Altri SGPS — Interim / Quarterly Report 2018

May 11, 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 – 1 st 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 – 1Q 2018

thousand Euro	1Q 2018	1Q 2017	1Q18/1Q17 Var%	4Q 2017	1Q18/4Q17 Var%
Total Revenues	173,385	159,836	8.5%	174,987	-0.9%
Cost of sales External supplies and services Payroll expenses	58,694 40,986 8,315	69,261 41,783 7,719	-15.3% -1.9% 7.7%	56,816 44,994 9,124	3.3% -8.9% -8.9%
Other expenses	2,111	950	n.a.	5,427	-61.1%
Provisions and impairment losses Variation of the fair value in the biological assets	- -	- -	- -	-167 8,934	- -
Total Expenses (a)	110,106	119,714	-8.0%	125,128	-12.0%
EBITDA (b) Margin	63,278 36.5%	40,122 25.1%	57.7% +12.1 pp	49,858 28.5%	26.9% +7.5 pp
Amortisation and depreciation	13,863	13,915	-0.4%	12,130	14.3%
EBIT (c) Margin	49,415 28.5%	26,207 16.4%	88.6% +11.3 pp	37,728 21.6%	31.0% +6.4 pp
Gains/Losses in associated companies Financial costs Financial gains	723 -4,867 2,234	495 -5,082 448	46.0% -4.2% 398.1%	226 -6,835 1,953	219.7% -28.8% 14.4%
Financial Results	-1,910	-4,138	-53.9%	-4,656	-59.0%
Profit Before Income Tax	47,506	22,069	115.3%	33,072	43.6%
Income Tax	-14,860	-4,945	200.5%	-4,989	-0.9%
Profit for the period attributable to parent company's shareholders	32,645	17,124	90.6%	28,083	16.2%

(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 first quarter of 2018 was marked by three facts:

• (I) A continuous upwards trend in the price of pulp, whose market index (PIX) recorded, at the end of March 2018, 1,030 USD/ton, having continued to rise until the date of this press release. It should be noted that this index has been raising continuously since January 2017;
• (II) The conclusion of the investment project in Celbi's industrial unit, with interventions in the debarking and wood shredding and in the washing and bleaching of pulp. This project had an expressive impact in the reduction of the unitary and variable production costs;

(III) In environmental terms, it should be noted the fully functioning of the new Wastewater Treatment Plan of Celtejo, inaugurated at September 2017. This Plant uses the best technologies available in the world, including a treatment stage of ultrafiltration of membranes, with efficiency reduction of CQO, CBO5 and SST parameters by around 90%.

EBITDA records an increase of 58% amounting to 63.3 million Euro

Total revenues in the first quarter of 2018 achieved 173.4 million Euro, an increase of 9% over the same period of 2017 and a decrease of about 0.9% over the fourth quarter of 2017.

During the period under analysis, approximately 257.1 thousand tons of pulp were produced (-2.7% in relation to the 1st quarter of 2017), of which approximately 27.3 thousand tons of dissolving pulp (+2% when compared to the same period of 2017). The decrease in production levels was due to the restrictions applied to Celtejo by environmental authorities.

In terms of sales, in the first three months of 2018, around 247.5 thousand tons of pulp were sold (-9.8% over the same period of 2017), of which approximately 24.5 thousand tons of dissolving pulp (-8% comparatively to the same period of the previous year). The decrease on sales is related with the need to reset stocks to guarantee to the customers the good level of service and with the adverse weather conditions that induced the closure of some harbours.

In terms of exports, in the first quarter of 2018, Altri exported around 217.3 thousand tons of pulp, which corresponds to a decrease of about 13% over the same period of the previous year. In monetary terms, exports amounted to 131.7 million Euro, which implies an increase of 5.9% over the first quarter of 2017.

Total pulp sales amounted to 149.1 million Euro, which corresponds to an increase of about 11% over the same period of the previous year and in line with the amount of sales recorded in the last quarter of 2017.

Operating costs recorded a decrease of approximately 8% over the same period of the last year, and a decrease of 5% over the fourth quarter of 2017 (excluding the variation of the fair value in the biological assets caption). Hence, total costs, excluding depreciation, financial costs and taxes, in the first quarter of 2018, amounted to around 110 million Euro.

EBITDA for the first quarter of 2018 recorded about 63.3 million Euro, an increase of 58% over the EBITDA recorded in the same period of 2017. Regarding the fourth quarter of 2017, EBITDA recorded a raise of 27%.

The financial result was a net expense of 1.9 million Euro, which corresponds to a decrease of about 59% over the net financial expense incurred in the fourth quarter of 2017, essentially due to the exchange rate impact. The average cost of total financial debt is less than 3%.

Altri's consolidated net profit reached approximately 33 million Euro, which corresponds to an increase of about 91% when compared to the same period of 2017.

Net debt of 365.2 million Euro

Altri's nominal debt net of cash and cash equivalents as of March 31, 2018 amounted to 365.2 million Euro, which corresponds to a decrease of approximately 67 million Euro over the net debt recorded in the same period of 2017 and a decrease of 23 million Euro when compared to the net debt recorded in the end of 2017.

The total net investment (CAPEX) in the 1st quarter of 2018 by Altri's industrial units amounted to 23.4 million Euro.

The scheduling of Altri's remunerated gross debt maturity, as of March 31, 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) on USD 10 million per month, for the full 2018 financial year. Moreover, as of March 31, 2018, Altri had contracted Asian-style exchange collars, in the amount of USD 6 million per month, covering all 2019 financial year.

Key balance sheet indicators

thousand Euro	1Q 2018	2017	Var%
Biological assets	94,986.5	94,848.3	0%
Tangible assets	392,343.4	396,515.7	-1%
Goodw ill	265,531.4	265,531.4	0%
Investments in associated companies and joint ventures	18,180.2	17,456.9	4%
Others	60,526.1	52,609.1	15%
Total non current assets	831,567.5	826,961.4	1%
Inventories	54,810.3	50,728.0	8%
Customers	114,608.2	113,284.7	1%
Cash and cash equivalents	262,786.3	193,599.7	37%
Others	31,081.5	25,514.6	19%
Total current assets	463,286.2	383,127.1	21%
Total assets	1,294,853.8	1,210,088.5	7%
Shareholders' equity and non controlling interests	427,027.6	394,567.1	8%
Bank loans	33,500.0	39,500.0	-15%
Other loans	530,491.3	442,483.9	20%
Reimbursable incentives Others	14,565.8 50,530.5	14,565.8 45,427.5	0% 11%
Total non current liabilities	629,087.6	541,977.1	16%
Bank loans	6,059.2	6,216.6	-3%
Other current loans Reimbursable incentives	58,492.1 3,121.5	94,830.7 3,121.5	-38% 0%
Suppliers	100,521.8	95,373.3	5%
Others	70,543.8	74,002.2	-3%

Pulp Market

According to data from the Pulp and Paper Productions Council (PPPC Special Research Note - May 2017), during 2017, total demand for hardwood pulp increased by 5% comparing to the previous year, which corresponds to an additional consumption of 1.6 million tons, reaching around 33.9 million tons.

Geographically, the consumption of hardwood pulp in Europe was practically unchanged over the previous year, while China verified an increase of 12.8%. With regard to the eucalyptus pulp, there was a raise in the world demand around 3.6%, having maintained unchanged in Europe and having recorded an increase of 7.4% in China.

Regarding the demand evolution, according to the data from Pulp and Paper Products Council (PPPC World Chemical Market Pulp Global 100 Report – March 2018), during the first quarter of 2018, it was recorded a raise of hardwood pulp demand (YoY) of about 4.2%, which means, approximately 340 thousand tons of additional demand when compared to the first three months of 2017. Geographically, it is noted that Chinese consumption is increasing around 3% and European (Western and East) consumption is increasing around 6%.

In terms of BEKP pulp price evolution, the first quarter of 2018 was characterized by 7% increase in the price in USD, when compared to the previous quarter, and a 3% increase in the price in EUR. The average price recorded in the period under analysis reached 1,011 USD/ton (vs. 941 USD/ton in the previous quarter), while in EUR achieved 824 EUR/ton (vs. 800 EUR/ton in the previous quarter).

Evolution of BEHK pulp price in Europe since 2003 until May 2018

Source: FOEX

Outlook – 2 nd Quarter 2018

For the second quarter of 2018, in terms of BHKP pulp selling price evolution, it is expected to maintain the growth dynamics verified so far, while in operational terms, a raise on sales is expected.

The investment project in Celtejo is occurring within the scheduled period, being expectable to finish in the second half of the year.

Altri – Business Profile

Altri is a reference in 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 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 investment project contracted at Celbi is completed. At Celtejo, the amount of investment contracted was 85 million Euro and is aimed at improving the innovation and economic and environmental sustainability of the industrial unit with interventions at the level of the recovery boiler, steam reduction and industrial waste water treatment installation.

¹ FSC-C004615

ALTRI, SGPS, S.A. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF 31 MARCH 2018 AND 31 DECEMBER 2017

(Amounts expressed in Euro)

ASSETS	31.03.2018	31.12.2017
NON CURRENT ASSETS:
Biological assets	94,986,473	94,848,275
Tangible fixed assets	392,343,392	396,515,699
Investment property	4,512,169	113,310
Goodwill	265,531,404	265,531,404
Intangible assets	934,610	1,019,232
Investments in associated companies and joint ventures	18,180,159	17,456,932
Investments available for sale	8,692,628	8,692,628
Other non current assets	3,210,182	3,210,260
Derivatives	2,642,050	1,796,781
Deferred tax assets	40,534,469	37,776,892
Total non current assets	831,567,536	826,961,413
CURRENT ASSETS:
Inventories	54,810,256	50,728,047
Biological assets	628,172	628,172
Customers	114,608,175	113,284,683
Other debtors	4,931,084	1,304,931
State and other public entities	16,976,232	16,435,629
Other current assets	3,137,262	2,242,035
Derivatives	5,408,760	4,903,860
Cash and cash equivalents	262,786,279	193,599,737
Total current assets	463,286,221	383,127,094
Total assets	1,294,853,757	1,210,088,507
SHAREHOLDERS' FUNDS AND LIABILITIES	31.03.2018	31.12.2017
SHAREHOLDERS' FUNDS:
Share capital	25,641,459	25,641,459
Legal reserve	5,128,292	5,128,292
Other reserves	363,612,494	267,729,157
Consolidated net profit / (loss)	32,645,343	96,068,168
Total shareholders' funds attributable to the parent company's shareholders	427,027,588	394,567,076
Non controlling interests	-	-
Total shareholders' funds	427,027,588	394,567,076
LIABILITIES
NON CURRENT LIABILITIES
Bank loans	33,500,000	39,500,000
Other loans	530,491,342	442,483,927
Reimbursable incentives	14,565,751	14,565,750
Other non current liabilities	16,993,533	14,627,018
Deferred tax liabilities	25,743,330	23,003,709
Pension liabilities	2,771,471	2,771,471
Provisions	5,022,209	5,025,260
Derivatives Total non current liabilities	- 629,087,636	- 541,977,135
CURRENT LIABILITIES
Bank loans	6,059,229	6,216,583
Other loans	58,492,140	94,830,698
Reimbursable incentives	3,121,502	3,121,502
Suppliers	100,521,834	95,373,275
Other current creditors	15,433,660	21,489,230
State and other public entities	21,423,815	10,308,029
Other current liabilities	31,637,434	40,398,914
Derivatives	2,048,918	1,806,065
Total current liabilities	238,738,533	273,544,296
Total shareholders' funds and liabilities	1,294,853,757	1,210,088,507

ALTRI, SGPS, S.A.

CONSOLIDATED STATEMENTS OF PROFIT AND LOSS FOR THE PERIODS OF THREE MONTHS ENDED AT 31 MARCH 2018 AND 2017

(Amounts expressed in Euro)

	31.03.2018	31.03.2017
Sales	169,892,818	154,999,151
Services rendered	2,315,456	2,411,633
Other income	1,176,513	2,425,030
Cost of sales	(58,694,360)	(69,261,460)
External supplies and services	(40,986,119)	(41,783,093)
Payroll expenses	(8,314,972)	(7,719,061)
Amortisation and depreciation	(13,862,954)	(13,915,112)
Variation of the fair value in the biological assets	-	-
Provisions and other impairment losses	-	-
Other expenses	(2,110,947)	(950,237)
Gains and losses in associated companies and joint ventures	723,227	495,213
Financial expenses	(4,866,559)	(5,081,710)
Financial income	2,233,662	448,451
Profit before income tax	47,505,764	22,068,805
Income tax	(14,860,420)	(4,944,716)
Consolidated net profit	32,645,343	17,124,089
Consolidated net profit	32,645,343	17,124,089
Attributable to:
Equity holders of the parent Non controlling interests	32,645,343 -	17,124,089 -
	32,645,343	17,124,089
Earnings per share
Basic	0.16	0.08
Diluted	0.16	0.08

Oporto, May 11, 2018

The Board of Directors