Vulcabras Azaleia S A : Earnings Release- 3Q20

Earnings Release 3ndrd Quarter

of 2020

Jundiaí, November 9, 2020 - Vulcabras Azaleia S.A. (B3: VULC3) (Company) announces today its results for the third quarter of 2020 (3Q30). The Company´s operating and financial information is presented based on consolidated figures and in millions of reais, prepared in accordance with accounting practices adopted in Brazil and international financial reporting standards (IFRS). The data in this report refers to the performance for the third quarter of 2020, compared to the same period of 2019, unless specified otherwise.

HIGHLIGHTS

• Gross Volume: 7.9 million pairs/pieces in 3Q20, an increase of 8.6% over 3Q19, and 15.4 million pairs/pieces in 9M20, down 22.2% over 9M19.
• Net Revenue: R$ 382.9 million in 3Q20, an increase of 6.5% compared to 3Q19 and R$
• 1. million in 9M20, down 27.0% over 9M19.
• Gross Profit: R$ 130.8 million in 3Q20, an increase of 4.8% compared to 3Q19 and R$
• 1. million in 9M20, a reduction of 30.7% in relation to the amount recorded in 9M19.
• Gross Margin: 34.2% in 3Q20, down 0.5 p.p. compared to 3Q19 and 32.5% in 9M20, down 1.8 p.p. compared to the 9M19 margin.
• Net Income: R$ 43.4 million in 3Q20, an increase of 3.8% compared to that reported in 3Q19, and (R$ 23.0) million in 9M20, a decrease of R$ 121.0 million against the R$ 98.0 in 9M19.
• EBITDA: 66.3 million in 3Q20, an increase of 2.6% compared to R$ 64.6 million in 3Q19, and R$ 38.4 million in 9M20, a decrease of 76.3% in relation to that obtained in 9M19.

VULC3 Quote (09/30/2020):	Conference Call:
R$ 6.25 per share	11/10/2020 às 10h00 (Brasília time)
Number of shares	Telephones Brazil
Common: 245.756.346
	[phone]
Market Value	[phone]
R$ 1.5 bilhão
Investor Relations	IR E-mail: [e-mail]
Wagner Dantas da Silva (CFO and DRI)
Vulcabras Azaleia IR Website	IR Telephone: [phone]
http://vulcabrasazaleiari.com.br/

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MESSAGE FROM MANAGEMENT

Vulcabras Azaleia discloses hereby its financial results for the third quarter of 2020 amid an economic recovery, after the most arduous period of the pandemic, and reports with optimism the recovery of its results

Faced with a scenario of macroeconomic recovery that is still slow, but gradual, data from the Brazilian Institute of Geography and Statistics (IBGE), in September, state that retail registered an increase of 5.2% in July, in comparison with June of this year.

Directly linked to this scenario is the footwear sector, segment that was positively impacted with the resumption of activities of physical commerce in large centers which, according to data from the Brazilian Footwear Industries Association (ABICALÇADOS), accounts for more than 40% of the total of shoes sold in Brazil. Also, according to the Brazilian Association of Handicraft and Footwear Retailers (ABLAC), the Retail Performance Index (IPV), in September, and in the footwear sector as a whole, recorded a positive visitor flow of 12.4%, compared to the same month of the prior year.

In this quarter, we reported healthy sales growth, with the rebuilding of our gross margin and better balance of expenses within this scenario. The pace of sales and production in this third quarter was equal to that of pre-pandemic periods, which evidences the effectiveness of the measures adopted thus demonstrating a growth trend for the second half, as a whole.

In 3Q20, the Company posted net revenue of R$ 382.9 million, an increase of 6.5% compared to 3Q19. Gross Margin was 34.2% in 3Q20, down 0.5% when compared to 3Q19. EBITDA registered R$ 66.3 million, an increase of 2.6% compared to R$ 64.6 million in 3Q19.

The maintenance of the portfolios of the first half of the year, combined with the good performance in receiving orders for the new collections of the second half of the year (Olympikus and Under Armor), launched in July, were fundamental for the full recovery of our manufacturing operations. In July, we had already discontinued the adoption of Provisional Executive Order (MP) 936, which allowed us to operate with reduced working hours.

The use of this Provisional Executive Order, during the critical period of social distancing, enabled the Company to strategically preserve its productive and distribution capacity, thus allowing both a rapid and sharp recovery of results.

We still live with the pandemic and continue to care for the people and communities in which we operate. The security protocol adopted remains very strict in the manufacturing plants, where we protected around 300 people identified as belonging to risk groups. Most of the activities in the commercial, administrative and financial areas continued to be carried out under the home office regime.

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In July, we launched the collections of the second half of the year (Olympikus and Under Armour) in an innovative, dynamic and 100% digital format. The success of these collections, seen in the volume of orders made, is due to the relentless pursuit of innovation. New technologies introduced in the plants allowed the construction of increasingly lighter and more efficient models. This has enabled us to build and offer our consumers the widest portfolio of products based on the best cost-benefit ratio in the market.

The performance of our brands' online stores maintained the same trend of expansion recorded over the prior quarters, thus registering a growth of 234.7% over the same period in 2019 and 32.3% over the prior quarter.

In September 2020, the Company announced two strategic changes that endorse its decision to focus its efforts on the sports footwear category, a key segment where the Company has its greatest strengths. In September, the Company announced the purchase of the Mizuno (a leading brand in the running shoe category) operation in Brazil, previously operated by Alpargatas S.A., which, after the fulfillment of the precedent conditions, including CADE's approval, it joined the Olympikus and Under Armour brands becoming part of our sports brand portfolio, where each brand has a different purpose and "target consumer".

The announcement on the acquisition of the Mizuno operation in Brazil was followed by an announcement regarding licensing of the Azaleia brand to Grendene, which is recognized as a successful manager of women's footwear brands and which has all capability to continue building value in the Azaleia brand, which remains a significant asset for the Company. With this, the Company will start to produce sports shoes exclusively in its factories, generating more scale and synergy.

Where, despite the uncertainties in this atypical year of 2020, Vulcabras Azaleia remained focused on the search to expand its business and capture strategic opportunities. It continues to add value to its brands, develop products and technologies that bring the best value proposition as perceived by the consumer and in the improvement and adding value to its employees.

It is through these ideals and with an optimistic vision of the future that Vulcabras Azaleia believes in its growth and in a prognosis of increasingly better results

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