(10/27/2016) Paranapanema, the largest Brazilian producer of copper, recorded total Net Revenues of BRL 1,1 billion in the third quarter of 2016, a decrease of 18% compared to the second quarter of this year. The reduction was caused mainly by lower copper production volume due to routine maintenance held in August at the plant of Dias D´Ávila (BA) and consequent fall of sales of primary copper.

One of the highlights of Paranapanema in the quarter was the increase in participation in the Internal Market, responsible for 43% of net revenues and equivalent to 49% in sales volume. The increase in national marketing signals a trend of better returns for the company. The foreign market was responsible for 57% of net revenue and 51% in sales volume. The fall of sales by 59% of primary copper in foreign markets compared to 3Q15, added to the devaluation of the dollar in the period, also enhanced up sales in the Brazilian market, with a focus on copper products that provide better margins for the Company.

“In relation to the operational performance of the Company, we had a challenging quarter, with impacts of maintenance stop of Dias D´Ávila and the restrictions of credit and working capital”, says the President of Paranapanema, Christophe Malik Akli. “In the third quarter of 2016 we continued negotiations with the main creditors of the Company, targeting the reprofiling of debit and deepen discussions of alternative injection of cash liquidity and improving the capital structure”, he adds.

The volume of total sales in the quarter reached 60,3 thousand tons, a reduction of 22% in comparison to 3Q15 according to the retraction of primary copper production, partially offset by increased sales of copper products, which showed an increase of 6%. In primary copper, 16,397 thousand tons were sold at 3Q16, while in copper products 43,868 thousand tons. In coproducts, sales volume reached 207 thousand tons, a fall of 18% compared to 3Q15, composing 141 thousand tons of sulphuric acid, 65 thousand tons of slag and 213 tons of anode mud.

The Company’s adjusted Ebitda in 3Q16 was of BRL 70,2 million, negative variation of 56% as compared to the same period in 2015. The Adjusted EBITDA Margin was of 6.6% versus 10.4% in 3Q15, a negative oscillation of 3.8 p.p.

Another indicator that benefited the Company was the growth of Treatment Charge/Refining Charge (TC/RC) in 11% compared with 3Q15, rate used as a reference to set discounts on purchases of copper concentrate.

The Net Result of 3Q16 was BRL 58,2 million negative, mainly due to the exchange variation and financial expenditure growth.

Reprofiling of debit

Paranapanema celebrated the signing of Standstill Agreement on September 30th, which determines that the lenders from that date and for a period of 30 days shall suspend the financial obligations that shall be due (maturing), including interest and principal.

“The signing of the Standstill was a progress in the negotiation process of the reprofiling of debit, which still depends on the completion of other steps aimed at the conclusion of a final agreement of reprofiling with the main creditors”, says Akli.

Another achievement of the period was the adoption of the new Business Plan of the company, announced on September 14th, which provides the injection of liquidity, which can take place through the public or private issuance of securities, and may or may not involve an increase in the company capital.

Two post-closing events of the quarter were the replacement of the financial advisor Rothschild by RK Partners, released on October 7th, and the election on October 14th of the new CFO and Investor Relations Director, Marcos Paletta Camara. “Both the RK Partners as Marcos Camara provide credentials and professional experiences that certainly will contribute positively to the Company”, mentions Akli, that concludes by saying that “the Administration and the major stakeholders are gathered around an agenda aimed at the restoration of operational and financial normality of the Company”.