Mills 2Q15 Result

8/20/2019 Mills 2Q15 Result

1/15

Mills 2Q15 results

Investor Relations BM&FBOVESPA: MILS3 and OTC-US: MILTY

Mills: EBITDA 10% higher quarter over quarter

Rio de Janeiro, August 5th, 2015 - Mills Estruturas e Serviços de Engenharia S.A. (Mills) presented EBITDA of R$ 52.1 million in

the second quarter of 2015 (2Q15), with 9.9% growth in relation to the first quarter of 2015 (1Q15), and EBITDA margin of

35.3%.

In this quarter, we signed new contracts related to important construction jobs in the Heavy Construction business unit, started

having reversals of allowance for doubtful debt, and a new variable compensation program was launched, aiming at greater

engagement of our employees. However, uncertainties remain in the markets in which we operate. Therefore, we will continue

our efforts to reduce costs, improve operational productivity and synergies among the business units, as well as focus on cash

preservation and assets resizing, through sale of equipment.

The highlights of Mill’s performance in 2Q15 were:

Net revenues of R$ 147.9 million, 30.6% below the amount registered in the second quarter of 2014 (2Q14).

Sales of semi-new equipment of R$ 6.8 million, with planned sales of R$ 40 million.

Cost of goods and services sold (COGS) and general, administrative and operating expenses (G&A)¹ 8.2% lower year-over-year (yoy).

New adjustment of organizational structure, with annual cost reduction of approximately R$ 6.3 million.

Allowance for doubtful debt (ADD) represented 1.2% of net revenues, including reversal of R$ 6.8 million.

EBITDA(a) of R$ 52.1 million, with a drop of 50.8% yoy, impacted by operating leverage.

Net loss of R$ 8.2 million and Return on Invested Capital (ROIC)(b) of 2.0%.

Capex(c) of R$ 9.7 million, of which R$ 5.1 million for replacement of the mix of rental equipment.

Positive net cash flow(d) of R$ 36.6 million versus R$ 10.9 million in 2Q14.

Completion of principal payments expected for 2015, of R$ 131.2 million, without rolling over the debt.

in R$ million2Q14 1Q15 2Q15 (C)/(A) (C)/(B)

(A) (B) (C) % %

Net revenue 213.0 163.9 147.9 -30.6% -9.8%

EBITDA 105.9 47.4 52.1 -50.8% 9.9%

EBITDA margin (%) 49.7% 28.9% 35.3%

Net earnings (Loss) 33.4 -14.5 -8.2 n.a. n.a.

ROIC (%) 12.3% 4.0% 2.0%

Capex 54.7 6.4 9.7 -82.3% 51.1%

Table 1 – Key financial indicators

1

Excluding depreciation and allowance for doubtful debt (ADD)

The financial and operational information presented in this release, except when otherwise indicated, is in accordance with accounting policies adopted in Brazil,which are in accordance with international accounting standards (International Financial Reporting Standards - IFRS).


2/15

22Q15 Mills Results

Business Perspective

According to a research conducted by the National Confederation of Industry (CNI – Confederação Nacional da Indústria),

expectations for the infrastructure sector continue to deteriorate in the last months, as indicated by the expected level of activity,

which reached 40.92 points in July 2015, below the value recorded in April 2015, of 43.5 points.

In its Infrastructure letter of June 2015, consulting company Inter.B points out that the adjustments to public accounts and the

low visibility may cause a drop of 20% in investments in Infrastructure in 2015 in relation to 2014.

However, the federal government announced, in June, a new package of logistics, with estimated investments of R$ 198.4

billion, of which R$ 86.4 billion in railways, R$ 66.1 billion in highways, R$ 37.5 billion in ports and R$ 8.5 billion in airports. For

2015 four highway auctions are expected, with investments of R$ 18.3 billion.

In the real estate market, the activity level, as measured by the CNI research, finished 2Q15 with 38² points, lower than 1Q15,

with 41 points. The real estate credit market has been negatively impacted by the lower balance in savings accounts and the

recent restraint of Caixa Econômica Federal , the main source of housing credit in Brazil, in financing used properties.

Furthermore, higher interest rates and unemployment risk increased the number of dissolutions, the return of properties still

under construction, to 30-35% of gross sales, against 10% in 2012, increasing the level of property inventory and, thus,

hindering new launches. New launches announced by the listed real estate companies³ presented a reduction of 49.5% in the

first half of 2015, in relation to the same period of last year, while sales reduced 27.7% in the same period.

The market for motorized access equipment shares the same negative scenario as the construction sector. In the Oil and Gas

market, although Petrobras’ new plan foresees a reduction in investments of 37% in comparison to last year, the company is

prioritizing the exploration activities and should conclude Abreu e Lima refinery, in Pernambuco, which can gradually improve

demand for motorized access equipment, mainly in shipyard activities.

On the supply side, less than 300 machines entered the market between January and June of 2015, against about 3,300 in the

same period of last year. We believe the supply adjustment will occur gradually as a result of equipment exportation and

obsolescence due to players exiting the market and executing lower investments in maintenance.

Revenue

Net revenue reached R$ 147.9 million in 2Q15, with a 9.8% drop quarter-over-quarter (qoq), negatively impacted by a reduction

of R$ 9.5 million, or 30.3%, of revenues from sales, technical assistance and others. Heavy Construction business unit was

mainly responsible for this reduction, since its revenues from sales, technical assistance and others returned to historical levels,

not repeating results of 1Q15, when the amount was almost the double of the 2014 quarterly average.

Rental revenues dropped R$ 6.5 million, or 4.9%, with the lower rental volume in the three business units responsible for R$ 3.0

million of this reduction, while the variation of price and mix, in the Rental business unit, was responsible for R$ 3.5 million.

Costs and ExpensesCOGS, excluding depreciation, totaled R$ 48.5 million in 2Q15, similar to 1Q15.

Quarter-over-quarter, lower sales and asset write-offs costs were offset by higher freight and material costs, linked mainly to

construction jobs outside of Brazil and to the constructions which use fair-faced concrete, which require new wood sheets in

rented formwork, respectively.

In this quarter, we suspended the deferred maintenance of Real Estate and Heavy Construction equipment, and started to do

the maintenance according to the volume of equipment that leaves the deposit, since there is no sign of demand recovery in the

short term.


3/15

32Q15 Mills Results

G&A, excluding depreciation and ADD, amounted to R$ 45.541million in 2Q15, 6.0% lower qoq, as a result of initiatives to

reduce the Company’s costs.

We maintain our focus on reducing expenses, scaling our resources to reflect the new situation of the markets in which we

operate. In 2Q15, we made a new adjustment in our organizational structure, reducing personnel, with a non recurring impact of

R$ 1.8 million in layoff costs, totaling R$ 8.7 million in the last twelve months, and generating annual savings of R$ 6.3 million.

We are analyzing to close the Barra da Tijuca office until the end of 2015, transferring the employees and the company ’s

headquarters to our operational address in Rio de Janeiro, located in Jacarepaguá neighborhood, and continue to centralize

administrative activities, such as procurement, billing, collection, among others, which will bring productive gains and more

control to our business.

ADD amounted to R$ 1.8 million, representing 1.2% of net revenues in 2Q15, versus 12.8% in 1Q15.

The new phase of ongoing investigations did not affect the ADD level in this quarter, since the newly investigated companies

had already been included in the group that, being conservative, we downgraded the credit rating in the fourth quarter of 2014

(4Q14). Our net receivables exposure to these companies totaled R$ 21 million at the end of June 2015, versus R$ 27 million at

the end of March 2015.

Although we continue to adopt a conservative approach for the provisioning of receivables, average payment terms remained

stable on a consolidated basis, which enabled reversals in this quarter. Excluding reversals of R$ 6.8 million from previous

quarters, ADD would reach 5.8% of net revenues in 2Q15.

According to our accounting practices, ADD is reversed with the payment of the due amount or with the payment of the second

parcel of a signed Acknowledgement of Debt. In the latter case, if the client becomes a debtor again, the entire remaining debt

will be recorded as ADD.

EBITDA

Cash generation, as measured by EBITDA, reached R$ 52.1 million in 2Q15, with a 9.9% qoq increase due to lower levels of

ADD in the three business units. The EBITDA margin was 35.3% in 2Q15, versus 28.9% in 1Q15. Excluding ADD related to theongoing investigations, EBITDA would total R$ 55.1 million, with EBITDA margin of 37.3%, in 2Q15.

Accumulated EBITDA for the twelve months ended June 30, 2015, LTM EBITDA, totaled R$ 221.9 million. Excluding non-

recurring items, such as Easy Set and slow turnover inventory provisions (R$ 14.5 million), restructuring indemnities (R$ 8.7

million) and ADD related to the effects of ongoing investigations (R$ 21.7 million), LTM EBITDA would be R$ 266.8 million.

Net Earnings

Mills presented a net loss of R$ 8.2 million in 2Q15, versus a R$ 14.5 million loss in 1Q15. The qoq decrease of R$ 16.0 million

in revenues was more than offset by a decrease in ADD (R$ 19.2 million), a better financial result (R$ 2.3 million) and lower

expenses (R$ 1.5 million).The financial result was a negative R$ 16.1 million in 2Q15, against a negative R$ 18.4 million in 1Q15, due to lower gross debtqoq.

ROIC

ROIC reached 2.0% in 2Q15, against 4.0% in 1Q15, since the reduction in the operating profit yoy, of R$ 47.8 million, was

higher than its growth qoq, of R$ 5.0 million.

2 Values above 50 indicate a prospecto f growth of aactivity in the sector for the next six months.3Cyrela, Direcional, Even, Eztech Gafisa, Helbor, MRV, Rodobens, PDG e Tecnisa.4 G&A corresponds to the sum of Rental, Heavy Construction and Real Estate business units.


4/15

42Q15 Mills Results

Debt indicators

Mills’ total debt was R$ 618.2 million as of June 30, 2015. At the end of the quarter our net debt (e) position was R$ 480.2 million,

versus R$ 498.0 million at the end of 1T15.

Our debt is 18% short-term and 82% long-term, with an average maturity of 3.3 years, at an average cost of CDI+0.78%. In

terms of currency, 100% of Mills’ debt is in Brazilian Reais.

Besides the amortization payments of R$ 90 million, we performed, in 2Q15, a disbursement of R$ 21.8 million as interest on

capital, net of income taxes, related to the 2014 fiscal year. In July, we received the second of four installments of R$ 15.0

million, which amounted to R$ 18.6 million, adjusted by 100% CDI, from the sale of the Industrial Services business unit.

Our leverage, as measured by net debt/LTM EBITDA, was at 2.2x as of June 30, 2015. The total debt/enterprise value (f) was

46.5%, while interest coverage, as measured by LTM EBITDA/LTM interest payments, was 2.8x. Excluding non-recurring items

of the last twelve months, our leverage would drop to 1.8x, this being probably the leverage peak of the year, in accordance with

our forecasts.

The strategy to preserve cash, which includes the suspension of the Company ’s share buyback program, will continue as long

as the uncertainties in our operating markets remain. Even in a negative scenario, the Company is capable of honoring its

financial obligations. We already paid the relevant amortizations of 2015, without rolling over the debt, with the next installment,

of R$ 90.0 million, due only in April 2016.

Free Cash Flow

Mills presented a free cash flow, measured by operating cash flow minus investments, of R$ 36.6 million in 2Q15, totaling R$

225.6 million in the last twelve months.

Operating cash flow was positively affected by non-cash items (R$ 47.6 million) and by positive change in recoverable taxes

(R$ 6.2 million) and receivables (R$ 5.3 million), partially offset by the payment of interest which totaled R$ 24.5 million.

Mills invested R$ 9.7 million in 2Q15, of which R$ 5.1 million in rental equipment, mainly for the replacement of Real Estate and

Heavy Construction equipment, which suffered losses or damage during the rental period and is reimbursed by clients. We

invested R$ 2.0 million in our branch facilities, related to changes of address and to the Rental business unit geographic

expansion plan, R$ 1.2 million in operating equipment to improve our maintenance activity, and R$ 1.2 million in software

licenses and improvements in our SAP system.

Because of the characteristics of our equipment, the Company is able to maintain low investment levels for a few years, if

necessary, without reducing its operational capacity. In addition, our contracts allow us to charge compensation for loss or

damage of equipment. Therefore, our replacement capex is in line with revenues from indemnities. In the last two years, the

average annual indemnity revenue was R$ 34 million for Real Estate and Heavy Construction business units, in line with our

total 2015 capex, of R$ 33.6 million.

Additionally, we continue with our efforts to sell semi-new equipment, especially in the Rental and Real Estate business units.

Payments related to the sale of semi-new equipment and indemnities related to loss of our equipment during the rental period

positively impacted 2Q15 cash generation by R$ 5.8 million.

Share buyback program

On November 10th, 2014, Mills’ Board of Directors approved a program to repurchase common shares of Mills’ issuance, with

the objective of acquiring up to 4,000,000 shares, with a deadline of 365 days as of the date of approval, to be held in treasury

and subsequent cancellation or disposal, including in the context of any exercise of options under its stock option program, in

the case of exercise of options. Up to June 30, 2015, the Company acquired and kept in treasury 2,285,300 shares, shares, with

a total value of R$ 19.8 million, the last acquisition being made in 1Q15. During 2Q15, no shares were acquired, aiming at

preserving cash generation for the Company.

The Board of Directors approved in 2Q15 the sale of 6,878 shares, which were held in treasury, to attend the exercise of stock

options. Currently, Mills holds 2,278,422 shares in treasury.


5/15

52Q15 Mills Results

Performance of the business units

Rental

Net revenue from the Rental business unit amounted to R$ 74.5 million in 2Q15, with a reduction of 6.4% qoq and of 24.5% yoy.

Rental revenue reached R$ 65.3 million, with a reduction of R$ 4.0 million, or 5.8%, qoq, with price and mix change responsible

for R$ 3.5 million of the reduction and lower rental volumes for R$ 0.5 million. The utilization rate average for the twelve months

ending June 30, 2015 was 60.6%.

Returns from the Oil and Gas sector, which started in December 2014, continue to contribute to a negative effect in the mix of

equipment rented, as this industry requires the use of larger equipment, generally more expensive, and difficult to relocate to

other industrial sectors.

We continue on the strategy of selling semi-new equipment, mainly exports, which totaled R$ 4.5 million in 2Q15, 16.4% higher

qoq. Our planned sales for semi-new equipment for the second half of the year is R$ 40 million. The sales of semi-new

equipment will occur as we carry out the maintenance needed prior to delivery. We have a semi-new sales goal that will enable

the reduction of our assets, with current value of R$ 808 million in acquisition cost, by 10% in three years.

EBITDA totaled R$ 39.4 million in 2Q15, with an EBITDA margin of 53.0%, positively impacted by an ADD reversal of R$ 4.7

million, which generated a positive net effect of R$ 1.8 million in the quarter, and negatively affected by cost of layoffs of R$ 0.4

million and lower revenues. Excluding the R$ 1.9 million positive effect from the reversal of ADD from clients involved in ongoing

investigations, the EBITDA would reach R$ 37.5 million, with an EBITDA margin of 50.3%.

This quarter we opened two new branches: one at Maceió, in the state of Alagoas, and another at Pouso Alegre, in the state of

Minas Gerais, totaling 32 branches in the end of 2Q15.

COGS and G&A, excluding depreciation and ADD, remained stable qoq, since lower sales costs offset higher material and

freight costs, whilst there was a reduction of 7.8% yoy. Operating profit totaled R$ 18.7 million in 2Q15, 37.4% higher qoq,

though 46.2% lower yoy, contributing to a lower ROIC, from 8.8% in 1Q15 to 7.4% in 2Q15.

Heavy Construction Net revenues from Heavy Construction business unit amounted to R$ 41.8 million in 2Q15, with a reduction of 18.1% qoq, since

revenues from sales, technical assistance and others decreased. Rental revenues totaled R$ 35.6 million in 2Q15, presenting a

slight qoq decrease of R$ 0.8 million, or 2.3%. Lower rented volumes accounted for R$ 0.9 million of the reduction in rental

revenue, partially offset by a positive effect from price and mix of R$ 0.1 million. The utilization rate average for the twelve

months ended June 30, 2015 was 62.4%.

Many construction projects in which we are involved continue to progress at a slow pace, and with no significant impact from the

ongoing investigations of Petrobras. Despite the high level of uncertainty in Brazil´s infrastructure sector, we have signed new

contracts for relevant construction works starting in 2Q15, such as the São Lourenço system and Subway line 6, both in São

Paulo; a modest improvement over a very weak first quarter.

The main projects of 2Q15, in terms of revenue were:

South and Southeastern regions: Olympic Park, subway line 4, Joá Elevated road duplication, and Galeão airport, in

Rio de Janeiro; subway line 5, Gold monorail line, and the North Beltway, in São Paulo; CSN and Gerdau projects, and

the BR-381 highway in Minas Gerais; and the Klabin pulp plant in Paraná.

Midwest, North and Northeastern region: Jirau and Colíder hydroelectric power plants; Oeste-Leste and

Transnordestina railroads; transposition of the São Francisco river, BR-163, in Mato Grosso; Salvador subway, in

Bahia; the Companhia Siderúrgica do Pecém steel mill, in Ceará; Sertão channel, in Alagoas; and Vale’s S11D project,

in Pará and Maranhão.

EBITDA was R$ 12.5 million in 2Q15, stable qoq. The EBITDA margin was 29.8%, versus 25.3% in 1Q15, as a result of a

decrease in ADD (R$ 2.9 million), which represented 7% of net revenues in 2Q15 versus 17.3% of net revenues in 1Q15.


6/15

62Q15 Mills Results

The new phase of ongoing investigations did not bring significant changes for the construction works in progress or in ADD

levels, as explained in the Costs and Expenses section. Excluding the credit downgrade of clients involved in the ongoing

investigations, EBITDA would reach R$ 17.2 million in 2Q15, with an EBITDA margin of 41.1%.

There was a COGS decrease of 11.3% qoq because lower sales and asset write-off costs more than offset higher freight and

material costs, mainly due to construction works abroad and to constructions that use fair-faced concrete, which requires the

use of new wooden sheets in rented formwork. Furthermore, there were costs of layoffs of R$ 0.5 million in 2Q15. G&Aexcluding ADD reduced 8.5% qoq.

ROIC totaled 4.3%, against 7.0% in 1Q15, mainly due to the yoy reduction of 87.6% in the operating profit.

Real Estate

Net revenues from Real Estate amounted to R$ 31.6 million in 2Q15, 5% lower qoq and 46.3% lower yoy. Rental revenues

totaled R$ 25 million, 6.2% below qoq, affected by a lower utilization rate, an average of 50.2% in the twelve months ended

June 30, 2015. The lower rented volume was responsible for a qoq decrease of R$ 1.6 million and price and mix for a negative

effect of R$ 0.1 million.

We have recently signed important contracts, such as Natura´s building, in São Paulo, as well as the Hospital das Clínicas, a

hospital in Porto Alegre.

Sales totaled R$ 4.6 million in 2Q15, of which R$ 1.7 million were semi-new equipment. We will continue with our efforts to sell

semi-new equipment to minimize the negative effects of the weaker economic cycle in our results. Our target is to reduce by

20% total net assets, currently at R$ 300 million, until 2017.

COGS increased 27.1% qoq, due to higher costs of sales and materials, because of the need of new wooden sheets in

formwork recently rented for construction works that use fair-faced concrete, besides an impact of R$ 1 million from costs with

layoffs. G&A, excluding ADD, decreased 9.8% qoq. ADD amounted R$ 0.8 million in 2Q15, after the reversal of R$ 1 million in

provisions from previous periods.

EBITDA reached R$ 0.2 million in 2Q15, with an EBITDA margin of 0.7%, stable qoq. ROIC was -7.6% versus -3.3% in 1Q15,mainly due to the yoy reduction of R$ 25.0 million in operating profit.

Teleconference and Webcast

Date: Thursday, August 6, 2015

Time: 10 am (NY time) / 11:00 am (Rio de Janeiro time)/ 3:00 pm (London time)

Teleconference: +1 786 924-6977 (Dial-in) or +1 888 700-0802 (Toll-free); Code: Mills

Replay: +55 11 3193-1012 or +55 11 2820-4012, Code: 9744215# or www.mills.com.br/ri

Webcast: www.mills.com.br/ri

http://www.mills.com.br/rihttp://www.mills.com.br/rihttp://www.mills.com.br/rihttp://www.mills.com.br/ri


7/15

72Q15 Mills Results

Tables

Table 2 – Net revenue per type

in R$ million 2Q14 1Q15 2Q15 (C)/(A) (C)/(B)

(A) (B) (C) % %

Rental 175,7 132,4 125,9 -28,3% -4,9%

Technical support services 3,0 1,7 1,8 -41,2% 6,1%

Sales 25,8 17,9 12,3 -52,2% -31,3%

Others 8,4 11,9 7,8 -6,8% -34,0%

Total net revenue 213,0 163,9 147,9 -30,6% -9,8%

Table 3 – Net revenue per business unit

in R$ million 2Q14 % 1Q15 % 2Q15 %

Heavy construction 55.5 26.1% 51.1 31.2% 41.8 28.3%

Real estate 58.8 27.6% 33.2 20.3% 31.6 21.3%

Rental 98.6 46.3% 79.6 48.6% 74.5 50.4%

Total net revenue 213.0 100.0% 163.9 100.0% 147.9 100.0%

Table 4 – Cost of goods and services sold (COGS) and general, administrative and operating expenses (G&A), ex-depreciation

in R$ million 2Q14 % 1Q15 % 2Q15 %

Costs of job execution (g) 24,1 21,1% 18,1 15,6% 23,0 23,9%

Costs of sale of equipment 14,7 12,9% 10,9 9,3% 8,2 8,6%

Costs of asset write-offs 1,7 1,5% 4,7 4,1% 3,2 3,3%

Equipment storage (h) 10,9 9,6% 13,3 11,4% 14,2 14,8%

COGS 51,5 45,1% 47,1 40,4% 48,5 50,6%

G&A 57,8 50,6% 48,5 41,6% 45,5 47,5%

ADD 4,9 4,3% 21,0 18,0% 1,8 1,9%

Total COGS + G&A 114,1 100,0% 116,5 100,0% 95,9 100,0%

Table 5 – EBITDA per business unit and EBITDA margin

in R$ million 2Q14 % 1Q15 % 2Q15 %

Heavy Construction25.6 24.2% 12.9 27.2% 12.5 23.9%

Real Estate 25.2 23.8% 0.1 0.1% 0.2 0.4%

Rental55.1 52.0% 34.4 72.6% 39.4 75.6%

Total EBITDA105.9 100.0% 47.4 100.0% 52.1 100.0%

EBITDA margin (%)49.7% 28.9% 35.3%

Table 6 – Reconciliation of EBITDA


(A) (B) (C) % %

Results of continuing operations33.4 -14.5 -8.2 -124.5% -43.5%

Financial result -18.4 -18.4 -16.1 -12.8% -12.7%

Income tax and social contribution expenses -5.0 -0.1 -1.1 -77.3% 1096.8%

Operational Results before Financial Result56.8 4.0 9.0 -84.1% 125.5%

Depreciation42.1 43.4 43.0 2.3% -0.8%

Expenses (revenues) related to the Industrial services formerbusiness unit

7.1 0.1 0.1 -98.2% 36.6%

EBITDA 105.9 47.4 52.1 -50.8% 9.9%


8/15

82Q15 Mills Results

Table 7 – Investment per business unit

in R$ million

Actual Budget

2Q14 1Q15 2Q15 1H15 2015 (A)/(B)

(A) (B) %

Rental equipment

Heavy Construction 11,3 0,5 4,6 5,1 7,0 72,9%

Real Estate 8,9 0,6 0,5 1,1 3,0 38,3%

Rental 28,5 0,0 0,0 0,0 0,0 n.a.

Rental equipment 48,7 1,2 5,1 6,3 10,0 62,9%

Corporate and use goods 6,0 5,2 4,5 9,8 24,0 40,7%

Capex Total 54,7 6,4 9,7 16,1 34,0 47,2%

Table 8 – Rental financial indicators


(A) (B) (C) % %

Net revenue

Rental 84.4 69.3 65.3 -22.7% -5.8%

Technical support services. sales and others 14.2 10.3 9.2 -35.2% -10.6%

Total net revenue 98.6 79.6 74.5 -24.5% -6.4%

COGS. ex-depreciation 23.4 20.6 20.5 -12.1% 0.0%

G&A. ex-depreciation and ADD 16.5 16.2 16.3 -1.4% 0.4%

ADD 3.6 8.3 -1.8 n.a. n.a.

EBITDA 55.1 34.4 39.4 -28.4% 14.5%

EBITDA margin (%) 55.8% 43.3% 53.0%

ROIC (%) 16.2% 8.8% 7.4%

Capex 29.5 0.7 0.4 -98.8% -50.3%

Invested Capital 644.0 712.9 698.7 8.5% -2.0%

Rental net PP&E 561.4 588.2 570.2 1.6% -3.1%

Others 82.6 124.7 128.5 55.5% 3.0%

Depreciation 20.3 20.9 20.8 2.1% -0.4%

Table 9 – Heavy Construction financial indicators


(A) (B) (C) % %

Net revenue

Rental 45.9 36.5 35.6 -22.3% -2.3%

Technical support services. sales and others 9.7 14.6 6.2 -36.1% -57.7%


COGS. ex-depreciation 13.6 15.0 13.3 -2.0% -11.3%

G&A. ex-depreciation and ADD 15.5 14.3 13.1 -15.1% -8.5%

ADD 0.9 8.8 2.9 234.7% -66.7%

EBITDA 25.6 12.9 12.5 -51.4% -3.6%

EBITDA margin (%) 46.2% 25.3% 29.8%

ROIC (%) 16.3% 7.0% 4.3%

Capex 11.5 0.5 4.6 -60.0% 797.9%

Invested Capital 319.4 352.4 349.0 9.3% -1.0%

Rental net PP&E 245.1 248.8 243.4 -0.7% -2.2%

Others 74.3 103.6 105.6 42.2% 1.9%

Depreciation 10.0 10.6 10.5 5.0% -0.2%


9/15

92Q15 Mills Results

Table 10 – Real Estate financial indicators


(A) (B) (C) % %

Net revenue

Rental 45.5 26.7 25.0 -45.0% -6.2%Technical support services. sales and others 13.4 6.6 6.6 -50.8% -0.2%


COGS. ex-depreciation 14.6 11.5 14.7 0.5% 27.1%

G&A. ex-depreciation and ADD 18.7 17.6 15.9 -15.1% -9.8%

ADD 0.3 4.0 0.8 131.4% -81.1%

EBITDA 25.2 0.1 0.2 -99.1% 244.4%

EBITDA margin (%) 42.8% 0.2% 0.7%

ROIC (%) 6.5% -3.3% -7.6%

Capex 9.4 0.7 0.5 -94.6% -30.8%

Invested Capital 490.3 448.6 425.5 -13.2% -5.1%

Rental net PP&E 336.3 307.0 296.2 -11.9% -3.5%

Others 154.0 141.6 129.3 -16.0% -8.7%

Depreciation 11.7 11.9 11.7 0.2% -1.9%

Table 11 – ROIC Analysis

HeavyConstruction

Real Estate Rental Mills

ROIC variation (qoq)

Operational income after taxes -272 pbs -390 pbs -157 pbs -201 pbs

Rental net PP&E 11 pbs -8 pbs 23 pbs 8 pbs

Others -4 pbs -9 pbs -5 pbs 2 pbs

Total -267 pbs -429 pbs -143 pbs -196 pbs

ROIC variation (yoy)

Operational income after taxes -1158 pbs -1309 pbs -822 pbs -1015 pbs

Rental net PP&E 9 pbs 58 pbs -22 pbs 26 pbs

Others -146 pbs 34 pbs -108 pbs -57 pbs

Total -1199 pbs -1409 pbs -885 pbs -1021 pbs


10/15

102Q15 Mills Results

Glossary

(a) EBITDA – EBITDA is a non-accounting measurement which we prepare and which is reconciled with our financial statement

in accordance with CVM Instruction 01/2007, when applicable. We have calculated our EBITDA (usually defined as earnings

before interest, tax, depreciation and amortization) as net earnings before financial results, the effect of depreciation of

assets and equipment used for rental, and the amortization of intangible assets. EBITDA is not a measure recognized under

BR GAAP, IFRS or US GAAP. It is not significantly standardized and cannot be compared to measurements with similar

names provided by other companies. We have reported EBITDA because we use it to measure our performance. EBITDA

should not be considered in isolation or as a substitute for "net income" or "operating income" as indicators of operational

performance or cash flow, or for the measurement of liquidity or debt repayment capacity.

(b) ROIC - (Return on Invested Capital) - Calculated as Operating Income before financial results and after the payment of

income tax and social contribution (theoretical 30% income tax rate) on this income, divided by average Invested Capital, as

defined below. ROIC is not a measure recognized under BR GAAP, and it is not significantly standardized and cannot be

compared to measurements with similar names provided by other companies.

ROIC LTM : ((Net earnings in the last twelve months – (30% IR) + (firms remuneration in which possess minorityshareholding)/ (Average Invested Capital in the last thirteen months))

Ann ual ROIC: (Annual Operational Income – (30% Income Tax Rate) + remuneration from affiliates) / Average Invested

Capital of the last thirteen months

(c) Capex (Capital Expenditure) – Acquisition of goods and intangibles for permanent assets.

(d) Net cash flow - Net cash generated by operating activities minus net cash used in investing activities.

(e) Net Debt – Gross debt less cash holdings.

(f) Enterp rise value (EV) – Company value at the end of the period. It is calculated by multiplying the number of outstanding

shares by the closing price per share, and adding the net debt.

(g) Job execution costs – Job execution costs include: (a) labor costs from construction jobs supervision and technical

assistance; (b) labor costs for erection and dismantling of the equipment rented to our clients, when such tasks are carried

out by the Mills workforce; (b) equipment freight costs, when under Mills’ responsibility; (d) cost of materials used in the

maintenance of the equipment, when it is returned to our warehouse; and (e) cost of equipment rented from third-parties.

(h) Warehouse costs – Warehouse costs includes expenses directly related to the warehouse management, storage, repair

and maintenance of equipment to be rented and to be sold, including labor costs, PPEs used in the warehouse activities(handling, storage and maintenance), materials needed (forklift fuel, gases for welding, plywood, paints, timber battens,

among others) and machines and equipment maintenance (forklifts, welding machines, water-blasting hoists and tools in

general).

(i) Invested Capital – For the Company, invested capital is defined as the sum of its own capital (net equity or shareholders’

equity) and capital from third parties (total loans and other liabilities that carry interest, from banks or not), both being

average capital from the beginning to the end of the period considered. By business segment, it is the average of the capital

invested by the company weighted by the average assets of each business segment (net liquid assets plus PPE – Property,

Plant and Equipment). The quarter asset base is calculated as the average of the asset base of the last four months and the

annual asset base is calculated as the average of the last thirteen months.


11/15


INCOME STATEMENTin R$ million 2Q14 1Q15 2Q15

Net revenue from sales and services 213.0 163.9 147.9

Cost of products sold and services rendered (89.9) (86.1) (87.1)

Gross profit 123.0 77.8 60.8

Other operational revenues - - -

General and administrative expenses (66.3) (73.8) (51.8)

Operating profit 56.8 4.0 9.0

Financial expense (25.9) (26.1) (23.0)

Financial income 7.5 7.7 6.9

Financial result (18.4) (18.4) (16.1)

Profit before taxation 38.4 (14.4) (7.1)

Income tax and social contribution expenses (5.0) (0.1) (1.1)

Net income (Loss) 33.4 (14.5) (8.2)

Number of shares at the end of the period (in thousands) 128.026 128.058 128.058

Net income (R$ per shares) 0.26 (0.11) (0.06)


12/15


Balance Sheet

in R$ million 2Q14 1Q15 2Q15Assets

Current Assets

Cash and cash equivalents 93.7 214.0 138.0

Trade receivables 199.1 126.4 121.1Inventories 37.8 19.9 21.4

Recoverable taxes 32.6 28.6 29.8

Advances to suppliers 0.3 0.1 0.2

Other receivables- Sale of investee 16.5 18.0 18.5

Other current assets 8.0 6.6 7.5

Total Current Assets 388.2 413.7 336.6

Non-Current Assets

Trade receivables 1.3 1.2 -

Recoverable taxes 41.6 26.8 22.1

Deferred taxes 10.4 27.1 23.7

Deposits in court 10.3 10.9 11.4

Other trade receivables 49.6 35.9 37.0Other Assets - - 1,1

113.1 101.9 95.2

Investment 87.4 87.4 87.4

Property. plant and equipment 1.265.5 1.154.4 1.113.3

Intangible assets 75.0 76.5 76.3

1.427.9 1.318.4 1.277.0

Total Non-Current Assets 1.541.1 1.420.3 1.372.3

Total Assets 1.929.2 1.833.9 1.708.9


13/15


in R$ million 2Q14 1Q15 2Q15

Liabilities

Current Liabilities

Suppliers 29.1 14.9 11.1

Borrowings and financings 45.4 3.2 3.2

Debentures 107.1 114.3 107.8Salaries and payroll charges 24.3 20.0 21.7

Income tax and social contribution 2.7 - -

Tax refinancing program (REFIS) 1.0 1.0 1.1

Taxes payable 8.6 2.9 2.9

Profit sharing payable 1.7 - -

Dividends and interest on equity payable 21.8 21.8 0.0

Derivative financial instruments 5.2 - 0.0

Other current liabilities 5.1 1.2 0.2

Total Current Liabilities 252.0 179.4 148.1

Non-Current Liabilities

Borrowings and financings 16.5 14.3 13.5

Debentures 572.1 580.3 493.7

Provision for tax. civil and labor risks 11.6 12.4 12.0

Tax refinancing program (REFIS) 9.3 9.0 8.9

Total Non-Current Liabilities 609.5 616.0 528.1

Total Liabilities 861.5 795.3 676.2

Stockholders' Equity

Capital 563.1 563.3 563.3

Earnings reserves 447.9 487.0 487.0

Capital reserves 14.9 2.5 4.8

Valuation adjustments to equity (0.2) 0.2 0.2

Retained earnings 42.2 (14.5) (22.7)Total Stockholders' Equity 1.067.7 1.038.6 1.032.7

Total Liabilities and Stockholders' Equity 1.929.2 1.833.9 1.708.9


14/15


Cash Flowin R$ million 2Q14 1Q15 2Q15

Cash flow from operating activities

Net income before taxation 38,4 (14,4) (7,1)

Adjustments

Depreciation and amortization 42,1 43,4 43,0

Provision for tax, civil and labor risks 0,6 (0,5) (0,0)

Accrued expenses on stock options 2,5 2,5 2,2

Profit sharing payable 1,2 - -

Gain on sale of property, plant and equipment and intangible assets (11,4) (14,4) (0,2)

Interest, monetary and exchange rate variation on loans, contingencies and deposits in court 18,9 22,9 19,7

Allowance for doubtful debts 4,9 21,0 1,8

Others - 1,9 0,8

58,8 76,8 67,3

Changes in assets and liabilities

Trade receivables (11,5) 4,3 2,1

Inventories (1,2) 0,0 (2,3)

Recoverable taxes 8,4 7,2 6,2

Deposits in court 0,2 (0,4) (0,6)

Other assets 1,7 (1,0) (0,0)

Suppliers 1,5 (1,7) (3,7)

Salaries and payroll charges 0,7 0,6 1,7

Taxes payable 4,0 (1,1) 0,0

Other liabilities 1,4 0,2 (1,1)

5,1 8,2 2,2

Cash from operations 102,3 70,6 62,4

Lawsuits settled (0,4) (0,0) (0,8)

Interest paid (20,2) (15,0) (24,5)

Income tax and social contribution paid (13,4) (6,3) -

Net cash generated by operating activities 68,3 49,3 37,2

Cash flow from investment activities

Purchases of property, plant and equipment and intangible assets (82,5) (6,4) (6,4)

Proceeds from sale of property, plant and equipment and intangible assets 13,8 27,5 5,8

Proceeds from sale of SI business unit 11,3 - -

Net cash proceeded from (applied on) investment activities (57,4) 21,1 (0,6)

Cash flow from financing activities

Capital contributions 8,2 - -

Shares in treasury - (8,8) 0,0

Dividends and interest on capital invested paid (41,0) - (21,8)

Repayment of borrowings (292,8) (41,2) (90,8)

Borrowings/Debentures raised 400,0 - -

Net cash generated by (used in) financing activities 74,4 (50,0) (112,5)

Increase (decrease) in cash and cash equivalents 85,3 20,4 (76,0)

Cash and cash equivalents at the beginning of the period 8,5 193,7 214,0

Cash and cash equivalents at the end of the period 93,7 214,0 138,0


15/15

This press release may include declarations about Mills’ expectations regarding future events or results. All declarations based upon future expectations. rather thanhistorical facts. are subject to various risks and uncertainties. Mills cannot guarantee that such declarations will prove to be correct. These risks and uncertaintiesinclude factors related to the following: the Brazilian economy. capital markets. infrastructure. real estate and oil & gas sectors. among others. and government rulesthat are subject to change without previous notice. To obtain further information on factors that may give rise to results different from those forecasted by Mills.please consult the reports filed with the Brazilian Comissão de Valores Mobiliários (CVM. equivalent to U.S. “SEC”).

Documents

Mills 2Q15 Result