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3Q16 Earnings Release

BM&FBOVESPA: MILS3

Teleconference and
Webcast
Date: November 8, 2016,
Tuesday
Time: 12:00 pm Brasilia time
9:00 am New York time

2:00 pm London time


Teleconference:
+55 11 3193-1001 or
+55 11 2820-4001,
Code: Mills
Replay: +55 11 3193-1012 or
+55 11 2820-4012, code:
0516488# or www.mills.com.br/ri
Webcast: www.mills.com.br/ri

The financial and operational information contained in this press release,


except as otherwise indicated, is in accordance with the accounting policies
adopted in Brazil, which are in compliance with the International Financial
Reporting Standards - IFRS.

3Q16
3Q16 Earnings Release

Rio de Janeiro, November 7, 2016 - Mills Estruturas e Servios de Engenharia S.A. (Mills) announces its results for
the third quarter of 2016 (3Q16).
The quarter's performance reflects the current economic environment, which continues to negatively impact our rental
revenues and our margins. Since the Company does not believe in the recovery of its results in medium term, it has
several initiatives underway to adapt its structure to this new reality.
The main highlights of the quarter were:

Positive free cash flow before interest of R$67.1 million in 3Q16, totaling R$195.2 million in the first nine months
of 2016 (9M16), influenced by the receipt of R$21.2 million related to the third instalment of the sale of the
Industrial Services business unit, sold in 2013.

Net revenue of R$86.1 million in 3Q16, 18.2% below the second quarter of 2016 (2Q16).

Reversal of provision to reduce the net realizable value of the sale of R$1,4 million due to the cancellation of the
balance of the equipment sales agreement closed in August , 2015 for commercial reasons.

EBITDA, excluding non-recurring items, of R$11.4 million, with EBITDA margin of 13.2%.

Net loss of R$22.2 million in 3Q16.

Payment in August of an instalment of the second issue of debentures, totaling R$100.4 million, R$ 80.5 million in
principal.

Was approved in August, at the Board of Directors meeting, the transfer of our branch in So Paulo, from Osasco
to Cotia. The change is expected for the first quarter of 2017.

3Q15
(A)
136.5
34.8
25.5%
38.5
28.2%
-17.2
0.8%
9.5
73.9

in R$ million
Net Revenue
EBITDA
EBITDA Margin (%)
EBITDA ex. non-recurring items
EBITDA Margin ex. non-recurring items (%)
Net (Loss) Earnings
ROIC LTM (%) ex. impairment
Capex
Free Cash Flow before interests

2Q16
(B)
105.4
13.7
13.0%
17.6
16.7%
-20.9
-2.9%
1.4
48.6

3Q16
(C)/(A) (C)/(B)
(C)
86.1 -36.9% -18.2%
11.2 -67.8% -18.0%
13.0%
11.4 -70.4% -35.2%
13.2%
-22.2
29.0%
6.0%
-4.2%
0.4 -95.4% -70.0%
67.1
-9.2%
38.0%

Restructuring expenses, such as closing branches and liabilities of Industrial Services business unit, sold in
2013.
millls.com.br/ri

3Q16
Business Perspective
The Infrastructure and Real Estate markets, two main sectors in which Mills operates, are
still very pressured, but already indicate a recovery, according to the National
Confederation of Industry (Confederao Nacional da Indstria - CNI), although no signs of
recovery of GDP or the unemployment rate.
The investment intention indicator according to CNI, given the low utilization of operating
capacity, weak activity and the difficult financial situation of companies in the construction
segment remained practically stable between 2015 and 2016.
The Federal Government launched in September the Crescer Program (Grow Program),
which comprises 34 projects in the mining, transport and sanitation areas, totaling R$37.5
billion in infrastructure investments. The first auctions expected in the program are four
airports, with R$6.5 billion investment over the concession period. According to the
schedule, the bids will be announced by December this year and the auction is expected for
the first quarter of 2017. The possible impact on Mills revenue, arising from these auctions,
may take longer than 12 months of the publication of the notice. This is due to the time of
analysis of the documents until the date of the auction, signature the contract and
contracting the construction, which in turn, potentially hire an equipment and material rental
company, such as Mills.
However there are other events that can increase the pipeline and backlog of Mills
infrastructure sector in faster term: (i) the contractual amendments of existing infrastructure
concessions; and (ii) the resumption of the suspended works or at a slower rhythm.
Regarding the real estate market, according to market sources, its recovery should be slow
due to the high interest rates, rising unemployment, declining family income and restrictions
on granting loans, which determine the current lack of new investments in the sector and
the effective beginning of the construction, when our equipment are mobilized. In recent
periods, this term has come to 24 months; therefore, any recovery in this market will impact
Mills in a second moment.
Regarding the aerial work platforms, these equipment are exposed to different sectors of
the economy. With the resumption of the Industrial and Construction GDP, the aerial work
platforms rental market should resume gradually, reflecting primarily in the equipment
utilization rate and later in price.

Source: Exame 1122


millls.com.br/ri

3Q16
Revenue
In 3Q16, net revenue was R$86.1 million compared to R$105.4 million registered in 2Q16. The decline between
quarters was mainly due to equipment rental revenue, which dropped 13.1% or R$11.2 million. From this decrease,
R$3.9 million can be explained by the end of some contracts related to the Olympics held in Rio de Janeiro in August.
The sales revenue of new and semi-new equipment totaled R$6.2 million this quarter, 27.2% lower than the amount
recorded in the previous quarter. For commercial reasons, we decided to cancel the balance of the equipment sale
agreement of EUR 8.0 million closed in August 2015. 98 Rental machines from this contract returned to the PPE in
September. Of this contract, we received a total amount of R$20.6 million, equivalent to 209 equipment.

Per Business Unit

Per Type

R$ million

R$ million

-18.2%

-36.9%

136.5

-18.2%

-36.9%

136.5

105.4

105.4

86.1

86.1

10.3
7.0

68.7

11.8

3.2
54.4

26.5

43.4

17.9

41.2

33.1

15.7
27.0

3Q15

2Q16

3Q16

Heavy Construction

Real Estate

5.7
2.8

116.0

3Q15

Rental

1.4

85.0

4.8

73.9

2Q16

Rental
Sales of semi new equipment

6.1

3Q16
Sales of new equipment
Others

Evolution of the Revenue


R$ million

Rental

Construction
47.2
37.8

2Q16

2.6

0.9

Rented Volume Price and Mix

2.9

4.7
39.6

34.3

3Q16

2Q16

Rented Volume Price and Mix

3Q16

The utilization rate (UR), the ratio between the amount of rented equipment and the amount of equipment in the last
twelve months (LTM) ended September 30, 2016 was equal to 43.7% in Construction, and 58.1% in Rental. In this
quarter, UR was 40.7% in Construction and 52.7% in Rental.

Quarterly Evolution of the Utilization Rate


100.0%
80.0%
60.0%

52.7%

40.0%

40.7%

20.0%
0.0%

Construction

millls.com.br/ri

Rental

3Q16
Costs
Cost of Goods Sold (COGS), excluding depreciation, totaled R$36.0 million in 3Q16, a 14.6% lower result than
2Q16. Comparing the value of COGS and assets write-off between quarters, we had a reduction of R$4.2 million due
to lower volume of sales of new and semi new equipment and higher margins. The cost of job execution and
warehouse had a reduction of R$2.0 million between quarters mainly due to lower spending on consumption material,
maintenance and repair, which represented 31.4% of costs of job execution and warehouse.

COGS
In R$ million

COGS and Assets


Write-off
30. 0

Job Execution and


Warehouse

59. 0%

58.2%

39.4

58. 0%

32.4

30.4

25. 0
40. 0

55.0%

40. 0%

2.8
3.5

57. 0%

35. 0

20. 0

56. 0%

1.4

2.6

30.7%

2.0

1.4

30. 0

15. 0

53.7%

9.8

9.8

55. 0%

12.8

25. 0

28.9%

10.5

20. 0
54. 0%

1.9

35.2%

2.0

35. 0%

30. 0%

1.3

9.5

25. 0%

20. 0%

10. 0

5.0

2.6
2.1

3.0
3.0
3.8

5.7
1.0
3.6

5.2

15. 0

1.0

10. 0%

15.9

52. 0%

15.6

5.0

51. 0%

2Q16

18.9

10. 0

0.0

3Q15

15. 0%

53. 0%

5.0 %

0.0

3Q16

0.0 %

3Q15

2Q16

3Q16

Others
Third parties
Freight
Construction/maintenance and repair materials
Personnel
% Total Net Revenue

Assets Write-off
Cost of sales of new equipment
Cost of sales of semi new equipment
% Net Revenue + Indemnities

Expenses
General and administrative expenses, excluding ADD, had a reduction of 16.3% over the previous quarter (2Q16),
equivalent to R$7.1 million. The main reasons for this change were: i) reversal of provision for net realizable value
reduction of assets available for sale in 2Q16, which affected the Companys result in R$1.4 million; ii) positive
variation of R$3.7 million on non-recurring expenses, including expenses with closing branches and costs related to
the Industrial Services business unit, sold in 2013.

SG&A excluding ADD


In R$ million
44.5

43.2

36.1

9.1

2.4

10.3

10.0

23.7

23.7

2Q16

3Q16

1.9
11.3

31.2

3Q15

Others Expenses
General Services
Commercial, Operational and Administrative
The cost of sale of new equipment is tied to the sale of new equipment revenue. The cost of sale of semi new equipment is tied to
the sales revenue of semi new equipment and is equivalent to the write-off of these assets (residual cost) .The cost the asset writeoff is linked to Indemnities revenue, this value is the cost of the asset we write off.
millls.com.br/ri

3Q16
Delinquency and Allowance for Doubtful Debts (ADD)
In 3Q16, ADD amounted R$2.8 million, equivalent to 3.2% of net revenue, against 6.0% in 2Q16. The Company is
intensifying its initiatives to reduce the balance of past due accounts receivable and credit analysis. In July/2016, the
Company launched an internal campaign to reduce the balance of overdue receivable accounts. The exposure of
receivable accounts to clients related to ongoing investgations totaled R$14.5 million at the end of September 2016,
againsth R$29.0 million in the same period last year. ADD was R$136.1 million in September of 2016, R$34.8 million
related to clients envolved on ongoing investigations. This quarter, there was a R$7.2 million write off in ADD,
reaching R$10.2 million in the year of 2016, for having achieved the maturity over five years.
in R$ million

3Q15
(A)

ADD
ADD Total
% Net Revenue
Heavy Construction
% Net Revenue
Real Estate
% Net Revenue
Rental
% Net Revenue
Others
Default
Total Past Due
Past due between 1 and 60 days
Past due between 61 and 120 days
Past due above 120 days

2Q16
(B)

8.0
5.9%
2.9
7.0%
-0.3
-1.3%
5.4
7.9%
0.1

3Q16
(C)

(C)/(A)

(C)/(B)

6.3
2.8 -65.2% -55.9%
6.0%
3.2%
2.6
-1.0 -133.8% -137.7%
7.8%
-3.6%
1.0
-0.5
44.3% -148.7%
5.8%
-3.2%
2.7
4.3 -20.9%
57.6%
5.0%
9.9%
0.0 0.0

143.2 163.6
23.2
22.8
14.8
13.7
105.3 127.1

157.0
21.4
10.8
124.7

9.6%
-7.7%
-26.6%
18.5%

-4.0%
-5.9%
-20.9%
-1.9%

EBITDA
The operation cash generation, measured by EBITDA, totaled R$11.2 million with a margin of 13.0%. Excluding nonrecurring items of R$0,2 million in 3Q16, the net result of sales of semi new equipment of R$1.2 million and the
reversal of provision of R$1.4 million, adjusted EBITDA would be R$8.8 million with a margin of 10.8%. The decline
between quarters was due to the decrease in net revenue of 18.2%.

EBITDA Reconciliation with the Operational Cash Flow


R$ million
11.2

0.2

4.9

0.8

2.6

1.2

46.2

20.1

Cash
6

Operating Cash Flow

Interest paid

Operating Cash Flow


before interest paid

Other liabilities

Payroll and related


taxes

Trade payables

Other assets

Profit sharing payable

Non-Cash
millls.com.br/ri

Purchases of rental
equipment

Accrued expenses on
stock options

2.8

26.1

Trade receivables

Provision for tax, civil


and labor risks

5.7

Interest and monetary


and exchange gains

0.7

Other non cash items

0.9

1.1

Allowance for doubtful


debts

1.7

Gain on sale of
property, plant and

11.2

Ebitda CVM

11.3

3Q16
Financial Result
The financial result was negative R$4.8 million, an improvement of 33.0% compared to 2Q16. This result was due to
the investment income from the resources generated from the capital increase and lower financial expenses. In
August, we amortized one instalment of the principal of the second issuance of debentures in the amount of R$80.5
million.

3Q15
(A)
-15.2
8.9
-24.1

in R$ million
Net Financial Result
Financial Revenue
Financial Expenses

2Q16
(B)
-7.2
14.5
-21.8

3Q16
(C)
-4.8
14.1
-18.9

(C)/(A)

(C)/(B)

-68.2%
58.5%
-21.5%

-33.0%
-3.2%
-13.1%

Net Earnings
In this quarter, the Company recorded a loss of R$22.2 million, versus R$20.9 million in 2Q16. The change related to
2Q16 is explained by the lower operating income, partially offset by the income tax effect.

Debt and Indebtedness Indicators


Mills total debt was R$452.8 million on September 30, 2016, a reduction of R$84.9 million when compared to July
30, 2016. This quarter there was a payment of R$80.5 million of the principal regarding the second issuance of
debentures .
The Company remains generating cash (before the payment of interests and principal), ending 3Q16 with R$322.6
million in cash and financial applications. We ended this quarter with a net debt of R$130.3 million.
Leverage, as measured by net debt / LTM adjusted EBITDA, which was 2.1 x at the end of 2015, dropped to 1.4x at
the end of September, 2016. The LTM adjusted EBITDA / financial result was equal to 2.5 x.
The Company has no foreign currency debt and average maturity of 2.8 years. Short-term debt at the end of the
quarter amounted 35.9% of the total amount. The total average cost of debt was of CDI+0.17%. The chart below
shows the amortization schedule for the principal debt.

Amortization Schedule
In R$ million
322.6

150.3
106.2

106.2
38.9

0.8
Cash

4Q16

2017

2018

2019

Finame
3rd Emission of Debentures - 108,8% CDI
2nd Emission of Debentures - IPCA +5,5%
2nd Emission of Debentures - CDI + 0,88%
Cash

millls.com.br/ri

2020+

3Q16
ROIC
ROIC LTM, excluding impairment (R$57.1 million, which affected 4Q15 results),

was 4.2% negative in 3Q16,

compared to -2.9% in 2Q16. If we considered the impairment for calculation of NOPAT, ROIC LTM would be 7,2%
negative.

ROIC Decomposition
Net Revenue
449.5
COGS
(179.7)
SG&A
(246.0)
(188.9)

NOPAT
(93.4)
(53.4)

Depreciation:
(160.6)
ROIC LTM
-7.2%
Adjusted -4.2%

Income Tax (rate of 30%) 41.0


23.9
Rohr Dividends: 1.5

Net Rental PP&E


878.8
Invested Capital
1,302.7

Others
423.9

Indirect Cash Flow


Cash flow from operating activities, before interest paid plus proceeds from rental PP&E, continues to be positive in
R$46.4 million this quarter. Compared to the previous quarter, a decrease of 7.4% was mainly due to the decrease
in EBITDA. In year to date (9M16), the Company generated R$195.2 million of free cash flow. The Company
received in this quarter R$21.2 million related to the third instalment of the sale of the Industrial Services business
unit, which occurred in 2013.

Adjusted Free Cash Flow


In R$ million
383.7

372.7

295.5
158.9

288.3 281.9

198.9
116.1

2010

2011

2012
-31.2

2013

2014

80.8 79.5

2015

1Q16

50.1 48.6

46.4 67.1

2Q16

3Q16

-154.3
-208.9
Adjusted Operating Cash Flow

Free Cash Flow to the Firm

-356.5
It is considered the last thirteen months to the average invested capital calculation.
Current and non-current liabilities unpaid and fixed assets in use, intangible assets and investments,
For the adjusted operating cash flow to disregard them interest on debentures and Finame and investment in rental
equipment. For the free cash flow to the firm excludes the interest paid.
millls.com.br/ri

3Q16
Tables
In R$ million
Table 1 Net Revenue per type
3Q15
(A)
136.5
116.0
3.2
7.0
2.6
7.7

Total Net Revenue


Rental
Sales of new equipment
Sales of semi new equipment
Technical Assistance
Indemnity and Expenses Recovery

2Q16
(B)
105.4
85.0
2.8
5.7
3.4
8.4

3Q16
(C)
86.1
73.9
1.4
4.8
1.7
4.4

(C)/(A)

(C)/(B)

-36.9%
-36.3%
-56.3%
-31.2%
-34.9%
-42.9%

-18.2%
-13.1%
-51.0%
-15.5%
-50.9%
-47.7%

Table 2 Net Revenue per Segment


3Q15
136.5
41.2
26.5
68.7

Total Net Revenue


Heavy Construction
Real Estate
Rental

%
100.0%
30.2%
19.4%
50.4%

2Q16
105.4
33.1
17.9
54.4

%
100.0%
31.4%
17.0%
51.6%

3Q16
%
86.1 100.0%
27.0 31.4%
15.7 18.3%
43.4 50.4%

Table 3 Cost of goods and services sold (COGS) and general, administrative and operating
expenses (SG&A), ex-depreciation
3Q15

2Q16

3Q16

49.2

48.4%

42.2

46.0%

36.0

48.1%

Costs of Job execution/Warehouse

39.4

38.7%

32.4

35.3%

30.4

40.5%

Cost of sales of new equipment


Cost of sales of semi new equipment

3.0

3.0%

2.1

2.3%

1.0

1.4%

3.8

3.7%

5.2

5.6%

3.6

4.8%

Costs of assets write-offs

3.0

3.0%

2.6

2.8%

1.0

1.3%

COGS total, ex-depreciation

SG&A, ex-ADD

44.5

43.7%

43.2

47.1%

36.1

48.2%

Commercial, Operational e Administrative

31.2

30.7%

23.7

25.8%

23.7

31.6%

General Services

11.3

11.1%

10.3

11.3%

10.0

13.4%

Other expenses

1.9

1.9%

9.1

10.0%

2.4

3.2%

ADD
COGS + SG&A Total

8.0
101.7

7.9%
100.0%

6.3
91.7

6.9%
100.0%

2.8
74.9

3.7%
100.0%

%
100.0%
25.0%
75.9%
-0.8%

2Q16
13.7
0.0
15.1
-1.4
13.0%
14.6
17.6

%
100.0%
-0.1%
110.2%
-10.0%

3Q16
11.2
0.1
10.5
0.6
13.0%
8.6
11.4

%
100.0%
1.2%
93.8%
5.0%

Table 4 EBITDA per business unit and EBITDA margin


3Q15
34.8
8.7
26.4
-0.3
25.5%
31.6
38.5

EBITDA Total
Construction
Rental
Others*
EBITDA Margin (%)
EBITDA excluding sales of semi new equipment
EBITDA excluding non-recurring items
EBITDA excluding sales of semi new equipment and
non-recurring items

35.2

18.5

8.8

* Costs with Industrial Services business unit, sold in 2013.

millls.com.br/ri

3Q16
Continuation Tables
Table 5 EBITDA Reconciliation

Operations Result
Financial Result
Income tax and social contribution expenses
Net (Loss) Earnings before Financial Result
Depeciation
EBITDA
Non-recurring - Expenses related to SI Business Unit
Non-recurring - Restructuring Expenses
EBITDA ex. non-recurring items
Result of sales of semi new equipment
Provision for sales net revenue
EBITDA ex. Result of sales os semi new equipment,
non-recurring items, provisions for sales net
revenue

3Q15
(A)
-17.2
-15.2
5.5
-7.5
-42.3
34.8

2Q16
(B)
-20.9
-7.2
12.3
-26.1
-39.7
13.7

3Q16
(C)
-22.2
-4.8
10.8
-28.2
-39.4
11.2

-0.3
-3.4
38.5
3.2

-1.4
-2.5
17.6
0.5
-1.4

0.6
-0.7
11.4
1.2
1.4

35.2

18.5

8.8

Table 6 ROIC LTM Mills

(C)/(A)
29.0%
-68.2%
96.1%
275.7%
-6.8%
-67.8%

6.0%
-33.0%
-12.3%
8.1%
-0.9%
-18.0%

-291.5% -140.5%
-78.5% -71.2%
-70.4% -35.2%
-63.1% 126.7%
-200.0%
-75.2%

-52.7%

CVM 527 Instruction

3Q15
(A)
1,562.5
1,066.5
496.1
12.0
0.8%

Invested Capital
Rental Net PP&E
Others
NOPAT
ROIC

2Q16
(B)
1,373.9
924.3
449.6
-79.7
-5.8%

3Q16
(C)/(A)
(C)
1,302.7 -16.6%
878.8 -17.6%
423.9 -14.5%
-94.2 -887.2%
-7.2%

Table 7 EBITDA Reconciliation


Reconciliation

3Q16

Ebitda
Non Cash Item s
Provision for tax, civil and labor risks
Accrued expenses on stock options
Profit sharing payable
Gain on sale of property, plant and equipment
Allow ance for doubtful debts
Provision for slow -moving inventories and provision to the net realizable value of inventories
Others
Ebitda ex. non-cash provisions
Cash
Interest and monetary and exchange gains and losses (cash)
Trade receivables
Purchases of rental equipment
Inventories
Taxes recoverable
Judicial deposits
Other assets
Trade payables
Payroll and related taxes
Taxes payable
Other liabilities
Law suits settled
Interest paid
Net cash generated by operating activities

millls.com.br/ri

(C)/(B)

10

11.2
7.2
(1.7)
0.9
0.7
5.7
2.8
(1.1)
(0.0)
27.8
11.3
11.2
(0.2)
2.7
2.1
0.2
(0.1)
(0.8)
2.6
(0.7)
0.8
(1.2)
(20.1)
26.1

(C)/(B)
-5.2%
-4.9%
-5.7%
18.2%

3Q16
Continuation Tables
Table 8 Investment per business unit

Capex Total
Rental equipment
Construction
Rental
Corporate and use goods

3Q15
(A)
13.7
4.2
4.2
0.0
5.3

2Q16
(B)
2.4
1.0
1.0
0.0
0.4

3Q16
(C)
0.6
0.2
0.1
0.1
0.3

3Q15
(A)
67.7
41.2
26.5
56.2
33.4
22.9
1.7
1.1
0.6
1.6
0.4
1.2
8.1
6.3
1.8
27.1
21.6
2.0
0.6
3.0
29.4
2.5
2.9
-0.3
8.7
12.8%
-3.0%
22.2
4.2
747.2
521.3
225.9
868.8
50.1%
52.5%

2Q16
(B)
51.0
33.1
17.9
37.8
23.4
14.5
0.3
0.2
0.1
2.9
1.4
1.6
9.9
8.2
1.7
22.1
17.5
0.2
1.8
2.6
25.3
3.6
2.6
1.0
0.0
0.0%
-11.6%
21.4
1.0
650.8
459.7
191.1
828.4
42.7%
46.1%

3Q16
(C)
42.8
27.0
15.7
34.3
22.5
11.8
0.2
0.1
0.0
4.0
1.5
2.5
4.3
2.9
1.4
21.0
17.4
0.3
2.3
1.0
23.1
-1.5
-1.0
-0.5
0.1
0.3%
-13.0%
21.0
0.1
617.6
437.2
180.4
814.3
40.7%
43.7%

(C)/(A)

(C)/(B)

-95.5%
-95.8%
-97.5%
-386.2%
-95.2%

-75.1%
-82.2%
-89.6%

(C)/(A)

(C)/(B)

-36.8%
-34.4%
-40.6%
-39.0%
-32.6%
-48.4%
-90.8%
-89.0%
-93.7%
148.5%
278.0%
106.9%
-46.8%
-54.0%
-21.3%
-22.5%
-19.5%
-84.8%
320.4%
-66.0%
-21.5%
-158.4%
-133.8%
44.3%
-98.4%

-16.1%
-18.4%
-11.9%
-9.4%
-3.7%
-18.6%
-45.9%
-21.6%
-71.6%
34.6%
7.3%
58.2%
-56.3%
-64.5%
-15.7%
-5.0%
-1.0%
69.5%
26.4%
-60.7%
-8.7%
-140.9%
-137.7%
-148.7%
-777.6%

-5.1%
-97.5%
-17.3%
-16.1%
-20.1%
-6.3%

-1.6%
-89.6%
-5.1%
-4.9%
-5.6%
-1.7%

-42.7%

Table 9 Construction Business Unit

Total Net Revenue


Heavy Construction
Real Estate
Rental
Heavy Construction
Real Estate
Sales of new equipment
Heavy Construction
Real Estate
Sales of semi new quipment
Heavy Construction
Real Estate
Others
Heavy Construction
Real Estate
COGS Total, ex-depreciation
Cost of job execution/warehouse
Cost of sales of new equipment
Cost of sales of semi new equipment
Cost of assets write-offs
G&A, ex-depreciation and ADD
ADD
Heavy Construction
Real Estate
EBITDA
EBITDA Margin (%)
ROIC (%)
Depreciation
Capex
Invested Capital
Rental Net PP&E
Others
Rental PP&E
Utilization Rate Quarter
Utilization Rate LTM

millls.com.br/ri

11

3Q16
Continuation Tables
Table 10 Rental Business Unit
3Q15
(A)
68.7
59.8
1.4
5.4
2.1
22.1
17.8
1.0
3.2
0.1
14.9
5.4
26.4
38.4%
5.3%
20.1
0.0
675.8
545.2
130.6
758.2
72.0%
19.0%
9.0%
63.3%
61.6%

Total Net Revenue


Rental
Sales of new equipment
Sales of semi new equipment
Others
COGS Total, ex-depreciation
Cost of job execution/warehouse
Cost of sales of new equipment
Cost of sales of semi new equipment
Cost of assets write-offs
G&A, ex-depreciation and ADD
ADD
EBITDA
EBITDA Margin (%)
ROIC (%)
Depreciation
Capex
Invested Capital
Rental Net PP&E
Others
Rental PP&E
% Construction Revenue
% Non-Construction Revenue
% Spot Revenue
Utilization Rate Quarter
Utilization Rate LTM

millls.com.br/ri

12

2Q16
(B)
54.4
47.2
2.5
2.7
1.9
20.1
14.8
1.9
3.3
0.0
16.5
2.7
15.1
27.7%
2.8%
18.4
0.0
607.0
464.6
142.3
732.8
57.8%
31.9%
10.3%
57.0%
60.7%

3Q16
(C)
43.4
39.6
1.2
0.8
1.7
15.0
13.0
0.7
1.3
0.0
13.6
4.3
10.5
24.2%
1.2%
18.4
0.1
580.3
441.6
138.7
739.9
51.6%
34.3%
14.1%
52.7%
58.1%

(C)/(A)

(C)/(B)

-36.9%
-33.8%
-15.0%
-84.3%
-18.3%
-32.0%
-27.0%
-27.4%
-59.6%
-100.0%
-8.8%
-20.9%
-60.1%

-20.2%
-16.1%
-51.6%
-69.2%
-8.8%
-25.1%
-12.4%
-61.4%
-60.8%

-8.7%
-386.2%
-14.1%
-19.0%
6.2%
-2.4%

0.0%

-17.9%
57.6%
-30.2%

-4.4%
-5.0%
-2.5%
1.0%

3Q16
Income Statement
3Q15

2Q16

3Q16

(A)

(B)

(C)

Net revenue from sales and services

136.5

105.4

86.1

-36.9%

-18.2%

Cost of products sold and services rendered

(87.0)

(77.7)

(71.3)

-18.1%

-8.3%

49.5

27.7

14.9

-69.9%

-46.2%

(57.0)

(53.7)

(43.1)

-24.4%

-19.9%

Gross profit
General and administrative expenses
Net (Loss) Earnings before Financial Result

(C)/(A)

(C)/(B)

(7.5)

(26.1)

(28.2)

275.7%

8.1%

Financial Expenses

(24.1)

(21.8)

(18.9)

-21.5%

-13.1%

Financial Revenue

8.9

14.5

14.1

58.5%

-3.2%

-68.2%

-33.0%

Financial Result

(15.2)

(7.2)

(4.8)

Profit before taxation

(22.7)

(33.3)

(33.0)

45.3%

-0.8%

5.5

12.3

10.8

96.1%

-12.3%

(17.2)

(20.9)

(22.2)

29.0%

6.0%

Income tax and social contribution expenses


Net profit of the period

millls.com.br/ri

13

3Q16
Balance Sheet
in R$ million

3Q15

2Q16

3Q16

Asset
Current
Cash and cash equivalents
Bills to receive
Stocks
Stocks - Other assets held for sale
IRPJ and CSLL to compensate
Taxes to recover
Advance to suppliers
Derivate financial instruments
Other receivables - investee sales
Goods for sale
Other assets
Total Current asset

192.5
114.8
20.5

356.8
86.7
17.7
8.4
14.0
20.2
0.1

322.6
72.8
16.1

19.1
22.0
7.6
405.5

21.1

16.5
19.6
0.1
0.0
21.8

8.2
533.3

8.4
477.8

17.6

0.2
5.1

0.2
1.1
76.9
10.7

77.7

65.9
10.8
21.1
103.1

87.4
1,049.2
78.2
1,214.7

61.2
904.7
44.9
1,010.8

61.2
871.0
43.5
975.8

Total Non-Current Asset

1,292.4

1,113.9

1,064.6

Asset Total

1,697.9

1,647.2

1,542.4

Non-current
IRJP and CSLL to compensate
Taxes to recover
Deferred taxes
Deferred IRPJ and CSLL
Judicial deposits
Other receivables - investee sales
Other assets

Investment
Stationary
Intangible

in R$ million

28.8
0.2

29.2
11.7
19.1

3Q15

2Q16

88.8

3Q16

Passive
Current
Providers
Salaries and social charges
Loan and financing
Debentures
Tax Recovery Program (REFIS)
Income tax and social contribution
Payable Taxes
Participation on payable results
Dividends and interest on payable capital
Derivative financial instruments
Other passive
Total Current Passive
Non-Current
Loan and financing
Debentures
Tax Recovery Program (REFIS)
Provision for tax, civil and labor risks
Other passive
Total Current Passive
Total Passive

11.4
23.2
3.2
189.2
1.2

9.8
19.4
3.2
165.0
1.2

9.0
21.5
3.2
159.5
1.2

2.1

1.9

0.0
0.6
230.9

0.2
200.7

1.3
1.2
0.0

12.7
415.4
9.3
12.8

10.4
359.2
9.0
20.2

450.3

398.7

9.6
280.6
8.8
19.2
0.2
318.4

681.2

599.5

516.0

0.7
197.6

Net Worth
Subscribed Capital
Advance for future capital increase
Capital Reserves
Profit Reserves
Adjustment os asset valuation
Accumulated losses
Total Net Worth

563.3

688.3

688.3

6.0
487.1
0.2
(39.9)
1,016.7

8.9
389.2
(38.7)
1,047.7

9.8
389.2
(60.9)
1,026.4

Total Passive and Net Worth

1,697.9

1,647.2

1,542.4

millls.com.br/ri

14

3Q16
Indirect Cash Flow
in R$ million
Cash Flow of the operational activities

3Q15

Net (Loss) Earnings of the period before taxes and social contribution

2Q16

3Q16

(22,7)

(33,3)

(33,0)

42,3

39,7

39,4

0,4
1,2
6,9

1,1
1,3
0,5
9,2

20,5
8,0

18,9
6,3

9M2015

9M2016

(44,2)

(90,4)

128,6

119,6

Adjustments:
Depreciation and amortization
Provision for tax, civil and labor risks
Accrued expenses on stock options
Profit sharing payable
Gain on sale of property, plant and equipment
Interest and monetary taxes asset and passive changes
ADD

(1,7)
0,9
0,7
5,7

(0,1)
6,0
22,2

0,8
3,5
1,2
39,6

17,5
2,8

63,1
30,8

58,8
18,2

Provision to the net realizable value of inventories

Provision for slow-moving inventories

0,7

1,6

(1,1)

2,7

0,7

(2,2)

(0,3)

(0,0)

0,5

0,5

Others
Changes in assets and passive
Trade receivables

(1,7)

(1,5)

11,2

Purchases of rental equipment

9,3

8,8
(1,3)

(4,2)

(1,0)

(0,2)

(7,4)

Inventories

0,3

0,2

1,3

(1,4)

Taxes recoverable

0,9

2,4

2,1

14,3

Judicial deposits

(0,7)

0,2

(1,5)

0,8

Other assets

7,9

(1,2)

(0,1)

4,8

(2,9)

Trade payables

1,7

3,3

(0,8)

(5,9)

1,6

Payroll and related taxes

1,5

2,2

2,6

3,8

3,3

Taxes payable

(0,4)

0,4

(0,7)

(1,6)

(1,7)

Other liabilities

0,4

(0,4)

0,8

(0,3)

0,8

Lawsuits settled

Interest paid

(18,6)

Income tax and social contribution paid

1,7
14,5

(0,4)

(1,2)

(0,8)

(2,0)

(21,6)

(20,1)

(58,1)

(53,5)

42,0

27,5

Fixed and intangible assets acquisitions and intangible (*)

(5,3)

Value received by the sale of SI business unit

18,6

Net cash applied in investment activities

13,3

Net cash provided by operating activities

(6,3)

26,1

158,5

122,5

(0,4)

(0,3)

(14,9)

21,2

18,6

21,2

(0,4)

20,9

3,7

19,3

Cash flow from investing activities:


(1,9)

Cash flow from financing activities

Capital Integralization

Cost into shares

(3)

Acquisition of shares in treasury

(0)
(1)

(91)

(81)

Net cash provided by financing activities

(0,8)

(93,7)

Aumento (reduo) de caixa e equivalentes de caixa, lquido

54,5

Dividends and interest on equity paid


Repayment amortization

125,0
(3,4)
(8,7)

(21,8)
(132,8)

(172,8)

(81,3)

(163,3)

(51,2)

(66,7)

(34,3)

(1,1)

90,6

Increase (decrease) in cash and cash equivalents

138,0

423,5

356,8

193,7

232,0

Cash and cash equivalents at the end of the period

192,5

356,8

322,6

192,5

322,6

Increase (decrease) in cash and cash equivalents

54,5

(66,7)

(34,3)

millls.com.br/ri

15

(1,1)

90,6

3Q16
Glossary
(a) Asset Write-off - is linked to Indemnities revenue, this value is the cost of the asset write off.
(b) Capex (Capital Expenditure) - Acquisition of tangible and intangible assets to non-current assets.
(c) Invested capital - For the company, invested capital is defined as the sum of shareholders' equity (net assets) and
third-party capital (including all costly, bank and non-bank debt), both being the average values for the period. By
business unit, is the average amount of capital invested by the company by weighted average assets of each
business unit (assets plus net fixed assets). The asset base in the year is calculated as the average asset base of the
last thirteen months.
(d) Net Cash Flow - Net cash provided by operating activities less net cash used in investing activities.
(e) Job execution costs - Job execution cost include: (i) labor costs from construction jobs supervision and technical
assistance; (ii) labor costs for erection and dismantling of the equipment rented to our clients, when such tasks are
carried out by the Mills workforce; (iii) equipment freight costs, when under Mills responsibility; (iv) cost of materials
used in the maintenance of the equipment, when it is returned to our warehouse; and (v) cost of equipment rented
from third-parties.
(f) Warehouse costs - This cost includes the costs directly related to administration of the deposit, storage, handling
and maintenance of lease assets and resale, covering costs with hand labor, IPE used in the activities of deposit
(drive, storage and maintenance), inputs (forklift gas, gas welding, plywood, paints, wood battens, among others) and
maintenance of machinery and equipment (forklifts, welding machines, water-blasting hoists and tools in general).
(g) Cost of sales - Cost of sales of new equipment is linked to sales of new equipment revenue. The sales of seminew equipment cost is tied to sales of semi new equipment revenue and is equivalent to the cost of the assets writeoff (residual cost).
(h) General and administrative expenses - (i) The SG&A Commercial, Operational and Administrative includes
current expenses such as salaries, benefits, travel, representation of the various departments including Sales,
Marketing, Engineering, Projects and administrative back office departments, as HR and Finance; (ii) General
Services includes the equity costs of head officer and several branches (rents, fees, security and cleaning, mainly);
and (iii) Other expenses are items largely non-cash, as provisions for stock option programs, provisions for
contingencies, provisions for slow-moving inventories and some non-permanent disbursements.
(i) Net debt - Gross debt less financial resources.
(j) EBITDA - EBITDA is a non-accounting measure prepared by the Company, reconciled with our financial
statements in compliance with the provisions of CVM Circular No. 01/2007, where applicable. We calculate EBITDA
as our operating income before financial results, the effects of depreciation of use of property and rental equipment
and amortization of intangible assets. EBITDA is not a measure recognized by GAAP in Brazil, IFRS or US GAAP,
does not have a standard meaning and may not be comparable to measures with similar titles provided by other
companies. We reported EBITDA because we use to measure our performance. EBITDA should not be considered in
isolation or as a substitute for net income or operating income as measures of operating performance or cash flows
or to measure liquidity or debt payment capacity.

millls.com.br/ri

16

3Q16
Glossary
(K) ROIC - Return on Invested Capital, calculated as Operating Income before financial results and after income
tax and social contribution (theoretical rate of 30%) on this income, plus the remuneration companies in which it
has a minority interest, divided by the average capital invested. ROIC is not a measure recognized by the
accounting practices adopted in Brazil, does not have a standard meaning and may not be comparable to
measures with similar titles provided by other companies.
LTM ROIC: ((Operating profit in the last twelve months - (30% IR) + compensation of companies in which it has a
minority interest) / Capital invested average of the last thirteen months)

This press release may contain statements that express management's expectations about future events or results. All statements
are based on future expectations rather than on historical facts involve various risks and uncertainties. Mills can not guarantee that
such statements will prove to be correct. Such risks and uncertainties include factors: relating to the Brazilian economy, the capital
markets, the sectors of heavy construction, real estate, oil and gas, among others, and governmental rules that are subject to
change without notice. For additional information on factors that may give different results from those estimated by the Company,
please consult the reports filed with the Securities and Exchange Commission - CVM.

millls.com.br/ri

17

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