How To Plan For A Successful Year In A European Forest

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Rudolph Spencer
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2 AGENDA HIGHLIGHTS MAIN EVENTS ENVIRONMENT STRATEGY A YEAR OF SOLID GROWTH CONSOLIDATED ANALYSIS / GEOGRAPHIC ANALYSIS THE FUTURE 2

3 2005 HIGHLIGHTS TURNOVER GREW BY 4% TO 1,465 MILLION EUROS. EBITDA OF 208 MILLION EUROS. NET RESULTS WERE UP 67% TO 36 MILLION EUROS. RETURN ON CAPITAL INCREASED FROM 5% TO 7.5%. EXCLUDING GESCARTÃO 3

4 2005 MAIN EVENTS 4

5 2005 MAIN EVENTS 55 million Eur bond issue 23 million Eur payment of Tafisa 98 bonds Board of Directors approval of the Sonae Indústria Merger-Demerger and Merger project Conclusion of the Sonae Indústria Merger-Demerger and Merger project ABRIL JUNHO NOVEMBRO MARÇO MAIO SETEMBRO DEZEMBRO Bond issue totalling 250 million Eur Payment of a 160 million Eur debt to Sonae SGPS 40 million Eur anticipated payment on the syndicated loan in Canada 100 million Eur tranche/ down payment of the syndicated loan International Management Meeting Joint-venture agreement with Tarkett AG, for the manufacture and trade of laminate Flooring 5

250 million Eur Payment of a 160 million Eur debt to Sonae SGPS 40 million Eur anticipated payment on the syndicated loan in Canada 100 million Eur tranche/

6 2005 ENVIRONMENT THE EUROPEAN WOOD-BASED PANEL INDUSTRY SLOWED DOWN BOTH IN DEMAND AND PRODUCTION, COMPARED TO DESPITE THE SLOWDOWN, SONAE INDÚSTRIA KEPT A SIMILAR SALES VOLUME TO 2004 (6.8 MILLION M3 SOLD) WITH HIGHER AVERAGE PRICES. INCREASE IN OIL PRICES IMPACTED THE MARKET. SONAE INDÚSTRIA S EFFICIENCY PRODUCTION INCREASED TO 90% IN 2005, COMPARED TO 89% IN

DESPITE THE SLOWDOWN, SONAE INDÚSTRIA KEPT A SIMILAR SALES VOLUME TO 2004 (6.

7 2005 ENVIRONMENT INDUSTRIAL CONSOLIDATION. MAIN TRANSACTIONS: FINSA (SPAIN) ACQUIRED JOMAR AND WEYERHAEUSER S FRENCH ASSETS; PFLEIDERER (GERMANY) ACQUIRED KUNZ (GERMANY); WEYERHAEUSER ANNOUNCED AVAILABILITY TO SELL NORTH-AMERICAN PB AND MDF INDUSTRIAL PLANTS. HOWEVER, GREATER COMPETITIVE STABILITY WAS FELT BOTH IN PRICES AND PRODUCTION. 7

PFLEIDERER (GERMANY) ACQUIRED KUNZ (GERMANY); WEYERHAEUSER ANNOUNCED AVAILABILITY TO

8 2005 STRATEGY STRATEGIC FOCUS 1. A MULTIREGIONAL WOOD-BASED PANEL PRODUCER; 2. ORIENTED TOWARDS INNOVATION AND CONTINUOUS IMPROVEMENT OF OPERATIONAL PERFORMANCE; 3. WITH THE AMBITION TO GROW MAINTAINING A STRONG BALANCE SHEET. 8

9 STRATEGIC GUIDELINES 1. A MULTIREGIONAL WOOD-BASED PANEL PRODUCER WITH OWN CORPORATE GOVERNANCE RULES BOARD OF DIRECTORS WITH 11 MEMBERS, 6 OF WHICH NON-EXECUTIVE; EXECUTIVE COMMITTEE WITH 5 EXECUTIVES; WITH INDEPENDENT COMMITTEES: AUDIT AND FINANCE; ENVIRONMENT AND SOCIAL RESPONSABILITY; NOMINATION AND REMUNERATION. WITH ENVIRONMENTAL AND PEOPLE SAFETY CONCERNS ORGANISED BY COUNTRIES/REGIONS (FOCUSING ON INDUSTRIAL, MARKETING AND SALES ACTIVITIES) REPORTING DIRECTLY TO A MEMBER OF THE EXECUTIVE COMMITTEE AND SUPPORTED BY A CORPORATE CENTER, A SHARED SERVICES CENTRE AND AN EXPORT DEPARTMENT. 9

COMMITTEE WITH 5 EXECUTIVES; WITH INDEPENDENT COMMITTEES: AUDIT AND FINANCE; ENVIRONMENT AND SOCIAL RESPONSABILITY; NOMINATION AND REMUNERATION.

10 STRATEGIC GUIDELINES 2. ORIENTED TOWARDS INNOVATION AND CONTINUOUS IMPROVEMENT OF OPERATIONAL PERFORMANCE FOCUS ON EFFICIENCY AND IMPROVING PROFITABILITY TO OBTAIN SUSTAINED VALUE CREATION FOR SHAREHOLDERS SALES AND MARKETING PRIORITY ON PRICE AND MARGIN OVER MARKET SHARE MANUFACTURING AND SUPPLY CHAIN CONTINUOUS COST REDUCTION PROGRAM AND SHARING/INCORPORATING BEST PRACTICES; INCREASE PRODUCTIVITY AND CONTROL BY LEVERAGING ON IT INVESTMENTS. BACK OFFICE CONTINUE IMPROVING THE EFFICIENCY OF ADMINISTRATIVE PROCESSES AND INFORMATION QUALITY; SIMPLIFY STRUCTURE BY REDUCING THE NUMBER OF COMPANIES. 10

VALUE CREATION FOR SHAREHOLDERS SALES AND MARKETING PRIORITY ON PRICE AND MARGIN OVER MARKET SHARE MANUFACTURING AND SUPPLY CHAIN CONTINUOUS COST

11 STRATEGIC GUIDELINES 3. WITH THE AMBITION TO GROW MAINTAINING A STRONG BALANCE SHEET STRENGTH OF THE BALANCE SHEET ADEQUATE DEBT MATURITY AND FLEXIBILITY; ADEQUATE LEVEL OF CAPITAL. OPTIMIZATION OF CAPITAL EMPLOYED DISPOSAL OF NON-RELATED ASSETS TO THE OPERATIONAL ACTIVITIES; TOTAL WORKING CAPITAL MANAGEMENT. IMPROVE CASH-FLOW GENERATION 11

SHEET ADEQUATE DEBT MATURITY AND FLEXIBILITY; ADEQUATE LEVEL OF CAPITAL.

12 STRATEGIC GUIDELINES SUMMARY AN ORGANISATION FOCUSED ON OPERATIONS UNDER STRENGTHENED GOVERNANCE... BASED ON MARKETING AND SALES PRINCIPLES THAT GIVE PRIORITY TO MARGIN, CUSTOMER, PRODUCT AND MARKET MIX MANAGEMENT; ORIENTED TOWARDS INNOVATION, ECO-EFFICIENCY, PEOPLE SAFETY AND CONTINUOUS IMPROVEMENT OF INDUSTRIAL AND SUPPLY CHAIN PROCESSES.... WILL ALLOW US TO DELIVER AN ADEQUATE AND SUSTAINABLE LEVELS OF PROFITABILITY TO THE SHAREHOLDERS; TO ACHIEVE A HIGH LEVEL OF CONFIDENCE FROM ALL STAKEHOLDERS. 12

TOWARDS INNOVATION, ECO-EFFICIENCY, PEOPLE SAFETY AND CONTINUOUS IMPROVEMENT OF INDUSTRIAL AND SUPPLY CHAIN PROCESSES.

13 2005 A YEAR OF SOLID GROWTH CONSOLIDATED ANALYSIS 13

14 A YEAR OF SOLID GROWTH CONSOLIDATED

15 A YEAR OF SOLID GROWTH CONSOLIDATED

16 A YEAR OF SOLID GROWTH CONSOLIDATED

17 A YEAR OF SOLID GROWTH CONSOLIDATED

18 A YEAR OF SOLID GROWTH CONSOLIDATED PROFIT AND LOSS STATEMENT IAS/IFRS (MILLION EUROS) (a) 2005 TURNOVER 1, % 1, % 1, % GROSS MARGIN % % % OTHER COSTS - TOTAL % % % EBITDA % % % OPERATING PROFIT 131 9% 106 8% 108 7% FINANCIAL PROFIT -71-5% -71-5% -44-3% PROFIT BEFORE TAXES 61 4% 36 3% 64 4% NET PROFIT 43 3% 22 2% 36 2% 18 (a) EXCLUDING GESCARTÃO

32% 452 32% 489 33% EBITDA 239 16% 206 15% 208 14% OPERATING PROFIT 131 9% 106 8% 108 7% FINANCIAL PROFIT

19 A YEAR OF SOLID GROWTH CONSOLIDATED

20 A YEAR OF SOLID GROWTH CONSOLIDATED BALANCE SHEET (MILLION EUROS) NON-CURRENT ASSETS CURRENT ASSETS TOTAL ASSETS SHAREHOLDERS FUNDS MLT INTEREST BEARING DEBT ST INTEREST BEARING DEBT SUPPLIERS OTHERS LIABILITIES TOTAL LIABILITIES TOTAL LIABILITIES + SHAREHOLDERS FUNDS 1, , ,312 1,782 1, , ,273 1,803 20

BEARING DEBT SUPPLIERS OTHERS LIABILITIES TOTAL LIABILITIES TOTAL LIABILITIES + SHAREHOLDERS

21 A YEAR OF SOLID GROWTH CONSOLIDATED 21

22 2005 A YEAR OF SOLID GROWTH GEOGRAPHIC ANALYSIS 22

23 A YEAR OF SOLID GROWTH IBERIAN PENINSULA EXCLUDING GESCARTÃO 23

24 A YEAR OF SOLID GROWTH IBERIAN PENINSULA CONSTRUCTION SECTOR CONTINUED TO GROW IN SPAIN AND DECREASED IN PORTUGAL. FURNITURE INDUSTRY PERFORMED WELL IN PORTUGAL, WHEREAS IN SPAIN WAS NEGATIVELY INFLUENCED BY IMPORTS FROM ASIAN COUNTRIES AND REDUCTION OF EXPORTS. 24

25 A YEAR OF SOLID GROWTH CENTRAL EUROPE

26 A YEAR OF SOLID GROWTH CENTRAL EUROPE DEMAND SLOWED DOWN. GLUNZ SALES VOLUME WAS MARGINALLY POSITIVE, BACKED ON HIGHER VOLUME OF EXPORT, MAINLY FROM GERMANY. TURNOVER IN LINE WITH 2004, BUT EBITDA MARGIN FELL TO 5%, AGAINST 9% IN IN NOVEMBER, SONAE INDÚSTRIA REACHED AN AGREEMENT WITH TARKETT TO MANUFACTURE AND SELL FLOORING. 26

27 A YEAR OF SOLID GROWTH REST OF THE WORD

28 A YEAR OF SOLID GROWTH REST OF THE WORD NORTH-AMERICAN MARKET REMAINED STRONG, HOUSING KEPT GROWING, DESPITE THE APPRECIATION OF CAD OVER THE USD. THE BRAZILIAN MARKET PRESENTED A DECREASE IN PARTICLEBOARD VOLUMES AND A MARGINAL GROWTH IN MDF. THE SLOWDOWN IN THE FURNITURE INDUSTRY WAS DUE TO: DECREASE OF DOMESTIC DEMAND AND EXPORTS; FALL IN EXPORTS DUE TO APPRECIATION OF THE REAL; COMPETITION FROM ALTERNATIVE FLOORING PRODUCTS. 28

29 A YEAR OF SOLID GROWTH REST OF THE WORD SOUTH-AFRICAN MARKET POSTED A STRONG GROWTH. SALES VOLUMES GREW ON AVERAGE 2%. TURNOVER GREW 16% TO 368 MILLION EUROS AND EBITDA MARGIN INCREASED 24% TO 82 MILLION EUROS (22% MARGIN). 29

30 THE FUTURE 30

31 31

32 2006 THE FUTURE A STRATEGY SUPPORTED ON THREE MAIN GUIDELINES... PROTECT SHARE AND PROFITABILITY IN IBERIA. STRENGTHEN MARKET POSITION AND IMPROVE PROFITABILITY IN CENTRAL EUROPE. MAINTAIN SHARE AND PROFITABILITY IN MORE PROFITABLE MARKETS. 32

33 2006 THE FUTURE STRENGTHEN MARKET POSITION AND IMPROVE PROFITABILITY IN CENTRAL EUROPE WITH THE ACQUISITION OF HORNITEX, SONAE INDÚSTRIA AIMS: TO STRENGTHEN ITS POSITION IN CENTRAL EUROPE AND GUARANTEE A COMPETITIVE ADVANTAGE; TO LEAD IN TERMS OF THE PRODUCTION CAPACITY IN GERMANY; TO STRENGTHEN ITS COMPETITIVE RANKING IN MELAMINE-SURFACED AND VALUE-ADDED PRODUCTS; 33 THE PLANTS LOCATION OF BOTH COMPANIES ARE COMPLEMENTARY.

34 2006 THE FUTURE MAINTAIN SHARE AND PROFITABILITY IN MORE PROFITABLE MARKETS CANADA INCREASE MELAMINE SURFACING PRODUCTION CAPACITY INVESTMENT OF 12 MILLION CAD WHICH WILL INCREASE CAPACITY BY 50%. START-UP: SUMMER 2006 SOUTH AFRICA INCREASE CHIPBOARD PRODUCTION CAPACITY AN INVESTMENT OF 45 MILLION EUROS IN A NEW CONTINUOUS PRESS AT THE WHITE RIVER PLANT. START-UP: IN THE MIDDLE OF

35 2006 THE FUTURE WE WILL PROCEED WITH THE ADOPTED STRATEGY AND ANTICIPATE A MARGINAL GROWTH IN SALES VOLUMES IN MARKETS, SUCH AS: SOUTH AFRICA AND NORTH AMERICA. NO RELEVANT CHANGES IN PRODUCTION CAPACITY ARE EXPECTED, THEREFORE THE MARKET ENVIRONMENT WILL CONTINUE POSITIVE. MAIN CONCERN WILL BE THE RISK OF HIGHER OIL PRICES. 35

36 36

The sale of Tafisa Brazil in August 2009 generated a capital gain in the consolidated results for 9M09 of 56 million Euros.

The sale of Tafisa Brazil in August 2009 generated a capital gain in the consolidated results for 9M09 of 56 million Euros. Sonae Indústria, SGPS, SA Lugar do Espido Via Norte Apartado 1096 4470-177 Maia Portugal Phone (+351) 220 100 400 Fax (+351) 220 100 543 www.sonaeindustria.com SONAE INDÚSTRIA, SGPS, SA Registered Office: