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(A free translation of the original in Portuguese)

Klabin S.A.

Financial statements at December 31, 2015 and 2014


and independent auditor's report

PricewaterhouseCoopers Auditores Independentes

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(A free translation of the original in Portuguese)

Independent auditor's report


To the Board of Directors and Stockholders
Klabin S.A.

We have audited the accompanying financial statements of Klabin S.A. ("Parent Company"), which
comprise the balance sheet as at December 31, 2015 and the statements of operations,
comprehensive income, changes in equity and cash flows for the year then ended, as well as the
accompanying consolidated financial statements of Klabin S.A. and its subsidiaries
("Consolidated"), which comprise the consolidated balance sheet as at December 31, 2015 and the
consolidated statements of operations, comprehensive income, changes in equity and cash flows for
the year then ended, and a summary of significant accounting practices and other explanatory
information.
Management's responsibility for
the financial statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with accounting practices adopted in Brazil and with the International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and
for such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Brazilian and International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entitys
preparation and fair presentation of the financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.

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Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Klabin S.A. and of Klabin S.A. and its subsidiaries as at December 31, 2015, and
the parent company and consolidated financial performance and cash flows for the year then ended,
in accordance with accounting practices adopted in Brazil and with the International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
Other matters
Supplementary information - statements
of value added
We also have audited the parent company and consolidated statements of value added for the year
ended December 31, 2015, which are the responsibility of the Companys management. The
presentation of these statements is required by the Brazilian corporate legislation for listed
companies, but they are considered supplementary information for IFRS. These statements were
subject to the same audit procedures described above and, in our opinion, are fairly presented, in all
material respects, in relation to the financial statements taken as a whole.
So Paulo, February 02, 2016

PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/O-5
Tadeu Cendn Ferreira
Contador CRC 1SP188352/O-5

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(A free translation of the original in Portuguese)

Officers' statement on the financial statements and independent


auditor's report
We, as Officers of KLABIN S.A., a corporation headquartered in the city of So Paulo, State of So
Paulo, at Avenida Brigadeiro Faria Lima, 3.600, 3rd, 4th and 5th floors, Itaim Bibi, CEP 04538-132,
enrolled in the National Corporate Taxpayers' Registry (CNPJ) under No. 89.637.490/0001-45,
declare that we have reviewed, discussed and agreed with the set of financial statements, as well as
the opinions expressed in the independent auditor's report dated February 2, 2016, related to the
financial statements for the year ended December 31, 2015.
So Paulo, February 2, 2016.
Fabio Schvartsman - Chief Executive Officer
Antonio Sergio Alfano - Chief Financial Officer and Investor Relations Officer
Francisco Cezar Razzolini - Officer
Arthur Canhisares - Officer
Cristiano Cardoso Teixeira - Officer
Eduardo de Toledo - Officer

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(A free translation of the original in Portuguese)

Opinion of the Statutory Audit Board


We have audited the accompanying parent company and consolidated financial statements of
Klabin S.A., which comprise the balance sheet as at December 31, 2015 and the statements of
operations, comprehensive income (loss), changes in equity and cash flows for the year then ended,
and a summary of significant accounting practices and other explanatory information.
Based on the documents examined, the clarifications given by the representatives of the Company's
management, and the unqualified opinion issued by PricewaterhouseCoopers Auditores
Independentes on the Financial Statements, the members unanimously agree that the
aforementioned financial statements fairly reflect the financial position and the activities of the
Company during the year ended December 31, 2015 and can be submitted to the appreciation of the
General Stockholders' Meeting, together with the Management Report and the proposal for the
allocation of results.
So Paulo, February 2, 2016.
Joo Alfredo Dias Lins
Lus Eduardo Pereira de Carvalho
Maurcio Tiomno Tolmasquim
Vivian do Valle Souza Leo Mikui
Wolfgang Eberhard Rohrbach

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(A free translation of the original in Portuguese)

MANAGEMENT REPORT
MESSAGE FROM MANAGEMENT
2015 was a difficult year for everyone. The deterioration in Brazil's economic indicators
was reflected in the slowdown in domestic consumption, which was even felt by the most
resilient sectors, and in the impact of inflation on corporate production costs. On the other
hand, the substantial devaluation of the Brazilian Real, and the less adverse economic
conditions in the international markets favored exports. Adapting to this scenario, however,
is not an easy task and requires flexibility, focus and persistence.
Once again, Klabin proved to be a versatile company, capable of responding promptly to
new challenges and consistently improving its results. Taking advantage of its product mix
and highly competitive processes, the Company successfully and rapidly adapted to market
trends by expanding its overseas destination markets for papers and coated boards. As a
result of this strategy, we closed 2015 with export volume growth of 15%, increasing their
share of total sales volume from 31% in 2014 to 34%, with a level of 38% in the last
quarter of 2015, against 28% in the last quarter of 2014.
Thanks to this flexibility, as well as the quality and competitiveness of its products, Klabin
recorded another four quarters of growth in 2015, closing the year with its 18th consecutive
quarter of EBITDA expansion, raising its annual EBITDA to R$2.0 billion, up 15% on the
previous year. It is also important to note that these results were achieved at the same time
as the company was executing its biggest ever investment. At the year end, 95% of the
Puma Project works had been concluded and 77% of its financing had been disbursed.
The operational start-up of the new pulp plant will be one more milestone in the growth
cycle we have planned for Klabin. This is an evolutionary process that is supported by our
competitive advantages, which include our forestry base, the operational excellence of our
plants and the skills of our team. We believe in the performance capacity of a cohesive
group focused on the same goals, and we therefore invest in the development of our
employees so that they will be fully prepared for fresh challenges. These challenges are
many: we will be doubling our size, entering completely new markets, undertaking new
investments and strengthening our research, development and innovation efforts, all of
which will set the tone for the coming years.
The Technology Center, currently under construction in Paran, is Klabin's biggest
investment in this area. Its mission is to contribute to a constant increase in productivity and
product quality, developing multiple new possibile uses for our forest base and seeking
solutions for the increasingly efficient consumption of input volume in order to minimize
the environmental impact. It will also allow us to expand our research horizon to new
business opportunities.

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Klabin has been a sustainable company since it was founded more than 116 years ago,
underlined by the fact that more than 40% of its areas are dedicated to the preservation of
native Atlantic Forest. In 2015, it was recognized as the company with the best Natural
Capital Management practices by the Carbon Disclosure Project (CDP) Latin America. It
was also highlighted in the Water Management category by Exame magazine's
Sustainability Guide, and was included for the second time in the Environmental
Performance Report of the Environmental Paper Company Index (EPCI), compiled every
two years by the WWF based on companies around the world.
We were also named a Company of Value 2015 by Valor Econmico newspaper's Valor
1000 Yearbook, which assesses corporate governance criteria, social involvement and
respect for consumers and the environment, and we closed the year celebrating our
inclusion for the third consecutive time in the BM&FBovespa's Corporate Sustainability
Index (ISE).
Everything at Klabin is undertaken from a long term point of view and the Company's
capacity for renewal while preserving its essence, has been an integral part of its fabric
throughout its history. This is a company that has been built by successive generations
dedicated to making dreams come true, people with a constant eye on the future, with a
sense of opportunity, capable of transformation and committed to creating value for all
stakeholders. We are fully aware of the efforts of our employees and partners in making
2015 an outstanding year despite all the difficulties and we would like to thank our
shareholders, investors, customers and suppliers for helping us write one more chapter in
our history of prosperity and achieve one more evolutionary cycle.

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INITIAL CONSIDERATIONS
2015 HIGHLIGHTS
NET REVENUE

R$5,688
million
EXPORT VOLUME

15% increase

Net revenue in 2015 totaled R$5,688 million, up 16% on the previous year.

Annual export volume came to 627 thousand tonnes, underlining Klabin's flexibility
in response to a deteriorating economic scenario in Brazil.

ADJUSTED EBITDA

R$2.0 billion
INVESTMENTS

R$4.6 billion
PUMA PROJECT

95% complete

Adjusted EBITDA totaled R$1,975 million, 15% more than in 2014.

With the acceleration of Puma Project disbursements, the total investments


amounted to R$4,627 million in 2015, of which R$4,053 million was absorbed by
this project.
The works for Klabin's new pulp plant were 95% complete at the end of 2015, with
77% of the financing already disbursed. Operational start-up is scheduled for March
2016.

Overview of 2015
In the absence of non-recurring events such as the World Cup and the presidential
elections, which had a direct impact on the economy in 2014, 2015 in Brazil was marked by
a slowdown in economic activity, the devaluation of the Brazilian Real against international
currencies and the worsening of the political crisis. The attempts to rekindle confidence in
Brazil's economy, control inflation and execute fiscal adjustments lost momentum during
the year, as political turbulence increased, accelerating the deterioration of the economic
indicators and beginning-of-year expectations.
On the international front, the reduced pace of Chinese growth, uncertainty in the
Eurozone, and expectations of an upturn in U.S. interest rates as a result of the country's
economic recovery ensured high market volatility during the year. In addition, the
worldwide currency devaluations put further pressure on commodity prices, which
remained at historically low levels.
The gradual deceleration of the Brazilian economy during the entire year impacted the
paper and packaging markets, which showed increasing signs of weakening throughout,
despite the devaluation of the exchange rate. The Brazilian Corrugated Boxes Association
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(ABPO) reported a 3% reduction in shipments during the previous year, while the latest
figures from the Brazilian Tree Industry (IB, formerly Bracelpa) indicated a 6% downturn
in the coated board market in the same period (excluding liquid packaging board).
In 2015, Klabin once again underlined its capacity for efficient operations in adverse
market conditions. Despite the challenges of the deteriorating economic scenario and
inflationary pressure in Brazil, not to mention international uncertainty, the flexibility of its
product line, together with its cost competitiveness, enabled the Company consistently to
expand its paper and coated board export volume, and to increase its sales revenue. All in
all, export volume grew by 15% compared to 2014, and accounted for 34% of total sales
volume, versus 31% the year before. It is worth emphasizing that exports grew during the
entire year, representing 38% of sales volume in the fourth quarter, compared to 28% in the
same period of the previous year.
This substantial export growth and higher paper and coated board sales volume offset the
domestic performance, which was in line with the shrinking market for converted products
and the inflationary pressure on costs, pushing up EBITDA by 15% on 2014 to R$2.0
billion.
In addition to the substantial improvement in results, 2015 was marked by the acceleration
of the Puma Project. The new pulp line in Ortigueira (PR), which will add 1.5 million
tonnes of hardwood and softwood pulp to the Company's current capacity, saw substantial
progress and closed the year 95% completed and 77% of its financing disbursed. The
project is progressing in line with the original schedule and budget, as all while the
Company continues to record increasing results in a highly adverse scenario, underlining
Klabin's focus and significant execution capacity.
Among the year's main operating and financial results, it is particularly worth drawing
attention to paper and packaging sales volume of 1.8 million tonnes, net revenue of R$5.7
billion and adjusted EBITDA of R$2.0 billion.

BUSINESS PERFORMANCE
Forestry Business Unit
In 2015, Klabin handled approximately 10.9 million tonnes of pine and eucalyptus logs and
wood chips, as well as waste used for energy production. Of this total, 3.2 million tonnes
were sold to sawmills and planer mills, while the rest was transferred to the Company's
plants in Paran, Santa Catarina and So Paulo.
The higher exchange rate throughout the year increased the wood product exports of
Klabin's clients over the previous year, pushing up log sales to third parties by 12%.

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Given the upturn in sales volume, net revenue from wood sales totaled R$362 million, 9%
more than in 2014.
At the year end, the Company had 489 thousand hectares of land, 235 thousand of which
were planted with pine and eucalyptus forest and 210 thousand with preserved native forest.
Throughout 2015, Klabin planted 10 thousand hectares on its own and third party land
(fostering program).
Paper Business Unit
Packaging paper and coated board sales volume totaled 1,103 thousand tonnes in 2015, up
8% on the year before, due to the higher available capacity and increased exports of these
products, which are highly competitive abroad. The debottlenecking at the paper plants, as
well as the start-up of the new recycled paper machine in Goiana (PE), increased the
volume available and, along with the higher average exchange rate, elevated the net
revenue by 28% compared to 2014, reaching R$2,954 million.
The projects to increase paper and coated board capacity begun in 2012 with the
construction of the sack kraft machine in Correia Pinto (SC) were concluded in the first half
of 2015. The debottlenecking of the Angatuba and Piracicaba plants, which added 50
thousand tonnes of paper production capacity for boxes, and the new recycled paper
machine in Goiana (PE), which added 110 thousand tonnes, recorded progress with their
learning curves and were already operating at full capacity at the year end. Coated board
machine no. 9 in Monte Alegre (PR), which was overhauled to increase capacity in 2014,
also closed the year at full production capacity, raising annual coated board sales volume.
With more paper and coated board capacity available, coated board sales volume grew by
8% in 2015 to 685 thousand tonnes. Despite the 6% shrinkage in the Brazilian market for
these products compared to 2014 (excluding liquid packaging boards) disclosed by the IB
(formerly Bracelpa), Klabin increased its domestic sales volume. However, exports
increased even more, thanks to the higher exchange rate and less restricted markets,
ensuring healthier margins than in 2014.

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With exports' higher share of the sales mix, net revenue from total coated board sales came
to R$2,096 million, 26% more than the year before.
Klabin's kraftliner and sack kraft sales volume grew by 8% over 2014 to 418 thousand
tonnes, primarily driven by the above-mentioned capacity additions and higher exports.
With the decline in average scrap prices and less buoyant markets throughout the year in
Brazil, Klabin's flexibility allowed it to increase export volume, taking advantage of the
year-on-year upturn in the average exchange rate, compounded by the 4% annual increase
in the average kraftliner list price in Euros, as disclosed by FOEX.
As a result, net revenue from kraftliner and sack kraft sales totaled R$858 million, 34%
higher than in 2014.
Conversion Business Unit
Given the impact of lower consumption on demand in the packaging markets and the more
propitious export scenario throughout 2015, Klabin took advantage of its product line
flexibility to focus on the sale of packaging paper in the international markets. As a result,
the sales volume of converted products, sold primarily in Brazil, totaled 690 thousand
tonnes in 2015, down 3% on 2014, and net revenue came to R$2,251 million, down 4%.
The reduction in Brazilian economic activity had a direct impact on the market for
converted products, especially that for corrugated boxes, which are not exported. ABPO's
preliminary figures indicate that corrugated box shipments totaled around 3.3 million
tonnes in 2015, 3% less than in the previous year. In addition to lower sales, corrugated box
producers were impacted by competition from paper exports and the higher cost of energy,
fuel oil, chemicals and other inputs.
As for the industrial bags market, the construction industry recorded its worst performance
for 12 years in 2015, directly impacting cement sales in Brazil, which fell by 9% compared
to 2014, according to the National Cement Industry Association (SNIC). However, the
Company's positioning in the Northeast, the country's most stable region, as well as the
success of its strategy of developing new markets abroad, especially in Mexico and the
U.S., minimized the reduction in construction-related segments and improved the results of
the unit, which recorded sales revenue growth.
As a result, revenue from Klabin's converted products grew by 4% over 2014, totaling
R$2.251 million.

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FINANCIAL PERFORMANCE
2015

2014 2015/2014

Sales Volume (thousand tonnes)

1.833

1.771

Domestic Market

1.205

1.227

-2%

627
66%

545
69%

15%
-3 pp

6.746

5.900

14%

R$ Million

Exports
% Domestic Market
Gross Revenue

3%

Net Revenue

5.688

4.894

16%

Domestic Market

3.841

3.679

4%

Exports

1.846

1.215

68%

75%

52%
-7 pp.

536
(3.982)

924
(3.574)

-42%
11%

2.242
39%

2.244
46%

0%
-7 pp.

% Domestic Market
Variation in the fair value of biological assets
Cost of Products Sold
Gross Profit
Gross margin
Selling Expenses

(429)

(380)

13%

General & Administrative Expenses


Other Revenues (Expenses)

(338)
(13)

(298)
85

13%
n/a

(780)

(593)

31%

1.975
34%

1.718
35%

15%
-1 pp.

Net Result

(1.253)

730

n/a

Net Debt
Net debt/EBITDA

12.411

5.242
3,0x

137%

Total Operating Expenses


EBITDA
EBITDA Margin

6,3x

Notes: Due to rounding, some figures in tables and graphs may not result in a precise sum.
Notes: EBITDA margin is calculated over a pro-forma net revenue, which includes revenues from Vale do Corisco.

Operating Result
Sales volume (excluding wood) totaled 1,883 thousand tonnes in 2015, up 3% on 2014,
primarily due to the flexibility of Klabin's product line, which allowed it to route more
volume abroad due to the weakening of the domestic markets. The annual export volume
came to 627 thousand tonnes, 15% up on the year before and accounting for 34% of total
sales volume.

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Net revenue (including wood) amounted to R$5,688 million, 16% more than in 2014,
reflecting the Company's improved product and market mix and higher exports with a more
favorable exchange rate, especially in the second half of the year. Export revenue totaled
R$1,846 million, 52% up on the year before.
The unit cash cost, including selling, general and administrative expenses, came to
R$2,048/t. Excluding non-recurring effects, however, the figure stood at R$2,041/t, 10% up
on 2014, chiefly due to the upturn in energy, chemical and fuel prices, which significantly
outperformed the government's official price index. However, the Company's cost
reduction programs and the increase in sales volume, which diluted some of the fixed costs,
partially offset input inflation and the increase in the average period exchange rate.
The cost of goods sold per tonne, excluding depreciation, depletion and amortization,
climbed by 10% over the previous year, in line with the upturn in inflation for the period.
The net non-cash effect of the variation in the fair value of biological assets (variation in
the fair value of forests less depletion) on EBIT was a gain of R$69 million, versus a loss of
R$310 million in 2014. This variation was chiefly due to the lower increase in the prices
used in the fair value assessment in 2015 compared to the figure for 2014.
Selling expenses came to R$429 million, 13% up on 2014, due to net revenue growth and,
especially, the upturn in export volume throughout the year. Nevertheless, selling expenses
represented 7.5% of net revenue, in line with the previous year.
General and administrative expenses totaled R$338 million, a 13% increase in 2014,
impacted by the collective pay increases during the year, non-recurring indemnification
expenses and the initial hiring of employees for the new pulp business.
Operating cash generation (adjusted EBITDA) stood at R$1,975 million, 15% up on
2014 and the Company's best ever annual figure, with an EBITDA margin of 34%.

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Financial Result and Indebtedness


Consolidated gross debt closed 2015 at R$18,022 million, R$2,084 million of which (12%
of the total) short term. The annual upturn in gross debt was due to the contracting of long
term loans at competitive costs in order to ensure sufficient funds for the Puma Project, as
well as to provide a liquidity cushion in a year marked by substantial economic instability.
Cash and financial investments ended the year at R$5,611 million, flat compared to the
close of 2014 despite the disbursements during 2015 related to the construction of the new
pulp plant. This was possible due to the contracting of funding for the Puma Project and the
Company's strong operating cash generation.
Consolidated net debt totaled R$12,411 million, primarily due to the investments in the
Puma Project and the impact of the year's exchange variations on US Dollar-denominated
debt, which accounted for 69% of total debt at the close of December. The substantial
devaluation of the Brazilian Real in 2015 affected the net debt/EBITDA ratio by 1.4x, so
that it ended the year at 6.3x, versus 3.0x at the close of 2014. Considering that EBITDA in
the last 12 months and net debt in US Dollars, the year-end ratio stood at 5.4x. It is worth
emphasizing that, in addition to Klabin not having any financial covenants attached to its
debt, the exchange variation effect is of a purely accounting nature, and most of its impact
is on financing related to export pre-payment facilities not linked to the Puma Project and
already backed by Klabin's future exports.
Net result
On the one hand, net income was influenced by the Company's healthy cash generation in
2015 and, on the other, by the non-cash impact of the appreciation of the US Dollar against
the Brazilian Real on debt. As a result, the Company declared an annual net loss of
R$1,253 million, versus net income of R$730 million in 2014.

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CAPEX
R$ million
Forestry
Maintenance
Special Projects
Expansion
Project Puma
Total

The

Company

invested

R$4,628

2015

2014 million in 2015, its highest ever annual

97
348
59
71
4.053
4.628

102
282
74
245
2.242
2.945

figure, R$4,053 million of which was


allocated to the Puma Project. In
addition to the new pulp facility,
R$348 million was allocated to
ensuring the operational continuity of
the plants, R$97 million to forestry
operations, and R$59 million to special projects and the completion of the paper and coated
board capacity expansions.
At the beginning of the year, the Company began building the new recycled paper machine
in Goiana, in the state of Pernambuco, which added 110 thousand tonnes per year to
Klabin's total recycled paper capacity, and concluded the capacity increase in the Piracicaba
(SP) plant, which added 15 thousand tonnes of production capacity to the unit.
The year was also marked by major progress on the Puma Project. The new pulp line in
Ortigueira (PR), which will add 1.5 million tonnes of pulp to the Company's current
capacity, began the year with 38% of its works complete and 31% of its financing
disbursed. After 12 months, further investment of R$4 billion and more than 11,000
employees working on the project for most of the period, it closed the year 95% complete,
with 77% of financing disbursed and most of the main equipment in the commissioning
phase. It is important to emphasize Klabin's focus and execution capacity, which were
responsible for this major advance in the construction of its biggest ever expansion project
in line with the original schedule and budget, as all while the Company was recording
growing results in a highly adverse scenario.
CAPITAL MARKET
Klabin's Units (KLBN11) appreciated by 61% in 2015, compared to the 13% decline in
IBOVESPA. The Company's Units were traded in all sessions of BM&FBovespa, recording
1.2 million trades involving 794 million shares, with average daily traded volume of R$63
million at the year end.
Klabin's capital stock comprises 4,733 million shares, of which 1,849 million common and
2,884 million preferred. The Company's shares are also traded on the U.S. over-the-counter
market as Level I ADRs, under the ticker KLBAY.

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For the third consecutive year, Klabin was included in BM&FBovespa's Corporate
Sustainability Index (ISE). The new portfolio, which came into effect on January 4, 2016,
contains the shares of 35 companies recognized for their high level of commitment to the
sustainability of their businesses and the country as a whole. This achievement further
strengthens Klabin's historical commitment to sustainable development, exemplified by its
pioneering achievements in pulp and paper sector certifications and its activities in the
biodiversity management area.
Even in a year during which Brazil lost its sovereign investment-grade status, the Company
maintained its "BBB-" global scale investment-grade rating from Standard & Poors and
Fitch Ratings, who recognized its high liquidity, strong cash position and appropriate level
of debt to fund the execution of the Puma Project, as well as expected business and future
results solidity following the conclusion of the project.

SOCIAL AND ENVIRONMENTAL RESPONSIBILITY


Klabin's social and environmental initiatives accompanied the progress of the Company in
2015. Most investments, totaling R$7.35 million, went to benefiting the Puma Project's
surrounding communities. These funds were used to increase public health, leisure,
education and social assistance infrastructure in the municipalities of Ortigueira, Telmaco
Borba and Imba (PR).
In addition, a group of small farmers in Paran participated in the Sustainable Landscape
Planning project, designed to help them achieve Rural Environmental Registration; provide
them with guidance on planning the sustainable use of their properties; and encourage
family agriculture and entrepreneurship in the value chain of this market, in association
with the Brazilian Micro and Small Business Support Service (SEBRAE). Also under way
is the Puma for Childhood program, in association with the NGO Childhood Brasil, which
engages direct and indirect Puma Project employees in the full-time protection of children
and teenagers, especially in relation to abuse and sexual exploitation, as well as offering
training and advice on this issue to the three municipalities in the Project's direct area of
influence.
In recognition of its efforts for the permanent promotion of sustainable development, the
Company was elected as having the Best Natural Capital Management Practices by CDP
Latin America in 2015. The Carbon Disclosure Project is an international non-profit
organization that promotes sustainable economies and lists companies in accordance with
their management of water, forests and climate change. Klabin also participated in the
Environmental Performance Report of the Environmental Paper Company Index (EPCI),
compiled every two years by the WWF. The Company recorded excellent performance in
research, achieving an 82% approval rating, a growth of 7.5% over the last study published
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in 2013. It was also highlighted in the Water Management category by Exame magazine's
Sustainability Guide, which lists the 61 companies with the best sustainability policies and
practices in Brazil.
For the third consecutive year, Klabin was included in BM&FBovespa's Corporate
Sustainability Index (ISE), which contains the shares of companies renowned for their high
level of commitment to the sustainability of their businesses and the country as a whole.
Participants are selected annually, based on the criteria established by the So Paulo
Business Administration School of the Getulio Vargas Foundation (EAESP-FGV). Klabin
will be part of the new portfolio until January 2017.
Environmental Responsibility
In 2015, Klabin established a Climate Committee, an internal multidisciplinary working
group created to monitor the global evolution of climate change, with the primary aim of
evaluating the vulnerability of the Company's business to this issue.
Fully committed to questions related to energy generation and consumption and
atmospheric emissions, Klabin continues to achieve important results, such as reducing fuel
oil consumption in its industrial processes by 94 thousand tonnes per year and cutting CO2
emissions from paper production by 55.6%. Among the established midterm targets, the
Company has achieved 86.5% of its goal of having 88% of its energy matrix produced from
renewable sources by 2017. The matrix used by Klabin is structured under three pillars: the
burning of black liquor (a production byproduct), boilers fueled by biomass (replacing fuel
oil), and proprietary hydroelectric power generation. The Company also uses electricity
from clean sources such as wind and solar energy.
Social Responsibility
In order to help produce a fairer society, Klabin develops and supports programs to provide
young people with professional qualifications and its surrounding communities with
environmental education. In 2015, the Company invested more than R$9 million in social,
environmental and cultural projects, including:

Cultural incentive and popularization initiatives, including sponsorship of exhibitions


and cultural preservation associations;
Projects and entities focused on the education of young people and teenagers in
situations of social risk;
Projects and entities focused on inclusion of and accessibility for the disabled;
Environmental monitoring, protection and educational initiatives.
17

KLABIN15FT.docx

It is particularly worth mentioning the Crescer Lendo (Grow by Reading) project,


undertaken in association with United Way Brasil and Instituto Avisa L, which promotes
the training of teachers and the installation of children's education libraries in municipal
schools in the cities of Lages, Otaclio Costa, Correia Pinto, Itaja, Rio Rufino and Bocaina
do Sul (SC), and Angatuba and Piracicaba (SP). Since it began in 2014, Crescer Lendo has
already trained more than 380 children's education professionals, donated more than 10,000
books and benefited more than 5,000 children aged up to 6 years.
Klabin also provided support for the Paran Federal Technical Institute through the
donation of equipment for the Lutherie course, which trains young specialists in the
production of musical instruments from eucalyptus near Telmaco Borba (PR), thereby
fomenting new markets for the region's wood.

RESEARCH, DEVELOPMENT AND INNOVATION (RD&I)


The evolution of Klabin's competitiveness, from the performance of its forests through its
productive processes to managing the impact of its products, is inextricably linked to
ongoing investments in research, development and innovation. Given the increasingly
challenging paper and packaging markets, and the imminent entry into the new global pulp
market due to the operational start-up of the plant in Ortigueira (PR), the Company has
expanded its RD&I investments.
With a broader vision and more strategic initiatives, the RD&I area operates across several
links in the production chain:

The improvement of planting processes and the management of pine and eucalyptus
forests in order to boost productivity;
The development of new products and improvements to existing projects in order to
adjust them to clients' needs or to ensure better financial and environmental
performance;
The optimization of suppliers' processes in order to improve the flexibility of the units
in regard to input and service purchases;
Solutions to issues related to the physical properties of packaging, such as barriers
(water, steam, fat, pests), porosity, permeability and roughness, and in conversion
(cutting, creasing, gluing, closing and printing);
The evaluation of product performance in terms of environmental, quality, productivity,
and health and safety aspects.

As part of its increasing focus on RD&I in order to improve the Company as a whole, it is
currently investing more than it has ever previously invested in a short period of time in this
area. In addition to the investments in training new teams, RD&I investments between 2015
18
KLABIN15FT.docx

and 2018 will come to R$70 million, including associations with research institutes, the
physical structuring of the laboratory, the acquisition of equipment and staff training.
The new Technology Center, currently under construction in the Monte Alegre unit and
scheduled to open in 2016, will be responsible for most of these investments and will focus
on five areas:

The development of forestry inputs for pulp;


Paper improvements and new applications;
Biofuel/biochemicals (multiple uses of the forest base);
Reducing consumption - environment, emissions, the reuse of process byproducts,
reductions of water, energy and steam consumption;
Nanotechnology - micro or nano-scale pulp fractions and their applications to new
products.

In order to perform more efficiently, the RD&I area maintains partnerships with input and
equipment suppliers and receives support from research institutes and universities in Brazil
and abroad.

PEOPLE MANAGEMENT
At Klabin, the strategic guidelines, which include compliance with the Company's values as
part of a culture that is evolving in line with the challenges of modernity, are the starting
point for the definition of leadership and team competency profiles and development and
compensation plans, designed to ensure the alignment of professional performance and
business objectives. Our leaders are advised closely to monitor their teams, thereby forming
the basis for building confidence and promoting autonomy, avoiding superficiality, placing
great value on a deep understanding of the issues in question and the excellence of results,
and promoting the breaking down of barriers in order to ensure closer cooperation between
people and teams. In this manner, in line with the growth of the business, we strengthened
the working environment, putting great emphasis on our employees' quality of life and
personal and professional growth.
Human Development and Corporate Education are crucial issues for the Company, and can
therefore rely on the active participation of strategic executives as well as the
organizational and people management areas. The strengthening of a talent development
culture is currently one of the pillars for the building of a greater Klabin, allowing it to
deliver superior results and ensure the sustainable growth of the Company's value. The
integration of personal development and organizational management has led Klabin to
increase its investments and improve tools and processes in recent years, especially in 2014
and 2015.
19
KLABIN15FT.docx

Carried out every two years, the 360 Performance Evaluation program for leaders,
involving executives, top and middle managers, and specialist positions, is regarded as
being of major importance to the Company, given the involvement of everyone in selfassessment and the evaluation of peers, subordinates and superiors. The high point of the
process is the evaluation committees, which promote joint reflection between peers about
their teams, with mutual feedback and the shared creation of alternatives for professional
development, and making the best possible use of individuals and teams, who are treated as
Klabin teams and not those of this or that area. However, more important than the process
per se, is its impact on the perception of our executives that this responsibility for
evaluating, giving feedback, developing and recognizing employees is a continuous and
always constructive process, as well as the best means of preparing successors to sustain
the Company's growth and future. In 2015, 433 leaders, including executives, managers,
coordinators and specialists, took part in the program, which culminated with 35 evaluation
committees preparing the individual development plans for 2016.
In 2015, our Corporate University reached an even greater number of the Companys
employees. Known as the Klabin Business School (ENK), its objective is to improve the
skills needed for a greater Klabin through a consistent personnel development process. The
ongoing expansion included the addition of 4,500 new users at all levels and in various
remote units in 2015 and there are currently 7,000 users with access. The aim is to ensure
access to personnel from all units and to support the development of all employees in the
present phase of the Company's growth.
The ENK is organized into "knowledge trails", i.e. there are specific training programs for
technical and managerial aspects, as well as skills and behavioral development, in
accordance with the stage of each professional's career. Content is both online and
interactive as well as classroom-based, with workshops and training programs.
Online collaboration and learning takes place through the ENK Portal, which offers content
administered by executives, specialists and renowned institutions, such as the Universities
of Chicago and Columbia.
This content is presented by topic, with gradually increasing complexity, and includes
online courses, videos, articles, posts and surveys, which encourage participants to
collaborate in forums, always aligned with the challenges of the organization.
The classroom activities include leadership, team building and customized development
programs designed to help Klabin's leaders achieve exceptional results through people. The
classroom and online programs work hand in hand, promoting various types of learning
based on management, technical and operational content in line with the geographical
dispersal of the Company's employees.
20
KLABIN15FT.docx

The Klabin Development Program is designed to ensure the dynamic alignment of the
management team (officers, managers and coordinators), as well as the continuous
improvement of their management skills so that the Company can maintain its outstanding
position in the business scenario.
In order to ensure the cohesion of this process, the initiatives of the Klabin Development
Program are aligned with the 360 evaluations and the Individual Development Plans
(PDIs), i.e. based on the results of the 360 evaluations and the PDIs, employees seek
initiatives to further their development through the offerings of the Klabin Business School,
as well as coaching, mentoring and job rotation processes and internal projects.
In practical terms, professionals are subject to close monitoring regarding their careers,
enabling the Company to identify their particular skills, plan their progress and ensure
future successors for key positions. It is worth emphasizing that the encouragement towards
self-development, the focus on dialogue and the support provided by the People &
Management area are fully aligned with the Company's growth strategy, which requires
motivated, responsible and multidisciplinary professionals, as well as more flexible
processes.
Klabin closed 2015 with 16,334 employees, of which 12,651 direct, 3,367 outsourced and
316 temporary.

21
KLABIN15FT.docx

(A free translation of the original in Portuguese)

BALANCE SHEETS AT DECEMBER 31, 2015 AND 2014


(All amounts in thousands of Reais)

Note

Parent company
12/31/2015
12/31/2014

12/31/2015

Consolidated
12/31/2014

ASSETS
Current
Cash and cash equivalents
Marketable securities
Accounts receivable:
. Trade receivables
. Provision for impairment of trade receivables
. Related parties
Inventory
Taxes recoverable
Prepaid expenses - related parties
Prepaid expenses - third parties
Other assets
Total current assets
Non-current
Long term receivables
Related parties
Judicial deposits
Taxes recoverable
Other assets

Investments:
. Interests in investees
. Other
Property, plant and equipment
Biological assets
Intangible assets
Total non-current assets
Total assets

4
5

4,031,184
557,143

4,030,951
497,604

5,053,723
557,143

5,245,833
497,604

6
6
7
8
9
7

1,171,540
(37,907)
771,344
613,811
723,748
1,081
9,723
113,198
7,954,865

1,005,569
(45,177)
431,656
496,736
323,529
2,613
24,625
82,598
6,850,704

1,539,071
(37,972)
701,126
736,501
1,081
9,723
115,348
8,675,744

1,193,921
(45,245)
563,709
331,968
2,613
25,207
84,066
7,899,676

7
17
9

2,549
75,956
1,159,638
218,697
1,456,840

844
83,257
428,884
230,684
743,669

77,391
1,159,638
219,820
1,456,849

84,689
428,884
236,050
749,623

11

1,399,292
11,436
11,758,931
2,857,142
12,746
16,039,547
17,496,387

1,243,659
11,542
8,111,467
3,010,395
11,169
12,388,232
13,131,901

495,839
11,436
12,009,146
3,606,389
12,777
16,135,587
17,592,436

483,205
11,542
8,351,387
3,667,085
11,337
12,524,556
13,274,179

25,451,252

19,982,605

26,268,180

21,173,855

12
13

The accompanying notes are an integral part of these financial statements.

22
KLABIN15FT.docx

(continued)

BALANCE SHEETS AT DECEMBER 31, 2015 AND 2014


(All amounts in thousands of Reais)

Note

Parent company
12/31/2015
12/31/2014

12/31/2015

Consolidated
12/31/2014

LIABILITIES AND EQUITY


Current
Borrowing
Debentures
Trade payables
Tax obligations
Social security and labor obligations
Related parties
Enrollment in Tax Recovery Program (REFIS)
Other payables and provisions
Total current liabilities
Non-current
Borrowing
Debentures
Deferred income tax and social contribution
Provision for tax, social security, labor and civil
contingencies
Payables - Investors in Special Partnership
Companies (SPCs)
Enrollment in Tax Recovery Program (REFIS)
Other payables and provisions
Total non-current liabilities
Total liabilities
Equity
Share capital
Capital reserves
Revaluation reserve
Revenue reserves
Carrying value adjustments
Treasury shares
Total equity
Total liabilities and equity

14
15
16

1,700,494
329,810
696,277
36,384
192,239
6,716
61,772
85,154
3,108,846

1,452,240
275,201
429,003
46,653
137,650
11,037
50,400
66,246
2,468,430

1,716,306
329,810
702,199
45,400
195,349
4,500
61,772
106,959
3,162,295

1,479,788
275,201
438,864
55,137
139,879
3,567
50,400
76,037
2,518,873

14
15

14,450,876
1,140,679

7,366,116
1,070,263

14,834,935
1,140,679

8,160,320
1,070,263

10

717,724

1,485,248

954,269

1,699,823

17

65,797

80,642

65,796

80,642

361,240
253,750
16,990,066
20,098,912

384,607
68,975
10,455,851
12,924,281

143,116
361,240
253,510
17,753,545
20,915,840

131,526
384,607
69,477
11,596,658
14,115,531

2,383,104
1,293,962
48,705
748,162
1,064,181
(185,774)
5,352,340

2,271,500
1,295,919
48,767
2,534,303
1,065,446
(157,611)
7,058,324

2,383,104
1,293,962
48,705
748,162
1,064,181
(185,774)
5,352,340

2,271,500
1,295,919
48,767
2,534,303
1,065,446
(157,611)
7,058,324

25,451,252

19,982,605

26,268,180

21,173,855

7
17

17

18

The accompanying notes are an integral part of these financial statements.

23
KLABIN15FT.docx

(A free translation of the original in Portuguese)

STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(All amounts in thousands of Reais unless otherwise stated)

Note
Net sales revenue
Variation in the fair value of biological assets
Cost of products sold
Gross profit

Parent company
12/31/2015
12/31/2014

12/31/2015

Consolidated
12/31/2014

19
13
20

5,619,567
464,699
(3,942,883)
2,141,383

4,837,835
788,317
(3,577,543)
2,048,609

5,687,589
536,113
(3,981,502)
2,242,200

4,893,882
924,104
(3,573,609)
2,244,377

Operating income (expenses)


Sales
General and administrative
Other, net

20
20
20

(397,075)
(329,364)
(16,093)
(742,532)

(356,795)
(289,858)
80,440
(566,213)

(428,902)
(338,013)
(13,104)
(780,019)

(379,726)
(298,350)
84,785
(593,291)

Equity in the results of investees

11

70,316

148,775

29,641

48,649

1,469,167

1,631,171

1,491,822

1,699,735

21

(3,453,453)

(630,498)

(3,439,630)

(646,112)

(1,984,286)

1,000,673

(1,947,808)

1,053,623

(15,699)
746,788
731,089

167,544
(437,887)
(270,343)

(30,210)
724,821
694,611

154,171
(477,464)
(323,293)

(1,253,197)

730,330

(1,253,197)

730,330

(0.2322)
(0.2322)

0.1389
0.1389

(0.2322)
(0.2322)

0.1389
0.1389

Profit before finance result and taxes


Finance result
Profit (loss) before taxes on income
Income tax and social contribution
. Current
. Deferred

10
10

Profit (loss) for the year


Basic and diluted earnings (loss) per common share - R$
Basic and diluted earnings (loss) per diluted share - R$

23
23

The accompanying notes are an integral part of these financial statements.

24
KLABIN15FT.docx

(A free translation of the original in Portuguese)

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(All amounts in thousands of Reais)
Parent company and Consolidated
12/31/2015
12/31/2014
Profit (loss) for the year
Other comprehensive income (loss):
. Foreign currency translation adjustments (i)
. Actuarial liability restatement (ii)
Total comprehensive income (loss) for the year, net of taxes
(i) Effects that might be transferred to profit or loss in the future.
(ii) Effects that will never be transferred to profit or loss.

(1,253,197)

730,330

(5,044)
6,452
(1,251,789)

(4,635)
4,948
730,643

The accompanying notes are an integral part of these financial statements.

25
KLABIN15FT.docx

2,271,500

1,295,919

2,957

1,288,543

Capital
reserves
4,419

48,767

(502)

Own assets
49,269

ddition, reversal or realization of the balances contained in the equity in the results of investees.

ssets reserve (own)


t of land (own)
own)
subsidiaries) (*)
ive reserve
year
s for the year - proposed
d working capital

ption plan remuneration


year:

me for the year


the year
reserve
for 2013 - approved at the
holders
es
tible into shares
debentures convertible

Share
capital
2,271,500

Revaluation
reserve

98,403

36,517

Legal
61,886

7,610

2027

Tax
incentives
5,583

1,729,517

520,289
102,950

(389,783)

Biological
assets
1,496,061

102,000

102,000

(90,006)

Proposed
dividends
90,006

STATEMENT OF CHANGES IN EQUITY


FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(All amounts in thousands of Reais)

(A free translation of the original in Portuguese)

90,450
596,773

(90)

Investments
and working
capital
506,413

Revenue reserves

1,065,446

(2,092)

(3,684)
5,472

313
313

Carrying value
adjustments
1,065,437

(157,611)

2,434
3,684

(5,822)

Treasury
shares
(157,907)

(36,517)
389,783
2,092
(520,289)
(102,950)
(2,027)
(241,957)
(102,000)
(90,450)
-

(26,517)

730,330
502

730,330

Retained
earnings
(accumulated
deficit)

26

(241,957)
7,058,324

5,391
5,472

(26,517)

(90,096)
(5,822)
1,288,543

Total
5,392,667
730,330
313
730,643
-

Parent company and Consolidated

2,383,104

36

7,068

104,500

1,293,962

1,875

3,236

(7,068)

48,705

(62)

Own assets
48,767

dition, reversal or realization of the balances contained in the equity in the results of investees.

of land (own)
e reserve
ar
reserves

tion plan remuneration


an
ear:

serve
or 2014 - approved at the
Meeting of Stockholders
bentures convertible into shares
ebentures convertible into shares
th issue

e for the year


s) for the year

Share capital Capital reserves


2,271,500
1,295,919

Revaluation
reserve

1,513

(96,890)

Legal
98,403

31,175

31,175

(7,610)

Tax
incentives
7,610

(614,665)
715,474

(394,887)
(4,491)

Biological
assets
1,729,517

(102,000)

(276,012)
(320,778)
-

17

Revenue reserves
Investments
Proposed
and working
dividends
capital
102,000
596,773

STATEMENTS OF CHANGES IN EQUITY


FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(All amounts in thousands of Reais)

(continued)

1,064,181

(5,564)

(2,433)
7,199
(1,875)

1,408
1,408

Carrying value
adjustments
1,065,446

(185,774)

2,027
2,433

(32,623)

Treasury
shares
(157,611)

935,443
-

394,887
4,491
5,564
(31,175)

(56,075)

62

(1,253,197)

(1,253,197)

Retained earnings
(accumulated
deficit)
-

27

(101,983)
(56,075)
36
(32,623)
5,263
7,199
(276,012)
5,352,340

(1,253,197)
1,408
(1,251,789)
-

Total
7,058,324

Parent company and Consolidated

(A free translation of the original in Portuguese)

STATEMENTS OF CASH FLOWS


FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(All amounts in thousands of Reais)
12/31/2015
Net cash provided by operating activities
Cash from operations
Profit (loss) for the year
Depreciation and amortization
Variation in the fair value of biological assets
Depletion of biological assets
Deferred income tax and social contribution
Interest and foreign exchange variations on borrowing
Interest, monetary variation and share of results of debentures
Amortization - adjustment to present value of debentures
Payment of interest on borrowing
Accrued interest - REFIS
Result from disposal of assets
Equity in the results of investees
Income tax and social contribution paid
Other
Changes in assets and liabilities
Trade receivables and related parties
Inventory
Taxes recoverable
Marketable securities
Prepaid expenses
Other assets
Trade payables
Tax obligations
Social security and labor obligations
Other liabilities
Net cash used in investment activities
Purchases of property, plant and equipment
Planting costs of biological assets
Proceeds from disposal of assets
Acquisition of investments and payment of capital in
subsidiaries
Dividends received from subsidiaries
Net cash provided by financing activities
New borrowing
New debentures (net of transaction costs)
Repayment of borrowing
Payment of interest on debentures and monetary variation
Purchase of treasury shares
Disposal of treasury shares
Withdrawal of investors - SPCs
Dividends paid
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

Parent company
12/31/2014

12/31/2015

Consolidated
12/31/2014

1,467,585
2,065,481
(1,253,197)
311,735
(464,699)
676,044
(746,788)
3,734,741
416,815
40,891
(606,105)
47,653
(6,910)
(70,316)
(13,657)
(726)
(597,896)
(512,929)
(117,075)
(1,117,316)
(59,539)
1,236
(58,320)
1,085,138
(10,269)
54,589
136,589
(4,659,896)
(4,514,138)
(70,069)
14,672

1,192,275
1,945,480
730,330
289,480
(788,317)
652,476
437,887
1,018,725
85,744
51,596
(392,969)
46,263
(33,288)
(148,775)
(7,453)
3,781
(753,205)
(82,549)
(39,100)
(507,589)
(248,093)
549
(24,186)
226,315
(8,106)
12,235
(82,681)
(2,851,022)
(2,836,877)
(62,863)
18,277

1,739,996
2,167,727
(1,253,197)
313,424
(536,113)
685,303
(724,821)
4,004,843
416,815
40,891
(765,019)
47,653
(6,910)
(29,641)
(16,326)
(9,175)
(427,731)
(352,423)
(137,417)
(1,118,961)
(59,539)
1,818
(53,057)
1,081,199
(9,737)
55,470
164,916
(4,595,526)
(4,526,734)
(100,471)
14,672

1,555,391
2,208,713
730,330
277,783
(924,104)
674,182
477,464
1,262,068
85,744
51,596
(392,969)
46,263
(33,288)
(48,649)
(11,052)
13,345
(653,322)
(1,469)
(67,857)
(506,066)
(248,093)
47
(26,511)
232,918
(6,370)
12,523
(42,444)
(2,909,308)
(2,842,350)
(103,085)
18,277

(112,268)
21,907
3,192,544
5,503,704
(1,563,319)
(342,486)
(32,623)
5,263
(377,995)
233
4,030,951
4,031,184

(5,408)
35,849
3,287,876
2,254,427
2,470,151
(1,104,217)
(5,822)
5,391
(332,054)
1,629,129
2,401,822
4,030,951

17,007
2,663,420
4,925,579
(1,514,105)
(342,486)
(32,623)
5,263
(213)
(377,995)
(192,110)
5,245,833
5,053,723

17,850
3,869,878
2,837,527
2,470,151
(1,104,217)
(5,822)
5,391
(1,098)
(332,054)
2,515,961
2,729,872
5,245,833

(i) Corresponds to the dissolution of the Special Partnership "Leal" and the merger of subsidiaries Centaurus Holdings and
Klabin Celulose, as mentioned in Notes 1 and 3.
The accompanying notes are an integral part of these financial statements.

28

(A free translation of the original in Portuguese)

STATEMENTS OF VALUE ADDED


FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(All amounts in thousands of Reais)
12/31/2015
Revenue
. Sales of products
. Changes in the fair value of biological assets
. Other income
. Provision for impairment of trade receivables
Inputs acquired from third parties
. Cost of products sold
. Materials, electricity, outsourced services and other
Gross value added
Retentions
. Depreciation, amortization and depletion
Net value added generated by the Company
Value added received through transfers
. Equity in the results of investees
. Finance income, including foreign exchange variations
Total value added to distribute
Distribution of value added:
Personnel
. Direct compensation
. Benefits
. Government Severance Indemnity Fund for Employees (FGTS)
Taxes and contributions
. Federal
. State
. Municipal
Remuneration of third party capital
. Interest
Remuneration of own capital
. Dividends
. Profits reinvested/(loss) for the year

Parent company
12/31/2014

12/31/2015

Consolidated
12/31/2014

6,858,048
464,699
14,289
7,269
7,344,305

6,062,082
788,317
85,902
1,977
6,938,278

6,962,629
536,113
14,286
7,272
7,520,300

6,142,522
924,104
85,902
2,054
7,154,582

(2,410,400)
(1,007,007)
(3,417,407)
3,926,898

(991,559)
(2,074,996)
(3,066,555)
3,871,723

(2,439,472)
(1,047,572)
(3,487,044)
4,033,256

(996,725)
(2,091,678)
(3,088,403)
4,066,179

(987,779)

(941,956)

(998,727)

(951,965)

2,939,119

2,929,767

3,034,529

3,114,214

70,316
934,148
1,004,464
3,943,583

148,775
627,865
776,640
3,706,407

29,641
975,186
1,004,827
4,039,356

48,649
627,874
676,523
3,790,737

665,300
179,309
54,777
899,386

606,738
153,342
47,543
807,623

692,376
180,048
54,930
927,354

617,401
153,804
47,655
818,860

(239,613)
138,885
10,521
(90,207)

748,500
152,517
9,074
910,091

(199,023)
138,885
10,521
(49,617)

805,970
152,517
9,074
967,561

4,387,601
4,387,601

1,258,363
1,258,363

4,414,816
4,414,816

1,273,986
1,273,986

332,085
(1,585,282)
(1,253,197)
3,943,583

241,977
488,353
730,330
3,706,407

332,085
(1,585,282)
(1,253,197)
4,039,356

241,977
488,353
730,330
3,790,737

The accompanying notes are an integral part of these financial statements.

29

(A free translation of the original in Portuguese)

Notes to the financial statements


(presented in thousands of Reais unless otherwise stated)
1

GENERAL INFORMATION

Klabin S.A. (the "Company") and its subsidiaries operate in segments of the paper and pulp industry
to serve domestic and foreign markets, supplying wood, packaging paper, paper sacks and
corrugated cardboard boxes. Their operations are fully integrated, from forestry activities to the
production of the final products. Klabin S.A. is a publicly held corporation whose shares and
certificates of deposit of shares (Units) are traded on the So Paulo Commodities, Futures and Stock
Exchange (BM&FBOVESPA). The Company is domiciled in Brazil and headquartered in So Paulo.
The Company also has investments in Special Partnership Companies (SPCs) for the specific
purpose of raising funds from third parties for reforestation projects. The Company, as an ostensible
partner, has contributed forest assets, mainly forests and land, by means of the granting of the right
to use these assets, whereas the other investing stockholders have contributed cash to these SPCs.
The SPCs give Klabin S.A. a preemptive right to acquire forestry products at market prices and
conditions.
The Company also has ownership interests in other companies (Notes 3 and 11) whose operational
activities relate to the Company's business objectives.
The issue of these financial statements of the Company and its subsidiaries was authorized by the
Board of Directors on February 2, 2016.
1.1 Corporate restructuring
On January 7, 2014, the Company published in the market, in a Significant Event Notice, the
effectiveness of the resolutions approved by the Stockholders' Extraordinary General Meeting held
on November 28, 2013, corresponding to:
Listing in Level 2 of BM&FBOVESPA
The Company starts to adhere to the special listing segment of Level 2 of the Sao Paulo Securities,
Commodities and Futures Exchange (BM&FBOVESPA), and the Company's shares became bookentry shares and began to be traded accordingly from January 9, 2014.
Issue of new shares
After the corporate restructuring of the controlling stockholders Klabin Irmos & Cia ("KIC") and
Niblak Participaes ("Niblak"), 28,274,611 new common shares of the Company were issued and
granted to the controlling stockholders.
After this issue of new shares, the Company's fully subscribed and paid-up capital corresponds to
945,957,907 shares, with 345,102,174 nominative common shares (ON) and 600,855,733
nominative preferred shares (PN).
These shareholding changes occurred before the stock splits on March 20, 2014.

30

Changes in the Bylaws


Reviews of and adjustments to the Bylaws were approved due to the items mentioned above, besides
the change in the authorized capital, changing to 1,120,000,000 shares, eliminating the additional
dividend of 10% to the stockholders holding preferred shares, and granting them the right to vote,
as approved by the Special Meeting of those Stockholders holding preferred shares at November 29,
2013.
Certificate of deposit of shares ("Units")
The Company implemented the program of issuance of certificates of deposit of shares ("Units"),
which comprise one common share (ON) and four preferred shares (PN). The negotiations
concerning the Units began on January 10, 2014.
During the first quarter of 2014, three conversion windows were open, which resulted in the
conversion of 598 million units. From April 24 to 29, the Company opened a new conversion
window, which resulted in the creation of 14 million new units. During the third quarter of 2014, the
changes in shares resulted in the creation of 2 million new units, with another conversion window
being opened in November 2014, for the purpose of allowing the conversion of the American
Depositary Receipt ("ADR") Program shares into units, totaling 689 million units in the entire
program.
At December 31, 2015, the Company's shares (in millions) are divided as follow:
Units

Non-units

Total

Common (ON)

694

1,155

1,849

Preferred (PN)

2,774

109

2,883

3,468

1,264

4,732

1.2 Stock split


At the Extraordinary General Meeting held on March 20, 2014, the stockholders approved a 5-for-1
stock split of shares of the same class and type.
Therefore, the Company's share capital on March 20, 2014 amounted to 4,729,789,535 shares
(1,684,897,850 registered common shares and 3,044,891,685 registered preferred shares).
The Company's Bylaws were changed in order to reflect the changes in the number of shares, and
the capital limit was changed to 5,600,000,000 shares.
1.3 Contract for the sale of pulp
On May 4, 2015, the Company, together with Fibria Celulose S.A. ("Fibria"), announced to the
market a six-year contract agreed for the supply of short-fiber pulp, to be produced in the new pulp
plant which is under construction in the city of Ortigueira, in the state of Paran.
The beginning of the contract is expected for 2016. It is effective for six years, and can be renewed if
mutually agreed by the parties. A commitment to purchase at least 900,000 annual metric tons is
established by Fibria, for the first four years, with phased-in reductions in the subsequent two years,
for sale in countries outside South America. The price will be the average net amount practiced by
Fibria in the market.
31

The commercial operation resulting from the contract is an innovation in the global pulp market
which will benefit both companies, since it combines Fibria's commercial expertise with Klabin's
acknowledged production abilities.
2

BASIS OF PRESENTATION OF THE


SIGNIFICANT ACCOUNTING PRACTICES

FINANCIAL

STATEMENTS

AND

2.1 Basis of presentation of the financial statements


The parent company and consolidated financial statements have been prepared in accordance with
accounting practices adopted in Brazil, including the pronouncements issued by the Brazilian
Accounting Pronouncements Committee (CPC), as well as according to the International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
The financial statements have been prepared under the historical costs convention, as modified by
available-for-sale financial assets, other assets, financial liabilities and biological assets measured at
fair value.
2.2 Summary of significant accounting practices adopted
The main accounting practices adopted by the Company and its subsidiaries are defined below and
were consistently applied to the years presented.
a) Functional currency and translation of foreign currencies
These financial statements are presented in the Brazilian Real (R$), which is the functional and
presentation currency of the Company and its subsidiaries, except for subsidiary Klabin Argentina
and Klabin Finance (Note 3), whose functional currencies are the Argentine Peso (A$) and the US
Dollar (USD), respectively.
(i) Transactions and balances
Foreign currency transactions are originally recorded at the foreign exchange rate effective as at the
transaction date. Foreign exchange gains and losses resulting from the difference between the
translation of assets and liabilities in foreign currency at the end of the reporting period are
recognized in the Company's statement of operations.
(ii) Foreign subsidiaries
Foreign subsidiaries with the characteristics of a branch have the same functional currency as the
Company. The foreign exchange differences arising for the subsidiaries, which have a different
functional currency, resulting from the translation of its financial statements, are recorded
separately in an equity account, named "carrying value adjustments" (comprehensive income). On
the sale of a foreign subsidiary, the accumulated deferred amount recognized in equity relating to
this foreign subsidiary is recognized in the statement of operations.
The assets and liabilities of this foreign subsidiary are translated using the foreign exchange rate
prevailing at the end of the reporting period. Income and expenses are translated at the foreign
exchange rates prevailing at the dates of the transactions.

32

b) Cash and cash equivalents


Cash and cash equivalents include cash on hand, bank deposits and highly-liquid short term
investments that are readily convertible into a known amount of cash and are subject to an
immaterial risk of changes in value.
c) Financial instruments
Financial instruments are initially recognized at fair value plus, in the case of financial assets or
financial liabilities not carried at fair value through profit or loss, transaction costs that are directly
attributable to the acquisition or issuance of the financial asset or financial liability. They are
subsequently measured at the end of each reporting period based on the classification of financial
instruments in the following categories: 1) financial assets: (i) measured at fair value through profit
or loss, (ii) loans and receivables, and (iii) available for sale; 2) financial liabilities: (i) measured at
fair value through profit or loss, and (ii) other financial liabilities.
(i) Marketable securities
Marketable securities are considered as available-for-sale and are recognized in finance income
(costs), according to their fair value.
(ii) Borrowing
The balance of borrowing refers to the amount of funds raised, plus interest and charges
proportional to the period incurred, less installments paid, and includes the foreign exchange
variation on the liability, if applicable.
(iii) Debentures
This is the balance of debentures that are mandatorily convertible into shares and considered to be
hybrid (compound) financial instruments due to their nature, and are segregated, upon issuance,
into debt components and equity. The amount of interest to be paid to the debenture holders up to
the date of conversion, measured at present value, plus foreign exchange recognized on the
liabilities, when applicable, is recorded in liabilities.
The debentures that are not mandatorily convertible are recorded in liabilities at the amount
corresponding to the total raised funds, plus interest and charges, proportionately to the time
elapsed, less amortized installments and interest paid.
Financial assets and liabilities are offset, and the net amount presented in the balance sheet when
there is a legally enforceable right to offset the recognized amounts, and there is an intention to
settle on a net basis or to realize the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be enforceable in the normal
course of business and in the event of default, insolvency or bankruptcy of the Company or the
counterparty.
d) Trade receivables
Trade receivables are stated at the original amounts of the invoices for sales of products, plus
foreign exchange variations when applicable. The provision for the impairment of trade receivables
is recorded based on an individual analysis of the receivables and at an amount considered by
management as sufficient to cover probable losses on their realization, which can be modified as a
result of the recovery of receivables from default customers or a change in a customer's financial
situation.
33

The adjustment to present value of trade receivables is not material due to the short period of their
realization.
e) Inventory
Inventory is stated at average purchase cost, net of taxes to be offset, when applicable, and the fair
value of biological assets at the cut-off date, which are both lower than their net realizable values.
Inventory of finished products is valued based on the cost of processed raw materials, direct labor
and other production costs.
When necessary, inventory is reduced by a provision for losses, which is set up in cases of inventory
devaluation, obsolescence of products and physical inventory losses. In addition, because of the
nature of the Company's products, obsolete finished products may be recycled for reuse in
production.
f) Income tax and social contribution
The Company calculates current and deferred corporate income tax (IRPJ) and social contribution
on net income (CSLL) based on the rate of 15%, plus a 10% surcharge on any taxable profit
exceeding R$ 240, for income tax and 9% on any taxable profit for social contribution. The balances
are recognized in the Company's results on an accruals basis.
The amounts of deferred income tax and social contribution are recorded net in the balance sheet,
in non-current assets or liabilities.
Subsidiaries have their taxes calculated and accrued in accordance with the legislation of their
country and/or their specific tax system, including, in some cases, the presumed profit. The
provision for current income tax and social contribution for the year is stated in the balance sheet
net of tax prepayments made during the year.
g) Investments
These refer to investments in subsidiaries and jointly-controlled subsidiaries accounted for using
the equity accounting method, based on the Company's ownership interest in these companies. The
financial statements of subsidiaries and jointly-controlled subsidiaries are prepared for the same
reporting period as that adopted by the Company. When necessary, adjustments are made to bring
their accounting policies in line with those adopted by the Company.
Unrealized gains and losses resulting from transactions between the Company and its subsidiaries
and jointly-controlled subsidiaries are eliminated for equity accounting purposes in the parent
company balance sheet, as well as for consolidation purposes.
At the end of each reporting period, the Company determines if there is objective evidence that the
investments in the subsidiaries or jointly-controlled subsidiaries are impaired. If there is an
indication of impairment, the Company calculates the amount of the impairment loss and
recognizes it in the statement of operations.

34

The foreign exchange variation on the investment in foreign subsidiaries recognized in


"Comprehensive income" is classified as a carrying value adjustment and realized through the
realization of the investment to which it refers.
In the consolidated financial statements, the investors' interest in SPCs (Notes 3 and 11) is
presented in the balance sheet in liabilities, under "Other payables - investors in SPCs", as it refers
to financial liabilities, and not to equity instruments, in accordance with CPC 39 Financial
instruments: Presentation.
The Company's management treats Special Partnerships as independent entities with the
characteristics of subsidiaries, which are recorded in the parent company financial statements
under the equity accounting method.
h) Property, plant and equipment
Property, plant and equipment are stated at their cost of acquisition or construction, less taxes to be
offset, when applicable, and accumulated depreciation. Based on the option exercised by the
Company upon the first-time adoption of IFRS, the deemed cost of property, plant and equipment
(land) was determined.
Depreciation is calculated on a straight line basis, taking into consideration the estimated useful
lives of the assets, based on the expected future economic benefits, except for land, which is not
depreciated. The estimated useful lives of the assets are reviewed annually and adjusted, if
necessary, and may vary based on the technological stage of each unit. The useful lives of the
Company's assets are stated in Note 12.
The costs of maintaining the Company's assets are allocated directly to profit for the year, when
realized. Finance charges are capitalized to property, plant and equipment, when incurred on
construction in progress, if applicable.
i) Impairment of assets
Property, plant and equipment and other assets are tested for impairment on an annual basis or
whenever significant events or changes in circumstances indicate that their carrying amounts may
not be recoverable. When this is the case, the recoverable amount is calculated to determine
whether assets are impaired.
The recoverable amount of an asset is the higher of the net sales price and the value in use of the
asset or the Cash-Generating Unit (CGU) to which it belongs, and is determined individually for
each asset, unless the asset does not generate cash inflows that are independent from those of other
assets or groups of assets. In estimating the value in use, estimated future cash flow is discounted to
its present value, using a discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset.
An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its
recoverable amount, which is the higher of the net sales price and the value in use of that asset.

35

j) Biological assets
Biological assets refer to eucalyptus and pine forests, which are used for the production of packaging
paper, paper sacks and corrugated cardboard boxes, as well as being sold to third parties.
Harvesting and replanting have an approximate cycle of 7 - 14 years, which varies based on the crop
and genetic material to which they refer. Biological assets are measured at fair value, less estimated
selling costs at the time of harvest.
Significant assumptions for determining the fair value of biological assets are stated in Note 13.
The valuation of biological assets is carried out on a quarterly basis by the Company, and any gain
or loss is recognized in the statement of operations in the period in which it occurs, in a specific line
named "Change in fair value of biological assets". The depletion of biological assets is measured
based on the amount of wood cut, carried at fair value.
k) Non-current assets and liabilities
Non-current assets and liabilities comprise receivables and payables maturing more than 12 months
after the end of the reporting period, plus corresponding charges and monetary variations incurred,
if applicable, through the end of the reporting period.
l) Trade payables
Trade payables are obligations to pay for goods or services that have been acquired from suppliers
in the ordinary course of business. Trade payables are recognized initially at fair value and
subsequently measured at amortized cost using the effective interest rate method, when applicable.
m) Provisions
A provision is recognized when the Company has a present legal or constructive obligation as a
result of past events, it is probable that an outflow of resources will be required to settle the
obligation, and the amount has been reliably estimated.
The expense related to any provision is presented in the statement of operations, net of any
reimbursement. If the time effect of the amount is material, the provision is discounted using a
discount rate that reflects the risks specific to the obligation, if applicable.
The Company records provisions for tax, social security, labor and civil claims, which are accrued
when lawsuits are assessed by the Company's legal counsel and management as being likely to lead
to losses. This assessment is carried out considering the nature of the lawsuits, similarities to prior
lawsuits and the progress of ongoing litigation.
When the Company expects that the amount of a provision will be fully or partially reimbursed, this
asset is recognized only when realization is considered clear and certain, with no recognition of
assets in scenarios of uncertainty.

36

n) Sales revenue
Sales revenue is stated net of taxes, discounts and rebates, and is recognized when all the risks and
rewards of ownership of the product are transferred to the buyer, to the extent that it is probable
that economic benefits will be generated and will flow to the Company and its subsidiaries and
jointly-controlled subsidiaries, and when these benefits can be reliably measured based on the fair
value of the consideration received or receivable, net of discounts, rebates and taxes or charges on
sales.
o) Employee benefits and private pension plan
The Company grants employee benefits such as life insurance, healthcare, profit sharing and other
benefits, which are recognized on an accruals basis and are discontinued at the end of the
employment relationship with the Company.
Additionally, the Company granted a private pension and healthcare plan to former employees who
had retired by 2001. The liability and the result relating to these benefits are recognized based on an
actuarial valuation prepared by an independent expert. Gains and losses on the actuarial valuation
of benefits generated by changes in actuarial assumptions are recognized in an account in equity
named "Carrying value adjustments" (comprehensive income), as required by CPC 33 (R1)
Employee benefits.
p) Stock option plan
The stock option plan offered by the Company is measured at fair value on the date on which it is
granted, and the related expense is recognized in the statement of operations during the period in
which the granting right is acquired, against equity in the "Carrying value adjustments" group.
q) Government grant
Government grants received by the Company are recognized to the extent that the requirements
relating to the grant are complied with. Grants received for the purpose of offsetting expenses are
recognized as a reduction of the expenses expected to be offset.
In the case of government grants for the purpose of investment in assets, the benefits are recorded
in the balance sheet as being granted by the governmental agency, and they can be either recorded
in liabilities, or as deferred revenue, recorded as revenue, on a systematic basis throughout the
useful life of the acquired asset, or deducted from the grant-related asset, thereby being recognized
as revenue through credit to the depreciation recorded as an expense in the result.
In case the benefits received in the form of government grants must not be distributed to the
stockholders, the related amounts are reclassified through the allocation of the result for the year to
a specific "Tax incentive reserve" account, in equity.
r) Significant accounting judgments, estimates and assumptions
In preparing the financial statements, judgments, estimates and assumptions are utilized to account
for certain assets, liabilities, income and expenses for the periods. The accounting judgments,
estimates and assumptions adopted by management are made utilizing the best information
available at the financial statement reporting date, involving experience of past events, forecasts of
future events and the assistance of experts, when applicable.

37

The financial statements include various estimates, including, but not limited to, the realization of
deferred tax assets, the fair value measurement of biological assets, and the provision for tax, social
security, civil and labor claims and adjustment at the present value of the balances.
Actual results may differ from these estimates, and the Company could be exposed to material
losses.
s) Statement of value added
The Brazilian corporate legislation requires listed companies to present the statement of value
added as part of the set of financial statements of a company. The purpose of this statement is to
show the wealth created by the Company and its distribution during the reporting period.
IFRS does not require the presentation of this statement. Therefore, the presentation of such
statements is considered supplementary information, and not part of the set of financial statements.
2.3 New technical pronouncements, revisions and interpretations not yet effective
The International Accounting Standards Board (IASB) approved and issued the following new
standards, which have not yet become effective or been adopted early by the Company, since the
Brazilian Accounting Pronouncements Committee (CPC) has not yet issued the corresponding local
pronouncements. Therefore, since the early adoption of these new standards is not allowed in
Brazil, management has been studying the possible future impacts of the adoption.
(i) IFRS 15 - Revenue from Contracts with Customers
This standard replaces IAS 11 "Construction Contracts", IAS 18 "Revenue" and related
interpretations and introduces the principles to be applied by an entity to determine the measure
and recognition of revenue. The effective date of this revision is January 1, 2018.
(ii) IFRS 9 Financial Instruments
This standard addresses the classification, measurement and recognition of financial assets and
financial liabilities. The main changes resulting from IFRS 9 are: (i) new criteria for the
classification of financial assets; (ii) new impairment model for financial assets, which is a hybrid of
expected and incurred losses, replacing the current model of incurred losses; and (iii) relaxation of
the requirements for the adoption of hedge accounting. The effective date of this revision is January
1, 2018.
(iii) IFRS 16 Leases
This new standard, which replaces IAS 17 - "Leases" and related interpretations, requires lessees to
recognize the liability for the future payments and the right of use of the leased asset for virtually all
lease contracts, including operating leases. Certain short term and low-value contracts may be out of
the scope of this new standard. The criteria for the recognition and measurement of leases in the
financial statements of the lessors are substantially maintained. This new standard becomes
effective as from January 1, 2009, and management has been studying the effects of adopting it.

38

(iv) IAS 41 Agriculture (equivalent to CPC 19 Biological assets and agricultural products)
This standard currently requires that biological assets relating to agricultural activities be measured
at fair value, less cost of sale. When revising the standard, IASB decided that bearer plants should be
accounted for as a property, plant and equipment asset (IAS 16/CPC 27), that is, at cost less
depreciation or impairment. Bearer plants are defined as those used to produce fruit for several
years, but which, after development, does not experience significant changes. The only future
economic benefit from the bearer plant results from the agricultural production that it generates.
Apple trees, orange trees and grape vines are examples of bearer plants. In the case of plants whose
roots remain in the soil for a future harvest but which, at the end, are not sold, these roots meet the
requirements for being referred to as a bearer plant, which is applicable to the forests that are
expected to undergo more than one harvest. Since the Company's forests are harvested and
replanted, they do not undergo a second harvest. Therefore, management has concluded that
adopting the amendment to this standard will not have any effects on the current accounting
practice or in the calculation of the fair value of its forests. The standard becomes effective from
January 1, 2016.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to
have a material impact on the Company's financial statements.

CONSOLIDATION OF FINANCIAL STATEMENTS

Subsidiaries are fully consolidated from the date of acquisition of control and continue to be
consolidated until the date on which such control ceases to exist, except for jointly-controlled
entities (joint ventures), which are accounted for using the equity accounting method both in the
parent company financial statements and in the consolidated financial statements.
The subsidiaries' financial statements are prepared for the same reporting period as that of the
parent company, using accounting policies that are consistent with the policies adopted by the
parent company. The following criteria are adopted for consolidation purposes: (i) investments in
subsidiaries and equity in the results of investees are eliminated, and (ii) profits from intercompany
transactions and the related assets and liabilities are also eliminated. The consolidated financial
statements comprise Klabin S.A. and its subsidiaries as at December 31, 2015 and 2014, as follows:

39

Ownership - %
12/31/2015
12/31/2014

Country

Activity

Participation

Subsidiaries:
Klabin Argentina S.A.
Klabin Ltd.

Argentina
Cayman Islands

Direct
Direct

100
100

100
100

Klabin Trade

United Kingdom

Indirect

100

100

Direct

100

100

Direct

100

100

Direct

100

100

Brazil
Brazil
Luxembourg

Industrial sacks
Investments in other companies
Sale of products in the
foreign market
Sale of products in the
foreign market
Hotels
Manufacture of
phytotherapic products
Forestry
Investments in companies
Finance

Direct
Direct
Direct

100
100
100

100
100
100

Brazil
Brazil
Brazil

Reforestation
Reforestation
Reforestation

Direct
Direct
Direct

89
77
76

90
73
70

Brazil

Reforestation

Direct

51

51

Klabin Forest Products Company


IKAP Empreendimentos Ltda.
Klabin do Paran Produtos Florestais Ltda.
Klabin Florestal Ltda.
Monterla Holdings S.A.
Klabin Finance S.A.
SPCs:
Correia Pinto
CG Forest
Monte Alegre
Joint ventures (not consolidated)
Florestal Vale do Corisco S.A.

United States of
America
Brazil
Brazil

Investments in joint ventures


Considering its characteristics, the investment in Florestal Vale do Corisco S.A. is classified as a
joint venture, and is recorded based on the equity accounting method in the parent company and
consolidated financial statements.
4

CASH AND CASH EQUIVALENTS

In accordance with its policy, the Company has made low-risk investments with no significant risk
of changes in value with financial institutions considered by management as prime banks both in
Brazil and abroad, based on the ratings given to them by ratings agencies. Management considers
these financial assets as cash and cash equivalents due to their immediate liquidity with financial
institutions, and an insignificant risk of changes of value.

Cash and bank deposits - local currency


Cash and bank deposits - foreign currency (i)
Financial investments - local currency
Financial investments - foreign currency (i)

Parent company
12/31/2015 12/31/2014
20,416
45,700
3,661,827
3,798,943
348,941
186,308
4,031,184
4,030,951

12/31/2015
21,590
34,921
3,767,021
1,230,191
5,053,723

Consolidated
12/31/2014
87,656
18,138
3,880,452
1,259,587
5,245,833

(i) In US Dollars

Financial investments in local currency, relating to Bank Deposit Certificates (CDBs) and other
repurchase transactions, are indexed to the variations of the Interbank Deposit Certificate (CDI)
with an average annual yield of 14.32% (11.78% at December 31, 2014), and financial investments in
foreign currency, relating to time deposits in US Dollars, have an average annual yield of 1.90%
(0.55% at December 31, 2014). The investments have daily liquidity, as guaranteed by the financial
institutions.

40

MARKETABLE SECURITIES

Marketable securities comprise National Treasury Bills (LFTs), with yields indexed to the Special
System for Settlement and Custody (SELIC) interest rate, and with maturities up to 2020. At
December 31, 2015, the balance of these securities was R$ 557,143 (R$ 497,604 at December 31,
2014). Management has classified these securities as available-for-sale financial assets. There is an
active trading market for securities with these characteristics, and their fair value basically
represents the principal plus originally established interest.
Marketable securities are included in Level 1 of the fair value measurement hierarchy, according to
the hierarchy defined in CPC 46 (equivalent to IFRS 13), "Fair value measurement", since they are
assets with prices quoted in the market.
6

TRADE RECEIVABLES

Parent company
12/31/2015
Trade receivables
Local
Foreign
Total trade receivables
Provision for impairment of trade
receivables

Overdue
% on total portfolio (without provision for
impairment of trade receivables)
1 to 10 days
11 to 30 days
31 to 60 days
61 to 90 days
More than 90 days
Not yet due
Total portfolio

12/31/2014

Consolidated
12/31/2015

12/31/2014

920,171
251,369
1,171,540

864,440
141,129
1,005,569

920,232
618,839
1,539,071

864,513
329,408
1,193,921

(37,907)
1,133,633

(45,177)
960,392

(37,972)
1,501,099

(45,245)
1,148,676

91,490

113,609

92,594

138,697

4.57%
4,685
10,483
6,961
14,344
55,017
1,042,143
1,171,540

6.81%
4,073
16,674
20,468
7,817
64,577
891,960
1,005,569

3.55%
4,685
10,875
7,608
14,344
55,082
1,408,505
1,539,071

7.83%
4,073
33,748
21,532
14,767
64,577
1,055,224
1,193,921

The average collection period for trade receivables is approximately 90 days for domestic market
sales and approximately 120 days for foreign market sales, and interest is charged after the
contractual maturity date. As mentioned in Note 25, the Company has rules for monitoring
receivables and overdue notes as well as for monitoring the risk of not receiving the amounts arising
from credit sale transactions.
The provision for the impairment of trade receivables is considered sufficient to cover any losses on
the outstanding receivables. The changes in the provision for the impairment of trade receivables
were as follow:

41

At December 31, 2013


Provision for the period
Reversals
Definitive write-off
At December 31, 2014
Provision for the period
Reversals
Definitive write-off
At December 31, 2015

Parent company

Consolidated

(47,153)
(3,576)
4,281
1,271
(45,177)
(16,349)
1,750
21,869
(37,907)

(47,298)
(3,499)
4,281
1,271
(45,245)
(16,347)
1,750
21,870
(37,972)

The balance of the provision for the impairment of trade receivables relates mainly to trade notes
overdue for more than 90 days. The expense incurred on the recognition of the provision for the
impairment of trade receivables is recorded in the statement of operations, under "Selling
expenses".

42

RELATED PARTIES

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)

(441)

1,070,334

2,374

726,525

71,682

113

37,762

(i)
Subsidiary

(i) and (vi)


Subsidiary

(68,260)

28,165
1,561,920

(vi)

Klabin
Finance

7,861
(12,025)

1,508

1,791

(ii) and (v)


Subsidiary

Soc. Conta de
Participao
Correia Pinto

(6,985)

675

(iii)
Stockholder

Monteiro Aranha
S.A.

Balance receivable from product sale transactions carried out under terms and conditions established between the parties;
Purchases of timber at usual market prices and on normal terms and conditions;
Licensing for the use of brands;
Prepaid expenses for guarantee commission, calculated based on the BNDES financing balance of 1% semiannually;
Supply of seedlings, seeds and services at usual market prices and under normal terms and conditions;
Loans raised based on normal market conditions;
Advances on future capital subscriptions;
Other.

Transactions
Sales revenue
Purchases
Interest expenses on financing
Guarantee commission - expenses
Royalty expenses

Balances
Current assets
Non-current assets
Current liabilities
Non-current liabilities

Type of relationship

Klabin
Argentina

Klabin
Trade

a) Balances and transactions with related parties

(22,266)
(34,089)

3,295

1,081

Klabin Irmos &


Cia.
(iii), (iv), and
(viii)
Stockholder

(220,085)

420,544
3,723,450

(vi)
Stockholder

BNDES

(5,481)

19,838
(414)

5,266
1,799
726
127

(vii) and (viii)

Other

1,169,715
(12,439)
(288,786)
(22,266)
(46,555)

772,425
1,799
457,287
5,285,610

Total

12/31/2015

43

725,396
(21,179)
(122,691)
(13,580)
(40,973)

434,269
844
591,847
2,111,981

Total

Parent company
12/31/2014

12/31/2015
Monteiro
Aranha S.A.
(i)
Stockholder

Type of relationship
Balances
Current assets
Current liabilities
Non-current liabilities
Transactions
Interest expenses on financing
Guarantee commission - expenses
Royalty expenses

Klabin Irmos
& Cia.
(i), (ii), and (iv)
Stockholder

BNDES
(iii)
Stockholder

675

1,081
3,295

(6,985)

(22,266)
(34,089)

420,544
3,723,450

Other
(iv)

Total

530

(220,085)
(5,481)

Consolidated
12/31/2014
Total

1,081
425,044
3,723,450

2,613
580,161
1,578,085

(220,085)
(22,266)
(46,555)

(115,679)
(13,580)
(40,973)

(i) Licensing for the use of brands;


(ii) Prepaid expenses for guarantee commission, calculated based on the BNDES financing balance of 1% semiannually;
(iii) Loans obtained based on usual market conditions;
(iv) Other.

b) Management remuneration and benefits


Management remuneration is determined by the stockholders at the Annual General Meeting, in
accordance with Brazilian corporate legislation and the Company's bylaws. Accordingly, at the
Annual General Meeting held on March 19, 2015, the stockholders established the overall amount of
the annual remuneration of the members of the Board of Directors and Statutory Audit Board as up
to R$ 41,700 for 2015 (R$ 35,800 for 2014).
The table below shows the remuneration of the members of the Board of Directors and Statutory
Audit Board:
Parent company and Consolidated
Short term
12/31/2015
12/31/2014
Board of Directors and
Statutory Audit Board

30,332

31,120

Long term
12/31/2015
12/31/2014
5,100

848

Total benefits
12/31/2015
12/31/2014
35,432

31,968

Management remuneration includes the fees paid to the Board members, along with the fees paid
to, and the variable remuneration of, officers. Long term benefits relate to contributions made by
the Company to the pension plan. These amounts are mainly recorded under "Operating expenses administrative".
In addition, the Company grants a stock option plan to the statutory directors and other executives,
as described in Note 22.

44
KLABIN15FT.docx

INVENTORY

Finished products
Raw materials
Timber and logs
Fuel and lubricants
Maintenance supplies
Provision for losses
Other

12/31/2015
124,413
162,889
150,842
7,137
161,956
(13,633)
20,207
613,811

Parent company
12/31/2014
100,512
141,015
112,226
6,905
136,095
(15,664)
15,647
496,736

12/31/2015
162,899
196,459
150,842
7,137
167,478
(13,862)
30,173
701,126

Consolidated
12/31/2014
135,260
167,457
112,226
6,905
140,187
(15,900)
17,574
563,709

The inventory of raw materials includes paper rolls transferred from paper units to conversion
units.
The expense incurred on the recognition of provision for inventory losses is recorded in the
statement of operations under "Cost of products sold".
The Company does not have any inventory pledged as collateral.
9

TAXES RECOVERABLE

Current
assets

12/31/2015

12/31/2014

Non-current
assets

Non-current
assets

Current assets

Value-added Tax on Sales and


Services (ICMS)
Social Integration Program (PIS)
Social Contribution on
Revenue (COFINS)
Income tax/social contribution
Other
Parent company

122,397
40,056

1,048,897
10,897

58,237
1,512

325,652
9,990

179,329
324,041
57,925
723,748

62,578
37,266
1,159,638

4,963
218,895
39,922
323,529

57,698
35,544
428,884

Subsidiaries
Consolidated

12,753
736,501

1,159,638

8,439
331,968

428,884

The Company recognizes credits of taxes and contributions levied on purchases of property, plant
and equipment, as permitted by the prevailing legislation, in addition to the ICMS government
grant obtained from the Government of the State of Paran in relation to the new pulp plant (the
"Puma Project"). The credits are being utilized to offset against taxes payable of the same nature or
other taxes.
Based on analyses and the budget projection approved by management, the Company does not
foresee any risk of non-realization of these tax credits.
PIS/COFINS and ICMS on current assets are expected to be offset against the same taxes payable in
the next 12 months, according to management's estimates.

45
KLABIN15FT.docx

10

INCOME TAX AND SOCIAL CONTRIBUTION

a) Nature and expected realization of deferred taxes


The balances of deferred tax assets and liabilities at December 31, 2015 and 2014 were as follow:

Provision for tax, social security, labor and civil contingencies


Write-off of deferred charges (Law 12,973/14)
Income tax and social contribution losses
Actuarial liability
Other temporary differences
Non-current assets
Fair value of biological assets
Revisions to useful lives of property, plant and equipment
(Law 12,973/14)
Deemed cost of property, plant and equipment (land)
Adjustment to present value of balances
Asset revaluation reserve
Interest capitalized (Law 12,973/14)
Other temporary differences
Non-current liabilities
Net balance in the balance sheet (liabilities)

12/31/2015
24,556
6,385
892,392

Parent company
12/31/2014
24,787
9,205
57,464

12/31/2015
24,556
6,385
892,392

Consolidated
12/31/2014
24,787
9,205
57,464

20,314
64,897
1,008,544

19,251
52,046
162,753

20,314
64,981
1,008,628

19,251
52,133
162,840

692,340

737,769

856,369

879,811

322,032
489,178
45,641
25,092
131,939
20,046
1,726,268

276,642
492,044
46,792
25,124
25,189
44,441
1,648,001

322,032
561,798
45,641
25,092
131,939
20,026
1,962,897

276,642
564,664
46,792
25,124
25,189
44,441
1,862,663

717,724

1,485,248

954,269

1,699,823

Up to 2013, the Company adopted the Transitional Tax Regime (RTT), established by
Law 11,941/09, for the tax treatment of income tax and social contribution on the effects arising
from the adoption of CPCs. The Company opted for the early adoption of Law 12,973/14 in 2014.
Management, based on the budgets approved by the Board of Directors, estimates that tax credits
arising from temporary differences and tax losses will be realized as follows:

2016
2017
2018
2019

Parent company
311,825
217,999
172,630
306,090

12/31/2015
Consolidated
311,825
217,999
172,630
306,174

1,008,544

1,008,628

The above projection of the realization of the balance might not materialize if the estimates utilized
in the preparation of the financial statements differ from the actual amounts.
Information about the Company's taxes that are subject to litigation is disclosed in Note 17.

46
KLABIN15FT.docx

b) Analysis of income tax and social contribution in the results

Current tax expense


Adoption of the accruals basis for foreign exchange rate
variations (*)
Adjustments in respect of the prior year
Current

12/31/2015
(15,699)

Parent company
12/31/2014
(83,359)

12/31/2015
(30,210)

Consolidated
12/31/2014
(96,732)

(15,699)

243,045
7,858
167,544

(30,210)

243,045
7,858
154,171

(145,564)
892,392

(60,606)
-

(189,499)
892,392

(60,607)
-

45,389
(45,429)
746,788

(262,416)
(47,634)
(67,231)
(437,887)

45,390
(23,462)
724,821

(262,416)
(47,634)
(106,807)
(477,464)

Recognition and reversal of temporary differences


Recording of credits arising from tax losses
Adoption of the accruals basis for foreign exchange rate
variations (*)
Revisions to useful lives of property, plant and equipment
Variation in fair value and depletion of biological assets
Deferred

(*) Until 2013, the Company's management opted for the tax recognition criteria for the foreign exchange rate variations on its rights and
obligations on a cash basis, thus generating foreign exchange variation temporary differences. In 2014, the Company has adopted the accruals
basis of accounting to recognize its foreign exchange rate variations for tax purposes, thus ceasing to generate temporary differences.

c) Reconciliation of income tax and social contribution


with the result of applying the statutory tax rate

12/31/2015
Loss before income tax and social contribution

Parent company
12/31/2014

12/31/2015

Consolidated
12/31/2014

(1,984,286)

1,000,673

(1,947,808)

1,053,623

674,657

(340,229)

662,255

(358,232)

23,907
32,525
731,089

50,584
19,302
(270,343)

3,136
10,078
19,142
694,611

4,589
16,541
13,809
(323,293)

(15,699)
746,788

167,544
(437,887)

(30,210)
724,821

154,171
(477,464)

731,089

(270,343)

694,611

(323,293)

Income tax and social contribution at the rate of 34%


Tax effect on permanent differences:
Difference in taxation - subsidiaries
Equity in the results of investees
Other effects
Income tax and social contribution
. Current
. Deferred
Income tax and social contribution expense

d) Analysis of the impact of Law 12,973/14


On May 13, 2014, Law 12,973/14 was published, regulating the conversion of Provisional Measure
(MP) 627, which revoked the RTT, among other measures. The Law is effective from 2015, but early
adoption in 2014 was allowed. The Company opted for the early adoption of Law 12,973/14 in 2014
after carrying out a study on its impact. The main impacts related to the early adoption of the Law
are:
(i) Dividends - due to early adoption, dividends calculated based on the results obtained up to the
end of the calendar year 2013 are exempt from taxation.
(ii) Capitalized interest - it is possible to deduct the interest capitalized in property, plant and
equipment as it is incurred or through the depreciation of the property, plant and equipment item to
which it was allocated. The tax effect is temporary, however the advance use of the tax deductibility
benefit is permitted.

47
KLABIN15FT.docx

21,434

71,510
71,510
(25,163)

129,170
57,646
71,524
19,590

1,318,021
345,788
972,233
58,120

681,587
155,280
526,307
11,618

457,698

(4,900)
(1,007)

(17,007)
29,641

495,838

463,605

(17,999)
53,552

(20,484)
48,649

483,204

Soc. Conta de
Participao
Correia Pinto
428,052

Florestal Vale do
Corisco S.A. (ii)
455,039

134,544
25,889
108,655
15,074

83,050

14,647

68,403

17,566

Soc. Conta de
Participao CG
Forest
50,837

265,049
57,201
207,848
34,707

153,471

34,708

118,763

24,595

Soc. Conta de
Participao
Mt Alegre
94,168

(i) Parent company of Klabin Trade.


(ii) Because it is a joint venture (Note 3), Vale do Corsico is not consolidated and is the only investment in the consolidated balance sheet that is accounted for on an equity basis.
(iii) Includes the effects of variations in, and the realization of, fair value of biological assets (Note 13).

Total assets
Total liabilities
Equity
Profit (loss) for the year

2,045,966
1,991,849
54,117
(20,566)

54,120

(5,044)
69,789

71,510

Summary of the financial information of subsidiaries at December 31, 2015:

(30,378)

19,112

(25,382)
109,880

(30,592)

Klabin Finance
S.A.
5,210

3,579

(4,635)
55,721

13,513

Klabin Ltd. (i)


46,479

67,913
18

Klabin
Argentina S.A.
46,843

INVESTMENTS IN SUBSIDIARIES AND JOINTLY-CONTROLLED ENTITIES

At December 31, 2013


Acquisitions and capital contributions
Capital reduction
Dividends distributed
Equity in the results of investees (iii)
Foreign exchange variations on investments
abroad
At December 31, 2014
Acquisitions and capital contributions
Dividends distributed
Equity in the results of investees (iii)
Foreign exchange variations on investments
abroad
At December 31, 2015

11

13,816

14

11,432
2,370

58

Other
7,466
5,408
(1,500)

48

(5,044)
1,399,292

(4,635)
1,243,659
112,268
(21,907)
70,316

Total
1,134,094
5,408
(1,500)
(38,483)
148,775

12

PROPERTY, PLANT AND EQUIPMENT

a) Composition of property, plant and equipment

Parent company
Land
Buildings and construction
Machinery, equipment and facilities
Construction in progress
Other (i)
Consolidated
Land
Buildings and construction
Machinery, equipment and facilities
Construction in progress
Other (i)

Cost
1,776,761
676,240
4,986,462
6,620,794
442,080
14,502,337
2,008,613
682,058
5,007,468
6,627,185
444,261
14,769,585

12/31/2015

12/31/2014

(238,052)
(2,268,151)
(237,203)
(2,743,406)

Net
1,776,761
438,188
2,718,311
6,620,794
204,877
11,758,931

Net
1,784,065
449,862
2,740,247
2,948,566
188,727
8,111,467

(240,478)
(2,281,382)
(238,579)
(2,760,439)

2,008,613
441,580
2,726,086
6,627,185
205,682
12,009,146

2,013,562
453,484
2,745,677
2,949,530
189,134
8,351,387

Accumulated
depreciation

(i) Refers to leasehold improvements, vehicles, furniture and fittings and IT equipment.

Information about property, plant and equipment pledged as collateral in transactions carried out
by the Company is disclosed in Note 14, and information about the insurance coverage of assets is
disclosed in Note 27.
b) Summary of changes in property, plant and equipment
Parent company

At December 31, 2013


Purchases (i)
Disposals
Depreciation
Internal transfers
Interest capitalized (ii)
Other
At December 31, 2014
Purchases (i)
Disposals
Depreciation
Internal transfers
Interest capitalized (ii)
Other
At December 31, 2015

Land
1,785,738
(17,788)
16,115
1,784,065
7,348
(20,951)
6,299
1,776,761

Buildings
Machinery,
and
equipment and
construction
facilities
445,688
2,512,681
14
(1,377)
(15,827)
(22,592)
(234,577)
28,130
478,522
13
(566)
449,862
2,740,247
(4,563)
(790)
(3,060)
(21,107)
(274,241)
14,954
255,860
(168)
438,188

(495)
2,718,311

Construction
in progress
780,192
2,697,425
(596,523)
74,085
(6,613)
2,948,566
3,687,304
(324,106)
313,971
(4,941)
6,620,794

Other
146,691
(3,210)
(28,572)
73,756
62
188,727
1,426
(582)
(32,069)
46,993
382
204,877

Total
5,670,990
2,697,439
(38,202)
(285,741)
74,085
(7,104)
8,111,467
3,691,515
(25,383)
(327,417)
313,971
(5,222)
11,758,931

49

Consolidated

At December 31, 2013


Purchases (i)
Disposals
Depreciation
Internal transfers
Interest capitalized (ii)
Other
At December 31, 2014
Purchases (i)
Disposals
Depreciation
Internal transfers
Interest capitalized (ii)
Other
At December 31, 2015

Land
2,014,311
2,500
(19,288)
16,115
(76)
2,013,562
9,737
(20,951)
6,299
(34)
2,008,613

Buildings
Machinery,
and
equipment and
construction
facilities
450,102
2,517,458
35
931
(1,603)
(15,813)
(22,734)
(235,446)
28,130
479,514
(446)
(967)
453,484
2,745,677
(4,482)
4,330
(789)
(3,077)
(21,268)
(275,562)
14,954
255,860
(319)
441,580

(1,142)
2,726,086

Construction
in progress
780,357
2,699,260
(597,515)
74,085
(6,657)
2,949,530
3,692,435
(324,106)
313,971
(4,645)
6,627,185

Other
147,279
186
(3,270)
(28,726)
73,756
(91)
189,134
2,091
(488)
(32,276)
46,963
258
205,682

Total
5,909,507
2,702,912
(39,974)
(286,906)
74,085
(8,237)
8,351,387
3,704,111
(25,305)
(329,106)
(30)
313,971
(5,882)
12,009,146

(i) Net of recoverable taxes (Note 9).


(ii) Interest capitalized related to the borrowing obtained for investment projects, such as the Puma Project (Notes 14, 15, and 21).

Depreciation was mainly allocated to the production costs for the year.
c) Useful lives and depreciation method
The table below shows the annual depreciation rates calculated based on the straight line method,
which were applicable in the years ended December 31, 2015 and 2014, defined based on the
economically useful lives of assets:
Rate - %
Buildings and construction
2.86 to 3.33
Machinery, equipment and facilities
2.86 to 10 (*)
Other
4 to 20
(*) Mainly rate of 6%.

d) Construction in progress
The balance of construction in progress at December 31, 2015 relates to the following main projects:
(i) construction of a new pulp plant ("Puma Project"); (ii) expansion of the unit at Angatuba (SP);
(iii) insourcing of the forestry transportation; and (iv) current investments in the Company's
continuing operations.
Puma Project
At December 31, 2015, the general physical progress of the Puma Project was at 95%, and financial
disbursement was at 77%, as planned. The total amount budgeted for the project is R$ 7.2 billion
(net of recoverable taxes). The disbursement made until December 31, 2015 corresponds to R$ 6.7
billion and R$ 1.9 billion is expected to be paid in 2016, totaling a gross invested amount of R$ 8.6
billion.
The funds for investment are guaranteed by financing contracts and debentures issued with BNDES
in 2014, totaling R$ 4.2 billion, in addition to R$ 1.2 billion obtained with Finnvera (the Finnish
Export Credit Agency), and another R$ 1.2 billion from the Inter-American Development Bank
("IDB"), totaling R$ 6.6 billion.
During the execution of the project, the Company capitalizes the interest on borrowing used to
finance it. In 2015, interest capitalized in property, plant and equipment amounted to R$ 309,212,
totaling R$ 383,297 capitalized during the project, with a weighted average cost of 8% per annum.

50

e) Commitments
Contracts with suppliers taking part in the construction of the pulp plant (i.e. the Puma Project)
have been negotiated. These contracts relate to the main machinery, equipment and services
involved in the construction of the plant. The total value of the contracts was R$ 1.9 billion at
December 31, 2015. The amount shall be disbursed up to July 2016. The project is expected to start
up in the first quarter of 2016.
f) Impairment of property, plant and equipment
The Company did not identify indicators of impairment of its assets at December 31, 2015 and 2014.

13

BIOLOGICAL ASSETS

The Company's biological assets comprise the planting of pine and eucalyptus trees for the supply of
raw materials for the production of the pulp used in the manufacture of paper and for sales of logs
to third parties. Including its interest in the forestry area of its joint venture Florestal Vale do
Corisco, the Company owned 235 thousand hectares of planted areas at December 31, 2015 (239
thousand hectares at December 31, 2014), not including the permanent preservation areas and legal
reserve that it maintains in compliance with Brazilian environmental legislation.
The balance of the Company's biological assets consists of the costs for the formation of forests and
of the fair value difference on the cost of formation, less the costs necessary to prepare the assets for
use or sale, to ensure that the overall balance of biological assets is recorded at fair value, as follows:

Cost of development of biological assets


Fair value adjustment of biological assets

12/31/2015
836,726
2,020,416
2,857,142

Parent company
12/31/2014
856,364
2,154,031
3,010,395

12/31/2015
1,103,596
2,502,793
3,606,389

Consolidated
12/31/2014
1,094,836
2,572,249
3,667,085

The fair value measurement of biological assets considers certain estimates, such as estimates of the
price of wood, the discount rate, the harvesting plan for the forests and the productivity level, all of
which are subject to uncertainties and fluctuations which could have an impact on the Company's
future results.
a) Assumptions regarding the recognition of the fair value of biological assets
The Company recognizes its biological assets at fair value. In its calculation of this fair value, the
Company adopts the following assumptions:
(i) Eucalyptus forests are maintained at historical cost through the third year of planting and pine
forests through the fifth year of planting, based on management's understanding that during this
year the historical cost of biological assets approximated their fair values.
(ii) After the third and fifth years of the planting of eucalyptus and pine forests, respectively, the
forests are measured at fair value, which reflects the sales price of the asset less the costs necessary
to prepare the assets for the intended use or sale.

51

(iii) The methodology utilized in the fair value measurement of biological assets corresponds to the
discounted future cash flows estimated according to the projected productivity cycle of the forests,
taking into consideration price variations and the growth of biological assets.
(iv) The discount rate utilized for cash flows is the Company's weighted average cost of capital
(WACC), which is annually reviewed by management.
(v) The forest productivity volume is estimated based on stratification by species, genetic material,
forest management system, production potential, rotation and age of forests. Together, these
characteristics form an index called the Average Annual Growth (AAG) index, which is expressed in
cubic meters per hectare/year, and which is utilized as the basis in the projection of productivity.
The Company's harvesting plan varies mainly from six to seven years for eucalyptus trees and 14 to
15 years for pine trees.
(vi) The prices of biological assets, denominated in R$/cubic meter, are obtained through market
price surveys disclosed by specialized firms, and the prices charged by the Company on sales to
third parties. The prices obtained are adjusted by deducting the cost of capital relating to land, since
this asset contributes to the planting of forests, and other costs necessary to prepare the assets for
sale or consumption.
(vii) Planting expenses relate to the costs of the development of the biological assets.
(viii) The depletion of biological assets is calculated based on the fair value of the biological assets
harvested during the year.
(ix) The Company has decided to review the fair value of its biological assets on a quarterly basis,
since it understands that this year is sufficiently short to prevent any significant misstatement in the
fair value of the biological assets as recorded in its financial information.

52

b) Reconciliation and movement in fair value


At December 31, 2013
Planting
Depletion:
. Historical cost
. Fair value adjustment
Change in fair value due to:
. Price
. Growth
Sale of assets
At December 31, 2014
Planting
Depletion:
. Historical cost
. Fair value adjustment
Change in fair value due to:
. Price
. Growth
Sale of assets
At December 31, 2015

Parent company
2,819,598
62,863

Consolidated
3,321,985
103,085

(61,894)
(590,582)

(64,212)
(609,970)

310,378
477,939
(7,907)
3,010,395
70,069

383,503
540,601
(7,907)
3,667,085
100,471

(77,728)
(598,316)

(79,814)
(605,489)

11,950
452,749
(11,977)
2,857,142

36,114
499,999
(11,977)
3,606,389

The depletion of biological assets in the years presented was mainly included in production costs,
after allocation to inventory through the harvesting of forests and their use in the production
process or sales to third parties.
c) Sensitivity analysis
In accordance with the hierarchy set out in CPC 46 (equivalent to IFRS 13), "Measurements at fair
value", the calculation of biological assets is classified at Level 3 due to its complexity and
calculation structure.
The assumptions applied include sensitivity to the prices used in the evaluation, and the discount
rate used in the discounted cash flow. Prices refer to the prices obtained in the regions in which the
Company is located. The discount rate corresponds to the average cost of capital, taking into
consideration the basic interest rate (SELIC) and inflation levels.
Significant increases (decreases) in the prices used for the appraisal would result in an increase
(decrease) in the measurement at fair value of the biological assets. The weighted average price used
in the appraisal of the biological assets for 2015 was equivalent to R$ 57/m3 (R$ 55/m3 at December
31, 2014).
The effects of a significant increase (decrease) in the discount rate used in the measurement of the
fair value of biological assets would result in a decrease (increase) in the values measured. The
Company's WACC is updated on an annual basis. The new rate is applied as from the date of the
first quarterly evaluation for each year, and this rate remains unchanged for the year. The discount
rate used in the appraisal of the biological assets for the year ended 2015 was 5.9% in constant
currency (5.9% at December 31, 2014).

53

14

BORROWING

a) Composition of borrowing
Annual interest rate - %

12/31/2015
Current

In local currency
. BNDES - Project MA1100
. BNDES - Project Puma
. BNDES Other
. BNDES - FINAME
. Export credit notes (in R$)
. Other
. Commission
In foreign currency (ii)
. BNDES - Project Puma
. BNDES - Other
. Export prepayments
. Export credit notes
. Export prepayments in subsidiaries
. Other
. Commission

TJLP + 2.0 and basket (i) + 1.5


6.0% at TJLP + 2.48
TJLP + 4.82 and basket (i) + 2.06
2.5% to 10.28%
CDI
1.0 to 6.8

507
1,692,054
441,669
312,311
961,500
155,995
(4,040)
3,559,996

41,454
1,738,796
603,902
420,193
1,181,179
228,688
(38,971)
4,175,241

USD + 6.6
USD + 1.71 to 6.7
USD + LIBOR 6M + 1.7 to 6.4
USD + 2.0 to 8.0
USD + 3.1 to 5.7
USD + 1.9

12,558
50,182
415,180
492,904
30,122
86,477
(2,174)
1,085,249
1,700,494

992,042
284,867
1,581,444
5,347,602
1,561,920
1,233,036
(110,031)
10,890,880
14,450,876

1,004,600
335,049
1,996,624
5,840,506
1,592,042
1,319,513
(112,205)
11,976,129
16,151,370

USD + 5.2

46,790
(856)
(30,122)
15,812
1,716,306

1,952,400
(6,421)
(1,561,920)
384,059
14,834,935

1,999,190
(7,277)
(1,592,042)
399,871
16,551,241

Total Consolidated
Annual interest rate - %

12/31/2014
Current

In local currency
. BNDES - Project MA1100
. BNDES - Project Puma
. BNDES - Other
. BNDES - FINAME
. Export credit notes (in R$)
. Other
In foreign currency (ii)
. BNDES - Project Puma
. BNDES - Other
. Export prepayments
. Export credit notes
. Export prepayments in subsidiaries
. Other

TJLP + 2.0 and basket (i) + 1.5


TJLP + 2.5
TJLP + 4.8 and basket (i) + 3.3
2.5 to 4.5
CDI
1.0 to 6.8

Non-current

Total

297,169
1,776
172,194
71,800
37,299
127,554
707,792

37,892
200,500
652,243
315,587
780,500
91,818
2,078,540

335,061
202,276
824,437
387,387
817,799
219,372
2,786,332

USD + 6.6
USD + 5.2 to 7.4
USD + LIBOR 6M + 1.1 to 6.4
USD + 5.0 to 9.0
USD + 3.1 to 5.7
USD + 1.9

2,443
31,212
537,189
155,205
4,216
14,183
744,448
1,452,240

180,800
191,063
3,255,450
1,126,367
533,896
5,287,576
7,366,116

183,243
222,275
3,792,639
1,281,572
538,112
14,183
6,032,024
8,818,356

USD + 5.2

31,764
(4,216)
27,548
1,479,788

1,328,100
(533,896)
794,204
8,160,320

1,359,864
(538,112)
821,752
9,640,108

Total parent company


Subsidiaries:
In foreign currency (ii)
. Bonds (Notes)
. Elimination of prepayments in subsidiaries

Total

40,947
46,742
162,233
107,882
219,679
72,693
(34,931)
615,245

Total parent company


Subsidiaries:
In foreign currency (ii)
. Bonds (Notes)
. Commission
. Elimination of prepayments in subsidiaries

Non-current

Total Consolidated
(i) Currency basket mainly comprising US Dollars
(ii) In US Dollars

BNDES - National Bank for Economic and Social Development


FINAME - Government Agency for Machinery and Equipment Financing
LIBOR 6M -London Interbank Offered Rate - 6 months
TJLP - Long Term Interest Rate
CDI - Interbank Deposit Certificate

54

BNDES
The Company has contracts with BNDES for the financing of industrial development projects, such
as the construction of the new paper machine in Correia Pinto (SC), the construction of a new
recycled paper machine in Goiana (PE), and the paper segment expansion project, referred to as MA
1100, which will be settled up to January 2017, in addition to the construction of the Project Puma
pulp plant, the settlement of which is projected to take place in 2025. This financing is paid
monthly, along with the related interest.
Export prepayments and export credit notes
Export prepayment and credit note transactions were carried out for the purposes of working capital
management and the development of the Company's operations. These agreements will be settled
up to February 2025.
Bonds (Notes)
The Company, through its wholly-owned subsidiary Klabin Finance S.A., has issued securities
representing debt (Notes) in the international market, which are listed on the Luxembourg
Securities Exchange (Euro MTF). The Notes, of the Senior Notes 144A/Reg S type, amount to
US$ 500 million and mature within ten years, with a coupon of 5.25% paid semi-annually. The
raising of funds, which was concluded on July 16, 2014, had the objective of financing the activities
of the Company and its subsidiaries in the normal course of business, in accordance with their
business objectives.
Finnvera (Finnish Export Credit Agency)
As part of the funds necessary for the execution of the Puma Project, the Company entered into a
loan agreement, for the financing of the assets acquired. The commitment amounts to US$ 385
million, divided into two tranches: the first of US$ 347 million with interest of 3.4% p.a. and the
second tranche of US$ 39 million, with interest of LIBOR 6M + 1% p.a. Two disbursements
occurred in 2015 and the remainder will be released during 2016, as the payments to the suppliers
of the project are made.
b) Schedule of non-current maturities
The maturity dates of the Company's borrowing at December 31, 2015, classified in non-current
liabilities in the consolidated balance sheet, are as follow:
Year
Amount

2017

2018

2019

2020

2021

2022

2023
onwards

2,160,700

2,301,700

2,252,400

2,164,200

1,583,400

1,208,900

3,163,635

Total
14,834,935

55

c) Summary of changes in borrowing

At December 31, 2013


Borrowing
Accrued interest
Foreign exchange and monetary variations
Repayments and payment of interest
At December 31, 2014
Borrowing
Accrued interest
Foreign exchange and monetary variations
Repayments and payment of interest
Transfers - commission
At December 31, 2015

Parent company
6,968,288
2,254,427
435,542
657,285
(1,497,186)
8,818,356
5,503,704
783,758
3,264,954
(2,169,424)
(49,978)
16,151,370

Consolidated
6,963,597
2,837,527
518,638
817,532
(1,497,186)
9,640,108
4,925,579
889,295
3,429,519
(2,279,124)
(54,136)
16,551,241

d) Guarantees
The financing agreements with BNDES are guaranteed by the land, buildings, improvements,
machinery, equipment and facilities of the plants in Otaclio Costa (SC), Telmaco Borba (PR) and
Ortigueira (PR), which are the object of the related borrowing and escrow deposits, as well as
sureties from the controlling stockholders.
The financing with Finnvera is guaranteed by the industrial plants in Angatuba (SP), Lages (SC),
Piracicaba (SP), Betim (MG), and Goiana (PE).
Export credits, export prepayments, and working capital loans are not collateralized.
e) Restrictive covenants
At the end of the reporting period, the Company and its subsidiaries did not have any financing
agreements containing restrictive covenants that determine compliance with financial ratios for the
contracted transactions, where non-compliance would automatically accelerate the maturity of the
debt.
15

DEBENTURES

a) Sixth issue of debentures


On January 7, 2014, the Company concluded the process of subscription and payment of
27,200,000 debentures issued in a private placement, with a unit value of R$ 62.50, totaling R$ 1.7
billion. The debentures issued are subordinated, issued in a single series and in local currency,
without guarantees, and are mandatorily convertible into shares. The conversion of the debentures
will be at the proportion of one debenture for five units (considering the stock split mentioned in
Note 1), where the certificate of deposit of the shares comprises one common registered share (ON)
and four preferred registered shares (PN).
The debenture holders have the possibility of converting debentures into units in advance. The
Company has the possibility of early conversion only after the completion of the construction of the
Puma project and the achievement of operational levels.

56

The funds obtained from the issue of the debentures are being allocated to the construction of a
pulp plant related to the Puma Project.
The debentures have an effective term of five years, with maturity on January 8, 2019, and are
remunerated at 8% p.a., plus the variations in the Brazilian currency in relation to the US Dollar.
In addition, debenture holders are included in any profit distribution to the Company's
stockholders, which is calculated as if the shares that will be converted in the future already existed,
with the respective amount deducted from equity due to the debentures' nature as equity
instruments.
With the end of the lock-up period of the debentures of the 6th issue mandatorily convertible into
shares, on July 6, 2015, the first payment of R$ 317 million of interest and profit sharing amounting
to R$ 11.66 per debenture was carried out. As of July 7, the debentures started to be traded on the
So Paulo Commodities, Futures and Stock Exchange (BM&FBOVESPA), under the ticker symbol
KLBN-DCA61.
In accordance with CPC 39, "Financial instruments: Presentation", the Company recorded these
debentures as a hybrid instrument (compound), and the present value of the interest up to the
conversion was determined and recognized as a financial liability, whereas the carrying amount of
the equity instrument was recorded at the net amount - that is, the total amount of the debentures
less the present value of the interest payable and less the issuance costs of the security - in the
"Capital Reserve" account in equity.
b) Seventh issue of debentures
The Company concluded its seventh issue of debentures on June 23, 2014, issuing 55,555,000
simple debentures, with personal sureties, combined with a subscription bonus, at the nominal unit
value of R$ 14.40, totaling R$ 800 million, divided simultaneously into two series of 27,777,500
debentures each.

First series
Second series

Number
27,777,500
27,777,500
55,555,000

Total value
Unit value (R$ thousand)
14.40
399,996
14.40
399,996
799,992

Interest rate
IPCA + 7.25%
IPCA + 2.50%

Maturity
6/15/2020
6/15/2022

Amortization
Without amortization
Semi-annual

Interest
Semi-annual
Semi-annual

Nature
Convertible debt
Debt

Subscription bonus
Yes
No

(i) First series - The first series debentures mature on June 15, 2020, and have a yield of Amplified
Consumer Price Index (IPCA) + 7.25% per annum, with payment of interest on a semi-annual basis,
and a grace period of two years, without amortization of the principal. They represent a convertible
debt, since they can be utilized at any time until their maturity, at the discretion of the holder, to
subscribe and pay up shares issued by the Company, in the form of Units (comprising one common
share and four preferred shares), in the proportion of one Unit for each debenture, through the
exercise of the subscription bonus, which will be attributed as an additional benefit to the debenture
holders.
(ii) Second series - The second series debentures mature on June 15, 2022, and have a yield of IPCA
+ 2.50% per annum, paid semi-annually, together with the amortization of the principal, with a
grace period of two years. This series of debentures is not convertible. They are, therefore, not
linked to the subscription bonus.
Those who acquired the first series are obliged to acquire debentures of the second series. The
amount of R$ 28,503 arising from the subscription bonus on the debentures issued was allocated to
equity.

57

The debenture holders have the possibility of converting debentures into Units in advance.
A total of 98.86% of the debentures was subscribed by BNDES and the remaining debentures by
other stockholders in the market.
c) Composition of the balance of debentures

6th
Current liabilities
. Principal
. Interest
. Monetary restatement/profit sharing
Non-current liabilities
. Principal
. Interest
. Adjustment to present value of interest
. Monetary restatement/profit sharing
. Subscription bonus
Equity - capital reserve
. Debentures issued
. Interest up to maturity at present value
. Subscription bonus
. Cost of the issue of debentures
Total

16

Parent company and Consolidated


12/31/2015
Issue
7th Issue
Total

Parent company and Consolidated


12/31/2014
Issue
7th Issue
Total

6th

69,700
22,659
92,359

61,538
175,913
237,451

61,538
245,613
22,659
329,810

208,080
46,363
254,443

20,758
20,758

228,838
46,363
275,201

272,000
(44,114)
184,076
411,962

738,419
18,801
(28,503)
728,717

738,419
272,000
(44,114)
202,877
(28,503)
1,140,679

338,640
(85,006)
39,365
292,999

799,992
5,775
(28,503)
777,264

799,992
338,640
(85,006)
45,140
(28,503)
1,070,263

1,692,932
(410,119)
(29,841)
1,252,972
1,757,293

28,503
28,503
994,671

1,692,932
(410,119)
28,503
(29,841)
1,281,475
2,751,964

1,700,000
(410,119)
(29,841)
1,260,040
1,807,482

1,700,000
(410,119)
28,503
28,503
(29,841)
28,503 1,288,543
826,525 2,634,007

TRADE PAYABLES

Local currency
Foreign currency

12/31/2015
524,819
171,458
696,277

Parent company
12/31/2014
343,394
85,609
429,003

12/31/2015
524,889
177,310
702,199

Consolidated
12/31/2014
343,709
95,155
438,864

The Company's average payment term from operational suppliers is approximately 33 days. In the
case of suppliers of property, plant and equipment, the terms follow the commercial negotiations of
each operation; there is no specific average term.
Regarding this balance, we emphasize the amounts due to suppliers relating to the Puma Project
(see Note 12), corresponding to R$ 349,164 at December 31, 2015 (R$ 173,252 at December 31,
2014).
17

PROVISION FOR TAX, SOCIAL SECURITY, LABOR AND CIVIL


CONTINGENCIES

a) Provisioned risks
Based on the individual analysis of lawsuits filed against the Company and its subsidiaries and the
opinion of legal counsel, provisions have been constituted and classified in non-current liabilities
for losses considered as probable, as follow:

58

In the parent company:


Tax:
. PIS/COFINS
. ICMS/IPI
. Income tax/social
contribution
. Other
Labor
Civil

Subsidiaries:
Other
Consolidated

In the parent company:


Tax:
. PIS/COFINS
. Income tax/social
contribution
. ICMS/IPI
. Other
Labor
Civil

Subsidiaries:
Other
Consolidated

Restricted
judicial
deposits

Provisioned
amount

Net liability

12/31/2015
Unrestricted
judicial
deposits

27,194
22,319

(3,573)
(1,890)
(5,463)
(50,662)
(9,672)
(65,797)

3,573
1,890
5,463
16,174
1,731
23,368

(34,488)
(7,941)
(42,429)

1,116
1,959
52,588
52,588

1
(65,796)

23,368

1
(42,428)

1,435
54,023

Restricted
judicial
deposits

Provisioned
amount

Net liability

12/31/2014
Unrestricted
judicial
deposits

25,506

(7,739)
(895)
(8,634)
(64,296)
(7,712)
(80,642)

7,739
895
8,634
19,528
806
28,968

(44,768)
(6,906)
(51,674)

1,116
22,319
5,348
54,289
54,289

(80,642)

28,968

(51,674)

1,432
55,721

IPI - Excise Tax

The risks made subject to provision by the Company at December 31, 2015 relate to: (i) tax lawsuits,
comprising mainly challenges regarding income tax and social contribution on monetary
restatements under Law 8,200/91; (ii) labor lawsuits filed by former employees of the Company's
plants claiming labor rights (severance pay, overtime, hazardous duty and health hazard
premiums), indemnities and joint liability; (iii) civil lawsuits relating mainly to compensation
claims for tangible damage and/or pain and suffering resulting from accidents.

59

b) Summary of changes in the provisioned amounts

At December 31, 2013


New lawsuits/increases
and monetary restatements/derecognitions
(Provision)/reversals
At December 31, 2014
New lawsuits/increases
and monetary restatements/derecognitions
(Provision)/reversals
At December 31, 2015

Parent company and Consolidated


Civil
Net exposure
(7,604)
(65,067)

Tax
(1,332)

Labor
(56,131)

(965)
2,297
-

685
10,678
(44,768)

966
(268)
(6,906)

(2,168)
12,448
(34,488)

(133)
(902)
(7,941)

686
12,707
(51,674)
(2,301)
11,546
(42,429)

c) Provisions for tax, social security, labor and civil contingencies not recognized
At December 31, 2015, the Company and its subsidiaries were parties to other tax, labor and civil
litigation involving risks of loss evaluated as "possible", totaling approximately R$ 848,881,
R$ 199,373 and R$ 95,453 (R$ 685,698, R$ 147,216 and R$ 95.517 at December 31, 2014)
respectively. Based on the individual analyses of the disputes and the opinion of the Company's
legal counsel, management understands that they do not need to be provided for, since the
likelihood of loss is assessed as only possible.
d) Lawsuits filed by the Company
At December 31, 2015, the Company was a plaintiff in lawsuits for which there was no accounting
recognition in its financial statements: the related assets will only be recognized after a final and
unappealable decision is rendered, and the gain is virtually certain.
The Company's legal counsel assessed the likelihood of a favorable outcome in some of the lawsuits
as "probable", including claims for deemed Excise Tax (IPI) credits on purchases of electrical power,
fuel oil and natural gas used in the production process.
e) Enrollment in the Tax Recovery Program (REFIS)
The Tax Recovery Program (REFIS) (Law 11,941/09 and Law 12,865/13) balance payable recorded
in the parent company and consolidated totaled R$ 423,012 at December 31, 2015 (R$ 435,007 at
December 31, 2014), restated at the effective interest rate, which considers the future values and the
SELIC variations. The balance is being paid in monthly installments, with settlement projected for
2029.
f) Commitments
The Company and its subsidiaries did not have other material future commitments at the end of the
reporting period not disclosed in these financial statements.

60

18

EQUITY

a) Share capital
The Company's subscribed and paid-up capital was R$ 2,383,104 at December 31, 2015
(R$ 2,271,500 at December 31, 2014), comprising 4,732,629,090 shares at December 31, 2015
(4,729,789,565 at December 31, 2014), without par value, held as follows:
Stockholders
BNDESPAR
The Bank of New York Department
Capital World Investors
Monteiro Aranha S.A.
Klabin Irmos & Cia
Niblak Participaes S.A.
Other
Treasury shares

Common shares
49,425,928
57,891,204
63,474,000
70,290,789
941,837,080
142,023,010
493,234,594
30,983,500
1,849,160,105

12/31/2015
Preferred shares
197,703,712
231,564,816
253,896,000
281,163,156
1,795,207,301
123,934,000
2,883,468,985

Common shares
65,960,320
55,552,238
65,965,831
941,837,080
142,023,010
547,153,721
30,100,000
1,848,592,200

12/31/2014
Preferred shares
263,841,280
222,208,952
263,863,324
2,010,883,809
120,400,000
2,881,197,365

Besides common and preferred registered shares, the Company negotiates certificates of deposit of
shares, denominated Units, corresponding to one common share (ON) and four preferred shares
(PN).
The Company's authorized capital comprises 5,600,000,000 common shares (ON) and/or
preferred shares (PN) approved at the Extraordinary General Meeting held on March 20, 2014.
Capital increase with reserves
The Company's management submitted to the approval of the stockholders at the Extraordinary and
Ordinary General Meeting held on March 19, 2015 a capital increase using the reserve balances, of
which R$ 7,610 was from the tax incentives reserve and R$ 96,890 was from the legal reserve,
totaling a capital increase of R$ 104,500, without the issue of new shares.
The capital increase proposal was supported by the application of the provision in Article 199 of Law
6,404/76, which requires the Company to increase its capital if the sum of revenue reserves exceeds
the amount of capital. This was verified in the balance sheet at December 31, 2014.
Capital increase through the exercise of the right to convert debentures
The exercise of the right to conversion was requested by the debenture holders of the 6th Issue and,
therefore, the Board of Directors of the Company, at Extraordinary Meetings held in 2015, approved
the increase of the subscribed and paid-up capital, within the authorized capital limit of R$ 7,104,
with the issue of 567,905 common shares and 2,271,620 preferred shares, corresponding to the
conversion of 115,545 debentures.
The Company's subscribed and paid-up capital increased to R$ 2,383,104, represented by
1,849,160,105 common shares and 2,883,468,985 preferred shares, totaling 4,732,629,090 shares,
without par value.

61

b) Treasury shares
The Extraordinary Meeting of the Board of Directors held on December 9, 2014 approved the
buyback of the Company's shares, over a 365-day period, corresponding to up to 43,168,811 Units,
equivalent to 43,168,811 common shares and 172,675,244 registered preferred shares, representing
8% of each class of shares outstanding in the market on that date, to be held in treasury to cover
obligations relating to the stock option plan granted to executives, or for subsequent sale or
cancellation without a capital reduction.
The Company bought back 800,000 Units in January 2015, at an average price of R$ 13.94 per
Unit, totaling R$ 11,151. In December 2015, 900,000 Units were repurchased at the average price of
R$ 23.86 per Unit, for R$ 21,472.
In accordance with the stock option plan described in Note 22, granted as long term remuneration
to the Company's officers, 1,855,000 treasury shares were sold in March 2015, corresponding to
371,000 Units. The right to use 2,227,500 shares, corresponding to 445,500 Units, was also
granted.
The Company maintained 154,917,500 shares of its own issue in treasury at December 31, 2015,
corresponding to 30,983,500 Units. The price on the So Paulo Stock Exchange was R$ 23.45 per
Unit at December 31, 2015 (code KLBN11 - BM&FBovespa).
c) Carrying value adjustments
Created by Law 11,638/07, the group "Carrying value adjustments" in the Company's equity
comprises adjustments in respect of increases and decreases in assets and liabilities, when
applicable, that are not recorded in the results for the year, up to their effective realization.
The balance maintained by the Company corresponds to: the adoption of the deemed cost of
property, plant and equipment for forest land; an option exercised upon the initial adoption of the
new accounting pronouncements in convergence with IFRS at January 1, 2009; the foreign
exchange variations of the subsidiary abroad with a functional currency that differs from the parent
company (Note 2); balances relating to the stock option plan granted to executives (Note 22); and
actuarial liability restatements (Note 26).
Parent company and Consolidated
12/31/2015
12/31/2014
Deemed cost of property, plant and equipment
(land)
Foreign exchange variations - subsidiaries
abroad
Actuarial liability
Stock option plan

1,090,550

1,096,113

(31,778)
3,801
1,608
1,064,181

(26,734)
(4,844)
911
1,065,446

d) Allocation of the loss for the year


The allocation of the loss for the year follows the assumptions listed in the Company's Bylaws, in
compliance with the aspects of the Brazilian Corporate Legislation, pursuant to Law 6,404/76. The
allocation proposed below will be presented at the Stockholders' Ordinary General Meeting to be
held on March 10, 2016.

62

(=)
(+)
(+)
(-)
(+)
(+)
(-)
(=)

Loss for the year


Realization of biological assets reserve - own
Realization of biological assets reserve - subsidiaries (*)
Constitution of tax incentive reserve
Realization of deemed cost of property, plant and equipment (land)
Realization of revaluation reserve
Share in the results of the 6th issue of debentures
Deficit for the year to be offset
.Offsetting of losses with investment reserves and working capital
.Offsetting of losses with reserve of biological assets profits
(*) Included in equity in results of investees.

Parent company
(1,253,197)
394,887
4,491
(31,175)
5,564
62
(56,075)
(935,443)
(320,778)
(614,665)

e) Dividends
Dividends represent a portion of the profits earned by the Company which are distributed to the
stockholders as remuneration for the capital invested during the fiscal year. All stockholders are
entitled to receive dividends proportionately to their ownership interest, as assured by Brazilian
corporate legislation and the Company's bylaws. The bylaws also determine that management has
the option to prepay interim dividends during the year, ad referendum of the Ordinary General
Meeting held to examine the accounts for the year.
The basis of the calculation of the mandatory dividends, defined in the Company's bylaws, is
adjusted in accordance with the constitution, realization and reversal, in the respective year, of the
biological assets reserve, and entitles the Company's stockholders to receive, every year, a
mandatory minimum dividend of 25% of the annual adjusted profit. Additionally, the Company is
permitted to distribute dividends with Profit Reserve balances maintained in Equity.
Because of the net loss presented in the statement of operations for the year ended December 31,
2015, dividends distributed in 2015 were made by way of the Profit Reserve balance, as follows:
Dividends distributed with Profit Reserves balance in 2015
July (paid on August 7, 2015)
. R$ 37,34 per thousand common and preferred shares
. R$ 186,68 per thousand units
October (paid on November 9, 2015)
. R$ 22,93 per thousand common and preferred shares
. R$ 114,63 per thousand units

171,002
105,010
276,012

During 2015, R$ 377,995 was effectively paid, between R$ 276,012 in dividends for 2015 distributed
as Profit Reserves, and R$ 101,983 in supplementary dividends for the year 2014, as approved at the
Stockholders' Ordinary General Meeting held on March 19, 2015.

63

f) Share of profits of mandatorily convertible debentures


As mentioned in Note 15, the holders of debentures mandatorily convertible into shares of the sixth
issue are entitled to a share of profits upon the distribution of dividends to the Company's
stockholders. The amount is calculated based on the number of shares that will be converted in the
future, corresponding to 135,434,550 common shares and 541,738,200 preferred shares, after the
early conversions carried out up to December 31, 2015, at the amount per share effectively
distributed as dividends. In 2015, R$ 56,075 of profit sharing was paid to the debenture holders of
the 6th issue.
19

NET SALES REVENUE

The Company's net sales revenue is composed as follows:

Gross sales revenue


Discounts and rebates
Taxes on sales
. Domestic market
. Foreign market
Net sales revenue

20

12/31/2015
6,604,846
(21,195)
(964,084)
5,619,567

Parent company
12/31/2014
5,812,635
(20,451)
(954,349)
4,837,835

12/31/2015
6,745,775
(57,885)
(1,000,301)
5,687,589

Consolidated
12/31/2014
5,900,091
(25,093)
(981,116)
4,893,882

3,869,752
1,749,815
5,619,567

3,715,038
1,122,797
4,837,835

3,841,390
1,846,199
5,687,589

3,679,397
1,214,485
4,893,882

COSTS, EXPENSES AND OTHER INCOME, BY NATURE

Variable costs (raw materials and consumables)


Personnel
Depreciation, amortization and depletion
Freight
Commission
Services contracted
Revenue from sales of property, plant and equipment
Cost of sales and write-offs of property, plant and equipment
Deemed cost of property, plant and equipment (land)
Other

Parent company

Consolidated

12/31/2015 12/31/2014
(2,029,016)
(1,806,619)
(896,603)
(774,843)
(987,779)
(941,956)
(255,591)
(231,606)
(13,889)
(13,227)
(272,523)
(249,432)
17,400
85,902
(10,490)
(49,446)
(8,430)
(3,168)
(228,494)
(159,361)
(4,685,415) (4,143,756)

12/31/2015 12/31/2014
(2,016,991)
(1,785,440)
(905,660)
(782,670)
(998,727)
(951,965)
(261,921)
(235,523)
(29,922)
(27,686)
(275,276)
(251,952)
17,400
85,902
(10,490)
(49,446)
(8,430)
(3,168)
(271,504)
(164,952)
(4,761,521) (4,166,900)

64

21

FINANCE RESULT
12/31/2015

Finance income
. Income from financial investments
. Other
Finance costs
. Interest on borrowing and debentures
. Interest on REFIS (i)
. Capitalized interest in property, plant and equipment (ii)
. Amortization of present value adjustments to debentures
. Loan guarantees from related parties
. Investor remuneration - SPCs
. Other
Exchange variations
. Foreign exchange variations on assets
. Foreign exchange variations on liabilities
Finance result
(i) See Note 17.
(ii) See Note 12.

22

Parent company
12/31/2014

12/31/2015

Consolidated
12/31/2014

519,554
19,273
538,827

473,310
46,108
519,418

535,637
46,262
581,899

489,221
46,117
535,338

(947,960)
(47,653)
313,971
(40,891)
(22,266)
(54,732)
(799,531)

(521,378)
(46,263)
74,085
(51,596)
(13,580)
(59,029)
(617,761)

(967,716)
(47,653)
313,971
(40,891)
(22,266)
(13,052)
(69,892)
(847,499)

(549,305)
(46,263)
74,085
(51,596)
(13,580)
(7,347)
(60,924)
(654,930)

395,069
(3,587,818)
(3,192,749)
(3,453,453)

108,446
(640,601)
(532,155)
(630,498)

393,287
(3,567,317)
(3,174,030)
(3,439,630)

92,534
(619,054)
(526,520)
(646,112)

STOCK OPTION PLAN

The Extraordinary General Meeting of Stockholders held on July 10, 2012 approved the stock option
plan as a benefit for the members of the Executive Board and the Company's key personnel.
CVM authorized the Company, through Circular Letter/CVM/SEP/GEA-2/221/2012, to realize the
private transactions included in the incentive plan for its directors and employees, except for the
controlling stockholders, through the private transfer of treasury shares.
Pursuant to this plan, the Company established that its statutory and non-statutory directors could
utilize 25% to 70% of their variable remuneration for the acquisition of treasury shares, and the
Company would grant the right to use the same amount of shares to the acquirers for three years,
transferring to them the ownership of the shares after three years, provided that the clauses
established in the plan are complied with.
The plan does not establish the acquisition of shares by the Company's key personnel, but only the
granting of the right to use a certain number of shares for three years, the ownership of which will
be transferred to the beneficiary, provided the established clauses are complied with.
The right to use grants to the beneficiary the right to the dividends distributed in the period during
which the benefit is valid.
The value of the acquisition of treasury shares by the beneficiaries of the plan will be calculated
based on the lower of the average of the market value quotations in the last 60 trading sessions of
the Company's shares and their quotation as at the acquisition date. The value of shares granted
with rights to use corresponds to the quotation of shares traded on BOVESPA on the transaction
date.

65

The clauses that grant the transfer of shares establish the participation of the beneficiary in the
Company and stipulate that the shares acquired on enrollment in the plan may not be sold. The
shares granted can be immediately assigned in the case of the termination of employment by the
Company, or the retirement or death of the beneficiary, in which case the right to the shares
becomes part of the estate of the deceased.
The shares granted and the expense proportional to the grant term, recorded in the results, are
accumulated in equity in the "Carrying value adjustments" group, up to the end of the grant, which
may occur due to the three-year maturity or any other clause of the plan that may terminate the
grant.
The table below presents information about the agreed-upon plans:
a) Statutory and non-statutory Board members
Start of the plan
Final grant date
Treasury shares acquired by the beneficiaries (i)
Purchase value per share (R$) (i)
Treasury shares granted with right to use (i)
Value of the right to use per share (R$) (i)
Accumulated plan expenses - from the beginning
Expenses of the plan - 1/1 to 12/31/2014
Expenses of the plan - 1/1 to 12/31/2015

Plan 2011
3/1/2012
3/1/2015
2,375,000
1.56
2,375,000
1.75
4,166
1,388
694

Plan 2012
3/1/2013
3/1/2016
1,904,500
2.57
1,904,500
2.67
4,806
1,696
1,696

Plan 2013
3/1/2014
3/1/2017
2,302,500
2.34
2,302,500
2.29
3,216
1,462
1,754

Plan 2014
3/1/2015
3/1/2018
1,855,000
2.84
1,855,000
3.26
1,681
1,681

Total
8,437,000
8,437,000
13,869
4,546
5,825

b) Key personnel
Start of the plan (ii)
Final grant date
Treasury shares granted with right to use (i)
Value of the right to use per share (R$) (i)
Accumulated plan expenses - from the beginning
Expenses of the plan - 1/1 to 12/31/2014
Expenses of the plan - 1/1 to 12/31/2015

Plan 2012
3/1/2013
3/1/2016
682,500
2.67
1,722
608
608

Plan 2013
4/30/2014
4/30/2017
542,500
2.30
741
317
423

Plan 2014
4/30/2015
4/30/2018
372,500
3.36
342
342

Total

1,597,500
2,805
925
1,373

(i) Considers the stock split mentioned in Note 1.


(ii) The 2012 plan was granted in June 2013, on a retrospective basis.

23

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share are calculated by dividing the profit or loss for the year attributable
to holders of the Company's common and preferred shares by the weighted average number of
common and preferred shares available during the year. The Company has debentures mandatorily
convertible into shares (see Note 15) recorded in equity - therefore, the future conversion of the
debentures into the total amount of shares is already considered in the number of shares for
calculation purposes.
The shares from the future conversion of the seventh issue of debentures (Note 15) were considered
in the calculation for the year ended December 31, 2015, because their issue value is superior to the
Unit value in the market at December 31, 2015, corresponding to R$ 23.45 per Unit. This
consideration is paid since, with the value of the Unit in the market higher than the unit value of the
debenture, it is highly probable that the debenture holders will opt for the conversion.

66

Diluted earnings (loss) per share are equal to the basic earnings (loss) per share since the Company
does not have other potentially dilutive common or preferred shares.
As mentioned in Note 18, the changes in the balance of treasury shares affect the weighted average
number of preferred shares held in treasury in the calculation for the year ended December 31,
2015. The weighted average used in the calculation of earnings (loss) per share was determined as
follows:
Weighted average number of treasury shares - December 31, 2015 (*)
Jan
Feb to Mar
Apr to Nov
Dec
154,500,000 x 1/12 + 150,790,000 x 2/12 + 150,417,500 x 8/12 + 154,917,500 x 1/12 =

12M15
151,194,792

(*) Because the Company only has Units held in treasury, the distribution between common and preferred shares is made according to the
composition of the Units.

The table below, presented in R$, reconciles the profit or loss for the years ended December 31,
2015 and 2014 with the amounts used in the calculation of basic and diluted earnings (loss) per
share:
Parent company and Consolidated
From 1/1 to 12/31/2015
Preferred
Common (ON)
(PN)
Total
Denominator
Total weighted average number of shares
Number of shares to be converted from debentures
Weighted average number of treasury shares
Weighted average number of outstanding shares

1,849,160,105
163,212,050
(30,238,958)
1,982,133,197

2,883,468,985
652,848,200
(120,955,833)
3,415,361,352

4,732,629,090
816,060,250
(151,194,792)
5,397,494,548

36.72%

63.28%

100%

Numerator
Loss attributable to each class of shares (R$)

(460,214,152) (792,982,848)

(1,253,197,000)

Weighted average number of outstanding shares

1,982,133,197

3,415,361,352

(0.2322)

(0.2322)

% of shares in relation to the total

Basic and diluted loss per share (R$)

5,397,494,548

Parent company and Consolidated


From 1/1 to 12/31/2014
Common (ON)
Denominator
Total weighted average number of shares
Number of shares to be converted from debentures
Weighted average number of treasury shares
Weighted average number of outstanding shares
% of shares relative to the total
Numerator
Profit attributable to each class of shares (R$)
Weighted average number of outstanding shares
Basic and diluted loss per share (R$)

Preferred (PN)

Total

1,848,592,200
136,000,000
(30,083,729)
1,954,508,471

2,881,197,365
544,000,000
(120,334,917)
3,304,862,448

4,729,789,565
680,000,000
(150,418,646)
5,259,370,919

37.16%

62.84%

100%

271,408,158

458,921,842

730,330,000

1,954,508,471

3,304,862,448

5,259,370,919

0.1389

0.1389

67

24

OPERATING SEGMENTS

a) Criteria for identification of operating segments


The Company's operating structure is divided into segments according to the manner in which
management manages the business. The operating segments defined by management are as follow:
(i) Forestry segment: involves operations relating to planting and growing pine and eucalyptus trees
to supply the Company's plants. It also involves selling timber (logs) to third parties in the domestic
market.
(ii) Paper segment: mainly involves the production and sale of cardboard, kraftliner and recycled
paper rolls in the domestic and foreign markets.
(iii) Conversion segment: involves the production and sale of corrugated cardboard boxes,
corrugated cardboard and industrial sacks in the domestic and foreign markets. Pulp segment:
involves the operation of the Puma Project.
(iv) In the future, the pulp segment will include the production and sale of short and long-fiber pulp
in the domestic and foreign markets.

68

b) Consolidated information about operating segments

Forestry
Net revenue:
.Domestic market
.Foreign market
Revenue from sales to third parties
Revenue between segments
Total net sales
Changes in the fair value of biological assets
Cost of products sold
Gross profit
Operating income (expenses)
Operating result before finance result

Investments during the year


Depreciation, depletion and amortization
Total assets - 12/31/2015
Total liabilities - 12/31/2015
Equity - 12/31/2015

1,421,589
1,610,977
3,032,566
1,102,500
4,135,066
(2,572,652)
1,562,414
(413,565)
1,148,849

2,055,407
235,222
2,290,629
23,669
2,314,298
(1,904,581)
409,717
(270,378)
139,339

551,589
591,923
713,588
1,857,100

3,203,721
7,682,025
10,885,746
201,624
(709,611)
6,792,339
1,433,028
5,359,311

297,350
(246,515)
5,469,109
718,494
4,750,615

Forestry
Net revenue:
.Domestic market
.Foreign market
Revenue from sales to third parties
Revenue between segments
Total net sales
Changes in the fair value of biological assets
Cost of products sold
Gross profit
Operating income (expenses)
Operating result before finance result
Sales of products (in metric tons)
.Domestic market
.Foreign market
.Inter-segmental
Sales of timber (in metric tons)
.Domestic market
.Inter-segmental
Investments during the year
Depreciation, depletion and amortization
Total assets - 12/31/2014
Total liabilities - 12/31/2014
Equity - 12/31/2014

Conversion

364,095
364,095
627,865
991,960
536,113
(1,261,060)
267,013
(53,875)
213,138

Sales of products (in metric tons)


.Domestic market
.Foreign market
.Inter-segmental
Sales of timber (in metric tons)
.Domestic market
.Inter-segmental

Paper

Paper

330,899
1,305,745
1,061,285
330,899 2,367,030
575,031
1,081,453
905,930 3,448,483
924,104
(1,196,637) (2,239,036)
633,397 1,209,447
(16,080)
(317,117)
617,317
892,330

From 1/1 to 12/31/2015


Corporate/
Total
eliminations Consolidated

Pulp

299
299
(1,754,034)
(1,753,735)
1,756,791
3,056
(12,560)
(9,504)

3,841,390
1,846,199
5,687,589
5,687,589
536,113
(3,981,502)
2,242,200
(750,378)
1,491,822

653,800
35,470
4,065
693,335

(717,653)
(717,653)

1,205,389
627,393
1,832,782

68,722
(48,856)
1,386,882
232,887
1,153,995

4,052,895
7,271,582
548,119
6,723,463

(7,682,025)
(7,682,025)
1,855
6,255
5,348,269
17,983,312
(12,635,043)

3,203,721
3,203,721
4,622,446
(998,727)
26,268,181
20,915,840
5,352,341

Conversion
2,041,238
153,200
2,194,438
14,119
2,208,557
(1,808,623)
399,934
(232,038)
167,896

From 1/1 to 12/31/2014


Corporate/
Total
eliminations Consolidated

Pulp

1,515
1,515
(1,670,603)
(1,669,088)
1,670,687
1,599
20,593
22,192

3,679,397
1,214,485
4,893,882
4,893,882
924,104
(3,573,609)
2,244,377
(544,642)
1,699,735

1,226,659
544,588
1,771,247
2,870,274
2,870,274
2,945,435
(951,965)
21,173,855
14,115,531
7,058,324

548,007
513,681
740,917
1,802,605

678,652
30,907
2,250
711,809

(743,167)
(743,167)

2,870,274
7,432,275
10,302,549
172,568
(697,048)
6,701,752
1,662,233
5,039,519

441,805
(213,689)
4,816,679
450,458
4,366,221

86,773
(37,756)
1,252,769
186,841
1,065,928

2,242,401
2,724,272
189,646
2,534,626

(7,432,275)
(7,432,275)
1,888
(3,472)
5,678,383
11,626,353
(5,947,970)

69

The balance in the Corporate/eliminations column refers to the corporate unit's expenses not
apportioned among the segments, and eliminations refer to adjustments of operations between the
segments.
Information about the finance result and income tax was not disclosed in the segment reporting
because management does not utilize such data on a segmented basis, and the data is instead
managed and analyzed on a consolidated basis.
c) Information on net sales revenue
The Company's net revenue from sales to foreign customers, in the consolidated result for the years
ended December 31, 2015 and 2014, amounted to R$ 1,846,199 and R$ 1,214,485, respectively. The
table below shows the distribution of net revenue by country:

Country
Argentina
China
Singapore
Italy
Ecuador
Turkey
France
Mexico
Chile
Nigeria
Other

Consolidated
From 1/1 to 12/31/2015
Total revenue
% of total net
(R$/million)
revenue
574
10.1%
325
5.7%
195
3.4%
123
2.2%
83
1.5%
54
0.9%
41
0.7%
36
0.6%
32
0.6%
31
0.5%
352
6.2%
1,846
32%

Country
Argentina
China
Singapore
France
Mexico
Saudi Arabia
Colombia
Ecuador
South Africa
Italy
Other

Consolidated
From 1/1 to 12/31/2014
Total revenue
% of total net
(R$/million)
revenue
514
10.4%
246
5.0%
134
2.7%
30
0.6%
28
0.6%
27
0.5%
27
0.5%
25
0.5%
24
0.5%
21
0.4%
138
2.8%
1,214
25%

The Company's net revenue from sales to domestic customers in the consolidated result for the
years ended December 31, 2015 and 2014 amounted to R$ 3,841,390 and R$ 3,679,397,
respectively.
In the paper segment, in the year ended December 31, 2015, a single customer for cardboard
accounted for approximately 22% of the Company's net revenue, corresponding to approximately
R$ 1,251,270 (R$ 1,027,000 in 2014). The remaining customer base is diluted as none of the other
customers individually accounts for a material share (above 10%) of the Company's net sales
revenue.
c) Pro forma net sales revenue
As mentioned in Note 3, the Company is party to a joint venture that operates in the forestry
segment, named Florestal Vale do Corisco, which is not consolidated, and which is accounted for
using the equity accounting method, considering its share of the investment.
If the jointly-controlled investee were consolidated in the Company's financial statements, pro
forma net sales revenue for the year ended December 31, 2015 would be R$ 5,749,000
(R$ 4,951,000 in 2014).

70

25

RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

a) Risk management
The Company and its subsidiaries enter into transactions involving financial instruments, all
recorded in the balance sheet accounts, in order to meet their operational needs and reduce their
exposure to financial risks, mainly related to credit risks and investment of funds, market risks
(foreign exchange and interest rates) and liquidity risks, to which the Company understands that it
is exposed based on the nature of its business and its operating structure.
These risks are managed through the definition of strategies prepared and approved by the
Company's management, linked to the establishment of control systems and the determination of
limits. The Company does not enter into transactions involving financial instruments for speculative
purposes.
Management also carries out regular assessments of the Company's consolidated position, monitors
the financial results obtained, analyzes future projections to ensure compliance with the business
plan defined, and monitors the risks to which it is exposed.
The main risks to which the Company is exposed are described below:
Market Risk
Market risk is the risk that the fair value of the future cash flow of a financial instrument will
fluctuate due to changes in market prices. In the case of the Company, market prices are affected by
two types of risk: interest rate and foreign exchange. The financial instruments affected by market
risk include financial investments, trade receivables, trade payables, loans payable, available-forsale instruments, and derivative financial instruments.
(i) Foreign exchange rate risk
The Company has transactions denominated in foreign currencies (mainly in US Dollars) that are
exposed to market risks arising from fluctuations in foreign exchange rates. Any fluctuations in
foreign exchange rates could increase or reduce a balance expressed in Reais. The composition of
this exposure was as follows:

Bank deposits and financial investments


Trade receivables (net of provision for impairment of trade
receivables)
Other assets and liabilities
Borrowing
Net exposure

12/31/2015
1,265,112

Consolidated
12/31/2014
1,277,725

618,775
(154,400)
(12,376,000)
(10,646,513)

356,666
68,503
(6,853,776)
(5,150,882)

The balance of this net exposure at December 31, 2015 was as follows:
Year
Amount

2017
(903,513)

2018
(1,655,000)

2019
(1,731,000)

2020
(1,591,000)

2021
(1,155,000)

2022
(870,000)

2023 onwards
(2,741,000)

Total
(10,646,513)

71

The Company did not have derivative contracts to hedge against long term foreign exchange
exposure at December 31, 2015. However, in order to hedge against this net liability exposure, the
Company has a sales plan under which the projected flow of export revenue is approximately
US$ 800 million annually and the related receipts, if realized, would exceed the flow of payments of
the related liabilities, offsetting the cash effect of this foreign exchange exposure in the future.
(ii) Interest rate risk
The Company has loans indexed to the variations in the TJLP, LIBOR and CDI, as well as financial
investments indexed to the variations in the CDI and SELIC, which expose these assets and
liabilities to fluctuations in interest rates, as shown in the interest sensitivity analysis below. The
Company does not have derivative contracts to swap/hedge against the exposure to these market
risks.
The practice adopted by the Company in relation to interest rate risk is to continuously monitor
market interest rates in order to assess the possible need to contract derivatives to hedge against the
risk of volatility in these rates. The Company considers that the high cost associated with entering
into transactions at fixed interest rates in the Brazilian macroeconomic scenario justifies its choice
of floating rates.
The composition of the Company's interest rate risk is as follows:

Financial investments - CDI


Financial investments - SELIC
Asset exposure

12/31/2015
3,767,021
557,143
4,324,164

Consolidated
12/31/2014
3,880,452
497,604
4,378,056

Financing - CDI
Financing - TJLP
Financing - LIBOR
Debentures - IPCA
Liability exposure

(1,181,179)
(2,384,152)
(1,996,624)
(966,168)
(6,528,123)

(817,799)
(1,361,774)
(3,792,639)
(798,022)
(6,770,234)

Risk relating to application of funds


The Company is exposed to risks relating to the application of funds, including deposits in banks
and other financial institutions, foreign exchange transactions, financial investments and other
financial instruments that are contracted. The exposure relates mainly to financial investments and
transactions involving securities, which are described in Notes 4 and 5.
In relation to the quality of the financial assets of the Company invested in financial institutions, an
internal policy is applied in relation to the approval of the type of operation being entered into and
in relation to the analysis of the rating, according to the rating agencies, to assess the feasibility of
the investment of the funds in a given institution, provided that it meets the acceptance criteria
under the policy.
The table below presents the cash, cash equivalents and marketable securities invested by the
Company, classifying the amounts according to the national classification of the financial
institutions by the rating agency Fitch:

72

12/31/2015

Consolidated
12/31/2014

5,465,466

5,514,472

145,400
5,610,866

228,965
5,743,437

National rating AAA(bra) (*)


National rating AA+(bra)
Credit risk

Credit risk is the risk that a counterparty to a transaction will not fulfill an obligation established in
a financial instrument or contract with a customer, leading to a financial loss. In addition to the
investments referred to above, the Company is exposed to credit risk on its operating activities
(mainly in connection with trade receivables).
At December 31, 2015, the maximum exposure to credit risk was the carrying amount of the trade
receivables shown in Note 6.
The quality of the credit risk on the Company's operating activities is managed based on specific
rules regarding the acceptance of customers, credit analysis and the establishment of exposure
limits for each customer, which are periodically reviewed. Overdue receivables are monitored on a
regular basis to ensure their realization.
Liquidity risk
The Company monitors the risk of shortages of funds by managing its resources through a recurring
liquidity-planning tool, so that it has funds available for the fulfillment of its obligations, mainly
concentrated in financing from financial institutions.
The table below shows the maturity of the financial liabilities contracted by the Company and
reported in the consolidated balance sheet: the amounts include principal and future interest on
transactions, calculated using rates and indexes prevailing at December 31, 2015:

Trade payables
Financing/
debentures
Total

2016
(702,199)

2017
-

2018
-

2019
-

2020
-

2021
-

(2,281,260) (2,958,881) (3,406,699) (2,942,995) (2,665,167) (1,995,636)


(2,983,459) (2,958,881) (3,406,699) (2,942,995) (2,665,167) (1,995,636)

2022
onwards
-

Total
(702,199)

(5,654,809) (21,905,447)
(5,654,809) (22,607,646)

The budget projection for the coming years approved by the Board of Directors shows the ability to
meet these obligations.
Capital management
The Company's capital structure comprises net debt, consisting of borrowing (Note 14) and
debentures (Note 15) less cash and cash equivalents and marketable securities (Notes 4 and 5), and
equity, including the balance of issued capital and all of the constituted reserves.
The Company's net indebtedness ratio is comprised as follows:

73

Cash and cash equivalents and marketable securities


Borrowing and debentures
Net indebtedness
Equity
Net indebtedness ratio

12/31/2015
5,610,866
(18,021,730)
(12,410,864)
5,352,340
(2.32)

Consolidated
12/31/2014
5,743,437
(10,985,572)
(5,242,135)
7,058,324
(0.74)

b) Financial instruments by category


The Company has the following categories of financial instruments:

Assets - loans and receivables


. Cash and cash equivalents
. Trade receivables (net of provision for impairment of trade
receivables)
. Other assets
Assets - available for sale
. Marketable securities
Liabilities - at amortized cost
. Borrowing and debentures
. Trade payables
. Other payables

12/31/2015

Consolidated
12/31/2014

5,053,723

5,245,833

1,501,099
423,363
6,978,185

1,148,676
432,625
6,827,134

557,143
557,143

497,604
497,604

18,021,730
702,199
809,670
19,533,599

10,985,572
438,864
610,442
12,140,050

Loans and receivables and other financial liabilities at amortized cost


The financial instruments included in this group refer to balances arising from usual transactions,
such as trade receivables, trade payables, borrowing, financial investments and cash and cash
equivalents. All of these instruments are recorded at their notional amounts plus, when applicable,
contractual charges and interest, in respect of which the related income and expenses are
recognized in the results for the year.
Available-for-sale financial assets
The Company classifies its investments in National Treasury Bills (LFTs) (Note 5) as available-forsale financial assets, since they can be traded in the future. These are recorded at fair value, which,
in practice, corresponds to the invested amount plus interest on the transaction.
c) Sensitivity analysis
The Company presents below the sensitivity analysis of foreign exchange and interest rate risks to
which it is exposed, considering that any effects would impact future results, based on the exposure
at December 31, 2015. The effects on equity are basically the same as those on the results.

74

(i) Foreign exchange exposure


The Company had assets and liabilities indexed to a foreign currency in the balance sheet at
December 31, 2015 and, for sensitivity analysis purposes, it adopted as Scenario I the future market
rate in effect at the end of the reporting period. For Scenarios II and III this rate was adjusted by
25% and 50%, respectively.
It is important to point out that most of the financing maturities will not occur in 2016, according to
the maturity schedule shown in Note 14, and, therefore, the foreign exchange variations in this
analysis will not have any effect on cash. On the other hand, the Company's exports should
substantially be subject to the cash impact of the foreign exchange variations as they occur.
The sensitivity analysis of the foreign exchange variation is calculated in respect of the net foreign
exchange exposure (basically borrowing, trade receivables and trade payables in foreign currency),
not considering the effect on the scenarios of projected export sales that, as previously mentioned,
will offset any future foreign exchange loss.
Accordingly, the table below shows a simulation of the effect of the foreign exchange variation on
the results for the next 12 months, if all other variables remain constant, considering the balances at
December 31, 2015:

Assets
Cash and cash equivalents
Trade receivables, net of
provision for impairment of trade
receivables
Other assets and liabilities
Financing

At
12/31/2015

Scenario I

US$

Rate R$ gain (loss) Rate

Scenario II
R$ gain
(loss)
Rate

Scenario III
R$ gain (loss)

323,989 4.04

42,637 5.05

371,032

6.05

695,021

158,465 4.04
(39,541) 4.04
(3,169,432) 4.04

20,854 5.05
(5,204) 5.05
(417,097) 5.05

181,474
(45,282)
(3,629,634)

6.05
6.05
6.05

339,940
(84,824)
(6,799,067)

Net effect on finance results

(358,810)

(3,122,410)

(5,848,930)

(ii) Exposure to interest rate fluctuations


Financial investments and financing, except those subject to TJLP and LIBOR, are indexed to the
CDI floating interest rate. For sensitivity analysis purposes, the Company adopted the rates
prevailing at dates close to the presentation date of the financial statements using the same rate for
SELIC, LIBOR, IPCA and CDI, due to their proximity, in the Scenario I projection. For Scenarios II
and III, these rates were adjusted by 25% and 50%, respectively.
Accordingly, with all other variables held constant, the table below shows a simulation of the effect
of the interest rate variation on the future results for the next 12 months, considering the balances at
December 31, 2015:

75

At
12/31/2015
R$
Financial investments
CDBs
LFTs
Financing
Export credit notes (R$)
BNDES
Debentures
Export prepayments
Net effect on finance results

Rate

CDI
SELIC

3,767,021 14.15%
557,143 14.25%

CDI
TJLP
IPCA
LIBOR

(1,181,179) 14.15%
(2,384,152) 7.00%
(966,168) 10.6%
(5,840,506) 0.4%

Scenario I
R$ gain (loss)

Rate
- 17.69%
- 17.81%

(11,921)
(483)
260
(12,144)

17.69%
9.38%
13.31%
0.48%

Scenario II
R$ gain (loss) Rate
133,258 21.23%
19,848 21.38%
(41,784)
(56,624)
(26,207)
(5,366)
23,125

21.23%
11.25%
15.98%
0.58%

Scenario III
R$ gain (loss)
266,517
39,696
(83,568)
(101,326)
(51,932)
(10,992)
58,395

CDB - Bank Deposit Certificates

26

EMPLOYEE BENEFITS AND PENSION PLAN

The Company and its subsidiaries grant their employees life insurance, healthcare and pension plan
benefits. These benefits are recognized on the accruals basis, and their granting is discontinued at
the end of the employment relationship.
In 2015, the total expenses under these defined contribution plans amounted to R$ 12,901
(R$ 6,790 in 2014).
a) Private pension plan
Klabin S.A.'s pension plan - the Prever Plan, administered by Ita Vida e Previdncia S.A. - was
established in 1986 as a defined benefit plan. In 1998, the plan was restructured, becoming a
defined contribution plan.
In November 2001, a new pension plan was establishedPlano de Aposentadoria Complementar
Klabin (PACK) (a complementary pension plan), administered by Bradesco Vida e Previdncia S.A.
and structured as a free benefit generating plan (PGBL).
The participants in the Prever Plan were offered the option to migrate to the new plan. In neither
plan does the Company assume any responsibility for guaranteeing minimum benefit levels for
retiring participants.
b) Healthcare
Under the agreement entered into with the Union of the Pulp and Paper Workers of the State of So
Paulo, the Company pays for a lifetime healthcare plan (Hospital SEPACO, main plan) for its former
employees who had retired by 2001, as well as for their dependents, until they reach the age of
majority, and for their spouses. New beneficiaries cannot be added.
The Company understands that this healthcare benefit is considered as a defined benefit plan in
accordance with the accounting practices adopted in Brazil and, for this reason, maintains a
provision for the estimated actuarial liability, amounting to R$ 59,746 at December 31, 2015
(R$ 56,621 at December 31, 2014), in non-current liabilities, under "Other payables and provisions".
In the actuarial valuation, the following economic and biometric assumptions were utilized:
nominal discount rate of 12.25% p.a., nominal growth rate of variable medical costs starting at
12.5% p.a. in 2015 and decreasing to 7% p.a. in 2026, long term inflation of 5 % p.a., and biometric
mortality table RP-2000. Actuarial restatements are maintained in equity in the group "Carrying
value adjustments (comprehensive income (loss))", as required by CPC 33 (R1) Employee
benefits.

76

The increase or decrease by one percentage point in the rates used in the actuarial calculations does
not have a material effect on the Company's financial statements.
This plan does not have assets for disclosure.
c) Other employee benefits
The Company grants its employees the following benefits: healthcare, day nursery reimbursement,
assistance to parents with children with special needs, agreement for discounts aat drugstores,
school supplies, dental care plan, private pension plan and life insurance, in addition to the benefits
established by law (meal vouchers, transportation vouchers, profit sharing and food purchase
vouchers). Furthermore, the Company has an organizational development program for its
employees. For the year ended December 31, 2015, expenditure on training programs totaled
R$ 9,461 (R$ 7,100 for the year ended December 31, 2014).
All these benefits are recognized on an accruals basis and are discontinued at the end of the
employee's employment relationship with the Company.
27

INSURANCE COVERAGE

At December 31, 2015, the Company had insurance against fire, lightning, explosions, electrical
damage and windstorms for its industrial and administrative facilities and inventory. The Company
also has insurance coverage for general civil liability, responsibility of directors and officers, auto,
and multi-peril risks for its chattels, amounting to R$ 3,264,135.
In view of the nature of its activities, the distribution of forests in different areas, and the preventive
measures adopted against fire and other forestry risks, the Company has decided not to contract
insurance against damage caused to forests, opting for the adoption of protection policies that,
historically, have proven to be highly effective and have not impaired the Company's activities or
financial position. Accordingly, management understands that its financial risk management
structure in relation to forest activities is appropriate to ensure its continuity as a going concern.
28

EVENTS AFTER THE REPORTING PERIOD

Payment of interest on debentures


On January 5, 2016, the Company paid the interest of the 6th issue of debentures mandatorily
convertible into shares, totaling R$ 112,981, with R$ 4.171058 per debenture.
2015 interim dividend distribution
The Extraordinary Meeting of the Board of Directors held on February 02, 2016 approved the
distribution of interim dividends for 2015 with balances of revenue reserves of R$ 120,000,
corresponding to R$ 26.21 per thousand common and preferred shares and R$ 131.07 per thousand
Units, payable on February 22, 2016. Interim distributed dividends will be approved ad referendum
at the Stockholders' Ordinary General Meeting to be held on March 10, 2016.

77

OTHER INFORMATION
1

DISCLOSURE OF EBITDA

Pursuant to CVM Instruction 527/12, the Company has adopted the voluntary disclosure of nonfinancial information, as additional information included in its financial statements, and presents
EBITDA for the years ended December 31, 2015 and 2014.
In general terms, EBITDA represents the Company's operational generation of cash, corresponding
to the funds generated by the Company through its operating activities only, without financial or tax
effects. It is important to note that this does not represent the cash flow for the years presented, and
it must not be considered as a basis for the distribution of dividends, as an alternative to profit or
loss, nor as an indication of liquidity.
Consolidated
12/31/2015
(=)

Profit (loss) for the year

(+)

Income tax and social contribution

(+/-)
(+)

Finance results, net


Amortization, depreciation and depletion in the results

EBITDA

12/31/2014

(1,253,197)

730,330

(694,611)

323,293

3,439,630

646,112

998,727

951,965

2,490,549

2,651,700

(536,113)

(924,104)

(29,641)

(48,649)

8,430

35,972

Adjustments pursuant to CVM Instruction 527/12


(+/-)

Changes in the fair value of biological assets

(+/-)

Equity in the results of investees (ii)


Realization of deemed cost of property, plant and equipment land (iii)

(+)
(+/-)

EBITDA of a joint venture (ii)

Adjusted EBITDA

42,007

3,169

1,975,232

1,718,088

Adjustments for calculation of EBITDA - adjusted:


(i) Changes in the fair value of biological assets
The variation in the fair value of biological assets corresponds to the gains or losses obtained as a
result of the biological transformation of the forestry products, until they are in condition for
use/sale, during the formation cycle.
Since expectations relating to the value of assets are reflected in the Company's results, and the fair
value is calculated based on the assumptions included in the discounted cash flow, without cash
effects from its recognition, the variation in fair value is excluded from the calculation of EBITDA.
(ii) Equity in the results and EBITDA of investees
Equity in the results of investees in the consolidated statement of operations reflects the profit (loss)
of subsidiaries, calculated in accordance with its percentage of participation in the subsidiary.

78

The profit (loss) of the joint venture is influenced by items that are excluded from the EBITDA
calculation, such as net finance results, income tax and social contribution, amortization,
depreciation and depletion, and the variation in the fair value of biological assets. For this reason,
the result of the equity in the results of investees is excluded from the calculation, but the EBITDA
generated by the joint venture is included, in proportion to the Company's share and calculated in a
manner consistent with the above criteria.
(iii) Realization of cost of property, plant and equipment (land)
The effects of the deemed cost of land allocated to property, plant and equipment upon initial
adoption of the IFRS are adjusted in the EBITDA, when realized, through the disposal of the assets,
since they do not involve cash.

79

KLABIN S.A.
CNPJ No. 89.637.490/0001-45
Listed company
BOARD OF DIRECTORS
President
Armando Klabin
Board Members
Celso Lafer
Daniel Miguel Klabin
Helio Seibel
Israel Klabin
Miguel Lafer
Pedro Franco Piva
Olavo Egydio Monteiro de Carvalho
Paulo Srgio Coutinho Galvo Filho
Roberto Klabin Martins Xavier
Roberto Luiz Leme Klabin
Rui Manuel de Medeiros D'Espiney Patrcio
Vera Lafer
STATUTORY AUDIT BOARD
Joo Alfredo Dias Lins
Lus Eduardo Pereira de Carvalho
Maurcio Tiomno Tolmasquim
Vivian do Valle Souza Leo Mikui
Wolfgang Eberhard Rohrbach

EXECUTIVE BOARD
Fabio Schvartsman
Antonio Sergio Alfano
Eduardo de Toledo
Francisco Cezar Razzolini
Arthur Canhisares
Cristiano Cardoso Teixeira

Chief Executive Officer


Chief Financial Officer and Investor Relations Officer
Officer
Officer
Officer
Officer

Pedro Guilherme Zan


Controllership
CT-CRC-1SP168918/O-9

Angelo Ricardo Bonasorte


Accounting
CRC-1SP168200/O-6

80

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