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October/December 2003
December 30, 2003 KLBN4 (BOVESPA) / KLBAY (OTC) Shares outstanding Preferred share price Book value Free Float Daily traded volume 600,856 R$ 3.76 R$ 1.98 78% R$ 2,938 K
Initial Considerations
The month of September 2003 saw the completion of Klabins financial restructuring program, which involved the following major events: 1. End of joint venture with Norske Skog in March 2003, with the Company withdrawing from the newsprint business and the conversion of its newsprint facilities into a packaging paper (kraftliner) production line. 2. Transfer of shareholding control in Riocell to Aracruz in July 2003. 3. End of joint venture with Kimberly Clark in Brazil and Argentina in August 2003, resulting in the Companys withdrawal from the tissue paper business. 4. Transfer of the controlling stake in Bacell to RGM International in September 2003. Since the restructuring process completed in 2003 does not permit an appropriate comparison between the fiscal years of 2003 and 2002, pro forma financial statements have been prepared for the two periods, disregarding all the business operations that are no longer part of Klabin S.A. All the comments and comparisons contained in this release and related to the Companys operating results refer to such pro forma financial statements.
2003
2,707 2,370
1,713 657 28%
2002
2,140 1,877
1,353 524 28%
Change
26% 26% 27% 25% 25%
18% 6% 12%
Gross Profit
Gross Margin
1,090
46%
875
47%
Selling Expenses General and Adminstrative expenses Other operating revenues (expenses)
623
26%
461
25%
243 866
37%
247 708
38%
1,190
733 457 38%
1,233
832 401 33%
9% 31% 24%
9% 40%
Others Sacks/Envelopes Corrugated Boxes Boards Kraftliner
62%
21% 29%
34%
38%
33%
2003
2002
2003
Sales volume figures do not include wood
2002
Consolidated net revenue (including wood) amounted to R$ 2,370 million in 2003, up 26% from the previous year. Export volumes rose 14% to 457 thousand tons in 2003, while export net revenues grew 21% to US$ 214 million.
9%
2%
13% 32%
1%
72%
24% 20%
28%
2003
2002
Net revenue does include wood
2003
2002
Operating Result
Pro forma gross profit totaled R$ 1.1 billion (up 25% from 2002), with a gross margin of 46%. Considering the Income Statement prepared under Brazilian Corporate Law for the year 2003, Klabins business restructuring program generated non-recurrent expenses of R$ 104 million in 2003, booked on the General & Administrative Expenses account. Operating result before financial expenses (pro forma EBIT) increased 35% to R$ 623 million in 2003, with an EBIT margin of 26%.
EBITDA
Operating cash generation (pro forma EBITDA) amounted to R$ 866 million in 2003, up 22% from 2002, with a margin of 37%. It was possible to achieve this level of cash generation due to the production mix and continuous cost savings efforts pursued by the Company.
Indebtedness
The most important events behind the results reported in 2003 were Klabins financial restructuring program, net debt reduction and improved cash position. Net debt shrank from R$ 2,821 million in 2002 to R$ 513 million in 2003, while cash and short- term investments jumped from R$ 120 million to R$ 722 million.
Debt - Consolidated
R$ million 12/31/2002 Currency Local Foreign 899 1,028 1,927 719 295 1,014 12/31/2003 Currency Local Foreign 138 327 465 284 486 770
Short Term Long Term GROSS DEBT Cash and Short Term Investments NET DEBT
Gross debt dropped from R$ 2,941 million in late 2002 to R$ 1,235 million in December 2003. Sixty-six per cent (66%) of this amount refers to long-term contracts (45% in 2002) with terms to maturity extending to 2010.
Foreign currency debt totaled US$ 267 million and accounted for 62% of Klabins total indebtedness. Eighty-one per cent (81%) of this amount refers to trade finance (natural hedging). Hedge contracts totaled US$ 127 million at the end of December, 2003. With the referred debt reduction, net debt is now equivalent to 22% of total capitalization (71% in 4Q02) and the Net Debt / EBITDA ratio has dropped to 0.6x (2.9x in 4Q02).
Net Result
In 2003, Klabin reported a net profit of R$ 1.0 billion, including the effects of its financial restructuring program.
Business Performance
PACKAGING PAPER Sales volume reached 694 thousand tons in 2003, up 14% from 2002, while net revenue rose 34% to R$ 1,059 million. Exports grew 13% in terms of volume and 23% in terms of revenue when compared to 2002, accounting for 61% of the sales volume and 53% of the sales revenue reported by this segment in 2003. Boards Sales volume totaled 284 thousand tons in 2003 (up 13% from 2002), generating net revenue of R$ 571 million (up 43%). The highlight in 2003 was the 25% growth in exports sales, which amounted to 71 thousand tons. This improvement was due to the development of new markets for boards, with an increased shipping of such products to China for liquid packaging board (LPB), and carrier board exports to Europe and to the United States. Kraftliner Kraftliner sales totaled 409 thousand tons in 2003 (up 14% from 2002), fetching the Company R$ 488 million in net revenue (25% more). Kraftliner exports improved 11%, totaling 356 thousand tons and generating net revenue of R$ 420 million in 2003. This growth is due to a number of factors: a poorer demand for paper for the manufacture of corrugated boxes, the conversion of Klabins newsprint facilities into a packaging paper production line, the recovery of demand from Argentina and the opening of new markets (e.g. Asia). CORRUGATED BOXES Economic activity remains sluggish in Brazil. Due to the poor demand for corrugated boxes segment, domestic shipments of boxes, sheets and accessories in 2003 fell 12.8% to 1,869 thousand tons when compared to 2002, according to the ABPO. Klabin holds 20% of this market, with sales volume of 369 thousand tons. Net revenue totaled R$ 754 million, 12% higher than the figure reported in 2002. Klabin sells corrugated boxes to a variety of industries, with a strong leadership in the tobacco business market. It also supplies the export-quality fruit packaging industry, which is active everywhere in Brazil, but particularly in the Northeast, and in which case it is favored by the geographic coverage of its mills.
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MULTIWALL BAGS Sales volume reached 109 thousand tons in 2003, down 6% from 2002, while net revenue rose 26% to R$ 309 million. Exports amounted to 26 thousand tons, representing 24% of the total volume sold (against 17% in 2002). Major export markets are Mexico, Venezuela, Costa Rica, Panama, Nicaragua and the Dominican Republic. WOOD Klabin sold 7.1 million pinus and eucalyptus logs in 2003, up 3% from the previous year. Altogether, 4.7 million tons of these were transferred to its paper mills in Paran, Santa Catarina and So Paulo. Sales to third parties grew 14% to 2.4 million tons when compared to the previous year. Net revenue from such sales improved 40%, totaling R$ 206 million, also in comparison with 2002. At the end of 2003, Klabin owned 351 thousand hectares of forest land, comprising 186 thousand hectares of planted forests and 123 thousand hectares of preserved native forests.
Capital Expenditures
Pro forma capital expenditures totaled R$ 125 million in 2003 (R$ 148 million in 2002), most of which were invested in the paper mills.
Capital Markets
Klabins preferred shares (KLBN4) were negotiated at R$ 3.76 at the closing of the trading session on December 30, 2003. In 2003, KLBN4 appreciated 265%, while the So Paulo Stock Exchange Index (Ibovespa) rose 97%. Transactions involving 268 million preferred shares totaled 26,154 in 2003. The average traded daily volume was R$ 2.9 million.
KLBN4 vs.Ibovespa - 12 months Closing Price: 12/30/02 = 100
400 350 300 250 200 150 100 50
3 3 3 3 3 3 3 3 3 3 3 3 2 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 12 19 25 26 28 29 14 17 22 28 29 26 30 2/ 7/ 6/ 1/ 1/ 0/ 9/ 8/ 5/ 4/ 3/ 2/ 2/ 1 1 1 0 0 0 0 0 0 0 0 0 1
Klabin
Ibovespa
As at December 31st, 2003, the capital stock of Klabin S.A. was represented by 918.8 million shares: 317.0 million common shares and 601.8 million preferred shares. The Company maintained 1.1 million shares of stock in treasury on that date.
DIVIDENDS In a Extraordinary Meeting held on September 19, 2003, the Board of Directors approved the distribution of intermediary dividends of R$ 0.0675 per common share (ON) and R$ 0.07425 per preferred share (PN), starting on October 10, 2003. The total amount of intermediary dividends distributed was R$ 66 million. In a meeting held on February 16, 2004, the Board of Directors approved the distribution of supplementary dividends in the amount of R$ 0.20479 per common share (ON) and R$ 0.22527 per preferred share (PN) to be paid until April 30, 2004. The total amount of supplementary dividends to be distributed will be R$ 200 million. Thus, the total dividends related to the year 2003 will be R$ 266 million or 28% of the net profit reported in this period, net of the retained earnings (legal reserve of 5%). CORPORATE GOVERNANCE In addition to integrating the Ibovespa stock portfolio, Klabin is also classified as a Level 1 corporation in terms of Corporate Governance by the So Paulo Stock Exchange. In 2003, Klabin initiated the implementation of modern management value oriented techniques, trimming its remuneration tools, investments analysis and business rentability evaluation, in special the EVA system. In 2004, EVA system will be implemented in all units and will enable a great development on the present practices.
Outlook
The year 2004 holds bright prospects for Klabin. It will be the first full year of operations after the restructuring program, with a stronger and healthier financial structure, and a clear focus on the packaging paper and packaging products business markets. The Company expects to invest R$ 450 million in 2004. This amount will be used to expand its pulp and kraftliner paper production capacity at Monte Alegre, to eliminate production bottlenecks in the recycled paper mills, and to promote product quality and environmental initiatives in the paper mills in Santa Catarina. The Company is also preparing technical and economic studies for a new project to expand its paper and boards production capacity from 1.5 million tons/year to 2.0 million tons/year. The ultimate purpose of this project is to double its capacity to produce packaging boards for export. Exports should continue to play an important role in 2004. Klabin accounts for 75% of total Brazilian packaging paper exports and for 6% of all the kraftliner paper sold internationally. This expansion program is basically intended to increase its export revenues to 40% of total net revenue. By focusing on its core business namely packaging products the Company also hopes to maintain a leadership in the Brazilian market for corrugated boxes and multiwall bags, while increasing the supply of quality products that may contribute to improve the business performance of its customers. As an important part of this strategy, the Company will be investing more in Packaging Solutions, which are intended to complement its product line with customer product packaging services.
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Ronald Seckelmann, Finance & IR Director Luiz Marciano Candalaft, IR Manager Tel: (11) 3225-4045 Email: marciano@klabin.com.br
With gross revenue of R$ 2.7 billion in 2003, Klabin stands as the largest integrated packaging paper manufacturer in Brazil, with a production capacity of 1.5 million tons per year, and as a leader in all of its business markets. For strategic purposes, the Company will focus on the following business lines: packaging paper and boards products, corrugated boxes, multiwall bags and wood.
The statements contained herein with regard to the Company's business prospects, operating and financial result projections, and references to its potential growth are merely forecasts based on the expectations of Company Management in relation to its future performance. Such estimates are highly dependent on market behavior and on Brazilian economic, industry and international market conditions. They are therefore subject to change.
4Q02
898,905 (448,908) 449,997 (111,927) (40,839) (17,978) (170,744) 279,253 (1,197) (109,670) 108,031 9,702 8,063 286,119 (9,868) 276,251 125,568 (1,135) 400,684 65,508 21,339 366,100
3Q03
690,457 (389,706) 300,751 (76,898) (104,596) (13,580) (195,074) 105,677 (486) (85,759) (24,169) 16,411 (93,517) 11,674 (127,957) (116,283) (38,145) (116) (154,544) 53,088 13,685 172,450 60,977 233,427
10
2002
2,814,044 (1,548,789) 1,265,255 (384,624) (167,810) (61,355) (613,789) 651,466 (439) (408,309) (580,521) 21,665 (967,165) (316,138) (12,016) (328,154) 122,612 (2,754) (208,296) 245,467 82,005 978,938
Change
5.5% 4.8% 6.4% (6.7%) 62.6% (0.9%) 12.8% 0.4% 60.4% 17.5% (94.2%) 197.8% (53.6%) (164.6%) (7790.7%) (443.8%) (202.2%) (24.6%) (580.5%) (4.7%) (23.2%) (2.9%)
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12/31/2003 12/31/2002 909,595 421,891 107,032 64,574 20,043 51,632 200,237 44,186 1,097,602 812,606 284,996 2,031,405 1,135,431 482,705 231,842 3,788 32,510 56,133 88,996 1,566,618 758,566 564,000 244,052 2,605 61,733 1,083,566 800,000 193,632 93,799 (3,865) 4,745,927
Long-Term Receivables Deferred income tax and soc. contrib. Taxes to compensate Recoverable taxes Other receivables Permanent Assets Other investments Property, plant & equipment, net Deferred charges
Total
3,824,898
4,745,927
12
(*) Excluding the segments that are no longer part of Klabins business portfolio
13
(*) Excluding the segments that are no longer part of Klabins business portfolio
14
(*) Excluding the segments that are no longer part of Klabins business portfolio
15
Attachment 7
Financing Repayment Schedule 12/31/03
Gross Debt - Average Terms: 21 months Currency R$ Million TOTAL Local Foreign 1Q04 44 52 96 2Q04 33 80 112 3Q04 31 132 163 4Q04 30 22 52 1H05 63 69 133 2H05 52 106 158 2006 97 260 357 2007 onwards 114 51 165 TOTAL 465 771 1,235
Local Currency - Average Terms: 23 months - Average Cost: 14.7 % per year R$ Million 1Q04 2Q04 3Q04 4Q04 1H05 2H05 2006 2007 onwards TOTAL BNDES Others TOTAL
34 32 31 30 62 52 96 114 450
10 1 0 0 1 0 1 1 14
44 33 31 30 63 52 97 114 465
Foreign Currency - Average Terms: 20 months - Average Cost: 4.5 % per year Trade US$ Million Eurobonds Others TOTAL Finance 1Q04 16 1 1 18 2Q04 26 0 2 28 3Q04 22 23 1 46 4Q04 6 0 2 8 1H05 21 0 2 24 2H05 36 0 0 37 2006 89 0 1 90 2007 onwards 0 0 18 18 TOTAL 216 23 27 267
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Attachment 8
Consolidated Cash Flow Statement Period ended 12/31/03
Operating Activities Net profit for the period Expenses (revenues) not affecting cash and equivalents: Depreciation, amortization and depletion Amortization of non operating goodwill Amortization of goodwill Gain (Loss) on sale of property, plant and equipment Impaiment for losses on fixed assets Gain (Loss) of Capital Deferred income tax and social contribution Income tax and social contribution charges Interest and exchange rate variations on loans and financings Equity in the earning of subsidiaries Exchange rate variations on investments abroad Minority Interest Redution (increase) in Assets Accounts receivable Inventories Taxes recoverable Prepaid Expenses Others accounts receivable Increase (reduction) in Liabilities Suppliers Taxes payable Provision for income tax and social contribution Salaries, vacation pay and payroll charges Provision for contingencies Deferred income Others accounts payable Net cash provided from operating activities Investing activities Cash and cash equivalents Guarantee deposits Acquisitions of property, plant and equipment Increase in deferred assets Proceeds from disposals of property, plant and equipment Disposal of investments in controlled companies Capital Integralization Judicial deposits Other investments, net Net cash used on investing activities Financing activities: New funding Loan amortization Debentures amortization Interest paid Capital reduction Dividends paid Net cash used in financing activities Net increase in cash and equivalents Cash and cash equivalent at beggining of period Cash and cash equivalent at end of period Thousand of Reais 1,000,879 292,339 54,140 4,432 67,635 (903) (1,045,889) 48,808 73,480 138,904 704 49,091 2,077
83,970 (130,444) (57,040) 22,706 (203,812) (152,271) (3,265) (352) 10,161 49,184 (2,365) 51,091 353,260
44,395 (87,070) (176,957) (5,305) 20,898 2,262,281 88,086 (20,414) 126 2,126,040
1,133,089 (1,732,195) (1,036,000) (187,377) (31,984) (66,000) (1,920,467) 558,833 75,428 634,261 558,833
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