Dias d’Avila (Bahia), October 26, 2017 – Paranapanema, Brazil’s largest copper producer, announces the company’s balance sheet in the third quarter of 2017 (3Q17). The total volume produced in the period increased 35% compared to the second quarter of this year and the average utilization of its installed capacity increased substantially from 38% to 62%. The total net revenue reached R$ 955.6 million, increase of 48% over the second quarter and slightly less than the third quarter of 2016.  Net income was R$ 98 million, equivalent to a net margin of 10.2%.

In the third quarter, Paranapanema successfully completed its restructuring, with an 82% increase in gross debt, as well as a reduction of 22% in its net debt – with a conversion of R$ 360 million of debt into convertible debentures. With the issuance of new shares in the amount of R$ 352 million, the process resulted in a total capitalization of R$ 712 million. The company reduced its leverage, improved liquidity and net debt to equity ratio fell to 1.7 x.

The capital increase was achieved by current (CEF and Previ) and new shareholders (Glencore and Mineração Buritirama) and the new corporate structure opened up more space for private capital.

Also in this period, the company opted to join the Special Tax Regularization Program (PERT), eliminating a contingent liability of R$ 186 million, using tax credits, and reversed a provision for deferred income tax credits in the amount of R$ 373 million.

The processes of debt, capitalization restatement and a cathode trade-in agreement (operation to purchase copper concentrate for the term and sale of cathode for future delivery) were Paranapanema’s main measures to reverse the scenario of low demand and the reduction of credit occurred in the country, reducing credit and reducing industrial activity. “Now, in partnership with shareholders and creditors and with the new business plan, the company will focus on its growth strategy and its performance recovery. We turned a very important page and we started a new phase in Paranapanema”, says Marcos Camara, president of the company.

Results

Despite the improvement in financial results for the third quarter of 2017, the impacts of the cash restraint and the lower volume of production in previous quarters can still be seen in the 3Q figures. The Company’s EBITDA was negative in R$ 202.0 million in 3Q17, mainly due to the recognition of the tax liability arising from the adhesion to PERT.

Excluding the non-recurring impact of R$ 186.8 million from the adhesion to PERT and costs of R$ 26.6 million from the reprofiling of its debt, adjusted EBITDA margin in 3Q17 would have increased by +1.17%. Gross profit reached R$ 57.6 million in 3Q17.

About Paranapanema

Paranapanema is the largest non-integrated Brazilian producer of refined copper and copper products (rebar, drawn wire, laminates, bars, pipes, connections and their alloys).  The company has three industrial plants, a primary copper unit located in the municipality of Dias d’Ávila (BA), and two copper products plants and their alloys, located in Santo André (SP) and Serra (ES). It also has a distribution center in Rio de Janeiro, in the city of Itatiaia. With 2,000 employees, Paranapanema has established brands in the Brazilian market such as Eluma and Caraíba.

Press Information

FSB Comunicação

GUTO DESCROVE /  11 3165-9740 / 11 98758-8275

EDSON GUSHIKEN / PHONE: 11 3165-9592 / 11 98171-5774

E-mail: paranapanema@fsb.com.br