Paranapanema´s presentation 4Q09 and 2009 Earnings Released on March 12, 2010
Agenda Overview of the Group 03 Restructurings in 2008 and 2009 10 Tax Restructuring  16 Copper Division 19 Fertilizer Div...
Overview of the Group
After merger of  Eluma Prior to merger of Eluma Merger of  Caraíba at Nov 13, 2009 Merger of Eluma at  March 31, 2010
Current Shareholding Structure Mercado EWZ LLC * Consolidated position of Paranapanema S.A. on 03/15/2010. 23.96%  17.23% ...
THE LARGEST COPPER SEGMENT GROUP IN BRAZILL Share of Net Revenues 9M09 COPPER DIVISION FERTILIZER DIVISION 70% 28% 2%
<ul><li>IR site implemented on 12/03/2007 </li></ul><ul><li>Share Trading Policy implemented </li></ul><ul><li>Information...
Restructurings in 2008 and 2009   <ul><li>Financial </li></ul><ul><li>Corporate </li></ul><ul><li>Tax </li></ul>
<ul><li>06/13 to 11/13/08: Paranapanema’s non operating debt resolved with payment of  R$1.5 billion to creditors/sharehol...
<ul><li>Only debt remaining is of an operational nature at the subsidiaries(Advances against foreign exchange contracts - ...
<ul><li>• Justification for merges of Caraíba Metais and Eluma </li></ul><ul><li>simplification of the equity structure of...
Joining the Tax Debit Installment Payment Program Law 11.941/09 and PM 470/09 Taxation Restructuring
<ul><li>S earch for solutions for tax contingencies estimated at around R$1.58 billion for Paranapanema and its subsidiari...
<ul><li>The total amount of the adhesion  shown below is distributed as follows: </li></ul><ul><li>   R$91.6 million will...
Copper Division Paranapanema Eluma
<ul><li>Industries requiring copper worldwide : </li></ul><ul><li>   Civil construction </li></ul><ul><li>   Transportat...
<ul><li>Strategic actions by Paranapanema: </li></ul><ul><li>Expand the domestic market, taking up the slack left by impor...
Principal Players
Paranapanema is a foundry and refiner capable of operating in the entire copper production chain using copper concentrate ...
<ul><li>Significant sector diversification in different transformation industries </li></ul><ul><li>Competitive  advantage...
Fertilizer Division Cibrafértil
Strategic role in integrating with Paranapanema, to take advantage of the sulphuric acid generated by the metallurgy process
Economic and Financial Date 4Q09 and 12M09
<ul><li>Revenue and volume growth for the 4 th  consecutive quarter in 2009 </li></ul>
<ul><li>Sales volume rose steadily in all divisions  in 2009;  </li></ul><ul><li>Volume in 4Q09 against 4Q08 was 11% highe...
Principal Consolidated Indicators and those of the Operating Subsidiaries in 4Q09
Principal Consolidated Indicators and those of the Operating Subsidiaries in 12M09
<ul><li>Gross revenue evolved positively during 2009 </li></ul><ul><li>4Q09 revenue was 30% of the year, 14.4% over 4Q08 a...
<ul><li>Ebitda of R$100 million and margin of 4% of net revenue in the 12M09 </li></ul><ul><li>Ebitda of R$200 million and...
<ul><li>Net income of R$ 194 million and net margin of 7.7% in the 12M09, 46% over the 12M08 </li></ul><ul><li>Net income ...
Risk Management Policy
Outlook
<ul><li>Organic growth at Paranapanema </li></ul><ul><li>In the 12M09, consolidated investments in PARANAPANEMA were R$56....
<ul><li>For 2010, following conclusion of the financial, corporate and tax restructurings  of the last two years, manageme...
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  • 2010 03-12 presentation to the market-4_q09_2009

    1. 1. Paranapanema´s presentation 4Q09 and 2009 Earnings Released on March 12, 2010
    2. 2. Agenda Overview of the Group 03 Restructurings in 2008 and 2009 10 Tax Restructuring 16 Copper Division 19 Fertilizer Division 25 Economic and Financial Data 29 Risk Management Policy 37 Outlook 43 Page
    3. 3. Overview of the Group
    4. 4.
    5. 5.
    6. 6. After merger of Eluma Prior to merger of Eluma Merger of Caraíba at Nov 13, 2009 Merger of Eluma at March 31, 2010
    7. 7. Current Shareholding Structure Mercado EWZ LLC * Consolidated position of Paranapanema S.A. on 03/15/2010. 23.96% 17.23% 11.82% 7.35% 39.19% Major Shareholders * Position on 02/28/2010. Capital increase from the merger of Eluma: 319.2 million and capital of R$2,096 million Dilution of 0.46% Shareholder Distribution per Segment Reference Date 12/31/2009 Common 316,706,399 99.69% Preferred 993,865 0.31% Total 317,700,264 100.00% Free Float 316,624,727 99.66% Common 99.69% Preferred 0.31% Rótulos de Linha Total of Shares % Total Common % Common Preferred % Pref. Pension Funds 135,856,595 42.8% 135,856,595 42.9% - 0.0% Banks with Portifolios 57,660,707 18.1% 57,660,676 18.2% 31 0.0% Foreign Investiment Funds 42,918,558 13.5% 42,823,657 13.5% 94,901 9.5% Individuals 38,375,961 12.1% 37,720,422 11.9% 655,539 66.0% Investment Funds 21,651,300 6.8% 21,651,300 6.8% - 0.0% Non - Institutional Corporates 17,894,014 5.6% 17,714,042 5.6% 179,972 18.1% Investiment Clubs 2,963,393 0.9% 2,962,265 0.9% 1,128 0.1% Brokerage houses 312,294 0.1% 311,200 0.1% 1,094 0.1% Others 43,112 0.0% 6,113 0.0% 36,999 3.7% Treasury stocks 24,330 0.0% 129 0.0% 24,201 2.4% Total 317,700,264 100.0% 316,706,399 100.0% 993,865 100.0%
    8. 8. THE LARGEST COPPER SEGMENT GROUP IN BRAZILL Share of Net Revenues 9M09 COPPER DIVISION FERTILIZER DIVISION 70% 28% 2%
    9. 9. <ul><li>IR site implemented on 12/03/2007 </li></ul><ul><li>Share Trading Policy implemented </li></ul><ul><li>Information Policies </li></ul><ul><li>Voting Manual for shareholders at General Meetings </li></ul><ul><li>Management Committees: </li></ul><ul><ul><li>Finance </li></ul></ul><ul><ul><li>Taxation </li></ul></ul><ul><ul><li>Risks </li></ul></ul><ul><ul><li>HR </li></ul></ul><ul><ul><li>Budget </li></ul></ul><ul><li>Financial Risk Management Policy on 08/11/2009 </li></ul><ul><li>100% Tag Along on common shares </li></ul><ul><li>Joined the arbitration chamber contemplated in the bylaws </li></ul><ul><li>Dividends of 25% of adjusted net income </li></ul><ul><li>Company joins Novo Mercado of the BM&FBovespa in 2010 </li></ul><ul><li>100% of voting shares </li></ul>
    10. 10. Restructurings in 2008 and 2009 <ul><li>Financial </li></ul><ul><li>Corporate </li></ul><ul><li>Tax </li></ul>
    11. 11. <ul><li>06/13 to 11/13/08: Paranapanema’s non operating debt resolved with payment of R$1.5 billion to creditors/shareholders, 50% settled in cash and 50% by converting debt to common shares in a record time of only 5 months. </li></ul><ul><li>Funds raised: </li></ul><ul><li> 06/13/08: Private capital increase of R$ 514 million </li></ul><ul><li> 08/20/08: 6 th Convertible Debenture Issue of R$ 920 million for 30 months, 1 st series and 11 years, 2 nd series </li></ul><ul><li> 08/22/08: 1 st Debenture Conversion, liquidating the 1 st series </li></ul><ul><li> 08/26/08: 2 nd Debenture Conversion, with partial liquidation of the 2 nd series </li></ul><ul><li> 08/28/08: 3 rd Debenture Conversion, with partial liquidation of 2 nd series </li></ul><ul><li> 11/13/08: 4 th and final Debenture Conversion, with total liquidation </li></ul><ul><li> 11/13/08: divestment of Tin Division, with the sale of Taboca/Mamoré to Peruvian group, Minsur, for R$850 million, R$415 million net, after contingencies and debt </li></ul>R$ million 12/31/07 12/31/08 12/31/09 Total debt Cash and equivalents 2,031 866 668 685 486 668 Net Debt (Cash) 1,165 (18) (181) Capital Stock Shareholders Equity 967 (56) 2,067 1,193 2,089 1,408
    12. 12. <ul><li>Only debt remaining is of an operational nature at the subsidiaries(Advances against foreign exchange contracts - ACC and prepayment of exports-PPE); </li></ul><ul><li>Reduction of 27% in the total debt in 2009 compared to 2008; </li></ul><ul><li>2009 closed with no operating debt at Paranapanema; </li></ul><ul><li>Net cash at Eluma of R$213.4 million and consolidated net cash of R$181.4 million. </li></ul>
    13. 13.
    14. 14.
    15. 15. <ul><li>• Justification for merges of Caraíba Metais and Eluma </li></ul><ul><li>simplification of the equity structure of the companies controlled by Paranapanema; </li></ul><ul><li>reduction in administrative costs; </li></ul><ul><li>substantial synergy gains, given the complementary nature of the product ranges offered and the location of the manufacturing units; </li></ul><ul><li>higher investment capacity in new product research and development; </li></ul><ul><li>productivity gains arising from larger-scale production and distribution of the products offered by the companies; </li></ul><ul><li>more efficient corporate structure; </li></ul><ul><li>greater speed of response in executing strategic, administrative and commercial decisions; </li></ul><ul><li>Caraíba shareholders will remain shareholders of a publicly quoted company; and </li></ul><ul><li>greater liquidity for the shares issued by Paranapanema. </li></ul>
    16. 16. Joining the Tax Debit Installment Payment Program Law 11.941/09 and PM 470/09 Taxation Restructuring
    17. 17. <ul><li>S earch for solutions for tax contingencies estimated at around R$1.58 billion for Paranapanema and its subsidiaries; </li></ul><ul><li>10/28/09: BDM resolves to irrevocably join the tax debit liquidation and installment payment program in the case of Paranapanema S.A and Eluma S.A., as permitted by Law 11.941/09 and PM 470/09; </li></ul><ul><li>09/30/09: in view of this subsequent event, the impact of joining was already factored in for the 3 rd quarter of 2009; </li></ul><ul><li>11/30/09: cut-off date for companies to formally join the tax debit installment program; </li></ul><ul><li>The decision regarding tax debit installments and settlement took into account the probability of losses estimated by tax experts: (i) IPI – Presumed Credit on the Purchase by Eluma of untaxed or zero tax-rated Raw Materials, considered as a probable loss; and (ii) IOF tax in the case of Paranapanema, as a possible loss, but with no jurisprudence on the subject matter. </li></ul>
    18. 18. <ul><li>The total amount of the adhesion shown below is distributed as follows: </li></ul><ul><li> R$91.6 million will be paid in cash, of which R$18.2 million in 12 installments and the remainder at sight; </li></ul><ul><li> The remaining balance will be paid by fiscal losses and negative social contribution tax base. </li></ul><ul><li>The tax restructuring has placed the financial statements in a new and solid situation, reducing the costs of managing these tax liabilities, while providing a solution for all fiscal contingencies and radically changing the perception of Paranapanema’s consolidated risk and market value </li></ul>
    19. 19. Copper Division Paranapanema Eluma
    20. 20. <ul><li>Industries requiring copper worldwide : </li></ul><ul><li> Civil construction </li></ul><ul><li> Transportation (air, sea and land) </li></ul><ul><li> Automotive (hybrid cars, trucks) </li></ul><ul><li> Infrastructure (electricity and telecommunications) </li></ul><ul><li> Electroelectronics </li></ul><ul><li> Cooling and heating </li></ul><ul><li> Clean energy (solar, biodiesel, ethanol) </li></ul><ul><li> Apparel </li></ul><ul><li>Industries requiring copper in Brazil: the same, boosted by already approved government economic stimulus measures and others still in the pipeline, which are driving consumption and demand for copper in several industries such as: </li></ul><ul><li>(i) consumption: popular refrigerator substitution program; </li></ul><ul><li>(ii) solar energy: new municipal legislation determies the use of clean (solar) energy and the popular housing program; </li></ul><ul><li>(iii) electrical energy: “Luz Para Todos” (“Light for Everyone”) is also likely to encourage the industry; </li></ul><ul><li>(iv) civil construction: “Minha Casa Minha Vida” (“My Home, My Life”) foresees construction of 1 million homes; </li></ul><ul><li>(v) extension to the IPI tax exemption or reduction period: </li></ul><ul><li> electroelectronics: extended IPI benefits on certain white goods until 10/31/09; </li></ul><ul><li> automotive: benefits for cars were extended to 09/30/09; and </li></ul><ul><li> for trucks: exemption until 12/31/09, with the gradual return of taxation after these periods; </li></ul><ul><li>(vi) Reduction in IPI: </li></ul><ul><li> capital goods: machinery and equipment intended for industry and special funding facilities for small and mid-size companies via BNDES and Banco do Brasil; and </li></ul><ul><li> some civil construction items; and </li></ul><ul><li>(vii) Reduction of PIS and COFINS taxes: motorcycles up to 12/31/09, with the industry agreeing to retain jobs. </li></ul>
    21. 21. <ul><li>Strategic actions by Paranapanema: </li></ul><ul><li>Expand the domestic market, taking up the slack left by imports; </li></ul><ul><li>Expand sales of higher value-added products, like bars and drawn wire; </li></ul><ul><li>Offer clients more logistics services, reducing time frames, quantities and transport management risk by creating the CDPC. </li></ul>
    22. 22. Principal Players
    23. 23. Paranapanema is a foundry and refiner capable of operating in the entire copper production chain using copper concentrate from Chile
    24. 24. <ul><li>Significant sector diversification in different transformation industries </li></ul><ul><li>Competitive advantage and good thermometer of economic activity </li></ul><ul><li>Entry into the copper wire and bar segments with the Bus Bar project </li></ul><ul><li>Launch of new products like flexible cables (insulated electric wiring) </li></ul>
    25. 25. Fertilizer Division Cibrafértil
    26. 26. Strategic role in integrating with Paranapanema, to take advantage of the sulphuric acid generated by the metallurgy process
    27. 27.
    28. 28.
    29. 29. Economic and Financial Date 4Q09 and 12M09
    30. 30. <ul><li>Revenue and volume growth for the 4 th consecutive quarter in 2009 </li></ul>
    31. 31. <ul><li>Sales volume rose steadily in all divisions in 2009; </li></ul><ul><li>Volume in 4Q09 against 4Q08 was 11% higher, showing a recovery in both semi-finished copper products and in the Fertilizer Division </li></ul>
    32. 32. Principal Consolidated Indicators and those of the Operating Subsidiaries in 4Q09
    33. 33. Principal Consolidated Indicators and those of the Operating Subsidiaries in 12M09
    34. 34. <ul><li>Gross revenue evolved positively during 2009 </li></ul><ul><li>4Q09 revenue was 30% of the year, 14.4% over 4Q08 and 12.7% higher than 3Q09 </li></ul><ul><li>Volume of 452 000 t in the 12M09 and in 4Q09 accounted for 26% of the year </li></ul><ul><li>Internal market volume of 91 000 t grew by 24% in 4Q09 over 4Q08 and 108% in relation to 1Q09 </li></ul><ul><li>Exports rose by 55% in 4Q09 over 4Q08 and by 26% over 3Q09 and 71% over 1Q09 </li></ul><ul><li>Domestic market share averaged 51% of 2009 gross revenue </li></ul>
    35. 35. <ul><li>Ebitda of R$100 million and margin of 4% of net revenue in the 12M09 </li></ul><ul><li>Ebitda of R$200 million and margin of 26.5% of net revenue in 4Q09, because of the positive effects of joining the tax debt installment program </li></ul><ul><li>Ebitda of the copper division of R$223 million and margin of 9% in the 12M09 </li></ul>
    36. 36. <ul><li>Net income of R$ 194 million and net margin of 7.7% in the 12M09, 46% over the 12M08 </li></ul><ul><li>Net income of R$ 304 million and net margin of 40.4% in 4Q09, from reversal of original provisions and deferred IT and SC which returned from the effect of having paid the debits largely in cash. </li></ul>
    37. 37. Risk Management Policy
    38. 38.
    39. 39.
    40. 40.
    41. 41.
    42. 42.
    43. 43. Outlook
    44. 44. <ul><li>Organic growth at Paranapanema </li></ul><ul><li>In the 12M09, consolidated investments in PARANAPANEMA were R$56.5 </li></ul><ul><li>million, distributed in: </li></ul><ul><li>Paranapanema Branch in BA ( formerly Caraíba Metais) R$37.9 million </li></ul><ul><li>in 12M09 , channeled to (i) capacity expansion; (ii) boiler </li></ul><ul><li>refurbishment; (iii) technical stoppage in March 2009 to refurbish </li></ul><ul><li>furnace tiles; and (iv) reactivation of the plant for producing </li></ul><ul><li>oxy-free bars concluded, whose major client is Eluma. </li></ul><ul><li>Eluma R$17.2 million in 12M09, channeled to the following </li></ul><ul><li>programs: (i) conclusion of expansion projects; (ii) improvements in distribution and logistics, quality, informatics and others; (iii) environment, by segregating effluents from the Utinga lake; and (iv) maintenance. </li></ul><ul><li>Investments (CAPEX) for the 2010-2012 period: </li></ul><ul><li> With the approval of the project for expanding the installed capacity of Paranapanema’s BA Branch ( formerly Caraíba) from 220 to 276 mil t /year, the investments for the period 2010-2012 will be around R$329 million. </li></ul><ul><li> Eluma estimates R$175 million between maintenance and future expansion of capacity, the MBD of 08/Feb/10 having approved organic growth, with expansion of installed capacity, from72 000 t / year to approximately 90 000 t / year by 2012, with higher added-value products. </li></ul><ul><li> Cibrafértil: investments in the 12M09 were R$1.4 million, intended for improvements and maintenance, with investments of the order of R$2 million a year for the 2010-2012 period. </li></ul>
    45. 45. <ul><li>For 2010, following conclusion of the financial, corporate and tax restructurings of the last two years, management will now face new and interesting challenges, but in a much more comfortable situation given the current capital structure and the improved adaptation of the balance sheet to international accounting standards, enabling us to establish more ambitious goals, such as: </li></ul><ul><li>(i) focus on organic growth by expanding the installed capacity in Bahia (up to 276 000 t/year in primary copper and 30 000 t /year in laminates) and in São Paulo (up to 90 000 t / year in semi-manufactured goods) which will imply investments of R$510 million between 2010 and 2012; </li></ul><ul><li>(ii) analysis of the opportunities for strategic partnerships and alliances, in order to maximize the Company’s profitability; </li></ul><ul><li>(iii) strategic measures to conquer local and international markets; </li></ul><ul><li>(iv) Adding greater value to products, improving margins and competitiveness through economies of scale and permanent reductions in costs; </li></ul><ul><li>(v) Reducing the volatility of commodities and the exchange rate on the Company’s result by adopting a corporate hedge policy (to be felt throughout 2010 as a whole, since it began in August/09; </li></ul><ul><li>(vi) listing the Company on Novo Mercado, migrating directly from Level 1 to the highest level of Corporate Governance; and </li></ul><ul><li>(vii) adapting the organizational structure to the new operating structure of the copper chain within a single company, Paranapanema, while creating a corporate culture intended to maximize shareholder returns. </li></ul>
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