Klabin swings to profit of 331M reais in Q3 from loss of 243M reais in year-ago period, reports net revenue up 10% to 1.09B reais, says packaging paper market showed stronger growth, supported by government measures to stimulate consumption

SAO PAULO , October 25, 2012 (press release) –

3Q12 Highlights

Sales volume of 440 thousand tonnes sales volume, versus 71% in 3Q11;

Net revenue of R$ 1,086 million, up 10% on 3Q11

Unit cash cost, which was already down in September 2011, fell 1% from 3Q11;

EBITDA of R$ 375 million, with a margin of 34%, up 39% on the adjusted EBITDA of 3Q11, when margin was 27%;

The growth in operating cash flow over the last twelve months reduced from 2,5x in June to 2.3x in September.

Markets and Exchange Rate

The global economic outlook did not improve during the period. The volatility among developed economies persisted, leading to further reductions in the indicators for 2012 and 2013, with a less pessimistic outlook for emerging economies. Despite the uncertainties, by the close of the quarter, the global aversion to risk was noticeably lower, the Brazilian real was relatively stable against the dollar and commodity prices held steady. In the paper market, recent plant closures have shifted supply and demand, pointing towards an improvement in international prices.

Brazil showed modest signs of growth. However, the packaging paper market showed stronger growth, supported by government measures to stimulate consumption, an exchange rate that was less favorable to imported products, as well as the typical seasonality of the period (a stronger second half, due to the year-end holiday season). In this scenario, Klabin’s results, which were already strong during the first half of the year, despite the unfavorable economic environment, improved even further. Sales revenue increased 10% over 3Q11, while the unit cash cost dropped by 1%, despite the inflation during the period. EBITDA for the quarter increased 39% over 3Q11, which already saw the beginning of cost improvements at the Monte Alegre mill.

Once again, the Company posted significant growth in its results, based on the strategy of continuous efforts to improve operational efficiency and diversify its customers and markets. The improved management of costs, combined with a strategy focused on preserving margins, resulted in a process of sustainable growth in the company's operating cash flow in 2012, culminating in a record adjusted EBITDA of R$ 1,286 million over the last twelve months.

Klabin Third Quarter Financial Results

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