4Q13 Results Tres Picos #65 Col. Bosques de Chapultepec, Miguel Hidalgo, CP. 11580, Distrito Federal, México. 1
Highlights 3 New Projects 4 Results and Key Indicators 5 Environmental and Social Development 10 Proteak Informs 11 Financial Statements 12 Conference Call Results Friday, February 28, 2014 9:00 a.m. Mexico City CST Tres Picos #65 Col. Bosques de Chapultepec, Miguel Hidalgo, CP. 11580, Distrito Federal, México. 2
Highlights Proteak signed a turnkey contract with German machinery producer Dieffenbacher and started pre-construction activities for the MDF plant. The company signed a credit agreement with Ausfuhrkredit-Gesellshaft mbh (AKA) totaling EUR 66.8MM for the acquisition of machinery and equipment for the MDF plant. Mexico and Costa Rica s Forest Stewardship Council (FSC) certificates for Forest Management (FM) and Chain of Custody (CoC) were successfully renewed. Annual roundlog sales doubled in comparison to 2012 figures, even despite the difficult economic conditions of the Indian market. Proteak operated Fomex for a first complete quarter without inconveniences, increasing the sales volume of chips by 2,000 tons. Proteak continued its positioning strategy within the Asian markets, pioneering as a teak provider for Chinese furniture manufacturers who supply local markets. A strategic partnership was established with a renowned Vietnamese furniture manufacturer to produce export products using Proteak s wood. Keeping in line with its new strategic objectives, Proteak reached an agreement to transfer the operation of its manufacturing plant in Lerma, Estado de México. Proteak will source raw material to the plant, which will continue manufacturing products for the company. 3
New Projects I. FOMEX Acquisition 4Q13 was Proteak s first full quarter operating Fomex, the company with 8,600 hectares of eucalyptus it acquired from Kuo (BMV: KUO) in August 2013. Operations continued without any setbacks and the company is focusing on re-equipping to increase operating capacity. In doing so, chip sales increased 10% (2,000 tons) during the quarter. II. MDF Project During the quarter, Proteak formalized a partnership with Dieffenbacher through a turnkey contract. The German company is a world leader in the production and installation of press systems and complete manufacturing plants for wood-based panels. Under this contract, Dieffenbacher will provide the manufacturing plant with engineering expertise and equipment. Initial operations are scheduled to start during the second semester of 2015. During the plant s first 18 months, Dieffenbacher will jointly operate it with Proteak in order to guarantee the highest efficiency and productivity standards. In order to purchase the machinery, Proteak received resources from Ausfuhrkredit-Gesellschaft mbh (AKA) by signing a credit contract worth EUR 66.8 MM (USD 91.2 MM). The credit will be disbursed in US dollars, with a 50% risk-participation of Commerzbank Aktiengesellschaft and the guarantee of the German Federal Government through Euler Hermes. During the quarter, Proteak hired a Project Manager and started pre-construction activities on site in the municipality of Huimanguillo, Tabasco. Furthermore, the company hired the advisory services of a wood panel expert. 4
Results and Key Indicators SUMMARY OF RESULTS I. P&L Analysis Proteak continued in its efforts to diversify its markets. India s participation in the roundlog market kept decreasing to reach 26%. Sales by Destination vs. Value of the Rupee 5
On the other hand, the company sustained its efforts to position Proteak teak in other Asian markets. It successfully pioneered as a teak provider for Chinese furniture manufacturers who supply local markets. Since Proteak does not depend on intermediaries for its sales, 9 out of 11 clients in China and Vietnam are factories or final consumers and of those, 90% have already placed re-orders. Annual roundlog sales reached MXP 115.7MM, doubling their 2012 figure. Total annual sales increased 80%, sustaining a gross margin above 30% despite difficulties derived from the economic slowdown in India. Total Sales FY13 vs FY12 Quarterly Sales ( 000,000 MXP) 160 140 120 80% ( 000,000 MXP) 50 40 35% 100 80 30 60 20 40 20 10 - YTD12 Teak Sales YTD13 Eucal. Sales - 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 6
Quarterly administrative expenses were kept in line with the budget. However, the third and fourth quarter reflect expenses related to the integration of FOMEX, the capital increase and the MDF Project, which will generate value for the company. ( 000,000 MXP) General Expenses 50 40 30 20 10-1Q13 2Q13 3Q13 4Q13 6% General Expenses New Project Expenses 7
II. Balance Sheet Analysis Proteak s total assets grew 77% in comparison to 2012, reflecting the capital increase registered in September. Cashflow decreased mainly due to the acquisition of FOMEX and expenses related to the operation and start of the MDF Project. Accounts receivable derived from operations diminished 22% during the quarter, evidencing the improvement in the company s collection periods. At the end of the year, the accounts receivable balance matched fourth quarter s sales, reflecting a healthy collection portfolio. ( 000,000 MXP) Accounts Receivable DAYS 5 4 3 2 1-1Q 2Q 3Q 4Q 200 150 100 50 - Accounts Receivable Collection Days During the fourth quarter, Proteak conducted its annual biological asset inventory, thereby validating the amount of revaluation reserves for already made during the year. Consequently, the company s biological assets remained stable during the period. During the year, biological assets reflected a net revaluation of MXP 97MM, as well as the incorporation of MXP 255MM of of FOMEX, totaling ( 000,000 USD) 70.0 Biological Asset Value Components 60.0 50.0 40.0 30.0 20.0 10.0 - BA 12 Cost Hist. Cost of Sales New Adq Revaluation AB'13 Cost Revaluation 8
905MM. The value of Proteak s plantations is mainly modified by four different factors: (i) capitalized forestry expenses, (ii) exchange rate, (iii) revaluations that reflect the biological assets growth, and (iv) a reduction at the wood s cost of sales. During 2013, investments included: (i) MXP 75MM in capitalized forestry expenses, aimed at improving existing plantations expected return by maintaining growth rates that exceed original plans, as well as the plantation of 909 new hectares of teak, (ii) MXP 5MM due to the revaluation of the USD, (iii) MXP 97MM from the previously discussed revaluation, and (iv) MXP 67MM, representing the cost of wood sold. The volume harvested during the quarter reached 4,000 m 3 (thinning and final harvest), totaling 17,000 m 3 in 2013. Long-term assets kept for sale include non-strategic land that will be sold in the medium term. Most of these assets are located in Costa Rica, with a value of MXP 119MM. Fixed assets are integrated by nearly 8,000 hectares of teak and 4,800 hectares of eucalyptus, two nurseries, office facilities and other forestry assets. Biological Assets Value vs. Hectares Comparison 000,000 MXP Total Assets Evolution 100% 4 80% 60% 3 137% 40% 2 20% 1 0% MXP MM Current (Teak) Has Current (Eucalyptus) - 2009 2010 2011 2012 2013 Non- Current (Teak) Non- Current (Eucalyptus) Long-term liabilities include a net credit from Financiera Rural, which totals MXP 159MM, with interest, and a loan from the IFC, totaling MXP 65MM. Proteak s capital structure at year end reflects the two main movements that took place during 2013: raising capital for the MDF project and the FOMEX acquisition. Proteak s position continues to be solid with a 1:4 liabilities-to-capital ratio. 9
III. Cash Flow Analysis The quarter s cash flow behaved as expected, including MXP 18MM in operating expenses. Investments include MXP 43MM tagged for the MDF project. Positive movements in cash flow include the collection of accounts receivable (MXP 45MM), transferring the operation of the Lerma plant (MXP 25MM), income from subsidies (MXP 16MM) and loans from Financiera Rural (MXP 7MM). The combination of the latter results in a positive cash balance of MXP 360MM at year end. Environmental and Social Development FSC Certification During the fourth quarter, Proteak earned the Forest Stewardship Council (FSC) Forest Management and Chain of Custody certification from SCS Global Services (SCS), for its teak plantations in Mexico and Costa Rica. FSC provides third-party certification confirming that materials sold as FSC certified are harvested from well-managed forest operations. To accomplish the latter, Proteak has implemented sustainable practices and procedures in all its forestry activities in accordance with the FSC Principles and Criteria. Furthermore, it has integrated social and environmental considerations to achieve a sustainable operation within the forestry sector. 10
Proteak Informs Investor Relations Agency The company has hired the services of SernaPR, an Investor Relations Agency as part of its continued efforts in growing and improving in this area. Contact information: Alejandro Ramírez Arcia alejandro.ramirez@sernapr.com Tel: +52 (55) 5256 5705 Independent Analyst Follow-up on the independent analyst program is performed by: Ernesto Gustavo O Farrill Santoscoy eofarrills@bursametrica.com Tel: (55) 5531 0042 Bahía de todos los santos #26 Col. Verónica Anzures Delegación Miguel Hidalgo C.P. 11590, México, D.F. 11
Financial Statements The following summary P&L is presented in MXP 000. It shows the margin that each concept represents as a percentage of net sales and the % change when comparing 2013 with 2012. 12
The following table contains the company s consolidated 2013 Balance Sheet, compared to 2012 (in MXP 000). 13
February 27, 2014, Mexico City. Today, Proteak Uno, S.A.B. de C.V. (BMV: TEAK) has presented its financial results for 4Q13. This information has been prepared according to International Financial Reporting Standards and is presented in nominal terms. 14