3Q17 PRESS RELEASE

1

CONFERENCE CALL

(only in Portuguese)

Date: November 14th, 2017

at 5 pm BRT/ 2 pm US ET/

7 pm London

Phone:

Dial-in Brazil: +55 11 3193-1001

Code: Alpargatas

Presentation:

http://ri.alpargatas.com.br

Speakers:

Márcio Utsch

CEO

Fabio Leite

CFO

fabiols@alpargatas.com.br

jsalvio@alpargatas.com.br

mweger@alpargatas.com.br

pbueno@alpargatas.com.br

http://ri.alpargatas.com.br

3Q17 PRESS RELEASE

2

1. PERFORMANCE SUMMARY FOR THE THIRD QUARTER OF 2017

In the third quarter of 2017, Alpargatas initiated the recovery of its results, with some indicators outperforming

those of the first quarters of the year. From July to September 2017, company performance was better in

Brazil than in the international operations. In the domestic market, net revenue was slightly lower than in

3Q16 (-1.1%), in spite of revenue growth for Mizuno and Osklen. The reason was the drop in Sandals

business revenue, where the increase in average price did not offset the lower volume. On the other hand,

gross margin in Brazil increased by 2.2 percentage points, with higher profitability for Havaianas and Mizuno.

The cost reduction and expenditure contention programs continued to generate positive results. The gain in

gross margin and greater productivity in operating expenses benefited EBITDA margin in the domestic

market. However, it did not exceed 3Q16, due to an increase in other non recurrent expenses, principally the

provision for expenditures related to the exchange in controlling stockholders.

In Sandals International, the higher average price of exported products offset the lower volume and Export

revenue in dollars grew in comparison with 3Q16. In contrast, revenues in dollars and euros decreased in the

United States and the EMEA region. The evolution in Export profitability drove growth in gross margin in

Sandals International. This gain did not offset the lower SG&A productivity, reducing EBITDA margin in this

business in 3Q17.

In Argentina, Topper footwear continued to face competition from imported products, compromising sales

volume.

R$ million 3Q17 3Q16 Var. 3Q 9M17 9M16 Var. 9M

NET REVENUE 951.1 982.8 -3.2% 2,618.2 2,988.5 -12.4%

BRAZIL 670.5 678.2 -1.1% 1,582.3 1,809.0 -12.5%

SANDALS INTERNATIONAL 108.4 110.4 -1.8% 532.2 566.1 -6.0%

ARGENTINA 172.2 194.2 -11.3% 503.7 613.4 -17.9%

GROSS PROFIT 414.1 418.6 -1.1% 1,155.7 1,345.2 -14.1%

Gross margin 43.5% 42.6% 0.9 pp 44.1% 45.0% -0.9 pp

BRAZIL 308.5 297.2 3.8% 689.0 776.6 -11.3%

Margin 46.0% 43.8% 2.2 pp 43.5% 42.9% 0.6 pp

SANDALS INTERNATIONAL 72.8 73.5 -1.0% 354.5 395.4 -10.3%

Margin 67.2% 66.6% 0.6 pp 66.6% 69.8% -3.2 pp

ARGENTINA 32.8 47.9 -31.5% 112.2 173.2 -35.2%

Margin 19.0% 24.7% -5.7 pp 22.3% 28.2% -5.9 pp

EBITDA 109.0 128.1 -14.9% 429.5 430.1 -0.1%

EBITDA margin 11.5% 13.0% -1.5 pp 16.4% 14.4% 2.0 pp

BRAZIL 98.8 103.0 -4.1% 315.8 221.3 42.7%

Margin 14.7% 15.2% -0.5 pp 20.0% 12.2% 7.8 pp

SANDALS INTERNATIONAL -0.8 5.0 n.a. 97.6 133.0 -26.6%

Margin -0.7% 4.5% -5.2 pp 18.3% 23.5% -5.2 pp

ARGENTINA 11.0 20.1 -45.3% 16.1 75.8 -78.8%

Margin 6.4% 10.4% -4.0 pp 3.2% 12.4% -9.2 pp

CONSOLIDATED NET INCOME(FROM CONTINUING OPERATIONS)

71.3 83.9 -15.0% 307.2 258.9 18.7%

Net margin 7.5% 8.5% -1.0 pp 11.7% 8.7% 3.0 pp

3Q17 PRESS RELEASE

3

The increase in average prices was enough to increase revenue in pesos, but at a lower percentage than

annual inflation. Gross margin diminished as a result of increased production costs, as did EBITDA margin.

The variations in the main consolidated indicators in comparison with 3Q16 were:

Net revenue: R$ 951.1 million, a 3.2% drop.

Gross profit: R$ 414.1 million, a decrease of 1.1%. At 43.5%, gross margin grew 0.9 p.p.

EBITDA: R$ 109.0 million, 14.9% lower, with an 11.5% margin.

Net income: R$ 71.3 million, 15.6% lower, with a margin of 7.5%.

Operating cash generation: R$ 202.6 million in the 12 months ending on September 30, 2017.

Appreciation of preferred shares from January to September: 60.0%.

Shareholder compensation in the year: R$ 150.3 million.

Since 2Q17, Alpargatas has disclosed its results indicators excluding the sales cut-off effect (goods invoiced

but not yet delivered) so that the capital market may track performance without this effect. It should be noted

that with this criterion, the main result indicators advanced in the quarter.

On September 20, the sale of a controlling stake to Itaúsa – Investimentos Itaú S.A., Cambuhy I Fundo de

Investimento em Participações Multiestratégia and Cambuhy Alpa Holding S.A was concluded. On the same

date, the Board Members who will represent the new controlling shareholders were elected in an

extraordinary general shareholders meeting. An Alpargatas S.A. shareholder agreement was also signed. In

a meeting of the Board of Directors on October 6, Mr. Pedro Moreira Salles was elected Chairman of the

Board of Directors and the Finance, People and Strategy Committees were established. In an another

extraordinary general shareholders meeting held on November 1 the creation of a permanent statutory Audit

Committee and the reformulation of the company’s bylaws were approved.

R$ million 3Q17 3Q16 Var. 3Q

Net Revenue 1,020.1 1,000.9 1.9%

Gross Profit 454.7 425.8 6.8%

Gross Margin 44.6% 42.5% 2.1 pp

EBITDA 145.5 133.5 9.0%

EBITDA Margin 14.3% 13.3% 1.0 pp

Consolidated Net Income 107.8 90.0 19.8%

Net Margin 10.6% 9.0% 1.6 pp

Pro forma (without sales cut off)

3Q17 PRESS RELEASE

4

2. RESULT OF OPERATIONS

2.1. SALES VOLUME

Sandals and Havaianas Extension Products

As commented in the second quarter report, with the successful launch of the 2017/18 sandals collection,

favorable seasonal factors, low stock levels at major clients and the implementation of marketing measures,

the company was expecting the resumption of Havaianas and Dupé sell-in growth from the second quarter.

The 5.7% decrease in the volume sold in the domestic market (-2.0% without the cut-off effect) countered

this expectation due to the delay in the expected recovery. In July, volume was still lower compared with the

same month in 2016; however, volume growth accumulated in August and September was already 3.9%

higher. In the overseas market, the lower sandals volume is explained by:

United States: planned reduction in volume sold to the off-price channel and a significant drop in volume

in the Havaianas stores and the independent retail trade due to hurricane Irma. The Havaianas stores in

Miami, Disneyworld®

and Key West remained closed for a number of days.

EMEA: the third quarter accounts for 12% of the region’s annual sales volume being a period of lower

volume most of it commercialized via Havaianas stores. Some countries, especially England, France and

Germany had adverse weather conditions during the quarter compromising the performance of sandals

retailing.

Exports: suspension of exports to Colombia, due to the transition to a new operating model which is

being implemented in the country.

Sporting Goods and Textiles

Thousand pairs/pieces 3Q17 3Q16 Var. 3Q 9M17 9M16Var. 1SVar. 9M

SANDALS 58,347 62,137 -6.1% 145,507 177,824 -18.2%

DOMESTIC MARKET 53,782 57,049 -5.7% 122,333 155,372 -21.3%

INTERNATIONAL MARKETS 4,565 5,088 -10.3% 23,174 22,452 3.2%

NON-SANDALS PRODUCTS 493 644 -23.4% 1,443 1,930 -25.2%

DOMESTIC MARKET 361 540 -33.1% 864 1,470 -41.2%

INTERNATIONAL MARKETS 132 104 26.9% 579 460 25.9%

TOTAL 58,840 62,781 -6.3% 146,950 179,754 -18.2%

DOMESTIC MARKET 54,143 57,589 -6.0% 123,197 156,842 -21.5%

INTERNATIONAL MARKETS 4,697 5,192 -9.5% 23,753 22,912 3.7%

Thousand pairs/pieces 3Q17 3Q16 Var. 3Q 9M17 9M16 Var. 9M

FOOTWEAR 2,582 2,438 5.9% 6,859 6,963 -1.5%

BRAZIL 1,213 936 29.6% 3,060 2,938 4.2%

ARGENTINA 1,369 1,502 -8.9% 3,799 4,025 -5.6%

APPAREL 735 688 6.8% 2,123 2,243 -5.3%

BRAZIL 303 354 -14.4% 891 1,174 -24.1%

ARGENTINA 432 334 29.3% 1,232 1,069 15.2%

TOTAL 3,317 3,126 6.1% 8,982 9,206 -2.4%

BRAZIL 1,516 1,290 17.5% 3,951 4,112 -3.9%

ARGENTINA 1,801 1,836 -1.9% 5,031 5,094 -1.2%

TEXTILE (km) 3Q17 3Q16 Var. 3Q 9M17 9M16 Var. 9M

ARGENTINA 4,045 4,558 -11.3% 10,544 13,550 -22.2%

3Q17 PRESS RELEASE

5

Mizuno increased its footwear sales because of the higher offer of basic and intermediate line products which

are being manufactured/assembled in Brazil. Sales of the performance and infinity lines also grew. There

was a drop in sports apparel volume as a result of the strategy of increasing the presence of higher added

value articles in the portfolio, while reducing the number of products on offer.

In Argentina, sports footwear sales were lower because imports has enabled the commercialization of

imported products at lower prices than those manufactured locally. The decrease in volume was compounded

by the growth in the number of points of sale for competing brands of Topper, which have boosted their

presence in small footwear chains in the country. In Textiles, volume was lower due to higher stock levels at

distributors and to decreased purchases by apparel manufacturers, as a result of higher import volumes.

Osklen

Osklen volume was higher, driven by 50.0% growth in sales to the multibrand channel and a 25.5% increase in

e-commerce. Anticipating the summer collection launch calendar helped drive the strong performance in the

retail channel.

2.2. NET REVENUE

In spite of the increase in Mizuno and Osklen revenues driven by higher volumes, net revenue in Brazil was

slightly lower than in 3Q16, due to the decrease in Sandals business revenue, where the 3.2% higher

average price (sandals + Havaianas brand extension products) did not offset the lower volume.

In Sandals International, higher average prices in the United States (17.0%) and in the EMEA region (2.0%)

were not enough to offset the decrease in volumes, resulting in a decrease in revenue in local currencies.

In Exports, even with the lower volume, revenue in dollars grew due to a country mix with a higher average

price and price increases in diverse markets. The 2.6% appreciation of the real against the dollar (compared

with 3Q16) contributed to the reduction of International Sandals revenue in reais.

Thousand pairs/pieces 3Q17 3Q16 Var. 3Q 9M17 9M16 Var. 9M

(footwear, apparel and accessories) 446 394 13.2% 1,074 1,028 4.4%

R$ million 3Q17 3Q16 Var. 3Q 9M17 9M16 Var. 9M

NET REVENUE 951.1 982.8 -3.2% 2,618.2 2,988.5 -12.4%

BRAZIL 670.5 678.2 -1.1% 1,582.3 1,809.0 -12.5%

SANDALS INTERNATIONAL 108.4 110.4 -1.8% 532.2 566.1 -6.0%

ARGENTINA 172.2 194.2 -11.3% 503.7 613.4 -17.9%

3Q17 PRESS RELEASE

6

In Argentina, the increases in the average prices of footwear and textiles offset the decreases in volumes,

driving a 5.2% increase in revenue in pesos, worthy of note being the strong performance in retail, with a

27.0% revenue increase. In reais, revenue was lower because of the 15.7% appreciation of the real against

the peso (compared with 3Q16). The Footwear business accounted for 67.0% of revenue in 3Q17 (66.0% in

3Q16), with Textiles corresponding to 33.0% (34.0% in 3Q16).

During the quarter, the variations in Alpargatas retail revenues on a same store basis were:

Havaianas (franchises in Brazil): -4.0%, driven mainly by weaker sales in Rio de Janeiro, where there is

a large concentration of stores and where the market has suffered from a decrease in income and a

reduction in the flow of tourists.

Osklen: 2.0%, due to the anticipation of the launch of the summer collection in the stores and improved

consumption in some markets, such as São Paulo.

2.3. GROSS PROFIT

In Brazil, gross margin was higher, driven by:

Increase in Havaianas gross profitability, due to: (i) the positive impact on costs of the industrial changes,

such as the internalization of the rubber injection process; and (ii) the increase in average prices.

Growth in Mizuno gross margin, due to the exchange rate (impact on imported products) and switching

production to Brazil.

Osklen’s increased share in revenues – the business has a high gross margin.

CHANGE IN NET REVENUE 3Q17 x 3Q16 9M17 x 9M16

EMEA - euro -3.2% 7.2%

USA - dollar -5.1% -0.9%

Exports - dollar 1.8% 14.4%

FRANCHISES OWN TOTAL FRANCHISES OWN TOTAL

HAVAIANAS 574 46 620 520 37 557

Brazil 439 4 443 415 4 419

Overseas 135 42 177 105 33 138

OSKLEN 23 56 79 21 62 83

Brazil 22 53 75 20 58 78

Overseas 1 3 4 1 4 5

TOPPER ARGENTINA 0 10 10 0 9 9

OUTLETS 0 28 28 0 31 31

Brazil 0 13 13 0 16 16

Overseas 0 15 15 0 15 15

TOTAL 597 140 737 541 139 680

09/30/17 09/30/16STORES

R$ million 3Q17 3Q16 Var. 3Q 9M17 9M16 Var. 9M

GROSS PROFIT 414.1 418.6 -1.1% 1,155.7 1,345.2 -14.1%

Gross margin 43.5% 42.6% 0.9 pp 44.1% 45.0% -0.9 pp

BRAZIL 308.5 297.2 3.8% 689.0 776.6 -11.3%

Margin 46.0% 43.8% 2.2 pp 43.5% 42.9% 0.6 pp

SANDALS INTERNATIONAL 72.8 73.5 -1.0% 354.5 395.4 -10.3%

Margin 67.2% 66.6% 0.6 pp 66.6% 69.8% -3.2 pp

ARGENTINA 32.8 47.9 -31.5% 112.2 173.2 -35.2%

Margin 19.0% 24.7% -5.7 pp 22.3% 28.2% -5.9 pp

3Q17 PRESS RELEASE

7

In Sandals International, gross margin was slightly higher due to the increase in Export margin.

In Argentina, the lower dilution of fixed costs, driven by lower production and higher raw material prices, in

particular cotton (50.0%) increased footwear and textile production costs at a higher rate than the increase in

the respective average prices in pesos, resulting in a loss in gross margin.

2.4. EBITDA

In Brazil, growth in gross margin and higher productivity in commercial, general and administrative expenses

– the expenditure contention plan drove a 5.0% reduction in this group of expenses in the quarter – benefited

EBITDA margin. However, the increase in other operating expenses, such as for example the provision for non

recurrent expenses with the change in stock ownership, impacted EBITDA and reduced margin.

In Sandals International, the gain in gross margin did not offset the lower SG&A productivity, which was higher

in the United States, due to marketing investment, and in Europe, because of the increase in the number of

own stores.

In Argentina, higher operating expense productivity helped attenuate the loss in EBITDA margin, which was

lower than gross margin.

From this year, Alpargatas has started reporting consolidated EBITDA as shown in the following table, no

longer adjusting it for other extraordinary revenue (expenses). The amounts for 2016 follow the same

criterion.

The table below demonstrates the balance of other extraordinary revenues (expenses) with adjustments to

the classifications in the 1Q17 and 2Q17 reports. In 3Q17, as mentioned previously, the main extraordinary

expense in Brazil was the provision made for the change in stock ownership. In Argentina, the main

extraordinary expense was labor indemnities resulting from the restructuring.

R$ million 3Q17 3Q16 Var. 3Q 9M17 9M16 Var. 9M

EBITDA 109.0 128.1 -14.9% 429.5 430.1 -0.1%

EBITDA margin 11.5% 13.0% -1.5 pp 16.4% 14.4% 2.0 pp

BRAZIL 98.8 103.0 -4.1% 315.8 221.3 42.7%

Margin 14.7% 15.2% -0.5 pp 20.0% 12.2% 7.8 pp

SANDALS INTERNATIONAL -0.8 5.0 n.a. 97.6 133.0 -26.6%

Margin -0.7% 4.5% -5.2 pp 18.3% 23.5% -5.2 pp

ARGENTINA 11.0 20.1 -45.3% 16.1 75.8 -78.8%

Margin 6.4% 10.4% -4.0 pp 3.2% 12.4% -9.2 pp

R$ million 3Q17 3Q16 9M17 9M16

(=) Consolidated Net Income 71.3 84.5 305.5 255.8

Payment of taxes -11.5 2.5 -5.7 23.5

Financial Result 25.3 16.7 56.0 69.3

Depreciation and Amortization 23.9 25.0 72.0 78.4

Result from Discontinued Operations 0 -0.6 1.7 3.1

(=) EBITDA 109.0 128.1 429.5 430.1

R$ million 1Q17 2Q17 3Q17 9M17 1Q16 2Q16 3Q16 9M16

Other non recurring revenues (expenses) 155.8 -9.2 -25.4 121.2 -6.0 3.7 0.2 -2.1

Brazil 171.4 -7.6 -23.3 140.5 -5.6 7.5 1.7 3.6

Argentina -15.6 -1.6 -2.1 -19.3 -0.4 -3.8 -1.5 -5.7

3Q17 PRESS RELEASE

8

2.5. NET INCOME

Consolidated net income in the quarter totaled R$ 71.3 million, with a margin of 7.5%. The earnings per share

in the nine month period ending on September 30, 2017 was R$ 0.68, compared with R$ 0.56 for the same

period of the previous year. The most significant variations in net income were:

- R$ 19.1 million in EBITDA, impacted by the variation of R$ 20.9 million in the provision for expenses with

the change in ownership (R$ 17.0 million in 3Q17 and reversal of R$ 3.9 million in 3Q16).

+ R$ 14,0 million in income tax. The tax loss in the quarter generated an income tax credit, compared with

a debit in 3Q16.

- R$ 2.1 million in the financial result. The gain from the decrease in interest on loans was less than the

loss from financial investments (lower interest rates as well as average cash volume invested).

- R$ 6.5 million increase in expenses from the exchange variation related to financial assets and liabilities.

2.6. NET FINANCIAL POSITION

On June 30, 2017, Alpargatas had a negative net financial position of R$ 192.2 million, resulting from a cash

balance of R$ 370.6 million (operating generation totaled R$ 202.6 million in the year) and indebtedness of R$

562.8 million due in the short-term, R$ 413.6 million of which in Brazilian currency. In this quarter, total long-

term debt was temporarily reclassified as short-term while the company awaits approval of the change in stock

ownership from the BNDES and BNB – Banco do Nordeste do Brasil.

R$ million 3Q17 3Q16 Var. 3Q 9M17 9M16 Var. 9M

CONSOLIDATED NET INCOME 71.3 84.5 -15.6% 305.5 255.8 19.4%

Net margin 7.5% 8.6% -1.1 pp 11.7% 8.6% 3.1 pp

CONSOLIDATED NET INCOME

(CONTINUING OPERATIONS)

Quarterly variation

(R$ million)

8.6% Margins (% of net revenue) 7.5%\

(19.1)

14.0

(2.1)

(6.5)

0.5

84.5

50

60

70

80

90

100

110

120

Net income3Q16

EBITDA Income taxes Financialresult

Exchange rate Other Net income3Q17

71.3

3Q17 PRESS RELEASE

9

3. CAPITAL MARKET AND SHAREHOLDER COMPENSATION

On September 30, 2017, Alpargatas preferred shares (ALPA4) were quoted at R$ 15.70 and its common

shares (ALPA3) at R$ 14.15, respectively 60.0% and 62.4% higher than on December 31, 2016. From

January to September, Ibovespa appreciated by 23.4%. At the end of the third quarter, Alpargatas’s market

cap on the B3 index was R$ 7.01 billion, 59.1% higher than at the end of 2016. The average daily trading

volume for ALPA4 in the quarter was R$ 9.5 million, 63.8% higher than the average volume traded in 3Q16.

In a meeting held on November 13, 2017, the Board of Directors decided to antecipate a R$ 38.2 million

payment of interest on own equity, to be paid out on December 13, 2017. Added to the R$ 112.1 million

already paid in the year, Alpargatas shareholder compensation now totals R$ 150.3 million in 2017.

*****************************

POSIÇÃO FINANCEIRA LÍQUIDA

(R$ milhões)

Net Financial Position

(R$ million)

Operating cash generation of

R$ 202.6 million

(121.8)

(193.8)(50.2)

(128.8)

(38.6)(43.4)

9.2

8.0

(200.2) (192.2)

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575.4

3Q17 PRESS RELEASE

10

BALANCE SHEET

(in thousand reais)

ASSETS 09/30/2017 09/30/2016 LIABILITIES 09/30/2017 09/30/2016

Current assets 2,095,033 2,179,017 Current liabilities 1,079,795 994,342

Cash and banks 142,560 149,577 Suppliers 344,094 395,325

Tempory cash investment 228,094 245,220 Loans and financing 399,785 183,734

Trade accounts receivable (net of provisions) 792,095 837,209 Debt reestructuring agreements 4,371 6,559

Inventories 776,212 712,994 Payroll and related charges 156,834 188,868

Other receivables 42,527 50,593 Reserve for contingencies 16,623 13,637

Prepaid expenses 26,052 21,017 Provision for income and social contribuition taxes 21,414 39,791

Assets held for sale - - Taxes payable 21,312 31,377

Other assets - - Interest on capital and dividends payable 4,784 31,731

Recoverable taxes 87,493 96,843 Other payable liabilities 110,578 95,418

Assets from discontinued operations - 65,564 Liabilities on assets from discontinued operations - 7,902

Long-term assets 191,448 146,717 Long-term liabilities 303,887 654,823

Recoverable taxes 50,054 15,532 Loans and financing 163,101 332,858

Deferred income and social contribuition taxes 68,576 76,179 Debt reestructuring agreements 19,959 25,200

Escrow deposits 22,594 22,286 Provision for taxes - 193,051

Other receivables 50,224 32,720 Taxes Installments - -

Provision for income and social contribuition taxes 56,331 66,705

Reserve for contingencies 38,363 25,462

Other payable 26,133 11,547

Permanent Assets 1,353,981 1,364,486 Shareholders' equity 2,256,780 2,041,055

Investments 1,658 2,634 Capital 648,497 648,497

Property, plant and equipment 721,813 711,000 Capital reserves 172,799 183,542

Intangible 630,510 650,852 Treasury shares (64,248) (64,248)

Profit reserves 1,569,188 1,315,725

Equity assessment (149,529) (128,440)

Hedge operation - -

Additional dividend - -

Minority interest 80,073 85,979

TOTAL ASSETS 3,640,462 3,690,220 TOTAL LIABILITIES 3,640,462 3,690,220

Book value per share (R$) 4.70 4.22

3Q17 PRESS RELEASE

11

INCOME STATEMENT

(in thousands of Brazilian reais)

3Q17 3Q16 9M17 9M16

Net Sales 951,169 982,832 2,618,213 2,988,493

Cost of sales (537,023) (564,244) (1,462,476) (1,643,322)

Gross Profit 414,146 418,588 1,155,737 1,345,171

gross margin 43.5% 42.6% 44.1% 45.0%

Operating Income (Expenses) (329,017) (315,538) (798,190) (993,426)

Selling (256,347) (234,117) (754,162) (732,963)

General and administrative (41,573) (66,346) (146,369) (195,192)

Management fees (3,976) (3,768) (10,699) (12,928)

Amortization of intangible charges (6,272) (8,195) (20,230) (25,483)

Other operating Income (expenses), net (20,849) (3,112) 133,270 (26,860)

EBIT - Operating Results 85,129 103,050 357,547 351,745

operating margin 8.9% 10.5% 13.7% 11.8%

Financial Result (16,192) (14,052) (41,097) (49,471)

Exchange variation (9,126) (2,612) (14,989) (19,831)

Operating Income 59,811 86,386 301,461 282,443

Income and social contribution taxes 11,496 (2,501) 5,702 (23,455)

Net Income from continuing operations 71,307 83,885 307,163 258,988

Net result from discontinued operations - 658 (1,674) (3,138)

Consolidated net income 71,307 84,543 305,489 255,850

Net Income from controlling shareholder 73,318 85,334 315,141 261,349

Minority Interest (2,011) (791) (9,652) (5,499)

EBITDA - R$ million 109.0 128.1 429.5 430.1

EBITDA margin 11.5% 13.0% 16.4% 14.4%

3Q17 PRESS RELEASE

12

CASH FLOW

(in thousand reais)

CASH FLOW FROM OPERATING ACTIVITIES 09/30/2017 09/30/2016

Cash from operating activities 291,827 349,025

Net income for the period 307,164 258,988

Depreciation and amortization 71,985 78,352

Income (loss) from disposal/derecognition of property, plant and equips. 11,766 2,161

Equity pickup 0 0

Interest and Monetary and foreign exchange variation 34,743 53,804

Provisions for tax, civil contingencies and labor claims 15,173 14,681

Deferred income and social contribuition taxes -2,104 -24,651

Suspended taxes payments -198,624 0

Allowance (reversal of) for doubtful accounts 17,756 6,687

Provision for (reversal of) inventory losses 9,042 8,333

Amortization of charges on loans and financing -37,742 -32,513

Unrealized gains/losses on derivative transactions -154 3,291

Gain/loss in operation with derivatives 0 0

Stock option plan granted 0 0

Remeasurement adjustment - 1st acquisition Osklen 146 -2,052

From sale of Real property 0 0

Provision for Impairment of property, plant and equipment/Intangible assets 11,425 0

Remeasurement od asset for sale 0 0

Net cash spent in discontinued operations 51,251 -18,056

Changes in assets and liabilities -211,406 -172,312

Trade accounts receivable 78,153 -7,690

Inventories -181,503 -148,614

Prepaid expenses -14,666 -8,049

Taxes recoverable -59,479 -3,054

Trade accounts payable -61,919 -10,638

Taxes payable 185 35,929

Payroll and social charges -1,180 31,761

Payment of income and social contribuition taxes -28,346 -22,123

Other 57,349 -39,834

NET CASH - OPERATING ACTIVITIES 80,421 176,713

3Q17 PRESS RELEASE

13

CASH FLOW FROM INVESTING ACTIVITIES 09/30/2017 09/30/2016

Acquisition of property, plant and equipment and intangible assets -80,223 -60,555

Short-term investments -32,520 22,680

Redemption of Financial Investments 115,343 0

Receivable from sale of permanent assets 0 3,786

Acquisition of Investments 0 0

Initial Cash Balance of controlled company 0 0

NET CASH - INVESTING ACTIVITIES 2,600 -34,089

CASH FLOW FROM FINANCING ACTIVITIES

Loans and financing raised 174,990 267,555

Amortization loans and financing - Principal -195,781 -419,341

Payment of dividends and interest on equity -111,547 -43,150

Amortization through debt restructuring of subsidiary -4,946 -8,585

Acquisition shares to be held in treasury, net 0 23,890

NET CASH - FINANCING ACTIVITIES -137,284 -179,631

Exchange gains (losses) on cash and cash equivalents 1,427 -38,124

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS -52,836 -75,131

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 391,347 394,926

CASH AND CASH EQUIVALENTS AT END OF PERIOD 338,511 319,795