Highlights of results: 3Q18 and 9M18static.grendene.aatb.com.br/releases/1422_GRND_PR_3Q18.pdf · Results – 3Q18 and 9M18 Page 1 of 22 Results: 3Q18 and 9M18 B3 ticker: GRND3

Results – 3Q18 and 9M18 Page 1 of 22

Results: 3Q18 and 9M18

B3 ticker: GRND3

http://ri.grendene.com.br

Number of shares:

Common: 902,160,000

Price (Sep. 30, 2018):

R$ 6.73 per share

Market value:

R$ 6.1 billion

US$1.5 billion

Conference call

– Brazil:

Oct. 26, 2018: 10.30 a.m.

Connect on – Brazil:

+11-3193-1001 or

+11-2820-4001

Conference call

– International:

Oct. 26, 2018, 10:30 a.m.

(Simultaneous translation)

Connect on:

+1-646-828-8246 (USA)

+44-20-7442-5660 (UK)

Contacts:

Francisco Schmitt

CFO & IRO

[email protected]

Tel:

+55-54 -2109-9022

Fax:

+55-54 -2109-9991

9M18: Net revenue up 3% YoY

Sobral, October 25, 2018 – This release publishes consolidated 3Q18 and 9M18 results of GRENDENE (BM&FBovespa Novo Mercado – GRND3), in accordance with IFRS.

Highlights of results: 3Q18 and 9M18 Main figures

R$ mn 3Q17 3Q18

Change, %

3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

Gross revenue 723.9 732.8 1.2% 1,880.8 1,940.9 3.2%

Domestic market 597.2 599.5 0.4% 1,482.1 1,522.1 2.7%

Exports 126.7 133.3 5.2% 398.7 418.8 5.0%

Net revenue 596.3 599.1 0.5% 1,546.6 1,591.0 2.9%

COGS (307.4) (323.2) 5.2% (812.7) (859.6) 5.8%

Gross profit 288.9 275.9 (4.5%) 733.9 731.4 (0.3%)

Operational expenses (177.5) (179.5) 1.1% (455.5) (452.4) (0.7%)

Ebit 111.4 96.4 (13.5%) 278.4 279.0 0.2%

Ebitda 126.7 112.9 (10.9%) 323.4 328.1 1.5%

Net fin. rev. (exp.) 55.3 29.1 (47.4%) 191.8 101.5 (47.1%)

Net profit 146.7 112.4 (23.4%) 410.5 334.2 (18.6%)

Profit per share – R$ 0.16 0.12 (23.5%) 0.46 0.37 (18.6%)

Volume – million pairs 45.2 44.0 (2.5%) 116.4 117.4 0.9%

Domestic market 36.5 36.8 1.1% 87.4 91.0 4.1%

Exports 8.7 7.2 (17.7%) 29.0 26.4 (8.8%)

Gross revenue per pair (R$) 16.02 16.64 3.9% 16.16 16.53 2.3%

Domestic market 16.39 16.27 (0.7%) 16.95 16.72 (1.4%)

Exports 14.51 18.55 27.8% 13.76 15.84 15.1%

Margins – % 3Q17 3Q18 Change,

pp 9M17 9M18

Change, pp

Gross 48.5% 46.0% (2.5) 47.5% 46.0% (1.5)

Ebit 18.7% 16.1% (2.6) 18.0% 17.5% (0.5)

Ebitda 21.3% 18.9% (2.4) 20.9% 20.6% (0.3)

Net 24.6% 18.8% (5.8) 26.5% 21.0% (5.5)

Highlights, 9M18 vs. 9M17:

Net revenue: Up 2.9% YoY.

Net profit: R$ 334.2 million (18.6% below 9M17).

Ebit: Up 0.2% YoY, at R$ 279.0 million.

Gross margin: 46.0% = 1.5 p.p. lower.

Net margin: 21.0% = 5.5 p.p. lower.

Volume of pairs: Up 0.9% YoY, at 117.4 million.

Dividend payments for 3Q: R$ 47.2mn. Ex-dividend Nov. 6, 2018; paid from Nov. 21, 2018. Total of dividends in 9M18: R$ 171.6mn.

Leader in exports: Grendene maintains its leadership in Brazilian footwear exports for the 16th year running – exporting 33.5% of the total of all Brazilian footwear exported in 9M18.


Management discussion and analysis

Gross revenue, Net revenue and volumes

Results in 3Q18 were not good; as a consequence, our results for 9M18 were in line with those of 9M17. Compared to the first half of 2018, all operational lines in 3Q18 sustained the trend of solid results of 1H18, except net profit – which continued a decline that was caused by the fall in interest rates. Compared to 9M17: Net revenue in 9M18 was up 2.9%, Ebit was up 0.2%, and volume of pairs sold was up 0.9%; but as a result of financial revenue being 47.1% lower, final net profit was 18.6% lower YoY.

The exchange rate had a very strong positive impact in 3Q18, seen in the higher export revenue per unit in Reais – up 27.8% YoY – while in dollars this increase was only 2.2%. On the other hand, the strong impact on gross margins and Ebit was not enough to offset the effect of costs 5.2% higher, the small growth of 1.1% in volume of pairs sold in the domestic market, and 3Q18 export volume being 17.7% lower than in 3Q17. As a result, net profit for 3Q18 was 23.4% lower than in 3Q17.

In the domestic market, the expected recovery in demand was not intense as we had assumed: we saw higher than normal levels of retailers’ inventories, which slowed placements of orders to the industry, adversely affecting the number of pairs shipped. Even so, we achieved a small growth in comparison to 3Q17.

In spite of the low growth in the number of pairs, over 9M18 as a whole we believe we are still ahead of the growth in the domestic market.

Also in exports, in spite of the considerable reduction, of 8.8%, in the number of pairs shipped when compared to 9M17, our share of Brazilian exports has increased from 32.8%, in 9M17, to 33.5% in 9M18.

In net financial revenues, the trend that was already set in 1H18 was confirmed and continued. The Central Bank kept interest rates unchanged, and as a result our net financial revenues in 9M18 were lower than in 9M17 – by R$ 90.3 million – the determining factor in 9M18 net profit, at R$ 334.2mn, being R$ 76.3mn, lower than in 9M17 (R$ 410.5mn). Of this total reduction, R$ 45.5 million was the consequence of hedge transactions.

On these figures, operational cash flow in 9M18 was R$ 427 million, increasing the net cash position to R$ 1.8 billion, and the gross cash position to R$ 1.9 billion – these numbers being respectively up 8.5% and 6.5% from December 31, 2017.

On the other hand, in spite of the overall weak level of demand in 3Q18, Children’s Day was very good for our products, and this encourages us to expect a more favorable market in the last quarter of this year. Retailers too reacted to the good sales in that period, with increased confidence in buying for the year-end season.

We also have confidence in our new collections that are arriving in the market; we expect that after the elections are over market uncertainties should diminish and finally demand should show some sign of recovery.

723.9706.1

732.86.7 (4.4) (22.4) 2.3 26.7

Grossrevenue -

3Q17

Volumeeffect - DM

Mix andgross

revenue perpair effect -

DM

Volumeeffect - EM

Mix andgross


EX

Grossrevenue

without FXeffect

FX effect -EM

Grossrevenue -

3Q18

R$ m

illi

on

Change in gross revenue, domestic market (DM) and exports (EM) - analyzed by effect of volume, mix and gross revenue per pair

1,880.8 1,891.0 1,940.959.8 (19.8) (35.0) 5.2 49.9

Grossrevenue -

9M17

Volumeeffect - DM

Mix andgross


DM

Volumeeffect - EM

Mix andgross


EX

Grossrevenue

without FXeffect

FX effect -EM

Grossrevenue -

9M18

R$ m

illi

on

Change in gross revenue, domestic market (DM) and exports (EM) - analyzed by effect of volume, mix and gross revenue per pair


Comparison of performance with targets

Note that the guidance that we publish is for complete years, not individual quarters – but for optimum transparency and analysis we include comparisons of quarters in this chart:

Performance: CAGR, in the third quarters of the years 2008–2018:

R$ mn 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 CAGR

Gross revenue 457.9 475.5 546.4 511.3 613.0 739.0 730.1 734.5 654.0 723.9 732.8 4.8%

YoY change 3.9% 14.9% (6.4%) 19.9% 20.6% (1.2%) 0.6% (11.0%) 10.7% 1.2%

Net profit 73.3 65.6 104.8 83.5 119.4 122.1 126.0 133.5 150.9 146.7 112.4 4.4%

YoY change (10.5%) 59.7% (20.3%) 43.0% 2.2% 3.2% 5.9% 13.1% (2.8%) (23.4%)

R$ mn 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 CAGR

Advertising expenses

32.3 33.9 44.4 46.3 42.9 45.7 53.4 54.9 36.1 37.7 40.6 2.3%

% of NOR 9.0% 9.0% 10.2% 11.2% 8.6% 7.6% 8.9% 8.9% 6.7% 6.3% 6.8%

Performance: CAGR, in first nine months of year, 2008–2018:

R$ mn 9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 9M17 9M18 CAGR

Gross revenue 1,076.1 1,218.7 1,394.0 1,210.6 1,521.1 1,847.3 1,834.2 1,835.1 1,719.8 1,880.8 1,940.9 6.1%

YoY change 13.2% 14.4% (13.2%) 25.6% 21.4% (0.7%) (0.05%) (6.3%) 9.4% 3.2%

Net profit 156.7 187.2 189.7 183.9 261.0 290.6 294.9 357.1 387.5 410.5 334.2 7.9%

YoY change 19.5% 1.4% (3.1%) 41.9% 11.4% 1.5% 21.1% 8.5% 5.9% (18.6%)

R$ mn 9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 9M17 9M18 CAGR


69.5 72.3 82.6 85.0 101.3 105.2 105.9 100.1 83.6 84.8 85.9 2.1%

% of NOR 8.2% 7.4% 7.4% 8.7% 8.3% 7.1% 7.1% 6.6% 5.9% 5.5% 5.4%

In 2008 we published the following parameters as our targets for the 10 years from 2008 through 2018:

Compound average growth rate (CAGR) of gross revenue: between 8% and 12%.

CAGR of net profit: between 12% and 15%.

Objective for average advertising expenses in the period 8% to 10% of net revenue.

What has happened so far this year has been less positive than our initial expectations for the year, and contrary to our forecast, consumption did not recover during the year even though interest rates were kept very low.

The lower interest rates resulted in our financial revenue being lower, and we did not achieve the growth in the operational result that would have offset this effect.

This resulted in net profit being lower year-on-year, rather than slightly higher as we initially expected.

Information in this release may contain statements about future outcomes. Such statements reflect the present perception and outlook of the Company's Executive Officers on the development of the business, based on developments in the macroeconomic environment, industry conditions, performance of the Company and financial results. Any outcomes that are different from such expectations and factors could cause the Company’s results to be materially different from current expectations. Such statements and potential outcomes thus include various risks and uncertainties.


Highlights

On September 30, 2018 the Clube Melissa franchise network had a total of 291 stores – basically distributed all over Brazil – compared to 256 on September 30, 2017.

The figure includes 11 'mini-clubs’.

Our Ipanema sandals brand launched a campaign in which Anitta, together with the influencers Arielle Macedo, Isabella Trad, Gabb Cabo Verde and Jana Rosa, showed

the new models of the Sempre Nova line.

Our Zaxy brand presented its new digital campaign with music co-created by a group of YouTubers and singers:

Luiza Sonza, Gigi Grigio, Rayza Nicácio, Priscila Alcantara, Mari Maria, Camilla de Lucas, RayNeon (Raissa Azevedo), Nina Gabriella, Preta Araujo (Jéssica Araújo) and Megamahlu (Maria Luisa).

On August 5, the Grendene Kids ‘Organics Fair’ (Feira de Orgânicos), held at the Villa-Lobos Park in São Paulo, publicized our new Moranguinho sandal, which comes with a gardening kit – and a selection of organic products.

– Some junior ‘exhibitors’ at the fair offered small saplings in exchange for kindly and cheerful reactions.

Our Grendha brand held a meeting with a range of consumers for them to become familiar with the new collection in partnership with Ivete Sangalo.

As well as presenting the campaign’s video, Ivete herself presented the new products to the consumers that were invited.

To celebrate Father’s Day, Grendene’s Cartago brand launched its first film, with actor Juliano Cazarré (from Rio Grande do Sul) and his two children. The campaign included digital media, TV, outdoor billboards, airline in-flight entertainment displays, and a feature in Avianca’s inflight magazine.


+

Our Melissa and Rider brands joined up in an unprecedented collaboration, for a re-launch of two of our iconic sandal models – the Melissa Rider Slide, and the Melissa Rider Papete.

The launch – on August 4 – brought together more than 2,000 people, at the Galleria Melissa São Paulo.

A highlight of the trade fairs in this quarter was our participation in the 86th MICAM Milano International Footwear Fashion and Business Fair – in Milan, Italy, on September 16–19. The MICAM ShoEvent is the world’s leading footwear trade fair for high-fashion products.

Awards

August 20, 2018: Grendene was recognized with the Valor 1000 Award for the fifth year running, with first place in the Textile, leather and Apparel category.

These awards are promoted by Valor Econômico newspaper, based on technical criteria researched by market auditors who evaluate the largest companies in the country with the best performance in 25 sectors of the Brazilian Economy.

Sep. 13, 2018: Grendene won the 2018 Estadão Empresas Mais award in the Textile and Clothing category.

This award recognizes companies with the best results and positive impact on the economy in 23 sectors.

To rank the top three companies in each segment, a total of 3,600 Brazilian companies were analyzed, in partnership with the FIA (Management Institute Foundation) and Austin Rating.

August 29, 2018: Grendene Kids won the prize in the ‘Success Story’ category with Paw Patrol at the 2018 Nickelodeon Event.

A feature of the event was the year’s Biggest and Best awards, recognizing outstanding partners over the year.


Operational results for 3Q18 and 9M18 (consolidated figures, IFRS) Gross revenue

Gross revenue was higher, mainly reflecting higher gross revenue per pair due to the effect, on export revenue, of the depreciation of the Real against world currencies.

Total

(Domestic market + exports) 3Q17 3Q18

Change, % 3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

Gross revenue (R$ mm) 723.9 732.8 1.2% 1,880.8 1,940.9 3.2%

Volume (million pairs) 45.2 44.0 (2.5%) 116.4 117.4 0.9%

Gross revenue per pair (R$) 16.02 16.64 3.9% 16.16 16.53 2.3%

723.9 732.8

3Q17 3Q18

Gross sales revenue (R$ mn)

45.2 44.0

3Q17 3Q18

Volume (million pairs)

16.02 16.64

3Q17 3Q18

Gross revenue per pair (R$)

82.5%

17.5%

Share of gross revenue3Q17

Domestic market Exports

81.8%

18.2%

Share of gross revenue3Q18


80.7%

19.3%

Share sales volume3Q17


83.7%

16.3%

Share sales volume3Q18



Domestic market

Domestic market 3Q17 3Q18 Change,

3Q17–3Q18 9M17 9M18

Change, %

9M17–9M18

Gross revenue, domestic market ( R$ mn) 597.2 599.5 0.4% 1,482.1 1,522.1 2.7%

Volume – exports (million pairs) 36.5 36.8 1.1% 87.4 91.0 4.1%

Gross revenue per pair, exports (R$) 16.39 16.27 (0.7%) 16.95 16.72 (1.4%)

1,880.8 1,940.9

9M17 9M18

Gross sales revenue (R$ mn)

116.4 117.4

9M17 9M18

Volume (million pairs)

16.16 16.53

9M17 9M18

Gross revenue per pair (R$)

78.8%

21.2%

Share of gross revenue9M17


78.4%

21.6%

Share of gross revenue9M18


75.1%

24.9%

Share of sales volume9M17


77.5%

22.5%

Share of sales volume9M18



Export market

The increase in average gross revenue per pair exported, from US$4.59 to US$4.69 in 3Q18, reflects the lower proportion of lower-priced product in the export mix – these are also the products with the highest volume.

Exports 3Q17 3Q18 Change,

3Q17–3Q18 9M17 9M18

Change, %

9M17–9M18

Gross revenue – exports ( R$ mn) 126.7 133.3 5.2% 398.7 418.8 5.0%

Gross revenue, exports (US$mn) 40.0 33.7 (15.9%) 125.6 116.2 (7.5%)

Volume – exports (million pairs) 8.7 7.2 (17.7%) 29.0 26.4 (8.8%)

Gross revenue per pair, exports (R$) 14.51 18.55 27.8% 13.76 15.84 15.1%

Gross revenue per pair, exports (US$) 4.59 4.69 2.2 % 4.34 4.40 1.4%

597.2 599.56.7 (4.4)

Gross revenue DM - 3Q17 Volume effect - DM Mix and gross revenue perpair effect - DM

Gross revenue DM - 3Q18

R$ m

iill

ion

Change in gross revenue from domestic market - effect of volume, mix and gross revenue per pair

36.5 36.8

3Q17 3Q18

Volume - DM (million pairs)

16.39 16.27

3Q17 3Q18

Gross revenue per pair - DM (R$)

1,482.1 1,522.159.8 (19.8)

Gross revenue DM - 9M17 Volume effect - DM Mix and gross revenue perpair effect - DM

Gross revenue DM - 9M18

R$ m

illi

on

Change in gross revenue from domestic market - effect of volume, mix and gross revenue per pair

87.4 91.0

9M17 9M18

Volume - DM (million pairs)

16.95 16.72

9M17 9M18

Gross revenue per pair - DM (R$)


126.7 106.6133.3(22.4) 2.3

26.7

Gross revenue -3Q17

Volume effect -EM

Mix and grossrevenue per pair

effect - EM

Gross revenuewithout FX effect

FX effect - EM Gross revenue -3Q18

R$ m

illi

on

Change in gross revenue from export market - effect of volume, mix and gross revenue per pair

40.0 33.7(7.0)

0.7

Gross revenue - 3Q17 Volume effect - EM Mix and gross revenue perpair effect - EM

Gross revenue - 3Q18

US

$ m

illi

on

Change in gross revenue from exports market in US$ - effect of volume, mix and gross revenue per pair

8.77.2

3Q17 3Q18

Volume - EM (million pairs)

14.5118.55

3Q17 3Q18

Gross revenue per pair - EM (R$)

398.7 368.9418.8(35.0) 5.2

49.9

Gross revenue -9M17

Volume effect -EM

Mix and grossrevenue per pair

effect - EM

Gross revenuewithout FX effect

FX effect - EM Gross revenue -9M18

R$ m

illi

on

Change in gross revenue from export market in US$ - effect of volume, mix and gross revenue per pair

125.6 116.2(11.0) 1.6

Gross revenue - 9M17 Volume effect - EM Mix and gross revenue perpair effect - EM

Gross revenue - 9M18

US

$ m

illi

on

Change in gross revenue from export market in US$ - effect of volume, mix and gross revenue per pair


Figures from the trade ministry, Secex and Abicalçados show Brazilian footwear exports in 9M18 as 1.6% lower in average price per pair in US dollars than in 9M17, 12.1% lower in revenue in dollars, and 10.7% lower in number of pairs exported.

By contrast, Grendene’s average price per pair exported was 1.4% higher in US dollars, with total export revenue in dollars 7.5% lower, and the number of pairs billed 8.8% lower.

In spite of the fall in exports, Grendene's share of total Brazilian footwear exports remained significant at 33.5% in 9M18 (32.8% in 9M17).

Net sales revenue

R$ mn 3Q17 3Q18 Change, % 3Q17–3Q18

9M17 9M17 Change, %

9M17–9M18

Net sales revenue 596.3 599.1 0.5% 1,546.6 1,591.0 2.9%

Cost of goods sold

COGS showed a higher percentage growth (5.2%) in 3Q18 than the growth in net revenue (0.5%), reflecting an increase in costs of raw materials, and other inputs such as freight – this can be seen in the 7.9% growth in COGS per pair, and in the chart below which shows growth in the price of resins and plasticizing oils.

R$ mn 3Q17 3Q18 Change,

3Q17–3Q18 9M17 9M18

Change, %

9M17–9M18

COGS 307.4 323.2 5.2% 812.7 859.6 5.8%

COGS per pair (R$) 6.80 7.34 7.9% 6.97 7.32 5.0%

29,0 26,4

9M17 9M18

Volume - EM (million pairs)

13,76 15,84

9M17 9M18

Gross revenue per pair - EM (R$)

596.3 599.1

3Q17 3Q18

Net sales revenue (R$ mn)

1,546.6 1,591.0

9M17 9M18

Net sales revenue (R$ mn)

307.4 323.2

3Q17 3Q18

COGS (R$ mn)

812.7 859.6

9M17 9M18

COGS (R$ mn)


The chart below shows the movement in market prices (ICIS-LOR) in dollars, converted to Reais, of Grendene’s principal raw materials, and the change in Grendene’s average cost per pair, for the quarters of 2016 to 2018.

Thousands of pairs

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

34,906 33,599 44,558 50,494 37,860 33,361 45,181 54,944 40,442 32,961 44,041

Sources: Petrochemicals prices from ICIS-LOR; Grendene quarterly data.

As can be seen, there was an increase in the international prices of resins and also of plasticizing oils. Both effects were amplified by the weakening of the Brazilian currency, with an adverse effect on gross margin – which was 2.5 p.p. lower YoY in 3Q18 and 1.5% lower YoY in 9M18.

Gross profit

In comparing 9M18 and 9M17 we need to take into account that: (i) last year the Proapi export incentive subsidy made a contribution of R$ 11mn to gross profit in the first quarter; (ii) this effect no longer existed in the third quarter; and (iii) in the last month of the second quarter of this current year (2Q18) we had the reduction of the Reintegra tax credit on exports, from 2% to 0.1%, which will also effect 4Q18.

On the Reintegra tax credit, Grendene has filed a challenge in the administrative sphere, since the 90-day legal implementation period that we understood to be obligatory was not obeyed.

However, the main effect on gross profit was an increase in costs. We had higher costs of energy, depreciation, freight and inputs in general – these are costs we can do little to manage. At the same time, we also had lower productivity, which translates into a higher unit cost of labor. We will be seeking to reduce these costs.

R$ mn 3Q17 3Q18 Change, %, 3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

Gross profit 288.9 275.9 (4.5%) 733.9 731.4 (0.3%)

Gross margin, % 48.5% 46.0% (2.5 p.p.) 47.5% 46.0% (1.5 p.p.)

6.80 7.34

3Q17 3Q18

COGS per pair (R$)

6.97 7.32

9M17 9M18

COGS per pair (R$)

7.256.60

6.09 5.97

6.95 7.216.80

6.16

7.09 7.58 7.34

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housand /

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Plastifying oils / ton. (FOB ) - R$ PVC resin / ton. (CFR) - R$ COGS per pair - R$

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Selling expenses

Selling expenses have been kept under control, rising less than inflation, at around the same rate as sales:

R$ mn 3Q17 3Q18 Change, %, 3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

Selling expenses 148.1 151.5 2.3% 371.6 379.6 2.2%

% of net revenue 24.8% 25.3% 0.5 p.p. 24.0% 23.9% (0.1 p.p.)


With the increase in online marketing, as use of less traditional media is increased, advertising expenses have fallen as a proportion of net revenue, and are below the range that we indicated in the past, of between 8% and 10% of net revenue.


3Q17–3Q18 9M17 9M18

Change, %

9M17–9M18

Advertising expenses 37.7 40.6 7.4% 84.8 85.9 1.3%

% of net revenue 6.3% 6.8% 0.5 p.p. 5.5% 5.4% (0.1 p.p.)

165.8 149.0214.0 192.4

249.6 281.2 286.6 310.1264.5 288.9 275.9

46.0%39.7%

49.0% 46.5% 50.3% 47.0% 47.7% 50.4% 49.3%48.5% 46.0%

3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18

Gross profit (R$ mn) Gross margin (%)

335.6 375.3 420.8 397.3556.2 671.5 655.3 717.1 672.1 733.9 731.4

39.8% 38.5% 37.7% 40.8%45.5% 45.2% 43.9% 46.9% 47.4% 47.5% 46.0%

9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 9M17 9M18

Gross profit (R$ mn) Gross margin (%)

148.1 151.5

24.8% 25.3%

3Q17 3Q18

Selling expenses (R$ mn)

% of net revenue

371.6 379.6

24.0% 23.9%

9M17 9M18

Selling expenses (R$ mn)

% of net revenue


General and administrative (G&A) expenses

We continued to make progress in optimization of expenses:

R$ mn 3Q17 3Q18 Change, % 3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

G&A 23.1 22.9 (1.0%) 68.9 67.8 (1.6%)

% of Net revenue 3.9% 3.8% (0.1 p.p.) 4.5% 4.3% (0.2 p.p.)

Ebit and Ebitda

Ebit

Ebit (Earnings before interest and taxes) can be seen as operational profit before financial effects. Grendene believes that because it has a high cash position which generates significant financial revenues, the operational profit of its activity characterized by Ebit is a better indicator of its operational performance.

Reconciliation of Ebit and Ebitda*

R$ mn 3Q17 3Q18 Change, % 3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

Net profit for the period 146,727 112,353 (23.4%) 410,476 334,215 (18.6%)

Non-controlling stockholders - - - (26) - (100.0%)

Taxes on profit 20,082 13,140 (34.6%) 59,749 46,281 (22.5%)

Net financial revenue (expenses) (55,347) (29,115) (47.4%) (191,841) (101,481) (47.1%)

Accounting Ebit 111,462 96,378 (13.5%) 278,358 279,015 0.2%

Depreciation and amortization 15,274 16,553 8.4% 45,079 49,112 8.9%

Accounting Ebitda 126,736 112,931 (10.9%) 323,437 328,127 1.5%

Ebit margin (formal accounting) 18.7% 16.1% (2.6 p.p.) 18.0% 17.5% (0.5 p.p.)

Ebitda margin (formal accounting) 21.3% 18.9% (2.4 p.p.) 20.9% 20.6% (0.3 p.p.)

* Stated as per CVM Instruction 527 of October 4, 2012.

37.7 40.6

6.3% 6.8%

3Q17 3Q18

Advertising expenses (R$ mn)

% of net revenue

84.8 85.9

5.5% 5.4%

9M17 9M18

Advertising expenses (R$ mn)

% of net revenue

23.1 22.9

3.9% 3.8%

3Q17 3Q18

G&A expenses (R$ mn) % of net revenue

68.9 67.8

4.5% 4.3%

9M17 9M18

G&A expenses (R$ mn) % of net revenue


Ebitda:

Our business is low capital-intensive: Depreciation was approximately 3% of net revenue in both 9M17 and 9M18. Grendene regularly invests an amount equivalent to its depreciation to keep its production capacity updated. It also maintains positive net cash, and has no costs of interest that need to be paid with funds from operations. As a result we believe that assessing Ebit makes more sense as an indicator for the Company’s management.

Net financial revenue (expenses)

For 9M18 Grendene reports Net financial revenues of R$ 101.5mn, but this is R$ 90.3mn lower than the Net financial revenues for 9M17, as shown:

R$ ’000 3Q17 3Q18 Change, % 3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

Interest received from clients 505 577 14.3% 1,618 1,697 4.9%

Revenue from cash investments 40,267 32,971 (18.1%) 137,067 102,638 (25.1%)

Other financial revenues 200 1,073 436.5% 1,979 4,374 121.0%

Subtotal 40,972 34,621 (15.5%) 140,664 108,709 (22.7%)

Costs of financings (2,489) (2,515) 1.0% (7,632) (7,857) 2.9%

Cofins and PIS tax on Financial revenues (1,899) (1,693) (10.8%) (6,713) (5,275) (21.4%)

Other financial expenses (854) (1,183) 38.5% (2,782) (3,259) 17.1%

Subtotal (5,242) (5,391) 2.8% (17,127) (16,391) (4.3%)

Net financial revenues (expenses)(1) 35,730 29,230 (18.2%) 123,537 92,318 (25.3%)

Op. revenue on FX derivatives (BM&FBovespa) 5,707 25,214 341.8% 22,489 35,954 59.9%

Foreign exchange gains 7,079 15,341 116.7% 25,848 63,626 146.2%

Subtotal 12,786 40,555 217.2% 48,337 99,580 106.0%

Op. expenses on FX derivatives (BM&FBovespa) (584) (34,568) 5,819.2% (7,432) (68,604) 823.1%

Expenses of FX variation (9,150) (17,148) 87.4% (25,593) (61,212) 139.2%

Subtotal (9,734) (51,716) 431.3% (33,025) (129,816) 293.1%

Net gain (loss) on FX variations (2) 3,052 (11,161) (465.7%) 15,312 (30,236) (297.5%)

Adjustments to present value (APV) 16,565 11,046 (33.3%) 52,992 39,399 (25.7%)

Financial result – APV (3) 16,565 11,046 (33.3%) 52,992 39,399 (25.7%)

Net financial revenue: (1) + (2) + (3) 55,347 29,115 (47.4%) 191,841 101,481 (47.1%)

Average interest rates (as measured by the average Selic rate) were 40.4% lower in 9M18 (at 6.5% p.a.) than in 9M17 (10.9% p.a.).

111.4 96.4

18.7%16.1%

3Q17 3Q18

Ebit (R$ mn) Ebit margin (%)

278.4 279.0

18.0% 17.5%

9M17 9M18

Ebit (R$ mn) Ebit margin (%)

126.7 112.9

21.3%18.9%

3Q17 3Q18

Ebitda (R$ mn) Ebitda margin (%)

323.4 328.1

20.9% 20.6%

9M17 9M18

Ebitda (R$ mn) Ebitda margin (%)


Net profit

Net profit in 9M18 was R$ 90.3mn lower than in 9M17 – this difference was much greater than the small increase in operational profit (Ebit), of R$ 0.7mn. As we have said before, overall there was low demand in the domestic market and the same happened in several export destinations, especially in Latin America. The weakening of the Real against world currencies; the transport strike; and the political uncertainties were translated into an increase in prices of various inputs, preventing us from achieving our objective of offsetting the fall in financial revenues with an equal or better improvement in the results of operation.


3Q17–3Q18 9M17 9M18

Change, %

9M17–9M18

Net profit 146.7 112.4 (23.4%) 410.5 334.2 (18.6%)

Net margin, % 24.6% 18.8% (5.8 p.p.) 26.5% 21.0% (5.5 p.p.)

Capex (fixed and intangible investment)

Our investments in 9M18 were in: maintenance of industrial buildings and facilities; replacement of fixed assets; and acquisition of new equipment for modernization of the manufacturing plant and various projects to improve the company’s efficiency.


3Q17–3Q18 9M17 9M18

Change, %

9M17–9M18

Capex investment 25.5 16.5 (35.1%) 77.1 54.3 (29.6%)

Cash generation

In 9M18, cash from operations, of R$ 427.0mn, was allocated to payment of: (i) loans in the net amount of R$ 55.4mn; (ii) capital expenditure on PP&E and intangible assets, R$ 54.3mn; (iii) cash investments, in the net amount of R$ 24.5mn; (iv) dividends and Interest on Equity, totaling R$ 274.0mn; and (v) a net loss of R$ 29.1mn on sale of treasury shares for exercise of stock options. This resulted in a reduction of R$ 10.3mn in the amount held in current account and very short term cash investments. The complete cash flow is shown in Appendix IV.

Net cash and cash equivalents

Grendene continues to have a solid financial situation. Net cash (cash, cash equivalents and short and long-term financial investments, less short and long-term loans and financings) on Sep. 30, 2018 totaled R$ 1.8 billion, or 8.5% more than at Dec. 31, 2017 (R$ 1.7 billion).

The proportion of 12-month net revenue held in cash and cash equivalents and cash investments increased from 79.1% at Dec. 31, 2017 to 82.6% at Sep. 30, 2018.

Changes in the cash position (cash, cash equivalents and short and long-term financial investments), loans and financings and net cash are as follows:

146.7112.4

24.6%

18.8%

3Q17 3Q18

Net profit (R$ mn) Net margin (%)

410.5334.2

26.5%

21.0%

9M17 9M18

Net profit (R$ mn) Net margin (%)


Structure of Assets and Liabilities; value indicators

Assets

Sep. 30, 2017

Dec. 31, 2017

Sep. 30, 2018

Cash and cash equivalents plus cash investments

Working capital (excluding Cash and cash equivalents and cash investments)

Non-current assets

Liabilities: Current and non-current liabilities

Sep. 30, 2017

Dec. 31, 2017

Sep. 30, 2018

Liabilities – Financial

Liabilities – Operational

Consolidated Stockholders’ equity

1,873.5 1,781.4 1,742.9 1,780.6 2,054.4 1,932.61,896.6

(193.3) (120.4) (106.6) (123.6) (203.5) (143.3) (98.5)

1,680.2 1,661.0 1,636.3 1,657.01,850.9 1,789.3 1,798.1

(500)

500

1500

2500

31-Mar-17 30-Jun-17 30-Sep-17 31-Dec-17 31-Mar-18 30-Jun-18 30-Sep-18

R$ m

illio

n

Loans and financings (short-term and long term)

Cash and cash equivalents plus cash investments (short-term and long term)

Net cash

56.1%29.0%

14.9%

54.7%

29.4%

15.9%

57.3%28.3%

14.4%

3.2% 6.5%

90.3%

3.5% 6.6%

89.9%

2.7% 6.6%

90.7%


Value indicators

* Sep. 30, 2018. / ** Last 12 months.

Dividends

In 3Q18 Grendene paid interim dividends totaling R$ 47.2mn, 35.7% less than the dividends distributed in 3Q17 (R$ 73.5mn) – bringing the total in 9M18 to R$ 171.6mn, 24.8% less than in 9M17 (R$ 228.1mn).

Under Grendene’s by-laws, the minimum obligatory dividend is calculated as 25% of the net profit remaining for the year after payments to the reserves specified by law. Based on the results at Sep. 30, 2018, maintaining the policy of quarterly interim dividends and in accordance with the policy published on February 13, 2014, the Company is making advance payment of the third tranche of interim dividends, subject to ratification by the Annual General Meeting of Stockholders that approves the accounts for the year 2018, in the amount of R$ 47,225,071.31, equivalent to R$ 0.052457439 per share, excluding the shares in treasury, to be paid from November 21, 2018.

This will be payable to holders of Grendene shares (GRND3) in the company’s records at November 5, 2018 (cut-off date). The (GRND3) will be traded ex-dividend on the São Paulo stock exchange (B3) on November 6, 2018.

Basis for the distribution of dividends1 – September 30, 2018

Grendene S.A. (Holding company) R$

Net profit for the period 334,214,940.77

( – ) Tax Incentives reserve (153,539,102.77)

Basis for calculation of the Legal reserve 180,675,838.00

( – ) Constitution of Legal reserve (9,033,791.90)

Basis of the dividend for the profit reported up to September 30, 2018 171,642,046.10

( – ) 1st advance distribution (dividends plus Interest on Equity), paid May 23, 2018 90,731,045.64

( – ) 2nd advance distribution (dividends), paid August 22, 2018 33,685,929.15

Balance available for 3rd advance distribution of dividends 47,225,071.31

Mandatory minimum dividend – 25% 42,910,511.53

Dividend proposed in excess of the obligatory minimum dividend 128,731,534.57

Dividends Date approved Ex-date Date of start of

payment Gross value R$

Gross value per share R$

Net value R$ Net value per

share R$

Dividend 1, 2 April 26, 2018 May 8, 2018 May 23, 2018 90,731,045.64 0.100570903 90,731,045.64 0.100570903

Dividend 1 July 26, 2018 August 8, 2018 August 22, 2018 33,685,929.15 0.037418208 33,685,929.15 0.037418208

Dividend 1 October 25,

2018 November 6,

2018 November 21,

2018 47,225,071.31 0.052457439 47,225,071.31 0.052457439

Total 171,642,046.10 0.190446550 171,642,046.10 0.190446550

1 Dividends approved subject to ratification by the AGM that considers the financial statements for the 2018 business year.

2 Value per share adjusted for the stock split approved at the EGM of April 23, 2018.

2.102.69

3.64

0.65

6.73

10.35

Cash and cashequivalents pluscash investments

per share *

Net working capitalper share *

Book value pershare *

Profit per share ** Share price * Share price * / Profitper share **


(*) Payout: Dividend plus net Interest on Equity, divided by (net profit after constitution of the legal reserves).

(**) Dividend yield: Dividend per share + net Interest on Equity per share, divided by weighted average price of the share in the annualized period.

Corporate events

July 26, 2018 – Notice to stockholders: This noticed stated August 22, 2018 as start date of payment of the second interim dividend, of R$ 33,685,929.15 (R$ 0.037418208 per share), for the 2018 business year. The shares traded ex-dividend on August 7, 2018.

October 25, 2018 – Meeting of the Board of Directors: This meeting approved: the financial information for the third quarter of 2018; the third interim dividend, of R$ 47,225,071.31, based on the profit to September 30, 2018; and Internal Regulations of the Board of Directors.

Capital markets

In the first nine months of 2018 the price of Grendene’s shares (GRND3) depreciated by 26.5%, when reinvestment of dividends is included, while the Bovespa index rose by 3.8% over the same period. Average daily trading volume was R$ 6.2mn (R$ 8.5mn in 9M17).

The table below shows the number of shares traded, financial volume, and daily average trading. (The figures are adjusted to reflect the stock split approved at the EGM of April 23, 2018.)

Period No. of

trading sessions

No. of trades

No. of shares

Volume R$

Price R$ Average number

of shares Average volume, R$

Weighted average

Close Per

trade Daily

Per trade

Daily

9M17 187 291,554 195,321,600 1,588,778,902 8.13 8.91 670 1,044,501 5,449 8,496,143

9M18 186 331,847 134,504,800 1,154,675,893 8.58 6.73 405 723,144 3,479 6,207,934

The lowest market price for GRND3 in the 52 weeks to the end of September was R$ 6.73, on September 29, 2018. The highest market price for the 12-month period was R$ 10.50 on February 8, 2018. The dividend yield calculated on the basis of the weighted average price of the share in 9M18 was 3.0% p.a. (4.1% p.a. in 9M17).

This chart shows the performance of Grendene ON shares compared to the Bovespa index (Base: Dec. 31, 2017 = 100), and daily trading volume.

R$ 0.225R$ 0.253

R$ 0.190

52.6% 56.1% 52.8%

8.0% 4.1% 3.0%

9M16 9M17 9M18

%R

$ p

er

sh

are

Dividend per share (R$) Payout, % (*) Dividend yield, % (**)

0

50

100

150

-

5

10

15

20

25

30

31-Dec-17 31-Mar-18 30-Jun-18 30-Sep-18

Ba

se

: De

c. 3

1, 2

01

7 =

10

0V

olu

me

-R

$ m

n

Daily trading volume and GRND3 vs. Ibovespa

Daily trading volume, R$ GRND3 - with reinvest. of dividends IBOVESPA


Appendix I – Consolidated gross revenue, volumes, gross revenue per pair and market share

Gross revenue – R$ ’000 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Change, % 3Q17–

3Q18 9M17 9M18

Change, % 9M17–9M18

Domestic market 470,696 414,185 597,202 624,466 506,142 416,469 599,522 0.4% 1,482,083 1,522,133 2.7%

Exports 150,260 121,803 126,681 222,382 157,609 127,923 133,271 5.2% 398,744 418,803 5.0%

Exports (US$) 47,809 37,901 40,040 68,478 48,588 35,479 33,668 (15.9%) 125,648 116,250 (7.5%)

Total 620,956 535,988 723,883 846,848 663,751 544,392 732,793 1.2% 1,880,827 1,940,936 3.2%

Volume (thousands of pairs)

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Change, 3Q17–3Q18

9M17 9M18 Change, %

9M17–9M18

Domestic market 26,844 24,133 36,448 38,950 29,451 24,705 36,856 1.1% 87,425 91,012 4.1%

Exports 11,016 9,228 8,733 15,994 10,991 8,256 7,185 (17.7%) 28,977 26,432 (8.8%)

Total 37,860 33,361 45,181 54,944 40,442 32,961 44,041 (2.5%) 116,402 117,444 0.9%

Gross revenue per pair (R$) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Change, % 3Q17–

3Q18 9M17 9M18

Change, % 9M17–9M18

Domestic market 17.53 17.16 16.39 16.03 17.19 16.86 16.27 (0.7%) 16.95 16.72 (1.4%)

Exports 13.64 13.20 14.51 13.90 14.34 15.49 18.55 27.8% 13.76 15.84 15.1%

Exports (US$) 4.34 4.11 4.59 4.28 4.42 4.30 4.69 2.2% 4.34 4.40 1.4%

Total 16.40 16.07 16.02 15.41 16.41 16.52 16.64 3.9% 16.16 16.53 2.3%

US dollar (USD 1.00 = R$) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Change, % 3Q17–

3Q18 9M17 9M18

Change, 9M17–9M18

Dollar at end of period 3.1684 3.3082 3.1680 3.3080 3.3238 3.8558 4.0039 26.4% 3.1680 4.0039 26.4%

Average US dollar 3.1429 3.2137 3.1639 3.2475 3.2438 3.6056 3.9584 25.1% 3.1735 3.6026 13.5%

% of Gross revenue 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 9M17 9M18

Domestic market 75.8% 77.3% 82.5% 73.7% 76.3% 76.5% 81.8% 78.8% 78.4%

Exports 24.2% 22.7% 17.5% 26.3% 23.7% 23.5% 18.2% 21.2% 21.6%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

% of total volumes 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 9M17 9M18

Domestic market 70.9% 72.3% 80.7% 70.9% 72.8% 75.0% 83.7% 75.1% 77.5%

Exports 29.1% 27.7% 19.3% 29.1% 27.2% 25.0% 16.3% 24.9% 22.5%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%


Appendix II – Consolidated Statement of financial position, IFRS (R$ ’000)

Assets Dec. 31, 2017 % Sep. 30, 2018 % of total % of

previous

Current 2,846,838 79.6% 2,735,855 75.6% 96.1%

Cash and cash equivalents 30,119 0.8% 19,851 0.5% 65.9%

Cash investments

Securities at amortized cost 1,537,477 43.0% 1,471,206 40.7% 95.7%

Accounts receivable from clients 850,345 23.8% 772,129 21.3% 90.8%

Inventories 279,267 7.8% 327,324 9.0% 117.2%

Tax credits 50,810 1.4% 32,090 0.9% 63.2%

Income and Social Contribution taxes recoverable 3,841 0.1% 23,294 0.6% 606.5%

Other receivables 76,828 2.1% 59,519 1.6% 77.5%

Prepaid costs and expenses 3,888 0.1% 8,018 0.2% 206.2%

Other credits 14,263 0.4% 22,424 0.6% 157.2%

Non-current 729,170 20.4% 881,925 24.4% 120.9%

Non-current assets 277,116 7.7% 425,363 11.8% 153.5%

Cash investments

Securities at amortized cost 213,049 6.0% 405,512 11.2% 190.3%

Escrow deposits 1,316 - 1,114 - 84.7%

Tax credits 782 - 859 - 109.8%

Deferred income tax and Social Contribution tax 54,627 1.5% 10,509 0.3% 19.2%

Other credits 7,342 0.2% 7,369 0.2% 100.4%

Investments 412 - 412 - 100.0%

Property, plant and equipment 422,361 11.8% 425,201 11.8% 100.7%

Intangible assets 29,281 0.8% 30,949 0.9% 105.7%

Total assets 3,576,008 100.0% 3,617,780 100.0% 101.2%

Liabilities and Stockholders’ equity Dec. 31, 2017 % Sep. 30, 2018 % % of

previous

Current 322,074 9.0% 307,012 8.5% 95.3%

Loans and financings 89,666 2.5% 69,923 1.9% 78.0%

Suppliers 36,705 1.0% 49,051 1.4% 133.6%

Contractual obligations – Licenses 17,618 0.5% 18,281 0.5% 103.8%

Commissions payable 41,622 1.2% 37,927 1.0% 91.1%

Taxes 37,597 1.1% 22,633 0.6% 60.2%

Income tax and Social Contribution tax payable 6,425 0.2% 793 - 12.3%

Salaries and related charges payable 59,942 1.7% 89,248 2.5% 148.9%

Provision for labor and tax risks 833 - 3,834 0.1% 460.3%

Advances from clients 31,384 0.9% 11,370 0.3% 36.2%

Other accounts payable 282 - 3,952 0.1% 1,401.4%

Non-current 36,325 1.0% 30,914 0.9% 85.1%

Loans and financings 33,961 0.9% 28,564 0.8% 84.1%

Provision for employment-law litigation risk 452 - 468 - 103.5%

Other debits 1,912 0.1% 1,882 0.1% 98.4%

Stockholders’ equity 3,217,609 90.0% 3,279,854 90.7% 101.9%

Share capital 1,231,302 34.4% 1,231,302 34.0% 100.0%

Capital reserves 8,385 0.2% 7,478 0.2% 89.2%

Shares in treasury (134) - (15,564) (0.4%) 11,614.9%

Profit reserves 1,965,609 55.0% 1,990,225 55.0% 101.3%

Retained earnings - - 47,225 1.3% -

Other comprehensive income 12,447 0.3% 19,188 0.5% 154.2%

Total liabilities and Stockholders’ equity 3,576,008 100.0% 3,617,780 100.0% 101.2%


Appendix III – Consolidated Profit and loss account (R$ ’000)

R$ ’000 3Q17 % 3Q18 % Change, %

3Q17–3Q18

Domestic market 597,202 100.1% 599,522 100.1% 0.4%

Exports 126,681 21.2% 133,271 22.2% 5.2%

Gross revenue from sales and services 723,883 121.4% 732,793 122.3% 1.2%

Sales returns and sales taxes (98,601) (16.5%) (105,477) (17.6%) 7.0%

Discounts given to clients (28,953) (4.9%) (28,224) (4.7%) (2.5%)

Deductions from sales (127,554) (21.4%) (133,701) (22.3%) 4.8%

Net sales revenue 596,329 100.0% 599,092 100.0% 0.5%

Cost of goods sold (307,395) (51.5%) (323,233) (54.0%) 5.2%

Gross profit 288,934 48.5% 275,859 46.0% (4.5%)

Operational revenues (expenses) (177,472) (29.8%) (179,481) (30.0%) 1.1%

Selling expenses (148,088) (24.8%) (151,511) (25.3%) 2.3%

G&A (23,136) (3.9%) (22,901) (3.8%) (1.0%)

Other operational revenues 3,707 0.6% 1,518 0.3% (59.1%)

Other operational expenses (9,955) (1.7%) (6,587) (1.1%) (33.8%)

Profit before fin. rev. (exp.) and taxes (Ebit) 111,462 18.7% 96,378 16.1% (13.5%)

Financial revenues 70,323 11.8% 86,222 14.4% 22.6%

Financial expenses (14,976) (2.5%) (57,107) (9.5%) 281.3%

Net financial revenue (expenses) 55,347 9.3% 29,115 4.9% (47.4%)

Pretax profit 166,809 28.0% 125,493 20.9% (24.8%)

Income and Social Contribution tax:

Current (21,518) (3.6%) (15,491) (2.6%) (28.0%)

Deferred 1,436 0.2% 2,351 0.4% 63.7%

Net profit for the period 146,727 24.6% 112,353 18.8% (23.4%)

Depreciation and amortization 15,274 2.6% 16,553 2.8% 8.4%

Ebitda 126,736 21.3% 112,931 18.9% (10.9%)

R$ ’000 9M17 % 9M18 % Change, % 9M17–9M17

Domestic market 1,482,083 95.8% 1,522,133 95.7% 2.7%

Exports 398,744 25.8% 418,803 26.3% 5.0%

Gross revenue from sales and services 1,880,827 121.6% 1,940,936 122.0% 3.2%

Sales returns and sales taxes (262,385) (17.0%) (275,159) (17.3%) 4.9%

Discounts given to clients (71,859) (4.6%) (74,745) (4.7%) 4.0%

Deductions from sales (334,244) (21.6%) (349,904) (22.0%) 4.7%

Net sales revenue 1,546,583 100.0% 1,591,032 100.0% 2.9%

Cost of goods sold (812,675) (52.5%) (859,669) (54.0%) 5.8%

Gross profit 733,908 47.5% 731,363 46.0% (0.3%)

Operational revenues (expenses) (455,550) (29.5%) (452,348) (28.4%) (0.7%)

Selling expenses (371,636) (24.0%) (379,639) (23.9%) 2.2%

G&A (68,941) (4.5%) (67,817) (4.3%) (1.6%)

Other operational revenues 8,412 0.5% 8,511 0.5% 1.2%

Other operational expenses (23,385) (1.5%) (13,403) (0.8%) (42.7%)

Profit before fin. rev. (exp.) and taxes (Ebit) 278,358 18.0% 279,015 17.5% 0.2%

Financial revenues 241,993 15.6% 247,688 15.6% 2.4%

Financial expenses (50,152) (3.2%) (146,207) (9.2%) 191.5%

Net financial revenue (expenses) 191,841 12.4% 101,481 6.4% (47.1%)

Pretax profit 470,199 30.4% 380,496 23.9% (19.1%)

Income and Social Contribution tax:

Current (15,821) (1.0%) (2,163) (0.1%) (86.3%)

Deferred (43,928) (2.8%) (44,118) (2.8%) 0.4%

Minority interests 26 - - - -

Net profit for the period 410,476 26.5% 334,215 21.0% (18.6%)

Depreciation and amortization 45,079 2.9% 49,112 3.1% 8.9%

Ebitda 323,437 20.9% 328,127 20.6% 1.5%


Appendix IV – Consolidated Statement of cash flows (R$ ’000)

Statements of cash flow Sep. 30, 2017 Sep. 30, 2018

Cash flow from operations

Net profit for the period 410,450 334,215

Adjustments reconciling profit to cash from ops

Depreciation and amortization 45,079 49,112

Deferred income tax and Social Contribution tax 44,150 44,118

FX loss on investments 7,774 -

PP&E and Intangible – residual value after write-down 11,202 3,878

Provision for losses / Reversals (4,461) -

Stock options plan 4,777 4,934

Provision for doubtful receivables 3,112 (5,579)

Punctuality discounts – estimated (495) 675

Provision for obsolete inventory (707) 2,145

Provision for labor and tax risks (1,272) 3,017

Interest expenses on financing 2,667 1,367

Interest revenue on cash investments (134,107) (101,711)

FX variations, net 1,391 32,345

389,560 368,516

Variations in assets and liabilities:

Accounts receivable from clients 56,178 83,120

Inventories (33,619) (50,202)

Other accounts payable (18,897) 4,383

Suppliers (1,186) 12,346

Salaries and related charges payable 29,651 29,306

Taxes 5,162 4,536

Income tax and Social Contribution tax payable (2,982) (5,632)

Advances from clients 524 (20,014)

Other accounts payable 3,248 608

Net cash from operational activities 427,639 426,967

Cash flow from investment:

Acquisition of PP&E and intangible (77,112) (54,258)

Cash investments (2,175,357) (2,554,060)

Redemption of cash investments 2,105,123 2,417,724

Interest received 244,626 111,855

Loss on disposal of investment (46) -

Net cash flow from (used in) investment activities 97,234 (78,739)

Cash flow in financing activities:

Loans obtained 246,791 298,217

Payment of loans (268,039) (352,378)

Interest paid (2,187) (1,190)

Dividends paid (143,256) (144,047)

Interest on Equity paid (160,000) (130,000)

Acquisition of treasury shares (9,837) (35,148)

Sale of treasury shares: exercise of stock options 5,472 6,050

Net cash used in financing activities (331,056) (358,496)

Increase (reduction) in Cash and cash equivalents 193,817 (10,268)

Statement of variation in cash and cash equivalents

At start of period 20,663 30,119

At end of period 214,480 19,851

Increase (reduction) in Cash and cash equivalents 193,817 (10,268)

Documents

Highlights of results: 3Q18 and 9M18static.grendene.aatb.com.br/releases/1422_GRND_PR_3Q18.pdf · Results – 3Q18 and 9M18 Page 1 of 22 Results: 3Q18 and 9M18 B3 ticker: GRND3