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Klabin reports net profit of R$ 207 million in 2Q07, and reaches R$ 372 million in 1H07
The 2Q07 Net Revenue reached R$ 715 million, 7% higher then 2Q06. The gross margin in 2Q07 was 36%, 2 b.p. higher than 2Q06. Capex of the coated board expansion project in the Monte Alegre mill was R$ 424 million in the quarter. The production of the new machine is planned to start up in October 2007.
R$ million Net Revenue
% Exports
2Q07 715
26%
1Q07 691
29%
2Q06 667
26%
2Q07/1Q07
2Q07/2Q06
1H07 1,405
27%
1H06 1,313
26%
3.5%
7.1%
EBITDA
EBITDA Margin
200
28%
203
29%
169
25%
-1.9%
18.0%
403
29%
355
27%
Net Income
Net Debt Net Debt/EBTIDA (annualized) Capex
24.8% 17.0%
111.2% 279.3%
( * ) Figures related to paper, boards and recycled paper production, do not considered corrugated boxes and industrial bags.
730.8
730.8
725.3
714.5
667.3
686.2
Kraftliner
Coated Board
Corrugated Boxes
Industrial Bags
Others
Wood
Investor Relations
Ronald Seckelmann, CFO and IR Director Luiz Marciano Candalaft, IR Manager Iago Whately, IR Analyst Daniel Rosolen, IR Analyst Phone: 55 (11) 3046-5800 invest@klabin.com.br
Paper and coated boards mills, as well as industrial bags converting plants ran at full capacity and corrugated boxes had an impressive production growth compared with 2Q06.
In this quarter has occurred a 4 days 2Q07 1Q07 2Q06 1H07 1H06 maintenance shutdown in the Monte thousand tons Alegre mill (PR), in order to prepare the interconnections of the present installations with the new installations of MA 1100 Project.
Sales Volume
Sales volume in the 2Q07, excluding wood, reached 377.8 thousand tons, 11% and 5% higher than 2Q06 and the 1Q07. Exports volume in the 2Q07 totaled 138.2 thousand tons, 6% higher than 2Q06 and 8% lower than 1T07, due to the strong kraftliner sales volume in the domestic market and transfers to corrugated boxes converting plants.
Industrial B ags 8%
737 680 39% 378
37% 63%
Others 3%
39%
Kraftliner 33%
359
42%
58%
2Q07
1Q07
Domestic Market
2Q06
1H07
Foreign Market
1H06
Net revenue
Net revenue in the 2Q07, including wood, totaled R$ 714.5 million, 7% and 3% higher than the same period of 2006 and 1Q07, respectively. The highlights in this quarter were: The increase of kraftliner revenues in the domestic market, 55% higher than 2Q06 and 1Q07. The 9% and 17% growth in the corrugated revenues compared to 2Q06 and 1Q07. Net Revenue by Market
R$ million
Wo o d Others 8% 2%
1,405 1,313 27% 26%
Kraftliner 20%
Industrial B ags 1 4%
715 26%
74%
Co rrugated B o xes 31 %
1H07
Foreign Market
2Q07
1Q07
Domestic Market
2Q06
1H06
includes wood
Exports Destination
Volume 1H07
North America 2%
Africa 9% Asia 9%
Latin America 54% Latin America 50% Europe 30% Europe 25%
Operating Results
Cost of goods sold in the 2Q07 was R$ 454.9 million, 4% higher than 1Q07, due to the higher production volume and the increase in the consumption of fuel oil and chemical products. The recycled paper mills had cost increases due to prices of OCC, which are the main inputs of these units. Selling expenses in the 2Q07 reached R$ 67.5 million, stable compared with 2Q06 and 1% higher than 1Q07, due to the higher sales volume. Compared with net revenues, these expenses represented 9% in 2Q06, versus 10% in 2Q06 and 1Q07. Freights represented 63% of total selling expenses. Klabin is expanding the volume transported by railways. Besides the 100 thousand tons/year that are transported from Monte Alegre to the Paranagu Seaport, more 120 thousand tons are being transported from the new Lages railroad terminal (60 thousand tons/year Lages / Paranagu and the balance, Lages/Argentina). General and administrative expenses totaled R$ 48.2 million in the 2Q07, representing 7% of the net revenue, versus 6% in the 1Q07. Operating result before financial revenues (EBIT) in the 2Q07 was R$ 138.9 million, an increase of 36% when compared to 2Q06 and 3% lower than 1Q07.
EBITDA and EBITDA Margin 29% 26% 25% 24% 186 169 170 184 29% 28% 203
200
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
EBITDA - R$ Million
EBITDA Margin
44 -20 203
EBITDA Margin 29%
-10
-9
-8
200
EBITDA 1Q07
Volume
Price
Exchange Rate
COGS
Operational Expenses
EBITDA 2Q07
06/30/2007 Financing (R$ million) Local Short Term Long Term Gross Debt Cash and Cash Equivalents Net Debt 424.5 1,304.4 1,728.9 Currency Foreign 118.1 1,685.6 1,803.7 Total 542.6 2,990.0 3,532.6 (2,196.7) 1,335.9 Local
03/31/2007 Currency Foreign 120.6 1,626.1 1,746.7 490.4 1,057.2 1,547.6 Total 611.0 2,683.3 3,294.3 (2,152.8) 1,141.5
1,336
EBITDA
Working Capital
Capex
Others
Net Income
Net income in the 2Q07 was R$ 206.5 million, an increase of 111% and 25% compared with 2Q07 and 1Q07, respectively. In the first half, net income was R$ 372.0 million, R$ 0.41 per share, versus R$ 260.5 million and R$ 0.28 per share in the same period of 2006.
Business Performance
BUSINESS UNIT - FORESTRY
Klabin handled 1.8 million tons of Pine and Eucalyptus logs, as well as woodchips and biomass for energy generation in the 2Q07, volume 3% higher than 2Q06 and 1Q07. The amount transferred to the mills in Parana, Santa Catarina and So Paulo totaled 1.2 million tons. Sales volume of logs to sawmills and laminators was 584.8 thousand tons in the 2Q07, 15% and 7% lower than 2Q06 and 1Q07. Net revenue from logs sales to third parties in the 2Q07 reached R$ 54.8 million, 16% and 9% lower than 2Q06 and 1Q07, respectively. The slowdown in the US housing construction activity continues to affect negatively wood sales for third parties. In June, seasonally adjusted annual rate of new privately owned housing starts in the US was 1.5 million, 2% higher than May, but 19% lower than June 2006.
"US New Privately Owned Housing Units Started" Seasonally Adjusted Annual Rate Millions
2,500
2,000
1,500
1,000
Jan- 00 Jul-00 Jan-01 Jul-01 Jan- 02 Jul- 02 Jan-03 Jul-03 Jan-04 Jul- 04 Jan- 05 Jul-05 Jan-06 Jul-06 Jan- 07
At the end of June, the company held 413 thousand hectares of land, 344 thousand hectares owned and 69 thousand hectares leased. The amount of 208 thousand hectares are planted forest, while 158 thousand hectares are Pine and 50 thousand hectares are Eucalyptus, besides 165 thousand hectares of permanent preservation areas and legal reserves. In order to prepare the company for the capacity expansion project under way, as well as future expansions, the company keeps investing in the increase of owned timberland and via incentive program.
2.18
2.04
2.00 1.50
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 Average Price (US$) Average FX Rate (R$/US$) Source: FOEX
The hike of kraftliner prices continued in the 2Q07, and Klabin continued to implement price increases. The rise in the industrial activity in USA and Europe has sustained the increase of packaging demand and, in the cost side, OCC prices continue under pressure of Chinese demand. In this scenario, the paper packaging prices should maintain the growth trend, which should last, at least, while the industrial activity remains heated. Sales volume of coated boards in the 2Q07 reached 90.9 thousand tons, 12% e 3% higher than 2Q06 and 1Q07, respectively. Net revenue reached R$ 177.1 million in the 2Q07, 10% and 1 % higher than 2Q06 and 1Q07. Coated boards exports totaled 27.3 thousand tons in the 2Q07, 9% higher than 2Q07 and 2% lower than 1Q07. Klabin won, once again, the 1st place in the Tetra Pak Supplier Evaluation Ranking. Considering the quarters average, the company was the best supplier in 2006 and 1Q07. The increase in the international milk prices pushed the exports in this period. The shortage of liquid milk decreased temporarily the coated board demand. The domestic milk price increased, the supply grew and the coated board sales overcame the expectations.
Brazilian shipments of corrugated boxes - thousand tons 1,058 920 1,019 1,048 1,068 1,131
1Q02
Source: ABPO
1Q03
1Q04
1Q05
1Q06
1Q07
Net revenue in the 2Q07 totaled R$ 236.4 million, 9% and 17% higher than 2Q06 and 1Q07, respectively. The highlights of the quarter were the box sales volume, higher than 1Q07 and the strong corrugated boxes demand for the tobacco industry. In the first half of the year, there was a substantial raise of raw material prices, mainly OCC. Rising costs of freights, electrical energy and fuel oil, have also been observed and the company is compensating with price increases. Klabin was certified by FSC in four packaging conversion units Itaja (SC), Piracicaba, Jundia DI e Jundia TP and two recycled paper mills Guapimirim (RJ) and Piracicaba (SP).
jan
feb
mar
apr
may 2005
jun
jul 2006
aug
sep 2007
oct
nov
dec
Export sales volume in the 2Q07 reached 8.7 thousand tons, 8% lower than 2Q06 and 5% higher than1Q07. The unit has been achieving important advances looking forward the productivity raise, through a large optimization work in the client portfolio profile, which results are fewer stops and set up reductions. Aiming better results in environmental and quality patterns, new equipments were installed for confection of photopolymer plate, which eliminate the use of chemical solvents and its negative environmental impact and health problems. This technology also offers better work conditions with loss reduction and quality improvement.
Capex
The main investments made in 2Q07 are listed hereafter:
10
The project that will increase the production of coated boards in the Monte Alegre mill has reached its peak at the end of June, with almost 5,500 people working at that place. The physical program is on schedule and the start up dates of the mainly equipments are being maintained. The MA 1100 Project investment is listed below:
R$ Million Gross Capex Refundable taxes Net Capex Completed 1Q07 465 76 388 Total Planned 2H07 2008 537 200 112 42 425 158 Total 2,200 350 1,850
The taxes mentioned above will be recovered up to 4 years period. In September, Monte Alegre mill will have a 12 days shutdown for the expansion project interconnections. From October on, paper machine #9 (PM9) begins the production for tests and operating adjustments. Until December, when the power boiler starts to run, the capacity expansion will count on purchased electric energy. In 2008 the new machine will produce 80% of its capacity, reaching the full capacity in 2009. In the pictures below, the new recovery boiler and an inside view of the new building, with the MP9 in the spotlight:
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Capital Markets
At June 30th, 2007 Preferred Shares Share Price (KLBN4) Book Value Daily Trade Volume Market Capitalization 600.9 million R$ 6.80 R$ 3.03 R$ 8.8 million R$ 6.2 billion
The following chart shows the performance of Klabins preferred shares compared with So Paulo Stock Exchange Index (IBOVESPA):
KLBN4 x IBOVESPA
Closing Price = 28/12/06
140 130 120 110 100 90 80
+27,1% +22,3%
In the 1H07, Klabins preferred shares (KLBN4) saw a nominal increase of 27.1% and IBOVESPA 22.3%. The shares were negotiated in all trading sessions of BOVESPA, totaling 74,623 transactions in the period, involving 216.8 million shares, with average daily trading volume of R$10.0 million, a 33% increase compared to R$ 7.5 million of average daily trading volume in 2006. Klabins preferred shares was traded in BOVESPA by an average price of R$ 6.35 in the 2Q07, 21% higher than the average price of R$ 5.23/share in 1Q07. Klabins shares are also traded over-the-counter (OTC) as Level I ADRs in the US market under the code KLBAY. In June, Standard & Poors revised in its global scale, for stable to positive, the BB corporative long-term credit ratings perspective attributed to Klabin. Standard & Poors has also elevated, from brAA- to brAA, the corporative credit rating attributed in the Brazils National Scale to Klabin and its 5th issuance of debentures. In this scale, the corporative credit rating is stable.
28 /1 2/ 06 11 /0 1/ 07 25 /0 1/ 07 08 /0 2/ 07 22 /0 2/ 07 08 /0 3/ 07 22 /0 3/ 07 05 /0 4/ 07 19 /0 4/ 07 03 /0 5/ 07 17 /0 5/ 07 31 /0 5/ 07 14 /0 6/ 07 28 /0 6/ 07
KLBN4
IBOVESPA
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The capital stock of Klabin consists of 917.7 million shares, of which 316.8 million are common shares and 600.9 million preferred shares. In June, it has been ended the Preferred Shares Repurchase Program. Through this program, Klabin purchased 15 million preferred shares.
Outlook
With the start up of the PM9 in the Monte Alegre (PR) mill, in October 2007, the production capacity of coated boards will increase from the present 330 thousand to 680 thousand tons/year. This way, the Monte Alegre capacity will increase from 700 thousand to 1,100 thousand tons per year, ranking Klabin among the largest global producers of virgin fiber based coated boards. With the new machine, Klabins installed production capacity of paper and coated boards will have a 25% increase, from 1.6 million to 2.0 million tons/year. The coated board demand is still consistent in the United States and Europe and supply is limited, this way, coated board international prices are under pressure. Klabins commercial area has achieved positive results regarding coated boards additional sales capacity, which highlights the favorable timing of the new machine start up. With the beginning of the European summer, kraftliner prices remained stable, with a soft tendency to increase in the second half. The American manufacturers are spot suppliers of the European market, especially when there is a reduction in the American economy rhythm. With the American economy level sustained, they should retake the sales in domestic market, reducing kraftliner supply in Europe. The corrugated boxes shipping showed, in the first half, its best performance over the last years. The perspective is that this good performance will last in the second half, because the demand remained heated and the companies are increasing the prices, due to the strong cost pressure from OCC prices increase. The company remains evaluating the studies to the expansion of the production capacity of kraftliner in the Otaclio Costa (SC) Mill, as well as to increase capacity of sack kraft paper production at Correa Pinto (SC). In Otaclio Costa, the investment will be realized in two phases. The first one aims the technological actualization, which will result in cost reduction, a better environmental performance and a 30 thousand tons increase of kraftliner production. In Correia Pinto, the investment comprises the transfer of the PM4 from Monte Alegre, in order to increase the sack kraft production from the present 130 thousand to 190 thousand tons/year, to guarantee the supplying of the industrial bags mills in Brazil and Argentina. Klabin has already started studies for a new debottlenecking project at the Monte Alegre mill, which contemplates the installation of a new coated board machine, increasing the production from 1,100 thousand to 1,500 thousand tons/year, using all the infra-structure implemented during the MA 1100 Project. This project should be presented to the Board of Directors until the end of 2008 with the production start up in 2010.
13
Wednesday, July 27th, 2007 10:00 a.m. (N.Y.) / 11:00 a.m. (Braslia) Password: Klabin Phone: U.S. participants: 1-888-700-0802 International participants: 1-786-924-8430 Brazilian participants: (55 11) 4688-6301 Replay: (55 11) 46886225 Password: 291
Conference Call
Webcast
The audio of the conference call will also be broadcasted by the internet. Access: www.collaborate.com.br/klabin
With a Gross revenue of R$ 3.2 billion in 2006, Klabin is the largest integrated manufacturer of packaging papers in Brazil, with an annual production capacity of 1.6 million tons of products. The Company has defined its strategic focus in the following fields of business: paper and coated boards for packaging, corrugated boxes, industrial sacks and wood. It is the market leader in all of these.
The declarations made in this release, which refer to the business prospects of the Company, its forecast of operational and financial results and to its potential growth, should be considered as mere speculation based on Managements expectations with regard to the Companys future. These expectations are highly susceptible to changes in the market, in the state of the Brazilian economy, in industrial and, not least, in international markets.
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Results 2Q07 July 26th, 2007 Results 2Q07 July 26th, 2007
P P
15
T
15
Results 2Q07 July 26th, 2007 Results 2Q07 July 26th, 2007
Long-Term Receivables Deferred income tax and soc. Contrib. Taxes to compensate Judicial Deposits Other receivables
Permanent Assets Other investments Property, plant & equipment, net Deferred charges Total
16 16
12.6 48.4 67.3 244.0 105.1 429.4 23.3 85.7 6.4 30.2 214.7 837.7 542.1 2,625.8 503.9 1,976.0
19.3 31.7 63.6 124.4 126.9 233.7 22.2 45.4 7.6 12.8 239.6 448.0 584.8 1,211.1 531.5 1,018.8
Foreign Market Volume (1,000 t) Kraftliner Coated Boards Corrugated Boxes Industrial Bags Others Total Net Revenue (R$ million)
Total Sales Volume (1,000 t) Kraftliner Coated Boards Corrugated Boxes Industrial Bags Others Total Wood Volume (1,000 t) Net Revenue (R$ million) Kraftliner Coated Boards Corrugated Boxes Industrial Bags Others Wood Total
1Q06 113.4 79.9 107.5 28.7 10.2 339.7 693.5 121.3 155.6 202.0 88.8 9.4 68.1 645.2
2Q06 103.6 81.3 114.6 29.0 12.0 340.5 689.1 117.8 160.5 216.1 87.9 19.4 65.6 667.3
3Q06 122.1 88.4 105.4 30.3 9.6 355.8 701.1 144.6 172.2 209.4 95.4 15.5 68.2 705.3
4Q06
2006
1Q07 123.4 88.6 107.4 31.5 8.0 358.9 626.3 142.2 174.9 201.3 96.6 15.2 60.3 690.5
120.7 459.8 91.9 341.5 105.4 432.9 30.7 118.7 8.7 40.5 357.4 1,393.4 542.1 2,625.8 142.4 526.1 180.1 668.4 210.3 837.8 92.6 364.7 15.2 59.5 54.4 256.3 695.0 2,712.8
136.7 278.9 177.1 352.0 236.4 437.7 95.6 192.2 13.9 29.1 54.8 115.1 714.5 1,405.0
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Results 2Q07 July 26th, 2007 Results 2Q07 July 26th, 2007
After 2014
Total 1,136.1 2.8 320.3 269.7 1,728.9 1,320.1 482.9 0.7 1,803.7 3,532.6
Average Cost Average Tenor 11.4 % p.y. 45 months 6.8 % p.y. 61 months 53 months
302 193
338
347
136
18
2009 2010 2011 Foreign Currency 2012 2013 After 2014
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Appendix 5 Statement of Consolidated Cash Flow Public Company Legislation (R$ thousand)
Second Quarter 2007 2006 Cash flow from operating activities Net income Items not affecting cash and cash equivalents Depreciation, amortization and depletion Provision for loss on permanent assets Deferred income and social contribution Interest and exchange variation on loans and financing Capitalized interest Equity and subsidiaries Exchange variation on foreign investments Reserve for contingencies Reversal of the reserve Minority interest Decrease (increase) in assets Accounts receivable Inventories Recoverable taxes Prepaid expenses Other receivables Increase (decrease) in liabilities Suppliers Taxes and payable Deferred income and social contribution Salaries, vacation and payroll charges Other payables Net cash provided by operating activities (carry forward) Cash flow from investing activities Purchase of property, plant and equipment Increase in deferred assets Goodwill in the acquisition of controlled company Sale of property, plant and equipment Judicial deposits Others Net cash provided by (used in) investing activities Cash from financing activities New loans and financing Amortization of financing Payment of interest Capital contribution to subsidiaries by minority shareholders Dividends paid Stock repurchase Others Net cash used in financing activities Increase (Decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 206,541 60,845 790 19,147 (50,070) (26,429) 6 (563) 2,521 0 3,619 (29,420) (10,161) (111,860) (6,928) (24,824) 135,460 8,501 47,906 11,461 17,673 254,215 (410,314) (17,760) (54,139) 571 (3,325) 0 (484,967) 0 527,476 (152,166) (86,883) 1,430 0 (8,515) (6,694) 274,648 43,896 2,152,815 2,196,711 43,896 97,784 67,246 (4,193) 9,077 58,682 (3,896) 8 578 344 (4,218) 3,557 (8,775) (4,693) 31,194 (6,023) (3,730) (17,646) (27,776) (831) 14,458 (4,761) 196,386 (148,579) (7,211) 0 19,239 (563) 2 (137,112) 0 609,956 (163,622) (63,529) 0 (71,270) 0 0 311,535 370,809 1,647,439 2,018,248 370,809
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