www.duratex.com.br
          November / 2005




1
Contents



    Introduction

    Highlights

    Competitive vantages and competitors

    Market positioning

    Operat...
Duratex S.A. (Sep/2005)


    Total Outstanding Shares: 59 million
        Common        37%
        Preferred     63%
   ...
Capital Markets and Corporate Governance
                 52 weeks highest price: R$26,00 in 03/10/2005
                 5...
Business Areas


            Wood
    Hardboard
    Particle Board
    MDF / HDF / SDF
    Laminate Flooring
    Wall and ...
Selling Mix


           Net Revenues Breakdown                             Distribution Channel


            MDF / HDF /...
Contents



    Introduction

    Highlights

    Competitive vantages and competitors

    Positioning

    Operating imp...
Environment and Performance


    Maintenance of the             Reduction of the export income in Reais;
    restrictive ...
Nine Months Performance (in R$M)


                               January to September

                              2005...
Performance per Division (in R$M)



                                      January to September / 2005
                   ...
Quarterly Performance (in R$M)



                             3Q05      2Q05      1Q05      3Q04
     Shipments
     Wood...
Return on Invested Capital (ROIC)


                             p.p.
                        +3,3                  12,3%
...
Performance (January to September)
     (in R$M)




                                   993,5 12,6%                 1.035,...
Operating Cash Generation (in R$ M)



                                   ,5%                                         273,...
Accrual Dividends (in R$ M)



                            7%
                    R: +53,
             CA G               ...
EBITDA (R$M) & Margin (%)


              Wood
     Gain of scale with the start-up of a
     new MDF / HDF / SDF plant in...
EBITDA (R$M) & Margin (%)




     Cost and operating expenses
     savings;
     Automation of important
     productive ...
EBITDA (R$M) & Margin (%)



               Madeira

     36,4%                    33,6%
                      31,5%
     ...
Contents



     Introduction

     Highlights

     Competitive vantages and competitors

     Positioning

     Operatin...
Competitive Advantage - Location



                                            Agudos (MDF and Laminate Flooring)
       ...
Competitive Advantages

             Wood
     Timberland self-sufficiency;
     Production scale;
     Leadership     Mar...
Competitive Advantage - Timberland

                   90 thousand hectares
                   Self-sufficiency




      ...
Panel Making Players



                                     Particle                         Laminate     Wall
          ...
Competitive Advantage



     Well known brands     Deca e Hydra;
     Reference in design and quality;
     Market leader...
Competitive Advantage – Release of New Products




     Squared Showerhead



     Chromotherapy showerhead              ...
Metal Fittings and Vitreous China Market


     Metal Fittings:
      Deca’s estimated market share: 38%
      Main player...
Contents



     Introduction

     Highlights

     Competitive advantages and competitors

     Positioning

     Operat...
Exports (in US$ M)

                                  Average increase by 13% in hardboard
                               ...
Exports




     Wood                                      Hardboard
     91%                                          71%...
Debt and Amortization Schedule
      (in R$M)


                 606,5               Amortization Schedule
      Foreign  ...
Nominal Capacity & Occupancy Rate


                                JAN – SEP / 2005


                                   ...
Strategic Positioning


                                                                                                  ...
Contents



     Introduction

     Highlights

     Competitive vantages and competitors

     Positioning

     Operatin...
Internal Committees




     Corporative Intelligence

     Risks and Ethics           Objective: spread the best
        ...
Ongoing Actions


            Wood
     Introduction of a computing management system for freight and
     revision of the...
Ongoing Actions




     Effective cost and expense reduction:
         industrial:   R$ 6M / year;
         commercial: R...
Average Interest Rate (SELIC)

                                                23,1%
                                    1...
Civil Construction – Success Cases *
               INTEREST RATES            REAL ESTATE FINANCING                     RE...
Civil Construction Positive Scenario

     Mortgage Lending as a % of 2004 GDP *
     (only private financing)




       ...
Take Aways




     Strong competitive advantages;

     Leadership in the performing areas;

     Committed with cost cut...
Important


     This presentation material was based on the
     available results and DURATEX does not
     compromise i...
www.duratex.com.br
        08 / November / 2005




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Duratex - 3rd Quarter 2005

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Duratex - 3rd Quarter 2005

  1. 1. www.duratex.com.br November / 2005 1
  2. 2. Contents Introduction Highlights Competitive vantages and competitors Market positioning Operating improvement 2
  3. 3. Duratex S.A. (Sep/2005) Total Outstanding Shares: 59 million Common 37% Preferred 63% Market Capitalization: R$ 1.531,7 M Preferred Shareholders’ Structure Foreign Investors 29% Pension Funds 19% Others Itaúsa 28% 24% 3
  4. 4. Capital Markets and Corporate Governance 52 weeks highest price: R$26,00 in 03/10/2005 52 weeks lowest price: R$18,00 in 11/07/2005 Average daily volume: R$1,1 million . Quarterly . Termination of 25,35 the Beneficiary . . Platinum release of the Parts; Establishment Award from . 80% Tag- results via . Establishment of the IR Area; ABAMEC. Along rights conference call. of a 30% . Issuing of for the PN minimum R$ 191M in stock. dividend; new stock; . Extraordinary . Release of dividend; the . 2nd. Place on Company’s ABRASCA’s 5th . Adhesion to website. Award for the Bovespa’s Level I best Annual of Differentiated Report. Practices of Corporate Governance; 11,40 . Stock split in reverse. 3/1/2000 23/2/2000 17/4/2000 8/6/2000 31/7/2000 20/9/2000 28/11/2000 22/1/2001 16/3/2001 9/5/2001 29/6/2001 21/8/2001 11/10/2001 5/12/2001 31/1/2002 26/3/2002 17/5/2002 10/7/2002 29/8/2002 18/10/2002 10/12/2002 4/2/2003 28/3/2003 22/5/2003 15/7/2003 3/9/2003 23/10/2003 12/12/2003 6/2/2004 31/3/2004 24/5/2004 15/7/2004 3/9/2004 27/10/2004 20/12/2004 15/2/2005 7/4/2005 31/5/2005 20/7/2005 9/9/2005 1/11/2005 2000 2001 2002 2003 2004 2005 Stock Price Preço Volume Traded Volume 4
  5. 5. Business Areas Wood Hardboard Particle Board MDF / HDF / SDF Laminate Flooring Wall and Ceiling panels Metal Fittings Vitreous China Accessories 5
  6. 6. Selling Mix Net Revenues Breakdown Distribution Channel MDF / HDF / SDF Laminate 22% Flooring Furniture Makers 6% 32% Particle Board 16% Metal Fittings 22% Civil Construction 48% Hardboard Vitreous Others China • Deca; 24% • Skin door; 20% 10% • Laminate flooring; • Wall paneling; • Packaging; • Divisories. • Automotive; • Retail. 6
  7. 7. Contents Introduction Highlights Competitive vantages and competitors Positioning Operating improvement 7
  8. 8. Environment and Performance Maintenance of the Reduction of the export income in Reais; restrictive monetary policy Reduction of shipments: with high interest rates and Wood: - 4%; Deca: - 10%; a strong Real that valued Plant stoppage. against the Dollar by 16% between Jan and Sep / 05 Deepening of actions Increase revenues; targeting performance Cost reductions at Deca; Ongoing measures in both Deca and Wood; improvements Improvement of both gross and EBITDA margins; Improvement of ROE and ROIC; New products; Improvement on cash generation and working capital management. Climatic events Flooding in Deca; Windstorm at one timberland area; Katrina hurricane. 8
  9. 9. Nine Months Performance (in R$M) January to September 2005 2004 2003 SHIPMENTS 3 Wood (in 1.000 m ) 765,1 793,0 652,6 Deca (in 1.000 items) 9.435 10.444 9.829 2005 2004 2003 NET REVENUES 940,3 883,4 710,4 COGS 543,6 541,7 451,4 GROSS INCOME 396,7 341,7 259,0 % Gross Margin 42% 39% 36% OPERATING RESULT 210,2 184,4 115,6 EBITDA 269,9 240,8 159,5 % EBITDA Margin 29% 27% 22% NET INCOME 105,8 92,7 41,6 ROE 14% 13% 6% 9
  10. 10. Performance per Division (in R$M) January to September / 2005 Wood Division Deca Division Consolidated R$ M AV% R$ M AV% R$ M AV% Net Revenues 636,2 100% 304,1 100% 940,3 100% COGS (319,9) 50% (164,1) 54% (484,0) 51% Depreciation (43,7) 7% (15,9) 5% (59,6) 6% Gross Income 272,6 43% 124,1 41% 396,7 42% EBITDA 9m05 195,6 31% 74,3 24% 269,9 29% EBITDA 9m04 193,6 32% 47,2 17% 240,8 27% EBITDA 9m03 118,9 25% 40,6 17% 159,5 22% 10
  11. 11. Quarterly Performance (in R$M) 3Q05 2Q05 1Q05 3Q04 Shipments Wood (in 1,000 m³) 254,5 262,5 248,1 280,0 Deca (in 1,000 items) 3.376 2.855 3.204 3.740 (in R$ M) 3Q05 2Q05 1Q05 3Q04 Net Revenues 317,8 316,1 306,3 331,4 COGS 190,4 179,5 173,6 189,6 GROSS INCOME 127,4 136,6 132,7 141,9 % Gross Margin 40,1% 43,2% 43,3% 42,8% OPERATING RESULT 62,4 75,7 72,1 80,3 EBITDA 82,4 96,4 91,1 99,4 % EBITDA Margin 25,9% 30,5% 29,7% 30,0% NET INCOME 33,1 32,6 40,1 43,6 ROE (annualized) 13,4% 13,5% 16,9% 18,7% 11
  12. 12. Return on Invested Capital (ROIC) p.p. +3,3 12,3% 10,2% 9,0% 2003 2004 2005 * 12 * Setembro, 2005 annualized
  13. 13. Performance (January to September) (in R$M) 993,5 12,6% 1.035,4 13,8% 923,7 105,8 6,0% 92,7 41,6 2003 2004 2005 PL Equity L u c r o LNet Income íqu ido RO E Annualized ROE an u alizado 13
  14. 14. Operating Cash Generation (in R$ M) ,5% 273,3 C A GR:+7 % 140 + 184,1 159,3 143,8 113,7 2002 2003 2004 9m04 9m05 Operating Cash Generation = Net Income + Non Cash Expenses +/- Investment in Working Capital 14
  15. 15. Accrual Dividends (in R$ M) 7% R: +53, CA G 58,1 % 6 4,2 + 24,6 25,7 24,8 15,1 2002 2003 2004 9m04 9m05 15
  16. 16. EBITDA (R$M) & Margin (%) Wood Gain of scale with the start-up of a new MDF / HDF / SDF plant in Botucatu (SP); Installation of new coating lines; Cost reduction as the result of the verticalization of processes; Price recovery. 32% 31% 26% 193,6 195,6 118,9 2003 2004 2005 16 January to September
  17. 17. EBITDA (R$M) & Margin (%) Cost and operating expenses savings; Automation of important productive processes; Adjustment of the product portfolio; Price recovery. 24% 17% 17% 74,3 40,6 47,2 2003 2004 2005 17 January to September
  18. 18. EBITDA (R$M) & Margin (%) Madeira 36,4% 33,6% 31,5% 28,0% 27,1% 26,3% 23,6% 23,4% 83,7 15,4% 74,0 13,5% 57,0 64,4 57,2 26,7 22,4 25,2 15,7 13,6 3Q04 4Q04 1Q05 2Q05 3Q05 3Q04 4Q04 1Q05 2Q05 3Q05 18
  19. 19. Contents Introduction Highlights Competitive vantages and competitors Positioning Operating result 19
  20. 20. Competitive Advantage - Location Agudos (MDF and Laminate Flooring) Botucatu (MDF/HDF/SDF and Hardboard) Itapetininga (Particle Board) Jundiaí (Hardboard, Metal Fittings and V. China) São Paulo (Metal Fittings) São Leopoldo (V. China) Wood Division plants 90.000 ha of timberland Deca Division plants 20
  21. 21. Competitive Advantages Wood Timberland self-sufficiency; Production scale; Leadership Market Share; Broad product line; Own coating lines (painting, FF e LP); Ability to customize products (finishing and dimension); Environment awareness ISO 14.001 and “Green Label”. 21
  22. 22. Competitive Advantage - Timberland 90 thousand hectares Self-sufficiency High degree of mechanization Cost Reductions FSC – Forest Stewardship Council ISO 14.001 22 Environment sustainability
  23. 23. Panel Making Players Particle Laminate Wall Hardboard MDF/HDF SDF Board Flooring Paneling Plain Painted Plain LP FF Plain LP FF Duratex Berneck Eucatex Isdra Masisa Arauco Satipel Tafisa 23
  24. 24. Competitive Advantage Well known brands Deca e Hydra; Reference in design and quality; Market leadership with a stronger presence in higher end segments of luxury and super-luxury products lifestyle; Active policy of developing new products; Countrywide presence; Marketing; Well regarded technical assistance network. 24
  25. 25. Competitive Advantage – Release of New Products Squared Showerhead Chromotherapy showerhead Stick Line lavatory Sink L107 25
  26. 26. Metal Fittings and Vitreous China Market Metal Fittings: Deca’s estimated market share: 38% Main players: Docol; Fabrimar. Vitreous China: Deca’s estimated market share: 18% Main players: Roca; Icasa; Ideal Standard; Hervy. 26
  27. 27. Contents Introduction Highlights Competitive advantages and competitors Positioning Operating improvement 27
  28. 28. Exports (in US$ M) Average increase by 13% in hardboard prices; ,7% :+17 Increase of vitreous china exports by CAGR 39%, to 240 thousand items. 57,5 ,9% + 12 46,5 47,2 41,5 41,8 2002 2003 2004 9m04 9m05 28
  29. 29. Exports Wood Hardboard 91% 71% MDF/HDF/ SDF 14% Flooring 2% Deca InterD+ 4% 9% Vitreous Metal China Fittings 7% Main Markets: 2% United States 52% Europe 19% Asia and Middle East 7% South / Central Americas 14% Other 8% 29
  30. 30. Debt and Amortization Schedule (in R$M) 606,5 Amortization Schedule Foreign 50,8 Currency 61,8 114,4 242,2 Domestic 544,6 Currency 52,8 146,3 Total Debt 2005 2006 2007 2008 2009 & Beyond Cash R$ 218,3 M Net Debt / Equity 37,5% Net Debt R$ 388,2 M Net Debt / EBITDA* 1,08 * EBITDA Annualized 30
  31. 31. Nominal Capacity & Occupancy Rate JAN – SEP / 2005 360.000 m3/year Hardboard 94% 360.000 m3/year Particle Board 72% 500.000 m3/year 500.000 m3/year MDF/HDF/SDF 69% 640.000 m3/year 640.000 m3/year 14.400 KK Metal Fittings 68% 14.400 items/year items/year * 4.200 KK** Vitreous China 70% 4.200 ** items/year items/year * over the operating capacity of 3.800 K items / year 31 ** nominal capacity of the existent kilns
  32. 32. Strategic Positioning 28% 28% 27% 27% 27% 26% 26% 26% 26% 24% 25% 25% 24% 24% 24% 24% 24% 349 357 311 340 306 23% 23% 23% 23% 23% 268 22% 220 220 225 200 210 217 190 199 194 188 186 185 200 181 185 . New line of 223 165 panels . Improvements (Botucatu, SP); in the painting . New coating . Unification of . New Low line line the vitreous Pressure (Botucatu,SP); . New Particle . Expansion of (Itapetininga, china coating line . Aquisition of Board line in vitreous china SP); production (Botucatu, SP); complementary (Itapetininga, capacity . Aquisition of (Jundiaí, SP); . Aquisition of equipment for SP). (Jundiaí, SP). 4.400 ha of . Aquisition of 4.100 ha of the Botucatu, SP timberland. 6.400 ha of timberland. plant. timberland. 2000 2001 2002 2003 2004 2005 EBITDA 12 months (in R$M) EBITDA Margin (%) 32
  33. 33. Contents Introduction Highlights Competitive vantages and competitors Positioning Operating Improvement 33
  34. 34. Internal Committees Corporative Intelligence Risks and Ethics Objective: spread the best practices among all Corporate Governance industries belonging to the Itaúsa Group as to promote Talent Management the capture of synergies Operating Excellence allowing more value build- up. Commercial Excellence 34
  35. 35. Ongoing Actions Wood Introduction of a computing management system for freight and revision of the shipment logistics that should generate annual cost savings of R$ 6M; Launching of the Eco Panel in 2006, that should promote cost savings of about 15%; Introduction of mesures aiming: increase the painting line speed by 60%; economies related to the receiving process of resins. 35
  36. 36. Ongoing Actions Effective cost and expense reduction: industrial: R$ 6M / year; commercial: R$ 9M / year; personnel: 147 Further cost reductions to be implemented: reviewing of processes: R$ 5M / year. Vitreous China export contract (OEM): sales increase: US$ 10M per year until 2007. 36
  37. 37. Average Interest Rate (SELIC) 23,1% 19,5% 19,4% 17,5% 17,6% 18,0% 16,4% 14,5% 5,70% 2,10% 1,95% 2000 2001 2002 2003 2004 Sep/05 Dec/05 2006 -2,60% -2,50% -8,60% GDP Civil Construction Average Interest Rate * Estimated interest rate by the end of the years 2005 and 37 2006: estimates from Itaú and Santander research team.
  38. 38. Civil Construction – Success Cases * INTEREST RATES REAL ESTATE FINANCING REAL ESTATE Reduction of Extension of terms and Average growth of the SPAIN Interest Rates: introduction of finance mortgage lending by 1990 to 2001: incentives 21,6% between the years from 15% to 5% py of 1991 e 2001 Now: 2,40%py MEXICO Real Estate Financing: Infonavit’s number of Reduction of Terms from 15 to 30 years at an financing contracts: Interest Rates: approximate interest rate of 13% 1998: 108 thousand; 1998 to 2002: py. 2004: 306 thousand; from 30% to 8,2% py Since 2002, the financing Up to Sep 2005: 248 th. Now: 8,90%py volume grows on average by (goal for the year: 375 th.) 30% py. CHILE Reduction of Real Estate Financing: Number of new homes Interest Rates: Terms from 3 to 12 years at an grew from 3,3 M to 4.1 M 2001 to 2004: approximate interest rate of between 1992 and 2002. from 12% to 7% py 6,9% to 10,0% py. Now: 7% py Mortgage lending: Dec / 1997: US$ 7,2 bn; * Source: CSFB LATAM Banks, Housing May / 2005: US$ 13,7 bn. & Construction Report de 26/Aug/2005, Bloomberg and Infonavit Website at 38 www.infonavit.gob.mx
  39. 39. Civil Construction Positive Scenario Mortgage Lending as a % of 2004 GDP * (only private financing) 15,7% 2,1% 0,1% Chile Mexico Brasil * Source: CSFB LATAM Banks, 39 Housing & Construction Report de 26/Aug/2005
  40. 40. Take Aways Strong competitive advantages; Leadership in the performing areas; Committed with cost cutting actions; Improvement in corporate governance practices. 40
  41. 41. Important This presentation material was based on the available results and DURATEX does not compromise itself in updating it after this date. DURATEX is not to be held responsible for individuals’ investing decisions in the Company’s securities based in this present material. Expressions and terms that address future expectations and projections are subject to a high degree of uncertainty; thus, DURATEX is not responsible for its effective accomplishment. 41 11/08/2005
  42. 42. www.duratex.com.br 08 / November / 2005 42
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