Altri SGPS — Earnings Release 2018

Nov 30, 2018

ALTRI, SGPS, S.A. Public Company

Head Office: Rua do General Norton de Matos, 68, r/c – Oporto Fiscal number 507 172 086 Share Capital: 25,641,459 Euro

Financial Information – 3 rd Quarter of 2018 (Unaudited)

This document is a translation of a document originally issued in Portuguese, prepared using accounting policies consistent with the International Financial Reporting Standards and in accordance with the International Accounting Standard 34 – Interim Financial Reporting, some of which may not conform or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.

The financial information was prepared in accordance with the International Financial Reporting Standards (IFRS).

Income Statement – 3Q 2018

thousand Euro	3Q 2018	3Q 2017	3Q18/3Q17 Var%	2Q 2018	3Q18/2Q18 Var%
Total Revenues	205,193	165,539	23.9%	205,040	0.1%
Cost of sales External supplies and services	61,084 46,725	62,233 39,832	-1.8% 17.3%	74,657 47,869	-18.2% -2.4%
Payroll expenses	8,976	8,649	3.8%	8,597	4.4%
Other expenses	5,011	1,089	360.2%	2,390	109.6%
Provisions and impairment losses	1,385	0	-	-1,199
Total Expenses (a)	123,180	111,802	10.2%	132,314	-6.9%
EBITDA (b)	82,013	53,737	52.6%	72,726	12.8%
margin	40.0%	32.5%	+7.5 pp	35.5%	+4.5 pp
Amortisation and depreciation	16,096	13,729	17.2%	11,721	37.3%
EBIT (c)	65,916	40,008	64.8%	61,005	8.1%
margin	32.1%	24.2%	+8.0 pp	29.8%	+2.4 pp
Gains/Losses in associated companies Financial costs Financial gains	1,315 -5,440 1,390	882 -7,300 1,331	49.0% -25.5% 4.4%	449 -7,354 3,127	192.7% -26.0% -55.6%
Financial Results	-2,736	-5,087	-46.2%	-3,777	-27.6%
Profit Before Income Tax	63,181	34,922	80.9%	57,228	10.4%
Income Tax	-16,579	-8,489	95.3%	-16,064	3.2%
Profit for the period attributable to parent company's shareholders	46,602	26,433	76.3%	41,165	13.2%

(a) Operating costs excluding amortisation, financial expenses and income tax

(b) EBITDA = earnings before interest, taxes, depreciation and amortisation (c) EBIT = earnings before interest and taxes

The third quarter was characterized by the stability of the average hardwood pulp sales price (BHKP) in USD, while in EUR there was a slight increase (3.5%). Regarding industrial operations, during the quarter under analysis, Altri Group achieved the quarterly record in pulp production.

3 rd Quarter 2018: production record

During the third quarter, operational results of Altri Group achieved a new record, with EBITDA amounting to 82 million Euro, which corresponds to a 13% increase over the previous quarter and a 53% increase when compared with the same period of the previous year. The margin EBITDA amounted to 40%.

In terms of top line, total revenues achieved 205 million Euro, an increase of approximately 24% over the value recorded in the same period of 2017, in line with the revenues recorded on the second quarter of the current year.

During the period under analysis the Group produced 286.8 thousand tons of pulp, of which 27.6 thousand tons refer to dissolving pulp.

Pulp production quarterly evolution in 2018

In terms of sales, between July and September of 2018, there were sold 269.2 thousand tons of pulp (+6% over the same period of 2017 and -4% when compared to the second quarter of this year), of which approximately 24.5 thousand tons were dissolving pulp (-10% comparatively with the same quarter of the previous year). Sales evolution reflects, essentially, the need to reload stocks, aiming to maintain the quality of service provided to customers.

In cumulative terms, during the first nine months of 2018, Altri Group's mills produced around 814.7 thousand tons of pulp and total sales amounted to 797.1 thousand tons.

Exports amounted to 451 million Euro until September 2018

Regarding exports, during the third quarter of 2018, Altri exported around 241.2 thousand tons of pulp, which increased the total exports of pulp between January and September 2018 to 705.4 thousand tons. In monetary terms, the quarterly exports amounted to 160.7 million Euro, which totalizes approximately 451 million Euro of exports during the first nine months of 2018.

The total sales of pulp in the 3rd quarter amounted to 178.7 million Euro, which corresponds to a 28% increase over the same period of the previous year and is similar to the previous quarter.

Operating costs recorded a 10% increase over the same quarter of 2017 and a decrease of 7% over the previous quarter motivated, essentially, by the reduction of the Cost of sales caption. During the third quarter of 2018 the price of electric power kept increasing. Hence, total costs, excluding amortisation, financial expenses and income taxes, in the third quarter of 2018, amounted to 123 million Euro.

EBITDA for the third quarter of 2018 achieved approximately 82 million Euro, an increase of 53% over the EBITDA recorded in the same period of 2017. Regarding the second quarter of 2018, EBITDA recorded an increase of 13%.

The financial result was a net expense of 2.7 million Euro, which corresponds to a 46% improvement over the net financial expense recorded in the third quarter of 2017.

Altri's consolidated net profit reached approximately 46 million Euro, which corresponds to a 76% increase over the same period of 2017 and an increase of 13% over the second quarter of the year.

9M 2018: EBITDA of 218 million Euro and profit of 120 million Euro

thousand Euro	9M 2018	9M 2017	9M18/9M17 Var%
Total Revenues	583,618	490,792	18.9%
Cost of sales	194,435	200,195	-2.9%
External supplies and services	135,580	121,663	11.4%
Payroll expenses	25,888	24,829	4.3%
Other expenses	9,512	2,865	232.0%
Provisions and impairment losses	186	0	-
Total Expenses (a)	365,601	349,552	4.6%
EBITDA (b)	218,017	141,240	54.4%
margin	37.4%	28.8%	+8.6 pp
Amortisation and depreciation	41,680	41,562	0.3%
EBIT (c)	176,337	99,678	76.9%
margin	30.2%	20.3%	+9.9 pp
Gains/Losses in associated companies	2,487	2,303	8.0%
Financial costs	-17,660	-19,494	-9.4%
Financial gains	6,751	3,029	122.8%
Financial Results	-8,422	-14,162	-40.5%
Profit Before Income Tax	167,915	85,516	96.4%
Income Tax	-47,503	-17,532	171.0%
Profit for the period attributable to parent company's shareholders	120,412	67,985	77.1%

(a) Operating costs excluding amortisation, financial expenses and income tax

(b) EBITDA = earnings before interest, taxes, depreciation and amortisation

(c) EBIT = earnings before interest and taxes

During the first nine months of 2018, total revenues amounted to 583.6 million Euro, a 19% increase over the same period of 2017. EBITDA amounted to 218 million Euro (+54%), while EBITDA margin was 37.4%. The net profit of the period recorded a 77% increase over the same period of the previous year, for achieving 120.4 million Euro.

Net debt of 355 million Euro

Altri's nominal debt net of cash and cash equivalents as of September 30, 2018 amounted to 355.1 million Euro, which corresponds to a decrease of 20.5 million Euro over the net debt record in the previous quarter.

The total net investment (CAPEX) incurred until September 2018 by Altri's mills amounted to 55 million Euro. It should be highlighted that during the third quarter Altri granted 18 million Euro of shareholders' loans to Bioeléctrica in order to finance the ongoing investment in the new biomass plant at Figueira da Foz (located at Celbi's mill).

Altri's remunerated gross debt maturity profile, as of September 30, 2018, is as follows:

Regarding risk management, Altri uses exchange rate derivatives to hedge future cash flows. Hence, Altri has contracted European-style call and put options (exchange rate collars) of USD 10 million per month, for the full 2018 financial year. Moreover, as of September 30, 2018, Altri had contracted Asian-style exchange collars, in the amount of USD 12 million per month, covering all 2019 financial year.

Key balance sheet indicators

thousand Euro	30-Sep-18	31-Dec-17	Var%
Biological assets	94,907.5	94,848.3	0%
Tangible assets	395,969.8	396,515.7	0%
Goodw ill	265,531.4	265,531.4	0%
Investments in associated companies and joint ventures	46,487.7	17,456.9	166%
Others	58,464.3	52,609.1	11%
Total non current assets	861,360.8	826,961.4	4%
Inventories	69,750.8	50,728.0	37%
Customers	131,081.7	113,284.7	16%
Cash and cash equivalents	344,760.1	193,599.7	78%
Others	11,997.8	25,514.6	-53%
Total current assets	557,590.5	383,127.1	46%
Total assets	1,418,951.2	1,210,088.5	17%
Shareholders' equity and non controlling interests	445,471.1	394,567.1	13%
Bank loans	33,500.0	39,500.0	-15%
Other loans	517,488.2	442,483.9	17%
Reimbursable incentives	10,526.8	14,565.8	-28%
Others	50,688.9	45,427.5	12%
Total non current liabilities	612,203.9	541,977.1	13%
Bank loans	8,853.5	6,216.6	42%
Other current loans	140,509.7	94,830.7	48%
Reimbursable incentives	4,838.8	3,121.5	55%
Suppliers	109,519.9	95,373.3	15%
Others	97,554.3	74,002.2	32%
Total current liabilities	361,276.2	273,544.3	32%

Pulp Market

According to data from Pulp and Paper Products Council (PPPC World Chemical Market Pulp Global 100 Report – August 2018), during the first 8 months of 2018, total demand for hardwood pulp increased 4% comparing to the previous quarter, which corresponds to an additional consumption of 0.9 million tons, reaching around 22.7 million tons.

Geographically, the consumption of hardwood pulp in Europe increased by 5.3%, while in China there was a 9.1% increase.

In terms of BHKP, third quarter of 2018 was characterized by a slight increase of USD pulp price over the previous quarter (+0.5%) – to point out that the price in USD is stable at 1,050 USD/ton since May 29, 2018. In Euro, the average price recorded in the third quarter amounted to 903 EUR/ton (vs. 872 EUR/ton in the previous quarter).

Evolution of BHKP pulp price in Europe since 2003 until October 2018 Source: FOEX

Outlook

In operational terms, after the start-up in the end of the second quarter of the turbogenerator for electric power production in Celtejo's mill, the mill entered the ramp up stage in terms of pulp and electric power production. It is expected to present improvements during the fourth quarter of 2018.

On the other hand, during the third quarter of 2018, Altri announced the acquisition of the total share capital of Bioeléctrica, a company that produces electricity through biomass. During the fourth quarter of 2018 the transaction should be completed, thus enabling the full consolidation of this operation by Altri Group.

Regarding the pulp market, no significant changes are expected for the fourth quarter.

Altri – Business Profile

Altri is a reference European eucalyptus pulp producer. In addition to pulp production, the Company is also present in the renewable power production business from forest base sources, namely industrial cogeneration through black liquor and biomass. The forestry strategy is based on the full use of all the components provided by the forest: pulp, black liquor and forest wastes.

Currently, Altri has under its intervention over 81 thousand hectares of forest in Portugal entirely certified by Forest Stewardship Council® (FSC®)¹ and by Programme for the Endorsement of Forest Certification (PEFC), two of the most worldwide acknowledged certification entities.

Currently, Altri has three pulp mills in Portugal with an installed capacity that in 2017 amounted to more than 1 million tons/year of eucalyptus pulp.

The Altri Group, through its subsidiaries Celbi and Celtejo, engaged two investment contracts with the Portuguese State, represented by AICEP, at the beginning of 2017, considered to be of strategic interest to the country for the innovation introduced by the creation and qualification of jobs and the development of the regions where the industrial units are located, with financial and fiscal incentives being granted to those projects.

The investment project contracted for Celbi is completed. At Celtejo, the amount of investment contracted was 85 million Euro and aims to improve the innovation and economic and environmental sustainability of the industrial unit with interventions at the level of the recovery boiler, steam reduction installation and industrial waste water treatment facilities.

Oporto, October 31, 2018

The Board of Directors

¹ FSC-C004615

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF 30 SEPTEMBER 2018 AND 31 DECEMBER 2017

(Translation of financial statements originally issued in Portuguese - Note 21) (Amounts expressed in Euro)

ASSETS	Notes	30.09.2018	31.12.2017
NON CURRENT ASSETS:
Biological assets		94,907,528	94,848,275
Tangible fixed assets		395,969,827	396,515,699
Investments property		4,485,940	113,310
Goodwill		265,531,404	265,531,404
Intangible assets		765,367	1,019,232
Investments in associated companies and joint ventures	4.2	46,444,108	17,456,932
Investments available for sale	4.3	8,739,308	8,692,628
Other non current assets		3,210,260	3,210,260
Derivative financial instruments	11	49,561	1,796,781
Deferred tax assets	7	41,257,456	37,776,892
Total non current assets		861,360,759	826,961,413
CURRENT ASSETS:
Inventories		69,750,830	50,728,047
Biological assets		628,171	628,172
Customers		131,081,658	113,284,683
Other debtors		3,450,587	1,304,931
State and other public entities		5,240,080	16,435,629
Other current assets		2,211,343	2,242,035
Derivative financial instruments	11	467,669	4,903,860
Cash and cash equivalents	6	344,760,112	193,599,737
Total current assets		557,590,450	383,127,094
Total assets		1,418,951,209	1,210,088,507
SHAREHOLDERS' FUNDS AND LIABILITIES		30.09.2018	31.12.2017
SHAREHOLDERS' FUNDS: Share capital	8	25,641,459	25,641,459
Legal reserve		5,128,292	5,128,292
Other reserves		294,289,777	267,729,157
Consolidated net profit / (loss)		120,411,596	96,068,168
Total shareholders' funds attributable to the parent company's shareholders		445,471,124	394,567,076
Non controlling interests		-	-
Total shareholders' funds		445,471,124	394,567,076
LIABILITIES:
NON CURRENT LIABILITIES:
Bank loans	9	33,500,000	39,500,000
Other loans	9	517,488,201	442,483,927
Reimbursable subsidies	9	10,526,805	14,565,750
Other non current liabilities		17,508,603	14,627,018
Deferred tax liabilities	7	24,154,098	23,003,709
Pensions liabilities		2,771,471	2,771,471
Derivative financial instruments	11	230,572	-
Provisions Total non current liabilities	10	6,024,120 612,203,870	5,025,260 541,977,135
CURRENT LIABILITIES:
Bank loans	9	8,853,526	6,216,583
Other loans Reimbursable subsidies	9 9	140,509,668 4,838,805	94,830,698 3,121,502
Suppliers		109,519,873	95,373,275
Other current creditors		10,744,169	21,489,230
State and other public entities		38,436,672	10,308,029
Other current liabilities		45,127,025	40,398,914
Derivative financial instruments	11	3,246,477	1,806,065
Total current liabilities		361,276,215	273,544,296
Total shareholders' funds and liabilities		1,418,951,209	1,210,088,507

The accompanying notes form an integral part of the consolidated financial statements

CONSOLIDATED STATEMENTS OF PROFIT AND LOSS

FOR THE NINE AND THREE MONTHS ENDED 30 SEPTEMBER 2018 AND 2017

(Translation of financial statements originally issued in Portuguese - Note 21) (Amounts expressed in Euro)

		NINE MONTHS PERIOD ENDED		THREE MONTHS PERIOD ENDED
	Notes	30.09.2018	30.09.2017	30.09.2018	30.09.2017
Sales		571,210,038	477,835,461	200,261,929	161,172,637
Services rendered Other income	14	6,931,598 5,475,977	7,022,834 5,933,918	2,302,597 2,628,530	2,296,477 2,070,081
Cost of sales		(194,435,312)	(200,195,087)	(61,083,659)	(62,233,150)
External supplies and services		(135,580,406)	(121,663,416)	(46,725,452)	(39,831,617)
Payroll expenses		(25,887,621)	(24,829,259)	(8,976,121)	(8,648,732)
Amortisation and depreciation		(41,679,701)	(41,561,883)	(16,096,161)	(13,728,614)
Provisions and impairment losses	10	(185,680)	-	(1,384,610)	-
Other costs	15	(9,511,647)	(2,864,676)	(5,010,654)	(1,088,834)
Gains and losses in associated companies and joint ventures	4.2	2,487,176	2,302,638	1,314,708	882,148
Financial expenses	12	(17,660,245)	(19,493,573)	(5,440,108)	(7,299,519)
Financial income	12	6,750,644	3,029,300	1,389,613	1,330,866
Profit before income tax		167,914,821	85,516,257	63,180,611	34,921,743
Income tax		(47,503,225)	(17,531,508)	(16,578,871)	(8,489,118)
Profit after income tax		120,411,596	67,984,749	46,601,740	26,432,625
Consolidated net profit		120,411,596	67,984,749	46,601,740	26,432,625
Attributable to: Parent company's shareholders Non controlling interests		120,411,596 -	67,984,749 -	46,601,740 -	26,432,625 -
		120,411,596	67,984,749	46,601,740	26,432,625
Earnings per share
Basic	13	0.59	0.33	0.23	0.13
Diluted	13	0.59	0.33	0.23	0.13

The accompanying notes form an integral part of the consolidated financial statements

CONSOLIDATED STATEMENTS OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME FOR THE NINE AND THREE MONTHS PERIODS ENDED 30 SEPTEMBER 2018 AND 2017

(Translation of financial statements originally issued in Portuguese - Note 21) (Amounts expressed in Euro)

		NINE MONTHS PERIOD ENDED		THREE MONTHS PERIOD ENDED
	Notes	30.09.2018	30.09.2017	30.09.2018	30.09.2017
Net consolidated profit / (loss) for the period		120,411,596	67,984,749	46,601,740	26,432,625
Other comprehensive income: Items that may be reclassified to profit and loss Change in fair value of cash flow hedging derivatives Change in exchange currency reserves Others		(8,006,712) 39,824 (1,157) (7,968,045)	6,546,219 (46,185) 32,225 6,532,259	(1,677,288) 26,459 32 (1,650,797)	2,556,776 (33,977) - 2,522,799
Other comprehensive income for the period		(7,968,045)	6,532,259	(1,650,797)	2,522,799
Total comprehensive income for the period		112,443,551	74,517,008	44,950,943	28,955,424
Attributable to: Parent company's shareholders Non controlling interests		112,443,551 -	74,517,008 -	44,950,943 -	28,955,424 -

The accompanying notes form an integral part of the consolidated financial statements

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE NINE MONTHS PERIODS ENDED 30 SEPTEMBER 2018 AND 2017

(Translation of financial statements originally issued in Portuguese - Note 21) (Amounts expressed in Euro)

		Attributable to the parent company's shareholders
	Notes	Share capital	Legal reserve	Other reserves	Net profit	Total	Non controlling interests	Total shareholders' funds
Balance as of 1 January 2017	8	25,641,459	5,128,292	235,894,619	76,977,826	343,642,196	-	343,642,196
Appropriation of the consolidated net profit of 2016		-	-	76,977,826	(76,977,826)	-	-	-
Dividends distribution		-	-	(51,282,918)	-	(51,282,918)	-	(51,282,918)
Total comprehensive income for the period		-	-	6,532,259	67,984,749	74,517,008	-	74,517,008
Balance as of 30 September 2017	8	25,641,459	5,128,292	268,121,786	67,984,749	366,876,286	-	366,876,286
Balance as of 1 January 2018	8	25,641,459	5,128,292	267,729,157	96,068,168	394,567,076	-	394,567,076
Appropriation of the consolidated net profit of 2017		-	-	96,068,168	(96,068,168)	-	-	-
Dividends distribution		-	-	(61,539,503)	-	(61,539,503)	-	(61,539,503)
Total comprehensive income for the period		-	-	(7,968,045)	120,411,596	112,443,551	-	112,443,551
Balance as of 30 September 2018	8	25,641,459	5,128,292	294,289,777	120,411,596	445,471,124	-	445,471,124

The accompanying notes form an integral part of the consolidated financial statements

DO CONSELHO DE ADMINISTRAÇÃO ALTRI , SGPS, S.A. CONDENSED CONSOLIDATED CASH-FLOW STATEMENTS

FOR THE NINE AND THREE MONTHS PERIODS ENDED 30 SEPTEMBER 2018 AND 2017

(Translation of financial statements originally issued in Portuguese - Note 21)

	(Amounts expressed in Euro)

	NINE MONTHS PERIOD ENDED		THREE MONTHS PERIOD ENDED
	Notes	30.09.2018	30.09.2017	30.09.2018	30.09.2017
Operating activities
Cash flow from operating activities (1)		203,239,661	137,095,994	58,402,696	52,278,734
Investment activities
Receipts relating to:
Tangible assets		198,776	66,295	21,125	11,209
Financial investments	6	144,000	-	48,000	-
Interest and similar income		2,017,807	774,835	235,312	458,018
Other financial assets		6,000,000	-	-	-
Dividends distribution		-	55,000	-	-
Investment subsidies		1,747,075	76,107	-	76,107
Payments relating to:
Investment subsidies		(877,048)	(1,729,914)	-	-
Financial investments	6	(26,500,000)	-	(18,000,000)	-
Tangible assets		(55,034,611)	(59,232,703)	(15,001,484)	(11,533,411)
Intangible assets		-	(113,495)	-	(76,723)
Other financial assets		(10,633,888)	-	(1,183,252)	-
Cash flow from investment activities (2)		(82,937,889)	(60,103,875)	(33,880,299)	(11,064,800)
Financing activities
Receipts relating to:
Loans obtained		186,413,334	114,349,302	30,746,527	76,948,841
Other financial operations		131,206	-	(22,558)	-
Payments relating to:
Loans obtained		(84,461,402)	(191,886,432)	(37,335,514)	(68,413,071)
Interest and similar costs		(12,476,179)	(15,252,742)	(4,321,299)	(6,764,277)
Dividends distribution		(61,539,503)	(51,282,918)	-	-
Cash flow from financing activities (3)		28,067,456	(144,072,790)	(10,932,844)	1,771,493
Cash and cash equivalents at the beginning of the period	6	193,599,737	300,094,254	328,379,412	190,028,156
Exchange rate effects		(2,879)	(10,720)	(2,879)	(10,720)
Variation of cash and cash equivalents: (1)+(2)+(3)		148,369,228	(67,080,671)	13,589,553	42,985,427
Cash and cash equivalents at the end of the period	6	341,966,086	233,002,863	341,966,086	233,002,863

The accompanying notes form an integral part of the consolidated financial statements

1. INTRODUCTORY NOTE

Altri, SGPS, S.A. ("Altri" or "Company") is a public company incorporated as of 1 March 2005, has its head-office located at Rua General Norton de Matos, 68, r/c – Porto, Portugal and its shares are listed in the Euronext Lisbon Stock Exchange. Its main activity is the management of investments.

Altri is the parent company of a group of companies listed in Note 4 known as Altri Group. The current activity of Altri Group focuses on the production of bleached pulp of eucalyptus through three mills (Celbi in Figueira da Foz, Caima in Constância do Ribatejo and Celtejo in Vila Velha de Ródão).

Due to this reality of Altri Group, the Board of Directors believes that there is only one business segment (production and commercialisation of bleached eucalyptus pulp) and the management information is also analysed on this basis, for which the segmental information mentioned in Note 16 is limited by this assessment.

The consolidated financial statements of Altri Group are presented in Euro rounded off to the unit, which is the currency used by the Group in its operations and considered as the functional currency.

2. MAIN ACCOUNTING POLICIES AND BASIS FOR PRESENTATION

The consolidated financial statements as of 30 September 2018 were prepared using accounting policies consistent with the International Financial Reporting Standards and in accordance with the International Accounting Standard and International Accounting Standard 34 – Interim Financial Reporting and includes the statement of financial position, the statement of profit and loss, the statement of comprehensive income, the statement of changes in equity and the condensed statement of cash flows as well as the selected explanatory notes.

The accounting policies used in the preparation of the consolidated financial statements of Altri are consistent with those used in the year ended 31 December 2017, except regarding the adoption of the new policies whose application became effective as of January 1st, 2018, being that the application of IFRS 9 and IFRS 15 have not a significant impact in these financial statements.

As of the date of this financial statements, the Group is evaluating the impact of the adoption of IFRS 16 – Leases (mandatory application to future financial years beginning in January 1, 2019), and it is currently impracticable to provide a reasonable estimate of the effect until that study is completed; it is, nevertheless, expected that the new requirement for the recognition in the assets of use and the related liability will have a material impact on the consolidated financial statement of the Group. Additionally, the Group has not yet decided which transition option will adopt.

3. CHANGES IN ACCOUNTING POLICIES AND CORRECTION OF MISTAKES

During the period there were no changes in accounting policies and were identified no material mistakes related to previous years. .

4. INVESTMENTS

4.1 INVESTMENTS IN SUBSIDIARIES

The companies included in the consolidated financial statements by the full consolidation method, its headquarters, percentage participation held and main activity as of 30 September 2018 and 31 December 2017, are as follows:

Company	Head Office	Percentage Held		Main Activity
		2018	2017
Parent-Company:
Altri, SGPS, S.A.	Porto			Investment management
Subsidiaries:
Altri Abastecimento de Madeira, S.A.	Figueira da Foz	100%	100%	Wood commercialization
Altri Florestal, S.A.	Figueira da Foz	100%	100%	Forest management
Altri Sales, S.A.	Nyon, Sw itzerland	100%	100%	Group management support services
Altri, Participaciones Y Trading, S.L.	Pontevedra, Spain	100%	100%	Commercialization of pulp
Caima Energia – Empresa de Gestão e Exploração de Energia, S.A.	Constância	100%	100%	Production of energy
Caima Indústria de Celulose, S.A.	Constância	100%	100%	Production and commercialization of pulp
Captaraíz Unipessoal, Lda.	Figueira da Foz	100%	100%	Purchase and sale of properties
Celtejo – Empresa de Celulose do Tejo, S.A.	Vila Velha de Ródão	100%	100%	Production and commercialization of pulp
Celulose Beira Industrial (Celbi), S.A.	Figueira da Foz	100%	100%	Production and commercialization of pulp
Inflora – Sociedade de Investimentos Florestais, S.A.	Figueira da Foz	100%	100%	Forest management
Pedro Frutícola, Sociedade Frutícola, S.A. (a)	Constância	---	100%	Agriculture production
Sociedade Imobiliária Porto Seguro - Investimentos Imobiliários, S.A.	Porto	100%	100%	Purchase and sale of properties
Viveiros do Furadouro Unipessoal, Lda.	Óbidos	100%	100%	Production of plants in nurseries and services related w ith forests and landscapes

All the above companies were included in the Altri Group consolidated financial statements in accordance with the full consolidation method.

4.2 INVESTMENTS IN ASSOCIATED COMPANIES AND JOINT VENTURES

The associated companies and joint ventures, percentage of capital held and main activity as of 30 September 2018 and 31 December 2017 were as follows:

Company	Head Office	Statement of financial position		Percentage Held		Activity
		2018	2017	2018	2017
Associated companies:
Operfoz – Operadores do Porto da Figueira da Foz, Lda. Joint ventures:	Figueira da Foz	774,414	701,421	33.33%	33.33%	Harbor operations
EDP – Produção Bioeléctrica, S.A.	Lisboa	45,669,694	16,755,511	50.00%	50.00%	Energy production
		46,444,108	17,456,932

Associated companies and joint ventures were included in the Altri Group consolidated financial statements in accordance with the equity method.

The movements occurred in the balance of this caption in the nine months periods ended in 30 September 2018 and 2017 were as follows:

	Statement of financial position
	30.September.2018		30.September.2017
		EDP Bioeléctrica		EDP Bioeléctrica
	Operfoz	(a)	Operfoz	(a)
Opening balance	701,421	16,755,511	719,057	14,264,044
Loans granted (Note 6) Equity method:	-	26,500,000	-	-
Effects on gains and losses in associated companies and joint ventures	72,993	2,414,183	(27,261)	2,329,899
Closing balance	774,414	45,669,694	691,796	16,593,943

(a) – Includes loans granted.

EDP Produção – Bioeléctrica, S.A. owns shares representing the total share capital of Ródão Power – Energia e Biomassa do Ródão, S.A., of Biorodão, S.A. and of Sociedade Bioeléctica do Mondego, S.A..

The accounting policies used by these companies do not differ significantly from those used by Altri Group, fact that led to no need of any accounting policies harmonization.

4.3 INVESTMENTS AVAILABLE FOR SALE

As of 30 September 2018 and 31 December 2017 the investments available for sale are as follows:

		Statement of financial position
	2018
Rigor Capital - Produção de Energia. Lda.	7,957,111	7,957,111
Other investments	782,197	735,517
	8,739,308	8,692,628

It is the understanding of the Altri Group that the caption "Investments available for sale" includes financial investments under 20%, in companies where Altri Group has no significant influence on its management and is stated at acquisition cost, reduced by impairment losses, does not differ significantly from their fair value.

5. CHANGES OCCURRED IN THE CONSOLIDATION PERIMETER

During the nine months period ended as of 30 September 2018, there was the disposal of the subsidiary Pedro Frutícola, Sociedade Frutícola, S.A.. This operation did not have any relevant material impacts in these financial statements.

6. CASH AND CASH EQUIVALENTS

As of 30 September 2018 and 2017, the caption "Cash and cash equivalents" can be detailed as follows:

	30.09.2018	30.09.2017
Cash Bank deposits	36,711 344,723,401	44,533 232,958,330
Total available cash w ithin balance sheet	344,760,112	233,002,863
Bank overdrafts (Note 9)	(2,794,026)	-
Cash and cash equivalents	341,966,086	233,002,863

During the nine months period ended at 30 September 2018, payments related to financial investments refer to loans granted to EDP Bioeléctrica (Note 4.2).

During the nine months period ended at 30 September 2018, receipts related to financial investments refer to partial receipt from the sales of subsidiary Sócasca – Recolha e Comércio de Recicláveis, S.A. (sold in 2011).

7. CURRENT AND DEFERRED TAXES

In accordance with current legislation, tax returns are subject to review and correction by the tax authorities during a four-year period (five years for Social Security), with the exception when there have been tax losses, cases when there have been granted tax benefits, or tax inspections or claims are in progress, in which cases the periods may be extended or suspended. Therefore, the Company tax returns since 2014 might be subjected to review.

The Board of Directors of Altri believes that any potential corrections resulting from reviews/inspections of these tax returns by the tax authorities will not have a significant effect on the consolidated financial statements as of 30 September 2018.

Consolidated financial statements and notes

The movements occurred in deferred tax assets and liabilities in the nine months periods ended at 30 September 2018 and 2017 were as follows:

	2018
	Deferred tax assets	Deferred tax liabilities
Opening balance as of 1.1.2018	37,776,892	23,003,709
Total effect on income statement	-	-
Effects on shareholders' funds:
Fair value of derivatives	3,480,564	1,150,389
Closing balance as of 30.09.2018	41,257,456	24,154,098

		2017
	Deferred tax assets	Deferred tax liabilities
Opening balance as of 1.1.2017	39,508,901	18,731,619
Effects on income statement:
Harmonization of depreciation rates	(247,472)	-
Goodw ill tax amortization (Spain)	-	-
Others	(802,034)	-
Total effect on income statement	(1,049,506)	-
Effects on shareholders' funds:
Fair value of derivatives	(966,880)	933,635
Closing balance as of 30.09.2017	37,492,515	19,665,254

8. SHARE CAPITAL

As of 30 September 2018 and 2017, the Company's fully subscribed and paid up capital consisted of 205,131,672 shares with a nominal value of 12.5 cents of Euro each.

9. BANK LOANS, OTHER LOANS AND REIMBURSABLE SUBSIDIES

As of 30 September 2018 and 31 December 2017, the captions "Bank loans", "Other loans" and "Reimbursable subsidies" can be detailed as follows:

			30.09.2018
		Nominal value		Book value
	Current	Non current	Total	Current	Non current	Total
Bank loans	6,000,000	33,500,000	39,500,000	6,059,500	33,500,000	39,559,500
Bank overdrafts	2,794,026	-	2,794,026	2,794,026	-	2,794,026
Bank loans	8,794,026	33,500,000	42,294,026	8,853,526	33,500,000	42,353,526
Commercial paper	30,000,000	73,500,000	103,500,000	30,050,268	73,488,053	103,538,321
Bonds Other loans	60,000,000 47,964,028	445,900,000 240,000	505,900,000 48,204,028	62,495,372 47,964,028	443,760,148 240,000	506,255,520 48,204,028
Other loans	137,964,028	519,640,000	657,604,028	140,509,668	517,488,201	657,997,869
Reimbursable subsidies	4,838,805	10,526,805	15,365,610	4,838,805	10,526,805	15,365,610
	151,596,859	563,666,805	715,263,664	154,201,999	561,515,006	715,717,005
		Nominal value	31.12.2017		Book value
	Current	Non current	Total	Current	Non current	Total
Bank loans	6,000,000	39,500,000	45,500,000	6,216,583	39,500,000	45,716,583
Bank loans	6,000,000	39,500,000	45,500,000	6,216,583	39,500,000	45,716,583
Commercial paper	-	58,500,000	58,500,000	34,654	58,500,000	58,534,654
Bonds	55,000,000	384,900,000	439,900,000	57,439,917	383,599,927	441,039,844
Other loans	37,356,127	384,000	37,740,127	37,356,127	384,000	37,740,127
Other loans	92,356,127	443,784,000	536,140,127	94,830,698	442,483,927	537,314,625
Reimbursable subsidies	3,121,502	14,565,750	17,687,253	3,121,502	14,565,750	17,687,253
	101,477,629	497,849,750	599,327,380	104,168,783	496,549,677	600,718,461

The expenditures with the constitution of the loans were deducted from its nominal value, being these recognise as financial expenses along the loan's life period (Note 12).

10. ACCUMULATED PROVISIONS AND IMPAIRMENT LOSSES

The movements occurred in provisions and impairment losses for the nine months periods ended at 30 September 2018 and 2017 can be detailed as follows:

		30.09.2018
			Impairment losses in
		Impairment losses in	inventories and biological
	Provisions	accounts receivable	assets	Total
Opening balance	5,025,260	3,604,839	7,803,018	16,433,117
Increases	1,008,013	-	200,000	1,208,013
Reversals and utilisations	(9,153)	(1,518)	(1,020,815)	(1,031,486)
Closing balance	6,024,120	3,603,321	6,982,203	16,609,644
		30.09.2017
			Impairment losses in
		Impairment losses in	inventories and biological
	Provisions	accounts receivable	assets	Total
Opening balance	5,064,402	3,717,961	8,319,880	17,102,243
Increases	-	-	-	-
Reversals and utilisations	(9,153)	(1,518)	-	(10,671)
Closing balance	5,055,249	3,716,443	8,319,880	17,091,572

The amount recorded under the caption "Provisions" as of 30 September 2018 and 2017 is the best estimate of the Board of Directors in order to face all the losses that may be supported due to claims in force.

11. DERIVATIVE FINANCIAL INSTRUMENTS

As of 30 September 2018 and 2017, the companies of the Group operated with derivatives contracts to hedge interest rate variations and derivatives contracts to hedge exchange rate variations. As if 30 September 2018, Altri Group's companies have also derivatives contracts to hedge the pulp price variations, being these derivatives recorded at its fair value.

Altri Group's companies only use derivatives to hedge cash flows associated with operations created related with their activities.

As of 30 September 2018 and 31 December 2017, the detail of the financial derivative instruments is as follows:

		30.09.2018				31.12.2017
		Assets		Liabilities		Assets		Liabilities
	Current	Non current	Current	Non current	Current	Non current	Current	Non current
Interest rate derivatives	-	-	801,205	-	-	-	557,215	-
Exchange rate derivatives	296,936	49,561	47,312	230,572	4,048,407	1,796,781	-	-
Pulp price derivatives	170,733	-	2,397,960	-	855,453	-	1,248,850	-
	467,669	49,561	3,246,477	230,572	4,903,860	1,796,781	1,806,065	-

12. FINANCIAL RESULTS

The financial results for the nine months period ended at 30 September 2018 and 2017 are detailed as follows:

	30.09.2018	30.09.2017
Financial expenses:
Interests	12,667,558	12,195,003
Other financial expenses	4,992,687	7,298,570
	17,660,245	19,493,573
Financial income:
Interests	391,633	426,129
Other financial income	6,359,011	2,603,171
	6,750,644	3,029,300

The caption "Other financial expenses" includes, mainly, expenses with loans setup, which are recognised in the profit and loss statement through the duration of those loans (Note 9). The caption "Other financial expenses" includes, mainly, exchange rate earnings.

13. EARNINGS PER SHARE

Earnings per share for the nine months periods ended as of 30 September 2018 and 2017 were determined taking into consideration the following amounts:

	30.09.2018	30.09.2017
Share number considered for the computation of basic and diluted earnings	205,131,672	205,131,672
Net profit considered for the computation of basic and diluted earnings	120,411,596	67,984,749
Earnings per share
Basic	0.59	0.33
Diluted	0.59	0.33

14. OTHER INCOME

As of 30 September 2018 and 2017 the caption of the statement of profit and loss "Other income" is detailed as follows:

	30.09.2018	30.09.2017
Subsidies to investment and exploitation	4,377,465	3,726,318
Gains on disposal of fixed assets	466,277	49,184
Other income	632,235	2,158,416
	5,475,977	5,933,918

15. OTHER EXPENSES

As of 30 September 2018 and 2017 the caption of the statement of profit and loss "Other expenses" is detailed as follows:

	30.09.2018	30.09.2017
Direct taxes and charges	1,959,045	1,141,399
Other costs	7,552,602	1,723,277
	9,511,647	2,864,676

The caption "Other expenses" includes, among others, losses with derivative financial instruments to hedge changes in pulp prices.

16. SEGMENTAL INFORMATION

In 2008, it was signed the Altri, SGPS, S.A. spin-off public deed. Under the terms of that project, the planned reorganization implies the split of Altri's two business units that manage equity holdings in the pulp and paper sector and in the steel and storage systems sector. This reorganization aimed a bigger focus and transparency on Altri's business, and giving each of the areas an opportunity to be better seen and better evaluated by the market. This allows for the Altri Group to focus its activity on its core business, production and commercialization of bleached eucalyptus pulp, so the Board of Directors believes that there is only one business segment and the management information is reported and analysed on this basis.

17. RELATED PARTIES

The subsidiary companies of the Group have between each other transactions that classify as transactions with related parties and which are made at market prices.

In the consolidation procedures, the transactions between the companies included in consolidation by the full consolidation method are eliminated, once the consolidated financial statements present the owner and its subsidiaries information as one single company, therefore they are not disclosed in this note.

During the nine months periods ended at 30 September 2018 and 2017, there were no transactions or loans granted to the members of the Board of Directors.

As of 30 September 2018 and 2017 the balances and transactions with related parties are as follow:

		Purchases and services obtained		Sales and services rendered		Interest income
Transactions	30.09.2018	30.09.2017	30.09.2018	30.09.2017	30.09.2018	30.09.2017
Associated companies and joint ventures (a)	1,862,019	1,759,803	11,857,258	12,825,924	122,535	129,765
Other related parties (b)	767,931	4,589,840	-	-	-	-
	2,629,950	6,349,643	11,857,258	12,825,924	122,535	129,765
	Payable Accounts		Accounts receivables		Loans conceded
Balances	30.09.2018	30.09.2017	30.09.2018	30.09.2017	30.09.2018	30.09.2017
Associated companies and joint ventures (a)	211,011	309,885	2,949,246	3,006,327	38,026,483	11,482,905
Other related parties (b)	99,156	121,606	505,558	360,260	-	-
	310,167	431,491	3,454,804	3,366,587	38,026,483	11,482,905

• (a) All entities consolidated by the equity method as of 30 September 2018 and 2017 (Note 4.2);
• (b) Were considered as related parties the companies listed below.

Besides the companies included in consolidation (Note 4), entities considered as related parties as of 30 September 2018 can be detailed as follow:

• Actium Capital, S.A.
• Adcom Media Anúncios e Publicidade S.A
• A Nossa Aposta Jogos e Apostas On-line, S.A.
• Caderno Azul, S.A.
• Cofihold, S.A.
• Cofihold II, S.A.
• Cofina Media, S.A.
• Cofina, SGPS, S.A.
• Destak Brasil Editora de Publicações, S.A.
• Destak Brasil Empreendimentos e Participações, S.A.
• Elege Valor, Lda.
• Expeliarmus Consultoria, S.A.
• F. Ramada II, Imobiliária, S.A.
• Ramada Investimentos e Indústria, S.A.
• Grafedisport Impressão e Artes Gráficas, S.A
• Livrefluxo, S.A.
• Mercados Globais Publicação de Conteúdos, Lda.
• Planfuro Global, S.A.
• Préstimo Prestígio Imobiliário, S.A.
• Promendo, SGPS, S.A.
• Ramada Aços, S.A.
• Socitrel Sociedade Industrial de Trefilaria, S.A.
• Universal Afir, S.A.
• Valor Autêntico, S.A.
• VASP Sociedade de Transportes e Distribuições, Lda.
• 1 Thing, Investments, S.A.

18. APPLICATION OF THE NET PROFIT

Regarding 2017 financial year, the Board of Directors proposed, in its annual report, approved at the General Shareholders' Meeting held on May 4, 2018, that the individual net profit of Altri, SGPS, S.A. amounting to 56,705,382.66 Euro, would be integrally allocated as dividends distribution. The Board of Directors proposed, as well, the distribution of free reserves amounting to 4,834,118.94 Euro as dividends, which corresponds to a total dividend of 0.30 Euro/share.

19. SUBSEQUENT EVENTS

In a press release as of 31 July 2018, Altri announced to the market the achievement of an agreement, together with its subsidiary Caima Indústria, with EDP – Energias de Portugal, S.A. (EDP), to buy 50% of the share capital, credits and voting rights that EDP held in the share capital of EDP Produção – Bioeléctrica, S.A., hence assuming, as a consequence of that agreement, the control over 100% of the Company. The transaction was subject to prior notification to the Competition Authority, under the terms established in the competition legal regime and, therefore,

contingent to the decision of non-opposition by the Competition Authority. The transaction was completed as of November 28, 2018.

20. FINANCIAL STATEMENT APPROVAL

The financial statements were approved by the Board of Directors and authorised for issuance on October 31, 2018.

21. EXPLANATION ADDED FOR TRANSLATION

These condensed consolidated financial statements are a translation of financial statements originally issued in Portuguese, prepared using accounting policies consistent with the International Accounting Standard 34 – Interim Financial Reporting, some of which may not conform or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.

The Board of Directors

Paulo Jorge dos Santos Fernandes

João Manuel Matos Borges de Oliveira

Domingos José Vieira de Matos

Laurentina da Silva Martins

Pedro Miguel Matos Borges de Oliveira

Ana Rebelo de Carvalho Menéres de Mendonça

José Manuel de Almeida Archer

ALTRI, SGPS, S.A.

Rua do General Norton de Matos, 68 - R/C 4050 – 424 Porto PORTUGAL Tel: + 351 22 834 65 02

www.altri.pt