elekeiroz s.a. · date, time and place: on january 29 th, 2019, 10:00 am, at rua dr. edgardo de...
TRANSCRIPT
2018 Results
Elekeiroz S.A.
Financial statements
in accordance with the accounting practices
in place in Brazil and the IFRS as of
December 31st
, 2018
2018 Results
Management Report
Results for 2018
2018 Results
Scenario
Brazil’s manufacturing sector recorded a slight growth of 0.1 percent in November relative to October, the first
uptick after four consecutive months of decline, according the IBGE (Brazilian Institute of Geography and
Statistics). The growth rates for the year (1.5%) and the past 12 months (1.8%) remain positive, but the
manufacturing sector continued to see growth slowing down compared to the previous months, reflecting the
impacts of the trucker strike, a crisis in Brazilian exports, a persistently weak job market, and the political
uncertainty in the election season, which reined in both investments and consumption.
According to preliminary information from the Brazilian Chemical Industry Association (known for short in
Portuguese as Abiquim), the domestic production volume and demand displayed negative results in 2018
compared to 2017. Production contracted by 3.9 percent, while the domestic demand for chemicals, as
measured by the apparent domestic consumption, lost 1.1 percent over the period.
Elekeiroz Operational Performance – Shipping
Product shipping for 2018 was down 7 percent relative to 2017, with an 11-percent fall in inorganic chemical
shipments and stability in organic chemical sales.
The last quarter saw sales fall 5 percent compared to same period of the previous year, mostly due to the
decrease in shipping of organic chemicals (-8%), which was influenced by scheduled downtimes for the gas and
oxo-alcohol plants. The shipped volume of inorganic chemicals saw a slight decrease of 1 percent (Graph 1).
Graph 1 – Shipping (1,000 mt)
68 71 7060 61 60 58 60
50 44 54
48 41 44 51 47
10
2018Q32017Q2
3
128
2017Q1 2017Q3
34
5
2017Q4 2018Q1
9
2018Q2
82
2018Q4
113121 119
114 112 117 109
-5%
270239
197
183
28
2018
48215
2017
450
- 7%
Inorganic ChemicalsOrganic Chemical, IM Organic Chemicals, DM
2018 Results
Elekeiroz Financial Performance
Despite the fall in shipped volume, net revenues for 2018 were 17 percent higher than in 2017, reflecting an
increase of 10 percent in domestic sales and 143 percent in exports.
The result for the quarter was up 8 percent relative to the 4th
quarter of 2017, boosted by a 12-percent rise in
domestic sales, while exports were down 51 percent (Graph 2).
Graph 2 – Net Revenues (R$ million)
By virtue of the positive results seen for the first three quarters of the year, net profit grew 17 percent in 2018.
The 45-percent fall recorded for the 4th
quarter was mostly caused by the scheduled downtimes of two of the
Company’s plants and for a weakened market, especially in December (Graph 3).
216 210257 242
218 236
293271
3839
44
17Q2
1210
17Q317Q1
13
280
18
17Q4
260
18Q1 18Q2 18Q3
9
18Q4
225 223
271257
274
337
+8%
9251.019
129
2017
53
2018
979
1.148
+17%
Domestic Market International Market
2018 Results
Graph 3 – Gross Profit (R$ million)
Non-Recurring Events: The Company’s April results were affected by two non-recurring events: the sale of a
piece of land that was not used by the Company’s operations (R$22.5 million), and the de-recognition of an
asset related to the Company’s non-recoverable portion of contributions to the Private Pension Plan, as a result
of the termination of the joint and several liability agreement between Elekeiroz (sponsor) and Fundação Itaúsa
Industrial (a negative R$10.2 million). In September 2017, we had a tax credit recognized arising out of a
lawsuit resolved in favor of the Company (R$7.7 million).
EBITDA followed the trend in gross profit, climbing up 20 percent over those realized for 2017 (EBITDA margin
of 9.0%) and dropping 46 percent compared to the 4th
quarter (EBITDA margin of 4.6%). Excluding the effects of
non-recurring events, the result for 2018 was up 23 percent compared to 2017 (Graph 4).
Graph 4 – Recurring EBITDA (R$ million)
The Company reported net profit of R$66.2 million for the year (R$61.9 million recurring) and R$12.8 million
for the last quarter (Table 1).
24.8
34.7
46.8 47.0 41.4
53.3 58.9
26.1
2018Q42017Q32917Q1 2018Q32017Q2 2017Q4 2018Q1 2018Q2
-45%153.4
179.7
2017 2018
+17%
10.6
19.3
25.1 24.0
20.9
29.1
34.1
12.8
2018Q32018Q1 2018Q22017Q1 2017Q2 2017Q3 2017Q4 2018Q4
-47%
78.9
97.0
2017 2018
+23%
2018 Results
Table 1 – Financial Highlights
R$ million Full Year 4
th Quarter
2018
2017
Variance
2018
2017
Variance
Net Revenues
1,147.9 978.5 17%
279.6 259.8 8%
Domestic Market
1,018.5 925.4 10%
270.9 242.1 12%
International Market
129.4 53.2 143%
8.8 17.7 -51%
Cost of Sales
968.2 825.2 17%
253.6 212.7 19%
Gross Profit
179.7 153.4 17%
26.1 47.0 -45%
Gross Profit Margin
15.7% 15.7%
9.3% 18.1%
Net Profit
66.2 47.7 39%
4.5 24.3 -81%
Recurring Net Profit
61.9 40.0 55%
4.5 16.7 -73%
EBITDA
103.6 86.6 20%
12.8 31.7 -60%
EBITDA Margin
9.0% 8.8%
4.6% 12.2%
Recurring EBITDA
97.0 78.9 23%
12.8 24.0 -47%
Recurring EBITDA Margin
8.4% 8.1%
4.6% 9.2%
Investments
Investments hit R$39.1 million in 2018 and were applied towards sustaining the Company’s operations.
Material Facts
1. Change in Control
On July 4th
, 2018 Elekeiroz announced to its shareholders and the market at large that it received from
Kilimanjaro Brasil Partners I B - Fundo de Investimento em Participações Multiestratégia Investimento no
Exterior (the “Fund”), whose money comes from foreign entities managed by H.I.G. Capital LLC, a release
informing that a deal had been closed whereby ITAÚSA – Investimentos Itaú S.A. disposed of the entire equity
interest it held in the capital stock of Elekeiroz S.A. and of the resulting transfer of its controlling interest to the
Fund.
2. Application for Registration of Unified Takeover Bid Resulting from Change in Control and
Cancellation of Public Company Listing
On July 4, Elekeiroz was notified by Fundo Kilimanjaro of an application for registration of a takeover bid for the
Fund’s purchase of common and preferred shares issued by the Company (i) as a result of the sale of a
controlling interest in the Company by ITAÚSA – Investimentos Itaú S.A. to the Fund and (ii) for the purposes of
cancellation of the Company’s listing in the category A and its withdrawal from the B3 Basic Listing Segment
(“TOB”).
On August 24, Elekeiroz notified its shareholders and the market at large that: (a) as provided in the material
fact notices published by the Company on August 9th
, 14th
and 16yh, 2018, the Brazilian Securities Commission
(“CVM”) Collegiate Body, at a meeting held on August 8th
, 2018 (“Collegiate Decision”), deliberated on and
partially granted the minority shareholders’ motion to postpone the special shareholders’ meeting (the
“Special Shareholders’ Meeting) under article 4.A of the Joint-Stock Companies Act, originally expected to take
2018 Results
place on August 9th
, 2018, in the context of the public takeover bid targeting common and preferred shares
issued by the Company, by the method of disposal of controlling interest and for cancellation of listing
(“Unified TOB”), the registration of which was applied for to the CVM by the Company’s controlling
shareholders Kilimanjaro Brasil Partners I B - Fundo de Investimento em Participações Multiestratégia
Investimento no Exterior (“Bidder”); (b) on that date, the Company filed with the CVM an application for
reconsideration of the Collegiate Decision, requesting that CVM reconsider and review said Collegiate Decision
and to clarify to the Company the steps to be taken by the Company in order to accommodate the Special
Shareholders’ Meeting that had already been called to the timeline of the Unified TOB; and (c) also on that
date, the Bidder notified the Company that it, too, had filed with the CVM, together with the institution
brokering the Unified TOB, an application for annulment and, secondarily, reconsideration of the Collegiate
Decision.
In view of the Bidder’s submission of such application for reconsideration of the Collegiate Decision, the listing
cancellation process will be suspended until the CVM Collegiate Body considers the application in question.
3. Dividends and Return on Equity
Elekeiroz published on September 28th
a resolution of its Board of Directors, with the approval of the
Shareholders’ Meeting, declaring dividends, attributable to the amount of the minimum compulsory dividend,
of R$0.6748 per share, the calculation of which was based on the stock’s position at the close of October 4th
,
2018, which were credited in an individualized manner in the Company’s records and paid out to the
shareholders on October 15th
, 2018.
December 18th
saw Elekeiroz publish a resolution of its Board of Directors, with the approval of the
Shareholders’ Meeting, declaring an interest on equity payment n the amount of R$0.3334 per share, on
account of the compulsory dividend for the fiscal year 2018, which payment was made on January 15th
, 2019
upon withholding of income tax at the rate of 15 percent, where applicable, resulting in a net return on equity
of R$0.2834 per share, the calculation of which was based on the stock’s position at the close of December 21st
,
2018 and which was credited in an individualized manner to each shareholder in the Company’s records on
December 31st
, 2018.
Accordingly, the total amount paid to the shareholders as dividends and return on equity was R$31.7 million,
representing 48 percent of the net profit.
Independent Auditors
BDO RCS Auditores Independentes S/S provided exclusively independent auditing services to the Company in
2018 (CVM Instruction No. 381/03).
Closing Message and Acknowledgements
The results for the year were substantially better improved from those for 2017, notwithstanding the decline
for the last quarter, primarily by virtue of the margins being kept up in an environment of higher pricing
(appreciation of oil and the US Dollar), as well as a more favorable product mix and excellence in operating
performance, thus making up for the decrease in shipped volumes.
We would like to thank our employees for their commitment, our customers for the trust they have put in us,
our suppliers for their partnership spirit, and our shareholders for their support.
Management
CNPJ 13.788.120/0001-47 A Public Company NIRE 35300323971
SUMMARIZED MINUTES OF THE EXECUTIVE BOARD MEETING
HELD ON JANUARY 29th, 2019
DATE, TIME AND PLACE: On January 29th
, 2019, 10:00 am, at Rua Dr. Edgardo de Azevedo Soares No. 392, Vila Bela Cintra, Várzea
Paulista, São Paulo (Brazil).
CHAIRMAN: Marcos Antonio De Marchi.
QUORUM: All elected members.
DECISION MADE BY UNANIMOUS VOTE: Upon examination of the financial statements for the fiscal year ended on December 31
st,
2018, the Executive Board decided, by unanimous vote and in compliance with the provisions of Article 25, Paragraphs V and VI, of CVM (Brazilian Securities Commission) Instruction No. 480/09, as amended, to declare that:
a) they have reviewed and discussed and agree with the opinions set out in the report issued by BDO RCS Auditores Independentes S/S, in their capacity as independent auditors, concerning the financial statements as of December 31
st, 2018, in observance of
Corporate Governance practices; and
b) they have reviewed and discussed and agree with the financial statements for the fiscal year ended on December 31st
, 2018.
CLOSING: There being no further business to transact and no one wishing to speak, the meeting was adjourned, and these minutes were drawn up, read and approved, and then signed by all.
Várzea Paulista, São Paulo, January 29
th, 2019.
MARCOS ANTONIO DE MARCHI Chief Executive Officer
ELDER ANTONIO MARTINI RICARDO CRAVEIRO MASSARI Officer Officer
Balance Sheet
Fiscal Years ending on December 31st In thousands of Reals
The accompanying explanatory notes form an integral part of these financial statements.
Assets Note
December 31st
,
2018
December 31st
,
2017 Liabilities and shareholders’ equity Note
December 31st
,
2018
December 31st
,
2017
A Current assets Current liabilities
Cash and cash equivalents 7 114,891 56,357 Trade payables 17 56,414 54,252 Financial assets at fair value 34 3,201 - Borrowings 18 87,797 80,807 Trade receivables 8 119,765 122,363 Salaries, wages and employee-related expenses 17 10,162 9,669 Inventories 9 102,816 79,050 Other liabilities 17 8,262 8,901 Other receivables 12 10,412 5,283 Taxes payable 19 4,224 5,930 Taxes recoverable 10 18,393 28,412 Dividends payable 30 10,587 7,767 Prepaid expenses 2,341 1,719 Officer and employee profit-sharing payables 13,661 9,118 Total current assets A 371,819 293,184 Total current liabilities 191,107 176,444
A Non-current liabilities
Non-current assets Borrowings 18 143,228 87,982 Long-term receivables: Provision for contingencies 20 18,898 26,717
Held-to-maturity investments 7(b) - 3,587 Other liabilities 17 15,999 15,408 Taxes recoverable 10 1,505 681 Total non-current liabilities 178,125 130,107
Deferred taxes 11 18,345 18,345 Financial assets at fair value 34 - 430 Total liabilities 369,232 306,551
Other assets 12 30,318 25,500 Shareholders’ equity Capital stock 21(a) 103,057 103,057
Investment properties 14 2,023 2,029 Capital reserve 21(c) 8,326 8,326 Investments 13 19,697 21,245 Revenue reserves 21(d) 74,410 39,895 Property, plant and equipment 15 109,932 90,167 Intangible assets 16 1,386 2,661 Total shareholders’ equity 185,793 151,278
Total non-current assets 183,206 164,645
A Total assets 555,025 457,829 Total liabilities and shareholders’ equity 555,025 457,829
Statement of Income and Comprehensive Income Fiscal Years ending on December 31st
In thousands of Reals
The accompanying explanatory notes form an integral part of these financial statements.
Statement of Income Note 2018 2017
Operating revenues, net 22 1,147,941 978,541
Cost of sales 23 (968,211) (825,186)
A
Gross profit 179,730 153,355
Selling expenses 23 (53,261) (47,536)
General and administrative expenses 23 (66,715) (64,110)
Other income (expense), net 24 30,470 26,085
A
Operating profit 90,224 67,794
A
Financial income 25 48,929 35,442
Financial expenses 25 (67,274) (53,734)
A
Financial income, net (18,345) (18,292)
Share in joint venture losses 13 (909) (1,091)
Profit before income and social security taxes 70,970 48,411
A
Current income tax and social security-funding tax 27 (4,712) (749)
A
Profit for the year, net 66,258 47,662
A
Earnings per share, basic and diluted 29 2.10 1.51
Statement of Income and Comprehensive Income Fiscal Years ending on December 31st
In thousands of Reals
The accompanying explanatory notes form an integral part of these financial statements.
Statement of comprehensive income Note 2018 2017
Profit for the fiscal year, net 66,258 47,662
Other comprehensive income components for the period - -
Total comprehensive income for the fiscal year 66,258 47,662
Statement of Changes in Shareholders’ Equity
In thousands of Reals
The accompanying explanatory notes form an integral part of these financial statements.
A
Capital reserve
Revenue reserves
Capital
Tax
Tax
Retained
Total
shareholders’
stock
incentive
Legal
incentive
Special
earnings
equity
A
On January 1
st, 2018
103,057
8,326
1,635
14,958
23,302
-
151,278
A
Profit for the fiscal year, net
- - - - - 66,258 66,258 A
Total comprehensive income for the fiscal year
- - - - - 66,258 66,258
Appropriation of profit for the fiscal year
Statutory reserve
- - 3,118 - - (3,118) -
Tax incentive - - - 3,899 - (3,899) - Dividend payout - - - - - (21,246) (21,246) Distribution of return on equity - - - - - (10,497) (10,497) Formation of special reserve - - - - 27,498 (27,498) - Total appropriation of profit for the fiscal year
- 3,118 3,899 27,498 (66,258) (31,743)
A
On December 31
st, 2018
103,057 8,326 4,753 18,857 50,800 - 185,793
A
Statement of Changes in Shareholders’ Equity
In thousands of Reals
The accompanying explanatory notes form an integral part of these financial statements.
A
Capital reserve
Revenue reserves
Capital
Tax
Tax
Retained earnings
Total
shareholders’
stock
incentive
Statutory
incentive
Special
(Loss carryover)
equity
A
On January 1
st, 2017
322,000
8,326
-
-
-
(218,943)
111,383
A
Profit for the fiscal year, net
- - - - - 47,662 47,662 A
Total comprehensive income for the fiscal year
- - - - - 47,662 47,662
Appropriation of profit for the fiscal year
Absorption of losses for the period
(218,943) - - - - 218,943 -
Statutory reserve
- - 1,635 - - (1,635) - Tax incentive - - - 1,648 - (1,648) -
Re-establishment of tax incentive reserve - - - 13,310 - (13,310) - Dividend payout - - - - - (7,767) (7,767) Formation of special reserve - - - - 23,302 (23,302) - Total appropriation of profit for the fiscal year
(218,943) - 1,635 14,958 23,302 171,281 (7,767)
A
On December 31
st, 2017
103,057 8,326 1,635 14,958 23,302 - 151,278
A
Statement of Cash Flows
Fiscal Years ending on December 31st In thousands of Reals
The accompanying explanatory notes form an integral part of these financial statements.
2018
2017
Cash flows from operating activities
A
Loss before income and social security funding taxes
70,970
48,411
Adjustments for
Depreciation and amortization
13,692
19,252
Residual value of derecognized PP&E and investments
(20,081)
2,240
Provision (reversal) for trade receivables, in inventories and contingencies
(8,980)
(6,297)
Share in joint venture profit 909 1,091
Interest expenses
28,569
18,039
Derivative transactions
(2,771)
2,931
Patent amortization 636 636
Changes in assets and liabilities
Trade receivables
845
(25,142)
Inventories
(22,071)
27,101
Court deposits
(2,680)
2,332
Other receivables
4,269
(18,115)
Taxes recoverable, non-current
(824)
13,042
Receivables, non-current
(921)
5,937
Trade payables
2,162
20,801
Employee-related taxes and expenses
(1,077)
1,443
Other payables
4,357
9,820 A
Cash provided by operating activities
67,004
123,522 A
Income and social security funding taxes paid (4,712) (749)
Interest on borrowings repaid
-
(17,816) A
Cash provided by operating activities, net
62,292
104,957
Cash flows from investing activities
Purchase of property, plant and equipment (38,886)
(26,412)
Purchase of intangible assets
(202)
(232)
Revenue from disposal of assets
26,990
30
Financial investments 3,587 (251)
Cash used in investing activities, net
(8,511)
(26,865)
Statement of Cash Flows
Fiscal Years ending on December 31st In thousands of Reals
The accompanying explanatory notes form an integral part of these financial statements.
2018
2017
Cash flows from borrowing activities
New borrowings
227,609
21,450
Borrowings repaid
(193,932)
(76,953) Dividends and return on equity paid
(28,924)
-
A
Cash provided by (invested in) borrowing activities, net 4.753
(55,503)
Increase in cash and cash equivalents, net
58,534
22,589
Cash and cash equivalents at the start of the fiscal year (Note 7)
56,357
33,768
A
Cash and cash equivalents at the end of the fiscal year (Note 7)
114,891
56,357
Statement of Value Added
Fiscal Years ending on December 31st In thousands of Reals
The accompanying explanatory notes form an integral part of these financial statements.
2018
2017
A
Revenues
Products sold 1,423,965
1,217,937 Provision for doubtful debtors (2,963)
(128)
A
1,421,002
1,217,809
A
Inputs purchased from third parties
Costs of sales (1,207,020)
(984,210)
Materials, electric power, third-party services, and expenses (90,300)
(51,792) A
A (1,297,320)
(1,036,002)
A
Value added, gross 123,682
181,807
Retentions
Depreciation and amortization (13,692)
(19,252)
A
Value added by the company, net 109,990
162,555
A
Value added received in transfers
Share in joint venture losses (909) (1,091)
Financial income 48,929
35,442 A
Total value added available for distribution 158,010
196,906
A
Statement of Value Added
Fiscal Years ending on December 31st In thousands of Reals
The accompanying explanatory notes form an integral part of these financial statements.
2018
2017
Value added distribution
Personnel
Direct compensation 67,955
63,155 Benefits 10,861
9,637
Severance Pay Fund (FGTS) 4,098
4,213 Taxes and charges
Federal 19,946
27,917 State (30,917)
(3,074)
Local/Municipal 1,016
1,221 Return on debt
Leases 2,977
3,773 Interest 15,816
42,402
Return on equity Dividends 31,743
7,767 Retained earnings for the fiscal year 34,515
39,895
Value added distributed 158,010
196,906
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
1 General Information
Elekeiroz S.A. (“Elekeiroz” or “the Company”) is a publicly-held corporation with shares traded on the stock, commodities and futures exchange B3 S.A. - Brasil, Bolsa, Balcão, controlled by Fundo Kilimanjaro Brasil Partners I B- Fundo de Investimento em Participações Multiestratégia Investimento no Exterior (“Fundo Kilimanjaro”), and has three manufacturing sites, two in Camaçari, Bahia, and one in Várzea Paulista, São Paulo, where its headquarters are located. The Company is engaged in the business of processing and marketing chemicals and petrochemicals at large, including the business of reselling such products purchased from third parties, as well as importing, exporting and holding interests in other companies. The products processed by Elekeiroz are essentially designed for the manufacturing sector, particularly the building and construction, apparel, automotive and food industries. As set out in the material fact notice released to the market on July 4th, 2018, a deal was closed for disposing of all of the equity interest Itaúsa – Investimentos Itaú S.A. held in Elekeiroz S.A. to the new controlling shareholder Fundo Kilimanjaro Brasil Partners I B – Fundo de Investimento em Participações Multiestratégia Investimento no Exterior. The new controlling shareholder issued on July 4th, 2018 a notice of Material Fact informing the market and the shareholders that it had decided to submit an application for cancellation of Elekeiroz S.A.’s listing as public company and filed with the CVM and B3 – Brasil, Bolsa, Balcão an application for registration of a unified takeover bid (TOB) for Fundo Kilimanjaro’s purchase of common and preferred shares issued by the Company for the purposes of cancelling the Company’s category A listing and withdrawing the Company from the B3 basic listing segment. The issuance of these financial statements was authorized at a meeting of the Company’s Board of Directors held on January 29th, 2019.
2 Summary of Principal Accounting Policies
The principal accounting policies applied in the preparation of these financial statements are described below. These policies have been consistently applied in all reported fiscal years, except as otherwise provided.
2.1 Basis for Preparation
The financial statements have been prepared under the historical cost convention and considering financial assets available for sale, as well as financial assets and liabilities (including derivative financial instruments), measured at fair value. The preparation of financial statements requires the use of certain critical accounting estimates. It also requires Management to exercise its judgment in the process of applying the Company’s accounting policies. Those areas which involve a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.
Financial Statements
The financial statements have been prepared and are being presented in accordance with accounting practices in place in Brazil, including the pronouncements issued by the Brazilian Accounting Pronouncements Committee (CPC, the initials in Portuguese), as well as the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and reflect all of the relevant information typically disclosed in financial statements, and that alone, which have been consistent with those used by Management in its job. The presentation of the Statement of Value Added (DVA, the initials in Portuguese) is required by the Brazilian corporate laws and the accounting practices in place in Brazil for public companies. The presentation of said statement is not required by the IFRS. As a result, for IFRS purposes, such statement is presented as supplementary information, without prejudice to the set of financial statements. Changes in Accounting Policies and Disclosures
Changes Adopted by the Company
Below is our account of the amendments to standards that have been first adopted for the fiscal year commencing on January 1st, 2018.
.CPC 47 - "Revenue from Customer Contracts": For the purposes of its transition to CPC 47, the Company opted for the modified retrospective method, i.e. without restating the comparable figures for the previous year (2017) and with the cumulative impacts of the initial adoption. There were no adjustments against regained earnings as of January 1st, 2018. Currently, eligible revenues from contracts with customers, for the purposes of CPC 47, refer to sales of chemicals, the negotiation of which does not imply any after-sales obligations, incorporated services, customer retention programs or performance-linked results or otherwise any other form of after-sales obligations.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
.CPC 48 - "Financial Instruments": The Company has created a methodology to recognize expected impairment losses and reviewed its financial assets and liabilities in accordance with CPC 48. The Company intends to utilize its exemption from restating comparable information for previous periods due to changes in new classification and measurement of financial instruments (including expected credit losses).
2.2 Segment Reporting
The information on operating segments is reported in a manner consistent with the internal report provided to the principal operating decision-maker. The principal operating decision-maker, who is responsible for allocating funds, assessing the performance of operating segments and making the Company’s strategic decisions, is the Company’s Management, which consists of the Board of Directors and the Executive Board.
2.3 Foreign Currency Translation
(a) Functional Currency and Presentation Currency
The items included in the Company’s financial statements are measured using the currency of the primary economic environment in which the Company operates (“functional currency”). These financial statements are presented in Reals (BRL or R$), which are the Company’s functional currency, and its presentation currency as well.
(b) Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the respective transactions or of valuation, where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognized in the statement of income for the fiscal year. Foreign exchange gains and losses relating to borrowings, trade receivables and trade payables are presented in the statement of income within financial income or expenses.
2.4 Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks and other highly liquid short-term investments with original maturities of three months or less and a negligible risk of change in value.
2.5 Financial Assets
2.5.1 Classification
The Company classifies its financial assets based on the purpose and features for which they were purchased, initially measuring them at fair value. Subsequently, the financial assets are classified according to their amortized costs, fair value through other comprehensive income and fair value through profit or loss. Financial assets are presented as current assets, except for those with maturity dates in excess of 12 months of the balance sheet date.
2.5.2 Recognition and Measurement
Financial assets are recognized on the date when the Company becomes a party to the each instrument’s contractual provisions. Investments are initially recognized at fair value, except for accounts receivable, which are recognized at the transaction prices, plus transaction costs directly attributable to the purchase or issuance of each financial asset or liability. Financial assets are derecognized when the rights to receive cash flows from investments have been realized or transferred, and in the latter case, to the extent that the Company has transferred substantially all related ownership risks and rewards. Financial assets measured at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortized cost using the effective interest method.
Gains or losses arising out of changes in the fair value of financial assets measured at fair value through profit or loss are presented in the statement of income under “Other income (expenses), net” for the period in which they arise. The fair values of publicly quoted assets and liabilities are based on current purchase prices. If the market for a given financial asset is not active, then the Company determines the fair value using valuation techniques. These techniques include the use of recent arm’s
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models that use as many market inputs as possible and rely as little as possible on inputs provided by the Company’s own Management.
2.5.3 Offset of Financial Instruments Financial assets and liabilities are offset, and the net value is presented in the balance sheets where a legal right exists to offset recognized amounts and these are intended to be settled on a net basis or the asset is intended to be realized and the liability settled simultaneously. The legal right must not be contingent upon future events and must be applicable in the ordinary course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
2.5.4 Impairment of Financial Assets
(a) Assets Carried at Amortized Cost
The Company assesses on the date of each set of balance sheets whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are recognized as such only if there is objective evidence of impairment as a result of one or more events occurring after the initial recognition of the asset (a “loss event”) and that such loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Company applies to determine whether there is objective evidence of impairment losses include: (i) significant financial difficulty of the issuer or debtor; (ii) breach of contract, such as default or delinquency in interest or principal payments; (iii) the disappearance of an active market for the relevant financial asset on account of financial difficulties; or (iv) observable data indicating that there has been a measurable decrease in the estimated future cash flows from a portfolio of
financial assets since the initial recognition of such assets, notwithstanding that such decrease may not be identified with any individual financial assets in said portfolio, including: . adverse changes in the payment status of borrowers in the portfolio; and . national or local economic conditions that correlate with defaults on the assets comprised in the portfolio.
The amount of any impairment loss is measured as the difference between the carrying amount of the relevant assets and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the original interest rate in place for such financial assets. The carrying amount of the asset is reduced, and the amount of the loss is recognized in the statement of income. If the amount of the impairment loss decreases in a subsequent period and the decrease can be objectively related to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized loss is recognized in the statement of income.
(b) Assets Classified as Available for Sale
At the end of each reporting period, the Company assesses whether any objective evidence exists that a financial asset or a group of financial assets is impaired. For debt securities, the Company uses the criteria referred to in item (a) above. For equity investments classified as available for sale, any significant or prolonged decline in the fair value of the relevant securities below their cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, then the cumulative loss—measured as the difference between the acquisition cost and the current fair value, minus any such impairment loss on the relevant financial asset as may have been previously recognized in profit or loss—is removed from equity and recognized in the statement of income. For debt instruments, if the fair value of any given instrument classified as available for sale increases in any subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, and then the impairment loss is reversed through the statement of income.
2.6 Trade Receivables
Trade receivables correspond to amounts receivable from customers for products sold and are recorded and maintained at the nominal
amount of the trade notes arising from sales of products, plus exchange rate fluctuation, where applicable. If expected to be received
within one year or earlier, the receivables are classified as current assets. Otherwise, they are presented as non-current assets.
Trade receivables are initially recognized at fair value, and subsequently measured at amortized cost using the effective interest rate
method, minus a provision for doubtful debtors (PDD) or provision for impairment of trade receivables.
2.7 Inventories
Inventories are stated at either the cost or net realizable value, whichever the lower. The cost is determined using the moving weighted-average cost method. Costs of finished products comprise raw materials, direct labor, and other direct and indirect costs related to
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
production (based on the normal operating capacity), except borrowing costs. The net realizable value is the estimated selling price in the ordinary course of business, minus estimated conclusion costs and estimated selling expenses. Imports in transit are stated at the accumulated cost of each import.
2.8 Other Receivables (Current and Non-Current)
Other receivables are stated at cost or realizable value, including, where applicable, any interest accrued thereon and currency and exchange fluctuation, as adjusted to present value, where appropriate. Contingent assets are recognized only where there is evidence that realization is virtually certain or favorable, final and non-appealable court decisions have been obtained. Court deposits refer to amounts deposited in court and maintained until the relevant legal proceedings are concluded, and are measured at amortized cost. Where provision for contingencies exists, they are presented net of the related court deposits.
2.9 Intangible Assets
(a) Software
Includes the right to use software, with software licenses capitalized on the basis of the costs incurred and amortized over their lifespan, which is estimated at 5 years. Costs associated with software maintenance programs are recognized as expense, as incurred.
(b) Registered trademarks and licenses
Registered trademarks and licenses acquired separately are initially stated at the historical amount. Subsequently, trademarks and
licenses valued with a defined lifespan are carried at their cost amount minus accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of registered trademarks and licenses over their lifespan, which is estimated at 5 years.
2.10 Investment Property
The Company owns a property in Arujá, São Paulo, which it does not occupy. Management has opted to value the property at cost, and
the balance is presented at the historical cost of acquisition minus the depreciation amount, where applicable. Depreciation is calculated
by the straight-line method to allocate the costs of the property to its residual value over its estimated lifespan at an average rate of 4
percent per annum.
The Company owns an apartment located in Canoas, Rio Grande do Sul, which has been received as payment from a customer and
classified as investment property.
As of the date of these financial statements, the carrying amount of these assets does not exceed their recoverable value, as estimated
based on an appraisal report at market value. The balance of the investment property is presented in the “Investments” account (Note
14).
2.11 Property, Plant and Equipment
Land and buildings comprise mostly production plants and offices. Property, plant and equipment are stated at their historical cost minus accumulated depreciation. Historical cost includes expenditures directly attributable to the acquisition of such items and financing costs related to the acquisition of qualifying assets. Any subsequent costs, such as those incurred in connection with renovations and periodic inspections required for operating, are included in the carrying amount of the relevant assets or recognized as separate assets, as appropriate, only where the Company is likely to perceive economic benefits associated with the item in the future and the cost thereof can be reliably measured. The carrying amount of replaced items or parts is derecognized. All other repair and maintenance costs are entered in the statement of income for the fiscal year as incurred. Depreciation is calculated by the straight-line method at rates compatible with the lifespan of the relevant assets. For equipment and facilities used directly in the production process, the Company applies the unit-of-production method, taking into consideration the lifespan of the relevant assets.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
The estimated lifespan of each of such assets is reviewed annually, and then adjusted if necessary. The estimated average lifespan of each property, plant and equipment item by category is as follows:
Years
Buildings 25 Equipment and facilities 3 to 20 (5 on average) (*) Data processing equipment 5 Furniture and fixtures 10 Vehicles 5 Land Not depreciated
(*): The depreciation of equipment and industrial facilities will vary according to production volume at average rates ranging from 5 to 33.33 percent per annum.
The residual values and life spans are reviewed and, where appropriate, adjusted at the end of each reporting period.
The residual value of property, plant and equipment items is promptly derecognized at their recoverable amount when the residual value exceeds said recoverable amount (Note 2.12). Gains and losses on disposals are determined by comparing the proceeds to the carrying amount and recognized in the “Other income (expenses), net” account in the statement of income. As of the date of these financial statements, the Company does not have any financial leasing transactions.
2.12 Impairment of Non-Financial Assets
Assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized at the value whereby the carrying amount of the relevant asset exceeds its recoverable amount. Recoverable amount is either the fair value of the asset minus selling costs or the current value thereof, whichever the higher. For impairment assessment purposes, assets are grouped at the lowest levels for which identifiable cash flows (Cash-Generating Units, or CGUs) exist separately. Non-financial assets other than goodwill having been adjusted due to impairment are subsequently reviewed for possible reversal of impairment on the balance sheet date.
2.13 Trade Payables
Trade payables are obligations to pay for goods or services having been acquired in the ordinary course of business, and are classified as current liabilities if payment is due in one year or less. Otherwise, trade payables are presented as non-current liabilities. Trade payables are initially recognized at fair value, and subsequently measured at amortized cost using the effective interest method. In practice, they are usually recognized at the amount of the related invoices.
2.14 Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred, and subsequently carried at amortized cost. Any difference between the proceeds (net of transaction costs) and the total amount payable is recognized in the statement of income over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Borrowing costs directly attributable to the purchase, construction or production of a qualifying asset, which is one that necessarily takes a substantial period of time to get ready for the intended use or sale, are capitalized as part of the cost of the asset when they are likely to provide future economic benefits to the Company and can be reliably measured. Other borrowing costs are recognized as expenses for the period in which they are incurred.
2.15 Provisions
Provisions for lawsuits (labor claims, civil, tax suits) are recognized when the Company has a present legal or constructive obligation as a result of past events, disbursements are likely to be required for settling the obligation, and the amount can be reliably estimated. These provisions do not include future operating losses. Where a series of similar obligations exist, the likelihood of settling them is determined taking into consideration the obligation class as a whole. A provision is recognized notwithstanding that the likelihood of settlement related to any individual item included in the same obligation class may be low.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
Provisions are measured by the present value of expenses required to be incurred for settling the obligation, using such a rate before taxes as will reflect the current market appraisal of the amount of money over time and the specific risks of the obligation. Any increase in an obligation as a result of lapse of time is recognized as financial expense.
2.16 Current and Deferred Income Tax and Social Security Funding Tax
The expenses incurred in connection with income tax and social security funding tax for the period comprise current and deferred taxes. Income taxes are recognized in the statement of income, except to the extent that they relate to items recognized directly in shareholders’ equity or in comprehensive income. In such cases, the taxes are also recognized in shareholders’ equity or comprehensive income. The current income and social security funding taxes are calculated on the basis of the tax laws enacted or substantively enacted as of the balance sheet date. Management periodically evaluates positions taken by the Company in income tax returns in respect of situations where the applicable tax regulations make room for interpretations. It makes provisions, where appropriate, based on the amounts expected to be paid to the relevant tax authorities.
The current income tax and social security funding tax are presented net, either in liabilities, where any amounts are payable, or in assets, where any amounts prepaid exceed the total amount due on the reporting date. The income tax is calculated on taxable profit at the rate of 15 percent, plus a 10-percent surcharge, and existing tax losses are being offset. The social security funding tax on net profit is calculated on the adjusted accounting profit at the rate of 9 percent, also taking into consideration any offset of social security funding tax losses. The Company is the beneficiary of a partial income tax reduction for its Camaçari production complex, Bahia, at the rate of 75 percent until December 31st, 2025. The provision for income tax is formed net of the tax incentive portion, and there are no such conditions to be met as might affect the recognition of such credit. Deferred income tax and social security funding tax are recognized on temporary differences between the tax bases for assets and liabilities and their carrying amounts in the financial statements. In practice, the inclusion of expenses in the accounting profit or exclusion of revenues from the accounting profit, which is temporarily non-deductible in either case, generates deferred tax credits or debts. However, the deferred income tax and social security funding tax are not accounted for if they result from the initial recognition of an asset or liability in any transaction other than a combination of business, which transaction, at its closing time, affects neither the accounting income nor the taxable profit (tax loss). Deferred income and social security funding tax assets are recognized only to the extent that future taxable profits are likely to be available against which temporary differences can be utilized. Deferred income tax assets and liabilities are presented in the balance sheet at net value where there is a legal right and the intent to offset them at the time of determination of current taxes generally relating to the same legal entity and the same tax authority.
2.17 Employee Benefits
(a) Private Pension Plan
The Company offers all of its employees a private pension plan of the defined contribution type whereby fixed contributions are paid to a separate Entity (a pension fund), and the Company has no legal or constructive obligations to pay any further contributions if the fund lacks sufficient assets to pay all benefits due. Contributions are recognized as expenses for the period in which they are incurred and cease when the employment relationship between an employee and the Company is terminated. Prepaid contributions are recognized as assets to the extent that a cash refund or reduction of the future payments is available.
(b) Profit Sharing
The Company recognizes a profit-sharing liability and expense based on a methodology that takes into account the profit attributable to its shareholders after certain adjustments are made. The profit-sharing plan is also related to the achievement of specific operating targets and goals which are set and approved at the beginning of each fiscal year. The Company recognizes a provision where contractually required to do so or where a past practice has created a constructive obligation.
(c) Other Benefits
Other benefits are provided as well, such as life insurance and health care, which are recorded on an accrual basis and cease when the employment relationship between an employee and the Company is terminated.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
2.18 Capital Stock
The Company’s capital is represented by shares in common and preferred stock, with no par value. Common and preferred shares are classified as shareholders’ equity. Any incremental costs directly attributable to any issuance of new shares or stock options are shown in shareholders’ equity as a deduction from the proceeds, net of tax.
2.19 Revenue Recognition
Revenue consists of the fair value of a consideration received or receivable for a sale of products and services in the ordinary course of the Company’s business. Revenues are shown net of taxes, refunds, rebates and discounts. The Company recognizes revenues when the corresponding amounts can be reliably measured and future economic benefits to the entity are likely to result from the transaction. No revenue is recognized if the realization thereof is significantly uncertain.
(a) Product Sales
Revenues from product sales are recognized in the statement of income when all the risks and benefits inherent in the relevant product are transferred to the purchaser, i.e. for FOB sales, revenues are recognized at the time that each buyer picks up the goods at a Company site, while for CIF sales, the revenue is only recognized after the goods are delivered to the location designated by the customer.
(b) Interest Income
Interest income is recognized on an accrual basis, using the effective interest method. When a loan or receivable instrument is impaired, the Company reduces the carrying amount to its recoverable amount, which corresponds to the estimated future cash flow, as discounted at the original effective interest rate of the relevant instrument.
(c) Dividend Income
Dividend income is recognized when the right to receive payment is established.
(d) Other Income and Expenses
Other income and expenses are recognized in the income statement on the accrual basis of accounting.
2.20 Dividend Payout and Return on Equity Capital
Dividend payouts and return on equity capital payments made to the Company’s shareholders are recognized as a liability at the end of the fiscal year or in such shorter periods as may be determined by the Board of Directors based on the Company’s by-laws. Any amount in excess of the compulsory minimum amount is only provided for on date of approval thereof by the Board of Directors and the relevant Shareholders’ Meeting. The tax benefit of return on equity capital is recognized in the statement of income.
2.21 New Financial Reporting Standards Yet to Be Adopted
The new standard below was issued by the IASB in 2018, to be effective as of January 1st, 2019. While it is encouraged by the IASB, the early adoption of rules is not permitted in Brazil by the Accounting Pronouncements Committee (CPC).
(i) .IFRS 16 (Leases): This new standard requires a lessee to recognize liabilities for future payments and a right-of-use asset representing its right to use the underlying leased asset for practically all lease agreements, including operational leases, while the scope of this new standard may exclude certain agreements concluded for short periods or involving small amounts. The criteria for recognition and measurement of leases in the lessor’s financial statements remain substantially unchanged. IFRS 16 takes effect for fiscal years commencing on or after January 1st, 2019 and replaces IAS 17/CPC 06 (Leases), as well as the relevant interpretations. This rule is mandatory for fiscal years commencing on or after January 1st, 2019. Management intends to take the simplified transition approach and will not re-present any comparative amounts for the year preceding that of such adoption. Potential impacts of adopting this standard on the Company’s financial statements are being assessed, and a conclusion will be reached by the date when the standard takes effect. There are no such other IFRSs or CPCs or IFRIC interpretations having not yet taken effect as might have a material impact on the Company’s financial statements.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
3 Critical Accounting Estimates and Judgments
Accounting estimates and judgment are assessed on an ongoing basis and based on experience with historical events and such other factors, including expectations for future events, as may be deemed reasonable under the circumstances.
3.1 Critical Accounting Estimates and Judgments Based on assumptions, the Company makes estimates concerning the future. Seldom will the resulting accounting estimates equal the corresponding actual results. Estimates and assumptions posing a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities for the next fiscal year are addressed below:
(a) Income Tax and Social Security Funding Tax on Net Profit The Company records deferred income and social security funding tax assets on income tax losses and social security funding tax losses. The recognition of these assets takes into consideration the expectation of future taxable profit. Estimates of future results that will allow these assets to be offset are based on the Company’s Budget, which is reviewed and approved by the Board of Directors taking into consideration economic scenarios, discount rates and other variables that may not materialize.
(b) Private Pension Plan
The Company recognizes regular future contributions at present value, calculated by the projected unit credit method in respect of the Defined-Contribution Plan. The amount recorded in the “Private Pension Plan” account represents the estimated value of decreases in future contribution payments that will benefit the Company. Such value depends on a series of variables and assumptions regarding the discount rates and actual market conditions. Any change in those assumptions will affect the corresponding carrying amounts.
(c) Provisions for Contingencies
The Company discusses tax, labor and civil issues in administrative proceedings and lawsuits in the ordinary course of its business, and a provision for future payments is made based on the analysis performed by Management, in conjunction with their legal counsel. Any changes in decision trends or the case law may alter the estimates concerning provisions for contingencies.
3.2 Critical Judgments in Applying the Entity’s Accounting Policies
The items in which the use of judgment can be considered more relevant refer to the determination of property, plant and equipment life spans, provisions for labor and tax liabilities, and provisions for doubtful debtors and asset impairment.
4 Financial Risk Management
4.1 Risk Factors
The Company’s business exposes it to a variety of financial risks: market risks (including currency risk, interest rate risk and price risk), credit risks, liquidity risks, and the risk resulting from dependence on basic inputs. Risk management is carried out by the Executive Finance and IT Department in accordance with the policies approved by the Board of Directors. The Executive Finance and IT Department identifies, assesses and hedges the Company’s financial risks in cooperation with the operating units. Concerning financial instruments, the risk management activity is carried out by Management according to operating strategies and aiming at liquidity, profitability and security. The control policy consists of the ongoing monitoring of contracted rates against those prevailing in the marketplace. The Company does not make any speculative investments in derivatives or any other risk assets.
(a) Market Risks
(i) Currency Risk
Foreign exchange rate fluctuations may lead to decreases in value of assets or increase in liabilities. Since part of its revenues originates in exports, the Company generates assets in foreign currency in amounts higher than its liabilities in foreign currency as well, the latter arising out of importation of raw materials and equipment required for its regular operations or out of foreign borrowing on convenient terms. To prevent incurring or mitigate foreign exchange risks to the fullest extent possible, which is one of its key financial policies, the Company uses advances against exchange contracts, as well as financial derivative transactions, to avert unbalance between assets and liabilities in foreign currency. The net exposure and sensitivity to foreign exchange rate fluctuations are presented in Note 4.1 (e).
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
(ii) Derivative Transactions
In order to hedge against exchange rate fluctuations, the Company contracted the derivative transactions relating to USD-CDI (the initials in Portuguese for Interbank Deposit Certificate) rate swap agreements. Details of these transactions are provided in Note 34.
(iii) Cash Flow or Fair Value Risk Associated with Interest Rates
Interest rate risk is the risk that the Company may incur losses due to interest rate fluctuations. This risk is continuously monitored in order to assess any possible need for contracting derivative transactions to hedge against volatility in interest rates. The required sensitivity analysis is shown in Note 4.1(e).
(iv) Product and Input Price Risk
The Company faces competition with Brazilian and international producers, and the prices for most of its products are fixed based on international markets. An increase in competition, as well as any unbalance between supply and demand, may force the Company to lower its prices, thereby harming results.
(b) Credit Risk
Credit risk arises from cash and cash equivalents and deposits with banks and other financial institutions, as well as credit exposures to domestic and foreign customers, including outstanding receivables. The credit risk in receivables is managed by a Credit Operating Committee, consisting of the staff members of offices of the Executive Finance and IT Department, the Sales Department and the Financial Department. The Company’s sales show a low degree of concentration, as no one customer accounts for more than 10 percent of its net revenues.
The Company has a credit policy in place setting limits and repayment times consistent with liquidity standards determined by several rating tools. In addition to diversification in the domestic market, a significant portion of its products is intended for foreign markets, following the same risk assessment procedure.
As regards financial and other investments, it is the Company’s policy to contract with prime institutions and to avoid concentrating investments in any one business group.
No credit limits were exceeded during the fiscal year, and Management does not expect any significant losses to arise out of any default on the part of any of these counterparties other than losses already provided for in these statements.
(c) Liquidity Risk
Cash flow forecasting is performed by the Financial Department, which monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs. The control of the Company’s liquidity position is carried out daily through the monitoring of cash flows. The surplus cash held is monitored by the Financial Department. The Company invests its surplus cash in financial investments and marketable securities with appropriate maturities or sufficient liquidity to provide sufficient margins, as determined by the aforementioned forecasts. As of the reporting date, the Company had investments in Bank Deposit Certificates (CDB, the initials in Portuguese) and funds with banks in the amount of R$114,025 (R$53,337 on December 31st, 2017), in investment funds of R$866 (R$3,020 on December 31st, 2017), and in marketable securities of R$0.00 (R$3,587 on December 31st, 2017), which are expected to promptly generate cash inflows for managing the liquidity risk. The table below shows the maturity of the financial liabilities and trade payables contracted by the Company as of the closing date of these financial statements:
On December 31st
, 2018:
Less than one year
Between one and
three years
Between four and five
years Total
Trade payables 56,414 - - 56,414
Borrowings 87,797 81,434 61,794 231,025
Other liabilities 8,262 15,999 - 24,261
Total 152,473 97,433 61,794 311,700
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
On December 31st
, 2017:
Less than one year
Between one and
three years
Between four and five
years Total
Trade payables 54,252 - - 54,252
Borrowings 80,807 84,032 3,950 168,789
Other liabilities 8,901 15,408 - 24,309
Total 143,960 99,440 3,950 247,350
The projections included in the budget approved by the Board of Directors for the next year demonstrate the Company’s ability to generate cash and meet its liabilities if said projections materialize.
(d) Dependence on Basic Inputs
Due to price volatility in international markets, price increases for key inputs—such as propene, ortho-xylene, sulfur, natural gas, benzene, and electric power, amongst others—may influence the Company’s cost structure, thereby affecting its results.
(e) Additional Sensitivity Analysis – Foreign Exchange and Interest Rate Risk
Based on the balances of assets and liabilities exposed to foreign exchange rates on December 31st, 2018, the Company prepared two simulations with increases in the exchange rates (R$/US$) of 25 and 50 percent. As shown in the table below, considering a low net exposure, exchange rate fluctuations within the simulated limits would have no significant impacts on the Company’s results.
4.2 Capital Management
The Company conducts its capital management in such a manner as to ensure its ability to carry on with its operations, while providing returns to its shareholders and controlling its level of indebtedness by monitoring its financial leverage ratio. This ratio corresponds to the net debt divided by the total capital. The net debt, for its part, corresponds to the total borrowings (including both short and long-term borrowings, as shown in the balance
sheet) minus the amount of cash and cash equivalents, financial investments, ACC-backed export receivables and swap. The total capital
is determined by adding the shareholders’ equity, as shown in the balance sheet, to the net debt.
In order to maintain or adjust its capital structure, the Company may review its dividend payout policy, return capital to shareholders or
even issue new shares or otherwise dispose of assets to reduce its indebtedness, for example.
FOREIGN EXCHANGE RISK
Balance Effects on Results up to Maturity
Transaction 12/31/2018 Probable Possible Remote
(+/- 25%) (+/- 50%)
FINANCIAL ASSETS
Export Receivables 31,483 156 USD Depreciation (7,910) (15,819)
Total financial assets 31,483 156 (7,910) (15,819) FINANCIAL LIABILITIES
Exchange Rate Discount (-) SWAP 738 (7) USD Depreciation (186) (373)
Foreign Trade Payables 16,358 (106) USD Depreciation (4,116) (8,232)
Total financial liabilities 17,096 (113) (4,302) (8,605)
NET EXPOSURE 14,387 43 USD Depreciation(12,212) (24,424)
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
4.3 Fair Value Estimation
The carrying values of trade receivables and trade payables minus impairment are assumed to be near their fair values. The fair value of financial liabilities, for reporting purposes, is estimated by discounting future contractual cash flows at the interest rate currently prevailing in the market that is available to the Company for similar financial instruments.
The Company applies CPC 40/IFRS 7 for financial instruments that are measured in the balance sheet at fair value, which requires disclosure of fair value measurements by level, according the following fair value measurement hierarchy:
.Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
.Inputs, other than quoted prices, included at level 1 that are observable market data for the asset or liability, whether directly (i.e.
prices) or indirectly (i.e. deriving from prices) (level 2).
.Inputs for the assets or liabilities that are not based on observable market data (i.e. unobservable inputs) (level 3).
4.4 Derivative Financial Instruments
Derivatives are initially recognized at their fair value on the conclusion date of a derivative agreement and subsequently re-measured at their fair value. Such derivative instruments do not qualify for recognition as hedging. Any changes in the fair value of any such derivative instruments are promptly recognized in the statement of income in “Other gains (losses), net”. The fair value of financial instruments not traded in active markets is determined using evaluation techniques. The Company exercises its judgment to choose various methods and specify their underlying assumptions especially in the market conditions prevailing on the date of the balance sheet.
5 Financial Instruments by Category
On December 31st
, 2018
Financial Instruments Amortized
Cost
Assets and liabilities
measured at fair value
through profit or loss
Total
Cash and cash equivalents 114,891 - 114,891 Financial investment - - - Trade and other receivables 119,765 - 119,765 Derivative financial instruments - 3,201 3,201 Other assets 40,730 - 40,730 Borrowings 231,025 - 231,025 Trade payables 56,414 - 56,414 Other liabilities 24,261 - 24,261
Total 587,086 3,201 590,287
December 31st
,
2018
December 31st
,
2017
A - Total borrowings (note 18) 231,025 168,789 B - (-) Cash and cash equivalents (note 7) (114,891) (56,357) C - (-) Financial investments - (3,587) D - (-) ACC-secured export receivables (12,618) - E - (+/-) SWAP (note 34) (3,201) (430) F = (A - B – C – D - E) - Net debt 100,315 108,415 G - Total shareholders’ equity 185,793 151,278 H = (F + G) – Total capital 286,108 259,693 F / H = Financial leverage ratio 35% 42%
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
On December 31st
, 2017
Financial Instruments Amortized
Cost
Assets and liabilities
measured at fair value
through profit or loss
Total
Cash and cash equivalents 56,357 - 56,357 Financial investment 3,587 - 3,587 Trade and other receivables 122,363 - 122,363 Derivative financial instruments - 430 430 Other assets 30,783 - 30,783 Borrowings 168,789 - 168,789 Trade payables 54,252 - 54,252 Other liabilities 24,309 - 24,309
Total 460,440 430 460,870
6 Credit Quality of Financial Assets The credit quality of financial assets pertaining to current and non-current trade receivables is assessed by an internal customer credit rating methodology which considers each customer’s listing time and track record of payments, resulting in the rating of financial assets into four categories:
Rating Listing Time Track Record of
Payments
A Over 5 years Timely
B Over 3 years Average delay of up to
1 day
C 3 years or less Average delay over
1 day
D - In Default
Rating December 31st
, 2018 December 31st
, 2017
A 48.7% 50.7%
B 21.3% 1.6%
C 12.5% 28.3%
D 17.5% 19.4%
Bank deposits and financial investments amounting to R$114,891 (R$56,357 on December 31st, 2017) are classified as posing a low short-term risk.
7 Cash and Cash Equivalents, Marketable Securities and Available-for-Sale Financial Assets
(a) Cash and cash equivalents
The short-term investments were classified as held for trading and are basically represented by floating-rate Bank Deposit Certificates (CDB) with prime financial institutions, bearing interest at the CDI rate. On December 31st, 2018 the average rate of return on the investments was 99.22 percent of the CDI rate (99.32% of the CDI rate on December 31st, 2016).
December 31
st,
2018
December 31st
,
2017
Cash in banks and on hand 1,947 75
Short-term financial investments – CDI 112,078 53,262
Short-term financial investments – investment funds 866 3,020
Total 114,891 56,357
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
(b) Held-to-Maturity Investments
As of December 31st, 2017 the Company had a balance of R$0.00 (R$3,587 on December 31st, 2017) concerning financial investments that it intends to hold up to maturity. These financial investments bear interest at 100 percent of the CDI rate.
8 Trade Receivables
December 31st
,
2018
December 31st
,
2017
Domestic trade receivables 93,026 104,882
Foreign trade receivables 31,483 20,472
Estimated provision for doubtful debtors (4,744) (2,991)
Total current 119,765 122,363
Domestic trade receivables 24,857 26,076
Estimated provision for doubtful debtors (24,857) (26,076)
Total trade receivables 119,765 122,363
Trade receivables are amounts receivable from customers and reduced through a provision to their probable realizable values. The provision for doubtful debtors is made in an amount considered sufficient by Management to cover any possible losses on the realization of trade receivables. The Company reviews its receivables portfolio on a quarterly basis by assessing expectations for realization of the relevant credits. Such an assessment will primarily consider: (i) change in listing information; (ii) economic and financial information; (iii) track record of purchases and payments; (iv) restrictive information in the marketplace; (v) consultation of external information systems; and (vi) guarantees. For all customers commencing judicial reorganization, provisions are promptly made in amounts ranging from 20 to 100 percent of the affected credits receivable. Such provisions are based on case-by-case analyses and reviewed to the extent that the customer’s situation evolves as a result of their submission of a reorganization plan and related terms, whether or not the plan is approved at a meeting of creditors, a judgment as to whether or not the customer can actually succeed in implementing that plan, etc. The fair values of trade receivables are near their carrying amounts as of December 31st, 2018 and December 31st, 2017, and no one of the Company’s customers accounted for more than 10 percent of its total revenues in any of these periods.
CPC 48 (Financial Instruments): The Company has created a methodology to recognize expected impairment losses. Analyses are conducted on a monthly basis, and expected losses are stated as provision for doubtful debtors. The table below shows the balances of accounts receivable by age past maturity:
As of December 31st, 2018 trade receivables overdue for up to 60 days in the amount of R$5,231 (R$7,476 on December 31st, 2017) refer to a series of independent customers which have no recent default in their track record, and are extensions and normal delays. Receivables overdue for more than 61 days, in the amount of R$30,456 (R$29,809 on December 31st, 2017) with losses of R$29,600 (R$29,067 on December 31st, 2017) substantially refer to customers in judicial reorganization. Full provisions have been made for receivables from such customers.
December 31st
,
2018
December 31st
,
2017
Not yet due 113,678 114,145
Overdue for up to 30 days 3,515 6,011
Overdue for 31 to 60 days 1,716 1,465
Overdue for 61 to 90 days 342 946
Overdue for 91 to 120 days 588 113
Overdue for over 120 days 29,526 28,750
(-) Estimated provision for doubtful debtors (29,600) (29,067)
Total 119,765 122,363
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
The changes in the Company’s estimated loss for doubtful debtors were as follows:
December 31
st, 2018 December 31
st, 2017
Opening Balance 29,067 28,867 (+) Formation of provision 6,510 778
(-) Realization of provision (5,977) (578)
Closing Balance 29,600 29,067
Classified as:
Current 4,744 2,991
Non-current 24,856 26,076
The formation and de-recognition of the provision for doubtful debtors were recorded in the statement of income for the fiscal year as “selling expenses and other operating expenses.” The Company’s trade accounts receivable are denominated in the following currencies:
December 31
st,
2018
December 31st
,
2017
Real 88,282 101,891
Euro 870 567
US Dollar 30,613 19,905
119,765 122,363
9 Inventories
December 31st
,
2018
December 31st
,
2017
Finished products 37,434 41,088
Raw, auxiliary and packaging materials 57,443 29,405
General warehouse 10,937 13,250
Provision for losses on inventories ( ¹ ) (2,998) (4,693)
Total 102,816 79,050
( ¹ ) The provision for losses on inventories is formed for those products which are considered obsolete as of the date of the financial
statements.
The cost of inventories recognized as expenses and included in “Cost of sales” totaled R$968,211 on December 31st, 2018 (R$825,186 on
December 31st, 2017).
Changes in the provision for losses on inventories were as follows:
December 31
st, 2018 December 31
st, 2017
Opening Balance 4,693 6,824 (+) Formation of provision 43 1,381 (-) Realization of provision (1,738) (3,512)
Closing Balance 2,998 4,693
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
10 Taxes Recoverable
December
31st
,
2018
December
31st
,
2017
Taxes recoverable/to be offset Social Security Funding Tax on Net Profit 1,717 12
Income tax 3,060 802
ICMS to be offset on acquisition of assets 2,318 1,410
ICMS credit balance – BA 2,536 4,997
ICMS credit balance – State of Bahia 2,390 1,035
Tax credit related to the “Reintegra” program 6,616 20,366
Federal tax credits to be offset arising from lawsuits upon final judgment 1,261 471
Other 19,898 29,093
Classified as: Current 18,393 28,412
Non-current 1,505 681
11 Deferred Taxes
For the purposes of a better presentation and in accordance with the provisions of CPC 32 (Taxes on Profit), the Company is presenting deferred tax assets net of differed tax liabilities. Net changes in the deferred tax account are as follows:
Deferred tax assets are recognized for tax loss purposes proportionally to the probability of realizing the relevant tax benefit through future taxable profit. The Company did not recognize any deferred taxes as of December 31st, 2018 in the amount of R$108,235 (R$119,255 on December 31st, 2017).
( ¹ ) Amount recoverable within 10 years, according to projected tax assets.
Opening Balance
12/31/17Formation Reversal
Closing Balance
12/31/2018
Deferred tax assets
Tax losses and negative tax bases 60,843 1,185 (6,116) 55,912
Provision for doubtful debtors 9,882 2,214 (2,032) 10,064
Provision for labor contingencies 5,765 1,177 (3,033) 3,909
Provision for tax contingencies 1,011 876 (803) 1,084
Impairment of PP&E and intangible assets 43,493 - (5,817) 37,676
De-recognition of shut-down plants in PP&E 10,193 - - 10,193
Miscellaneous provisions 13,261 6,406 (10,085) 9,582
Present value adjustment 720 136 (276) 580
Disposal of deferred charges 56 - (56) -
Total deferred tax assets 145,224 11,994 (28,218) 129,000
Deferred tax liabilities
Miscellaneous provisions 4,090 - (1,670) 2,420
Surplus contributions to pension plan 3,534 303 (3,837) -
Total deferred tax liabilities 7,624 303 (5,507) 2,420
Total deferred tax, net 137,600 11,691 (22,711) 126,580
Summary:
Amount recoverable ( ¹ ) 18,345 - - 18,345 Amount of deferred taxes not assessed 119,255 11,691 (22,711) 108,235
Total deferred tax, net 137,600 11,691 (22,711) 126,580
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
12 Other Assets
December 31st
,
2018
December 31st
,
2017
Restricted and court deposits 7,914 6,833
Participation in pension fund - Plan CD ( ¹ ) - 10,395
Disposal of property, plant and equipment ( ² ) 29,756 12,153
Related-party credits 1,599 -
Other amounts receivable 1,461 1,402
Total 40,730 30,783
Classified as:
Current 10,412 5,283
Non-current 30,318 25,500
( ¹ ) Due to the transfer of the Itaú group’s controlling interest in the Company to Fundo Kilimanjaro, an application has been filed with the PREVIC for termination of joint and several liability between Elekeiroz S.A. and the entities making up Fundação Itaúsa Industrial, and amount corresponding to such interest has been de-recognized.
( ² ) The Company disposed of two properties that it owned in the municipality of Várzea Paulista as follows: (i) in August 2015 for R$23,500 to be received by 64 payments adjusted for inflation by the IGPM + 2% p.a., 36 of which had been received by the conclusion of these financial statements; (ii) in April 2018 for R$23,654 to be received by 36 payments adjusted for inflation by the IGPM + 3% p.a., the first of which falling due in April 2019. As directed by CPC 12 (Present Value Adjustment), the Company calculated the present value adjustment of accounts receivable net of such payments according to the fluctuation of the CDI and recognizing the present value adjustment of trade receivables indicating the current and non-current portions.
13 Investments
The Company holds a 50-percent stake in Nexoleum Bioderivativos S.A., a joint venture engaged in the market for plasticizers from renewable sources by producing and providing bio-based products of plant origin in Brazil and such relevant regions as the United States and Europe. The other investments do not represent any subsidiaries and/or associated companies, and their net book amounts are recorded at acquisition cost, net of impairment, where applicable.
14 Investment Property
December 31st
,
2018
December 31st
,
2017
Value of property, land and facilities, net of depreciation 2,023 2,029
The Company owns a piece of land and facilities in the municipality of Arujá which are classified as investment property. The fair value as
of December 31st, 2018, based on expert reports, is R$38,000 (carrying amount of the property on December 31st, 2018: R$1,455). There was no significant change in that amount until the date of these financial statements.
In September 2016 the Company accepted as payment of a debt owed by a customer an apartment located in the city of Canoas, Rio
Grande do Sul, which has been classified as investment property. The fair value as of December 31st, 2018, based on an expert report, is R$650 (carrying amount of the apartment on December 31st, 2018: R$568).
Interest in Joint Ventures Other Investments Nexoleum Bioderivados S.A. Cetrel S.A. Other
Carrying Carrying Carrying
Amount Intangible Total Amount Amount
Balance on December 31st
, 2017 2,491 13,286 15,777 5,463 5 21,245 Equity accounting (909) - (909) - - (909)
Amortization of intangible assets - (636) (636) - - (636)
Write-offs - - - - (3) (3)
Balance on December 31st
, 2018 1,582 12,650 14,232 5,463 2 19,697
Total InvestmentsAsset Appreciation
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
15 Property, Plant and Equipment
The amount of R$12,215 (R$17,825 on December 31st, 2017) corresponding to depreciation expense was recorded in the statement of income in “Cost of sales”, while R$11,013 (R$16,644 on December 31st, 2017) and R$1.202 (R$1,181 on December 31st, 2017) were recognized in “General and administrative expenses.” Impairment of Non-Financial Assets
In compliance with CPC 01, with a view to ascertaining the existence of assets stated at amounts exceeding their recoverable amounts, the Company has conducted an appraisal of the items making up its intangible assets and property, plant and equipment on December 31st, 2016. The Company found that the Alcohol, Maleic Anhydride and Polyester Resin Cash Generating Units displayed carrying amounts in excess of their recoverable amounts, leading to the formation a provision for losses arising out of the impairment of such assets. The only Camaçari Cash Generating Unit is the Alcohol/Gas plant, which required impairment, wherefore the same treatment was extended to the assets of its supporting areas and indirect areas. In 2018 the Company conducted an impairment analysis of its intangible assets and property, plant and equipment for a period of 10 years, using economic assumptions published by Banco Itaú BBA for the next 5 years and extrapolating said assumptions for the following years, considering changes in its main raw materials and products according to projected market fluctuations. In spite of the improved performance displayed by the Company for 2018, long-term projections still confirm the 2016 impairment analysis, which has therefore been maintained by the Company.
Property, plant and equipment breakdown
Land Buildings
Equipment &
facilities Furniture
& fixtures Vehicles
Data
processing
equipment
Construction in progress Impairment Total
Opening balance on 12/31/16 Cost 9,819 55,468 540,144 4,753 3,250 4,130 18,349 - 635,913
Accumulated depreciation - (41,216) (351,602) (3,309) (2,305) (3,041) - (401,473)
Impairment (8,835) (132,891) (796) (131) (363) (7,501) (150,517)
Net book amount 9,819 5,417 55,651 648 814 726 10,848 - 83,923
On 12/31/2017
Opening balance 9,819 5,417 55,651 648 814 726 10,848 - 83,923
Purchases - 34 1,687 28 247 170 24,246 - 26,412
Disposals, costs - - (331) (3) (156) (99) (2,123) - (2,712)
Disposals, accumulated depreciation - - 234 1 120 86 - - 441
Depreciations - (1,974) (41,547) (286) (394) (364) - 26,740 (17,825)
Transfers - 709 20,813 100 36 55 (21,785) - (72) Net book amount 9,819 4,186 36,507 488 667 574 11,186 26,740 90,167
Balance on 12/31/2017 Cost 9,819 56,210 562,313 4,878 3,377 4,255 18,686 - 659,538
Accumulated depreciation - (43,189) (392,915) (3,593) (2,579) (3,318) - - (445,594)
Impairmen
- (8,835) (132,891) (797) (131) (363) (7,500) 26,740 (123,777)
Net book amount 9,819 4,186 36,507 488 667 574 11,186 26,740 90,167
On 12/31/2018
Opening balance 9,819 4,186 36.507 488 667 574 11,186 26,740 90,167
Purchases - 21 1,752 200 739 250 35,924 38,886
Disposals, costs (5,239) (1,909) (1,479) (8) (668) (213) (1,375) 216 (10,675)
Disposals, accumulated dep. - 1,663 1,404 8 484 210 - - 3,769
Depreciations - (1,654) (26,378) (283) (308) (378) - 16,786 (12,215)
Transfers - 596 9,972 35 71 - (10,674) - -
Net book amount 4,580 2,903 21,778 440 985 443 35,061 43,742 109,932
Balance on 12/31/2018
Cost 4,580 54,918 572,558 5,105 3,519 4,292 42,562 - 687,534
Accumulated depreciation - (43,180) (417,889) (3,868) (2,403) (3,486) - - (470,826) Impairment - (8,835) (132,891) (797) (131) (363) (7,501) 43,742 (106,776)
Net book amount 4,580 2,903 21,778 440 985 443 35,061 43,742 109,932
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
16 Intangible Assets
17 Trade Payables; Salaries, Wages and Employee-Related Expenses; and Other Payables
December
31st
,
2018
December
31st
,
2017
Trade payables 56,414 54,252Salaries, wages and employee-related expenses 10,162 9,669Provision teardown ( ¹ ) 15,000 15,000Miscellaneous provisions 1,644 2,021Other payables 7,617 7,288
90,837 88,230
Classified as:
Current 74,838 72,822
Non-current 15,999 15,408
( ¹ ) For the fiscal year 2016, due to the shutdown of the plasticizer and phthalic anhydride plants at the Camaçari, Bahia site, the Company set up a provision of R$15,000 for tearing down their production lines. Proposals and rollout timetables are currently being considered for this job.
Intangible assets breakdown
Software
right to
use
Impairment Total
Opening balance on 12/31/2016
Cost 10,337 - 10,337
Accumulated amortization (5,773) - (5,773)
Impairment (780) - (780)
Net book amount 3,784 - 3,784
On 12/31/2017
Opening balance 3,784 - 3,784
Purchases 232 - 232
Amortization (1,565) 138 (1,427)
Transfers 72 - 72
Net book amount 2,523 138 2,661
Balance on 12/31/2017
Cost 10,641 10,641
Accumulated amortization (7,338) (7,338)
Impairment (780) 138 (642)
Net book amount 2,523 138 2,661
On 12/31/2018
Opening balance 2,523 138 2,661
Purchases 202 - 202
Amortization (1,584) 107 (1,477)
Net book amount 1,141 245 1,386
Balance 12/31/2018
Cost 10,842 10,842
Accumulated amortization (8,921) (8,921)
Impairment (780) 245 (535)
Net book amount 1,141 245 1,386
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
18 Borrowings Borrowings, which refer to investments in the expansion and modernization of facilities and in working capital, are characterized as follows:
12/31/2018 12/31/2017
Type Charges (%) Guarantees Amortization Ending Current Non-current Current Non-current
BNDES TJLP + 1.72-4.32 p.a.
Itaúsa Guarantee
Monthly and Quarterly
02/15/2021 - - 12,003 20,097
BNDES IPCA + 1.96-2.26 p.a.
Itaúsa Guarantee
Monthly and Quarterly
04/15/2021 - - 2,478 6,701
BNDES 3.00-6.00 p.a. Itaúsa Guarantee
Monthly and Quarterly
02/15/2021 - - 670 1,264
FINEP 3.50 p.a. Itaúsa Guarantee
Monthly 04/15/2021 --
2,0594,780
BNB 9.50 p.a. Itaúsa Guarantee
Monthly 12/29/2020 --
9,29919,408
SAFRA FINAME TJLP + 4.50 p.a. Equipment Monthly 09/15/2022 - - 13 177
NCE – SAFRA 127.00% CDI Receivables Half-yearly 06/27/2019 - - 27,466 25,000
NCE – CCB 100.00% CDI - Yearly 04/16/2019 15,315 - - -
FINEX SANTANDER CDI + 2.28 p.a. - Final 07/29/2019 15,517 - - -
CCE - SANTANDER
CDI + 2.5 p.a. Fiduciary transfer
Half-yearly 06/15/2023 7,001 23,333 - -
CCB - BRAZIL CDI + 2.35 p.a. Fiduciary transfer
Half-yearly 05/02/2023 9,745 31,111 - -
COMMON
DEBENTURES CDI + 2.50 p.a.
Fiduciary transfer
Quarterly 06/22/2023 20,461 90,588 - -
(-) CONTRACTING
COSTS (1,155) (1,804) - -
TOTAL NATIONAL CURRENCY 66,884 143,228 53,988 77,427
BNDES
EXCHANGE RATE FLUCTUATION + 2.12-2.16 p.a.
Itaúsa Guarantee
Monthly and Quarterly
10/15/2020 - - 2,800 3,780
NCE – ABC 129.25% CDI Fiduciary transfer
Yearly 07/04/2019 8,141 - 7,134 6,775
4131 – SAFRA 131.70% CDI Itaúsa Guarantee
Final 07/17/2018 - - 16,885 -
ACC – SAFRA 4.72 p.a. Final 01/25/2019 12,772 - - -
TOTAL FOREIGN CURRENCY 20,913 - 26,819 10,555
TOTAL 87,797 143,228 80,807 87,982
Upon completion of disposal of the controlling interest in the Company as set out in the Material Fact notices of June 4th, 2018, the new controlling shareholder started the Company’s financial restructuring process by raising funds with long-term maturity dates aiming at an early settlement of other existing contracts, many of which guaranteed by Itaúsa. The relevant settlements began to take place in July 2018. In June 2018, the Company released the second issue of common mortgage debentures not convertible into single-series shares in the amount of R$110,000 maturing on July 22nd, 2023 and paying interest at the CDI rate + 2.50 p.a., with quarterly repayments starting on September 22nd, 2019.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
Borrowings classified as non-current liabilities break down as follows, by year of maturity:
December 31
st, 2018 December 31
st, 2017
2020 40,580 58,6542021 40,854 25,3782022 41,126 3,9142023 20,668 36
Total 143,228 87,982
Borrowing amounts are stated at their amortized costs, which are near their fair values. The following table provides details of changes in borrowings and the net debt breakdown:
Covenants
In the ordinary course of business, the Company borrows money from financial institutions and signs commercial agreements with other entities that become contractually binding under their respective compliance, restriction and/or guarantee provisions (“covenants”). For the most part, the restrictions to which the Company is subject, especially in 2018, concerning financing and loan agreements with the banks Banco do Brasil and Santander and the issuance of debentures. For 2017, restrictions referred to financing and loan agreements with the BNDES. The indicator set forth in such agreements is the Net Debt-to-EBITDA ratio. As of the date of completion of these financial statements, then Company is in compliance with the covenants set forth in the loan agreements with Banco do Brasil and Santander and the issuance of debentures.
19 Taxes Payable
December 31st
, 2018 December 31st
, 2017
Federal tax liabilities 4,224 4,247 State tax liabilities - 1,683
Total taxes payable 4,224 5,930
Classified as:
Current 4,224 5,930
Non-current - -
CurrentNon-
current
Total
debt
Cash & cash
equivalentsDerivatives
Financial
investments
Pledged
accounts
receivable
Net
debt
Net debt as of January 1st
, 2017 67,715 149,526 217,241 (33,768) 3,467 (3,335) - 183,605
Transactions affecting cash flow (94,769) - (94,769) (22,589) - (252) - (117,610) Transactions not affecting cash flow 43,572 - 43,572 - (3,897) - - 39,675
Purchase 21,450 - 21,450 - - - - 21,450
Currency/exchange rate fluctuations (18,705) - (18,705) - - - - (18,705) Transfers to current assets 61,544 (61,544) - - - - - -
- Net debt as of December 31
st, 2017 80,807 87,982 168,789 (56,357) (430) (3,587) - 108,415
Transactions affecting cash flow (193,932) - (193,932) (58,534) - 3,587 - (248,879) Transactions not affecting cash flow 48,227 - 48,227 - (2,771) - (12,618) 32,838
Purchase - 227,609 227,609 - - - - 227,609
Currency/exchange rate fluctuations (19,668) - (19,668) - - (19,668) Transfers to current assets 172,363 (172,363) - - - - - -
Net debt as of December 31st
, 2018 87,797 143,228 231,025 (114,891) (3,201) - (12,618) 100,315
Bank Loans
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
20 Provision for Contingencies The Company is a party to labor, civil and tax lawsuits and administrative proceedings arising in the ordinary course of business.
(a) Provisions for Tax, Labor and Civil Contingencies
The provisions for labor, tax and civil contingencies are sufficient to cover any of the losses initially classified as probable. Management believes, based on the opinion of its legal counsel, that such provisions are sufficient to cover probable losses arising out any unfavorable decisions and that the relevant final and non-appealable court decisions will not have significant impacts on the Company’s financial and economic position, as shown below:
Tax Labor Civil Total
On January 1st
, 2018 2,974 16,958 6,785 26,717
Adjustment for inflation 127 993 339 1,459
Formation 2,448 2,353 915 5,716
Reversal (1,995) (2,227) (2,784) (7,006)
Payments (365) (6,577) (1,046) (7,988)
On December 31st
, 2018 3,189 11,500 4,209 18,898
Tax Labor Civil Total
On January 1st
, 2017 2,634 21,836 6,541 31,011
Adjustment for inflation 147 1,661 174 1,982
Formation 2,296 1,889 1,000 5,185
Reversal (1,919) (2,724) (668) (5,311)
Payments (184) (5,704) (262) (6,150)
On December 31st
, 2017 2,974 16,958 6,785 26,717
(i) Tax
Tax lawsuits likely to be lost refer to ICMS bookkeeping issues, an increase in the IPTU (real estate tax) rate, and miscellaneous matters.
(ii) Labor and Civil
The Company is a party to labor and civil lawsuits that are being handled by the relevant courts. Provisions pertaining to all such lawsuits are made when loss is deemed probable in the opinion of the attorneys responsible for such lawsuits and are fully stated in the balance sheet. The labor lawsuits mainly refer to claims of joint liability, occupational disease, salary equalization, and overtime, and, individually, the amounts involved in such labor claims do not represent a material risk to the Company’s operations. The civil lawsuits mainly refer to complaints arising out of environmental and commercial matters.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
(b) Possible Losses
The Company is involved in other tax, labor and civil proceedings for which no provision has been made because the likelihood of loss in those cases is only possible in the opinion of the Company’s legal counsel, as shown in the table below:
December 31st
,
2018
December 31st
,
2017
Tax 41,860 48,677
Labor 90,068 86,040
Civil 6,059 6,056
Total 137,987 140,773
i) Tax
Tax liabilities as of December 31st, 2018 amount to R$41,860 (R$48,677 on December 31st, 2017) and refer to cases set in motion by tax assessment notices concerning especially the following themes: (i) assumed IPI (Tax on Industrial Products) credit offset amounting to R$4,062 (R$3,971 on December 31st, 2017); (ii) PIS and COFINS taxes on financial income amounting to R$5,081 (R$4,931 on December 31st, 2017); (iii) social security contribution of R$3,479 (R$3,320 on December 31st, 2017); (iv) irregularity in the ICMS Bahia bookkeeping in the amount of R$0.00 (R$9,979 on December 31st, 2017); (v) PIS/COFINS tax credit on utilities amounting to R$5,259 (R$4,970 on December 31st, 2017); (vi) inclusion of the ICMS in the import ARFMM tax base in the amount of R$4,678 (R$4,501 on December 31st, 2017); and (vii) other lawsuits amounting to R$19,301 (R$17,005 on December 31st, 2017).
(ii) Labor and Civil
Labor and civil liabilities in the amount of R$96,127 (R$92,096 on December 31st, 2017) refer to paint and suffering damages, overtime and joint liability to third parties. Civil cases refer primarily to actions for pain and suffering, pecuniary and environmental damages.
(c) Contingent Assets
The Company is discussing in court the reimbursement of taxes, and it is also a party to civil lawsuits in which it has rights or the expectation of rights receivable. According to the assessment of the Company’s legal counsel, these lawsuits are classified based on the possibility of victory as probable, possible or remote. Since they are contingent assets, the amounts below are not recorded in the financial statements. The table below shows the main lawsuits pending decision to which the Company is a party where favorable outcomes are considered probable:
December 31st
, 2018 December 31st
, 2017
Tax
PIS offset under Executive Laws 2,445 and 2,449 of 1988 18,628 18,307 Other tax lawsuits involving amounts lower than R$10 million 9,703 9,455 Total tax 28,331 27,762
Civil Collection/foreclosure on securities out of court 16,339 14,790 Other civil lawsuits involving amounts lower than R$10 million 117 2,778 Total civil 16,456 17,568
21 Shareholders’ Equity
(a) Capital Stock
As of December 31st, 2018 the subscribed and paid-up capital stock amounted to R$103,057 (R$103,057on December 31st, 2017), divided into 31,485,170 book-entry shares with no par value, 14,518,150 of which were common shares, and 16,967,020 non-voting preferred shares (on December 31st, 2017, 31,485,170 book-entry shares with no par value, 14,518,150 of which were common shares, and 16,967,020 non-voting preferred shares).
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
(b) Characteristics of Shares
The non-voting preferred shares have the following characteristics: (i) Priority over common shares in the distribution of mandatory minimum dividends; (ii) Dividends per preferred share are never to be inferior to those attributed to each common share; (iii) Share in capital increases arising out of the capitalization of reserves and profits; (iv) Priority over common shares in capital reimbursement, without premium, in the event that the Company is liquidated; (v) In the event of transfer of control, the right to be included in the public offering for the acquisition of shares, so as to
ensure a unit price equivalent to 80 percent of the amount paid for each voting share in the control stock; (vi) Minimum annual non-cumulative priority dividend of R$2.00 per thousand shares, to be adjusted in the event of split or
reverse split.
(c) Capital Reserve
Made up with credits arising from the income tax reduction incentive and the FINOR directly stated in shareholders’ equity. As of December 31st, 2018 it amounts to R$8,326 (R$8,326 on December 31st, 2017).
(d) Revenue Reserves The revenue reserve is composed of the following reserves:
(i) Statutory Reserve
The statutory reserve is made annually as an appropriation of 5 percent of the net profit for the fiscal year and cannot exceed 20 percent of the capital stock. The purpose of the statutory reserve is to ensure the integrity of capital stock, and it can only be used to offset losses and increase the capital. As of December 31st, 2018 the statutory reserve amounted to R$4,753 (R$1,635 on December 31st, 2017). (ii) Special Reserve
The special reserve is formed out of the net profit balance remaining after the statutory reserve has been formed and dividends have been paid out, and serves the following purposes: (a) exercise of preemptive subscription rights in capital increases of any investees; (b) any future additions of the relevant funds to the capital stock; and (c) payment of interim dividends distributable according to the decision of the Board of Directors, subject to approval by the Shareholders Meeting. As of December 31st, 2018 the special reserve amounted to R$50,800 (R$23,302 on December 31st, 2017). (iii) Tax Incentive Reserve The tax incentive reserve is formed out credits resulting from an income tax cut and the Desenvolve Bahia program that are recorded in the income statement for the fiscal year, which are subsequently transferred to the tax incentive reserve and excluded from the dividend calculation because, according to the tax laws for the time being in force, they cannot be distributed to shareholders. As of December 31st, 2018 I amounts to R$18,857 (R$14,958 on December 31st, 2017).
(e) Proposed Dividends
The shareholders are entitled to receive, as compulsory dividend, an amount equivalent to 25 percent of the net profit determined for the fiscal year, as adjusted by subtracting or adding the amounts specified in article 202, items (a) and (b), of Law no. 6,404/76, subject to sections II and III of that same statute. The dividend calculation is demonstrated in Note 30.
22 Revenues
The reconciliation of gross revenues to net revenues is shown in the following table:
December
31st
,
2018
December
31st
,
2017
Gross sales revenues 1,423,964 1,217,937
Domestic market 1,294,562 1,164,772 Foreign market 129,402 53,165 Taxes on sales and returns (IPI, ICMS, PIS, COFINS) (276,023) (239,396)
Net sales revenues 1,147,941 978,541
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
23 Expenses by Nature
December 31st
,
2018
December 31st
,
2017
Raw materials and consumables 877,196 734,459
Compensation, payroll charges and employee benefits 84,041 82,555
Variable selling expenses 53,261 47,536
Depreciation and amortization 13,692 19,252
PIS and COFINS credits on depreciation (1,297) (2,395)
Maintenance expenses 9,902 8,524
Third-party services 15,049 13,508
Profit sharing 12,916 9,118
Other expenses 23,427 24,275
Total 1,088,187 936,832
Cost of sales 968,211 825,186
Selling expenses 53,261 47,536
General and administrative expenses 66,715 64,110
Total 1,088,187 936,832
24 Other Revenues (Expenses), Net
December
31st
,
2018
December
31st
,
2017
Tax reversals (provisions), net (659) (2,344)
Labor reversals (provisions), net (1,065) (118)
Civil and environmental reversals (provisions), net 1,822 (388)
Reversals (provisions) for losses on inventories 1,695 2,131
Projects and research (40) (261)
Variation in the pension plan of Fundação Itaúsa Industrial (10,395) (891)
PIS and COFINS credits on purchases of raw materials ( ¹ ) 17,822 15,320
Ratification of tax credits 1,316 16,259
Reversals (provisions) for doubtful debtors (321) 361
Disposal of property, plant and equipment (net) ( ² ) 20,956 (71)
Other expenses (661) (3,913)
Total other revenues (expenses), net 30,470 26,085
( ¹ ) Relating to Law 12,859 of September 10th, 2013, which granted tax incentives to the chemical industry by means of assumed credits and lower PIS/PASEP and COFINS tax rates on purchases of raw materials.
( ² ) In April 2018 the Company disposed of a property located in the municipality of Várzea Paulista for R$23,654.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
25 Financial Income (Expenses) The financial result comprises the following financial income and expense items:
December
31st
,
2018
December
31st
,
2017
Financial income
Return on financial investments 2,882 4,023
Foreign exchange gains 35,932 27,888
Interest and discounts earned 2,710 2,677
Reversal of present value adjustment 812 510
Derivative transactions 6,474 -
Other 119 344
Total financial income 48,929 35,442
Financial expenses
Charges on borrowings (19,514) (16,992)
Foreign exchange losses (43,245) (30,125)
Derivative transactions - (2,931)
Other (4,515) (3,686)
Total financial expenses (67,274) (53,734)
Total financial income (expenses), net (18,345) (18,292)
The amounts above are shown in the “financial income (expenses)” account in the statement of income for the fiscal year.
26 Foreign Exchange Gains (Losses), Net The exchange differences (charged) credited to the statement of income are as follows:
December 31st
, 2018 December 31st
, 2017
Foreign exchange fluctuation gain 35,932 27,888Foreign exchange fluctuation loss (43,245) (30,125)
(7,313) (2,237)
The amounts above are shown in the “financial income (expense)” account in the statement of income for the fiscal year.
27 Income Tax and Social Security Funding Tax Reconciliation of income tax (IRPJ) and social security funding tax (CSLL) expense.
IRPJ and CSLL expense breakdown December 31st
, 2018 December 31st
, 2017
Profit (loss) before income and social security funding taxes 70,970 48,411
(-) Offset for tax losses and negative tax bases (19,395) (3,563)
Income tax and social security funding tax rate of 34% (20,888) (16,139)
Permanent additions (exclusions) (1,283) (729)
Temporary additions (exclusions) 10,927 14,814
Return on equity 3,568 -
PAT (Worker Food Program) 195 55
IRPJ rate cut tax incentive calculated based on the profit from the operation 2,769 1,250
Total (4,712) (749)
Current income tax and social security funding tax (4,712) (749)
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
28 Segment Information In adopting the principles set forth by the pronouncement concerning Segment Information, Management defined the Company’s reportable operating segments based on its review of the reports used in strategic decision-making, and is responsible for allocating funds, assessing performance by operating segment and making strategic decisions. Accordingly, the operating segments were divided into two major product groups, namely, Organic Chemicals and Inorganic Chemicals, which have different characteristics in relation to their respective markets. Organic Chemicals: These include oxo alcohols, phthalic and maleic anhydrides, plasticizers, unsaturated polyester resins, formaldehyde, urea-formaldehyde concentrate, and fumaric acid. Inorganic Chemicals: Comprising sulfuric acid and some other resale activities.
On December 31st
, 2018
Organic
chemicals
Inorganic
chemicals Corporate
Total
Company
Net revenue 996,847 151,094 - 1,147,941
Cost of sales (881,342) (86,869) - (968,211)
Gross margin 115,505 64,225 - 179,730
Selling expenses (38,811) (14,450) - (53,261)
Administrative expenses/other - - (36,245) (36,245)
Financial income (expense) - - (18,345) (18,345)
Share in profit (loss) of joint venture - - (909) (909)
Tax on profit - - (4,712) (4,712)
Net income 76,694 49,775 (60,211) 66,258
On December 31st
, 2017
Organic
chemicals
Inorganic
chemicals Corporate
Total
Company
Net revenue 861,777 116,764 - 978,541
Cost of sales (755,249) (69,937) - (825,186)
Gross margin 106,528 46,827 - 153,355
Selling expenses (29,902) (17,634) - (47,536)
Administrative expenses/other - - (38,025) (38,025)
Financial income (expense) - - (18,292) (18,292)
Share in profit (loss) of joint venture - - (1,091) (1,091)
Tax on profit - - (749) (749)
Net income 76,626 29,193 (58,157) 47,662
The Company has elected not to state profit, assets and liabilities separately for each of the operating segments in which it is engaged because they share the same indirect cost, administrative expense and selling expense structure.
29 Earnings (Loss) per Share
December 31st
, 2018 December 31st
, 2017
Net earnings (losses) attributable to shareholders 66,258 47,662
Weighted average number of outstanding shares (in thousands) 31,485 31,485
Earnings (losses) per share (R$), basic and diluted 2.10 1.51
For the fiscal years presented herein, the Company did not have any such convertible instruments or other liabilities as could potentially dilute the number of outstanding shares.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
30 Dividends
The shareholders are entitled to a compulsory dividend in an amount equivalent to 25 percent of the net profit determined for that same fiscal year, as adjusted by any decrease or increase in the amounts specified article 202, section I, items (a) and (b), of Law no. 6,404/76, subject to sections II and III of said article. The proposed dividends posted in the Company’s financial statements, subject to approval by the shareholders at the Shareholders’ Meeting, are calculated as set forth in the aforementioned law, particularly as regards the provisions of articles 196 and 197 of the Joint-Stock Companies Act. The dividends have been calculated as follows:
December 31st
, 2018
Net profit for the period 66,258
(-) IRPJ-cut tax incentive recognized in the statement of income (2,768)
(-) Tax incentive from the Desenvolve Bahia program (1,130)
(-) Statutory reserve (5%) (3,118)
(=) Basis 59,242
Minimum mandatory dividend (25%) 14,811
Supplementary dividend 6,435
Return on equity 10,497
Total dividends 31,743
31 Balances and Transactions with Related Parties
(a) Sales and Purchases of Products and Services, Dividends and Financial Investments
The transactions with companies owned by the parent company Itaúsa in 2017 refer to purchases and sales of products and services and property leases, and are carried out at prices, for periods and on terms commonly in use in the marketplace. In 2018, upon disposal of Itaúsa’s controlling interest to Fundo Kilimanjaro, the company has no commercial or financial transactions with any entities owned by the new controlling shareholder.
The financial investments in Banco Itaú S.A. are made under normal money market conditions and within the limits set to the Company by Management. Returns on financial investments are recognized in the statement of income. a) Itaú Unibanco S.A. – Cash and cash equivalents. b) Itaú Corretora de Valores S.A. – Provision of share custody services. c) Itaúsa Empreendimentos S.A. – Provision of economic and financial analysis services; payment of dividends. d) Itaú Seguros S.A. – Contracting of insurance policies. e) Itaúsa Investimentos Itaú S.A. – Payment of dividends and property lease. f) Nexoleum Bioderivados S.A – Loan Agreement. All of the sureties previously granted by the shareholder Itaúsa Investimentos Itaú S.A. where either replaced or changed by other guarantees. As of December 31, 2017 the former controlling shareholder stood as guarantor of debts amounting to R$102,223.
December 31st
, 2018 December 31st
, 2017 Company Re. Nature Assets Liabilities Profit (loss) Assets Liabilities Profit (loss)
of Transaction
Itaú Unibanco a Financial investment - - - 4,738 - 265 Itaú Corretora de Valores b Service provided - - - - - (32)
Itaúsa Empreendimentos cService provided and
dividends/ROE - - - - 9 (245)
Itaú Seguros d Service provided - - - - - (670)
Itaúsa e
Service provided and
dividends/ROE - - - - 7,494 (236)
Nexoleum f Loan agreement 1,599 - 72 - - -
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
(b) Management Compensation
Key management personnel includes directors elected at the Annual Shareholders’ Meeting and officers. The compensation paid to management personnel breaks down into fixed fees, profit sharing, and benefits. The amounts incurred are fully recorded in the statement of income for the fiscal year, as shown in detail below:
December 31st
, 2018 December 31st
, 2017
Executive Board 9,121 9,418
- Fees 2,726 4,406 - Profit sharing 4,862 2,916 - Payroll charges (INSS and FGTS) 763 1,234 - Short-term benefits 311 382 - Post-employment benefits 459 480 Board of Directors 707 1,671
- Fees 562 1,322 - Payroll charges (INSS) 112 264 - Post-employment benefits 33 85
32 Employee Benefits
Defined-Contribution Plan – Private Pension Plan
Elekeiroz S.A. offers all of its employees a private pension plan of the defined contribution type (PAI-CD Plan). The plan is administered by Fundação Itaúsa Industrial, a non-profit closed private pension entity sponsored by the Company, among other entities. Due to the nature of the plan, there is no actuarial risk, and the investment risk is borne by its participants. The by-laws for the time being in force provide for contributions from employees ranging from 1 to 10 percent of their salaries, while the sponsor contributes 100 percent of the amount contributed by employees. Up until December 31st, 2017, contributions amounted to R$3,400 (R$3,005 on December 31st, 2017). Due to the transfer of the Itaúsa group’s controlling interest in the Company to Fundo Kilimanjaro, application has been filed with the PREVIC for termination of joint and several liability between Elekeiroz S.A. and the entities making up Fundação Itaúsa Industrial, which will lead the employees’ private pension fund to be transferred to another administrator that is in the process of being retained.
33 Insurance Coverage The Company has a risk management program in place to delimit risks and searches the market for insurance coverage compatible with its size and operations. Insurance coverage has been contracted for amounts considered sufficient by Management to cover any losses, considering the nature of the Company’s business, the risks involved in its operations and the advice of its insurance advisers. As of December 31st, 2018 the insurance coverage and miscellaneous risks for inventory and property, plant and equipment items amounted to R$942,701 (R$669,165 on December 31st, 2017).
34 Derivative Financial Instruments In derivative transactions there are no monthly settlements or margin calls. Rather, contracts are settled at maturity and recognized at fair value considering market conditions such as time to due date and interest rates. As of December 31st, 2018 the Company had the following contract: - USD-CDI Rate Swap Agreement
The Company has two contracts of this type the notional value of which is US$5,206 maturing on January 25th, 2019 and July 4th, 2019, with an active position (bought) in US Dollars and a passive position (sold) in CDI. The Company contracted these transactions in order to hedge against constant fluctuations in the US Dollar exchange rate, securing one export credit note agreements. The amount receivable under the swap agreements is recorded in current and non-current liabilities as financial liabilities at fair value.
Management’s Explanatory Notes to the Financial
Statements as of December 31st, 2018 In thousands of Reals, except where stated otherwise.
On December 31
st, 2018
Swap Agreement
Notional Amount
(USD) Active Position Passive Position Amount Payable
5,206 20,995 17,794 (3,201)
On December 31
st, 2017
Swap Agreement
Notional Amount
(USD) Active Position Passive Position Amount Payable
9,096 31,339 30,909 (430)
BOARD OF DIRECTORS
Chairman
Marcelo Marinho Cecchetto
Deputy Chairman
Felipe Franco da Silveira
Directors
Pedro Samson Cury
Deputy Directors
Marcelo Hudik Furtado de Albuquerque Pedro Blanc Cezar de Andrade
EXECUTIVE BOARD
Chief Executive Officer
Marcos Antonio De Marchi
Investor Relations Officer
Marcos Antonio De Marchi
Officers Ricardo Craveiro Massari
Elder Antonio Martini
Djalma Roberto Zillo
Accountant CRC 1SP 244668/O-1