iKRelease2001_3q

8/4/2019 iKRelease2001_3q

1/13

July/September 2001

Cash generationgrows by 12% inthe third quarter

This was the eleventh consecutivequarter with an increase in our cashgeneration. This result was achievedin spite of an adverse economicscenario, aggravated by the terroristattack in the USA and the deepeningcrisis in Argentina. Our commitment tode-leverage our balance sheet byreducing debt with our strong cashgeneration also became more evidentduring the quarter. We have beensuccessful in reducing our net debt

denominated in dollars by US$ 153million for the year.

The focus for the fourth quarter 2001will be on streamlining our operatingand corporate structure which willallow us to further reduce costs andconsequently reach a new level ofprofitability for the companysoperations.

Third QuarterHighlights:

Cash generation(EBITDA) wasR$ 205 million, anincrease of 12%,accumulating R$

565 million in thefirst nine monthsof 2001.

Net revenue grewby 4%, reachingR$ 588 million

Net debt hasbeen reduced by

US$ 153 millionsince December2000

September 30, 2001

Shares Outstanding 600,741 K

Local Share Price R$ 0.72

Book Value R$ 1.43

Free Float 66%

Daily Traded Volume R$ 602 K


2/13

Quarterly Release November 12, 2001

2

Initial Considerations

The results of Igaras, which was acquired in October 2000, have been consolidated intoKlabin Groups earnings since 4Q00. Due to the significant contribution of thisacquisition and for a better understanding of the Companys performance, all

comparisons in this report are based on 3Q01 results in relation to those of 2Q01(excluding the net result of the sale of the forestry assets of Klabin Riocell) unlessotherwise specified.

The Companys operating and financial information, unless otherwise stated, are inReais according to Brazilian corporate law.

Highlights

* Excluding the net result on the sale of forestry assets of Klabin Riocell.

Economic and Financial Performance

Net Revenue and Sales Volume

Net Revenue in 3Q01 was R$ 588 million, an increase of 4% in relation to 2Q01. In thefirst nine months of 2001, accumulated net revenue totaled R$ 1,691 million.

The 6% increase in average price of Klabins products, which reached R$ 1,374 per tonin 3Q01 (R$ 1,301 per ton in 2Q01), contributed to this growth. Net revenue was alsofueled by higher export revenue due to the appreciation of the Dollar against the Real.

Sales volume in 3Q01 was 437 thousand tons (1,315 thousand tons for the year), 4%lower than the previous quarter.

Average Price (R$/ton) 1,301 1,374 6%Sales Volume (1,000 ton) 453 437 -4%Net Revenue *567 588 4%Gross Profit *235 255 9%Gross Margin *41% 43%EBIT *124 137 10%Net Profit (Loss) 15 (111)EBITDA *183 205 12%EBITDA margin (%) *32% 35%Equity 1,425 1,316

Net Debt 2,408 2,595 8%Total Capitalization 3,894 3,972Net Debt / EBITDA (annualized) *3.3 x 3.4 xNet Debt / Total Capitalization 62% 65%Depreciation / Amortization 58 68Capital Expenditures 92 106

QoQR$ Million 2Q/01 3Q/01


3/13


3

Part of this quarter-over-quarter reduction in volume is attributable to the standardizationof accounting criteria used to recognize exports. This standardization has caused an11% reduction in the volume of packaging paper sales. This was especially the case ofsales from Igarass plants, which had still not adopted these criteria.

Still in the segment of packaging, weakening demand was responsible for a 6% fall in

sales volume of corrugated boxes. In September, this situation was further aggravatedby the lower level of sales in the retail segment, which had a direct impact on boxproduction. Third quarter sales were also adversely impacted by the increase ininventories by some clients in 2Q01 due to the expectation of shortages as a result ofthe energy rationing. However, as this decline was throughout the whole market, Klabinwas able to maintain its market share and leadership position.

Sales volume of multiwall bags reported a fall of 13%, similarly impacted by thedeceleration of demand in the domestic market.

The packaging segment continues to account for the majority of sales volume,representing 62% in the 3Q01 and 66% for the year.

Pulp volumes remained flat in the third quarter, accounting for 22% of 3Q01 sales and20% for the first nine months of the year.

Market pulp inventory fell from 21 thousand tons in June to 14 thousand in Septemberdue to a problem in a recovery boiler at Klabin Riocell, thus affecting sales volume at thecompany, which fell by 4% in 3Q01.

Two segments registered increased volumes in relation to 2Q01: tissue and publicationpaper volumes were up by 6% and 32% respectively, this later mainly due to a recoveryin newsprint sales volume.

Exports accounted for 38% of total sales in the quarter. The slight reduction in thecontribution of this segment was due to the standardization of export recognitionaccounting procedures.

The packaging segment represented 57% of the net revenue in the first nine months of2001 (59% in 1H01). This reduction again reflects the accounting standardization forpackaging paper exports and the weaker performance in the corrugated box segment in3Q01 due to the economic slowdown.

VolumeJan/Sep01

CorrugatedBoxes

29%

Pulp20%

Packaging

Paper30%

Tissue8%

PublicationPaper

6%Sacks/

Envelopes7%

62%

38%

60%

40%

65%

35%

3Q01 2Q01 1Q01

Sales Volume by Market

Domestic Market Exports


4/13


4

Operating Result

The operating result before financial expenses (EBIT) was R$ 137 million, an increase of10%, in 3Q01 and accumulating R$ 383 million in the year. This result represents a netmargin of 23% in 3Q01 and corresponds to the average for the first nine months of2001.

The increase in net revenue and the maintenance of cost of products sold, whichreported a slight drop as percentage of net revenue from 59% in 2Q01 to 57% in 3Q01,both contributed to this result.

In addition, there was a 4% reduction in general and administrative expenses with nofurther non-recurring expenses being registered - the case in previous quarters. Theoperating and corporate reorganization, which is to be implemented in 4Q01, shouldbring further savings in this item.

Significantly, in the 3Q01 the Company began to amortize the goodwill premium ofR$ 12 million for the Igaras acquisition. The amortization, which will extend over a periodof 10 years, was booked to the item Other operating expenses; thus impacting theEBIT and causing an increase of 8% in total operating expenses for 3Q01.

EBITDA

The operating cash generation, EBITDA,grew for the 11th consecutive quarter,reaching R$ 205 million, a growth of 12%,with the EBITDA margin rising from 32%to 35%.

This growth underscores the Companyssolid operating cash generation, which

was R$ 565 million with a 33% EBITDAmargin for the first nine months of theyear.

Net RevenueJan/Sep01

Tissue17%

CorrugatedBoxes25%

PackagingPaper23%

Pulp

16%

Publication

Paper7%

Others3% Sacks/

Envelopes9% 67%

33%

66%

34%

70%

30%

3Q01 2Q01 1Q01

Net Revenue by Market

Domestic Market Exports

Net Revenue - Consolidated 100%

178 178 183205

144 145 164

31% 33% 32%35%35%33%35%

0

50

100

150

200

250

1Q 00 2Q 00 3Q 00 4Q 00 1Q 01 2Q 01 3Q 01

0%

10%

20%

30%

40%

EBITDA EBITDA Margin

EBITDAMargin

R$ Million

Excluding the effect on the sale of forestry assets in 2Q01


5/13


5

Financial Results and Debt

Net financial expenses totaled R$ 273 million in 3Q01. Of this amount, R$ 174 million or64%, relates to the 16% depreciation of the Real against the Dollar during the period. Inthe nine-month period, net financial expenses totaled R$ 656 million, of which R$ 399

million, or 61% of this total, is attributable to the net loss on foreign exchangedepreciation (37% in the nine months) on liabilities indexed to the Dollar. This effectdistorts any comparison with the same period in 2000 when the devaluation was only3%.

Net debt was R$ 2,595 million at the end ofSeptember, or 65% of the total capitalization(62% in 2Q01).

In December 2000, US$ denominated netdebt represented US$ 1,124 million, alsoincluding the capitalization of R$ 278 millionwhich took place on January 4, 2001. At theend of September, based on the samecriteria, net debt represented US$ 971 million,a reduction of US$ 153 million.

This 14% reduction underscoresmanagements determination to reduce thedebt level using not only the Companys strong cash generation but also through thesale of assets.

The long term profile of the debt is more significant than the total amount, which allows aproactive management of the debt, taking advantage of market opportunities - especiallyimportant when considering the expected scenario in 2002. In this context, more thantwo thirds of the Companys debt is long term with maturities which extend out to 2008(see annex 5).

The Company has trimmed foreign currency denominated debt by 7%, declining fromUS$ 803 million in 2Q01 to US$ 746 million at the end of September.

Local Foreign Local Foreign

Short Term 435 520 955 148 802 950

Long Term 549 1,123 1,672 634 1,191 1,825

GROSS DEBT 984 1,643 2,627 782 1,993 2,775

Cash and Banks (152) (180)

NET DEBT 2,475 2,595

Total(R$ million)Currency

TotalCurrency

12/31/00 9/30/01

1.124

971

Dec'00 Sep'01

Net Debt

US$ Million


6/13


6

Hedge operations worth US$ 264 million remained in place at the end of 3Q01 as part ofthe continuing strategy of minimizing the Companys exposure to foreign exchange ratefluctuations. In addition to hedge operations, the Companys foreign exchange risk isalso protected by prepayment operations (natural hedge), thus reducing the debtexposure to fluctuations in the Real/ Dollar exchange rate to only 5% of total foreign

currency denominated debt.

Net Profit

Klabins favorable operating performance in 3Q01 was offset by the adverse effect oflosses accruing on foreign currency denominated debt, which translated into a net lossof R$ 111 million in the period.

For the period from January to September, the accumulated loss was R$ 176 million.

This result reflects the full effect of the depreciation of the Real against the Dollar.Management states that it does not intend to defer financial expenses as a result of theReals devaluation during 2001, although permitted by the Brazilian SecuritiesCommission (Comisso de Valores Mobilirios). The same procedure was adopted atthe time of the 1999 devaluation when the local currency was allowed to float.

Capital Expenditures

Capital expenditures totaled R$ 106 million in 3Q01, or R$ 262 million in the period fromJanuary to September. Investments were largely focused on the Klabin Riocell projectand preventive maintenance of the industrial plants.

The amount of R$ 74 million was allocated to the Klabin Riocell project in 3Q01, a totalof R$ 165 million in the nine-month period. The physical part of the project isapproximately 84% complete.

9/30/01 US$ Million

TOTAL 746

Trade Finance - Natural Hedge (447)

Hedge (264)

Exposure 35

Foreign Currency Debt


7/13


7

Operating and Corporate Reorganization

Klabin released an announcement on October 15, informing the market of a corporate

restructuring with the objective of streamlining the operating and corporate organization.

The conclusion of this process, expected to be complete by December 2001, aims toachieve the following benefits:

reduction in administrative, operating and fiscal costs;

increase in operating synergy;

greater integration of the Klabin companies through the standardization of policies andprocedures;

rationalization of the use of financial resources;

alignment of the financial strategy to the operating business cycle, increasing thecompanies transparency to the capital markets.

The necessary procedures will involve the incorporation of controlled companies, exceptthe joint ventures, and have the objective of concentrating the operations in a singlepublicly held company, essentially with the same equity and shareholding position as atpresent, the new company to hold the corporate title of Klabin S.A..

Capital Markets

Klabins preferred shares weretraded on all the business daysof the So Paulo StockExchange (Bovespa) for theJanuary to September period2001. Share prices registered adepreciation of 50.3% against a

decline of 30.3% in theIbovespa.

In the first nine months of theyear, the Bovespa recorded10,270 transactions involvingapproximately 120.9 millionKlabin preferred shares with adaily volume of R$ 602,000.

0

10

20

30

40

50

60

70

80

90

100

110

120

130

28/

12/00

11/01

/01

25/01

/01

08/02

/01

22/02

/01

08/03

/01

22/03

/01

05/04

/01

19/04

/01

03/05

/01

17/05

/01

31/05/0

1

14/06

/01

28/06

/01

12/07/0

1

26/07

/01

09/08

/01

23/08

/01

06/09

/01

20/09

/01

Share Performance at IbovespaBase: 12/28/00 = 100

Ibovespa

Klabin

0

10

20

30

40

50

60

70

80

90

100

110

120

130

28/

12/00

11/01

/01

25/01

/01

08/02

/01

22/02

/01

08/03

/01

22/03

/01

05/04

/01

19/04

/01

03/05

/01

17/05

/01

31/05/0

1

14/06

/01

28/06

/01

12/07/0

1

26/07

/01

09/08

/01

23/08

/01

06/09

/01

20/09

/01

Share Performance at IbovespaBase: 12/28/00 = 100

Ibovespa

Klabin


8/13


8

For further information, please contact:

Ronald Seckelmann, CFO and Investor Relations Director

Luiz Marciano Candalaft, Investor Relations Manager

Phone: +55 (11) 3225-4045

E-mail: [email protected]

Rick Huber

Phone: 1 (212) 701-1830

E-mail: [email protected]

Klabin is the largest integrated producer of pulp and paper in Brazil with gross revenue of R$ 2.1 billion in2000 and an annual sales production capacity of 2 million tons of forest products. The Company has as itsstated strategic focus, activities in the following areas: cardboards, corrugated boxes, multiwall bags,tissue, wood and pulp, being the leader in the majority of the markets in which it participates.

Statements included in this report regarding the Companys business outlook and anticipated financial and operatingresults, regarding the Companys growth potential, constitute forward-looking statements and are based onmanagement expectations regarding the future of the Company. These expectations are highly dependent onchanges in the market, general economic performance of Brazil, industry and international markets, therefore they aresubject to change.


9/13

9

Attachm

ent1

ConsolidatedInc

omeStatement

Bra

zilianCorporateLaw(ThousandofR$)

(*)ExcludingtheNetResultontheSaleofForestryAssetsofKlab

inRiocell(NetRevenueandCostofProductsSold).

2Q01(*)

3Q01

NetRevenue

633,757

567,301

588,057

3.7%

100.0

100.0

CostofProductsSold

(357,539)

(332,714)

(332,767)

0.0%

58.6

56.6

GrossProfit

276,218

234,587

255,290

8.8%

41.4

43.4

SellingExpenses

(69,684)

(69,684)

(70,815)

1.6%

12.3

12.0

General&AdministrativeExpe

nses

(38,518)

(38,518)

(36,838)

-4.4%

6.8

6.3

OthersRevenue(Expenses)

(1,905)

(1,905)

(10,681)

0.3

1.8

TotalOperatingExpenses

(110,107)

(110,107)

(118,334)

7.5%

19.4

20.1

OperatingResult(beforeFin.Results)

166,111

124,480

136,956

10.0%

21.9

23.3

NetResultontheSaleofFore

stryAssets

41,631

-

FinancialExpenses

(95,130)

(95,130)

(113,425)

19.2%

16.8

19.3

NetForeignExchangeLosses

(70,695)

(70,695)

(174,174)

146.4%

12.5

29.6

FinancialRevenues

15,438

15,438

15,132

-2.0%

2.7

2.6

NetFinancialExpenses

(150,387)

(150,387)

(272,467)

81.2%

26.5

46.3

OperatingResult

15,724

15,724

(135,511)

2.8

23.0

NonOperatingRevenues(Exp

enses)

2,402

2,402

1,191

0.4

0.2

NetIncome(Loss)beforeTaxes

18,126

18,126

(134,320)

3.2

22.8

IncomeTaxandSoc.Contrib.

(2,012)

(2,012)

23,965

0.4

4.1

MinorityInterest

(951)

(

951)

(1,128)

0.2

0.2

NetIncome(Loss)

15,163

15,163

(111,483)

2.7

19.0

Amortization/Depreciation

58,171

58,171

68,203

17.2%

10.3

11.6

EBITDA

224,282

182,651

205,159

12.3%

32.2

34.9

%ofNetRevenue

Change

2Q01

2Q01(*)

3Q01


10/13

10

Attachm

ent2

ConsolidatedInc

omeStatement

Bra


(*)ExcludingtheNetResultontheSaleofForestryAssetsofKlabinRio

cell(NetRevenueandCostofProductsSold).

(**)Th

eresultsofIgaras,acquiredonO

ctober3,2000,areconsolidateda

sfromthe4thQ00.

Jan/S

ep'00(**)

Jan/Sep'01(*)

NetRevenue

1,312,601

1,757,740

1,691,284

100.0

100.0

CostofProductsSold

(729,216)

(1,009,503)

(984,678)

55.6

58.2

GrossProfit

583,385

748,237

706,606

44.4

41.8

SellingExpenses

(136,274)

(193,049)

(193,049)

10.4

11.4

General&AdministrativeExpense

s

(108,410)

(115,690)

(115,690)

8.3

6.8

OthersRevenue(Expenses)

(261)

(14,372)

(14,372)

0.0

0.8

TotalOperatingExpenses

(244,945)

(323,111)

(323,111)

18.7

19.1

OperatingResult(beforeFin.Res

ults)

338,440

425,126

383,495

25.8

22.7

NetResultontheSaleofForestry

Assets

-

-

41,631

-

-

FinancialExpenses

(179,675)

(300,682)

(300,682)

13.7

17.8

NetForeignExchangeLosses

(28,206)

(398,517)

(398,517)

2.1

23.6

FinancialRevenues

31,552

43,110

43,110

2.4

2.5

NetFinancialExpenses

(176,329)

(656,089)

(656,089)

13.4

38.8

OperatingResult

162,111

(230,963)

(230,963)

12.4

13.7

NonOperatingRevenues(Expens

es)

3,032

5,711

5,711

0.2

0.3

NetIncome(Loss)beforeTaxes

165,143

(225,252)

(225,252)

12.6

13.3

IncomeTaxandSoc.Contrib.

(73,957)

51,546

51,546

5.6

3.0

MinorityInterest

(42,737)

(2,362)

(2,362)

3.3

0.1

NetIncome(Loss)

48,449

(176,068)

(176,068)

3.7

10.4

-

Amortization/Depreciation

115,128

181,830

181,830

8.8

10.8

EBITDA

453,568

606,956

565,325

34.6

33.4

%o

fNetRevenue

Jan/Sep'00(**)

Jan

/Sep'01

Jan/Sep'01(*)


11/13

11

Attachm

ent3

ConsolidatedB

alanceSheet

Bra


Assets

Dec.31-00

Sep.30-01

LiabilitiesandShareholder's

Equit

Dec.31-00

Sep.30-01

C

urrent

832,036

947,063

Curre

nt

1,247,717

1,271,684

Cashandbanks

24,382

29,991

Loansandfinancing

952,094

941,884

Short-terminvestiments

127,470

149,894

Debent

ures

2,822

8,554

Receivables

301,305

307,087

Supplie

rs

157,956

153,783

Inventories

236,230

251,064

Income

taxandsocialcontribution

33,425

6,196

Recoverabletaxesandcontributions

82,345

99,220

Taxesp

ayable

25,711

36,448

Oth

erreceivables

60,304

109,807

Payroll

provisions

37,792

41,903

Othera

ccountspayable

37,917

82,916

Long-Term

211,570

309,367

Long-Term

1,798,051

1,995,467

Deferredincometaxandsoc.contrib.

83,946

158,161

Loansandfinancing

1,556,553

1,709,111

Tax

estocompensate

25,221

33,866

Debent

ures

115,300

115,300

Recoverabletaxes

52,568

70,763

Othera

ccountspayable

126,198

171,056

Oth

erreceivables

49,835

46,577

ResultsforFutureFiscalYears

23,507

15,836

MinorityInterests

58,892

61,538

P

ermanent

3,312,913

3,403,617

Shareholders'Equity

1,228,352

1,315,522

Oth

erinvestiments

609,193

630,018

Capital

928,444

1,206,589

Pro

perty,plant&equipment,net

2,578,416

2,644,328

Capital

reserves

111,604

119,215

Deferredcharges

125,304

129,271

Revaluationreserve

102,988

100,690

Profitre

serve

85,316

62,798

Retaine

dEarnings

0

(173,770)

T

otal

4,356,519

4,660,047

Total

4,356,519

4,660,047


12/13

12

Attachm

ent4

SalesVolumeandNetAveragePrice

Consolidated100%

*DoesnotincludeIgarass

alesvolumeandprices.

PublicationPaper

38

36

3

8

38

150

30

25

32

Packaging

74

62

8

1

136

353

135

135

1

20

Tissu

e

34

37

3

8

35

144

30

34

36

Pulp

72

92

8

7

83

334

70

94

95

Kla

binRiocell

56

64

6

7

49

236

49

69

66

Kla

binBacell

16

28

2

0

34

98

21

25

29

Corru

gatedBoxes

72

76

8

9

135

372

128

132

1

24

Sacks/Envelopes

26

27

2

8

27

108

30

31

27

Others

3

4

3

3

13

2

2

3

Sum

319

334

36

4

457

1,474

425

453

4

37

AveragePrice(R$/ton)

1,333

1,400

1,447

1,344

1,380

1,327

1,301

1,374

2Q01

3Q01

1,000t

1Q00(*)

2Q00(*)

3Q00(*)

4Q00

2000

1Q01


13/13

13

Attachment 5

Financing Repayment Schedule September 30, 2001

Total Debt- Average Tenor: 25 months

Local Currency Average Terms: 38 months Average Cost 17.2% p.a.

Foreign Currency Average Terms: 20 months Average Cost 7.7% p.a.

Local Foreign

4Q00 48 252 3001Q00 33 47 802Q01 34 160 1943Q01 33 343 3764Q01 33 460 4932003 134 405 5392004 222 259 4812005 onwards 245 67 312TOTAL 782 1,993 2,775

CurrencyR$ Million TOTAL

4Q00 37 9 2 481Q00 32 0 1 33

2Q01 32 0 2 343Q01 32 0 1 334Q01 32 0 1 332003 131 0 3 1342004 104 115 3 2222005 onwards 243 0 2 245

TOTAL 643 124 15 782

R$ Million Debentures Others TOTALBNDES

TradeFinance

4Q00 31 18 45 941Q00 7 0 10 172Q01 56 0 4 603Q01 102 0 27 1294Q01 55 109 8 1722003 97 0 55 1522004 74 23 0 972005 onwards 25 0 0 25

TOTAL 447 150 149 746

US$ Million TOTALOthersEurobonds

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