Dexco S A : Results Presentation 4Q23

Results Presentation

4Q23 | 2023

March 07, 2024

Disclaimer

The information herein has been prepared by Dexco S.A. and does not represent any form of prospectus regarding the purchase or subscription to the company's shares or securities.

This material contains general information relating to

Dexco and the markets in which the company operates.

No representation or guarantee, expressed or implied, is made herein, and no reliance should be placed on the accuracy, justification or completeness of the information provided.

Dexco does not offer any assurances or guarantees regarding the fulfilment of expectations described.

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2023

Strong, into the future.

SCENARIO	▪	Political and economic
	the markets in which Dexco
		uncertainty directly impacting
		operates.

1Q23

• News linked to the tax	• Start of the reduction in interest rates	• Interest rate continues on a downward
framework, coupled with	cycle;	curve;
the maintenance of	• But with no significant impact on the	• Reduction in the decline in the
inflation targets creates an	building materials market;	construction materials market;
opening for interest rates to	• Panels market starting to show signs	• Sales in the panels sector remain
start to fall.	of recovery.	steady.

2Q23 3Q23 4Q23

WOOD

FINISHINGS

LD CELULOSE

Restructuring of the	2021-2025Cycle revised from	Go live SAP
4/HANA
Executive Committee.	R$2.1 billion to R$1.8 billion.
Fall in panels volumes	Maintenance of market share	Sequential improvement in
offset by forestry business.	and forestry business at	factory utilization.
78% of factory utilization.	significant levels.	80% factory utilization.
	75% factory utilization.
Metals price repositioning and	Review of the factory footprint	Review of the factory
scheduled shutdowns in Tiles.	of Sanitary Ware and partial	footprint ofTiles.
	return of Tiles' market share.
First maintenance shutdown.	Operating at full capacity.	Excellent levels of quality and
		factory utilization.

Effective management of Working Capital leading to cash generation and reduction in leverage.

Best quarter in the Division's

history: increase in market share of panels + forestry business.

93% factory utilization.

Temporary factory shutdown to balance inventory levels.

Improvement in the operation's productivity curve.

Highlights

2023

• Strategy of optimum capacity in Wood (high levels of factory utilization + forestry business) more than compensated for the impacts arising from a shrinking market and structural actions in Finishings.

Consolidated~

2022 - Gross Margin	34.5%
Volume	~ -3 p.p.	Operational
Forestry Business	~ 4 p.p.
		gains
Price/Mix	~ -1 p.p.
~2 p.p.
Cost of Goods Sold	~ 2 p.p.
Variation in fair value of biological assets	~2 p.p.
Depreciation/amortization/depletion	~-5 p.p.
2023 - Gross Margin	33.5%

Highlights

• New quarterly EBITDA record for the Wood Division reassuring the consistent performance in panels and the focus on profit generation with the forestry business;

4Q23/2023

Pro-forma Adjusted & Recurring EBITDA of R$2,007 million in 2023, including the 49% EBITDA from LD Celulose

• Finishings Division impacted by market conditions and initiatives aimed at inventory reduction in 4Q23;
• Dexco's Adjusted & Recurring EBITDA of R$404 million in 4Q23 and R$1,393 million for the full year, excluding LD Celulose;
• LD Celulose reported a Recurring EBITDA of R$321 million for 4Q23 and a

Margin of 54%, with R$157 million relating to Dexco.

Recurring Net Revenue		Adjusted & Recurring EBITDA		Recurring Net Income	-21%
and Gross Margin R$ million / %		and Margin R$ million / %			R$ million
												+4%					824
					-13%	+9%				1,926	2,007					53
										-33%			649
		-2%	8,487	7,383	517	561	194	613	249			278
1,980	1,949				157			42	168
		151	20.4%
34.5%					18.9%			771
					33.5%	18.5%	20.8%
32.7%								90		371
26.0%				207
				1,732
									1,393
														77
							366	404
	4Q22			4Q23	2022	2023		4Q22	4Q23	2022	2023	4Q22	4Q23	2022	2023
				Net Revenue	Pro-forma Gross		Adjusted &			Adjusted & Recurring	EBITDA		Adjusted & Recurring Net
					Recurring			EBITDA	Margin %		Income - LD Celulose
					Margin%
							EBITDA - LD

Celulose

5

Cash Flow

4Q23/2023

Improvement in Working Capital/Net Revenue (~12%5)

Free Cash Flow YTD R$ million

1,732	CCR4	: 26%
	1,393

447

	(470)	(303)
		(687)	(864)(711)
		Financial
Recurring	Working	Sustaining
EBITDA	Capital	flow	CAPEX

• Ongoing initiatives to rationalize sustaining CAPEX;
• Effective management of working capital leading to sustaining cash generation of R$363 million in the year, with R$257 million in 4Q23;
• Ongoing investment in Cycle 2021-2025 projects in 2023:
• • R$300 million: New Tiles unit in SP
  • R$185 million: Productivity projects, improvement to the mix and sanitary ware automation
  • R$53 million: Factory debottlenecking, improvement to the mix and expansion of the forestry base
  • R$94 million: DX Ventures

								Working Capital/Net Revenue
				2022			2023	28%				18%	18%	18%
									12%	10%	15%	12%5
	363							2019	2020	2021	2022	1Q23	2Q23	3Q23	4Q23
								CAPEX R$ million
(132) (79)	(37)									Investment		4Q22	4Q23	2022	2023
				(330)			FORESTRY OPEX	101	112	430	368
		(823)(693)						MAINTENANCE	158	134	382	343
		(859)
	Sustaining			Sustaining CAPEX1	259	247	864	711
Tax	FCL	Projects2			FCL
				PROJECTS2,3		143	189	823	693
						Total

1- Maintenance, factory modernization and business sustaining | 2- Projects, DX Ventures, M&A and LD Celulose | 3 - Expansion projects (4Q23): R$ 162.2 million; DX Ventures: R$3.3 million; Other projects: R$ 23.1 million | 4 - Cash Conversion	6
Ratio: rate of converting Adjusted & Recurring EBITDA into sustaining FCL | 5 - Does not consider the one-off effects in the trimester

Corporate Debt

4Q23/2023

Reduction in leverage to

3.1x.

• Reduction in leverage to 3.1x driven mainly by effective cash generation initiatives;
• Liability management:
• • Extension of the average payment term to 1.1 years, anchored by the CRA issue to the amount of R$1.5 billion made in October/23;
  • Long term debt represents more than 80% of gross debt.

Amortization Timeline	R$ million					Financial Leverage		R$ million
			Average term¹		Average cost		17%			Dívida Líquida		Dívida Líquida/EBITDA Recorrente (UDM)
					Short
			4.5 years			108.9% of CDI
													3.5x
															3.1x	3.1x
		3,535						Term					2.7x
								2.3x
Revolving						83%
750										4,706
Credit						Long						4,582	4,336
							4,038	4,284
									2,284
	Cash	2,785
		1,228
			927	1,061	1,023
							599
			2024	2025		2026	2027	2028	2029+	4Q22	1Q23		2Q23	3Q23	4Q23
		Liquidity

1 - Average weighted debt term.

7

WOOD

8

Sector Environment

Wood Panels

IBÁ data

• Consistent market growth in the quarter in relation to 4Q22;
• Drop of 3% in the panels market in relation to 2022, despite the uptick seen in the 2nd quarter of the year;

Panels Total		Volume 000m3
vs 2022	4Q23	2023
Domestic mkt	+6%	+1%
External mkt	+66%	-24%

MDF Domestic Market

Volume 000m3

+3%

MDP Domestic Market

Volume 000m3

		-3%		4,390			-3%
		+10%	4,250
+11%				0%	2,745
8,200	7,980		1,163
	1,055	691	690	2,671
	2,108

1,900

4Q22	4Q23	2022	2023	4Q22	4Q23	2022	2023	4Q22	4Q23	2022	2023

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Results

Wood

• Resilient results: quarterly increase in market share for panels and forestry business optimized asset profitability;
• Significant improvement in utilization levels, leveraging productivity with greater dilution of fixed costs;
• Best quarterly result in the Division's history with Adjusted & Recurring EBITDA of R$439 million and margin of 33.8% in 4Q23, and of R$1.4 billion for the full year;

Capacity Utilization			Capacity Utilization
		2023
4Q23			%
%
		MDF	MDP		MDF	MDP
93%	81%
95%	90%	82%	80%

Volume				Recurring Net Revenue		Adjusted & Recurring EBITDA¹
000m3				and Pro-forma Gross Margin	and Margin
			-6%	R$ million / %		-7%	R$ million / %			+18%
+5%					+3%						+51%			1,400
						5,205	4,831					1,186
688	722	2,879	2,706	1,256	1,298				439
							291		22.8%		29.0%
				38.0%	30.4%	36.6%	40.2%
							33.8%
						23.2%
4Q22	4Q23	2022	2023	4Q22		4Q23	2022	2023	4Q22	4Q23	2022		2023
										EBITDA
						Net Revenue	Pro-forma				Adjusted & Recurring
										Margin %
							Gross Margin				EBITDA

%

1 -Adjusted & Recurring EBITDA is net of the effects of the variation in biological assets.

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