Conferência Santander (somente em inglês)

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  • 1. Santander 9th Conference August 22, 2008 1
  • 2. Agenda • The Company • The Nonwovens Sector • 2Q08 Highlights • 2Q08 Results • Outlook 2
  • 3. Ownership Structure Espírito Santo Shares in AIG Capital Asas Group GG Group Group Treasury 18.3% 17.7% 18.3% 9.1% 3.1% 33.5% Total: 85.6 million shares 100.0% Isofilme Independent private equity fund managed by Antônio Approx. US$7.8 billion in private equity investments in AIG GG Group Kandir, former Planning Minister emerging markets. Recent success stories include Gol Capital and Fertilizantes Heringer, among others Espírito Its private equity division is present in Portugal, Spain, Investment fund of Constantino family, founders and Asas Group controlling shareholders of Gol, which recently Santo Group France and Brazil with 32 companies in its portfolio acquired Varig 3
  • 4. Overview Providência operates two business divisions with over 1,000 employees Major Key Nonwovens: 82% of our Net Revenues* End-uses Customers #1 manufacturer of Diapers nonwovens in Latin Feminine hygiene America Furniture & bedding 56% market share in Brazil (hygiene Medical disposables products) Major Key PVC: 18% of our Net Revenues* End-uses Customers #3 manufacturer Construction of PVC pipes in Companies Contractors Brazil Infrastructure • 7% market share * On 2Q08 4
  • 5. Our Focus: The Nonwovens Segment Nonwovens were created in the 50s from the combination of three technologies What is a Nonwoven Fabric? Paper Created when paper, textile and chemical technologies were combined to produce new fabrics and products with the attributes of textiles, but at significant lower costs Nonwoven Polypropylene is the main raw material Plastic Textile • Approximately 87% of nonwovens COGS Providência has the best platform within the winning technology 5
  • 6. Our Nonwovens Focus: Consumer Goods Industry Providência is focused on high value-added nonwoven products with high growth potential (hygiene and medical disposables) Product Mix (% of Nonwovens Net Revenues) Market Segmentation Outlook Medical Value-added Operating Market Expected 0% products margin size growth Medical Double High Small Disposables digit Hygiene / Double Consumer Medium Large digit Goods Single Durables Low Medium digit 6
  • 7. Agenda • The Company • The Nonwovens Sector • 2Q08 Highlights • 2Q08 Results • Outlook 7
  • 8. Outlook in Brazil Nonwovens demand can grow an additional 3x as a result of higher usage per diaper… Estimated Disposable Diapers Penetration Basic Diaper Share of Total Diaper Sales 70% 65% 65% 60% 60% 53% 40% 35% 35% 30% 30% 30% Bolivia Chile Argentina Colombia Mexico Peru Venezuela Ecuador Brazil Paraguay Others Uruguay Evolution of Baby Diaper Penetration in Brazil Nonwovens Usage Per Diaper (m2/diaper) 0.54 0.33 0.17 Basic Diaper Mid Tier Premium Diaper Brazil …and Providência has the technology to lead this growth
  • 9. Leading Market Position & High Barriers to Entry Providência is the leading manufacturer of nonwoven fabrics in South America with over 1.5x the capacity of the second largest player South American Main Spundbond Players: Total Capacity High Barriers to Entry (2008 in tons) 80,000 7 lines R3/41 Scale to service major clients Providência Typical investment for a new entrant PGI 48,000 4 lines R3/41 is approximately US$60 million Fitesa 34,000 2 lines R3/41 24 months of project implementation Certification process with major Softbond 5,000 consumer companies can take up to 18 months to be concluded Polystar 4,200 Know-how and highly specialized Lord 4,200 workforce Sulbrasil 3,000 Source:Technomic International - 20,000 40,000 60,000 80,000 Providência achieved its leading position by adding Note: 1. Hygienic Disposable Lines Reicofil 3 or 4 a new machine every two years since 1988 The update was made in accordance with market data and Providência’s estimates. 9
  • 10. Agenda • The Company • The Nonwovens Sector • 2Q08 Highlights • 2Q08 Results • Outlook 10
  • 11. Operational and Administrative Highlights Operational startup of Kami 9: Sales beginning on April; World-class quality, in line with top international products; Full capacity of 1,250 tons/ month reached on June; Main products are ultrathin special hygienic disposables and medical disposables. 11
  • 12. Operational and Administrative Highlights Isofilme Operations: EBITDA Margins higher than the consolidated KAMI margins due to End of investments and fiscal incentives in Minas Gerais State improvements at Isofilme production process; Full capacity of 800 tons/month reached on June/2008; On the 2nd Quarter 2008 it increased 2,300 tons of hygienic disposables to the domestic market. 12
  • 13. Operational and Administrative Highlights Specialties in Hygienic Disposables: Laminated nonwovens production line at full capacity in the 2Q08; Projects to expand the production capacity of specialties in hygienic disposables in progress, with 2008 total capital expenditures estimated at R$23 million and startup operations on 4Q08. Domestic Market Exports Volume in tons of laminated/ printed hygienic disposables Price premium of printed hygiene versus commodity hygienic disposables 13
  • 14. Operational and Administrative Highlights Other: Repurchase of 2.9 million shares (92% of authorized) since the beginning of the program until July 28, 2008, at a total cost of R$22.1 million; Implementation (go live) of SAP system on July 1st, 2008. Operation - Pipes and Fittings Division: Start-up sales of large-diameter pipe extrusion line to the industrial segment with installed capacity of 5,000 tons/year. 14
  • 15. Agenda • The Company • The Nonwovens Sector • 2Q08 Highlights • 2Q08 Results • Outlook 15
  • 16. Sales Volume Increase of 31.3% over 2Q07, Total: 24.1 more significant in the Nonwovens Total: 21.4 Division that increased 42.4% in the Total: 18.4 same period, due to the expansion in volume added by Isofilme, acquired in August 2007, and at KAMI 9, installed in 2007 and operating since April 2008; Increase of 12.5% in comparison to 1Q08, having the Nonwovens Division increased 18.8% in the same period. In thousands of tonnes 16
  • 17. Gross Revenue Increase of 25.7% in relation to 2Q07 and 10.9% when compared to 1Q08: Sales to the export market increased 23.2% over 2Q07 and 3.2% in relation to 1Q08, even in a scenario of significant appreciation of the real against the dollar. Sales to the domestic market increased 26.8% over 2Q07 and 14.7% when compared to 1Q08, due to the start-up of Line 9 and Isofilme’s full capacity utilization. In million of Reais 17
  • 18. EBITDA (R$ million) and EBITDA Margin (%) Adjusted EBITDA reached R$ 30.9 million (with margin of 24.2%), 17.5% 31.4 over 2Q07; Increase of 17.3% in relation to 27.6 1Q08; EBITDA Adjusted by the hedge operation* totaled R$ 31.4 million (with margin of 24.6%), 19.3% over 2Q07; In relation to 1Q08, the growth was 13.7%, mainly due to the increase in Sales volumes. Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivables from the export market. 18
  • 19. Net Income (R$ million) and Net Margin (%) Net Income of R$ 13.8 million with net margin of 10.8%, reverting the loss registered in 2Q07 due to the financial expenses on account of the promissory notes and the exchange gains/losses from the export market; Increase of 40.6% over 1Q08, when was recorded a profit of R$ 9.8 million and a margin of 8.5%. 19
  • 20. Nonwovens Division Volume reached 17.9 thousand tonnes, up 42.4% when compared with 2Q07. The domestic market posted a growth of 15.5% (mainly Isofilme) and the External Market registered a 33.7% increase due to Kami 9; Compared to 1Q08, the increment was of 18.8%; Net revenue totaled R$ 103.7 million in 2Q08, up 34.4% in relation to 2Q07 and up 17.3% in relation to 1Q08; These results are mainly due to the increase in sales and to the full capacity utilization of Isofilme and Kami 9 (reached in June 08) 20
  • 21. Nonwovens Division Unitary Fixed Cost in line with 2Q07; In relation to 1Q08 there was a reduction of 8.1% due to efficiency gains and increased scale of production. Reduction of 0.3% compared with 2Q07, thanks to efficiency gains and increased scale of production, despite the increase in petrochemical resin prices. Indexation of the raw material supply contracts to the dollar also contributed to partially compensating for the upward pressure of resins on the external and domestic markets. In relation to 1Q08, there was a reduction of 2.7%, on account of the fall in exports, which have a greater 21 logistics cost.
  • 22. Nonwovens Division EBITDA of R$ 27.9 million, with a margin of 26.9%, 17.5% increase over 2Q07. Growth was 24.3% compared with 1Q08, due to the increase of the domestic sales. . Adjusted Ebitda through Operational Hedge* was of R$28.4 million (Margin of 27.4%), 19.5% increase compared with 2Q07. 22 Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivable from the export market.
  • 23. Pipes and Fittings Division 2Q08 volume was of 5.7 thousand tonnes in line with 1Q08 and 14.2% over 2Q07. Revenue of R$ 22.8 million, with a 17.6% growth when compared to 2Q07 and a 2.3% reduction when compared to 1Q08, due to the product mix change that drove to a decrease in price (reduction of approximately 3% over the average price). 23
  • 24. Pipes and Fittings Division Growth of 7.8% in relation to 2Q07 due to a new sales and operational structure in line with the strategy of the Pipes and Fittings Division Compared to 1Q08 there was a reduction of 3.5%. 0.3% increase in comparison with 2Q07 and 1.4% increase when compared to 1Q08. PVC’s resin prices presented a slight increase when compared with those of 1Q08 24
  • 25. Pipes and Fittings Division EBITDA of R$ 2.9 million, with a margin of 12.9%, na increase of 27.6% over 2Q07 and a reduction of 23.6% over 1Q08. Return to the historical margins due to the resin price stabilization and to the product mix. 25
  • 26. Consolidated net debt Consolidated net debt (R$ Million) March 31,2008 June 30, 2008 Total debt Short term 15.8 6.7 Long term 386.9 377.7 Total 402.7 384.4 Cash and equivalents 178.6 175.5 Net debt 224.1 208.9
  • 27. Shareholders’ Equity Shareholders’ Equity (R$ Million) March 31, 2008 June 30, 2008 Shareholders’ Equity 457.2 469.1 Social Capital 422.2 422.2 Capital Reserves 22.0 20.1 Profit Reserve 3.2 3.2 Accumulated Profit 9.8 23.6
  • 28. Agenda • The Company • The Nonwovens Sector • 2Q08 Highlights • 2Q08 Results • Outlook 28
  • 29. Internationalization of the Company Strategic Aspects: • Become a Global Player by using the technological potential and the Company’s knowhow in disposable hygienic and medical products. • Participate in the global product development by locating next to the leader manufacturers of disposable diapers. • Take advantage on the high disposable adult diapers market growth (7%per year) in the US. Operational Aspects: • Optimize logistical costs through the substitution of a local operation in the US for the volume exported from Brazil to the NAFTA. •Allow the Brazilian operation to redirect its sales volume to the South American market in order to keep up with the demand growth for this region in the next 3 years. 29
  • 30. Providência USA, Inc. Location: • South East USA (in final stage of definition) CAPEX: • Production Equipment: • KAMI 11: US$ 46.5 million (sep/08 to jun/09) • KAMI 12: US$ 51.5 million (dec/08 to jul/10) • Buildings/Installations/Utilities/Contingencies: US$ 22 million (sep/08 to jul/10) Estimated Return on Investment: • IRR between 17 and 21% • ROIC between 20% and 24% 30
  • 31. Volume Perspectives In tonnes Nonwovens installed capacity 2008 2009 2010 Providência Brazil 73,000 80,000 80,000 Providência United States - 18,000 40,000 Total 73,000 98,000 120,000 Brazilian Nonwovens Market +15% The increase in the +5% Brazilian Nonwovens Market tends to absorb the whole volume currently exported by the Company to the USA. Providência currently exports 12,000 tonnes to the USA, that will be sold in the domestic Sources: Company’s Estimates *Perspective market. ABIQUIM 31 ABINT
  • 32. CFO: Eduardo Feldmann Costa IR Manager: Gabriela Las Casas Phone: +55 (41) 3381-7600 Fax: +55 (41) 3283-5909 São José dos Pinhais – PR - Brazil www.providencia.com.br/ir The words “believe”, “anticipate”, “expect”, “estimate”, “will”, “plan”, “may”, “intend”, “foresee”, “project” and other similar expressions indicate forward-looking statements. These forward-looking statements involve uncertainties, risks and assumptions, since they include information related to our potential or assumed future operating results, business strategy, financing plans, competitive position in the market, industry environment, potential growth opportunities and the effects of future regulations and competition. In addition, forward-looking statements refer only to the date on which they were made and should not be taken as a guarantee of future performance. Providência is under no obligation to update this 32 presentation with new information and/or future events .