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8/20/2019 Mills 3Q15 Results
1/17
The financial and operating information contained in this press release, unless otherwise indicated, is in accordance with the accounting policiesadopted in Brazil, which are in conformity with the International Financial Reporting Standards (IFRS).
3Q15 earnings release
Investor Relations BM&FBOVESPA: MILS3 and OTC-US: MILTY
Rio de Janeiro, November 4, 2015 - Mills Estruturas e Serviços de Engenharia S.A. (Mills) announces its results for 3Q15.
Highlights
Positive free cash flow of R$ 55.3 million in 3Q15, reaching R$ 162.2 million
in the first nine months of 2015 (9M15).
Sales of semi new equipment of R$ 7.0 million in the third quarter of 2015
(3Q15), totaling R$ 20.5 million in 9M15.
Total revenue of R$ 136.5 million in 3Q15, 28.7% lower yoy and 7.7% lower
quarter over quarter (qoq).
Changes in the organizational structure generated non-recurring expenses of
R$ 3.1 million in 3Q15. Annual cost reduction is estimated at R$ 10 million.
EBITDA of R$ 35.1 million in 3Q15, with a reduction of 32.8% qoq, impacted
by lower revenues (-R$ 11.4 million), increased allowance for doubtful debts (+ R$ 6.0
million) and increase in costs of lay-off (+ R$ 1.3 million).
EBITDA excluding non-recurring items summed R$ 38.5 million in 3Q15, with
EBITDA margin of 28.3%.
in R$ million3Q14 2Q15 3Q15 (C)/(A) (C)/(B)
(A) (B) (C) % %
Net revenue 191.5 147.9 136.5 -28.7% -7.7%
EBITDA 66.7 52.1 35.1 -47.4% -32.8%
EBITDA margin (%) 34.8% 35.3% 25.7%EBITDA ex – nonrecurring items 80.5 56.9 38.5 -52.2% -32.5%
Net profit (loss) for the period 3.2 -8.2 -17.2 n.a. n.a.
ROIC LTM (%) 9.4% 2.0% 0.8%
Gross Capex 19.5 9.7 9.5 -51.3% -1.6%
Teleconferenceand WebcastDate: November 5, 2015,Thursday
Time:
12:00 pm Brasília time9:00 am New York time2:00 pm London time
Teleconference: +1 888 700-0802 or +1 786 924-6977,code: Mills
Replay: +55 11 3193-1012 or+55 11 2820-4012, code:
5482507# orwww.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
8/20/2019 Mills 3Q15 Results
2/17
23Q15 Earnings Release
Business perspective
A survey conducted by the National Confederation of Industry (CNI – Confederação Nacional da Indústria) continues to show
the slowdown in the construction industry activity. The indicator of activity level for the infrastructure industry was 36.0 points in
October, below the 40.91 points in July. The Federal Government estimates new auctions for highway, electric power and ports
still in 2015, which can influence the activity in 2016, but there are still uncertainties regarding the private sector’s interest and
the difficulties to finance the projects.
In the real estate market, the launches of the listed companies 2 recorded a fall of 12.7% in 3Q15 as compared to the same
period of the previous year. According to ABECIP (Brazilian Association of Real Estate Loans and Savings Companies), the
volume of loans granted for purchase and construction of real estate totaled R$ 5.87 billion in August, a fall of 35.9% against the
same period of 2014.
In the motorized access equipment market, prices are pressured since the beginning of the year due to the high idleness in the
market.
Changes in the organizational structure
Since the end of 2014, Mills has carried out a series of adjustments in its organizational structure in order to strengthen the
concept of single undertaking and create synergies between its businesses, making them leaner and more agile as the current
times demand. As part of this process, in September 2015 the Company made changes in its workforce, which resulted in non-
recurring layoff costs of R$ 3.1 million in 3Q15, but that will allow for annual savings of R$ 10 million in personnel expenses.
Heavy Construction and Real Estate commercial management have been brought together in a single business unit.
Engineering and operational Officers functions were also consolidated. As a result, the Heavy Construction and Real Estate
business units will now be reported together, under the label “Construction”. We will continue to monitor Heavy Construction and
Real Estate revenues separately, due to its different market dynamics. The Rental business unit continues to be treated
separately due to the specific characteristics of its business. The Investor Relations department was integrated with the finance
department and a Human Resources Officer was hired to support these changes consistently and to take care of employees in
these difficult times.
In October we concluded the move of Mills’ headquarters from Barra da Tijuca to Jacarepaguá, at the same address of the
warehouse and operations in Rio de Janeiro. The move, approved by the shareholders at the Extraordinary General Meeting
(EGM) held on October 13, aims at a closer proximity among the board of officers, administrative and operating departments,
improving the information flow and streamlining the decision-making process, as well as reducing expenses.
Mills continues its efforts to reduce costs and expenses, seeking to adapt to the uncertainties in the market in which it operates.
1 Values below 50 indicate perspective of slowdown in the industry’s activity in the next six months, while values above 50 indicate perspective of expansion of theindustry’s activity in the next six months.2 Cyrela, Direcional, Even, Gafisa, Helbor, MRV and Rodobens.
Ricardo Gusmão
Commercial Officer for Construction
Avelino Garzoni
Engineering andOperationsOfficer
Marcelo Yamane
Rental Officer Frederico Neves
CFO and IRODeise Vieira
Human ResourcesOfficer
Sérgio Kariya
CEO
Organization structure as of September 2015:
Construction
8/20/2019 Mills 3Q15 Results
3/17
33Q15 Earnings Release
Revenue
Net revenue reached R$ 136.5 million in 3Q15, a drop of 7.7% qoq and of 28.7% year-over-year (yoy).
Rental revenues dropped 7.9% in 3Q15 over the previous quarter, or R$ 9.9 million. Losses in price and mix of the three
business units were responsible for a contraction of R$ 11.3 million in revenues, of which R$ 3.2 million was in the Construction
business unit and R$ 8.1 million in the Rental business unit. The drop in prices is the result of a market shrinkage, resulting in
lower demand and increased idleness. Rental revenues in Construction business unit were also affected by a R$ 1.1 million
decrease in rented volumes, whereas in the Rental business unit, there was a positive effect in volume of R$ 2.6 million.
The utilization rate in the last twelve months was 52.3% in Construction, worse than the previous quarter mainly due to the
deterioration of the real estate market since volumes in Heavy Construction remained stable in the quarter. In Rental the
utilization rate in the last twelve months was 61.6%, reflecting an improvement in rental volume as compared to the previous
quarter.
Rental
0%
20%
40%
60%
80%
100%
0%
20%
40%
60%
80%
100% Construction
LTM 3Q15 average = 61.6%LTM 3Q15 average = 52.3%
35.6
0.4 1.8
33.425.0
0.7 1.4
22.9
65.3
2.6 8.1
59.8
2Q15 Volume Priceand Mix
3Q15 2Q15 Volume Priceand Mix
3Q15 2Q15 Volume Priceand Mix
3Q15
Net Revenue Evolution
In R$ million
Heavy
Construction
Real Estate Rental
8/20/2019 Mills 3Q15 Results
4/17
43Q15 Earnings Release
Sales in the quarter totaled R$ 10.2 million, of which R$ 7.0 million related to semi new equipment. Sales of semi new
equipment totaled R$ 1.6 million in Construction and R$ 5.4 million in Rental, part of it coming from equipment exports. In
August, Rental closed an equipment sale agreement estimated at EUR 8 million, a revenue that will be recognized as the
equipment are delivered, which are estimated to occur during 4Q15 and 1Q16.
Costs
COGS (Cost of Goods Sold), excluding depreciation, totaled R$ 49.2 million in 3Q15, 1.4% up from the previous quarter and
22.7% down from 3Q14. In 3Q15, COGS was impacted by the change of address from Simões Filho branch to Camaçari , which
generated non-recurring expenses of R$ 0.3 million. The move was necessary since Simões Filho branch had not enough
space to store equipment that were previously located in the Bahia ’s warehouse sold in 2013 together with the sale of
Industrials Services business unit.
Mills’ COGS are indicated in the table bellow. Costs of job execution and equipment storage include expenses on personnel,
maintenance, bulk material, transfers between branches, among other items.
in R$ million
3Q14 2Q15 3Q15 (C)/(A) (C)/(B)
(A) (B) (C) % %
Sales and asset write-offs 25.5 11.4 9.8 -61.4% -13.8%
Sales and asset write-offs, ex- Easy Set adjustments 13.2 11.4 9.8 -25.4% -13.8%
Job execution and equipment storage(g, h) 38.2 37.1 39.4 3.2% 6.1%
Total COGS, exc. depreciation 63.6 48.5 49.2 -22.7% 1.4%
In 3Q14, costs of sales and asset write-offs were impacted by R$ 12.3 million in Easy Set adjustments that, if not considered,would amount to R$ 13.2 million in the quarter. Thus, costs of sales and asset writes-offs, excluding the Easy Set adjustments,
decreased by 25.4% in 3Q15 against 3Q14, as a result of the drop in sales revenues and indemnities in the period (-38.0%).
Quarter-over-quarter, the decrease in COGS in Construction is due to lower sales and asset write-offs costs (-R$ 1.2 million), a
greater rationalization of freight costs (-R$ 1.2 million), partially offset by the increase in maintenance costs (+R$ 1.0 million),
such as utilization of wooden sheets in formworks. In Rental, the growth as compared to the previous quarter is due a greater
consumption of spare parts for machinery maintenance, which lead to an increase of R$ 1.2 million in maintenance costs, and a
larger volume of contracted freight between units (+R$ 0.7 million). COGS in 3Q15 was impacted by R$ 0.6 million in layoff
costs.
20,5
0,4 1,2 0,7
22,1
COGS, exdepreciation
2Q15
Sales and Asset write-
offs
Maintenance Freight COGS, exdepreciation
3Q15
COGS, ex-depreciationR$ million
28,0
1,2 0,3 1,0 1,2 0,2
27,1
COGS, exdepreciation
2Q15
Sales and Asset write-
offs
Workforce Maintenance Freight Others COGS, exdepreciation
3Q15
COGS, ex-depreciationR$ million
Construction Rental
Workforce41%
BulkMaterial
25%
Sales14%
Assetswrite-off
6%
Freight8%
Others6%
COGS, ex-depreciation in 3Q15R$ 49.2 million
8/20/2019 Mills 3Q15 Results
5/17
53Q15 Earnings Release
The proportion of COGS over net revenue has grown since last year. Further to the decrease in sales margins, which impacted
this ratio, this result is impacted by personnel costs that are not reduced in the same proportion as the increase in equipment
idleness. The costs of operational staff and materials used in the maintenance activity also did not decrease because more
equipment have entered the warehouses as a result of higher idleness.
* Excluding Easy Set adjustment of R$ 12.3 million
Expenses
SG&A (Selling, General and Administrative Expenses)3, excluding depreciation and allowance for doubtful debts (ADD), totaled
R$ 44.3 million in 3Q15, 2.3% down from 2Q15 and 15.6% down from 3Q14. The table bellow presents SG&A breakdown and
shows the effects of cost reduction initiatives performed until now. The major impact was the contribution to a reduction of
commercial, operational and administrative SG&A of 24.3% yoy.
This reduction is higher in real terms, considering the average raises of 8% from labor disputes. The restructuring effect
performed this quarter provides estimated annual savings of R$ 10 million.
in R$ million3Q14 2Q15 3Q15 (C)/(A) (C)/(B)
(A) (B) (C) % %
Selling, Operating and Administrative 41.3 31.5 31.2 -24.3% -0.7%
General Services 9.8 10.9 11.3 15.6% 3.5%
Other expenses 1.4 2.9 1.7 20,1% -41.4%
Total SG&A, ex- depreciation and ADD 52.5 45.3 44.3 -15.6% -2.3%
The SG&A relating to Selling, Operating and Administrative functions include current expenses of various departments,including sales, marketing, engineering, projects and the administrative back office, such as HR and Financial
departments.
General Services comprise the expenses incurred by the head office and the various branches (rents, fees, security
and cleaning, mainly).
Other expenses are items in great part without cash effect, such as provisions for stock option programs, provisions for
contingencies, provisions for slow-moving inventories and some occasional disbursements.
General Services expenses increased due to contractual adjustments of property rental and security and cleaning services.
Besides, there were changes of address of some branches, which also impacted this account.
Other expenses presented a reduction due to lower stock options expenses.
3 G&A corresponds to the sum of the Rental and Construction business units.
11.4 10.5 10.98.2 6.8
1.8 3.9 4.7
3.23.0
46% 46%52%
57% 55%
0%
10%
20%
30%
40%
50%
60%
3Q14* 4Q14 1Q15 2Q15 3Q15
Cost of sales and assets write-offs evolution
R$ Million
Assets write-offs
Cost of Sales
Cost of sales + assets write-offs/ Sales net revenue+indemnities
23.3 22.4 18.123.0 24.5
14.9 14.713.3
14.2 14.9
23% 25% 23%
29%33%
0.0
10.0
20.0
30.0
40.0
50.0
3Q14* 4Q14 1Q15 2Q15 3Q15
Cost of Job Excution and Equipment storage
evolutionR$ Million
Equipment Storage
Job Execution
Cost of Job Excution and Equipment storage / Rental net
revenue+Technichal Assistance
8/20/2019 Mills 3Q15 Results
6/17
63Q15 Earnings Release
Allowance for doubtful debts
ADD amounted to R$ 7.9 million, or 5.9% of the net revenue in 3Q15, against 1.2% in 2Q15.
The net effect in the allowance for doubtful debts in the quarter from customers involved in ongoing federal investigations was of
only R$ 0.1 million in the quarter. The constitution of new provisions had a higher impact in the Rental business unit, whereas
reversals benefited the Heavy Construction business unit. Net receivables exposure to these customers totaled R$ 29 million at
the end of September 2015, versus R$ 21 million at the end of June 2015. In the last twelve months, the allowance for doubtful
debts amounted to R$ 53.2 million, of which R$ 21.8 million relating to customers involved in the investigations.
The graph above shows the effect of allowance for doubtful debts on the coverage of Mills’ past due receivables, including the
trade notes with maturities extended.
By business unit, ADD posted growth in Rental, stability in Heavy Construction, and decrease in Real Estate in 3Q15 as
compared to the previous quarter. The allowance for doubtful debts for each business segment is as follows:
in R$ million3Q14 2Q15 3Q15 (C)/(A) (C)/(B)
(A) (B) (C) % %
Heavy Construction 2.3 2.9 2.9 27.4% -2.7%
% of net revenue 4.3% 7.0% 7.0%
Real Estate 2.2 0.8 -0.3 n.a. n.a.
% of net revenue 4.5% 2.4% -1.3%
Rental 4.3 -1.8 5.4 n.a. n.a.
% of net revenue 4.7% -2.4% 7.9%
Total allowance for doubtful debts 8.7 1.9 7.9 -8.1% n.a.
% of net revenue 4.5% 1.2% 5.9%
0,3%
1,7% 2,1%2,0%
5,3%
12,8%
1,2%
5,9%
-1,0%
1,0%
3,0%
5,0%
7,0%
9,0%
11,0%
13,0%
15,0%
2010 2011 2012 2013 2014 1Q15 2Q15 3Q15
2010-2014 average = 2.3%
As % of net revenues
Changes in allowance for doubtful debts
(ADD)
6,8%
Ex clients under investigation
4,2%5,9%
-0 8%
49.9%57.9%
70.7% 70.4%76.9%
3Q14 4Q14 1Q15 2Q15 3Q15
ADD Balance/ Trades receivable overdue + extendedmaturity
8/20/2019 Mills 3Q15 Results
7/17
73Q15 Earnings Release
EBITDA
Cash generation, as measured by EBITDA, reached R$ 35.1 million in 3Q15, 47.4% down from 3Q14 and 32.8% down from
2Q15, mainly due to the price and mix effect (- R$ 11.3 million) and increased allowance for doubtful debts in Rental business
unit (+ R$ 7.2 million). The result was also affected by the move of the Bahia branch to Camaçari (+R$ 0.3 million) and
increased layoff costs, of R$ 3.1 million in 3Q15 versus R$ 1.8 million in 2Q15.
The EBITDA margin was 25.7% in 3Q15, against 34.8% in 3Q14 and 35.3% in 2Q15. Excluding the layoffs in the period, the
move to Camaçari and the allowance for doubtful debts relating to customers involved in ongoing investigations, EBITDA would
total R$ 38.5 million, with EBITDA margin of 28.3% in 3Q15.
Accumulated EBITDA for the twelve-month period ended September 30, 2015, LTM EBITDA, totaled R$ 190.3 million.
Excluding extraordinary items, such as inventory adjustments (R$ 2.3 million), restructuring indemnities (R$ 10.3 million), ADDrelated to the effects of ongoing investigations (R$ 21.8 million) and expenses incurred on the move to Camaçari (R$ 0.3
million), LTM EBITDA would be R$ 224.9 million.
Financial result
in R$ million3Q14 2Q15 3Q15 (C)/(A) (C)/(B)
(A) (B) (C) % %
Financial income 10.4 6.9 8.9 -14.6% 28.2%
Financial expense 28.2 23.0 24.1 -14.5% 4.9%
Financial result -17.8 -16.1 -15.2 -14.5% -5.2%
The finance result was negative by R$ 15.2 million in 3Q15, against a negative R$ 16.1 million in 2Q15, due to the decrease in
net indebtedness quarter-over-quarter, in spite of the increase in the average cost of debt for the period.
Net earnings
In 3Q15 Mills reported a loss of R$ 17.2 million, against a loss of R$ 8.2 million in 2Q15 and profit of R$ 3.2 million in 3Q14.
Quarter-over-quarter, the variation is explained mainly by the R$ 17 million decrease in EBITDA, impacted by the decrease in
revenue (-R$ 11.4 million), increase in ADD (+R$ 6.0 million) and layoff costs (+R$ 1.3 million).
ROIC
ROIC was 0.8% in 3Q15, against 2.0% in 2Q15, impacted mainly by lower average prices of rental volume and increased
allowance for doubtful debts in the period.
52.1
1.5 11.3
1.5 0.2 1.8 6.0
1.6
35.1
0
10
20
30
40
50
60In R$ million
Change in EBITDA
8/20/2019 Mills 3Q15 Results
8/17
83Q15 Earnings Release
Debt and indebtedness indicators
Mills’ total debt was R$ 618.2 million as of June 30, 2015, versus R$ 620.5 as of September 30, 2015. We closed 3Q15 with a
net debt(e) position of R$ 428.0 million against R$ 480.2 million at the end of 2Q15.
The Company’s debt is 31% short-term and 69% long-term, with an average maturity of 3.0 years and average cost of
CDI+0.95%. In terms of currency, 100% of Mills’ debt is in Brazilian Reais.
Leverage, as measured by net debt/LTM EBITDA, was 2.2x in 3Q15. LTM EBITDA/Financial result was of 2.9x in the same
period. Excluding non-recurring items of the last twelve months, net debt/LTM EBITDA was 1.9x, while LTM EBITDA/Financial
result reached 3.5x.
Cash flow
Cash flow from operating activities, before interest paid plus proceeds from sale of property, plant and equipment and intangible
assets, amounted to R$ 65 million in 3Q15, against R$ 68 million in 2Q15, impacted by restructuring expenses. In the lasttwelve months, cash flow from operating activities totaled R$ 310 million.
The free cash flow, measured by cash flow from operating activities minus investments, was positive by R$ 55.2 million in 3Q15,
totaling R$ 206.9 million in the last twelve months.
¹ Before interest paid plus proceeds from sale of property, plant and equipment and intangible assets² Net cash generated by operational activities, excluding net cash used in investment activities
159
199
296
384 373
310
79102 105
86 9268 65
-209
-357
-31
-154
116
207
-13
11
7445
7037 55
Adjusted¹ operational cash flow and free² cash flow
R$ million
Adjusted¹ operational cash flow Free² cash flow
193 174150
106 106
38
Cashposition
2016 2017 2018 2019 2020
Principal amortization schedule
In R$ million
57447 193
428
Principal Interests CashPosition
Net Debt
Debt, as of September 30, 2015
In R$ million
8/20/2019 Mills 3Q15 Results
9/17
93Q15 Earnings Release
The cash flow generated by investing activities was positively impacted by the R$ 18.6 million received in July from the sale of
the Industrial Services business unit occurred in 2013.
Mills invested R$ 9.5 million in 3Q15, of which R$ 4.2 million in rental equipment and R$ 1.6 million in equipment licenses,
which are disbursed every five years.
Share buyback programUp to September 30, 2015, the Company acquired 2,285,300 shares, with a total value of R$ 19.8 million, the last acquisition
being made in 1Q15. During 3Q15, 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. As of September 30, 2015, Mills holds 2,278,422 shares in treasury.
Tables
Table 2 – Net revenue per type
in R$ million 3Q14 2Q15 3Q15 (C)/(A) (C)/(B)
(A) (B) (C) % %
Rental 161.4 125.9 116.0 -28.1% -7.9%
Technical support services 1.3 1.8 2.6 104.6% 43.2%
Sales 19.1 12.3 10.2 -46.7% -17.5%
Others 9.8 7.8 7.7 -21.1% -1.8%
Total net revenue 191.5 147.9 136.5 -28.7% -7.7%
Table 3 – Net revenue per business unit
in R$ million 3Q14 % 2Q15 % 3Q15 %
Heavy construction 51.9 27.1% 41.8 28.3% 41.2 30.2%
Real estate 48.6 25.4% 31.6 21.3% 26.5 19.4%
Rental 91.0 47.5% 74.5 50.4% 68.7 50.4%
Total net revenue 191.5 100.0% 147.9 100.0% 136.5 100.0%
Table 4 – Cost of goods and services sold (COGS) and general, administrative and operating expenses (G&A), ex-depreciation
in R$ million 3Q14 % 2Q15 % 3Q15 %
Costs of job execution(g) 23.3 18.6% 23.0 23.9% 24.5 24.1%
Costs of sale of equipment 19.1 15.2% 8.2 8.6% 6.8 6.7%
Costs of asset write-offs 6.4 5.1% 3.2 3.3% 3.0 3.0%
Equipment storage(h) 14.9 11.8% 14.2 14.8% 14.9 14.7%
COGS 63.6 50.7% 48.5 50.6% 49.2 48.4%
SG&A 52.5 41.8% 45.3 47.2% 44.3 43.6%
ADD 8.7 6.9% 1.9 1.9% 7.9 7.8%
SG&A + ADD relative to SI 0.7 0.6% 0.1 0.1% 0.3 0.3%
Total COGS + G&A 125.5 100.0% 95.9 100.0% 101.7 100.0%
Table 5 – EBITDA per business unit and EBITDA margin
in R$ million 3Q14 % 2Q15 % 3Q15 %
Construction 16.7 25.1% 12.7 24.4% 8.7 24.8%
Rental 50.0 74.9% 39.4 75.6% 26.4 75.2%
Total EBITDA 66.7 100.0% 52.1 100.0% 35.1 100.0%
EBITDA margin (%) 34.8% 35.3% 25.7%
8/20/2019 Mills 3Q15 Results
10/17
103Q15 Earnings Release
Table 6 – Reconciliation of EBITDA
in R$ million 3Q14 2Q15 3Q15 (C)/(A) (C)/(B)
(A) (B) (C) % %
Results of continuing operations 3.2 -8.2 -17.2 -634.2% 110.2%
Financial result -17.8 -16.1 -15.2 -14.5% -5.2%
Income tax and social contribution expenses -1.7 -1.1 5.5 -433.7% -588.7%
Operational Results before Financial Result 22.7 9.0 -7.5 -133.1% -183.4%
Depreciation 43.3 43.0 42.3 -2.3% -1.7%
Expenses (revenues) related to the Industrial services former businessunit
0.7 0.1 0.3 -59.8% 123.4%
EBITDA 66.7 52.1 35.1 -47.4% -32.8%
Table 7 – Investment per business unit
in R$ million Actual Budget
3Q14 2Q15 3Q15 9M15 2015 (A)/(B)
(A) (B) %
Rental equipment
Construction 10.8 5.1 4.2 10.5 10.0 4.7%
Rental 3.0 0.0 0.0 0.0 0.0 n.d.
Rental equipment 13.8 5.1 4.2 10.5 10.0 104.8%
Corporate and use goods 5.7 4.5 5.3 15.1 24.0 62.7%
Capex Total 19.5 9.7 9.5 25.5 34.0 75.1%
Table 8 – Rental financial indicators
in R$ million 3Q14 2Q15 3Q15 (C)/(A) (C)/(B)
(A) (B) (C) % %
Net revenue
Rental 79.7 65.3 59.8 -25.0% -8.4%
Technical support services, sales and others 11.3 9.2 9.0 -20.8% -2.6%
Total net revenue 91.0 74.5 68.7 -24.5% -7.7%
COGS, ex-depreciation 23.5 20.5 22.1 -5.9% 7.6%
G&A, ex-depreciation and ADD 13.3 16.3 14.9 12.1% -8.9%
ADD 4.3 -1.8 5.4 n.a n.a
EBITDA 50.0 39.4 26.4 -47.2% -33.1%
EBITDA margin (%) 14.5% 7.4% 5.2%
ROIC (%) 10.4% 1.2% -2.2%
Capex 3.6 0.4 0.2 -94.8% -48.1%
Invested Capital 683.8 698.7 679.1 -0.7% -2.8%
Rental net PP&E 584.3 570.2 545.2 -6.7% -4.4%
Others 99.6 128.5 134.0 34.5% 4.3%
Depreciation 20.9 20.8 20.1 -3.6% -3.2%
8/20/2019 Mills 3Q15 Results
11/17
113Q15 Earnings Release
Table 9 – Construction financial indicators
in R$ million 3Q14 2Q15 3Q15 (C)/(A) (C)/(B)
(A) (B) (C) % %
Net revenue
Rental 81.7 60.6 56.2 -31.2% -7.2%
Heavy Construction 44.4 35.6 33.4 -24.8% -6.3%
Real Estate 37.3 25.0 22.9 -38.7% -8.5%
Technical support services, sales and others 18.8 12.7 11.5 -38.9% -10.1%
Heavy Construction 7.5 6.2 7.8 4.3% 26.5%
Real Estate 11.3 6.6 3.7 -67.6% -44.4%
Total net revenue 100.5 73.4 67.7 -32.6% -7.5%
COGS, ex-depreciation 40.1 28.0 27.1 -32.5% -3.1%
G&A, ex-depreciation and ADD 39.2 29.0 29.4 -25.0% 1.3%
ADD 4.4 3.7 2.5 -43.0% -31.5%
EBITDA 16.7 12.7 8.7 -48.1% -31.7%
EBITDA margin (%) 16.6% 17.3% 12.8%
ROIC (%) 6.7% -2.2% -3.1%
Capex 11.7 5.1 5.8 -50.3% 13.2%
Invested Capital 820.3 774.6 743.9 -9.3% -4.0%
Rental net PP&E 577.9 539.7 521.3 -9.8% -3.4%
Others 242.4 234.9 222.5 -8.2% -5.3%
Depreciation 22.4 22.2 22.2 -1.2% -0.4%
Table 10 – ROIC Analysis
Construction Rental Mills
ROIC variation (qoq)
Operational income after taxes -70 pbs -229 pbs -131 pbs
Rental net PP&E -5 pbs 27 pbs 6 pbs
Others -4 pbs -6 pbs 2 pbs
Total -82 pbs -214 pbs -128 pbs
ROIC variation (yoy)
Operational income after taxes -944 pbs -933 pbs -866 pbs
Rental net PP&E 49 pbs 88 pbs 57 pbs
Others 17 pbs -70 pbs 2 pbs
Total -973 pbs -929 pbs -861 pbs
8/20/2019 Mills 3Q15 Results
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123Q15 Earnings Release
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.
8/20/2019 Mills 3Q15 Results
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133Q15 Earnings Release
INCOME STATEMENT
in R$ million 3Q14 2Q15 3Q15
Net revenue from sales and services 191.5 147.9 136.5
Cost of products sold and services rendered (102.7) (87.1) (87.0)
Gross profit 88.7 60.8 49.5
General and administrative expenses (66.1) (51.8) (57.0)
Operating profit 22.7 9.0 (7.5)
Financial expense (28.2) (23.0) (24.1)
Financial income 10.4 6.9 8.9
Financial result (17.8) (16.1) (15.2)
Profit before taxation 4.9 (7.1) (22.7)
Income tax and social contribution expenses (1.7) (1.1) 5.5
Net income (Loss) 3.2 (8.2) (17.2)
Number of shares at the end of the period (in thousands) 128,058 128,058 128,058
Net income (R$ per shares) 0.03 (0.06) (0.14)
8/20/2019 Mills 3Q15 Results
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143Q15 Earnings Release
Balance Sheet
in R$ million 3Q14 2Q15 3Q15
Assets
Current Assets
Cash and cash equivalents 161.1 138.0 192.5
Trade receivables 177.9 121.1 114.8Inventories 32.0 21.4 20.5
Recoverable taxes 29.8 29.8 28.8
Advances to suppliers 0.2 0.2 0.2
Derivative financial instruments 0.1 - -
Other receivables- Sale of investee 17.0 18.5 19.1
Other current assets 4.7 7.5 7.6
Current Assets held for sale - - 22.0
Total Current Assets 422.7 336.6 405.5
Non-Current Assets
Trade receivables 0.9 - -
Recoverable taxes 36.4 22.1 17.6
Deferred taxes 20.0 23.7 29.2
Deposits in court 10.5 11.4 11.7
Other trade receivables 34.0 37.0 19.1
Other assets - 1.1 -
101.7 95.2 77.7
Investment 87.4 87.4 87.4
Property, plant and equipment 1,230.9 1,113.3 1,049.2
Intangible assets 76.0 76.3 78.2
1,394.3 1,277.0 1,214.7
Total Non-Current Assets 1,496.0 1,372.3 1,292.4
Total Assets 1,918.7 1,708.9 1,697.9
8/20/2019 Mills 3Q15 Results
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153Q15 Earnings Release
in R$ million 3Q14 2Q15 3Q15
Liabilities
Current Liabilities
Suppliers 18.6 11.1 11.4
Borrowings and financings 46.4 3.2 3.2Debentures 109.6 107.8 189.2
Salaries and payroll charges 25.3 21.7 23.2
Income tax and social contribution 2.9 - -
Tax refinancing program (REFIS) 1.0 1.1 1.2
Taxes payable 4.7 2.9 2.1
Dividends and interest on equity payable 21.8 0.0 0.0
Derivative financial instruments 1.2 0.0 -
Other current liabilities 2.1 0.2 0.6
Total Current Liabilities 233.6 148.1 230.9
Non-Current Liabilities
Borrowings and financings 15.7 13.5 12.7
Debentures 573.3 493.7 415.4Provision for tax, civil and labor risks 12.8 12.0 12.8
Tax refinancing program (REFIS) 9.2 8.9 9.3
Total Non-Current Liabilities 611.0 528.1 450.3
Total Liabilities 844.6 676.2 681.2
Stockholders' Equity
Capital 563.3 563.3 563.3
Earnings reserves 447.9 487.0 487.0
Capital reserves 17.3 4.8 6.0
Valuation adjustments to equity 0.3 0.2 0.2
Retained earnings 45.4 (22.7) (39.9)Total Stockholders' Equity 1,074.1 1,032.7 1,016.7
Total Liabilities and Stockholders' Equity 1,918.7 1,708.9 1,697.9
8/20/2019 Mills 3Q15 Results
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163Q15 Earnings Release
Cash Flow
in R$ million 3Q14 2Q15 3Q15
Cash flow from operating activities
Net income before taxation 4.9 (7.1) (22.7)
Adjustments
Depreciation and amortization 43.3 43.0 42.3
Provision for tax, civil and labor risks 1.5 (0.0) 0.4
Accrued expenses on stock options 2.4 2.2 1.2
Profit sharing payable (1.7) - -
Gain on sale of property, plant and equipment and intangible assets (12.0) (0.2) (7.1)
Interest, monetary and exchange rate variation on loans, contingencies and deposits in court 18.9 19.7 20.5
Allowance for doubtful debts 8.7 1.8 8.0
Slow turnover inventory provisions - - 2.7
Others 12.3 0.8 (3.3)
73.3 67.3 64.7
Changes in assets and liabilities
Trade receivables 12.9 2.1 (5.2)
Inventories (2.0) (2.3) 0.9
Recoverable taxes 8.6 6.2 5.9
Deposits in court (0.1) (0.6) (0.5)
Other assets 3.4 (0.0) 0.5
Suppliers 1.0 (3.7) 1.6
Salaries and payroll charges 1.0 1.7 1.5
Taxes payable (0.6) 0.0 (0.9)
Other liabilities (3.2) (1.1) 0.8
21.1 2.2 4.6
Cash from operations 99.3 62.4 46.5
Lawsuits settled (0.2) (0.8) -
Interest paid (16.8) (24.5) (18.6)
Income tax and social contribution paid (10.7) - -
Net cash generated by operating activities 71.6 37.2 28.0
Cash flow from investment activities
Purchases of property, plant and equipment and intangible assets (31.0) (6.4) (9.5)
Proceeds from sale of property, plant and equipment and intangible assets 16.8 5.8 18.2
Proceeds from sale of SI business unit 16.6 - 18.6
Net cash proceeded from (applied on) investment activities 2.4 (0.6) 27.3
Cash flow from financing activities
Capital contributions 0.3 - -
Shares in treasury - 0.0 -
Dividends and interest on capital invested paid (3.3) (21.8) (0.0)
Repayment of borrowings (3.6) (90.8) (0.8)
Net cash generated by (used in) financing activities (6.6) (112.5) (0.8)
Increase (decrease) in cash and cash equivalents 67.3 (76.0) 54.5
Cash and cash equivalents at the beginning of the period 93.7 214.0 138.0
Cash and cash equivalents at the end of the period 161.1 138.0 192.5
8/20/2019 Mills 3Q15 Results
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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”).