Dexco S A : Results Report 3Q22

Quarterly Results - 3Q22 / 9M22| GRI 102-52

HIGHLIGHTS

Adjusted and Recurring EBITDA of R$415.6 million and of R$1,365.5 million for 3Q22 and 9M22 respectively, a fall in relation to the same periods in 2021, which arose mainly from significant inflation;

Positive generation of Sustaining Cash Flow of R$156.6 million in the quarter and R$23.0 million in 9M22, without allowing for expansion investment.

WOOD

FINISHINGS FOR CONSTRUCTION

WOOD

DISSOLVING WOOD PULP

METALS & SAN. WARE TILES

736.1k m³ sold in 3Q22 and 2,191.9k m³ in 9M22, a slight drop versus the prior year;

An increase in the cost of inputs and freight impacted margins during the period;

Adjusted and Recurring EBITDA of R$276.1 million in the quarter and of R$895.4 million in 9M22.

The ramp up of operations has gone to plan, with premium quality DWP already being produced;

Sector indicators, such as the exchange rates and commodity prices are currently favorable to the business.

Unit revenue increased 17.7% in 3Q22 and 24.8% in 9M22, with better mix and price increased;

Retail sales dropped off, with 5,991k pieces sold in 3Q22 and 18,313k sold in 9M22;

Adjusted and Recurring EBITDA of R$73.3 million in 3Q22 and R$258.6 million in 9M22.

Price increases and an improved mix led to +27.2% in unit revenue in the 3Q22 and 32.6% in 9M22;

Cost pressures were offset by the revenue gains and a significant increase in gross margin;

Adjusted and Recurring EBITDA of R$66.3 million for the quarter and R$211.6 million in 9M22.

As at 09/30/2022

MARKET CAP | GRI 102-7

R$ 6,867.3 million

CLOSING SHARE PRICE

R$ 9.35

ISSUED SHARES

760,962,951

TREASURY SHARES

26,489,405

INVESTOR		Live
RELATIONS
	transmission
Henrique Haddad -Adm, Financial & IR VP	1938, Paulista Avenue-CEP01310-200	October 27, 2022, at
4pm | GRI 102-50
Consolação -São Paulo - SP
Natasha Utescher - IR Manager
11 3179.7045
Alana Santos -IRSpecialist	Access via the website:
Carolina Mulet -IRAnalyst	[e-mail]	www.dexcoday.com.br

www.dex.co/ri

3Q22

Consolidated Financial Results

In BRL '000	3Q22	3Q21	%	2Q22	%	9M22	9M21	%
Highlights
Volume shipped Deca ('000 items)	5,991	7,856	-23.7%	7,464	-19.7%	18,313	22,453	-18.4%
Volume shipped Ceramic tiles (m²)	5,036,576	6,793,645	-25.9%	5,188,084	-2.9%	15,588,280	19,106,709	-18.4%
Volume shipped Wood (m³)	736,123	805,799	-8.6%	722,757	1.8%	2,191,854	2,363,289	-7.3%
Consolidated Net Revenue	2,161,642	2,177,147	-0.7%	2,213,567	-2.3%	6,506,211	5,919,402	9.9%
Consolidated Net Revenue - Pro Forma	2,161,642	2,177,147	-0.7%	2,213,567	-2.3%	6,506,211	5,919,402	9.9%
Gross profit	739,018	751,861	-1.7%	775,744	-4.7%	2,257,708	2,078,785	8.6%
Gross profit - Pro Forma (1)	753,583	751,861	0.2%	781,906	-3.6%	2,278,435	2,051,553	11.1%
Gross margin	34.2%	34.5%		35.0%		34.7%	35.1%
Gross margin - Pro Forma (1)	34.9%	34.5%		35.3%		35.0%	34.7%
EBITDA according to CVM No. 527/12 (2)	572,151	592,470	-3.4%	561,809	1.8%	1,734,953	2,142,368	-19.0%
EBITDA Mg CVM No. 527/12	26.5%	27.2%		25.4%		26.7%	36.2%
Adjustments for non-cash events	(170,044)	(9,851)	1626.2%	(151,178)	12.5%	(392,156)	(100,539)	290.1%
Non-recurring events (3)	28,755	(25,764)	-211.6%	5,060	-	33,815	(495,498)	-106.8%
Dissolving Wood Pulp	(15,268)	47,243	-132.3%	30,556	-150.0%	(11,096)	53,867	-120.6%
Adjusted and Recurring EBITDA (4)	415,594	604,098	-31.2%	446,247	-6.9%	1,365,516	1,600,198	-14.7%
Adjusted and Recurring EBITDA margin (4)	19.2%	27.7%		20.2%		21.0%	27.0%
Net Income	154,148	255,336	-39.6%	169,191	-8.9%	547,054	1,144,635	-52.2%
Recurring Net Income (1)(3)	162,896	267,547	-39.1%	202,909	-19.7%	564,127	741,184	-23.9%
Recurring Net Margin (1)(3)	7.5%	12.3%		9.2%		8.7%	12.5%
INDICATORS
Current ratio (5)	1.41	1.70	-17.1%	1.44	-2.1%	1.41	1.70	-17.1%
Net debt (6)	3,828,336	1,705,363	124.5%	3,689,344	3.8%	3,828,336	1,705,363	124.5%
Net debt / EBITDA LTM(7)	1.96	0.81	142.0%	1.72	14.0%	1.96	0.81	142.0%
Average Shareholders' equity	5,825,039	5,835,343	-0.2%	5,623,571	3.6%	5,825,039	5,471,038	6.5%
ROE (8)	10.6%	17.5%		12.0%		0.13	27.9%
Recurring ROE	11.2%	18.3%		14.4%		0.13	18.1%
SHARES
Earnings per share (BRL) (9)	0.2100	0.3724	-43.6%	0.2306	-8.9%	0.7417	1.6645	-55.4%
Closing share price (BRL)	9.35	16.97	-44.9%	9.87	-5.3%	9.35	16.97	-44.9%
Net equity per share (BRL)	8.04	8.77	-8.3%	7.82	2.8%	8.04	8.77	-8.3%
Treasury Shares	26,489,405	5,906,452	348.5%	26,489,405	0.0%	26,489,405	5,906,452	348.5%
Market Cap (BRL1.000)	6,867,328	11,639,350	-41.0%	7,249,254	-5.3%	6,867,328	11,639,350	-41.0%

1. Cost of Goods Sold: 3Q22: Deca Restructuring: (+) R$ 3,103 thousand; Ceramic Tiles Restructuring (+) R$ 11,462 thousand; Cost 2Q22: Deca Restructuring (+) R$5.610 thousand Tiles
   Restructuring (+)R$552 thousand. Sales expenses 2Q22: Deca Restructuring (+) R$227 thousand.
2. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): measure of operating performance in accordance with CVM Instruction 527/12.
3. Non-recurringevents detailed in the attachment to this material.
4. EBITDA adjusted for non-cash events arising from variation in the fair value of biological assets and combination of businesses, in addition to extraordinary events.
5. Current liquidity: Current assets divided by current liabilities. Indicates the amount available in R$ 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.

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3Q22

Market & Business Scenario |GRI 203-1

The Company faced ongoing challenges in the third quarter of the year. Still without visibility of the impacts arising from government aid that would directly positively impact the income of Brazilians, the general rate of household debt continued to rise, according to data from the Brazilian Institute of Geography and Statistics (IBGE). This factor, coupled with a fall in real estate financing, has caused significant instability in the home improvement sector and affected demand for the Dexco's products. Despite this backdrop, the outlook remains favorable in terms of real estate launches, which remain strong. On the flip side, the Company continued to face cost pressures in the quarter, especially with respect to freight and chemicals, while any benefits arising from the fall in the price of dollarized inputs, such as copper and urea, were partially offset by exchange rate fluctuations in the period.

In the midst of this scenario, traditional third-quarter seasonality was surprisingly absent and Dexco, like the market as a whole, suffered a drop off in sales, especially in Finishes for Civil Construction. This, coupled to cost increases in the Company's main inputs, led to an Adjusted and Recurring EBITDA of R$415.6 million in 3Q22, a fall of 31.2% compared to 3Q21. Despite this result falling below expectations, Dexco ended the year with an Adjusted and Recurring EBITDA of R$1,350.0 million, which once again highlights the enhanced level of operations.

For the quarter the main highlight was the resilience of wood panel sales, which despite the absence of seasonality, remained strong, leading to gains in market share. However, inflationary pressures, especially with respect to dollarized inputs and freight, continued to have a direct impact on results, with a 28.0% fall in the Adjusted and Recurring EBITDA versus 3Q21. Year to date, the fall is 18.0%. This drop off is also less than that for the market, which highlights the Company's differential in its positioning. The wood panels sector ended the quarter with a 9.0% decrease in sales versus 3Q21, which reflects a 11.5% fall in the domestic market and a 13.0% rise in exports. Year to date the drop off has been 10% versus the same period the prior year, according to data from the Brazilian Tree Industry (IBÁ).

The results for the Deca Division showed the most impact in the quarter. The well-implemented pricing strategy was not enough to offset the sharp drop off in retail sales, which led the Division to end the quarter with an Adjusted and Recurring EBITDA of R$73.3 million, giving a year-to-date figure of R$258.5 million. The construction materials market, like Deca, shrank in the quarter, with a fall of 4.7% and 7.3% in gross deflated revenue for the third quarter and first 9 months respectively, according to data from the Brazilian Association of Construction Materials (ABRAMAT).

The Tiles market also took a hit from the fall off in retail sales during the quarter, with a 17.3% drop in sales volumes, while for the first nine months of the year this decrease was 14.1% versus the same periods in 2021. The Company's level of exposure in the retail channel caused its decline to exceed that noted in the industry, with falls of 25.9% in 3Q22 and 18.4% in 9M22 versus the same periods the prior year, according to data from the National Association of Ceramic Tile Manufacturers (ANFACER). As a result, the Division ended the quarter with an Adjusted and Recurring EBITDA of R$66.3 million in the quarter, and R$211.6 million year to date.

The new Dissolving Wood Pulp operation, LD Celulose, for its part, has been exceeding productivity and quality expectations at its new unit, which has meant it has already been possible to sell products to Europe and China. As a result, despite the high costs common to start-up operations, the Division ended the quarter with a positive EBITDA of USD 22.7 million, while consolidated EBITDA was USD 12 million.

It should be noted that even amid great market volatility, Dexco has demonstrated its resilience in implementing and sustaining price increases, and through its effective product positioning. The Company remains alert to market movements, especially with respect to inflation, which is already showing signs of stabilizing, and continues to progress with productivity and price adjustment projects.

3

3Q22

Consolidated Financial Results |GRI 103-2e 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 interim financial statements, there has not yet been a final and unappealable decision on the Company's judicial measure, relating to the extinct CNPJ of Duratex S.A., after the association with Satipel and Duratex Florestal Ltda, which covers the period from 2001 to 2015.

NET REVENUE

Dexco ended the third quarter of the year with an increase in Net	Net Revenue Breakdown
Revenue across all its divisions, validating the market positioning
3Q22 (%)
strategy of its products. This improvement offset the drop off in
sales volumes and led to Net Revenue of R$2,161.6 million, the	14%
same level as for 3Q21. Year to date, Net Revenue is R$6,506.2
million, an increase of 9.9% versus the same period in 2021, also	25%
explained by the improvement in Unit Revenue of the divisions	Wood
61%
and the uptick in exports.		Metals and San. Ware
During the quarter, Dexco maintained its increased focus on		Tiles
targeting the external market, when compared to the second

quarter of 2022, although the performance was lower than for the same period of 2021, due to higher-than- forecast freight costs. Net Revenue from sales to the external market and Colombia was 6.0% higher than for 3Q21, and 21.7% higher in 9M22. It should be noted that year to date sales volumes to the external market are in line with that for the same period of 2021, the Company benefitting from a boost in profitability arising from the higher pricing base and appreciation of the dollar against the real.

BRL '000 - consolidated	3Q22	3Q21	%	2Q22	%	9M22	9M21	%
Net Revenue	2,161,642	2,177,147	-0,7%	2,213,567	-2,3%	6,506,211	5,919,402	9,9%
Domestic market	1,758,886	1,797,317	-2,1%	1,790,261	-1,8%	5,209,048	4,853,733	7,3%
Foreign Market	403	380 6,0%	423 -4,9%	1,297,163	1,065,669	21,7%

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 third quarter of the year at R$1.398.2 million, an increase of 10.3% in relation to the same period in 2021. Although in line with inflation for the period, this increase was mainly due to cost pressures on its main inputs and a lower dilution of fixed costs arising from lower sales volume. For the first nine months of the year, the Pro-Forma Cash Cost was 17.2% higher than for 9M21. It should be noted that since the last quarter, the Company has been focused on reducing costs and expenses in order to offset inflationary impacts on the sector, and these efforts are evident in the stabilization of costs versus the previous quarter.

4

3Q22

Pro-forma gross income for the quarter was R$751.6 million, in line with 3Q21, while the gross margin was 34.9%, slightly higher than that achieved in 3Q21. For 9M22, pro forma gross income grew 11.1% versus 9M21, with a gross margin of 35.0%.

BRL´000 - Consolidated	3Q22	3Q21	%	2Q22	%	9M22	9M21	%
Cash COGS	(1,412,773)	(1,267,793)	11.4%	(1,392,758)	1.4%	(4,089,107)	(3,445,017)	18.7%
Non Recurring Event (1)	14,565	-	N/A	6,162	136.4%	20,727	(27,232)	-176.1%
Cash COGS Pro Forma	(1,398,208)	(1,267,793)	10.3%	(1,386,596)	0.8%	(4,068,380)	(3,472,249)	17.2%
Variation in fair value of biological assets	176,582	7,778	2170.3%	155,617	13.5%	403,291	93,232	332.6%
Depletion of biological assets	(38,615)	(29,750)	29.8%	(39,740)	-2.8%	(116,402)	(89,464)	30.1%
Depreciation, amortization and depletion	(147,818)	(135,521)	9.1%	(160,942)	-8.2%	(446,285)	(399,368)	11.7%
Gross Profit	739,018	751,861	-1.7%	775,744	-4.7%	2,257,708	2,078,785	8.6%
Recurring Gross Profit (1)	753,583	751,861	0.2%	781,906	-3.6%	2,278,435	2,051,553	11.1%
Gross Margin	34.2%	34.5%		35.0%		34.7%	35.1%
Recurring Gross Margin (1)(2)	34.9%	34.5%		35.3%		35.0%	34.7%

1. Non-recurringevents: 3Q22: Deca Restructuring: (+) R$ 3,103 thousand; Restructuring Tiles (+) R$ 11,462 thousand; 2Q22: Deca Restructuring: (+) R$5,610 thousand; Restructuring Tiles (+) R$552 thousand; 2Q21: Exclusion of ICMS from PIS and COFINS base: (-) R$27,232 thousand;(2) Pro Forma gross profit / Pro Forma consolidated net revenue.

SALES EXPENSES

The increase in both internal and external freight costs, coupled with the resumption of on-site events and travel, led to a 10.4% increase in pro forma sales expenses in the quarter versus 3Q21. Compared to the second quarter of 2022, these expenses decreased by 15.1%, reflecting the focus on optimizing the spending being undertaken by Dexco. For 9M22, proforma sales expenses grew by 28.7% versus the same period in 2021, mainly due to expenses associated with CasaCor and Feira Revestir at the beginning of the year, in addition to promotional and advertising activities, especially in relation to the Deca and Tiles Divisions.

BRL´000 - Consolidated	3Q22	3Q21	%	2Q22	%	9M22	9M21	%
Sales Expenses	(267,859)	(241,413)	11.0%	(313,986)	-14.7%	(864,682)	(675,001)	28.1%
% of Net Revenue	12.4%	11.1%	0.00%	14.2%	0.00%	13.3%	11.4%	0.00%
Non-recurring events (1)	1,443	-	N/A	227	N/A	1,670	4,390	N/A
Recurring Sales Expenses	(266,416)	(241,413)	10.4%	(313,759)	-15.1%	(863,012)	(670,611)	28.7%
% Recurring Net Revenue	12.3%	11.1%		14.2%	0.0%	0.13	11.3%

(1) Non-recurring events: 3Q22: Deca Restructuring (+) R$742 thousand; Restructuring Tiles(+) R$701 thousand; 2Q22: Deca Restructuring (-) R$ 227 thousand

GENERAL AND ADMINISTRATIVE EXPENSES

Pro forma General and Admin Expenses closed out the third quarter at R$ 81.8 million, 29.5% higher than for 3Q21, and at R$233.1 million for 9M22, 30.8% higher than for 9M21. The annual salary readjustments and the Company's focus on digitalization and automation process were the main drivers behind this increase. In addition, an increase in travel-related expenses, which were absent in 2021 and 1Q22, were also a significant contributor.

It should be noted that in 4Q21 there was an increase in the base salary of employees of approximately 10.0%, arising from the collective bargaining agreement, and that this increase will have an impact on General and Admin Expenses throughout 2022, when compared to the prior year.

BRL'000 - Consolidated	3Q22	3Q21	%	2Q22	%	9M22	9M21	%
General and Administrative Expenses	(81,763)	(76,497)	6.9%	-77,544	5.4%	(233,079)	(200,366)	16.3%
% of Net Revenue	3.8%	3.5%		3.5%		3.6%	3.4%
Non-recurring events (1)	-	13,366		-		-	22,141
Recurring General and Administrative Expenses(1)	(81,763)	(63,131)	29.5%	(77,544)	5.4%	(233,079)	(178,225)	30.8%
% Recurring Net Revenue(1)	3.8%	2.9%		3.5%		0.04	3.0%

(1) Non-recurring events: 3Q21: Brand restructuring (+) R$ 12,919 thousand, Dissolving Wood Pulp (+) R$ 447 thousand

5