Dexco S A : Quartely Results 2Q23

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Quarterly Results - 2Q23/1H23| GRI2-3, 2-6

HIGHLIGHTS

Pro-forma Adjusted and Recurring EBITDA of R$500.0 million in 2Q23, and R$984.3 million in 1H23, which includes 49.0% of the results arising from LD Celulose;

Dexco closed out 2Q23 with a positive Sustaining Cash Flow of R$60.4 million, which reflects a significant improvement in Working Capital, due to a reduction in inventory.

A resilient, sustainable result was reported by the Wood Division, even in the face of a challenging market scenario.

WOOD

FINISHINGS FOR CONSTRUCTION

WOOD

Sales of 663.9k m³ in 2Q23 and of 1,310.1 m³ in 1H23, a fall of 8.1% and 10.0% vs 2022, respectively.

Panels volumes for the 2nd quarter grew 2.7% in relation to the 1st quarter.

Adjusted and Recurring EBITDA of R$344.2 million in the quarter, with a margin of 27.6% and R$675.8 million for the half, with a margin of 28.3%.

DISSOLVING WOOD PULP

Operating at full capacity and meeting expected quality standards;

Improvement in costs arising from the stabilization of production, following the shutdowns in 1Q23;

Pro-forma Recurring EBITDA pertaining to Dexco of R$150.3 million in 2Q23, with a margin of 51.3% pertaining to Dexco

METALS & SAN. WARE

Unit Revenue fell by 1.1% in 2Q23 versus 2Q22, due mainly to price repositioning;

Structure related actions impacted the Division`s margins;

Adjusted and recurring EBITDA of negative R$2.6 million in 2Q23, but positive R$19.4 million in 1H23.

TILES

Increase in sales volumes driven by market share;

Partial recovery in factory utilization, which had a positive impact on costs;

Adjusted and Recurring EBITDA of R$8.0 million in 2Q23 and R$5.7 million in 1H23.

As of 06/30/2023

MARKET CAP | GRI 102-7

R$6,747.4 million

CLOSING SHARE PRICE

R$8.35

SHARES IN ISSUE

820,566,246

TREASURY SHARES

12,491,389

INVESTOR		Live transmission
RELATIONS		August 3, 2023 at 9 a.m.
| GRI 102-53		(BRT Time)| GRI 102-50
Francisco Semeraro - Director of Adm., Finance & IR	Av. Paulista 1.938 - CEP 01310-200	Access via the link:
Guilherme Setubal - ESG & IR Manager	Consolação - São Paulo - SP	https://mzgroup.zoom.us/webinar/r
Mariana Fontenelle - IR Specialist		egister/WN_D-stFYYZQeS5w-
	ZsiXsDIg#/registration
Carolina Mulet - IR Analyst	[e-mail]

https://ri.dex.co/

2Q23 | 1H23

Consolidated Financial Results

In BRL '000										2Q23	2Q22	%	1Q23	%	1H23	1H22	%
Highlights
Volume shipped Deca ('000 items)			5,739	7,464	-23.1%	4,304	33.3%	10,043	12,322	-18.5%
Volume shipped Ceramic tiles (m²)			4,147,714	5,188,084	-20.1%	3,496,802	18.6%	7,644,516	10,551,704	-27.6%
Volume shipped Wood (m³)				663,856	722,757	-8.1%	646,280	2.7%	1,310,136	1,455,731	-10.0%
Consolidated Net Revenue				1,953,755	2,213,567	-11.7%	1,712,018	14.1%	3,665,773	4,344,569	-15.6%
Gross profit										678,106	775,744	-12.6%	663,424	2.2%	1,341,530	1,518,690	-11.7%
Gross profit - Pro Forma	(1)					706,256	781,906	-9.7%	663,424	6.5%	1,369,680	1,524,852	-10.2%
Gross margin									34.7%	35.0%		38.8%		36.6%	35.0%
Gross margin - Pro Forma	(1)				36.1%	35.3%		38.8%		37.4%	35.1%
EBITDA according to CVM Resolution 156/22	(2)	658,761	561,809	17.3%	635,679	3.6%	1,294,440	1,162,802	11.3%
EBITDA Mg CVM Resolution 156/22			33.7%	25.4%		37.1%		35.3%	26.8%
Adjustments for non-cash events			(251,231)	(151,178)	66.2%	(238,490)	5.3%	(489,721)	(222,112)	N/A
Non-recurring events	(3)							29,150	5,060	N/A	(2,816)	N/A	26,334	5,060	N/A
Dissolving Wood Pulp								(86,989)	30,556	N/A	(43,244)	N/A	(130,233)	4,172	N/A
Adjusted and Recurring EBITDA	(4)			349,691	446,247	-21.6%	351,129	-0.4%	700,820	949,922	-26.2%
Adjusted and Recurring EBITDA margin	(4)		17.9%	20.2%		20.5%		19.1%	21.9%
Net Income										157,383	169,191	-7.0%	154,329	2.0%	311,712	392,906	-20.7%
Recurring Net Income	(1)(3)					89,411	202,909	-55.9%	109,227	-18.1%	198,638	401,231	-50.5%
Recurring Net Margin	(1)(3)					4.6%	9.2%		6.4%		5.4%	9.2%
INDICATORS									1.40	1.44	-2.8%	1.58	-11.4%	1.40	1.44	-2.8%
Current ratio	(5)
Net debt	(6)										4,561,850	3,689,344	23.6%	4,284,452	6.5%	4,561,850	3,689,344	23.6%
Net debt / EBITDA LTM	(7)						3.08	1.72	79.1%	2.71	13.7%	3.08	1.72	79.1%
Average Shareholders' equity				6,081,796	5,623,571	8.1%	5,998,374	1.4%	6,081,796	5,623,571	8.1%
ROE	(8)											10.4%	12.0%		10.3%		20.5%	14.0%
Recurring ROE									5.9%	14.4%		7.3%		13.1%	14.3%
SHARES											0.1950	0.2306	-15.4%	0.1828	6.7%	0.3778	0.5317	-28.9%
Earnings per share (BRL)	(9)
Closing share price (BRL)					8.35	9.87	-15.4%	5.88	42.0%	8.35	9.87	-15.4%
Net equity per share (BRL)					7.58	7.82	-3.1%	7.47	1.5%	7.58	7.82	-3.1%
Treasury Shares									12,491,389	26,489,405	-52.8%	29,138,345	-57.1%	12,491,389	26,489,405	-52.8%
Market Cap (BRL1.000)							6,747,425	7,249,254	-6.9%	4,750,575	42.0%	6,747,425	7,249,254	-6.9%

1. Cost of Goods Sold: 2Q23: Deca restructuring: (+) R$28,150k. 2Q22: Deca restructuring: (+) R$5,610k; Tiles restructuring (+) R$552k. Sales expenses: 2Q22: Deca restructuring (+) R$227k.
2. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): measure of operating performance in accordance with CVM Instruction 156/22.
3. Non-recurringevents detailed in the attachment to this material.
4. EBITDA adjusted for non-cash events arising from variation in the fair value of biological assets and combination of businesses, in addition to extraordinary events.
5. Current liquidity: Current assets divided by current liabilities. Indicates the amount available in R$ to cover each R$ of short-term obligations.
6. Net Corporate Debt: Total Financial Debt (-) Cash.
7. Financial leverage calculated on the rolling EBITDA over the last 12 months, adjusted for events of a purely accounting and non-cash nature.
8. ROE (Return on Equity): measure of performance obtained by taking the annualized Net Earnings over the period, annualized, and dividing by Average Net Equity.
9. Net earnings per share is calculated by dividing the earnings attributable to the company's shareholders by the average weighted number of ordinary shares issued during the period, excluding the ordinary shares held by the Treasury.

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2Q23 | 1H23

MARKET & BUSINESS SCENARIO GRI 3-3

Even with the combined effects of a reduction in political and economic uncertainty during the quarter - reflecting a slight improvement in the consumer confidence index - the prospect of a moderate drop in interest rates in the 2nd semester, and the announcement of government initiatives for boosting the construction industry, these factors have yet to be reflected in the markets in which Dexco operates, which remain depressed versus 2022. Despite a slight upside in 2Q23 versus the first quarter, data for the sector still suggest Dexco is facing a challenging scenario. Year to date, the Associação Nacional dos Fabricantes de Cerâmicos para Revestimentos (ANFACER) data show a 15.8% drop in sales of ceramic tiles; Associação Brasileira da Indústria de Materiais de Construção (ABRAMAT) reported a 3.3% fall in gross deflated revenues; and the Indústria Brasileira de Árvores (IBÁ) reported that sales were 10.0% lower than for the first semester of 2022.

At Dexco, as in the previous quarter, the results for the Wood Division exceeded expectations, and were the stand out performance in the group, highlighting the Division's resilience in the face of market instability. The ability of the operation to respond deftly to the demand scenario, through optimizing the use of assets, serving its panel customers and profitably selling wood to third parties, led the Division to end 2Q23 with an Adjusted and Recurring EBITDA of R$344.2 million, an increase of 32.3% versus 2Q22 and 3.8% versus 1Q23. The margin was 27.6%, 7.4

1. higher than in 2Q22, but 1.6 p.p. lower than for 1Q23. In the semester, the Adjusted and Recurring EBITDA was R$675.8 million, with a margin of 28.3%, 9.1% and 4.8 p.p. higher than for the same period in 2022, respectively.

The Finishings for Construction Division remains the most impacted by the market downturn. Despite the growing market share since 1Q23, structuring internal actions focused on the medium and long term still had a significant impact on results, especially in the Metals and Sanitary Ware Division, which closed out 2Q23 with a negative Adjusted and Recurring EBITDA of R$ 2.6 million for the quarter but positive R$19.4 million for the first semester of 2023. Tiles Division saw a slight improvement in factory utilization, which translated into an improvement in costs. This effect leveraged its results, with a reported Adjusted and Recurring EBITDA of R$8.0 million for 2Q23 and R$5.7 million in the semester.

It should be noted that LD Celulose's operation was fully operational during the second quarter, following maintenance shutdowns at the beginning of the year. The improvement in costs due to the stabilization of production led to an Adjusted EBITDA of R$307.6 million. Including Dexco's 49.0% stake in the operation, the Company's Adjusted and Recurring EBITDA should increase by R$150.3 million in 2Q23.

The Company remains cautiously optimistic about the performance of its operations in the second semester, which should be boosted by both the seasonality typical to the business and the prospect of returns arising from structure-focused actions carried out in the Metals, Sanitary Ware and Tiles Divisions running throughout the first semester. However, uncertainty remains over the level of traction in the market recovery seen to date.

3

2Q23 | 1H23

Consolidated Financial Results Highlights GRI 3-3

NET REVENUE

The partial boost in market share across all the Divisions in comparison to 1Q23, reflecting the seasonality typical to the business, led to a 14.1% increase in Net Revenue versus the prior quarter, which more than offset the remaining price repositioning effects seen with Metals and Sanitary Ware. However, this quarterly increase was insufficient to compensate for the more challenging market conditions seen since 2022, resulting in a Net Revenue of R$1,953.8 million, a drop of 11.7% versus 2Q22. For the semester, Net Revenue was R$3,665.8 million, down 15.6% versus 1H22.

	Net Revenue Breakdown
	2Q23 (%)
	12%
	Wood
24%	Metals and San. Ware
Tiles
	64%

It should be noted that the strategy for optimizing the profitability of operations, particularly through the timely sale of standing wood to third parties in the Wood Division, has partially mitigated impacts arising from the adverse market scenario in the year-to-date results. Considering the exportation channel, volumes fell around 24.7% versus 2Q22, while revenues from this channel fell 26.9%.

BRL '000 - consolidated	2Q23	2Q22	%	1Q23	%	1H23	1H22	%
Net Revenue	1,953,755	2,213,567	-11.7%	1,712,018	14.1%	3,665,773	4,344,569	-15.6%
Domestic market	1,644,427	1,790,261	-8.1%	1,366,927	20.3%	3,011,354	3,450,162	-12.7%
Foreign Market	309,328	423,306	-26.9%	345,091	-10.4%	654,419	894,407	-26.8%

COST OF GOODS SOLD

The pro-forma Cash Cost, Cost of Goods Sold net of depreciation, amortization and exhaustion and of the net change in biological assets, ended the second quarter of the year at R$1,236.1 million, down 10.8% compared to the same period in 2022. This result reflects lower sales volumes, and consequently lower expenditure on variable costs, as well as a reduction in the cost of key raw materials, such as urea and other chemicals. Conversely, versus the prior quarter, the COGS increased by 17.1%, due mainly to the increase in volumes across all Divisions in this period.

Since the end of 2022, Dexco has been readjusting the value of its biological assets, taking into consideration increases in the price of wood traded in the market, which has resulted in a 59.9% increase in the variation in the fair value of biological assets in relation to 2Q22. It should be noted that, for the calculation of the value of biological assets, the price of sales transactions in the market is considered, in addition to the productivity of the Company's forests. The variation in the value of biological assets has no cash effect on Dexco's results.

Despite the quarter ending with a 9.7% drop in Pro-forma Gross Income, the fall in the cost of raw materials and other manufacturing inputs seen, together with the positive result regarding the variation in biological assets, led to an increase in Dexco's Pro-Forma Gross Margin of 0.8 p.p. versus 2Q22.

In addition, the Company reported a drop of 14.2% in Pro-Forma Cash Cost for the first semester versus the first half of 2022, which led to a 10.2% fall in Pro-Forma Gross Income, albeit with an 2.3 p.p. increase in Pro-Forma Gross Margin for the period.

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2Q23 | 1H23

BRL´000 - Consolidated		2Q23	2Q22	%	1Q23	%	1H23	1H22	%
Cash COGS			(1,264,304)	(1,392,758)	-9.2%	(1,055,374)	19.8%	(2,319,678)	(2,676,334)	-13.3%
Non Recurring Event	(1)		28,150	6,162	N/A	-	N/A	28,150	6,162	N/A
Cash COGS Pro Forma		(1,236,154)	(1,386,596)	-10.8%	(1,055,374)	17.1%	(2,291,528)	(2,670,172)	-14.2%
Variation in fair value of biological assets	248,866	155,617	59.9%	241,546	3.0%	490,412	226,709	N/A
Depletion of biological assets	(79,055)	(39,740)	98.9%	(70,911)	11.5%	(149,966)	(77,787)	92.8%
Depreciation, amortization and depletion	(181,156)	(160,942)	12.6%	(163,855)	10.6%	(345,011)	(298,467)	15.6%
Gross Profit			678,106	775,744	-12.6%	663,424	2.2%	1,341,530	1,518,690	-11.7%
Recurring Gross Profit	(1)	706,256	781,906	-9.7%	663,424	6.5%	1,369,680	1,524,852	-10.2%
Gross Margin			34.7%	35.0%		38.8%		36.6%	35.0%
Recurring Gross Margin	(1)(2)	36.1%	35.3%		38.8%		37.4%	35.1%

1. Non-recurringevents: 2Q23: Deca restructuring: (+) R$28,150k. 2Q22: Deca restructuring: (+) R$5,610k; Ceramic Tiles restructuring (+) R$552k; (2) Pro-forma gross income / Consolidated Pro-forma net revenue.

SALES EXPENSES

Sales Expenses totaled R$280.1 million for the quarter. This figure is down by 10.8% versus 2Q22, mainly due to lower sales volumes. However, investment in significant events in the sector, such as the Expo Revestir and Casacor, coupled with Deca's own initiatives regarding the sell out of products, with price repositioning and volume increases, led to a 19.2% increase compared to the immediately preceding quarter.

For the semester, the drop in volumes led to a 13.7% fall in sales expenses compared to the same period of the previous year.

BRL´000 - Consolidated	2Q23	2Q22	%	1Q23	%	1H23	1H22	%
Sales Expenses	(280,075)	(313,986)	-10.8%	(234,890)	19.2%	(514,965)	(596,823)	-13.7%
% of Net Revenue	14.3%	14.2%		13.7%		14.0%	13.7%

GENERAL AND ADMIN. EXPENSES

Pro-Forma General and Administrative Expenses closed out the quarter at R$94.5 million, 21.8% higher than for 2Q22, following salary increases that came into effect in 4Q22 and the Company's focus on digitalization and process automation.

Compared to the prior quarter, expenditure related to digitalization led to a General and Administrativa Expenses increase of 13.4% for the period, but with the effects dissolved when considered as a share of Revenue.

For the semester, General and Administrative Expenses totaled R$177.8 million, an increase of 17.5% versus the same period in 2022, for the above-mentioned reasons.

BRL'000 - consolidated	2Q23	2Q22	%	1Q23	%	1H23	1H22	%
General and Administrative Expenses	(94,476)	(77,544)	21.8%	(83,284)	13.4%	(177,760)	(151,316)	17.5%
% of Net Revenue	4.8%	3.5%		4.9%		4.8%	3.5%

EBITDA

The successful portfolio diversification carried out by the Wood

Adjusted and Recurring EBITDA Breakdown

Division sustained a healthy set of results, even under a challenging scenario, and offset the decrease in results from the Sanitary Ware, Metals and Tiles Divisions, leading Dexco to an Adjusted and Recurring EBITDA of R $349.7 million, in line with the previous quarter, with a margin of 17.9%. However, compared to 2Q22, this represents a decrease of 21.6%, mainly driven by the weaker markets in which the Company operates over in the

-1%2%

2Q23 (%)

Wood

Metals and San. Ware

Tiles

period.

99%

Including the 49.0% from LD Celulose, Dexco's Adjusted and Recurring EBITDA was R$500.0 million. Fully operational, LD ended 2Q23 with a Recurring EBITDA of R$307.6 million and a margin of 51.3%. Of this figure, R$150.3 million pertains to Dexco via its 49.0% stake in the company.

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