Dexco S A : Quarterly results report 4Q22

Quarterly Results - 4Q22 / 2022| GRI 102-52

HIGHLIGHTS

Pro-forma Adjusted and Recurring EBITDA of R$517.1 million and R$1,926.9 million in 4Q22 and 2022 respectively, including the 49% of LD Celulose's EBITDA;

Generation of Sustaining Cash Flow was negative R$30.3 million in 2022, with the consumption of R$858.9 million, following investment in strategic projects.

WOOD

FINISHINGS FOR CONSTRUCTION

WOOD

Drop in volumes sold of 9.2% in 4Q22 and 7.7% in the full year versus the same periods in 2021;

Price level support and improved product mix led to a growth of 9.3% in annual Net Revenue;

Adjusted and Recurring EBITDA of R$291.0 million for the quarter and R$1,186.3 million for the year.

DISSOVLING WOOD PULP

First quarter in operation;

91.5k tons sold in 4Q22, and 139.7k ton for the year;

Quarterly Adjusted and Recurring EBITDA of R$307.3 million, with a margin of 56.5%, and R$398.4 million with a margin of 45.5% for the full year, considering 100% of operation.

METALS & SAN. WARE

Increase in Unit Revenue of 8.8% in 4Q22 and

20.2% for the year, with an improvement in the mix and price increases;

Drop in sales and cost pressures impacted the Division's margins;

Adjusted and Recurring EBITDA of R$52.4 million in 4Q22 and R$311.0 million for the full year.

TILES

Price increases lead to a 12.3% increase in Unit Revenue in 4Q22, with a 27.0% increase for the full year;

Cost pressures arising from downtime for maintenance put pressure on the Division's margins;

Adjusted and Recurring EBITDA of R$22.7 million in 4Q22 and R$234.3 million for the full year.

As of 12/31/2022	SHARES IN ISSUE
MARKET CAP | GRI 102-7
837,059,246
R$5,675.3 million
CLOSING SHARE PRICE	TREASURY SHARES
29,138,345
R$6.78

INVESTOR	Live broadcast
RELATIONS	March 9, 2022 at 10 a.m. |
	GRI 102-50

Francisco Semeraro Neto- Director of Adm., Finance & IR	Av. Paulista 1.938 - CEP 01310-200
Natasha Utescher - IR Manager	Consolação - São Paulo - SP
11 3179.7045
Alana Santos - IR Specialist
Carolina Mulet - IR Analyst	[e-mail]

Access via the website: https://mzgroup.zoom.us/ webinar/register/WN_OF2 x94HrRMyMzn5kahT2Xw

https://ri.dex.co/

4Q22

2022

Consolidated Financial Results

In BRL '000	4Q22	4Q21	%	3Q22	%	2022	2021	%
Highlights
Volume shipped Deca ('000 items)	5,084	7,163	-29.0%	5,991	-15.1%	23,397	29,616	-21.0%
Volume shipped Ceramic tiles (m²)	4,128,908	6,210,976	-33.5%	5,036,576	-18.0%	19,717,188	25,317,685	-22.1%
Volume shipped Wood (m³)	687,640	757,151	-9.2%	736,123	-6.6%	2,879,494	3,120,440	-7.7%
Consolidated Net Revenue	1,980,439	2,250,839	-12.0%	2,161,642	-8.4%	8,486,650	8,170,241	3.9%
Gross profit	614,079	791,063	-22.4%	739,018	-16.9%	2,871,787	2,869,848	0.1%
Gross profit - Pro Forma (1)	648,037	798,468	-18.8%	753,583	-14.0%	2,926,472	2,850,021	2.7%
Gross margin	31.0%	35.1%		34.2%		33.8%	35.1%
Gross margin - Pro Forma (1)	32.7%	35.5%		34.9%		34.5%	34.9%
EBITDA according to CVM No. 527/12 (2)	559,625	461,316	21.3%	572,151	-2.2%	2,294,578	2,603,685	-11.9%
EBITDA Mg CVM No. 527/12	28.3%	20.5%		26.5%		27.0%	31.9%
Adjustments for non-cash events	(203,219)	(27,182)	647.6%	(170,044)	19.5%	(595,375)	(127,721)	366.2%
Non-recurring events (3)	51,164	137,266	-62.7%	28,755	-	84,979	(358,232)	-123.7%
Dissolving Wood Pulp	(41,435)	16,714	-347.9%	(15,268)	171.4%	(52,531)	70,581	-174.4%
Adjusted and Recurring EBITDA (4)	366,135	588,114	-37.7%	415,594	-11.9%	1,731,651	2,188,313	-20.9%
Adjusted and Recurring EBITDA margin (4)	18.5%	26.1%		19.2%		20.4%	26.8%
Net Income	217,868	581,047	-62.5%	154,148	41.3%	764,922	1,725,682	-55.7%
Recurring Net Income (1)(3)	206,955	407,057	-49.2%	162,896	27.0%	771,082	1,148,241	-32.8%
Recurring Net Margin (1)(3)	10.4%	18.1%		7.5%		9.1%	14.1%
INDICATORS
Current ratio (5)	1.58	1.38	14.5%	1.41	12.1%	1.58	1.38	14.5%
Net debt (6)	4,038,140	2,448,346	64.9%	3,828,336	5.5%	4,038,140	2,448,346	64.9%
Net debt / EBITDA LTM(7)	2.33	1.12	108.0%	1.96	18.9%	2.33	1.12	108.0%
Average Shareholders' equity	5,934,748	5,875,003	1.0%	5,825,039	1.9%	5,934,748	5,523,812	7.4%
ROE (8)	14.7%	39.6%		10.6%		12.9%	31.2%
Recurring ROE	13.9%	27.7%		11.2%		13.0%	20.8%
SHARES
Earnings per share (BRL) (9)	0.2761	0.8258	-66.6%	0.2100	31.5%	1.0178	2.4903	-59.1%
Closing share price (BRL)	6.78	14.96	-54.7%	9.35	-27.5%	6.78	14.96	-54.7%
Net equity per share (BRL)	7.38	7.60	-2.9%	8.04	-8.2%	7.38	7.60	-2.9%
Treasury Shares	29,138,345	6,489,405	349.0%	26,489,405	10.0%	29,138,345	6,489,405	349.0%
Market Cap (BRL1.000)	5,477,704	11,286,924	-51.5%	6,867,328	-20.2%	5,477,704	11,286,924	-51.5%

1. COGS: 4Q22: Inventory Impairment Deca: (+) R$27,357k; Employee Indemnity Tiles: (+) R$6,601k; 3Q22: Restructuring Deca: (+) R$3,103k; Restructuring Tiles (+) R$11,462k; 2Q22: Restructuring
   Deca: (+) R$5,610k; Restructuring Tiles (+) R$552k; Sales Expenses: 4Q22: Restructuring Tiles (+) R$6,363k; Restructuring Deca (+) R$10,843k; 3Q22: Restructuring Deca (+) R$742k; Restructuring
   Tiles (+) R$701k; 2Q22: Restructuring Deca (+) R$227k.
2. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): measure of operating performance in accordance with CVM Instruction 527/12.
3. Non-recurringevents detailed in the attachment to this material.
4. EBITDA adjusted for non-cash events arising from variation in the fair value of biological assets and combination of businesses, in addition to extraordinary events.
5. Current liquidity: Current assets divided by current liabilities. Indicates the amount available in R$ 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.

2

4Q22 2022

MARKET & BUSINESS SCENARIO GRI 203-1

2022 ended with significant pressures on the sectors in which Dexco operates, arising from the tightening monetary policy seen in the second half of the year, especially in 4Q22, and from the shrinking of the building materials sector, which is more dependent on credit and revenues. The effects can be seen in the 7% fall in gross revenues in the sector reported by ABRAMAT, and in the numbers reported by ANFACER (-18% in sales volumes versus 2021 and -29% versus 4Q21) and by SNIC - the National Union for the Cement Industry - (-2.8% in sales volumes versus 2021). High interest rates and political uncertainties have impacted the retail sales indicator (ICVA), which reported both a quarterly and annual fall, and the search for new real estate financing, according to data from the Brazilian Institute of Geography and Statistics (IBGE), show a weakness in the home improvement sector. Faced with this scenario, Dexco ended the year with a fall in sales volumes across all its business divisions, especially in the Finishings for Construction Division.

Despite the deteriorating macroeconomic scenario, the Wood Division stood out for its resilience, with improved quarterly results, closing out the year with significant gains in market share. In 2022, the Division reported a drop of 7.7% in sales volumes, compared to a fall of 18.0% in the panels market (according to IBÁ data) versus 2021. In addition, there has been an improvement in the sales mix arising from investment in new panel coating lines, with a 4.7% increase in the sale of coated products for the year and 14.0% for 4Q22, in keeping with the strategy implemented by the Division over recent years. As a result, the Division ended the quarter with an Adjusted and Recurring EBITDA of R$291.0 million, R$1,186.3 million for the year, a result which exceeds that achieved by Dexco in 2019.

With respect to the Finishings for Construction Division, Dexco's sales were directly impacted by the softening seen in the market. Sales for Tiles fell by more than the market, which led to planned maintenance stoppages being brought forward at all of the Dexco' ceramic tiles plants, which had a direct impact on 4Q22 costs, leading to an Adjusted and Recurring EBITDA of R$22.7 million for the quarter, R$234.3 million for the full year. The same scenario has played out with sales of Deca products, which saw a fall of 29.0% in 4Q22 versus 4Q21, with a full year drop of 21.0%. Despite the successful implementation of price increases during the year, Deca ended the quarter with an Adjusted and Recurring EBITDA of R$52.4 million, 55.7% lower than for 4Q21. Even given this significant decline, the Division ended 2022 with an Adjusted and Recurring EBITDA of R$311.0 million.

Another positive for the quarter was the LD Celulose operation which, despite only achieving full production capacity at the end of December, ended the quarter with 91.5k tons sold and an Adjusted EBITDA of R$308.1 million. For the year, the new Division, which began operations in April, sold 139.7k tons, resulting in an Adjusted and Recurring EBITDA of R$398.4 million. It should be noted that, including the results from the Company's 49.0% stake in LD Celulose, Dexco's Adjusted and Recurring EBITDA should grow by R$150.7 million for 4Q22, and R$194.1 million for the full year.

Dexco understands that 2023 will be a challenging year and, therefore, reinforces its commitment to direct its efforts towards gaining profitability from its operations through greater efficiency and productivity.

3

4Q22 2022

Consolidated Financial Results GRI 103-2and 103-3

EXCLUSION OF ICMS FROM THE BASE CALCULATION OF PIS AND COFINS

A decision by the Federal Supreme Court, published on May 14, 2021, decreed that the ICMS (a form of VAT) to be excluded from the PIS and COFINS (social security contributions) base calculation is the one shown on the invoice. In 2021, the Company and its subsidiaries recognized accumulated credit of R$614.7 million (before tax effects), R$8.9 million in 4Q21. In addition, in the second quarter of 2021 there was a reversal of the accounting provision previously constituted due to the limitation imposed by the COSIT Solution 13/2018, to the amount of R$141.7 million before tax effects.

The impact of this amount was distributed in the year between the Cash Cost of Goods Sold to the amount of R$27.2 million, Other Operating Results to the amount of R$496.6 million, and the Financial Result to the amount of R$221.6 million. This result has been treated as non-recurring for 2021, which is why the Company is reporting the result on a pro forma basis for the lines impacted.

At the time of reporting financial statements, a res judicata on the Company's legal submission has yet to be issued with regards to the extinct company registration (CNPJ) of Duratex S.A., following the association with Satipel and Duratex Florestal Ltda covering the period from 2001 to 2015.

NET REVENUE

Even faced with a challenging scenario, Dexco ended the year with Net Revenue slightly up in 2021. The pricing pass-through in the Finishings for Construction Division coupled with the improvement to the mix in the Wood Division were the main contributory factors to this increase. In the last quarter, however, an increase in Unit Revenue across all Divisions was not enough to offset the fall in sales volumes, which resulted in Net Revenue falling 12.0% versus 4Q21.

The cost of international freight, although trending downwards, remains at high levels, which has led the Company to ease back on sales to the export market, giving priority to long-term relationships and higher profitability. For the quarter, this factor led to a reduction in both volumes and revenue arising from the exports. For the year, despite the quarterly dip, the Company sustained export volumes, reporting revenue growth of 11.6% versus 2021. It should be noted that while the performance of this channel may vary, Dexco remains focused on diversifying its markets and driving export sales, while always prioritizing the profitability of its products.

Net Revenue Breakdown 4Q22 (%)

12%

	Wood
25%	Metals and San. Ware
Tiles
	63%

Net Revenue Breakdown 2022 (%)

13%
			Wood
25%			Metals and San. Ware
		Tiles
61%

BRL '000 - consolidated	4Q22	4Q21	%	3Q22	%	2022	2021	%
Net Revenue	1,980,439	2,250,839	-12.0%	2,161,642	-8.4%	8,486,650	8,170,241	3.9%
Domestic market	1,684,108	1,888,683	-10.8%	1,758,886	-4.3%	6,893,156	6,742,416	2.2%
Foreign Market	296,331	362,156	-18.2%	402,756	-26.4%	1,593,494	1,427,825	11.6%

4

4Q22 2022

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 and benefits calculated with the exclusion of ICMS from the PIS and COFINS base calculation, ended the year at R$5,440.0 million, an increase of 13.9% versus the same period in 2021, and fourth quarter at R$1,350.9 million, on par with the previous year. It should be noted that in 2022, Dexco experienced severe pressures on its supply chain, particularly dollar denominated inputs and materials (such as urea), which for the most part showed signs of easing in 4Q22, which explains the fall in these costs versus the prior quarter.

With the stabilization of costs and maintenance of Net Revenues levels, Dexco ended the year with a Pro-Forma Gross Income of R$2,926.5 million, in line with 2021, while the Pro-Forma Gross Margin was 34.5%. For the quarter, the decrease in sales and consequent drop in Net Revenue led to Pro-Forma Gross Income of R$648.0 million, 18.8% lower than for 4Q21.

BRL´000 - Consolidated	4Q22	4Q21	%	3Q22	%	2022	2021	%
Cash COGS	(1,350,872)	(1,332,712)	1.4%	(1,412,773)	-4.4%	(5,439,979)	(4,777,729)	13.9%
Non Recurring Event (1)	33,958	7,405	358.6%	14,565	133.1%	54,685	(19,827)	-375.8%
Cash COGS Pro Forma	(1,316,914)	(1,325,307)	-0.6%	(1,398,208)	-5.8%	(5,385,294)	(4,797,556)	12.3%
Variation in fair value of biological assets	194,575	36,212	437.3%	176,582	10.2%	597,866	129,444	361.9%
Depletion of biological assets	(53,406)	(26,792)	99.3%	(38,615)	38.3%	(169,808)	(116,256)	46.1%
Depreciation, amortization and depletion	(156,657)	(136,484)	14.8%	(147,818)	6.0%	(602,942)	(535,852)	12.5%
Gross Profit	614,079	791,063	-22.4%	739,018	-16.9%	2,871,787	2,869,848	0.1%
Recurring Gross Profit (1)	648,037	798,468	-18.8%	753,583	-14.0%	2,926,472	2,850,021	2.7%
Gross Margin	31.0%	35.1%		34.2%		33.8%	35.1%
Recurring Gross Margin (1)(2)	32.7%	35.5%		34.9%		34.5%	34.9%

1. Non-recurringevents: 4Q22: Inventory Impairment Deca: (+) R$27,357k; Restructuring Tiles: (+) R$6,601k; 3Q22: Restructuring Deca: (+) R$3,103k; Restructuring Tiles (+) R$11,462k; 2Q22: Restructuring Deca: (+) R$5,610k; Restructuring Tiles (+) R$552k; (2) Pro-Forma Gross Income /Pro-forma Consolidated Net Revenue.

SALES EXPENSES

With the resumption of on-site events and a significant increase in freight costs, Pro-forma Selling Expenses ended the year at R$1,100.9 million, an increase of 15.5% versus 2021. However, with the reduction in sales volumes in the fourth quarter, this expense fell 15.9% versus 4Q21.

At the end of 2021, Dexco began the process of merging the Deca and Ceramic Tiles Divisions to create the new Finishings for Construction Division. As part of this process, the sales forces of the old divisions merged and, through the actions implemented in 2022, this led to a non-recurring expense of R$17.2 million in 4Q22, R$18.9 million for the full year.

BRL´000 - Consolidated	4Q22	4Q21	%	3Q22	%	2022	2021	%
Sales Expenses	(255,059)	(331,041)	-23.0%	(267,859)	-4.8%	(1,119,741)	(1,006,042)	11.3%
% of Net Revenue	12.9%	14.7%		12.4%		13.2%	12.3%
Non-recurring events (1)	17,206	48,127		1,443		18,876	52,517
Recurring Sales Expenses (1)	(237,853)	(282,914)	-15.9%	(266,416)	-10.7%	(1,100,865)	(953,525)	15.5%
% Recurring Net Revenue(1)	12.0%	12.6%		12.3%		13.0%	11.7%

1. Non-recurringevents: 4Q22: Restructuring Tiles (+) R$6,363k; Restructuring Deca (+) R$10,843k; 3Q22: Restructuring Deca (+) R$742k; Restructuring Tiles (+) R$701k; 2Q22: Restructuring Deca (+) R$227k.

GENERAL AND ADMINISTRATIVE EXPENSES

Pro-forma General and Admin Expenses closed the year at R$319.1 million, 23.8% up on 2021. The figure for 4Q22 was R$86.0 million, 10.4% higher than for 4Q21. Salary adjustments and the Company's focus on digitalization and process automation were the main drivers behind this rise, the increase in travel expenses, which were absent in 2021, also contributed significantly.

It should be noted that in 4Q21 and 4Q22 there were increases to the base salary of employees from the collective bargaining agreements, and that increase had a direct impact on General and Administrative Expenses throughout 2022, when compared to the prior year.

5