the GPTW certificate . o Internal actions to strengthen the
culture. o Dissemination at Ceusa. o Culture adherence research.
2016 Dissemination of the new culture o The Board of Directors and the leadership built together the new culture ( Jeito
de Ser e de Fazer) and prepared themselves to deploy it in the Organization. o Communication campaigns and caravan of executives in all business units. o Creation of the Innovation Center
12
Innovation
+ 350 companies
applied
15 scale-ups selected by a working group composed of different areas
of the company
7 scale-ups selected by the executive board
7 months of acceleration
Focus on: Construction and Remodeling, Operational Efficiency and Digital Platforms
Support an innovation culture in the Company
Increase the connection with the entrepreneurial ecosystem
Challenge the Organization’s business model
7
Priorities in the agenda
13
Improve the results in the business divisions
Consolidate the projects related to assets improvement of the Company
Consolidate the capacity expansion in Ceramic Tiles
Implement the project of the DWP joint-venture, which is currently on schedule
The information herein has been prepared by Duratex S.A. and does not represent any form of prospectus regarding the purchase or subscription to the company’s shares or securities. This material contains general information relating to Duratex and the markets the company operates in. No representation or guarantee, expressed or implied, is made herein, and no reliance should be placed on the accuracy, justification or completeness of the information provided. Duratex does not offer any assurances or guarantees regarding the fulfilment of expectations described.
November 2018
1) Recurring EBITDA: EBITDA adjusted for events not arising from the fluctuation in the fair value of biological assets, a combination of extraordinary business and events
2) Recurring EBITDA LTM: Sum of Recurring EBITDA from the previous 12 months
Disclaimer e Glossary
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