Professional Documents
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July/September 2003
September 30, 2003 KLBN4 (BOVESPA) / KLBAY (OTC) Shares outstanding Preferred share price Book value Free Float Daily traded volume 600,856 K R$ 3.05 R$ 2.13 77% R$ 2,542 K
The month of August also saw the signature of an agreement for the transfer of Klabins 81.7% stake in Bacell for an amount equivalent to US$ 91.2 million in reais. With the conclusion of the divestiture program, Klabin raised an amount equivalent to US$ 854.9 million in reais. A substantial portion of these proceeds was used to reduce the Company's gross debt from R$ 2.9 billion in December 2002 to R$ 1.2 billion in September 2003. The balance served to reinforce its cash and equivalents, which ended the quarter at R$ 544 million. A highlight in the third quarter was a decline in Klabin's Net Debt/EBITDA ratio, from 2.9x in December 2002 to 0.5x in September 2003.
Initial Considerations
The information presented herewith in connection with the Company's operations and finances consists of consolidated figures stated in local currency as per Brazilian Corporate Law, except where otherwise indicated. The 3Q03 includes three months of Bacell operations and one month of Klabin Kimberly and KCK Tissue operations.
Highlights
R$ Million Sales Volume (1,000 ton) Net Revenue Gross Profit Gross Margin EBIT Net Profit (Loss) EBITDA(*) EBITDA margin (%) Equity Net Debt Total Capitalization Net Debt / EBITDA (annualized) Net Debt / Total Capitalization Depreciation + Amortization Capex
( )
3Q03 365 690 301 44% 106 (155) 233 34% 1,957 609 2,566 0.5 x 24% 67 35
3Q02 489 772 346 45% 178 (386) 262 34% 681 3,118 3,859 4.2 x 81% 84 48
2Q03 421 812 369 45% 170 1,031 297 37% 2,179 2,077 4,352 1.6 x 48% 86 54
YTD03 1,236 2,371 1,103 47% 552 940 892 38% 1,957 609 2,566 0.5 x 24% 238 135
YTD02 1,373 1,915 815 43% 372 (609) 613 32% 681 3,118 3,859 4.2 x 81% 241 153
* Before businesses restructuring expenses: R$ 40.5 million in 2Q03 and R$ 61.0 million in 3Q03
Operating Result
Gross profit amounted to R$ 301 million, with a gross margin of 44%. The divestiture program generated non-recurrent expenses in the amount of R$ 61 million in 3Q03, booked on the General & Administrative Expenses account.
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Operating result before financial expense (EBIT) was R$ 106 million in 3Q03.
EBITDA
Operating cash generation (EBITDA) reached R$ 233 million in 3Q03, totaling R$ 892 million from January to September 2003. Below we present the Company's cash generation (EBITDA) by business segment over the period. The Packaging business includes packaging papers and cardboards, corrugated boxes and multiwall bags (Brazil).
R$ Million
EBITDA Margin
41
42 37 34
366
361
297
1Q02
2Q02
3Q02
EBITDA
4Q02
1Q03 2Q03
3Q03
EBITDA Margin
(*) Before businesses restructuring expenses: R$ 40.5 million in 2Q03 and R$ 61.0 million in 3Q03
( )
3Q03 *
( )
50 62 9 0 1 1 6 (19) 297
(*) Before businesses restructuring expenses: R$ 40.5 million in 2Q03 and R$ 61.0 million in 3Q03
Short Term Long Term GROSS DEBT Cash and Short Term Investments NET DEBT
Net Result
Non-recurring business restructuring related expenses leaded the Company to report a loss of R$ 155 million in 3Q03. Accumulated net profit until September readhed R$ 940 million.
Business Performance
* In this section, Sales volume and Net Revenues are consolidated 100%
Volume 3Q03
Dissolving Pulp 9% Tissue 4% Others 3% Bags/ Envelopes 8% Corrugated Boxes 25% Kraftliner 30%
Boards 21%
Boards 21%
Kraftliner 17%
(*) Net Revenue consolidated 100% Net revenue does include wood
Packaging Paper Sales volume reached 188 thousand tons in 3Q03, up 17% from 3Q02, while net revenue rose 33% to R$ 278 million. A highlight from January to September 2003 was the sale of 163 thousand tons of cardboard products to the domestic market, up 14% from the same period in 2002. As for exports, an important achievement was the expansion into new markets for cardboard products, with the shipping of 2,000 tons of LPB per month to China as of August and the export of 700 tons of carrier board to Europe per month. With regard to current exports, notable events include: the sales to Argentina, which exceeded the levels reported before the crisis in that country, the maintenance of carrier board shippings to the United States; and increased kraftliner exports, totaling 99 thousand tons in 3Q03, up 13% from 3Q02. The packaging paper and cardboard business showed a significant 20% productivity gain from 360 tons/man/year in 2001 to 429 tons/man/year in 2003. Operating efficiency
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is a priority for Klabin and an even more challenging target has been set for these industrial units. Corrugated Boxes Economic activity remains sluggish in Brazil. As per ABPO statistics, the country shipped 1,376 thousand tons of corrugated boxes from January to September 2003, i.e. 15% less than the 1,611 thousand tons shipped in 2002. Corrugated boxes sales amounted to 91 thousand tons in the third quarter, down 29% from 3Q02. Notwithstanding, net revenue rose 10% to R$ 186 million when compared to 3Q02. Klabin maintained the price levels practiced since the end of 2002 and it has made an effort to recover its market share. To do so, the Company has reviewed its product specifications as a mean to obtain lighter corrugated boxes grammages. Additionally, it offers a system of partnerships for the development of customized solutions. Multiwall Bags Sales volume totaled 29 thousand tons in 3Q03, down 8% from 3Q02. Decreased sales to the domestic market on account of a generalized economic slowdown in the country was partly offset by higher exports. Net revenue rose 19% to R$ 80 million in the third quarter. Wood Major customers for pinus and eucalyptus logs are basically exporters of solid wood products, plywood and sawn lumber. Prices in the United States, the most important market, are low despite the large volume shipped. Sales of pinus and eucalyptus logs to third parties totaled 584 thousand tons in 3Q03, generating R$ 50 million in net revenue. Sales by Market Segment Export volumes amounted to 169 thousand tons in 3Q03 and accounted for 46% of total sales over the period. From January to September 2003, the Company exported 583 thousand tons, thus generating R$ 935 million worth of revenue. Considering Klabins core businesses (packaging paper, cardboards, corrugated boxes, bags and envelopes), the exports totaled 132 thousand tons in 3Q03, up 23% from 3Q02. Export volume until September amounted to 350 thousand tons.
Sales Volume by Market Net Revenue by Market
47%
41%
36%
35%
53%
59%
64%
65%
YTD02 Exports
YTD02 Exports
(*) Net Revenue consolidated 100% Net revenue does include wood
Exports fetched the Company US$ 84 million in 3Q03 or US$ 297 million from January to September 2003.
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Capital Expenditures
Capital expenditures amounted to R$ 35 million in the third quarter, totaling R$ 135 million until September.
Retrospective
Based on a strategic plan prepared in 1998, Klabin initiated a repositioning program that consisted fundamentally in focusing on the packaging paper and wood segment, with a gradual withdrawal from other activities considered non core business. In 1998, two joint ventures were constituted, KCK Tissue in Argentina and Klabin Kimberly in Brazil for operations in the tissue paper products. The agreements allowed for a withdrawal from this business as of June 2003. In 2000, Klabin consolidated its leadership in the packaging paper business by acquiring Igaras for US$ 510 million. Also in 2000, the Company initiated a restructuring program intended to simplify its operating and corporate structure by: ! Increasing its stake in Klabin Riocell from 40% to 99% through a preferred share swap operation; ! Increasing its shareholding in Klabin Bacell from 61% to 82% through the debt assumption; ! Forming a joint venture with Norske Skog in the newsprint segment and scheduled to end in March 2003; ! Capital increase through a primary public offering of preferred shares in the amount of R$ 278.1 million, completed on January 4, 2001. In 2001, the Company accomplished a corporate restructuring process with the incorporation of Klabin S.A., thus concentrating all of its operations under a single publicly-held company. Despite a satisfactory operating performance in 2002, the Company was affected by unfavorable macroeconomic conditions that culminated in the closing of credit lines for exporters. In the second half of the year, Klabin began to restructure its debts with certain local banks. The result was an issue of debentures in the amount of R$ 1.04 billion at the end of 2002, which allowed the Company to meet its short-term debt obligations. In February 2003, Klabin announced the beginning of a divestiture program to be completed by August. The program was a success not only in terms of time frames but also with regard to the amount raised, i.e. US$ 854.9 million. The proceeds enabled the Company to pay all short-term debts in addition to strengthening its position in cash and equivalents.
Development Guidelines
Having carried through the divestiture program, Company Management is now prioritizing the development of a strategic plan for the next five years. The plan is intended to increase the production of packaging paper and cardboard products from the present 1.5 million tons/year to 2.0 million tons/year. The cardboard segment, higher value-added products, will have its production capacity doubled and accounting for more than 60% of the total increase in production. Eighty per cent (80%) of the additional output of 500 thousand tons/year will be earmarked for exports, thus expanding the post-divestiture share of export revenues from 29% to 40%. Technical, marketing and economic studies will be made throughout the first half of 2004. Capital Expenditure decision and beginning of implementation will occur up to the end of 2004. In the short term, capital expenditures will be used to debottlenecking of Company's industrial units as well as to increase the production of pulp and packaging paper in Paran and in Santa Catarina.
Capital Market
Klabin's preferred shares (KLBN4) were negotiated at R$ 3.05 at the end of the trading session on September 30, 2003. They appreciated 3.4% in 3Q03 while the Ibovespa [So Paulo Stock Exchange Index] rose 23.4%. From January to September 2003, KLBN4 rose 196%. Ibovespa increased 42% over the same period. In addition to integrating the Ibovespa portfolio, Klabin is also classified as a Level I corporation in terms of Corporate Governance by the So Paulo Stock Exchange.
KLBN4 vs.Ibovespa - 12 months Closing Price: 9/30/02 = 100
400 350
Klabin
300 250 200 150
Ibovespa
100 50
2 2 2 2 3 3 3 3 3 3 3 3 3 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 28 26 26 30 27 24 26 25 26 24 23 20 17 0/ 1/ 2/ 9/ 1/ 2/ 3/ 4/ 5/ 6/ 7/ 8/ 9/ 1 1 1
Altogether, 55 million preferred shares changed hands in 6,114 transactions in 3Q03, with an average daily traded volume of R$ 2.5 million.
Ronald Seckelmann, Finance & IR Director Luiz Marciano Candalaft, IR Manager Tel: (11) 3225-4045 Email: marciano@klabin.com.br
With a gross revenue of R$ 3.2 billion in 2002, Klabin stands as the largest integrated packaging paper manufacturer in Brazil, capable of selling 1.5 million tons of products per year, and as a leader in most of its business markets. For strategic purposes, the Company will focus on the following business lines: packaging paper and cardboard, corrugated boxes, multiwall bags, tissue paper, wood and pulp.
The statements contained herein with regard to the Company's business prospects, operating and financial result projections, and references to its potential growth are merely forecasts based on the expectations of Company Management in relation to its future performance. Such estimates are highly dependent on market behavior and on Brazilian economic, industry and international market conditions. They are therefore subject to change.
3Q02
772,022 (426,296) 345,726 (107,946) (45,845) (14,121) (167,912) 177,814 (147) (135,412) (421,759) (4,000) (561,171) (383,504) 1,787 (381,717) (3,435) (1,136) (386,288) 63,497 20,714
2Q03
811,989 (443,204) 368,785 (98,472) (88,474) (11,849) (198,795) 169,990 27 (187,913) 32,607 6,384 (148,922) 21,095 1,026,273 1,047,368 (14,993) (1,121) 1,031,254 67,234 19,208
690,457 (389,706) 300,751 (76,898) (104,596) (13,580) (195,074) 105,677 (486) (85,759) (24,169) 16,411 (93,517) 11,674 (127,957) (116,283) (38,145) (116) (154,544) 53,088 13,685
233,427 262,025 296,932 33.8 EBITDA * (*) Before businesses restructuring expenses: R$ 40.5 million in 2Q03 and R$ 61.0 million in 3Q03
YTD02
1,915,139 (1,099,881) 815,258 (272,697) (126,971) (43,377) (443,045) 372,213 758 (298,639) (688,552) 11,963 (975,228) (602,257) (2,148) (604,405) (2,956) (1,619) (608,980) 179,959 60,666 612,838
2,370,925 (1,267,728) 1,103,197 (289,351) (228,977) (33,046) (551,374) 551,823 (526) (445,177) (7,689) 34,638 (418,228) 133,069 899,584 1,032,653 (90,658) (2,077) 939,918 185,684 52,546 891,530
(*) Before businesses restructuring expenses: R$ 40.5 million in 2Q03 and R$ 61.0 million in 3Q03
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6/30/2003 1,052,755 630,728 0 151,651 44,500 24,036 54,337 81,504 65,999 779,267 522,819 0 256,448
12/31/2002 2,031,405 1,135,431 482,705 231,842 3,788 32,510 56,133 88,996 1,566,618 758,566 564,000 244,052 2,605 61,733 1,083,566 800,000 193,632 93,799
Total
3,789,180
4,745,927
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1Q02 Sales Volume (1,000 ton) Kraftliner Boards Corrugated Boxes Bags/Envelopes Others Sum Newsprint Printing and Writing Paper Tissue Market Pulp Dissolving Pulp Total Wood Volume (1,000 ton) Net Revenue (R$ million) Kraftliner Boards Corrugated Boxes Bags/Envelopes Others Wood Sum Newsprint Printing and Writing Paper Tissue Market Pulp Dissolving Pulp Total 4 67 140 43 14 29 297 28 10 83 2 0 419 6 47 121 23 5 202 23 6 28 3 0 261 497
2Q02
3Q02
4Q02
2002
1Q03
2Q03
3Q03
12
13
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Attachment 7
Financing Repayment Schedule 09/30/03
Gross Debt - Average Terms: 17 months Currency R$ Million TOTAL Local Foreign 4Q03 45 158 202 1Q04 41 67 108 2Q04 31 112 143 3Q04 30 146 177 4Q04 31 12 43 2005 114 123 237 2006 onwards 209 34 242 TOTAL 501 652 1,154
Local Currency - Average Terms: 24 months - Average Cost: 15.9 % per year R$ Million 4Q03 1Q04 2Q04 3Q04 4Q04 2005 2006 onwards TOTAL BNDES Others TOTAL
10 10 0 0 2 2 2 24
Foreign Currency - Average Terms: 12 months - Average Cost: 5.3 % per year Trade US$ Million Eurobonds Others TOTAL Finance 4Q03 20 0 34 54 1Q04 22 0 1 23 2Q04 36 0 2 38 3Q04 27 23 1 50 4Q04 2 0 2 4 2005 39 0 3 42 2006 onwards 0 0 12 12 TOTAL 147 23 53 223
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Attachment 8
Consolidated Cash Flow Statement
period ended 09/30/03
Operating Activities Net profit for the period Expenses (revenues) not affecting cash and equivalents: Depreciation, amortization and depletion Amortization of non operating goodwill Amortization of goodwill Gain (Loss) on sale of property, plant and equipment Impaiment for losses on fixed assets Gain (Loss) of Capital Deferred income tax and social contribution Income tax and social contribution charges Interest and exchange rate variations on loans and financings Equity in the earning of subsidiaries Exchange rate variations on investments abroad Minority Interest Redution (increase) in Assets Cash and cash equivalents Guarantee Deposits Accounts receivable Inventories Taxes recoverable Prepaid Expenses Judicial Deposits Others accounts receivable Increase (reduction) in Liabilities Suppliers Taxes payable Provision for income tax and social contribution Salaries, vacation pay and payroll charges Provision for contingencies Deferred income Others accounts payable Deconsolidation of subsidiaries companies Net cash provided from operating activities Investing activities Acquisitions of property, plant and equipment Increase in deferred assets Proceeds from disposals of property, plant and equipment Capital Gain Capital Integralization Capital Reduction Other investments, net Deconsolidation of subsidiaries companies Net cash used on investing activities Financing activities: New funding Loan amortization Debentures amortization Interest paid Net cash used in financing activities Net increase in cash and equivalents Cash and cash equivalent at beggining of period Cash and cash equivalent at end of period Thousand of Reais 939,918 233,798 54,140 4,432 (137,196) (927) (928,695) 32,345 55,325 91,531 526 48,143 2,077
44,395 (121,145) 46,436 (79,221) (54,089) 27,411 (12,564) (268,873) (137,338) 321 (3,948) 10,077 12,489 (2,365) 31,960 212,490 101,453
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