Altri SGPS — Interim / Quarterly Report 2017

Nov 3, 2017

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 – 3rd Quarter of 2017 (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 presented was prepared in accordance with the International Financial Reporting Standards (IFRS).

thousand Euro	3Q 2017	3Q 2016	3Q17/3Q16 Var%	2Q 2017	3Q17/2Q17 Var%
Total Revenues	165,539	149,542	10.7%	165,417	0.1%
Cost of Sales External supplies and services	62,233 39,832	59,803 39,752	4.1% 0.2%	68,700 40,049	-9.4% -0.5%
Payroll expenses	8,649	8,135	6.3%	8,461	2.2%
Other costs	1,089	1,605	-32.2%	826	31.9%
Provisions and impairment losses	0	0	ss	0	ss
Total Costs (a)	111,802	109,295	2.3%	118,036	-5.3%
EBITDA (b)	53,737	40,247	33.5%	47,381	13.4%
Margin	32.5%	26.9%	+5.5 pp	28.6%	+3.8 pp
Depreciations and Amortizations	13,729	13,249	3.6%	13,918	-1.4%
EBIT (c)	40,008	26,998	48.2%	33,463	19.6%
Margin	24.2%	18.1%	+6.1 pp	20.2%	+3.9 pp
Gains/Losses in associated companies Financial Costs Net exchange gains/losses Financial gains	937 -6,164 -1,135 1,276	1,179 -5,463 254 774	-20.5% 12.8% 64.8%	925 -5,451 -1,661 1,250	1.3% 13.1% 2.1%
Financial Results	-5,087	-3,256	56.2%	-4,937	3.0%
Profit Before Income Tax	34,922	23,742	47.1%	28,526	22.4%
Income Tax	-8,489	-6,920	22.7%	-4,098	107.2%
Consolidated Net Profit	26,433	16,823	57.1%	24,428	8.2%

Income Statement – 3Q 2017

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

(b) EBITDA = earnings before interests, taxes, depreciation and amortization

(c) EBIT = earrnigs before interests and taxes

During the third quarter of 2017 the price of BHKP pulp maintained the upward trend, by rising around 12% in USD (from 783 USD in the previous quarter to 873 USD in the current quarter), while in EUR this increase was around 5%.

On the other hand, the investment projects in Celbi and Celtejo's industrial units remain on course, being highlighted the latter, with interventions in the recovery boiler, steam reduction and industrial waste water treatment installations, implying a limitation of the mill operational potential, in terms of production capacity and efficiency of production costs. This investment is expected to be completed by the end of the first half of 2018.

In respect to the investment in Celtejo, there was a short programmed maintenance stoppage in September (three days) in this industrial unit.

EBITDA of 54 million Euro and margin of 32.5%

Total revenues in the third quarter of 2017 achieved 165.5 million Euro, an increase of 11% over the same period of last year and in line with the revenues from the previous quarter.

During the period under analysis, approximately 270 thousand tons of pulp were produced (268 thousand in the third quarter of 2016), of which approximately 28.2 thousand tons of dissolving pulp (26.9 thousand tons in the same quarter of 2016).

In terms of sales, in the third quarter, were sold approximately 255 thousand tons of pulp, of which 27 thousand tons were dissolving pulp. The difference between produced tons and sold tons is related with the need to accumulate stocks to offset the lower estimated production for the fourth quarter of 2017, as a consequence of the programmed maintenance stoppage at Celbi's industrial unit.

In terms of exports, during the period under analysis, Altri exported around 228.6 thousand tons of pulp, corresponding to approximately 126 million Euro, corresponding to approximately 90% of its pulp sales.

Total pulp sales amounted to 139.7 million Euro, which corresponds to a decrease of approximately 1.6% over the previous quarter of 2017, in result of the reduction of the volume sold and an increase of 13% in relation to the same period of the previous year.

Operating costs recorded an increase of 2.3% over the same period of 2016, higher than the variation in the volume sold (-1.3%), which is explained by the normal inefficiencies that arise during investment periods and the above-mentioned stoppage at Celtejo's industrial unit. Total costs, excluding amortisations, financial costs and taxes, in this quarter, amounted to approximately 111.8 million Euro, which corresponds to a reduction of 5.3% over the previous quarter of 2017.

Financial Information 3Q 2017

Regarding the forest fires that happened in the country until the 30th of September 2017, the effect over the Group's consolidated financial statements is fully recorded and is immaterial. Considering the forests fires that occurred after the closing of the quarter, the Company is currently evaluating their impact. However, it is not expected that these events will be materially relevant, neither jeopardize the wood supply to the plants in the short-term.

EBITDA for the third quarter of 2017 was around 53.7 million Euro, an increase of 34% compared to EBITDA recorded in the same period of 2016. In relation to the second quarter of 2017, EBITDA increased 13%.

The financial result was a net loss of 5 million Euro. The variation of the financial result is due to exchange rate differences, a consequence of the devaluation of USD against EUR that occurred during the period under analysis. The average cost of total financial debt is below 3%.

Altri's consolidated net profit reached approximately 26.4 million Euro, an increase of 8% over the second quarter of 2017 and an increase of 57% over the same quarter of the previous year.

First nine months of 2017

In accumulated figures, total revenues reached approximately 491 million Euro (+8%). EBITDA reached 141.2 million Euro, corresponding to an increase of 10% over the same period of 2016. The net profit was around 68 million Euro, an increase of 19% over the first nine months of 2016.

thousand Euro	9M 2017	9M 2016	var %
Total Revenues	490,792	453,403	8.2%
Cost of Sales	200,195	177,678	12.7%
External supplies and services	121,663	118,266	2.9%
Payroll expenses	24,829	24,290	2.2%
Other costs	2,865	4,599	-37.7%
Provisions and impairment losses	0	-88	ss
Total Costs (a)	349,552	324,746	7.6%
EBITDA (b)	141,240	128,657	9.8%
Margin	28.8%	28.4%	+0.4 pp
Depreciations and Amortizations	41,562	39,805	4.4%
EBIT (c)	99,678	88,852	12.2%
Margin	20.3%	19.6%	+0.7 pp
Gains/Losses in associated companies	2,358	1,907	23.6%
Financial Costs	-19,494	-15,961	22.1%
Net exchange gains/losses	0	0	ss
Financial gains	2,974	3,298	-9.8%
Financial Results	-14,162	-10,756	31.7%
Profit Before Income Tax	85,516	78,097	9.5%
Income Tax	-17,532	-21,053	-16.7%
Consolidated Net Profit	67,985	57,043	19.2%

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

(b) EBITDA = earnings before interests, taxes, depreciation and amortization

(c) EBIT = earrnigs before interests and taxes

Free Cash Flow to Equity reached 19,5 million Euro

Altri's nominal debt net of cash and cash equivalents at 30 September 2017 reached to 436.3 million Euro, which corresponds to a decrease of 19.5 million Euro compared to net debt of 455.8 million Euro, recorded in the end of June 2017.

The total net investment (CAPEX) incurred until the end of September 2017 by the industrial units of the Group amounted to 59.4 million Euro, which means that during the third quarter of 2017 it was paid 11.7 million Euro of CAPEX.

The scheduling of Altri's remunerated gross debt maturity is as follows:

	2017	2018	2019	2020	2021	2022	2023	2024	2025	2026	2027	TOTAL
Bank loans		16 12	16	16	20	28	-	-	-	-	-	108
Commercial paper		- 30	12	-	37	-	-	-	-	-	-	79
Bonds		55 -	40	-	35	45	-	141	90	-	35	441
Other Loans		0 42	0	0	-	-	-	-	-	-	-	42
TOTAL		71 84	68	16	92	73	-	141	90	-	35	669

In the end of September 2017, Altri's cash and equivalents amounted to approximately 233 million Euro.

Regarding the risk management, Altri uses exchange rate derivatives to hedge future cash flows. Accordingly, Altri has contracted European-style call and put options (exchange rate collars) on 10 million USD per month, covering the period from October 2017 to December 2018.

For the fourth quarter of 2017, the exchange rate collars present lower levels between 1.000 and 1.065 and protection levels of 1.15 and 1.17.

During the month of October, it was contracted European-style exchange rate collars, with a notional amount of 6 million USD per month, covering the 12 months of 2019.

Key Balance Sheet Indicators

Thousand Euro	9M2017	2016	Var%
Biological Assets	97,572.0	102,302.6	-5%
Tangible Assets	386,429.1	359,638.8	7%
Goodw ill	265,531.4	265,531.4	0%
Investments in associated companies and joint venture	17,285.7	14,983.1	15%
Others	54,379.5	55,072.8	-1%
Non-Current Assets	821,197.7	797,528.7	3%
Inventories	65,553.4	58,890.4	11%
Costumers	107,286.2	92,261.4	16%
Cash and Cash Equivalents	233,002.9	300,094.3	-22%
Others	33,806.4	36,291.8	-7%
Current Assets	439,648.8	487,537.8	-10%
Total Assets	1,260,846.5	1,285,066.5	-2%
Shareholders' Equity and non-controlling interests	366,876.3	343,642.2	7%
Bank Loans	79,500.0	118,000.0	-33%
Other Loans	484,143.4	462,357.6	5%
Reimbursable Incentives	17,142.9	14,946.6	15%
Others	43,682.8	48,451.2	-10%
Non-Current Liabilities	624,469.1	643,755.4	-3%
Bank Loans	28,205.1	38,897.7	-27%
Other Loans	77,620.2	120,854.4	-36%
Reimbursable Incentives	1,929.6	3,115.2	-38%
Suppliers	81,341.5	69,045.1	18%
Others	80,404.7	65,756.4	22%
Current Liabilities	269,501.1	297,668.9	-9%

Pulp Market

In accordance with information from the Pulp and Paper Products Council (PPPC World Chemical Market Pulp Global 100 Report – September 2017), during the first nine months of 2017, total demand for hardwood pulp increased by 3.6% relatively to the same period of 2016, reaching around 24.7 million tons, which represents an increase of 1 million of tons. The hardwood pulp produced through eucalyptus recorded an increase in demand of 2.9% in the same period.

In terms of stock days, the hardwood pulp had 40 days of inventory in the end of September, compared to 43 days one year ago. Comparing August with September of 2017, there was an increase of three days of inventory.

Concerning the supply evolution, during the second semester of 2017 there were unscheduled stops of some hardwood pulp producers, which had a very positive impact in terms of pulp price evolution. On the other hand, it was announced the entry of a new mill in Brazil – Horizonte 2 belonging to Brazilian company Fíbria.

In terms of BEKP pulp price evolution, the third quarter of 2017 was characterized by an increase of the price in USD of 12% compared to the previous quarter and an increase of the price in EUR of 5%. The average price recorded in the period under analysis reached 873 USD/ton (vs. 783 USD/ton in the previous quarter), while in Euro achieved 746 EUR/ton (vs. 714 EUR/ton in the previous quarter).

Evolution of BEHK pulp price in Europe since 2003 until the press release date (EUR)

Source: FOEX

Outlook for the 4th quarter of 2017

During the fourth quarter of 2017, Celbi's industrial unit had its programmed annual stoppage, which occurred in accordance with the forecast, having the production in that industrial unit restarted successfully at the date of this press release. It was also concluded the ongoing investment project in that mill.

In terms of BHKP pulp selling prices evolution it is expected that, in the short-term, the prices will remain with an upward trend, peaking historical levels. However, the level of prices announced start to jeopardize the profitability of some paper producers.

Moreover, already during the fourth quarter, Altri received 12 million Euro related to payments on account of income tax from previous years.

Altri – Business Profile

Altri is a European reference 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 the Forest Stewardship Council® (FSC®)¹ and by 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 that in 2016 amounted to more than 1 million tons/year of bleached 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 the projects in question.

The amount of the investment contracted at Celbi was 40 million Euro and is aimed at improving the production process, particularly in the debarking and wrecking of wood and in the washing and bleaching of pulp. At Celtejo, the amount of the investment contracted was 85 million Euro and its objective is the innovation, economic and environmental sustainability of the industrial unit with interventions at the level of the recovery boiler, steam reduction and industrial waste water treatment installations.

¹ FSC‐C004615

Financial Information 3Q 2017

ALTRI, SGPS, S.A.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts expressed in Euro)

ASSETS 30.09.2017 31.12.2016 NON-CURRENT ASSETS Biological assets 97,572,019 102,302,637 Tangible fixed assets 386,429,065 359,638,821 Investment property 113,310 113,310 Goodwill 265,531,404 265,531,404 Intangible assets 689,191 643,354 Investments in associated companies and joint ventures 17,285,739 14,983,101 Investments available for sale 11,262,914 11,262,914 Other non current assets 3,374,254 3,544,289 Financial derivative instruments 1,447,282 - Deferred tax assets 37,492,515 39,508,901 Total Non-Current Assets 821,197,693 797,528,731 CURRENT ASSETS Inventories 65,553,359 58,890,414 Biological Assets 340,119 - Customers 107,286,173 92,261,372 Other debtors 2,856,106 4,297,543 State and other public entities 25,023,682 29,538,312 Other current assets 2,884,289 2,455,926 Derivative financial instruments 2,702,206 - Cash and cash equivalents 233,002,863 300,094,254 Total Current Assets 439,648,797 487,537,821 TOTAL ASSETS 1,260,846,490 1,285,066,552 EQUITY AND LIABILITIES 30.09.2017 31.12.2016 EQUITY Share capital 25,641,459 25,641,459 Legal reserve 5,128,292 5,128,292 Other reserves 268,121,786 235,894,619 Consolidated net profit / (loss) 67,984,749 76,977,826 Total shareholders' funds attributable to the parent company's sharedholders 366,876,286 343,642,196 Non-controlling Interests - - Total Equity 366,876,286 343,642,196 LIABILITIES NON-CURRENT LIABILITIES Bank loans 79,500,000 118,000,000 Other loans 484,143,420 462,357,627 Reimbursable subsidies 17,142,916 14,946,631 Other non current liabilities 16,433,445 19,698,356 Deferred tax liabilities 19,665,254 18,731,619 Pension liabilities 2,528,818 2,528,818 Provisions 5,055,249 5,064,402 Financial derivative instruments - 2,428,023 Total Non-Current Liabilities 624,469,102 643,755,474 CURRENT LIABILITIES Bank loans 28,205,123 38,897,709 Other loans 77,620,159 120,854,418 Reimbursable subsidies 1,929,607 3,115,183 Suppliers 81,341,496 69,045,134 Other current creditors 23,167,212 14,915,753 State and other public entities 15,193,937 14,318,318 Other current liabilities 41,466,705 34,099,716 Financial Derivatives Instruments 576,863 2,422,650 Total Current Liabilities 269,501,102 297,668,881 Total Equity and Liabilities 1,260,846,490 1,285,066,552 Financial Information 3Q 2017

CONSOLIDATED STATEMENTS OF PROFIT AND LOSS

(Amounts expressed in Euro)

	9M 2017	9M 2016	3Q2017	3Q2016
Sales	477.835.461	440.120.191	161.172.637	144.821.070
Services rendered	7.022.834	6.952.130	2.296.477	2.353.058
Other income	5.933.918	6.330.947	2.070.081	2.367.723
Cost of sales	(200.195.087)	(177.678.296)	(62.233.150)	(59.802.888)
External supplies and services	(121.663.416)	(118.266.097)	(39.831.617)	(39.751.708)
Payroll expenses	(24.829.259)	(24.289.718)	(8.648.732)	(8.135.096)
Amortisation and depreciation	(41.561.883)	(39.804.980)	(13.728.614)	(13.248.808)
Provisions and impairment losses	-	87.602	-	-
Other costs	(2.864.676)	(4.599.490)	(1.088.834)	(1.605.352)
Gains and losses in associated companies and joint ventures	2.357.638	1.906.741	937.148	1.179.315
Financial expenses	(19.493.573)	(15.960.733)	(7.299.519)	(5.209.075)
Financial income	2.974.300	3.298.335	1.275.866	774.171
Profit before income tax	85.516.257	78.096.632	34.921.744	23.742.409
Income tax	(17.531.508)	(21.053.448)	(8.489.118)	(6.919.690)
Consolidated net profit	67.984.749	57.043.184	26.432.625	16.822.719

Oporto, November 3, 2017

The Board of Directors