Citi Brazil Equity Conference

8/21/2019 Citi Brazil Equity Conference

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June 2015

Corporate Presentation


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Executive Summary


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H e a v y C o n s t r u c t i o n

•

• Market leader. extensive trackrecord, with more than 60 yearsof experience

• Focus on: large and complexinfrastructure projects

• Products: engineeringsolutions and rental offormwork and shoring

• Services: planning, design,technical supervision,equipment and related services

• Main clients:

R e a

l E s t a t e

•

• Market leader; acquired in 2008

• Focus on: residential andcommercial constructions

• Products: engineering solutionsand rental of formwork, shoringand suspended access

• Services: planning, design,technical supervision, equipmentand related services

• Clients: real estate companies,such as:

R e n t a l

• Market leader; started in2008

•Focus on: civil construction,Industry, retail e others

• Products: rental and sale ofmotorized accessequipment, such as aerialwork platforms andtelescopic handlers

• Cross-selling with all other

Mills’ business units

• Elected "Best Company for Access of the Year" by theInternational Awards forPowered Access (IAPA

Awards) for the year of 2011

Mills - Business Units

2

http://www.pdgrealty.com.br/pdg/Capa.aspxhttp://www.pdgrealty.com.br/pdg/Capa.aspx


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3

Mills – 2014 Financial highlights per business unit

In R$ million

353.1

172.7

186.1

26.7

211.0

76.2

750.2

275.6

Net Revenue EBITDA

Heavy Construction

Real Estate

Rental

EBITDA margin ROIC

36.1% 7.0%

14.3% -3.3%

48.9% 8.8%

36.7% 4.0%


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Estamos presentes em 16 estados no Brasil com 56 unidades

Geographic Presence

4

Branches location As of March 31, 2015

MinasGerais

Rio Grandedo Sul

Santa Catarina

São Paulo

Mato Grosso

do Sul

Rio deJaneiro

(headquarters)

EspiritoSanto

Bahia

DistritoFederal

Goias

Sergipe

Paraiba

Rio GrandeCeará

Piaui

Maranhão

Tocantins

Pará

Rondônia

Acre

Roraima Amapá

Amazonas

Mato Grosso

Parana

Alagoas

States with Mills' presence

Pernambuco

do Norte

Rental

Heavy Construction

Real Estate


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5

Financial Performance1

¹ Reclassifiedexcluding the Industrial Services business unit, for comparison

² ROIC: Return on Invested Capital.

³ Excluding non-recurring items of R$ 21.7 million of net earnings and R$ 14.5 million of EBITDA in 2014, of which R$ 12.3 million in 3Q14

In R$ million

1Q15/1Q14 1Q15/4Q14 LTM1Q15/2014³ CAGR 11-14³

Net revenue -21% -10% -6% 20%

EBITDA -56% -15% -21% 17%

Net earnings -143% 133% -72% -4%

207.8213.0

191.5 191.5

181.9163.9

107.5 105.9

66.779.0

55.647.4

33.9 33.4

3.211.3

-6,2-14,5

48.7% 49.7%

34.8%

41.3%

30.6%28.9%

12.3%

9.4%9.9%

6.6%4.0%

1Q14 2Q14 3Q14 3Q14³ 4Q14 1Q15

Net revenue EBITDA Net earnings EBITDA margin (%) ROIC²

665.5

832.3794.2 794.2

750.2

339.0

403.1

335.7 350.2

275.6

151.5172.6

64.3 81.7

23.0

50.9%48.4%

42.3%

44.1%

36.7%

14.7% 14.1%

6.6% 6.6% 4.0%

2012 2013 2014 2014³ LTM1Q15


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Positive cash flow of R$ 70 million in 1Q15, reaching R$ 200million in the last twelve months

6

(340)

(219)

(31)

(154)

116

(13)

11

7445

70

(400)

(300)

(200)

(100)

-

100

200

2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14 1Q15

Free cash flow1

1 Net cash generated by the operating activities minus net cash applied in investment activities


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72 57 34 38 31 27

134 174

150106 106

38

194206

231

184

144 137

65

Cashposition

2015 2016 2017 2018 2019 2020

Interest Principal

Debt profile

Debt amortization schedule1

in R$ million

7

Credit lines available¹.2

Used R$ 64.5 million

Not used R$ 505.6 million

¹As of December 31st, 20142 Unsecured overdraft account+ Secured bank credit lines

712

214 498

Gross debt Cash position Net debt

Debt, as of March 31, 2015in R$ million


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Debt indicators

Net Debt/EBITDA

Debentures Covenants :

(1) EBITDA/net financial results higher than or equal to two; and

(2) Net Debt/EBITDA less than or equal to three.

EBITDA/Net financial results

8

1.5x 1.5x 1.5x

1.6x

1.8x

1.6x

1Q14 2Q14 3Q14 4Q14 1Q15 1Q15

8.0x

7.1x

6.1x

5.2x

4.0x

4.5x

1Q14 2Q14 3Q14 4Q14 1Q15 1Q151 1

1Excludind R$ 40.1 million of non-recurring items from LTM EBITDA.


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The new organizational structure aims to improve operationalefficiency and synergy from the Heavy Construction and RealEstate business units

CEO

CommercialHeavyConstruction

CommercialReal Estate

Operations

Maintenance

Inventoryhandling and

control

Engineering

Projects

Field service

Rental

9

New Organizational Structure

CEO

Heavyconstruction

Commercial

Maintenance

Projects

Field service

Real estate

Commercial

Maintenance

Projects

Field service

Rental

Old Organizational Structure


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We have a broad client base

10

IndicatorsHeavy

ConstructionReal Estate Rental Mills

% 2014 Revenue 29% 25% 46% 100%

# Clients 377 2,065 4,083 5,798

Top 10 Clients (% revenue) 38% 20% 12% 16%


12/3511Source: The Conference Board Total Economy Database, January 2014

Brazil presents a low level of productivity compared to otherdeveloping countries

17.2%

34.0%

8.1%

17.1%

28.2%

34.5%

31.4%

Brazil Russia India China South Africa Chile Mexico

GDP per person employed, % of U.S. 2013

Our services enable productivity growth, which is essential for higher sustainable GDP growth


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Business Units


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Rental

Aerial work platforms


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Growth drivers in the motorized access equipment market:safety and productivity

Source: Mills

Market penetrationthroughsubstitution of lesssecure andefficient access

methods

Recent safety standards (NR-18 and NR-35) oblige the use of aerial platforms to lift people,increasing safety and productivity in the work site


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Safety - Growth driver in the motorized access equipmentmarket

Source: (1) EUA: Osha – data of 2010 and (2) Brazil : BOLETIM SIRENA – Accidents in work

analysis -N° 2 - January to December, 2010, data of 2010

Leading causes of fatal accidents in construction work

4%

8%

10%

35%

8%

5%

12%

19%

Crushing

Collision

Electric shock

Falls

Brazil

USA

15


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1,889

403

277233

72

Mobile ladders Vehicles with lifttables, dock

levellers, ramps andflying tables

Fixed scaffolding Mobile scaffolding Aerial platform

16

Number of accidents by type of access equipment

EUA – 2010-2011

Source: HSE HandS-On Statistics Data Tool

Safety - Growth driver in the motorized access equipmentmarket


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Productivity - Growth driver in the motorized accessequipment market

Preparation: scaffolding assembly last 2 dayswith 8 peopleOperation: fixed structure makes it difficult toaccess certain points

Preparation: it reaches working heights inone and half minutesOperation: flexible, easy to operate andmaneuver

17


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Evolution in Rental’s number of units

Geographic expansion - Growth driver in the motorizedaccess equipment market

18

4 4

14

1617

26

30

2008 2009 2010 2011 2012 2013 2014


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Revenues per type of use

64% 67%73%

45%

63%

19% 16%16%

51% 17%

17% 17%11%

4%

20%

Brazilian market Mills United Rentals(pre-merger

RSC)

United Rentals(post-merger

RSC)

Ramirent

Others

Spot

Industry

Construction

Construction sector is the major user of motorized access inBrazil

19Source: Brazilian Market – 2014, estimated by Mills Mills – 2014, United Rental - 2014 and Ramirent - 2014


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Rental – Financial Performance

20

1 ROIC: Return on Invested Capital.

In R$ million

1Q15/1Q14 1Q15/4Q14 LTM1Q15/2014 CAGR 11-14

Net revenue -18% -5% -5% 28%

EBITDA -41% 4% -12% 28%

97.3 98.6

91.0

83.979.6

58.455.1

50.0

33.2 34.4

60.1%

55.8% 54.9%

39.6%43.3%

17.8% 16.2%14.5%

11.5%

8.8%

1Q14 2Q14 3Q14 4Q14 1Q15

Net revenue EBITDA EBITDA margin (%) ROIC¹

253.5

357.3370.8

353.1

141.2

201.2 196.7

172.7

55.7% 56.3%53.0%

48.9%

18.2% 18.2%

11.5%8.8%

2012 2013 2014 LTM1Q15


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Heavy Construction

Laguna bridge – Santa Catarina


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1.00

0.53

0.71

0.64

0.76

- 0,50 1,00

USA

Brazil

Russia

India

China

Infrastructure

0.50 1.00

Infrastructure quality ranking for BRIC countries (2013-14)

Index EUA = 1.0

1.00

0.47

0.68

0.70

0.81

- 0,50 1,00

USA

Brazil

Russia

India

China

Ports

0.50 1.00

1.00

0.35

0.88

0.86

0.98

- 0,50 1,00

USA

Brazil

Russia

India

China

Railways

0.50 1.00

1.00

0.49

0.47

0.67

0.81

- 0,50 1,00

USA

Brazil

Russia

India

China

Highways

0.50 1.00

Brazil is behind other BRIC countries quality of infrastructure

Source: World Economic Forum, The Global Competitiveness Report 2014-2015

22

Infrastructure investments are priority in Brazil However


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1,509

1,772

1,013

598

830

643

BNDES - 2015-2018

Sobratema - 2014 - 2019

Exame - Balance 2014/2015Infrastructure

Total

Infrastructure investments are priority in Brazil. However,there are major uncertainties regarding its execution.

Expected investments in Brazil

in R$ billion

Source: BNDES – December 2014. Sobratema – 5ª Edição – 2014. Anuário Exame 2014-2015, datafrom 1,565 construction works.

23


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24

Characteristics of 2015 backlog1

Public40%

Private46%

PPP13%

Source of funds

Industry32%

Infrastructure55%

Other 13%

Per sector

1

Revenues expected in 2015 for signed contracts of December 31st

, 2014


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In R$ million

Heavy Construction – Financial Performance

25

1 ROIC: Return on Invested Capital.

1Q15/1Q14 1Q15/4Q14 LTM1Q15/2014 CAGR 11-14

Net revenue 0% -3% 0% 17%

EBITDA -50% -21% -14% 15%

51.0

55.5

51.9 52.5 51.1

25.6 25.6

21.4

16.312.9

50.2%

46.2%

41.2%

31.0%

25.3%

17.9% 16.3%13.3%

7.0%

1Q14 2Q14 3Q14 4Q14 1Q15

Net revenue EBITDA EBITDA margin (%) ROIC¹

174.1

217.0 211.0 211.1

84.3

108.1

88.9

76.2

48.5%49.8%

42.1%

36.1%

17.2%19.2%

9.9%7.0%

2012 2013 2014 LTM1Q15

9.9%


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Real Estate

Flying table


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Growth drivers of the residential market: housing financing

27

¹ In 2011; ² In 2012; ³ In 2013; 4 In 2014.

Source: Valor Econômico Newspaper, with data from Abecip and Secovi

3.2%

3.5%

9.3%

14.5%

18.9%

24.0%

35.2%

68.8%

81.0%

Russia

India

Brazil

China

Chile

South Africa

Germany

USA

Reino Unido

Housing financing relative to GDP (%)

3.1%

4.1%

5.4%

6.8%

7.4%

9.3%

2009 2010 2011 2012 2013 2014

Housing financing relative to GDP (%)

in Brazil

2

2

3

1

2

2

4

1

2


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In million families% of families per social class Number of families per income range

Growth drivers of the residential market: higher purchasingpower

28

31.729.1

27.2

60.4

1.45.9

2007 2030E

< R$ 1,000

>= R$ 1,000 and R$ 8,000

-0.4%

+3.9%

+7.1%

+33.2 millionfamilies with income

betweenR$ 1,000 to 8,000

Growth rate(%. p.a.)

10.7 6.8 3.6

38.2

28.0

20.1

37.0

49.7

58.4

8.1 9.8 11.7

6.0 5.7 6.2

2002 2009 2014E

Class A

Class B

Class C

Class D

Class E

Source: IBGE and FGV


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The major challenge for the sector: labor

29Source: Sondagem Especial Construção Civil, April 2011, CBIC, CNI and Mills

89% of companies from the construction industry stated that

lack of qualified labor is a problem for the company

94% of companies from the construction industry facing

shortages of skilled manpower have difficulty finding workers

for basic construction activities, such as bricklayers and

laborers

Solution: Industrialization of the construction process

Only 7% of companies from the construction industry plan to

deal with the shortage of skilled labor by changing the

building process to an industrial assembly model


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Stages of industrialization of the construction process

30

1 Approximately 800 m2

Source: Téchne Magazine, June 2012 and Mills

System Traditional with wood Traditional with steel Deck type Flying table

Cycle betweenconcreting activities

15 days 7-10 days 6-8 days 4-7 days

Labor required1 30 people 20 people 12 people 10 people


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31

29.8

32.1

21.3

23.4

19.1

7.6%

-33.7%

10.1%

-18.6%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

0

5

10

15

20

25

30

35

2010 2011 2012 2013 2014

V a r . ( % )

L a u n c h e s ( i n R $ m i l l i o n )

1 Cyrela. Direcional, Even. Eztech, Gafisa, Helbor, MRV, Tecnisa, Rodobens, and PDG

Source: Operational reports from companies and Mills

Total launches1

in R$ billion

Launches and sales declined in 2014, with possible negativeimpact on 2015 construction activities

26.627.9

22.7

25.0

20.0

4.7%

-18.4%

9.8%

-19.9%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

0

5

10

15

20

25

30

2010 2011 2012 2013 2014

V a r . ( % )

S al e s ( i nR $ mi l l i on )

Total sales1

in R$ billion


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In 2015, civil construction GDP should present largerreduction than the previous year

-10%

-5%

0%

5%

10%

15%

2009 2010 2011 2012 2013 2014 2015*

Total GDP Civil construction GDP

Source: Bacen (2009-2013), IBGE (2014) and estimative from Ibre-FGV (2015)

GDPYoy variation (%)

32


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Real Estate – Financial Performance

33

¹ Excluding non-recurring effects of R$ 14.5 million in 2014, of which R$ 12.3 million was in 3Q14.

² ROIC: Return on Invested Capital

In R$ million

1Q15/1Q14 1Q15/4Q14 LTM1Q15/2014 CAGR 11-14

Net revenue -44% -27% -12% 11%

EBITDA -100% -99% -18% -9%

59.5 58.8

48.6 48.645.4

33.2

23.525.2

-4.7

7,7 6,1

0,1

39.4%42.8%

-9.6%

15.7%13.5%

0,2%

6.7% 6.5%2,1%

3.8%0.4%

-3.3%

1Q14 2Q14 3Q14 3Q14¹ 4Q14 1Q15

Net revenue EBITDA EBITDA margin (%) ROIC²

238.0258.0

212.4 212.4

186.1

113.4

93.8

50.164.6

41,2

47.7%

36.4%

23.6%

30.4%

22.1%

15.7%8.1%

0.4%2.5%

-3.3%

2012 2013 2014 2014¹ LTM1Q15¹


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Mills – Investor Relations

Tel.: +55 21 2123-3700

E-mail: [email protected]

www.mills.com.br/ri

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