2Q08 Results Presentation

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2Q08 Results Presentation

  1. 1. 2Q08 Results August 14, 2008 1
  2. 2. Agenda • 2Q08 Operational and Administrative Highlights • 2Q08 Results • Outlook 2
  3. 3. 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. 3
  4. 4. 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. 4
  5. 5. 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 Overpice of printed hygienic disposable versus standard 5
  6. 6. 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$22.1 million;  Implementation (go live) of SAP system on July 1st, 2008.  Operation - Pipes and Fittings Division:  Start-up sales of large-diameter Pipes to the industrial segment with installed capacity of 5,000 tons/year. 6
  7. 7. Agenda • Operational and Administrative Highlights • 2Q08 Results • Outlook 7
  8. 8. Sales Volume  Increase of 31.3% over 2Q07, Total: 24.1 more significant in the Nonwovens Total: 21.4 Division that increased 42.4% in the Total: 18.4 same period, due to the expansion in the volume added by Isofilme, acquired in August 2007, and at KAMI9, construction of which began in 2007 and operations in April 2008;  Increase of 12.5% in relation to 1Q08, having the Nonwovens Division increased 18.8% in the same period. In thousands of tonnes 8
  9. 9. Gross Revenue  Increase of 25.7% in relation to 2Q07 and 10.9% compared with 1Q08:  Sales on the external market increased 23.2% over 2Q07 and 3.2% in relation to 1Q08, even in a scenario of significant appreciation in the real’s value against the dollar.  Sales on the domestic market increased 26.8% over 2Q07 and 14.7% compared with 1Q08, due to the operation of Line 9 and Isofilme, reaching full capacity. In million of Reais 9
  10. 10. EBITDA (R$ 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 increase was of 13.7%, mainly due to the increase in sold volumes. Operational hedge*: The result ofexchange-rate lock forward contracts on accounts receivable from the exportmarket. 10
  11. 11. Net Revenue (R$ million) and Net Margin (%)  Net Revenue 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, registering a profit of R$ 9.8 million and a margin of 8.5%. 11
  12. 12. Nonwovens Division  Volume reached 17.9 thousand tonnes, up 42.4% when compared with 2Q07. The domestic market registered 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 income 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 principally due to the increase in sales and to the full capacity of Isofilme and Kami9 (reached on June 08) 12
  13. 13. Nonwovens Division  Unitary Fixed Cost in line with 2Q07;  In relation to 1Q08 there was a drop of 8.1% due to the efficiency gains and increased scale.  Drop of 0.3% compared with 2Q07, thanks to the efficiency gains and increased scale, despite the increase in petrochemical resin prices. Indexation of the raw material supply contracts to the dollar also contributed to at least 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 13 logistics cost.
  14. 14. 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$28.4 million (Margin of 27.4%), 19.5% increase compared with 2Q07. 14 Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivable from the export market.
  15. 15. Pipes and Fittings Division  2Q08 volume was of 5.7 thousand tonnes in line with 1Q08 and 14.2% over 2Q07.  Revenue of R$ 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). 15
  16. 16. 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 drop of Variable Costs 3.5%. (R$ million) Fixed Costs and Unitary Fixed Costs (R$ million) 3.2 3.2  0.3% increase in comparison with 2.5 2Q07 and 1.4% increase when compared 2Q07 1Q08. to 1Q08 2Q08 0.57 0.55  PVC’s resin prices presented a slight 2Q07 0.51 1Q08 2Q08 increase when compared with those of 1Q08 Unitary Fixed Costs 16
  17. 17. Pipes and Fittings Division Ebitda (R$ million) and Ebitda Margin (%)  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. 3.9 2.9 Return to the historical 2.3 margins due to the resin price 16.5% stabilization and to the product 11.9% 12.9% mix. 2Q07 1Q08 2Q08 EBITDA Margin% 17
  18. 18. Agenda • 2Q08 Operational and Administrative Highlights • 2Q08 Results • Outlook 18
  19. 19. 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. 19
  20. 20. 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% 20
  21. 21. 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 75.732 66.133 62.986 +15% The increase in the +5% Brazilian Nonwovens Market tends to absorb the whole volume currently exported by the Company to the USA. Providência 2006 2007 2008* currently exports 12,000 tonnes to the USA, that will be sold in the domestic Sources: Company’s Estimates *Perspective market. ABIQUIM 21 ABINT
  22. 22. 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 22 presentation with new information and/or future events .

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