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December 30, 2004 KLBN4 (BOVESPA) / KLBAY (OTC) Shares Outstanding Preferred Share Price Book Value Free Float Daily Traded Volume 600,856 K R$ 5.40 R$ 2.50 78% R$ 4,066 K
Highlights in 2004:
Paper and packaging paper sales hit a record of 1.3 million tons, up 13% from 2003. Wood sales to third parties also reached a record level of 3.3 million tons, exceeding the volume sold in 2003 by 39%. Exports amounted to 555 thousand tons, generating US$ 279 million in revenue or 30% more than in 2003. EBITDA totaled R$ 990 million in 2004, with a margin of 36%. Supplementary dividends to be paid in April, 2005: R$ 92.05 per 1,000 common shares and R$ 101.26 per 1,000 preferred shares. The total dividends related to the year 2004 will be R$ 165 million.
Initial Considerations
As the restructuring program implemented in 2003 does not permit an appropriate comparison between the figures reported in 2004 and 2003, pro forma financial statements have been prepared for the year 2003, disregarding all business operations that are no longer part of Klabin S.A. Thus, the comments and comparisons contained in this release regarding the operating results of 2003 refers to pro forma financial statements. The information presented herewith in connection with the Companys operations and finances in 2004 and 2003 consists of consolidated figures stated in local currency (R$), according to the general accounting principles adopted in Brazil, except where otherwise indicated.
Key Figures
R$ million
Gross Revenues Net Revenue
Domestic Market Exports % Exports
2004
3,202 2,729
1,914 815 30%
2003*
2,707 2,369
1,713 656 28%
Change
18% 15% 12% 24% 15% 19% 14% 142% 13%
8% 21%
Gross Profit
Gross Margin
1,256
46%
1,090
46%
EBIT EBITDA
EBITDA Margin
759 990
36%
636 866
37%
2004
Equity Net Debit Total Capitalization Net Debt / Total Capitalization Net Debt / EBITDA 2,107 498 2,665 19% 0.5
2003
1,818 513 2,331 22% 0.6
Change
16% -3% 14%
4Q04
828 702
504 198 28%
4Q03*
683 599
444 155 26%
3Q04
867 738
534 204 28%
Gross Profit
Gross Margin
315
45%
243
41%
354
48%
EBIT EBITDA
EBITDA Margin
190 248
35%
102 160
27%
224 282
38%
59 95 325
197 128 39%
58 44 306
192 114 37%
58 94 348
217 131 38%
Operating Result
Gross profit totaled R$ 315 million in 4Q04, with a gross margin of 45%, 30% higher than 4Q03 and 11% down 3Q04. Sales expenses in the amount of R$ 66 million (14% lower than 3Q04), accounting for 9% of net revenue were still influenced by higher export freight costs, which totaled R$ 43 million.
General & administrative expenses amounted to R$ 49 million, representing 7% of net revenue versus 5% in 3Q04. This variation was primarily due to a salary adjustments for all headquarters and most of Klabins 19 industrial plants. Such adjustments averaged out at 8%. Operating results before financial expenses (EBIT) totaled R$ 190 million in 4Q04, up 86% from 4Q03 and 15% down 3Q04.
EBITDA
Operating cash generation (EBITDA) amounted to R$ 248 million in 4Q04, which is 55% higher than the 4Q03 and 12% lower than the 3Q04. EBITDA margin reached 35% despite the negative effect of the appreciation of the real against the U.S. dollar on export revenues in 4Q04.
Financial Result
Net financial expenses totaled R$ 45 million (5% down 3Q04), due to the impact of a stronger real on dollar-denominated assets, which exceeded the liabilities stated in the same currency as in December 31, 2004.
Net Result
The net profit reported in 4Q04 was R$ 89 million or 46% higher when compared to the R$ 61 million registered in 4T03.
41%
39%
22%
24%
36%
34%
2004
2003
2004
Sales volume figures do not include wood
2003
Wood sales to third parties reached a record volume of 3.3 million tons in 2004, a 39% expansion when compared to 2003. Gross revenue amounted to R$ 3.2 billion or US$ 1.1 billion in 2004. Consolidated net revenue (including wood) totaled R$ 2.7 billion, up 15% from the previous year. Exports accounted for 30% of this amount, a 24% growth in relation to 2003.
Net Revenue by Product Net Revenue by Market
9%
2% 13% 32%
Others Wood Bags Corrugated Boxes Cardboards Kraftliner
30%
28%
24% 20%
22%
2004
2003
2004
2003
Operating Result
Klabin reported a gross profit of R$ 1.3 billion in 2004, which is 15% higher than 2003. Gross margin remained leveled at 46% in 2004. Operating results before financial expenses amounted to R$ 759 million, up 19% from the year 2003, with an operating margin of 28%.
31/12/2004
Currency Foreign 262 417 679 Total 405 1,218 1,623 (1,125) 498 Local
31/12/2003
Currency Foreign 284 486 770 138 327 465 Total 422 813 1,235 (722) 513
Foreign currency totaled US$ 256 million, a reduction of US$ 10 million when compared to 2003. They account for 42% of gross debt, down 10% from 2003. Trade finance (natural hedging) represents 80% of Klabins total indebtedness in foreign currency. Hedged contracts totaled US$ 100 million at the end of December 2004. The EBITDA / Net Financial Expense ratio in 2004 was 6.3 times. Net debt corresponds to 19% of total capitalization, and the Net Debt / EBITDA ratio is 0.5 times. In 2004, Klabin registered in the Comisso de Valores Mobilirios (CVM) a program for the issue of debentures not convertible into shares, in the amount of R$ 1.0 billion. In December, the Company issued the first series, totaling R$ 314 million, with a 3 year maturity and paying 105.5% of the yield on Interbank Certificates of Deposit (CDI). Klabin is applying for a R$ 195 million financing agreement with BNDES to support planned capex on its industrial units and forest implementation projects.
Net Result
The net profit reported in 2004 was R$ 456 million.
Business Evolution
BUSINESS UNIT FORESTRY In 2004, Klabin harvested 8.1 million tons of Pine and Eucalyptus logs or 14% more than in 2003. Of these, 4.8 million tons were transferred to its paper mills in Paran, Santa Catarina and So Paulo. Wood sales to sawmills and laminators in Paran and Santa Catarina reached a record volume of 3.3 million tons in 2004, up 39% from 2003. Demand for Pinus and Eucalyptus logs remained high practically throughout the year. In addition, prices were more favorable when compared to those practiced in the previous years. Net revenue from wood sales to third parties amounted to R$ 302 million, a 47% increase when compared to the previous year. The most important factor behind this growth was the U.S. construction industry, which reflects the economic expansion of that country. Highlights in the forest business include the certification of Klabins forest farms in Santa Catarina by the Forest Stewardship Council (FSC). The forest farms in Paran had their FSC Certificate renewed in 2003. This represents an important commercial advantage since it facilitates the access of Klabins customers to some markets, such as the European Union. However, it is above all a confirmation of Klabins good performance in forest management, from an environmental, economic and social perspectives. The Company had 353 thousand hectares of forest area at the end of 2004, including 185 thousand hectares of forest plantations and 120 thousand hectares of preserved native forests. Maintaining a long tradition, Klabin continues to promote the socioeconomic development of local communities with whom it does business, such as those in Telmaco Borba (PR), Octaclio Costa (SC) and Correia Pinto (SC). In these regions approximately 60 sawmills and laminator workshops were set up generating over 4,000 direct jobs. In 2004 more than 4,500 hectares of forestation were developed, reaching 50,000 hectares, with the participation of ten thousand small and medium-sized producers. BUSINESS UNIT PAPER Paper and cardboards sales to third parties reached a record volume of 786 thousand tons in 2004, up 13% from the previous year. Exports accounted for 65% of the total volume sold in this segment, an increase of 20% when compared to 2003. Kraftliner exports amounted to 435 thousand tons in 2004, a 21% increase in relation to 2003. The products were shipped to regular clients in Argentina, Chile, Europe, Asia and Africa. Cardboard sales totaled 302 thousand tons, with large volumes sold to Tetra Pak (Brazil, Argentina and China) and to local customers, including Brazilian companies that export poultry, meat and meat products. Klabin also exported cardboard products directly to offshore clients. Net revenue also reached a record level of R$ 1.2 billion, up 14% from the previous year. Exports accounted for 58% of this amount, which is 23% higher when compared to 2003.
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The recovery of the US economy reduced the kraftliner supply in the world, thus the international kraftliner prices rose around US$ 100/ton in 2004. Debottlenecking project at Monte Alegre concluded at the end of 2004, will enable the Company to expand its pulp production by 100 thousand tons in 2005. The additional output will be used for the manufacture of packaging paper. It was also in 2004 that Klabin began to plan a project designed to increase its installed capacity for paper and cardboard production at Monte Alegre to 900 thousand tons per year. This is part of the Klabin Program, an initiative intended to boost the Companys packaging paper and cardboard production capacity from 1.5 million to 2.0 million tons per year. The basic engineering began in January 2005. The decision to invest will be taken in the second half of 2005, full deployment is expected by the year end 2007. In order to fill in the gap in carton board output between 2005 and 2008, Klabin has decided to increase its carton board production capacity at Angatuba (SP) to 100 thousand tons per year, of which 60 thousand tons will be used to supply the carton board market. This project will be implemented as of 4Q05. The capex for this project will be approximately R$ 75 million. BUSINESS UNIT PACKAGING CORRUGATED CARDBOARD 2004 was a good year for Klabins packaging segment, thanks to the Brazilian economic recovery and to the foreign demand for industrialized products, particularly from the food, beverage and cosmetics segments. Sales volume totaled 413 thousand tons, up 12% from the previous year (369 thousand tons). As per preliminary data provided by the Brazilian Association of Corrugated Producers (ABPO), Brazilian shipments of corrugated boxes, sheet and accessories totaled 2.1 million tons in 2004, which is 12% higher than 2003. Klabins market share remained leveled at 20%. Net revenue rose 7% when compared to 2003, totaling R$ 807 million. This business unit concentrated its capital investments in the Northeast region in order to increase its participation in the growing fruit packaging industry in the So Francisco Valley, to supply the demand of companies that have transferred their plants from the Southeast to this area. A new printer and one of the most advanced corrugating machines in Brazil were installed at Goiana (PE) in 2004. A new printer was installed at the Feira de Santana (BA) mill. These two units are now endowed with modern technology in terms of corrugating quality and printing capacity. Furthermore, Klabin has completed the construction of the Vale do So Francisco Distribution Center. In 2004, Klabin invested in the technological upgrade of its recycling board plant located in Guapimirim (RJ), aimed to develop lower base weight and better performance boards. The primary objective of this project is cost reduction and it should be concluded by year end 2005. Although this project is not yet finalized, the plant is already producing cutsized paper and Klabin has already been able to reduce corrugated boxes base weights. Technical upgrade investments are foreseen as well to capabilities of several conversion units, with emphasis in regions with more opportunities.
BUSINESS UNIT PACKAGING INDUSTRIAL MULTIWALL BAGS Klabin leads the market for industrial multiwall bags, with a market share of approximately 47%. The construction industry (cement) and agribusiness (seeds) are the main customers. The sale of multiwall bags and related products attained a record level in 2004, totaling 111 thousand tons. Exports accounted for 16% of this volume, and they were mainly shipped to Mexico, Venezuela, Costa Rica, Panama, Nicaragua and the Dominican Republic. The most important capex in this segment in 2004 was the concentration of (glued and sewn) multiwall bag production at Lages (SC). This project was completed in December 2004, with the shut down of the mill in Correia Pinto (SC), it is expected to result in synergy gains and further cost savings. With 19 thousand tons of multiwall bags and related products sold in 2004 and a net revenue of R$ 55 million, Klabin Argentina holds 45 % of the market for multiwall bags in that country.
Capital Expenditures
Below are the capital expenditures made in 4Q04 and in the year 2004:
R$ Million Debottlenecking project in Monte Alegre Packaging and Recycled Paper Environment project in Santa Catarina Forestry: planting and maintenance Current Investments and other projects Expansion of cardboard at Angatuba Total
4Q04 37 13 3 10 27 7 97
In 2004, the investments disbursements were lower than the budget, although the main projects were concluded. The table below shows the capital expenditures planned for 2005:
R$ Million Forestry: planting and maintenance Paper Mills Conversion Others Total Note: Disregarding Board expansion 2005 116 331 108 9 564
Capital Market
Klabins preferred shares (KLBN4) showed an outstanding performance in the So Paulo Stock Exchange (Bovespa), in 2004. KLBN4 was the third share in profitability reaching 54.5% in the year. They presented an appreciation of 44%, while the So Paulo Stock Exchange Index (Ibovespa) rose only 18%. There was also a significant improvement in terms of liquidity, and Klabin shares are negotiated in all trading session held at Bovespa.
145 135 125 115 105 95 85 75
03 z/ de 4 4 4 04 /0 /0 r/ 0 n/ ai ar ja ab m m 04 n/ ju 4 04 l /0 o/ ju ag t se 4 /0 4 04 04 t/ 0 z/ v/ ou de no
Klabin +43,6%
Ibovespa +17,8%
Trading totaled 47,500 transactions involving 241 million shares, and a daily traded volume of R$ 4.1 million. Klabin shares were also traded in the U.S. market. These Level I ADRs are now listed in the OTC (over-the-counter) market under code KLBAY. The capital stock of Klabin S.A. is represented by 918.8 million shares, segregated into 317.0 million common shares and 601.8 million preferred shares. DIVIDENDS In an Extraordinary Meeting held on September 10, 2004, the Board of Directors approved the distribution of intermediary dividends of R$ 76.71 per 1,000 common share (ON) and R$ 84.38 per 1,000 preferred share (PN), starting on October 6, 2004. The total amount of intermediary dividends distributed was R$ 75.0 million. In the Extraordinary General Meeting to be held on March 30, 2005, Company Management will propose the distribution of supplementary dividends in the amount of R$ 90 million: R$ 92.05 per 1,000 common shares and R$ 101.26 per 1,000 preferred shares. Thus, the total dividends related to the year 2004 will be R$ 165 million. Klabin has a commitment to distribute at least 25% of its net profit per year after making the provisions required by law. In order to increase its stockholders remuneration, the Company distributed 28% of its adjusted net profit in 2003, and it expects to distribute 38% in 2004.
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CORPORATE GOVERNANCE Klabin is rated as a Level I corporation in terms of Corporate Governance by the So Paulo Stock Exchange (Bovespa). The Companys policy regarding the services provided by independent auditors and unrelated to the external audit is based on principles designed to preserve the auditors independence. The principles establish that: The auditor should not audit its own work; The auditor should not exercise management functions; The auditor should not provide legal advice on behalf of its own client. In compliance with CVM Instruction no. 308/99, Klabin hired the services of Deloitte, Touche & Tohmatsu as independent auditors in 2004.
Outlook
The world economy grew 4% in 2004 while the Brazilian economy around 5%. With the international scenario expected to remain favorable and the world economy to continue growing, Brazils economy should be able to continue expanding at a significant rate in 2005, giving an increase to Klabins business both domestically and internationally. Klabin will continue to focus on the export market despite the expected appreciation of the real against the U.S. dollar. As part of a plan to increase its own paper production capacity to 2 million tons per year, the Company is determined to raise exports share from 30% to 40% of total sales. Major capex planned for 2005 include: planting more Pine and Eucalyptus forests; expanding the production capacity of the Angatuba mill to 100 thousand tons per year, 60 thousand tons of which will be used to supply the carton board market; besides the investments in the corrugated boxes and industrial multiwall bags plants. In 2004, Klabin began to plan a project designed to boost the installed capacity for packaging paper and cardboard production at Monte Alegre to 900 thousand tons per year. It is part of the Klabin Program, an initiative intended to increase the Companys packaging paper and cardboard production capacity from 1.5 million to 2.0 million tons per year. The basic engineering began in January 2005. The decision to invest will be taken in the second half of 2005, full deployment is expected by year end 2007, with an expected investment of approximately US$ 500 million, with outlays already scheduled for the years 2006 and 2007. Klabin accounts for 62% Brazils total kraftliner production, and it is the largest exporter, with 87% of Brazilian exports. Also, it should maintain its leading position in the segments of the domestic market, including the market for carton board products for a variety of applications, corrugated boxes, packaging systems and industrial multiwall bags. In 2005, Klabin will begin to supply Tetra Pak in South Africa and Singapore, thus consolidating its position as a global supplier.
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Ronald Seckelmann, CFO and IR Director Luiz Marciano Candalaft, IR Manager Gustavo Vittorazze Schroden , IR Analyst Tel: (11) 3225-4045 Tel: (11) 3225-4059 marciano@klabin.com.br gvschroden@klabin.com.br
With a gross revenue of R$ 3.2 billion in 2004, 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 most of its business markets. For strategic purposes, the Company will focus on the following business lines: packaging paper and cardboard products, corrugated cardboard 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.
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31/12/2004 31/12/2004 837,895 396,103 8,887 136,894 73,363 24,061 60,715 90,007 47,865 1,363,382 903,880 314,050 145,452 59,364 2,107,511 800,000 193,845 89,521 1,028,010 (3,865) 4,368,152 909,595 421,891 107,032 64,574 20,043 51,632 200,237 44,186 1,097,602 812,606 284,996
Long-Term Receivables Deferred income tax and soc. contrib. Taxes to compensate Judicial Deposits Other receivables
Permanent Assets Other investments Property, plant & equipment, net Deferred charges Total
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Attachment 4 Exports
1Q03 Sales Volume (1,000 ton) Kraftliner Boards Corrugated Boxes Bags Others Total Wood Volume (1,000 ton) Net Revenue (R$ million) Kraftliner Boards Corrugated Boxes Bags Others Wood Total 115 29 4 19 2 0 169 109 29 4 19 2 0 163 112 33 2 20 2 0 170 90 46 2 14 3 0 155 426 137 12 72 9 0 657 140 44 4 21 3 0 211 125 42 9 22 5 0 203 133 39 5 22 5 0 204 134 37 4 20 3 0 197 533 162 21 85 15 0 815 84 12 1 6 0 103 0 91 15 2 7 0 114 0 100 18 1 8 0 126 0 86 22 1 5 0 114 0 360 66 5 26 0 457 0 131 21 1 7 0 160 0 103 19 3 8 1 135 0 99 17 2 8 5 131 0 101 18 1 7 2 128 0 435 75 8 30 7 554 0 2Q03 3Q03 4Q03 2003 1Q04 2Q04 3Q04 4Q04 2004
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Attachment 6
Financing Repayment Schedule 31/12/04
Gross Debt - Average Terms: 24 months Currency R$ Million TOTAL Local Foreign 1Q05 38 15 54 2Q05 44 80 124 3Q05 26 85 111 4Q05 34 82 116 2006 162 278 440 2007 565 12 577 2008 55 127 181 2009 14 0 14 2010 onwards 6 0 6 TOTAL 943 680 1,623
Local Currency - Average Terms: 27 months Average Cost: 16 % per year R$ Million 1Q05 2Q05 3Q05 4Q05 2006 2007 2008 2009 2010 onwards TOTAL BNDES Debentures Others TOTAL
33 32 26 27 97 79 25 6 6 330
0 9 0 0 0 314 0 0 0 323
5 3 0 8 65 172 30 8 0 291
Foreign Currency - Average Terms: 19 months Average Cost: 3.4 % per year Fixed Trade US$ Million Others Finance Assets 1Q05 5 1 0 2Q05 28 2 0 3Q05 32 0 0 4Q05 31 0 0 2006 104 1 0 2007 4 1 0 2008 0 0 48 2009 0 0 0 2010 onwards 0 0 0 TOTAL 204 4 48
TOTAL
6 30 32 31 105 5 48 0 0 256
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Attachment 7
Consolidated Cash Flow Statement Period ended 31/12/2004
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 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 Capital Gain Capital Integralization Judicial deposits Other investments, net Net cash used on investing activities Financing activities: New funding Debentures Loan amortization Debentures amortization Interest paid Capital integralization in subsidiaries companies from minorities Capital reduction Loans coligated companies 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 12/31/2004 12/31/2003 462,708 218,471 664 (1,391) 29,967 156,193 287 2,538 29,225 (133,298) (9,843) (3,150) (3,194) 14,207 31,461 4,018 8,426 9,083 (54,659) (5,346) 756,367 (34,135) 87,070 (337,373) (2,577) 12,100 (109) (12,131) 27 (287,128) 441,715 319,459 (428,960) (99,983) 30,149 (275,252) (12,872) 456,367 634,261 1,090,628 456,367 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 0 (1,732,195) (1,036,000) (187,377) 0 (31,984) 0 (66,000) (1,920,467) 558,833 75,428 634,261 558,833
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