Altri SGPS — Interim / Quarterly Report 2020

May 28, 2020

Informação financeira 2012

ALTRI, SGPS, S.A. Public Company

Financial Information – 1 st Quarter of 2020 (Unaudited)

This document is a translation of a document originally issued in Portuguese, prepared using accounting policies consistent with the International Financial Reporting Standards as adopted in European Union (IFRS-EU), 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.

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

1.	HIGHLIGHTS 3
2.	RESULTS ANALYSIS 5
3.	INVESTMENTS 8
4.	DEBT 8
5.	SUSTAINABILITY 10
6.	PULP MARKET 12
7.	ALTRI – Business Profile 13
8.	FUTURE PERSPECTIVES 14

1. HIGHLIGHTS

1.1. COVID-19

The first quarter of 2020 was marked by the emergence of a global epidemic called COVID-19, and on March 11, 2020 the World Health Organization declared it a pandemic. In Portugal, a state of emergency was declared, which was in force from the 19th of March to the 2nd of May 2020.

First of all, Altri's Board of Directors wants to formally address a special thanks to all its Employees, for the absolutely exemplary and noteworthy way in which they all endeavored to overcome this phase that we are going through.

Altri Group has been assessing and monitoring the pandemic's developments, in terms of the risk factors that in its understanding are relevant, and which may affect the business areas, whether in operational, investment or financial terms.

From all the actions implemented within the scope of the monitoring and evaluation of pandemic developments, we highlight the following:

• Altri Group, from a very early stage, implemented a set of measures for the prevention, control and surveillance of this infection. As a result of the various measures implemented by the Group, on March 31, 2020, a negative impact on the income statement is estimated in the amount of approximately 250 thousand Euro (including personnel expenses, namely extra shifts and hours, as well as travel expenses, donations, protective equipment, expenses with hiring companies specialised in disinfecting spaces, among others).
• Altri Group proceeded cautiously with an internal review and evaluation process on the investments it had planned for the 2020 financial year, reassessing the cost-benefit of these portfolio projects, as well as their feasibility, considering the current reality. From this review, it was decided to reschedule the understanding of some projects in the amount of approximately 9 million Euro.
• With regard to liquidity risk management, the Group maintained a liquidity reserve in the form of credit lines with its relationship banks, in order to ensure the ability to meet its commitments, without having to refinance in unfavorable conditions. As of March 31, 2020, the amount of consolidated loans¹ maturing in the next 12 months is approximately 128 million Euro. On the same date, the Group has consolidated credit

¹ Consolidated loans: Bank loans + Other loans + Reimbursable government grants + Lease liabilities.

lines available (namely bank overdrafts, pledged current accounts and not used commercial paper programs) in the amount of approximately 85.1 million Euro. Additionally, the Group's cash and cash equivalents reach roughly 220 million Euro, representing approximately 80% of its current liabilities.

• Ensuring the permanent well-being of all Employees, their families and community, has always been and will continue to be a priority within Altri Group. Altri Group put in place a set of additional preventive measures to protect the health and safety of its Employees, based on the recommendations of the Portuguese Health Authority to deal with the pandemic. The human resources department, based on the recommendations of the Portuguese Health Authority, proceeded with the elaboration of a Group's COVID-19 Contingency Plan. This plan has been continuously adjusted considering the evolution of the pandemic, being essential for the purposes of containing the impacts of the pandemic between our employees and the local community. Altri Group hereby informs that, up to this date, it is unaware of any of its employees testing positive for COVID-19. Nevertheless, the Group is prepared for that contingency.

Within Altri Group, the three plants continue to produce fully, as well as the power plants. During this period, and until today, operations at all units that make up the Altri Group's business universe were carried out at the usual pace, with no disruptions.

1.2. Altri Group's Activity Summary

• ✓ Pulp production amounts to 282.3 thousand tonnes
• ✓ Exports amount to 114.5 million Euro
• ✓ EBITDA of 33.1 million Euro
• ✓ Nominal remunerated net debt² of 491 million Euro

During the first quarter of 2020, the Altri Group increased its pulp production by around 8% compared to the first quarter of 2019 (impacted by the annual maintenance stoppage at the Celbi industrial unit) and by about 6% compared to the last quarter of the previous year. Pulp sales followed the same trend, with growth of around 3% and 6%, respectively.

It should also be noted that the production of renewable electric energy through forest biomass, in the period under analysis, reached about 184.3 GWh, which corresponds to a 72% growth compared to the first quarter of 2019 and a growth of 10% compared to the fourth quarter of 2019. This was essentially due to the entry into operation of the renewable energy production unit in Figueira da Foz.

² Nominal remunerated net debt: Other loans (nominal values) + Bank loans (nominal values) – Cash and cash equivalents.

2. RESULTS ANALYSIS

The financial information was prepared in accordance with the recognition and measurement principles of the International Financial Reporting Standards, as adopted by the European Union (IFRS-EU).

1Q2020 Income Statement

thousand Euro	1Q2020	1Q2019	1Q20/1Q19 Var%	4Q2019	1Q20/4Q19 Var%
Total revenues (a)	165,660	207,354	-20.1%	171,396	-3.3%
Cost of sales	81,037	77,467	4.6%	71,586	13.2%
External supplies and services	42,948	44,085	-2.6%	46,995	-8.6%
Payroll expenses	9,193	9,269	-0.8%	11,985	-23.3%
Other expenses	1,193	1,835	-35.0%	324	268.2%
Provisions and impairment losses	-1,857	159	-	6,093	-
Fair value changes in biological assets	0	-	-	-1,937	-
Total expenses	132,514	132,815	-0.2%	135,046	-1.9%
EBITDA (b)	33,146	74,539	-55.5%	36,350	-8.8%
EBITDA margin (c)	20.0%	35.9%	-15.9 pp	21.2%	-1.2 pp
Amortisation and depreciation	-19,766	-18,926	4.4%	-19,156	3.2%
EBIT (d)	13,380	55,613	-75.9%	17,193	-22.2%
EBIT margin (e)	8.1%	26.8%	-18.7 pp	10.0%	-1.9 pp
Results related to investments	120	1	-	-99	-221.4%
Financial expenses	-5,806	-6,189	-6.2%	-4,829	20.2%
Financial income	1,277	1,393	-8.3%	350	264.9%
Financial results	-4,409	-4,795	-8.1%	-4,578	-3.7%
Profit before income tax	8,971	50,818	-82.3%	12,616	-28.9%
Income tax	-2,156	-14,093	-84.7%	-2,500	-13.8%
Consolidated net profit for the period
Attributable to:
Shareholders of the parent company Non-controlling interest	6,815 0	36,725 -	-81.4% -	10,120 (4)	-32.7% -

(a) Total revenues = Sales + Services rendered + Other income

(b) EBITDA = Profit before income tax - Results related to investments + Financial expenses - Financial income + Amortisation and depreciation

(c) EBITDA margin = EBITDA / Total revenues

(d) EBIT = EBITDA + Amortisation and depreciation

(e) EBIT margin = EBIT / Total revenues

The first quarter of 2020 was characterised by a market context that was closely linked to the COVID-19 pandemic. Thus, there was a strong demand from producers of tissue paper (raw material for the production of paper products for households' domestic use, hygiene and protection), however from the end of March onwards, demand from paper manufactures for printing and writing began to show some signs of slowing down.

Production

tons	1Q 2020	1Q 2019	1Q20/1Q19 Var%	4Q 2019	1Q20/4Q19 Var%
BHKP pulp production	259,748	234,290	10.9%	247,861	4.8%
DWP pulp production	22,584	27,983	-19.3%	19,816	14.0%
Total pulp production	282,332	262,273	7.6%	267,677	5.5%
BHKP pulp sales	254,286	252,515	0.7%	257,399	-1.2%
DWP pulp sales	32,897	27,024	21.7%	14,784	122.5%
Total pulp sales	287,183	279,539	2.7%	272,183	5.5%

During the first quarter of 2020, Altri produced 282.3 thousand tonnes of pulp, of which 259.7 thousand tonnes were paper pulp (BHKP) and about 22.6 thousand tonnes were dissolving wood pulp (DWP). In terms of sales, during the period under analysis, 287.2 thousand tonnes were sold, of which 32.9 thousand tonnes were of DWP.

During the quarter under analysis, Altri's total revenues reached 165.7 million Euro, corresponding to a decrease of about 20% compared to the same period from the previous year and a decrease of 3% compared to the fourth quarter of 2019. Total revenues associated with pulp production units amounted approximately 143.8 million Euro.

The average market pulp price (BHKP) during the first quarter of 2020 was €616/ton, which corresponds to a decrease of 29.5% compared to the average price registered in the same period of 2019.

Total revenues associated with the units of energy production through forest biomass amounted to approximately 21.8 million Euro, which corresponds to an increase of 70% compared to the first quarter of 2019 and to a 9.4% increase compared to the last quarter of the previous year.

In the first quarter of 2020, the Altri Group exported 248.7 thousand tonnes of pulp, which corresponds to 87% of its total pulp sales. In monetary terms, quarterly exports amounted to 114.5 million Euro.

Total expenses for the first quarter of 2020 amounted to 132.5 million Euro, which corresponds to a slight decrease of 0.2% in relation to the first quarter of 2019 and a reduction of 1.9% compared to the fourth quarter of the previous year.

Total EBITDA reached 33.1 million Euro, a decrease of around 55.5% compared to the EBITDA recorded in the same period last year, and 8.8% compared to the fourth quarter of 2019. In terms of segments, the EBITDA of the pulp production units and others amounted to 25.4 million Euro and the EBITDA generated by the forest biomass energy production units amounted to 7.8 million Euro.

EBIT amounted to 13.4 million Euro. Altri Group's consolidated net profit reached 6.8 million Euro.

3. INVESTMENTS

The total net investment³ made during the period under analysis by the Group's units amounted to approximately 9.7 million Euro. Considering the current context, the total estimated investment for the year 2020, for all industrial units that make up the Altri Group, is about 35 million Euro.

4. DEBT

Altri's nominal remunerated net debt on 31 March 2020 amounted to 491 million Euro, which corresponds to a decrease of around 21.7 million Euro compared to the nominal remunerated net debt on 31 December 2019.

³ Total net investment: Payments in the period related to the acquisition of property, plant and equipment related to the operational activity of the Paper and Energy segments.

Key balance sheet indicators

thousand Euro	31.03.2020	31.12.2019	Var%
Biological assets	105,778	104,491	1%
Property, plant and equipment	543,109	555,289	-2%
Right-of-use assets	68,973	69,601	-1%
Goodw ill	265,631	265,631	0%
Investments in associated companies	845	725	17%
Others	88,737	89,108	0%
Non-current assets	1,073,072	1,084,846	-1%
Inventories	82,941	85,966	-4%
Trade receivables	86,278	83,739	3%
Cash and cash equivalents	219,639	181,344	21%
Others	39,228	46,557	-16%
Current assets	428,086	397,605	8%
Total assets	1,501,158	1,482,451	1%
Equity and non-controlling interests	470,932	466,043	1%
Bank loans	27,500	27,500	0%
Other loans	568,598	558,765	2%
Reimbursable government grants	2,868	2,942	-3%
Lease liabilities Others	70,514 80,913	70,392 82,337	0% -2%
Non-current liabilities	750,394	741,936	1%
Bank loans	2,934	6,203	-53%
Other loans	112,508	102,651	10%
Reimbursable government grants	2,921	3,026	-3%
Lease liabilities	9,422	9,316	1%
Trade payables	101,077	102,378	-1%
Others	50,969	50,898	0%
Current liabilities	279,832	274,471	2%
Total liabilities	1,030,226	1,016,408	1%
Total liabilities and equity	1,501,158	1,482,451	1%

5. SUSTAINABILITY

During the first quarter, Altri Group structured and refined the carbon footprint calculation, in order to improve its alignment with several frameworks and international benchmarks, such as the GHG Protocol, CDP Climate Change and the CEPI Framework for Carbon Footprints for Paper and Board Products. On the other hand, Altri has committed to calculate its emissions according to the Science Based Target Initiative (SBT) methodology, a platform that supports companies to establish emission reduction targets, in line with the Paris Agreement commitment, to limit the global warming below 1.5ºC.

At the same time, Altri Group continued its policy of efficient resource management, namely in reducing water and energy consumption per tonne of pulp produced. It should be noted that the consumption of water per tonne of pulp of the Altri Group (21 m³ /tpsa) is a reference value for the sector, whereas in the case of the Celbi industrial unit this consumption (16 m³ /tpsa) is a reference worldwide.

FOREST BIODIVERSITY

Altri Group has been investing in recent years, and will continue to invest in the future, through its subsidiary Altri Florestal, S.A., in the development of biodiversity valorisation and recovery initiatives (namely the AltriDiversity Program) in protected areas that are under its management.

This program plans to duplicate the conservation area within 10 years, producing and planting around 1 million native plants per year, expanding the network of biodiversity stations, preserving and restoring ecosystems of high safeguarding value and integrating other activities with economic, social and environmental value with forest management.

SUSTAINABLE FINANCE

Altri is strongly committed to integrating the sustainability agenda into its corporate finances. Therefore, through sustainable finance, Altri aims to invest in projects that improve its environmental performance, promote a clean and renewable energy production environment, and enhance an integrated pollution prevention and control, thus reinforcing Altri Group's sustainability commitment.

Based on these assumptions, in February 2019, Altri Group issued – through Sociedade Bioelétrica do Mondego – its first Green Bond, being the first Green Bonds' issuance to be admitted to trading in Portugal, on Euronext Access Lisbon.

In January this year, within the 2020 edition of the Euronext Lisbon Awards event, Altri Group saw this commitment and vanguardism recognised, being presented the "Finance for the Future" award.

6. PULP MARKET

According to data from the Pulp and Paper Products Council (PPPC), World Chemical Market Pulp Global 100 Report, February 2020, the cumulative total demand for the first two months of 2020 for hardwood pulp increased by 13.3% compared to the same period of 2019. In the last 12 months, the price of hardwood pulp has dropped by about 35%.

Geographically, it is verified that consumption of hardwood pulp in Europe (Western Europe and Eastern Europe) grew by 2.2% and the demand from China grew by 16.9%.

Recently, already during the second quarter of 2020, pulp producers announced their intention to increase the selling price in Europe by 30 USD/ton.

Evolution of BHKP pulp price in Europe from 2010 to May 2020

Source: FOEX

7. ALTRI – Business Profile

Altri is a reference in European eucalyptus pulp producers. In addition to pulp production, the Group 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 around 83.5 thousand hectares of forest in Portugal, entirely certified by the Forest Stewardship Council® (FSC®) ⁴ and for the Programme for the Endorsement of Forest CertificationTM (PEFCTM), two of the most worldwide acknowledged certification entities.

Currently, Altri has three pulp mills in Portugal, with an installed capacity that in 2019 reached more than 1 million tonnes/year of eucalyptus pulp.

Altri's current organic structure can be represented as follows:

8. FUTURE PERSPECTIVES

Despite the measures already mentioned, and at this stage, characterised by a generalised uncertainty in the social and economic context, Altri Group will remain alert and careful in the management of its business, and in the evaluation and monitoring of the actions already implemented and/or to be implemented in order to manage and anticipate, as far as possible, the impacts of this pandemic on its operational and financial performance.

We are convinced that with prevention, serenity and joint efforts with all of our partners, namely, Customers, Suppliers, Employees and local Communities, we are ready to face this challenge.

The schedule for programmed maintenance stoppages is as follows:

• Celbi: June 2020 10 days
• Caima: fourth quarter of 2020 10 days

Following the continuous improvement and digital transformation processes that have been implemented, and taking into account the current degree of uncertainty, the Altri Group is deepening a series of projects aimed at reducing operating costs and reinforcing efficiency operating of its production units, as well as prudent execution of the revised investment plan for 2020.

Oporto, May 28, 2020