of 15
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Klabin reports a netprofit of R$ 63million in 1Q03
EBITDA reached R$ 361 million in
1Q03. The EBITDA margin of 42% ina quarter that is seasonally weaker,exceeded the excellent performanceat the end of last year, confirming afavorable trend for the Companysbusinesses.
Gross revenue was R$ 980 million in1Q03. Consolidated net revenuetotaled R$ 868 million, supported byrising pulp prices, higher exports and
the improvement in the sales marginsfor packaging products.
Net profit amounted to R$ 63 million,reflecting Klabin's excellent operatingperformance and adjusted debtprofile, which is now less exposed tocurrency exchange rate fluctuations.
January/March 2003
March 31, 2003
KLBN4 (BOVESPA) / KLBAY (OTC)
Preferred shares ('000) 600,856
Preferred share price R$ 1.83
Book value R$ 1.25
Free float 77
Daily traded volume R$ 633 K
Highlights:
Net revenue reachesR$ 868 million.
Sales volume expands 3%to 452 thousand tons.
Exports reachedUS$ 102 million.
Cash generation amountsto R$ 361 million, with anEBITDA margin of 42%.
Net debt/ EBITDA falls to
2.4x.
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Initial Considerations
The information presented herewith in connection with the Company's operations andfinancials consists of consolidated figures stated in local currency as per BrazilianCorporate Law, except where otherwise indicated.
Highlights
Economic and Financial Performance
Sales Volume and Net Revenue
Sales volume, excluding wood, increased 3% to 452 thousand tons in 1Q03 comparedto 1Q02. In relation to 4Q02, it declined 8% due to seasonal effects in the first quarter ofthe year, particularly in the packaging segment.
Net revenue reached R$ 868 million in 1Q03, up 56% from 1Q02 but down 3% fromR$ 899 million in 4Q02. Net revenue growth can be attributed to a steady improvementin prices despite a poorer demand for corrugated boxes. Furthermore, it reflects a
recovery in international pulp prices, coupled with the positive effect of currencydevaluation on export revenues.
Sales Volume (1,000 ton) 452 441 491 3% (8%)
Net Revenue 868 558 899 56% (3%)
Gross Profit 434 235 450 84% (4%)Gross Margin 50% 42% 50%
EBIT 276 104 279 166% (1%)
Net Profit (Loss) 63 8 401 0% 0%
EBITDA 361 181 366 99% (1%)
EBITDA margin (%) 42% 33% 41%
Equity 1,148 1,296 1,084
Net Debt 2,806 2,487 2,821 13% (1%)
Total Capitalization 4,017 3,842 3,966
Net Debt / EBITDA (annualized) 2,4 x 3,4 x 2,9 x
Net Debt / Total Capitalization 70% 65% 71%
Depreciation + Amortization 85 77 87 10% (2%)
Capex 45 44 40 2% 13%
Change
QoQR$ Million 1Q03 1Q02 4Q02
Change
YoY
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Operating Result
Gross profit totaled R$ 434 million, up 84% from 1Q02 thanks to more favorable prices,higher sales volumes and a tight control over production costs. Gross margins amountedto 50% compared to 42% in 1Q02.
Operating result before net financial expenses (EBIT) reached R$ 276 million in 1Q03against R$ 104 million 1Q02. Operating margins expanded from 19% to 32%, mainlydue to the increase in gross profit, coupled with lower general and administrativeexpenses.
Higher export volumes (45% of total sales volume in 1Q03 versus 41% in 1Q02) causeddollar-denominated freight expenses to rise to R$ 62 million, as compared to R$ 47million in 1Q02.
EBITDA
Although business in the firstquarter is typically slower due toseasonal effects, EBITDA in 1Q03gave continuity to the rising trendobserved in 4Q02, totaling R$ 361million, i.e. up 99% from 1Q02 and1% down from 4Q02. EBITDA
margin climbed to 42%, above thelevel attained in 4Q02, thanks togrowing revenues and successfulefforts towards operating costefficiency.
Below is the Company's cashgeneration (EBITDA) by business line over the period. The packaging segment includespackaging paper, corrugated boxes and multiwall bags (Brazil).
366 361
181 169 262
4241
3429
33
0
100
200
300
400
1Q02 2Q02 3Q02 4Q02 1Q03
0%
10%
20%
30%
40%
50%
EBITDA EBITDA Margin
EBITDAMargin
R$ Million
366 361
181 169 262
4241
3429
33
0
100
200
300
400
1Q02 2Q02 3Q02 4Q02 1Q03
0%
10%
20%
30%
40%
50%
EBITDA EBITDA Margin
EBITDAMargin
R$ Million
R$ Million 1Q02 2Q02 3Q02 4Q02 2002 1Q03
Packaging 126 127 170 257 680 249
Forestry 33 36 40 46 155 57
Market Pulp 26 21 57 75 179 74
Dissolving Pulp 10 7 16 15 49 13
Tissue Brazil 3 (1) 5 5 12 6
Tissue Argentina 1 1 1 0 3 1
Sacks Argentina 1 2 1 1 6 1
Newsprint 1 (1) 0 0 0 (15)Corporate Expenses / Intercompany (20) (22) (27) (34) (104) (24)
C lid t d 181 169 262 366 979 361
EBITDA per business segment
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Financial Result and Indebtedness
Net financial expenses totaled R$ 176 million in 1Q03 versus R$ 91 million in 1Q02. Netexchange variations reached R$ 16 million (9% of the total amount), now that theCompany is less exposed to currency variations.
Gross debt fell from R$ 2,941 million in December 2002 to R$ 2,922 in March 2003.Forty-three per cent (43%) of this amount refers to long-term contracts with maturitydates extending to 2010.
Foreign currency debt represents 33% of Klabin's total indebtedness. Fifty-nine per cent(59%) of this amount refers to trade finance.
Net debt at the end of 1Q03 amounted to R$ 2,806 million or 70% of total capitalization,versus 71% in 4Q02.
Higher cash generation improved the Company's net debt/EBITDA ratio from 3.4x in1Q02 to 2.4x in 1Q03, as compared to 2.9x in 4Q02.
Having changed its debt profile and dramatically reduced its exposure to foreigncurrency variations, Klabin adjusted its hedge position, as shown in the table below:
Net Result
Klabin reported a net profit of R$ 63 million in 1Q03, reflecting an excellent operating
03/31/03 US$ Million
Foreign Currency Debt 288
Trade Finance - Natural Hedge (171)
Hedge Operations (116)
Exposure 1
Hedge Strategy
R$ million
Local Foreign Local Foreign
Short Term 899 719 1,618 968 688 1,656
Long Term 1,028 295 1,323 988 278 1,266
GROSS DEBT 1,927 1,014 2,941 1,955 966 2,922
Cash and Short Term Investments (120) (115)
NET DEBT 2,821 2,806
12/31/2002 3/31/2003
Debt - Consolidated
Total TotalCurrency Currency
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Business Performance
Packaging Paper Sales volume totaled 158 thousand tons in 1Q03, up 5% from1Q02, while net revenue advanced 59% to R$ 255 million. This positive performance interms of revenue resulted from the attainment of a new threshold in packaging paper
exports, with Klabin's entry into new markets, aided by a stronger U.S. dollar over theperiod.
A highlight in this business segment is the adaptation of machine # 6, previously used toproduce newsprint, for the manufacture of packaging paper products, most of which forthe export market. The effects of this change will therefore be felt in 2Q03 results.
Corrugated Boxes Although the first quarter of the year is generally a low season forcorrugated boxes sales, they took longer than usual to bounce back in 2003 becauseinventories at major customers remained high and consumption declined more thanprojected. Consequently, sales volume totaled 94 thousand tons in 1Q03, down 22%from 1Q02. As per ABPO, corrugated boxes shipments in Brazil decreased byapproximately 9% over the same period.
Net revenue reached R$ 193 million, up 36% from 1Q02 due to price stability.
Multiwall Bags Sales volume expanded 3% to 28 thousand tons when compared to1Q02. A slight decline in the building and food packaging industry prevented Klabin fromselling more multiwall bags. However, higher exports and favorable international priceshelped to increase net revenue by 62% to R$ 80 million in 1Q03.
Corrugated
Boxes
21%
Packaging
Paper
35%
Others
1%
Market Pulp
15%
Tissue
9%
Dissolving
Pulp
4%
Newsprint7%
Printing/
Writing
2%
Sacks/
Envelopes
6%
Volume1Q03
Corrugated
Boxes
20%
Packaging
Paper26%
Wood
6%
Others
2%
Market Pulp
10%
Tissue
17%
Newsprint
5%
Dissolving
Pulp
4%
Printing/
Writing
2%
Sacks/Envelopes
8%
Net Revenue1Q03
(*) Sales volume figures do not include wood(*) Net Revenue consolidated 100%
Net revenue does include wood
Corrugated
Boxes
21%
Packaging
Paper
35%
Others
1%
Market Pulp
15%
Tissue
9%
Dissolving
Pulp
4%
Newsprint7%
Printing/
Writing
2%
Sacks/
Envelopes
6%
Volume1Q03
Corrugated
Boxes
20%
Packaging
Paper26%
Wood
6%
Others
2%
Market Pulp
10%
Tissue
17%
Newsprint
5%
Dissolving
Pulp
4%
Printing/
Writing
2%
Sacks/Envelopes
8%
Net Revenue1Q03
(*) Sales volume figures do not include wood(*) Net Revenue consolidated 100%
Net revenue does include wood
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Market Pulp Favorable market conditions due to a reduction in NORSCAN'sinventories pushed international pulp prices up and benefited Klabin's performance inthis segment.
In 1Q03, the market pulp mill at Guaba (RS) operated at 95% of its installed capacity.Thus, sales to third parties reached 66 thousand tons in 1Q03, up 28% from 1Q02 and3% from 4Q02.
Net revenue jumped 121% to R$ 100 million when compared to 1Q02 as the result ofhigher sales and prices.
Dissolving Pulp Due to the annual downtime for maintenance and operationaladjustments, dissolving pulp sales slipped 4% to 20 thousand tons in 1Q03 as comparedto 1Q02. On the other hand, sales revenue climbed 41% to R$ 35 million, thanks tomore favorable prices.
Tissue Higher exports, particularly of jumbo rolls, raised sales volume by 13% to 41thousand tons, and net revenue by 63% to R$ 168 million in 1Q03, compared to 1Q02.
Newsprint Sales totaled 33 thousand in 1Q03, generating net revenue of R$ 45million. As already anticipated, Klabin terminated its joint venture with Norske Skog atthe end of March. Machine # 6 was therefore adapted for the production of packagingpaper.
Printing & Writing Paper In 1Q03, printing & writing paper sales remained flat at 6thousand tons when compared to 1Q02. However, net revenue improved 53% toR$ 16 million on account of price adjustments in this segment.
Wood Klabin sold 655 thousand tons of pinus and eucalyptus logs to third parties in1Q03, up 21% from the volume reported in 1Q02. Influenced by currency variationsthroughout the year and adverse climatic conditions in the northern hemisphere, withsignificant effects on lumber prices, net revenue grew 61% to R$ 55 million.
Sales by Market Export volumes rose 13% to 203 thousand tons in 1Q03. Their sharein total sales increased from 41% in 1Q02 to 45% in 1Q03.
63%
37%
69%
31%
1Q03 1Q02
Domestic Market Exports
55%
45%
59%
41%
1Q03 1Q02
Domestic Market Exports
Sales Volume by Market Net Revenue by Market
(*) Sales volume figures (*) Net Revenue consolidated 100%
63%
37%
69%
31%
1Q03 1Q02
Domestic Market Exports
55%
45%
59%
41%
1Q03 1Q02
Domestic Market Exports
Sales Volume by Market Net Revenue by Market
(*) Sales volume figures (*) Net Revenue consolidated 100%
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Attendant to a strategy implemented by Klabin, export revenues expanded dramaticallyto R$ 355 million in 1Q03, up 85% from 1Q02. As a result, the share of exports in totalnet revenue rose from 31% in 1Q02 to 37% in 1Q03.
Exports generated US$ 102 million in 1Q03 versus US$ 80 million in 1Q02. Packagingpaper sales accounted for US$ 41 million of this amount, while market pulp contributedwith US$ 28 million, tissue with US$ 14 million, dissolving pulp with US$ 10 million,multiwall bags with US$ 5 million, and other products with US$ 4 million.
Exports should continue growing throughout the year 2003, favored by higher productionof market pulp at Guaba (RS) and as machine # 6 at Monte Alegre (PR) begins tomanufacture packaging paper, mainly for the export market.
Capital Expenditures
Klabin invested R$ 45 million in 1Q03, R$ 14 million of which in the recycling plant atCorreia Pinto (SC) and R$ 8 million in market pulp operations at Guaba (RS).R$ 5 million were disbursed in the revamping of machine # 6 (MP6) for the production ofpackaging paper.
Capital Markets
Klabin's preferred shares (KLBN4)ended the trading session held onMarch 31, 2003 quoted at R$ 1.83. In1Q03, they climbed 78% while the SoPaulo Stock Exchange Index(Ibovespa) remained level atapproximately 11,270 points.Klabin is
part of the Ibovespa and it hasadhered to Level I CorporateGovernance practices prescribed bythe So Paulo Stock Exchange(Bovespa). In 1Q03, 27.2 millionKLBN4 shares were traded in 3,632transactions, with an average dailytraded volume of R$ 633 thousand.
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60
80
100
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11/1/200
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12/1/200
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1/1/20
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2/1/20
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Klabin
Ibovespa
KLBN4 vs.Ibovespa - 12 monthsClosing Price: 3/31/02 = 100
40
60
80
100
120
140
160
4/1/20
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Klabin
Ibovespa
KLBN4 vs.Ibovespa - 12 monthsClosing Price: 3/31/02 = 100
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For further information, please contact:
Ronald Seckelmann, Financial and IR Director
Luiz Marciano Candalaft, IR Manager
Tel: (11) 3225-4045
Email: [email protected]
Paulo Roberto Esteves
Tel: (11) 3848-0887 ext.: 205
Email: [email protected]
With a gross revenue of R$ 3.2 billion in 2002, Klabin is the largest integrated pulp &paper mill in Brazil, capable of selling up to 2 million tons of products per year. Forstrategic reasons, the Company has decided to focus on the following market segments:packaging paper, cardboard, corrugated boxes, multiwall bags, tissue paper, timber andpulp. Klabin leads most of the business markets where it operates.
The statements contained herein with regard to the Company's business prospects, operating andfinancial result projections, and references to its potential growth are merely forecasts based on theexpectations of Company Management in relation to its future performance. Such estimates are highlydependent on market behavior and on Brazilian economic, industry and international market conditions.They are therefore subject to change
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Attachment 1
Consolidated Income Statement
Brazilian Corporate Law (Thousand of R$)
1Q0
Net Revenue 868,479 558,019 898,905 55.6% (3.4%) 1
Cost of Products Sold (434,818) (322,941) (448,908) 34.6% (3.1%) 5
Gross Profit 433,661 235,078 449,997 84.5% (3.6%) 4
Selling Expenses (113,981) (77,406) (111,927) 47.3% 1.8% 1
General & Administrative Expenses (35,907) (40,133) (40,839) (10.5%) (12.1%)
Other Revenues (Expenses) (7,617) (13,543) (17,978) (43.8%) (57.6%)
Total Operating Expenses (157,505) (131,082) (170,744) 20.2% (7.8%) 1
Operating Profit (before Fin. Results) 276,156 103,996 279,253 165.5% (1.1%) 3
Equity in net profit (loss) of subsidiaries (67) 175 (1,197) (138.3%) (94.4%)
Financial Expenses (171,505) (76,878) (109,670) 123.1% 56.4% 1
Net Foreign Exchange Losses (16,127) (21,409) 108,031
Financial Revenues 11,843 6,937 9,702
Net Financial Expenses (175,789) (91,350) 8,063 2
Operating Profit 100,300 12,821 286,119 1
Non Operating Revenues (Expenses) 1,268 (3,898) (9,868)
Net Profit (Loss) before Taxes 101,568 8,923 276,251 1
Income Tax and Soc. Contrib. (37,520) (1,062) 125,568
Minority Interest (840) (223) (1,135)
Net Profit (Loss) 63,208 7,638 400,684
Amortization 65,362 57,579 65,508 13.5% (0.2%)
Depreciation 19,653 19,843 21,339 (1.0%) (7.9%)
EBITDA 361,171 181,418 366,100 99.1% (1.3%) 4
Change
QoQ1Q021Q03 4Q02
Change
YoY
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Attachment 2
Consolidated Balance Sheet
Brazilian Corporate Law (Thousand of R$)
Assets 3/31/2003 12/31/2002 Liabilities and Stockholders' EquCurrent Assets 1,139,020 1,021,844 Current Liabilities
Cash and banks 64,736 60,952 Loans and financing
Short-term investments 50,645 58,871 Debentures
Receivables 550,329 473,035 Suppliers
Inventories 318,261 291,805 Income tax and social contribution
Recoverable taxes and contributions 104,104 90,016 Taxes payable
Other receivables 50,945 47,165 Payroll provisions
Other accounts payable
Long-Term Receivables 482,604 480,342 Long-Term Liabilities
Deferred income tax and soc. contrib. 282,186 281,457 Loans and financing
Taxes to compensate 26,072 25,151 Debentures
Recoverable taxes 130,588 120,254 Other accounts payable
Other receivables 43,758 53,480 Results for Future Fiscal Years
Minority Interests
Permanent Assets 3,207,268 3,243,741 Stockholders' Equity
Other investments 68,564 70,225 Capital
Property, plant & equipment, net 2,904,027 2,921,101 Capital reserves
Deferred charges 234,677 252,415 Revaluation reserve
Treasury stock / Profit reserve
Total 4,828,892 4,745,927 Total
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Attachment 3
Domestic Market (Consolidated 100%)
1Q03 1Q02 4Q02Change
YoY
Change
QoQ
Sales Volume (1,000 ton) 250 261 283 (4.5%) (12.0%)
Newsprint 33 23 28 41.2% 17.3%
Printing and Writing Paper 5 6 7 (8.5%) (23.1%)
Packaging Paper 62 53 73 16.1% (14.9%)
Tissue 26 28 27 (4.8%) (3.1%)
Market Pulp 2 3 2 (19.9%) 38.5%
Dissolving Pulp 0 0 0 (10.7%) (27.1%)
Corrugated Boxes 93 121 116 (22.8%) (19.9%)Sacks/Envelopes 22 23 24 (7.7%) (7.9%)
Others 6 5 7 34.9% (14.4%)
Wood Volume (1,000 ton) 655 497 628 31.7% 4.3%
Net Revenue (R$ million) 610 419 610 45.4% 0.0%
Newsprint 45 28 38 64.8% 19.1%
Printing and Writing Paper 13 10 15 29.1% (14.5%)
Packaging Paper 111 71 113 56.6% (1.5%)
Tissue 117 83 113 41.0% 4.0%
Market Pulp 2 2 1 10.8% 125.1%
Dissolving Pulp 0 0 1 (0.4%) (22.1%)
Corrugated Boxes 189 140 211 35.0% (10.4%)
Sacks/Envelopes 61 43 54 42.1% 13.6%
Others 16 14 17 21.5% (3.3%)
Wood 55 29 48 86.7% 13.6%
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Attachment 4
Exports (Consolidated 100%)
1Q03 1Q02 4Q02Change
YoY
Change
QoQ
Sales Volume (1,000 ton) 203 179 207 13.2% (2.1%)
Newsprint - - -
Printing and Writing Paper 1 0 1
Packaging Paper 96 96 100 (0.6%) (3.7%)
Tissue 15 9 11 70.4% 31.7%
Market Pulp 64 49 62 30.3% 2.6%
Dissolving Pulp 20 20 27 (3.7%) (26.7%)
Corrugated Boxes 1 1 0 0.0% 0.0%Sacks/Envelopes 6 3 6 81.3% 1.3%
Others 0 0 0
Wood Volume (1,000 ton) - 44 31
Net Revenue (R$ million) 355 192 377 85.4% (5.8%)
Newsprint - - -
Printing and Writing Paper 3 1 3 466.9% 3.2%
Packaging Paper 144 90 160 60.2% (10.1%)
Tissue 51 20 43 155.0% 18.1%
Market Pulp 98 44 97 125.4% 1.3%
Dissolving Pulp 34 24 48 41.8% (28.4%)
Corrugated Boxes 4 2 1 120.8% 289.1%
Sacks/Envelopes 19 6 19 199.1% (1.0%)
Others 2 1 1 145.5% 32.4%
Wood 0 5 4
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Attachment 5
Total Sales (Consolidated 100%)
1Q03 1Q02 4Q02Change
YoY
Change
QoQ
Sales Volume (1,000 ton) 452 441 491 2.7% (7.8%)
Newsprint 33 23 28 41.2% 17.3%
Printing and Writing Paper 6 6 8 8.3% (18.1%)
Packaging Paper 158 150 172 5.3% (8.4%)
Tissue 41 36 38 13.0% 6.9%
Market Pulp 66 52 64 27.7% 3.5%
Dissolving Pulp 20 21 27 (3.9%) (26.7%)
Corrugated Boxes 94 121 116 (22.2%) (18.9%)Sacks/Envelopes 28 27 29 3.1% (6.1%)
Others 7 5 8 35.9% (13.8%)
Wood Volume (1,000 ton) 655 541 658 21.1% (0.6%)
Net Revenue (R$ million) 965 611 987 58.0% 2.2%
Newsprint 45 28 38 64.8% (16.0%)
Printing and Writing Paper 16 10 18 52.7% 12.9%
Packaging Paper 255 161 273 58.6% 7.0%
Tissue 168 103 156 62.9% (7.3%)
Market Pulp 100 45 98 121.0% (2.3%)
Dissolving Pulp 35 25 48 41.0% 39.5%
Corrugated Boxes 193 142 212 36.2% 9.8%
Sacks/Envelopes 80 49 73 62.0% (8.9%)
Others 18 14 18 28.0% 0.6%
Wood 55 34 53 61.4% (3.8%)
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Attachment 6
Financing Repayment Schedule 03/31/03
Total Debt - Average Tenor: 15 months
Local Currency Average Tenor: 19 months Average Cost 26.3% per year
Foreign Currency Average Tenor: 7 months Average Cost 8.5% per year
Local Foreign
2Q03 322 289 6113Q03 67 242 3104Q03 531 77 6091Q04 47 79 1262Q04 34 95 1292H04 62 171 2332005 681 53 7342006 onwards 211 (41) 170
TOTAL 1,955 966 2,922
CurrencyR$ Million TOTAL
2Q03 60 52 210 3223Q03 39 - 28 674Q03 34 472 25 531
1Q04 33 - 14 472Q04 32 - 2 342H04 62 - 1 622005 115 564 2 6812006 onwards 209 - 2 211TOTAL 584 1,088 283 1,955
R$ Million Debentures Others TOTALBNDES
Trade
Finance2Q03 36 0.4 50 863Q03 36 - 37 724Q03 18 - 5 231Q04 22 - 2 242Q04 26 - 3 282H04 24 23 4 512005 9 - 7 162006 onwards - - (12) (12)TOTAL 171 23 94 288
US$ Million TOTALOthersEurobonds
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Attachment 7
Consolidated Cash Flow Statement
period ended 03/31/03Operating Activities Thousand of Reais
Net profit for the period 63,208
Expenses (revenues) not affecting working capital:
Depreciation, amortization and depletion 84,347Amortization of goodwill 1,484Gain (Loss) on sale of property, plant and equipment (1,278)Impaiment for losses on fixed assets (4)Deferred income tax and social contribution 1,043Income tax and social contribution charges 36,477Interest and exchange rate variations on loans and financings 129,795Equity in losses of subsidiaries 67Exchange rate variations on investments abroad 9,604Minority Interest 838
Redution (increase) in Assets
Cash and cash equivalents 3,445Accounts receivable (77,294)Inventories (26,456)Taxes recoverable (17,127)Prepaid Expenses 12,015Judicial Deposits (5)Others accounts receivable (6,071)
Increase (reduction) in Liabilities
Suppliers 14,417Taxes payable (1,783)Provision for income tax and social contribution 23
Salaries, vacation pay and payroll charges (12,964)Provision for contingencies 15,642Deferred income (2,605)Others accounts payable (26,659)
Net cash provided from operating activities 200,159
Investing activities
Acquisitions of property, plant and equipment (41,481)Increase in deferred assets (2,966)Proceeds from disposals of property, plant and equipment 1,442Loans to related parties 5,533Other investments, net 108
Net cash used on investing activities (37,364)
Financing activities:
New funding 247,161Loan amortization (313,278)
Interest paid (97,675)
Net cash used in financing activities (163,792)
Net increase in cash and equivalents (997)
Cash and cash equivalent at beggining of period 75,428
Cash and cash equivalent at end of period 74,431
(997)