CTT-Correios de Portugal

Earnings Release • Oct 31, 2016

CTT – Correios de Portugal, S.A.

9M16 Results Presentation

31 October 2016

DISCLAIMER

This document has been prepared by CTT – Correios de Portugal, S.A. (the "Company" or "CTT") exclusively for use during the presentation of the results of the third quarter and the first nine months of 2016. As a consequence thereof, this document may not be disclosed or published, nor used by any other person or entity, for any other reason or purpose without the express and prior written consent of CTT. This document (i) may contain summarised information and be subject to amendments and supplements, and (ii) the information contained herein has not been verified, reviewed nor audited by any of the Company's advisors or auditors. Except as required by applicable law, CTT does not undertake any obligation to publicly update or revise any of the information contained in this document. Consequently, the Company does not assume liability for this document if it is used for a purpose other than the above. No express or implied representation, warranty or undertaking is made as to, and no reliance shall be placed on, the accuracy, completeness or correctness of the information or the opinions or statements expressed herein. Neither the Company nor its subsidiaries, affiliates, directors, employees or advisors assume liability of any kind, whether for negligence or any other reason, for any damage or loss arising from any use of this document or its contents. Neither this document nor any part of it constitutes a contract, nor may it be used for incorporation into or construction of any contract or agreement.

This document has an informative nature and does not constitute, nor must it be interpreted as, an offer to sell, issue, exchange or buy any financial instruments (namely any securities issued by CTT or by any of its subsidiaries or affiliates), nor a solicitation of any kind by CTT, its subsidiaries or affiliates. Distribution of this document in certain jurisdictions may be prohibited, and recipients into whose possession this document comes shall be solely responsible for informing themselves about, and observing any such restrictions. Moreover, the recipients of this document are invited and advised to consult the public information disclosed by CTT on its website (www.ctt.pt) as well as on the Portuguese Securities Exchange Commission's website (www.cmvm.pt). In particular, the contents of this presentation shall be read and understood in light of the financial information disclosed by CTT, through such means, which prevail in regard to any data presented in this document. By attending the meeting where this presentation is made and reading this document, you agree to be bound by the foregoing restrictions.

FORWARD-LOOKING STATEMENTS

This presentation contains forward-looking statements. All the statements herein which are not historical facts, including, but not limited to, statements expressing our current opinion or, as applicable, those of our directors regarding the financial performance, the business strategy, the management plans and objectives concerning future operations and investments are forward-looking statements. Statements that include the words "expects", "estimates", "foresees", "predicts", "intends", "plans", "believes", "anticipates", "will", "targets", "may", "would", "could", "continues" and similar statements of a future or forward-looking nature identify forward-looking statements.

All forward-looking statements included herein involve known and unknown risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results, performance or achievements to differ materially from those indicated in these statements. Any forward-looking statements in this document reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the results of our operations, growth strategy and liquidity, and the wider environment (specifically, market developments, investment opportunities and regulatory conditions).

Although CTT believes that the assumptions beyond such forward-looking statements are reasonable when made, any third parties are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of CTT, what could cause the models, objectives, plans, estimates and/or projections to be materially reviewed and/or actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Forward-looking statements (in particular, the objectives, estimates and projections as well as the corresponding assumptions) do neither represent a commitment regarding the models and plans to be implemented, nor are they guarantees of future performance, nor have they been reviewed by the auditors of CTT. You are cautioned not to place undue reliance on the forward-looking statements herein.

All forward-looking statements included herein speak only as at the date of this presentation. Except as required by applicable law, CTT does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

01. Key highlights

• 1. Other financials
• 1. Strategy update
• 1. Business units performance

3

Financial and operational performance

€ million, except when otherwise indicated

	Including Banco CTT			Excluding Banco CTT 4
Financial indicators:	9M15	9M16	Δ%	9M15	9M16	Δ%
Recurring revenues 1	538.1	517.1	-3.9%	538.1	516.6	-4.0%
Recurring operating costs 2	433.3	426.1	-1.6%	430.5	411.5	-4.4%
Recurring EBITDA 1, 2	104.8	91.0	-13.2%	107.6	105.1	-2.3%
Recurring net profit 3	59.8	48.7	-18.6%	61.8	59.4	-3.9%
Reported net profit	50.6	46.0	-9.1%	56.3 5	62.5 5	11.1%

	Addressed mail (million items)	Unaddressed mail (million items)	Parcels 6 (million items)	FS savings flows 7 (€ billion)	Banco CTT current accounts (thousand)
9M16 volumes	592.2	361.4	19.3	3.6	45.1
9M16 vs. 9M15	-3.1%	+4.8%	-7.2%	-17.9%	N/A

¹ Excluding non-recurring revenues of €1.7m recognised in 9M16 as a result of the early termination of a vacant building lease contract.

² Excluding amortisation, depreciation, provisions, impairment losses and non-recurring costs affecting EBITDA of €7.4m in 9M15 (€4.8m related to Banco CTT) and €9.8m in 9M16 (€5.4m related to Banco CTT).

³ Considers the theoretical (nominal) tax rate of CTT.

⁴ Excluding Banco CTT revenues and costs booked in Banco CTT, FS and Mail & other business units.

⁵ Considers the effective tax rate for the period of CTT S.A. and Banco CTT.

⁶Including Portugal (10.5 million items; -2.1%), Spain (8.7 million items; -12.7%), and Mozambique (0.1 million items; 0.0%).

7 Including savings & insurance products placements and redemptions. 9M16 placements amount to €2.9bn. €2.2bn were placed in a single month in Jan-15.

KEY HIGHLIGHTS: REVENUES EVOLUTION INFLUENCED BY MIX EFFECT IN MAIL, RESTRUCTURING IN SPAIN & STILL SKEWED (DUE TO A STRONG JAN-15) COMP IN FS

• FS recovers strongly in 3Q16 as savings & insurance placements maintain FY15 pace, although 9M16 revenues comparison is still affected by the extraordinary effect of the placement of €2.2bn of public debt certificates in Jan-15
• E&P affected primarily by the acceleration of the restructuring process in Spain, resulting in volumes (-12.7%) and revenues (-€5.2m) decline in the region
• Mail & other revenues decline mainly due to negative mix effect (drop in registered mail) and lower FS sales in the Retail Network

RECURRING OPERATING COSTS (EXCLUDING BANCO CTT)

• Staff costs decline primarily due to the implemented variable remuneration policy (€6.2m impact) and the full impact of the revised Company Agreement, decline in Tourline staff costs (€2.8m), the reduction in the telephone subscription fee benefit (€1.8m), partially offset by Banco CTT recurring staff costs increase (€5.9m) and by the extension of the coverage of work accidents insurance to the "Caixa Geral de Aposentações" workers (€0.9m)
• Outsourcing savings from networks integration (€2.4m) & other smaller efficiency measures fully absorb Banco CTT recurring ES&S costs (€7.7m)
• ¹ Excluding amortisation, depreciation, provisions, impairment losses and non-recurring costs affecting EBITDA of €7.4m in 9M15 (€4.8m related to Banco CTT) and €9.8m in 9M16 (€5.4m related to Banco CTT). ²Booked in FS business unit (€1.1m Staff costs and €1.7m ES&S costs).
• ³ Excluding Banco CTT recurring op. costs: €2.8m in 9M15 (booked in FS business unit) and €14.6m in 9M16 (€14.9m booked in Banco CTT business unit, -€0.3m in Mail business unit).
• ⁴ Booked in Banco CTT business unit (€14.9m, of which €7.0m Staff costs and €7.9m ES&S and other costs) and in Mail business unit (-€0.3m of which -€0.3m Staff costs and €0.1m ES&S and other costs).

KEY HIGHLIGHTS: DOUBLE-DIGIT GROWTH IN 3Q16 (RECURRING EBITDA, EXCLUDING

BANCO CTT) SUPPORTS A SMALL DECLINE IN THE 9M16 RESULTS

Recurring EBITDA ³ breakdown

Recurring EBITDA excluding Banco CTT increases 11.9% in 3Q16, as a result of a strong performance in Financial Services (the skewed comparison effect with 2015 in the savings & insurance product line fading away as the year progresses), driving also margin increase

¹Including -€0.3m Banco CTT recurring operating costs booked in Mail business unit.

² Excluding -€14.6m Banco CTT business unit recurring EBITDA.

³ Excluding non-recurring revenues of €1.7m in 9M16 and non-recurring operating costs affecting EBITDA of €7.4m in 9M15 (€4.8m related to Banco CTT) and €9.8m in 9M16 (€5.4m related to Banco CTT).

⁴ Excluding Banco CTT recurring revenues: €0.5m in 9M16 (€0.3m booked in Banco CTT business unit and €0.2m in Central Structure).

⁵ Excluding Banco CTT recurring op. costs: €2.8m in 9M15 (booked in FS business unit) and €14.6m in 9M16 (€14.9m booked in Banco CTT business unit and -€0.3m in Mail business unit).

⁶ Booked in Banco CTT business unit (-€14.6m) and in Mail & other (€0.5m).

Revenues & volumes	 Addressed mail volumes decline expected to be closer to the -3% bound of the initially forecasted range [-3% to - 5%], but continued negative mix effect (registered mail volumes decline) makes the flat revenues guidance difficult to achieve  Revenues generation initiatives in FS (e.g. payments) and E&P (e.g. modular offer) underway in Portugal and Spain, but with limited impact in 2016  Banco CTT focused on client acquisitions in 2016 in order to begin the monetisation of the client base through an expansion of its product offer, namely launch of mortgage loans and consumer credit
Operating costs & EBITDA	 Recurring operating costs decline as a result of efficiency measures, which has enabled CTT to partially absorb Banco CTT costs and the decline in revenues  FY16 recurring EBITDA guidance remains challenging, but resilient 3Q16 performance provides a strong base for 2H16
Earnings & dividend	 Dividend policy reaffirmed based on strong liquidity position (111%) and cash flow generation prospects  Despite a challenging 2016, the Board is confident that it will be able to propose a minimum dividend of €0.48 per share for the financial year, payable in 2017

01. Key highlights

1. Other financials

2. Strategy update

3. Business units performance

OTHER FINANCIALS: BALANCE SHEET OPTIMISATION MEASURES AND BANCO CTT

LAUNCH IMPACT THE CASH FLOW IN THE PERIOD

Cash flow

9M16 ∆ % 9M16 ∆% From operating activities 212.4 >> 171.7 >> Cash flow excl. Banco CTT 49.1 -10.7 8.4 -88.8 Banco CTT cash flow 163.3 >> 163.3 >> From investing activities -153.5 << -153.5 << Capex payments ² -25.1 -9.4 -25.1 -9.4 of which Banco CTT -9.1 -15.1 -9.1 -15.1 Banco CTT financial assets -134.3 N/A -134.3 N/A Operating free cash flow 58.9 86.4 18.3 -64.6 From financing activities -71.8 -8.7 -71.8 -8.7 Dividends -70.3 -0.7 -70.3 -0.7 Other 2.1 N/A 2.1 N/A Net change in cash -10.9 68.5 -51.5 << Cash at end of period 592.8 -5.9 227.5 -13.9 Reported Adjusted ¹ € million, % change vs. 9M15 Adjusted cash at the end of the period € million 9M16 Deprec. - Capex payment 5.2 9M16 Dividend & empl. profit sharing (paid expensed) 77.2 31/12/15 Adjusted cash / (debt) 279.0 15.0 9M16 Non-cash revenues (Altice, VAT & onerous contracts) 8.2 9M16 Net profit 46.0 Working capital (increase) Vacant lease term. paymt. & deferred profit 16.3 181.0 30/9/16 Adjusted cash / (debt) w/o Banco CTT 46.5 Healthcare payments to retired staff & other Banco CTT deposits - fin. assets ³ 227.5 30/9/16 Adjusted cash / (debt) 22.3

¹Cash flow from operating activities excluding changes in net Financial Services payables of -€19.9m (9M15) and +€40.6m (9M16), respectively. Cash at the end of the period excluding net Financial Services payables of €365.7m (Sep-15) and €365.3m (Sep-16).

² Capex payments presented in the table; Capex expense was €19.1m in 9M16 (€15.5m in 9M15).

³ Cash from Banco CTT can only be used for operations in the scope of its activity.

The procedures are being put in place for the company to be able to take a decision regarding the transfer of part of the healthcare responsibilities to a fund before the end of 2016

1 Including Financial Services receivables of €6.4m and €9.6m as at Dec-15 and Sep-16, respectively, and €73.1m in Banco CTT current financial assets (Sep-16).

2 Including €63.1m in Banco CTT non-current financial assets (Sep-16).

³ Excluding Banco CTT.

Consolidated results	Including Banco CTT			Excluding Banco CTT 1
€ million	Reported		Recurring 2		Reported		Recurring 2
	9M15	9M16	9M15	9M16	9M15	9M16	9M15	9M16
Revenues	538.1	518.8	538.1	517.1	538.1	518.4	538.1	516.6
Operating costs	440.7	435.9	433.3	426.1	433.1	416.0	430.5	411.5
EBITDA	97.4	82.9	104.8	91.0	105.0	102.4	107.6	105.1
EBITDA margin	18.1%	16.0%	19.5%	17.6%	19.5%	19.8%	20.0%	20.3%
Depreciation, amortisation, provisions and impairments	17.7	12.5	17.3	19.5	17.6	11.1	17.2	18.4
EBIT	79.8	70.4	87.5	71.4	87.4	91.3	90.4	86.7
Financial income, net	-3.9	-4.2	-3.9	-4.2	-4.0	-4.2	-4.0	-4.2
Gains / (losses) in associated companies	0.03	0.2	0.03	0.2	0.03	0.2	0.03	0.2
Earnings before taxes (EBT)	75.8	66.4	83.6	67.5	83.5	87.3	86.4	82.7
Income tax for the period	25.2	20.6	23.8	19.0	27.2	25.0	24.6	23.5
Non-controlling interests	0.01	-0.2	0.01	-0.2	0.01	-0.2	0.01	-0.2
Net profit attributable to equity holders	50.6	46.0	59.8	48.7	56.3 3	62.5 3	61.8	59.4

¹ Excluding revenues / costs of Banco CTT business unit and Banco CTT project reported in CTT S.A..

² Recurring net profit excludes non-recurring revenues and costs and considers the theoretical (nominal) tax rate of CTT.

³ Considers the effective tax rate for the period of CTT S.A. and Banco CTT.

€ million

	9M15	9M16	∆
Reported EBITDA	97.4	82.9	-14.6
Non-recurring items affecting EBITDA	7.4	8.1	+0.7
Revenues	0.0	-1.7	-1.7
Staff costs	1.2	3.2	+1.9
ES&S & other op. costs	6.1	6.7	+0.5
Recurring EBITDA	104.8	91.0	-13.8

Reported EBIT	79.8	70.4	-9.4
Non-recurring costs affecting only EBIT	0.4	-7.0	-7.4
Provisions (reinforcements / reductions)	-0.1	-7.6	-7.5
Impairments and depreciations / amortisations (losses / reductions)	0.5	0.6	+0.1
Non-recurring items affecting EBITDA & EBIT	7.7	1.1	-6.7
Recurring EBIT	87.5	71.4	-16.0

Early termination of a vacant building lease contract

Compensations resulting from the 2015 Company Agreement and curtailments

Studies and strategic projects, mainly related to the launch of Banco CTT

Early termination of a vacant building lease contract (€2.9m) and reversal of provisions for two other buildings

• 1. Key highlights 02. Other financials
• 1. Strategy update
• 1. Business units performance

14

SUSTAINABILITY OF REVENUES & EBITDA GROWTH

E&P Portugal market split by type

2015; % of total market (including domestic & cross-border)

Portuguese e-commerce market still strongly dependent of international offer, putting a challenge to domestic players to also address cross-border flows with a competitive offer – quite different from other European countries where the domestic market is relevant

Initiatives to increase the domestic market and share in the growing B2C market: expected to deliver return to revenues growth in 2017

Turnaround of Tourline (inorganic option also being pursued): – break-even at EBITDA level expected by 4Q17 along an improving path

STRATEGY UPDATE: OPERATIONAL EFFICIENCY EVER MORE IMPORTANT FOR

THE PRESERVATION OF THE PROFITABILITY IN MAIL

2

TRACK RECORD OF OPERATIONAL EFFICIENCY…		…FURTHER ENHANCING THE FOCUS ON THIS LEVER IN THE FUTURE
Executed initiatives; 2011-2016 (non-exhaustive)		Main objectives	Timeline	Impact p.a.
Postal delivery offices optimisation	New production & logistics	• Deployment of new core operational network		Up to €1.0m EBITDA
Introduction of segmented delivery	network architecture	architecture, including site location, route and process optimisation	2017
Consolidation of sorting processes at main operational sites (Lisbon and Oporto)		• Migration of ~50% of on-foot
Re-location of Printing & Finishing operation to the Lisbon Mail Sorting Centre	On-foot urban routes motorisation	urban routes to vehicle-based routes to increase quality of service and reduce time spent	FY18 phased deployment	Up to €0.5m EBITDA
Insourcing of mail digitalisation operations in Coimbra / Taveiro and Lisbon		in motion
Large packages and Restmail automation	Optimisation of customs	• Insourcing of customs broker functions. Changes in customs fees, including the creation of a priority fee for items picked	1Q17	Up to €1.0m additional
Delivery of >70% of Express & Parcels volumes by the Mail distribution network	activities	up by clients at the customs reception counter		revenues
New optimisation initiatives planned for the next 24 months with estimated 1%-2% positive impact on Mail EBITDA, mitigating the impact of the structural decline in addressed mail volumes				Up to €2.5m of additional EBITDA p.a.

3

CTT INTO A PROFITABLE OPERATION

	Launch achievements	Next steps
Network & distribution model	• Banco CTT opened in 137 CTT post offices (end of Oct-16) and a head office (with widespread geographical presence), benefiting from the high capillarity of the CTT Retail Network • Investment / branch refurbishment costs aligned with business plan	• Presence in c. 200 post offices by the end of 2016 • The high market acceptance and digital profile of clients provides support for Banco CTT to open in up to 100 additional post offices with dedicated space in the next years, with the possibility of pursuing a lighter branch model in the future.
Client profile and digital channels	• High market acceptance - >45K accounts opened by the end of Sep-16 (above plan) • Younger than expected customer base with strong digital engagement • Digital (web and mobile) presence	• Increase market acceptance, continue to attract clients based on the capillarity, brand, wide product offer (e.g. launch of the mortgage offer in 1Q17) • The main investments will continue to be in IT systems and digital channels (expected to be c. 50% lower than the original plan)
Product strategy	• Simple deposits / customer acquisition offer, aligned with the bank's principles of simplicity and value for money available since March 2016. • Mortgages operational and risk frameworks in place • Consumer loans and credit cards (partner Cetelem) available since Sep-16 • Healthcare insurance – contract signed with partner Fidelidade	• Deposit prices aligned with the market • Go-live of the mortgage offer in 1Q17 • Launch life and property insurance (third-party offer) to support the mortgage business • Pursue alternative applications for deposits (potential acquisition of asset portfolios) • Increase transactionality and cross-selling

01. Key highlights

1. Other financials

2. Strategy update

04. Business units performance

BUSINESS UNITS PERFORMANCE: USE OF THE RETAIL & DISTRIBUTION NETWORKS

BY OTHER BUSINESS UNITS INCREASES THE PROFITABILITY OF MAIL

¹Including +€2.5m from the Altice MoU terminating in Dec-16, improvements made in the VAT deduction methodology procedures (+€2.4m), and decline in international mail exchange rate differences revenues (-€1.2m).

² Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs. Including Banco CTT recurring operating costs of -€0.3m booked in Mail business unit in 9M16.

³ Million items.

⁴ USO, excluding international inbound mail.

BUSINESS UNITS PERFORMANCE: E&P REVENUES CONTINUE TO BE AFFECTED BY THE PRIOR CANCELLATION OF LARGE CONTRACTS; NEW INITIATIVES UNDERWAY

1 Including internal and other revenues, and internal transactions with Spain and Mozambique. Including +€2.5m from the MoU with Altice terminating in Dec-16.

² Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs.

³ Million items.

BUSINESS UNITS PERFORMANCE: SAVINGS & INSURANCE REVENUES RECOVER IN 3Q16, ALTHOUGH STILL BELOW 2015 DUE TO JAN-15 COMPARISON EFFECT

1 Including +€2.5m from the MoU with Altice terminating in Dec-16 and +€1.1m from the improvements made in the VAT deduction methodology procedures.

² Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs. Including Banco CTT recurring operating costs of €2.8m booked in FS business unit in 9M15.

³Amount of savings & insurance products placements (€ billion).

⁴ Million operations.

⁵ € million, new credit production, including consumer credit & credit cards.

BUSINESS UNITS PERFORMANCE: BANCO CTT PROJECT SPEND WITHIN TARGET;

CUSTOMER ACCOUNTS DOUBLE AND DEPOSITS TRIPLE IN THE QUARTER

Banco CTT indicators as at 30 September 2016.

¹ Excluding depreciation / amortisation, impairments and provisions.

²Including cash and deposits at Central Banks (€11.5m) and deposits in other credit institutions (€55.0m).

³Including investments held to maturity (€64.1m), applications in other credit institutions (€46.8m) and financial assets available for sale (€21.4m).

CTT Investor Relations

Upcoming Events:

• 1 Nov. Edinburgh - Roadshow with BPI
• 2 Nov. London Roadshow with JPMorgan
• 3 Nov. Frankfurt Roadshow with Goldman Sachs
• 4 Nov. Madrid Roadshow with Santander
• 9 Nov. Lisbon Roadshow with Caixa BI
• 6 Dec. Surrey Berenberg European Corporate Conference

24 Contacts: Phone: +351 210 471 857 E-mail: investors@ctt.pt