Altri SGPS — Interim / Quarterly Report 2019

May 30, 2019

ALTRI, SGPS, S.A. Public Company

Head Office: Rua Manuel Pinto de Azevedo, 818 – Oporto Fiscal Number 507 172 086 Share Capital: 25,641,459 Euro

Financial Information – 1 st Quarter of 2019 (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). Since January 1, 2019, IFRS 16 was adopted, and in accordance with this standard, 2018 information was not restated.

1Q2019 Profit and Loss Statement

Thousand Euro	1Q 2019	1Q 2018	1Q19/1Q18 Var%	4Q2018	1Q19/4Q18 Var%
Total revenues	207,354	173,385	19.6%	201,213	3.1%
Cost of sales	77,467	58,694	32.0%	61,083	26.8%
External supplies and services	44,085	40,986	7.6%	51,491	-14.4%
Payroll expenses	9,269	8,315	11.5%	13,640	-32.0%
Other expenses	1,835	2,111	-13.1%	3,134	-41.4%
Provisions and impairment losses	159	-	-	470	-66.1%
Change in the fair value of biological assets	-	-	-	-3,269	-
Total expenses (a)	132,816	110,106	20.6%	126,548	5.0%
EBITDA (b)	74,538	63,278	17.8%	74,665	-0.2%
margin	35.9%	36.5%	-0.6 pp	37.1%	-1.2 pp
Amortisation and depreciation	18,926	13,863	36.5%	18,525	2.2%
EBIT (c)	55,612	49,415	12.5%	56,141	-0.9%
margin	26.8%	28.5%	-1.7 pp	27.9%	-1.1 pp
Gains / (losses) related to investments Financial expenses Financial income	1 -6,189 1,393	723 -4,867 2,234	- 27.2% -37.6%	28,322 -3,050 1,313	- 102.9% 6.1%
Financial profit / (loss)	-4,794	-1,910	151.1%	26,584	-118.0%
Profit before income tax	50,817	47,506	7.0%	82,725	-38.6%
Income tax	-14,093	-14,860	-5.2%	-8,639	63.1%
Net profit attributable to parent company's shareholders	36,724	32,645	12.5%	74,086	-50.4%

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

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

(c) EBIT = earnings before interests and taxes

The first quarter of 2019 was characterised by a continuous downward trend in the sales price of BHKP pulp. In industrial terms, during the quarter under analysis, a programmed maintenance stoppage occurred at Celbi. These stoppages occur every 18 months.

In terms of consolidation perimeter, the first quarter of 2019 includes Bioelétrica's full consolidation, the Group's Company whose operation consists of the production of electric power through forest biomass. It should be noted that the 2018 results only included 1-month of activity of this unit.

1 st Quarter of 2019: total revenues amounted to 207 million Euro

During the first quarter of 2019, EBITDA of Altri Group reached 75 million Euro, which corresponds to a 18% increase over the same quarter of the previous year. EBITDA margin achieved 35.9%.

In terms of top line, total revenues amounted to 207 million Euro, a 20% increase over the same quarter of 2018.

During the period under analysis, 262.3 thousand tons of pulp were produced, of which 28 thousand tons of dissolving pulp. Notwithstanding the programmed maintenance stoppage of Celbi's industrial unit (occurred in February 2019, throughout more than 15 days), the volume of produced pulp increased 2% when compared to the first quarter of 2018.

In terms of sales, during the first three months of 2019, 279.5 thousand tons of pulp were sold (+13% when compared to the same period of 2018), of which 27.0 thousand tons of dissolving pulp (+10% comparatively to the same period of the previous year).

Exports increase 18% amounting to 156 million Euro

Regarding exports, during the first quarter of 2019, Altri recorded around 242.2 thousand tons of pulp exported (+12% over the first three months of 2018). In monetary terms, quarter exports amounted to 156 million Euro, corresponding to a 18% increase.

Operational expenses recorded an increase of 21% over the same period of 2018, which can be explained by Celbi's programmed maintenance stoppage and for a significant increase in production levels recorded at Celtejo. However, when compared to the fourth quarter of 2018, excluding the accounting impact of the change in the fair value of the biological assets, total operational expenses recorded a slight increase of 2.3%.

Besides the stoppage costs, it should be noted that the level of energy costs recorded at Celtejo, due to the use of auxiliary fuels, as natural gas, resulting from the ramp up process after the investment plan conclusion at this industrial unit. Considering the annual programmed maintenance stoppage at this unit, in progress during May, it is expectable a positive energy balance in this mill.

EBITDA recorded during the first quarter of 2019 amounted to 74.5 million Euro, a 18% increase over the EBITDA recorded in the same period of 2018.

Amortisation and depreciation amounted to 18.9 million Euro, representing a 37% increase over the first quarter of 2018. This increase reflects the biomass company consolidation; the conclusion of the investment projects occurred at Celbi and Celtejo; and the impact of the IFRS 16 adoption.

The financial loss amounted to 4.8 million Euro.

Altri's consolidated net profit amounted to 36.7 million Euro, which corresponds to a 12.5% increase over the same period of 2018.

Remunerated net debt of 397 million Euro

Altri's nominal remunerated net debt as of March 31, 2019 amounted to 397 million Euro, a decrease of 36 million Euro over the net debt recorded in the end of 2018.

Total investment (CAPEX) recorded until March 2019 by its industrial units and Bioelétrica amounted to 22.9 million Euro, of which 7 million Euro are related to the new biomass power plant at Figueira da Foz.

Altri's remunerated gross debt maturity profile, as of March 31, 2019, is as follows:

Regarding risk management, Altri uses exchange rate derivatives in order to hedge future cash flows. Hence, as of March 31, 2019, Altri has contracted Asian-style call and put options (exchange rate collars) in the amount of USD 12 million per month covering the first half of 2019; USD 18 million per month for the second half of 2019; USD 9 million per month for 1H2020 and USD 3 million per month for 2H2020.

Key balance sheet indicators

thousand Euro	31.Mar.19	31.Dec.18	Var%
Biological assets	98,777	98,474	0%
Property, plant and equipment	558,972	555,510	1%
Goodw ill	265,531	265,531	0%
Intangible assets and Right of use	124,512	55,284	125%
Others	43,288	41,760	4%
Non-current assets	1,091,080	1,016,559	7%
Inventories	62,957	70,096	-10%
Customers	133,584	120,825	11%
Cash and banks	309,113	240,766	28%
Others	35,575	43,943	-19%
Current assets	541,229	475,630	14%
Total assets	1,632,309	1,492,189	9%
Equity and non-controlling interests	549,109	521,597	5%
Bank loans	583,229	539,536	8%
Lease liability	69,211	-	-
Others	84,060	82,586	2%
Non-current liabilities	736,500	622,122	18%
Bank loans	123,443	135,348	-9%
Lease liability	11,050	-	-
Suppliers	120,753	123,710	-2%
Others	91,455	89,412	2%
Current liabilities	346,701	348,470	-1%

Impacts of IFRS 16

As of 1 January 2019, Altri's Group financial statements reflect the adoption of IFRS 16. The Group did not restate the comparative information regarding 2018, according to the possibility stated in this standard. The main impacts of the standard in the quarter under analysis are as follows:

• 1. EBITDA: increase of 2.6 million Euro;
• 1. Amortisations: increase of 2.1 million Euro;
• 1. Financial expenses: increase of 0.6 million Euro;
• 1. Asset ("Right of Use"): increase of 69 million Euro;
• 1. Liability ("Lease Liability"): increase of 80 million Euro;
• 1. Equity: decrease of 7 million Euro (net of deferred taxes).

The nominal remunerated net debt of 397 million Euro does not include the lease liability mentioned above.

Pulp market

The hardwood pulp market recorded a strong downward trend in demand, during the last two months of 2018, which extended for the first quarter of 2019. Hence, according to data from Pulp and Paper Products Council (PPPC World Chemical Market Pulp Global 100 Report – March 2019), during the first 3 months of 2019, hardwood pulp total demand decreased around 10% comparatively to the same period of the previous year.

In terms of BHKP pulp price, the first quarter of 2019 was characterized by a 2% decrease of the price in USD when compared to the same period of the previous year. In Euro, the evolution of the average market price during the same period was -6%.

Evolution of BHKP pulp price in Europe from 2003 until May 2019 Source: FOEX

2019 Outlook

In operational terms, Altri's industrial units schedule for programmed maintenance stoppage during 2019 is as follows:

Celtejo: May Caima: October

In terms of CAPEX, regarding the investment plan announced for 2019 (amounting to 80 million Euro), it should be noted that the conclusion and the operations start of the new biomass power plant at Figueira da Foz are expected to occur during the third quarter of 2019.

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 80 thousand hectares of forest in Portugal, entirely certified by the Forest Stewardship Council® (FSC®)¹ and for the Programme for the Endorsement of Forest Certification (PEFC), two of the most worldwide acknowledged certification entities.

Altri has three pulp mills in Portugal, with an installed capacity that in 2018 reached more than 1 million tons/year of eucalyptus pulp.

Altri's organic structure can be represented as follows:

Oporto, May 30, 2019

¹ FSC-C004615