Altri SGPS — Interim / Quarterly Report 2015

Jul 30, 2015

ALTRI, SGPS, S.A. Public Company

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

Financial information – First Semester of 2015 (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 with 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.

Key indicators: 1st semester of 2015 (vs. 1st semester of 2014)

• Total revenue: 312.8 million Euros (+19%)
• EBITDA: 100.0 million Euros (+91%)
• EBIT: 73.9 million Euros (+173%)
• Net profit: 50.3 million Euros (+296%)
• Free cash flow of 39.9 million Euros in the 1st semester
• Debt reduction: 23.5 million Euros
• Dividends: 16.4 million Euros
• Net Debt: 491.3 million Euros
• EBITDA for the second quarter of 2015 reaches a record: 53.5 million Euros
• 481.2 thousand tons of pulp produced (+1%)
• 487.9 thousand tons of pulp sold (+1%)

Conclusion of the ongoing projects: conversion of Caima for the production of specialty pulp (June) and reinforcement of the operating efficiency of Celbi (April)

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

Income Statement – 2Q 2015

thousand euros	2Q 2014	2Q 2015	2Q15/2Q14 Var%	1Q 2015	2Q15/1Q15 Var%
Total Revenues	134,926	158,709	17.6%	154,078	3.0%
Costs of sales External supplies and services Payroll expenses Other expenses Total expenses (a)	62,024 38,926 7,010 845 108,805	57,468 38,268 7,922 1,582 105,240	-7.3% -1.7% 13.0% 87.2% -3.3%	58,545 40,490 7,735 729 107,499	-1.8% -5.5% 2.4% 117.1% -2.1%
EBITDA (b) Margin	26,120 19.4%	53,469 33.7%	104.7% +14,3 pp	46,580 30.2%	14.8% +3,5 pp
Amortisation and depreciation	12,577	12,991	3.3%	13,155	-1.2%
EBIT (c) Margin	13,543 10.0%	40,478 25.5%	198.9% +15,5 pp	33,425 21.7%	21.1% +3,8 pp
Financial profit	-7,924	-5,391	-32.0%	-5,747	-6.2%
Profit before income tax	5,619	35,087	524.4%	27,677	26.8%
Income tax Minority interest	-587 0	-6,961 10	ss ss	-5,514 6	26.2% 61.4%
Profit for the period attributable to parent company's shareholders	5,033	28,115	458.6%	22,157	26.9%

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

(b) EBITDA = Earnings before interests, taxes, depreciation and amortisation

(c) EBIT = Earnings before interest and taxes

The second quarter of 2015 was marked by the EBITDA level (53.5 million Euros), which is an absolute record in quarterly performance.

This performance is explained by the positive evolution of pulp sales price and by the materialization of the production cost reduction strategy that Altri has been implementing.

As referred in the financial information of the 1st quarter 2015, Celbi industrial plant held in April 2015 an annual stoppage for maintenance and reinforcement of the operating efficiency of about 15 days. Caima held in June 2015 the necessary stoppage for the conclusion of the conversion project for specialty pulp.

The total revenue of the second quarter of 2015 amounted to 158.7 million Euros, an increase of 3% compared to the amount recorded in the previous quarter and an increase of about 18% comparing to the second quarter of 2014.

As a result of the schedule stoppages held in the second quarter of 2015, the three industrial units of Altri produced 224.8 thousand tons of pulp (-12% in relation to the production of the same period of 2014 and in relation to the first quarter of 2015), and sold 239.3 thousand tons of pulp (-4% in relation to both the first quarter of 2015 and the second quarter of 2014).

Evolution of pulp production between 2Q 2014 and 2Q 2015 by industrial unit (tons)

Evolution of pulp sales between 2Q 2014 and 2Q 2015 by industrial unit (tons)

In terms of exports, during the second quarter of 2015, Altri exported about 220.5 thousand tons of pulp, corresponding to an amount of 124.5 million Euros.

Quarterly EBITDA reaches record: 53.5 million Euros. Margin of 33.7%

The evolution of production level and sales prices was complemented with a reduction of operating costs, which led to an EBITDA in the quarter of 53.5 million Euros, corresponding to a growth of 105% over EBITDA of the same period of the previous year and an increase of 15% over the 1st quarter of 2015. EBITDA margin reached 33.7%, which corresponds to a 3.5 pp increase compared to the EBITDA margin recorded in the previous quarter.

Total costs, excluding depreciation, interest and taxes, on the second quarter of 2015, amounted to approximately 105.2 million Euros, which represents a decrease of 3.3% compared to the same period of 2014 and a decrease of 2.1% compared to the first quarter of 2015.

The operational income (EBIT) of the second quarter of 2015 reached 40.5 million Euros, an increase of 199% comparing to the EBIT recorded in the same period of 2014 and an increase of 21% compared to the previous quarter.

Altri net profit reached 28.1 million Euros in the second quarter of 2015, recording an increase of more than five times the amount recorded in the same period of 2014. Comparing to the net profit recorded in the first quarter of 2015 the increase was of 27%.

Income Statement for the first semester of 2015

thousand euros	1S 2014	1S 2015	1S15/1S14 Var%
Total Revenues	263,702	312,787	18.6%
Costs of sales	124,445	116,013	-6.8%
External supplies and services	71,520	78,758	10.1%
Payroll expenses	13,921	15,657	12.5%
Other expenses	1,608	2,310	43.7%
Total expenses (a)	211,494	212,739	0.6%
EBITDA (b)	52,208	100,049	91.6%
Margin	19.8%	32.0%	+12,2 pp
Amortisation and depreciation	25,156	26,146	3.9%
EBIT (c)	27,052	73,903	173.2%
Margin	10.3%	23.6%	+13,4 pp
Financial profit	-13,351	-11,138	-16.6%
Profit before income tax	13,701	62,764	358.1%
Income tax Minority interest	-1,002 0	-12,475 17	ss ss
Profit for the period attributable to parent company's shareholders	12,699	50,272	295.9%

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

(b) EBITDA = Earnings before interests, taxes, depreciation and amortisation

(c) EBIT = Earnings before interest and taxes

In the first semester of 2015, it was reached the record EBITDA of 100 million Euros, approximately the double of the EBITDA recorded in the first semester of 2014.

In the first semester, the net profit amounted to 50.3 million Euros, compared with a net profit of 12.7 million Euros reached in the same period of the previous year.

Quarterly Cash flow around 30 M€: net debt of 491 M€

Altri's nominal remunerated debt net of cash and cash equivalents and investments available for sale on June 30, 2015 amounted to 491.3 million Euros, which represents a decrease of 13.2 million Euros comparing to the net debt of 504.4 million Euros recorded in the end of March 2015.

The cash flow generated on the second quarter of 2015 amounted to 29.6 million Euros, having Altri paid dividends in the amount of 16.4 million Euros and reduced the net debt by approximately 13.2 million Euros.

The total net investment (CAPEX) made in the first semester of 2015 by the industrial units of the Group amounted to 27.6 million Euros. Taking into account that the projects of reinforcement of operational efficiency (Celbi) and conversion to specialty pulp (Caima) were concluded during the first semester, the intensity of the investment expected for the second semester is necessarily lower.

During the month of February 2015, Altri reimbursed the bonds "Celbi 2015", amounting to 300 million Euros. Thus, the medium and long term commercial paper programs and bonds issued by Altri Group at the end of the second quarter of 2015 are as follows:

Type	2015	2016	2017	2018	2019	2020	2021	2022	Total
Commercial paper	60,500,000	-	28,000,000	-	-	-	25,000,000	75,000,000	188,500,000
Bonds	-	-	-	145,000,000	73,500,000	50,000,000	35,000,000	-	303,500,000
Float 01/2018 Euribor+0,950%				50,000,000					50,000,000
Float 02/2018 Euribor+0,950%				25,000,000					25,000,000
Float 03/2019 Euribor+3,650%					73,500,000				73,500,000
Float 02/2021 Euribor+2,170%							35,000,000		35,000,000
Float 04/2020 Euribor+3,500%						50,000,000			50,000,000
Float 11/2018 Euribor+3,000%				70,000,000					70,000,000
Total	60,500,000	-	28,000,000	145,000,000	73,500,000	50,000,000	60,000,000	75,000,000	492,000,000

Key balance sheet indicators

thousand euro	2014	2Q 2015	Var%
Biological assets	105,158.8	104,030.4	-1%
Tangible assets	384,285.5	387,322.1	1%
Goodw ill	265,531.4	265,531.4	0%
Investments available for sale	10,691.2	10,691.2	0%
Others	43,226.9	41,689.2	-4%
Total non current assets	808,893.7	809,264.4	0%
Inventories	54,725.4	69,019.0	26%
Customers	88,868.1	92,236.5	4%
Cash and cash equivalentes	260,855.0	202,820.2	-22%
Others	25,913.7	26,075.3	1%
Total current assets	430,362.3	390,150.9	-9%
Total assets	1,239,256.0	1,199,415.3	-3%
Shareholder's equity and non controlling interests	272,264.0	306,437.7	13%
Bank loans	103,837.5	156,175.0	50%
Other loans	278,276.9	429,471.4	54%
Reimbursable incentives	11,723.8	11,619.7	-1%
Others	48,330.3	47,385.8	-2%
Total non current liabilities	442,168.5	644,651.9	46%
Bank loans	77.2	8,100.0	ss
Other current loans	398,648.0	107,903.8	-73%
Reimbursable subsidies	9,082.8	5,423.3	-40%
Suppliers	61,686.4	63,372.4	3%
Others	55,329.1	63,526.2	15%

Pulp market: price evolution

At the end of the second quarter of 2015, the price of bleached pulp hardwood type, according to the market index FOEX, reached 797 USD, which represented 710 EUR. During the second quarter, the average price reached 781 USD (709 EUR), which corresponds to an increase of 4% in USD and an increase of about 7% in EUR compared to the first quarter of the year. Comparing to the same period of 2014, the price recorded an increase of 4% in USD and 29% in EUR.

Market price evolution in BEKP pulp in Europe since 2003 to the end of April 2015 (EUR) Source: FOEX

Outlook

Taking into account that the most of the investment associated to the two industrial projects (Celbi and Caima) was concluded during the first semester of 2015, the investment requirements estimated for the second half of the year are significantly lower.

With respect to the pulp market, there are no significant anticipated changes for the third quarter.

Altri – business profile

Altri is a reference in European eucalyptus pulp producers. 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 manages over 84 thousand hectares of forest in Portugal entirely certified from Forest Stewardship Council® (FSC®)1 and from the Program 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 in 2014 that reached 990 thousand tons/year of eucalyptus bleached pulp. The company concluded some ongoing small projects of optimizing operating efficiency which will allow, in the medium term, to increase the productive capacity and diversified the client basis.

Altri's organic structure is as follows:

1 FSC-C004615

ALTRI, SGPS, S.A.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 AND 31 DECEMBER 2014

(Amounts expressed in Euro)

ASSETS	30.06.2015	31.12.2014
NON CURRENT ASSETS:
Biological assets	104,030,443	105,158,777
Tangible fixed assets	387,322,121	384,285,503
Investment property	113,310	456,936
Goodwill	265,531,404	265,531,404
Intangible assets	103,518	139,448
Investments in associated companies and joint ventures	9,720,165	9,058,140
Investments available for sale	10,691,197	10,691,197
Other non current assets	4,196,519	6,031,139
Deferred tax assets	27,555,679	27,541,201
Total non current assets	809,264,356	808,893,745
CURRENT ASSETS:
Inventories	69,018,973	54,725,440
Customers	92,236,454	88,868,133
Other debtors	5,474,857	7,776,064
State and other public entities	14,213,257	15,629,003
Other current assets	6,280,063	2,508,606
Derivatives	107,158	-
Cash and cash equivalents	202,820,185	260,855,007
Total current assets	390,150,947	430,362,253
Total assets	1,199,415,303	1,239,255,998
SHAREHOLDERS' FUNDS AND LIABILITIES	30.06.2015	31.12.2014
SHAREHOLDERS' FUNDS:
Share capital	25,641,459	25,641,459
Legal reserve	4,336,498	3,405,143
Other reserves	226,187,307	205,680,587
Consolidated net profit / (loss)	50,272,419	37,381,548
Total shareholders' funds attributable to the parent company's shareholders	306,437,683	272,108,737
Non controlling interests	-	155,240
Total Shareholders' funds	306,437,683	272,263,977
LIABILITIES:
NON CURRENT LIABILITIES:
Bank loans	156,175,000	103,837,500
Other loans	429,471,380	278,276,931
Reimbursable incentives	11,619,653	11,723,809
Other non current creditors	404,350	404,350
Other non current liabilities	26,632,389	27,568,617
Deferred tax liabilities	15,283,515	15,283,810
Provisions	5,065,570	5,073,481
Total non current liabilities	644,651,857	442,168,498
CURRENT LIABILITIES:
Bank loans	8,099,988	77,228
Other loans	107,903,839	398,648,024
Reimbursable incentives	5,423,322	9,082,810
Suppliers	63,372,396	61,686,358
Other current creditors	21,232,997	14,170,871
State and other public entities	9,958,644	4,351,443
Other current liabilities	32,334,577	34,904,492
Derivatives	-	1,902,297
Total current liabilities	248,325,763	524,823,523
Total shareholders' funds and liabilities	1,199,415,303	1,239,255,998

ALTRI, SGPS, S.A.

CONSOLIDATED STATEMENTS OF PROFIT AND LOSS FOR THE SIX MONTHS PERIODS ENDED 30 JUNE 2015 AND 2014

(Translation of financial statements originally issued in Portuguese – Note 20) (Amounts expressed in Euro)

	SEMESTER ENDED
	30.06.2015	30.06.2014
Sales	303.800.396	254.923.847
Services rendered	4.442.247	4.370.377
Other income	4.544.472	4.407.320
Cost of sales	(116.013.313)	(124.444.620)
External supplies and services	(78.758.008)	(71.520.067)
Payroll expenses	(15.656.858)	(13.921.039)
Amortisation and depreciation	(26.145.991)	(25.155.810)
Provisions and other impairment losses	307.041	(52.903)
Other expenses	(2.617.365)	(1.555.154)
Gains and losses in associated companies and joint ventures	705.366	1.252.965
Financial expenses	(16.809.382)	(17.799.483)
Financial income	4.965.518	3.195.938
Profit before income tax	62.764.123	13.701.371
Income tax	(12.474.916)	(1.001.519)
Consolidated net profit	50.289.207	12.699.852
Attributable to:
Parent company's shareholders	50.272.419	12.699.416
Non controlling interests	16.788	436
	50.289.207	12.699.852
Earnings per share:
Basic	0,25	0,06
Diluted	0,25	0,06

Oporto, July 30 2015

The Board of Directors