Vulcabras S A : ITR 4Q23

Individual and Consolidated Financial Statements

Vulcabras S.A.

December 31, 2023

with Independent Auditor's Report

Vulcabras S.A.

Individual and consolidated financial statements

December 31, 2023

Contents

Independent auditor's report on individual and consolidated financial statements	................................1
Audited individual and consolidated financial statements
Statements of financial position	6
Statements of profit or loss	7
Statements of comprehensive income	8
Statements of changes in equity	9
Statements of cash flows - Indirect method	10
Statements of value added	11
Notes to individual and consolidated financial statements	12

Centro Empresarial Queiroz Galvão - Torre Cícero Dias

Rua Padre Carapuceiro, 858

8º andar, Boa Viagem

51020-280 - Recife - PE - Brasil

Tel: [phone]

Fax: [phone] ey.com.br

A free translation from Portuguese into English of Independent Auditor's Report on Individual and Consolidated Financial Statements prepared in Brazilian currency in accordance with the accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS), issued by International Accounting Standards Board (IASB)

Independent auditor's report on individual and consolidated financial statements

To the Shareholders, Board of Directors and Officers

Vulcabras S.A.

Jundiaí - SP

Opinion

We have audited the individual and consolidated financial statements of Vulcabras S.A. (the "Company"), identified as Individual and Consolidated, respectively, which comprise the statement of financial position as at December 31, 2023, and the statements of profit or loss, of comprehensive income, of changes in equity and of cash flows for the year then ended, and notes to the financial statements, including material accounting policies and other explanatory information.

In our opinion, the accompanying individual and consolidated financial statements present fairly, in all material respects, the individual and consolidated financial position of the Company as at December 31, 2023, and its individual and consolidated financial performance and cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

Basis for opinion

We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the individual and consolidated financial statements section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical principles set forth in the Code of Professional Ethics for Accountants and the professional standards issued by Brazil's National Association of State Boards of Accountancy (CFC), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Key audit matters

Key audit matters are those that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter, including any commentary on the findings or outcome of our procedures, is provided in that context.

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Uma empresa-membro da Ernst & Young Global Limited

We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the individual and consolidated financial statements section of our report, including in relation to this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying financial statements.

Recognition of sales revenue

The Company's sales revenues comprise a large volume of transactions with deliveries to its customers in all regions of Brazil. Executive board monitors the delivery of products to customers to identify invoiced and undelivered sales at the end of the year, in order to recognize revenue in its correct accrual period.

Considering the large volume and dispersion of its sales as well as the materiality of the related amount recorded in its financial statements, the Company has controls to determine the product delivery date for the accounting record of revenues in the correct accrual period. The determination of the revenue amount to be recognized, as well as the timing of its recognition, requires Company executive board to analyze in detail the terms and conditions of sales, and also involve the use of professional judgment. Professional judgment may lead to the risk of early recognition of revenue, especially with regard to the monthly accounting closing period. With that in view, we consider revenue recognition a key audit matter.

How our audit addressed this matter:

Our audit procedures included, among other: (i) assessment of operational effectiveness and design of key controls implemented by the Company in determining the timing of revenue recognition; (ii) analysis of the monthly changes in balances of revenue recognized by the Company in order to assess the existence of variations contrary to our expectations established based on our knowledge of the sector and of the Company; (iii) analysis of returns and cancellations occurred after the end of the year; and (iv) for a sample of sales recorded over the year, we obtained the related supporting documentation to assess whether the revenue was recognized in the appropriate accounting period. In addition, we assessed the adequacy of related disclosures, included in Notes 3.3 and 21.

Based on the result of the audit procedures performed on sales revenue, which is consistent with executive board's assessment, we consider that the revenue recognition criteria and assumptions adopted by the executive board, as well as the respective disclosures in Notes 3.3. and 21, are appropriate, in the context of the individual and consolidated financial statements taken as a whole.

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Other matters

Statements of value added

The individual and consolidated statements of value added (SVA) for the year ended December 31, 2023, prepared under the responsibility of the Company's executive board and presented as supplementary information for IFRS purposes, were submitted to audit procedures conducted jointly with the audit of the Company's financial statements. To form our opinion, we evaluated if these statements are reconciled to the financial statements and accounting records, as applicable, and if their form and content comply with the criteria defined by Accounting Pronouncement NBC TG 09 - Statement of Value Added. In our opinion, these statements of value added were prepared fairly, in all material respects, in accordance with the criteria defined in the abovementioned accounting pronouncement, and are consistent in relation to the individual and consolidated financial statements taken as a whole.

Other information accompanying the individual and consolidated financial statements and the auditor's report

The executive board is responsible for such other information, which comprises the Management Report.

Our opinion on the individual and consolidated financial statements does not cover the Management Report and we do not express any form of assurance conclusion thereon.

In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the Management Report, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the executive board and those charged with governance for the individual and consolidated financial statements

The executive board is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for such internal control as it determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the individual and consolidated financial statements, the executive board is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the executive board either intends to liquidate the Company or to cease its operations, or has no realistic alternative but to do so.

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Those charged with governance are responsible for overseeing the Company's and its subsidiaries' financial reporting process.

Auditor's responsibilities for the audit of the individual and consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identified and assessed risks of material misstatements of the individual and consolidated financial statements, whether due to fraud or error, designed and performed audit procedures responsive to those risks, and obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtained an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's and its subsidiaries' internal control.
• Evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the executive board.
• Concluded on the appropriateness of the executive board's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluated the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identified during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements, including applicable independence requirements, and communicated with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determined the matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matter. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matters or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Recife, March 7, 2024

ERNST & YOUNG

Auditores Independentes S/S Ltda.

CRC SP-015199/O

Francisco da Silva Pimentel

Accountant CRC SP-171230/O

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A free translation from Portuguese into English of individual and consolidated financial statements prepared in Brazilian currency in accordance with the accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS), issued by International Accounting Standards Board (IASB)

Vulcabras S.A.

(Publicly-held corporation)

Statements of financial position

December 31, 2023 and 2022 (In thousands of reais)

		Consolidated		Individual			Consolidated		Individual
Assets	Note	12/31/2023	12/31/2022	12/31/2023	12/31/2022	Liabilities and equity	Note	12/31/2023	12/31/2022	12/31/2023			12/31/2022
Cash and cash equivalents	4	361,020	197,197	1,023	35,161	Trade accounts payable	16	83,779	104,925	2,631			368
Short-term investments	5	3	4	3	4	Loans and financing	17	234,497	283,638	-			-
Trade accounts receivable	6	830,672	769,457	-	-	Lease liabilities	18	8,433	8,509	-			-
Inventories	7	583,534	567,831	-	-	Taxes payable		39,332	19,670	195			330
Taxes recoverable	8	119,435	18,685	648	582	Salaries and vacation payable		56,070	56,139	21			13
Income and social contribution taxes	9a	26,786	13,859	992	1,331	Provisions	19	2,739	3,102	382			397
Other accounts receivable - related parties	11b	-	-	255,742	-	Commissions payable		28,239	19,538	-			-
Other accounts receivable and other credits		39,177	26,074	4,142	6,141	Dividends and profits payable		15	20,734	15			20,734
									Other accounts payable		58,576		53,716		225			1,191

Total current assets		1,960,627	1,593,107	262,550	43,219	Total current liabilities		511,680	569,971	3,469	23,033
Financial investments	5	13,446	8,942	2	1	Loans and financing	17	203,253	133,410	-	-
Trade accounts receivable	6	3,873	5,153	-	-	Intercompany loans	11	-	18,448	-	109,889
Taxes recoverable	8	59,236	193,504	1,920	1,831	Lease liabilities	18	6,862	12,059	-	-
Deferred income and social contribution taxes	9b	1,286	13,591	-	301	Provisions	19	53,147	54,274	399	591
Judicial deposits	10	27,847	22,419	250	408	Deferred income and social contribution taxes	9b	2,071	17,079	-	301
Goods for sale		194	194	-	-	Other accounts payable		2,844		3,681		-		-
Other accounts receivable		2,090		1,934		1,012		973	Total noncurrent liabilities		268,177	238,951	399	110,781
Long-term assets		107,972	245,737	3,184	3,514
	Equity
									Capital	20a	1,108,354	1,106,717	1,108,354	1,106,717
									Reservas de capital	20b	(4,102)	(1,472)	(4,102)	(1,472)
Investments	12a	62,883	75,662	1,733,010	1,798,458	Revaluation reserves	20c	4,020	4,175	4,020	4,175
Investment property		2	4	-	-	Equity adjustments	20d	23,965	25,974	23,965	25,974
Right of use	18	12,903	18,119	-	-	Income reserve	20e	862,750	576,094	862,750	576,094
Property, plant and equipment	13	422,650	379,031	-	-
Intangible assets	14	208,116		209,096		111		111	Equity attributable to controlling shareholders		1,994,987		1,711,488		1,994,987		1,711,488
		706,554	681,912	1,733,121	1,798,569
		Noncontrolling shareholders		309		346		-		-
Total noncurrent assets		814,526		927,649		1,736,305		1,802,083	Total equity		1,995,296		1,711,834		1,994,987		1,711,488
									Total liabilities		779,857		808,922		3,868		133,814
Total assets		2,775,153		2,520,756		1,998,855		1,845,302	Total liabilities and equity		2,775,153		2,520,756		1,998,855		1,845,302
											-	-	-	-
See accompanying notes.

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Vulcabras S.A.

(Publicly-held corporation)

Statements of profit or loss

December 31, 2023 and 2022

(In thousands of reais, except earnings per share)

		Consolidated		Individual
	Note	12/31/2023	12/31/2022	12/31/2023	12/31/2022
Continuing operations
Net sales revenue	21	2,817,679	2,536,936	-	-
Cost of sales and resales	22	(1,641,645)		(1,599,498)		-		-
Gross profit		1,176,034	937,438	-	-
Selling expenses	23	(486,315)	(384,695)	-	-
(Setup) reversal of allowance for expected credit losses	23	297	(14,539)	-	-
Administrative expenses	24	(155,252)	(150,168)	(7,331)	(5,398)
Other operating income (expenses), net	25	(108)	50,233	9,643	5,050
Equity pickup	12b	7,864		5,298		492,883		473,848
Income (loss) before net finance income and costs and taxes		542,520	443,567	495,195	473,500
Finance income		86,204	125,916	6,641	18,244
Finance costs		(90,979)		(84,618)		(6,015)		(21,821)
Finance income and costs, net	26	(4,775)		41,298		626		(3,577)
Income before income taxes		537,745	484,865	495,821	469,923
Current and deferred income and social contribution taxes	9c	(42,862)		(14,935)		(929)		(23)
Net income for the year		494,883	469,930	494,892	469,900
Income attributable to:
Controlling shareholders		494,892	469,900	494,892	469,900
Noncontrolling shareholders		(9)		30		-		-
Net income for the year		494,883	469,930	494,892	469,900
Earnings per share
Earnings per common share - basic						2.0180		1.9124
Earnings per common share - diluted					2.0051	1.9056
Number of shares at end of year
Common shares outstanding						245,237,428		245,710,968
Common shares outstanding with a dilution effect						246,820,783		246,595,701

See accompanying notes.

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Vulcabras S.A.

(Publicly-held corporation)

Statements of comprehensive income

December 31, 2023 and 2022

(In thousands of reais)

	Consolidated		Individual
	12/31/2023	12/31/2022	12/31/2023	12/31/2022
Income for the year	494,883	469,930	494,892	469,900
Other comprehensive income - OCI
(2,009)	3,230	(2,009)	3,230
Items that can be subsequently reclassified to profit or loss
Exchange differences from translation of foreign operations	(2,059)	2,873	(2,059)	2,873
Financial assets at fair value through other comprehensive income	50	357	50	357
Total comprehensive income	492,874	473,160	492,883	473,130
Comprehensive income attributable to:
Controlling shareholders	492,883	473,130	492,883	473,130
Noncontrolling shareholders	(9)	30	-	-

See accompanying notes.

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