International Conference Call Mills 3rd Quarter 2013 Earnings Results November 9, 2013

Operator: Good afternoon. Welcome to Mills 3Q 13 conference call. Right now all participants are connected in listen-only mode and afterwards we will have a question-and-answer session when further instructions will be given for you to participate. Should you need assistance from an operator during the call please press star zero. This call is being simultaneously translated into English and questions may be asked normally by participants connected from abroad. Questions may also be asked over the Internet by means of the webcast platform. We would like to remind you that this conference call is being recorded and the audio will be available at the company's website in up to 24 hours. In case you do not have a copy of Mills release that was published on Wednesday, November 6 you may obtain it at the company's website www.mills.com.br/ir. This conference call together with a slide presentation is being broadcast simultaneously on the Internet and you may access it through www.mills.com.br/ir or still at www.ccall.com.br/mills/3t13.htm for Portuguese and www.ccall.com.br/mills/3q13.htm for English. Before proceeding I would like to clarify that forward-looking statements that might be made during this call related to the business perspectives for the company as well as projections, financial and operational targets related to the growth potential of the company are mere forecasts based on the expectations of the companys management in relation to Mills future. These expectations depend on the sectors performance, the general economic performance of the country and the conditions of both the national and international markets and therefore they are subject to changes. Today with us we have Mr. Ramon Vazquez, CEO; Mr. Frederico Neves, CFO and Mrs. Alessandra Gadelha, Investor Relations Officer. Now I would like to give the floor to Mr. Ramon Vazquez. Please Mr. Vazquez you may proceed.

Mr. Ramon Vazquez: Good morning ladies and gentlemen and thank you very much for participating in Mills 3Q 13 conference call. On slide number 4 we present the highlights for 3Q where we obtained new revenue and Ebitda records. I would like to remind you that after we signed a contract for the sale of our industrial services unit in July we started to report as of 2Q this business as operation available-for-sale according to the CPC 31 technical pronouncement. For comparison purposes we would like to make the presentation with the historical data of the company net of the values referring to industrial services. Net revenue was R$ 222 million, growing almost 30% on a year-on-year basis. Ebitda was R$ 106.1 million and Ebitda margin was 47.8%, impacted by a higher participation of sales in the revenue mix.Net income reached 39.6 million and ROIC 13.9%. In this quarter we had two extraordinary items with a negative net effect of R$ 3.3 million: the first one with the cost with legal and financial consultancy in the process of divestment of industrial services with a negative effect of 4.8 million and the second was the tax chargeback in the construction business unit with a positive impact of R$ 1.5 million. Net of the effects of these extraordinary items the net income would have been 42.4 million with a 12% growth on a year-over-year basis and ROIC would have been 14.6%. On slide number 5 we show the revenue breakdown for the quarter. Rental was the business unit that delivered the highest net revenue representing 42% of the total revenues; Jahu accounted for 33% and construction 25%. In relation to the type of service 77% of Mills revenues in the quarter had to do with equipment rental and 16% sales. On slide number 6 we show you the results of the construction division: revenue 55.7 million, a new quarterly record; Ebitda was 29.4 million, also a record with a 52.8% Ebitda margin and 20.9% ROIC and net of the extraordinary item of 1.5 million which I mentioned before Ebitda would have been 28.2 million with an Ebitda margin of 50.6% and 19.7% ROIC. Maintenance went back to the normal pace allowing us to have a return of the profitability of the segment back to historical levels. On slide number 7 we list some important contracts based on their monthly revenue evolution phase in our heavy construction projects. We signed in this quarter new important contracts such as the S11D project of Vale; the So Lus airport; the new stretches of the Guarulhos and Cuiab airports; the change in the So Francisco River course and Belo Monte plant among others.
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On slide number 8 we show you the segmentation of construction revenue breakdown per sector: infrastructure works 29% of revenues; industry 22% and projects related to the World Cup and the Olympics events 38%, impacted by the development of the airport and urban mobility projects. We are present in eight airports, line 4 and 5 (subway lines in So Paulo), line 4 in a Rio de Janeiro, VLTs and light-rail in six Brazilian capitals (Rio de Janeiro, Belo Horizonte, Braslia, Cuiab, Belm and Fortaleza. On slide number 9 we show you the investment perspective for 2014 - 2017 according to the BNDES. Investments in the industry will amount to R$ 1.1 trillion going by 24% vis--vis the 2009 and 2012 period and infrastructure investments will amount to R$ 510 billion, a 25% increase vis--vis the same period already mentioned. On slide number 10 we show you the auctions of new concessions in the transportation sector. There was a partial success in the last few months with the transfer of the Salvador and line 6 of So Paulo subways and the Federal BR 050 Highway transferred to the private sector. In order to minimize risks raised by prospective investors the auction schedule has been revised and if materialized these concessions that are forecasted for the next few months will require investments of approximately R$ 80 billion and this could have a significant impact on our revenues of the construction business unit as of 2015. On slide 11 we show you the Jahu results, which reached 72.4 million revenues, a new quarterly record growing by 20% on a year-on-year basis and on a quarter on quarter comparison the increase in revenues from sales, technical assistance and others offset the reduction in rental revenues. Ebitda reached 24.4 million; Ebitda margin was 33.7% and ROIC 8.2%, all impacted by the higher idle capacity and the higher volume of sales because they have a lower margin than rental. Utilization rate was lower than the normal levels because besides a slight reduction in the volume of equipment rented out and major increase in our inventory of equipment in the last few months, and we expect the level of utilization and the operating margins of Jahu to go back to the normal levels in the next few months. On slide number 12 we show you the Jahu rental revenue breakdown: residential projects represented 50% of the rental revenues and commercial projects represented 36%; real estate listed companies accounted for 23% of the total rental revenues in this quarter. On slide 13 we show you the results of the rental division which were revenues 93.9 million; Ebitda 52.3 million (both record, growing almost 40% on a year-on3

year basis); rental revenue also reached a new quarterly record, R$ 80.5 million which represents a 9% increase on a quarter-over-quarter basis. This quarter we signed a three-year contract with Vale and with Arcelor Mittal Esprito Santo and in Carajs. Ebitda margin was 55.7% and ROIC was 18.1%. On slide 14 we show you the results of the industrial services division: we had revenues amounting to 57.2 million, a slight reduction on the quarter-on-quarter basis and net of the extraordinary effect already mentioned of 4.8 million Ebitda would have been 8 million and the Ebitda margin would have been 14%, both in line with the previous quarter. In July we signed an agreement for the sale of industrial services for R$ 102 million and we received a down payment of 25 million on the date we signed the contract and we will be receiving the balance after we close the sale in installments that will be restated according to the CDI rate discounting the cash generation of this business for Mills between June 1 and the closing date. And the accumulated value after the end of September was equal to R$ 15.5 million in this divestment is in line with our strategy to focus on our core businesses where our competences can generate a higher value both for our shareholders and clients. And lastly we show you our growth plan. As you can see on slide 16 we opened a new rental unit in 3Q and our target is to open an additional five and closing the year with 29 rental units. And as we mention on slide 17 investment in rental equipment amounted to 119 million in 3Q and 382 million year-to-date, equivalent to 79% of the revised budget for 2013, which amounts to R$ 481 million in investments in rental assets. We will be investing R$ 241 million in the rental unit in 2013 instead of 274 million budgeted once we have not been able to get our suppliers to deliver the desired models still before the end of this year. In October we signed contracts for the purchase of motorized access equipment to be delivered in 2014 amounting to R$ 71.3 million and we also made a hedge contract to protect ourselves from the FX variation risk. This investment will be part of the overall Capex budget for 2014 for the rental business unit and will allow us to continue with our geographic expansion strategy by means of opening at least five new units in 2014. Ok thank you very much and now we will be available to answer your questions.

Q&A Session

Operator: Ladies and gentlemen we would like to start our question-and-answer session now. In order to ask a question please press star one and in order to remove your question from the queue please press star two. Our first question comes from Mr. Felipe Nuessli from BTG Pactual. Mr. Felipe Nuessli: Good morning everyone, good afternoon in fact and thank you for the call. I would like to talk about Jahu. As expected we saw a drop in the margin because of the slightly lower utilization rate, and Ramon said that this should be going towards something similar to the historical level in the next few months. So I would like to better understand the behavior of the competitive environment. What about the price pressure because of your main competitors? And I would like to better understand the strategy of Mills, if your policy of maintaining your prices to the detriment of the utilization rate continues in force and I would like to understand if in 4Q and 1Q 14 we could see return levels and margins going back to historical levels. And lastly still talking about Jahu I would like to better understand the sales. We see a relevant increase in sales of equipment and I would like to understand if this is something recurring in the company and if the answer is yes could you mentioned whether this has to do with some kind of product or some specific, concrete form work? What lies behind this increase in sales? Mr. Vazquez: Regarding sales we are talking basically about the Easy Set equipment which is the equipment used in the Minha Casa Minha Vida Program basically and in Jahu this is the equipment that we sell. We do not rent out this equipment, we only sell it and there is a fluctuation between quarters: in some quarters you have a large amount of sales, of delivery of equipment and in other quarters we do not have as many deliveries or sales as that. So this is part of the revenue mix of Jahu and we do not foresee any substantial changes in the percentage that is usually around 15% of the total revenues of Jahu. So there is nothing new about that, just business as usual. Regarding the Jahu BU over this year we have been delivering results that are lower than the ones we have been delivering historically first because of the beginning of the year when there was a gap regarding the delivery of rental equipment and our forecast was to receive equipment and we were not able to get
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this equipment during the first months of the year and so the equipment started to come after the end of May and because of that we ended up losing some businesses and this had a negative impact on our result. And also the delivery of this equipment over the months of June, July and August coincided with a very high demobilization of projects in the infrastructure sector and these were projects that were more closely related to stadiums and because of that some of our competitors who were taking advantage of this gap that was caused by the large number of projects generated by the World Cup, they went back to their original businesses, which is buildings and this is Jahus area. And when you work with infrastructure both when you send out and when you get the equipment back this has to do with very large amounts. In terms of these companies as they had a very large idle capacity they decided to rent their equipment at prices that are way below what we believe would be Would make sense and our strategy was to hold back and not lower our prices and maintain our pricing policy that is a pricing policy that we have had over time. And so you had the effect of this situation in which the competitors slashed down their prices and also the arrival of a large amount of equipment, and these two factors led our idleness rate or utilization rate to be lower than historical levels and this is already rebounding. As of October this idleness rates are going down over the next few months this rate will go back to what we consider as our historical levels and right now we are We have already reached levels that we consider adequate, acceptable levels of utilization rate for this division. But we understand that over the next few months we will be increasing the utilization rate of our equipment and thereby we will be going back to the profitability levels that had been achieving historically at this division around 45% of Ebitda margin. Mr. Nuessli: Perfect very clear, thank you very much for the update Ramon. Operator: In case you have a question please press star one. Our next question comes from Mr. Gabriel Cotelessa, Goldman Sachs. Mr. Gabriel Cotelessa: Good afternoon everybody, thank you for the presentation. My question has to do with better understanding the competitive environment in the rental division. You are carrying out quite a major expansion with branches throughout Brazil and I would like to know about your competition and what you expect in terms of competition from now on.

Mr. Vazquez: This market as you mentioned yourself is expanding very strongly and it should continue to expand very strongly. We believe that this market would be reaching maturity only around 2025 and because of that even if the economic growth of Brazil is not very significant this is a market that will be growing every much up to this date. Now talking about the competitive environment we continue to have more and more companies coming to this business. They are usually either small companies or medium-sized companies; however there are some European players that have been in the Brazilian market for about two years and of course there will be American companies coming to this market. But in spite of that we do not see any pressure regarding our margins for the future because we understand that the market has a very big growth potential and we believe that we are doing a very good job not only in terms of geographical expansion but also trying to differentiate our rental unit vis--vis the other players in the market by offering more and more services to our clients as other more mature markets such as the US and the European market the services component in this specific businesses very low in the Brazilian market, which is crawling in its initial stages where the client does not really know what machine he needs and he does not know how to operate the machine. In this kind of environment the services component is very important and it is along these lines that we are trying to position this business of ours as a company that supplies not only the rental of the equipment, the aerial platforms, but also brings to the clients a differentiated service with a very big concern with safety and training, etc. This has been our focus and we have been very successful and we believe that we are doing a rather good job in terms of having a differentiated company in a business that is very much focused on equipment rental by itself. Mr. Cotelessa: Ok thank you very much. Operator: Our next question comes from Mr. Cssio Lucin from J.P. Morgan. Mr. Cssio Lucin: Good morning everybody and thank you for the call. I have two questions, the first one has to do with rental still. Could you tell us about the development of used equipment, the dynamics of the used equipment, what you have been doing in order to promote or to boost this market? And the other question has to do with your operating cash flow. I see a reasonable improvement mainly in the working capital line item so I would like to know about this quarter.
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Mr. Vazquez: First talking about the rental division. The action that we have been undertaking regarding selling of used equipment is basically focused on growing this market and when we look at the mature markets we see that this market is very important. This niche of used equipment is a very important business not only due to the fact that you can maintain good margins in this business but also in order for you to decrease your maintenance costs. One important point is that you must transfer to the market as quickly as possible equipment that is used and because of that you may have a very low average age of your equipment. So we are carrying out this effort. We started this at the beginning of last year and inside the company we created a group which is focused exclusively on the sale of this equipment. We are looking for rental companies that rent out all kinds of equipment: compactors, compressors, etc., and stackers, and we are showing them the possibility that they have of getting into this segments as well. So what we have been doing is creating some competitors in fact. They compete with us but they are not major companies; they have more regional operations and they are more focused on the retail operation and not the wholesale operation and with that we expect to create a market for the used equipment and this will lead us to renew our equipment fleet and today we already have the machines; we started the business in 2008 and the machines that were bought in 2007, 2008 and 2009 we have already sold them in the market. So although we understand that this is a very hard job because you have to create a new market from scratch in fact and the result that we have been obtaining in this market is very good and this encourages us to make more and more endeavors in this area. And as we are carrying out the very major geographical expansion we are getting into new markets and in these new markets we can link other companies to these new markets and thereby we can have new channels and new locations for the sale of used equipment. This is an integral part of our strategy and we will continue with it because when you look at the market, you look at a mature market like the US and Europe, you can see that the used equipment of sale is a very big cash cow for companies that rent this kind of equipment. And Frederico will be adding to what you asked. Mr. Frederico Neves: About the cash flow we had three factors that contributed in this quarter: the first one was a strong cash generation coming from the high
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Ebitda mainly from the rental division; the second was in accounts receivable under control vis--vis our inflows, our sales; and the third factor was the reduction in tax payment because of the provisions for interest on own capital. This was done in late June and this brings about a major benefit in terms of disbursement for income tax payment. So these were the three reasons. Mr. Lucin: Just a quick follow-up on the used equipment question: so you intend to keep an average age of three, three and a half years and your feet? Mr. Vazquez: In normal situations this would be the ideal age of the fleet, and when you look at the US market for instance in 2008 and 2009 and 2010 they went through a major depression in their businesses in general and the average age reached five years because of the crisis. But I believe that three years, three and a half years would be very good. I would like to remind you that this equipment can be used for up to 15 years. Mr. Lucin: Thank you. Operator: I would like to remind you that in order to ask a question you should press star one. If there are no more questions I would like to give the floor back to Mr. Ramon Vazquez for his closing remarks. Mr. Vazquez: Once again I would like to thank you very much for participating in our conference call. Our investor relations team will be available to you to clarify any doubts that you might have. Thank you very much. Operator: Mills conference call is closed. We thank you very much for your participation and wish you all a very good afternoon. Thank you.