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1
Q4 2017
RESULTS
W E M A K E F O R E S T R Y M A T T E R
2
Relevant Issues ......................................................................................................... 3
MDF business unit .................................................................................................... 3
Teak business unit .................................................................................................... 4
Results analysis ......................................................................................................... 5
Environmental and social development ................................................................. 10
Stock development ................................................................................................. 11
Investor relations ................................................................................................... 11
Financial statements .............................................................................................. 12
Results’ Conference Call
Thursday March 1st, 2018
10:00 a.m. Mexico Time
Tel: (55) 4624 0133
Dial in Code: 00424338
3
Relevant Issues
• During the quarter Proteak sold 100,100 CO2 credits to ENI Shipping Company through the broker South Pole.
• During the Q4 17, the first amortization of the principal and interests of the credit that Multiva granted to
PROMDF for working capital in 2016 was paid.
MDF business unit
Comercialization
After 18 months of the start of operations, Tecnotabla closed the year with an estimated market share of 21%, supported
by the production strategy of high quality boards and a value added product approach. Tecnotabla MDF board sales
continue as of quarter end with a positive trend, growing 5% vs Q4 16 and 96% vs 2016FY. In 2017, the MDF market in
Mexico continues to grow with a favorable trend. According to our analysis and estimations, the MDF market has been
growing over 10% each year showing great opportunities in the next 24 months.
Source: Proteak Analysis, ANAFATA, SIAVI Analysis Source: Composite Panel Association with Datamyne 2017.
Proteak Analysis
During the quarter, MDF prices remained in line with the last quarter, nevertheless prices continue to be low compared
to historic data and international standards. With the market consolidation and the current macroeconomic conditions,
we expect that the prices will continue to strenghten. During the first months of 2018 MDF prices are already showing a
positive trend.
On the other side, we continue to focus our commercialization strategy efforts on value added products to create a better
mix. To develop value added MDF products market, we continue to participate actively in events such as trade fairs and
personalized events with clients to promote the use of Melamine MDF.
Tecnotabla
13%
Tecnotabla
21%
Other87%
Other79%
2016 2017
Estimated Market Share
600
895
2013 2018e
MDF Market in México(M m3)
Imp
ort
s 9
1%
Imp
orts 4
5%
4
Quarter sales totalled MxP 194MM, 4% over the Q4 2016 supported by price, a favorable mix of value added sales and
the development of our US export business.
Production
In 2017 we produced 192,986 m3, 1.9x more than during the same period in 2016. After 20 months of operations, the
plant is on the final stage of stabilization. The ramp-up production is in line with the plan and has maintained the growth
curve, reaching the expected installed capacity level with que expected quality, and reducing the waste production 2pp
vs 2016. During Q4 2017 the production decreased vs Q3 2017 due to a schedulled stop for major maintenance, as well
as stops related to the integration process of the power generation turbine.
We continue to maintain adequate inventory levels to steadily supply the market demand considering market seasonality,
production capacity, schedulled maintenance stops and required stops for the turbine and the resine application system
in the first quarter of 2018.
With the main system of the plant functioning efficiently, we continue to progress in the optimization of the auxiliary
systems that will allow us to reach the expected production costs. The cogeneration turbine succesfully completed the
start-up and stabilization tests and is ready to be integrated to the production process in Q1 2018. Additionally, the resine
plant continues to increase its production, and during the quarter the produce volume was close to the installed capacity.
During the next months we expect to continue improving the resine cost per m3 through the use of the resine plant and
the start-up of the EvoJet system.
Forestry
During Q4 2017 we continued with the 2017/2018 plantation campaign, which considers 2,000 ha of Eucalyptus. With
this, we will reach our goal for planted hectares of certified Eucalyptus to supply the MDF plant. Maintenance of the
2017/2018 campaign was concluded to ensure that the plantations remain with a good level of conservation and
productivity.
Teak business unit
During Q4 2017, Proteak designed a strategy to keep its presence in Asian markets. This includes the commercialization
of Teak from our own plantations, specifically our plantations in Costa Rica, combined with the commercialization of
mature Teak from third-parties in Mexico, and other countries in central and south America.
Nevertheless, it’s worth mentioning that, in the short and medium term, commercial activities from our own Teak
plantations will remain limited due to its age and maturity, and no significant activities are expected.
5
Results analysis
I. Income statement analysis
Sales
In 2017, net income was MxP 1,035, 41% growth vs 2016, mainly driven by the growth in MDF sales after one full year of
operation. The quarterly net income totaled MxP 248MM, in line with the registered income the same period last year,
but with a difference in mix between Boards sales and Teak income.
MxP MM Q4 2017 Q4 2016 VAR B/(W) % YTD17 YTD16 VAR B/(W) %
BOARD SALES
Volume m3 42,216 40,195 2,021 5% 175,881 89,803 86,078 96%
Sales 193.9 186.7 7.2 4% 836.3 445.8 390.5 88%
Other Income 2.7 16.6 (13.9) (84)% 20.9 54.3 (33.5) (62)%
Revaluations of Biological Inventory 4.3 (2.4) 6.7 n/a 14.8 8.1 6.7 n/a
TOTAL INCOME 200.9 200.9 (0 .0) (0)% 872.0 508.2 363.8 72%
Cost of sales (145.2) (220.4) 75.2 (34)% (766.7) (513.6) (253.1) 49%
GROSS PROFIT 55.7 (19.5) 75.2 n/a 105.3 (5 .4) 110.7 n/a
Gross Profit Margin 28% (10)% 37% 12% (1)% 13%
TEAK SALES
Sales 15.1 17.4 (2.3) (13)% 59.0 87.6 (28.6) (33)%
Other Income (8.2) (1.3) (7.0) 553% (3.8) (5.6) 1.8 (33)%
Revaluations of Biological Inventory 40.2 33.5 6.7 20% 107.3 142.2 (34.9) (25)%
TOTAL INCOME 47.1 49.6 (2 .5) (5)% 162.6 224.2 (61.7) (27)%
Cost of sales (15.8) (12.6) (3.1) 25% (59.4) (79.5) 20.2 (25)%
GROSS PROFIT 31.3 37.0 (5 .7) (15)% 103.2 144.7 (41.5) (29)%
Gross Profit Margin 67% 75% (8)% 63% 65% (1)%
TOTAL
Sales 209.0 204.1 4.9 2% 895.3 533.4 361.9 68%
Other Income (5.5) 15.4 (20.9) n/a 17.1 48.7 (31.6) (65)%
Revaluations of Biological Inventory 44.5 31.1 13.5 43% 122.2 150.3 (28.1) (19)%
TOTAL INCOME 248.0 251 (2 .5) (1)% 1,034.6 732.4 302.1 41%
Cost of sales (160.9) (233) 72.1 (31)% (826.1) (593.2) (232.9) 39%
GROSS PROFIT 87.1 17.5 69.6 397% 208.5 139.3 69.2 50%
Gross Profit Margin 35% 7% 28% 20% 19% 1%
Gastos de Operac ión
Logistics and Sales Expenses (25.1) (8.8) (16.2) 184% (90.2) (31.7) (58.6) 185%
Administration Expenses (43.8) (53.1) 9.3 (18)% (195.9) (148.3) (47.6) 32%
OPERATING INCOME (LOSS) 18.2 (44.4) 62.6 n/a (77.6) (40.7) (36.9) 91%
Operating Margin 7% (18)% 25% (8)% (6)% (2)%
Income from subsidiary participation 25.9 0.0 25.9 n/a 25.9 0.0 25.9 n/a
UTILIDAD (PÉRDIDA) DESPUES DE PARTICIPACIÓNPROFIT (LOSS) AFTER SUBSIDIARY PARTICIPATION 44.1 (44.4) 88.5 n/a (51.8) (40.7) (11.1) 27%
Financial expenses, net (183.2) (120.3) (62.9) 52% (101.8) (194.3) 92.5 (48)%
PROFIT (LOSS) BEFORE INCOME TAXES (139.2) (164.7) 25.6 (16)% (153.6) (235.0) 81.4 (35)%
Income taxes (48.9) (182.6) 133.7 (73)% (44.6) (168.8) 124.2 (74)%
NET CONSOLIDATED PROFIT (LOSS) (188.1) (347.4) 159.3 (46)% (198.2) (403.8) 205.6 (51)%
6
In 2017, sales of goods totaled MxP 895mm, 1.7x over the sales registered in 2016. This are the highest sales registered
in Proteak’s history, strengthening the transition from a company focused on the development of biological and
productive assets to an operating company focused on the manufacturing and sales of MDF boards.
Quarter sales reached a total of MxP 194MM, 4% over the ones registered on Q4 2016. The MDF board of Tecnotabla
continues with an excellent acceptance thanks to its quality, and as result the purchase recurrence remains near 80%.
We continue to develop a commercialization strategy in United States, and sales during Q4 2017 reached MxP 15MM,
close to 8% of the quarter’s sales.
Teak sales decreased 13% compared to Q4 2016. This number reflects sales from our own Teak plantations, third-party’s
Teak commercialization and sales from Teakhaus products business unit.
In the fourth quarter of 2017, income from the reasonable value of the Biological Assets (revaluation) accrual totaled
MxP 45MM. Throughout the year, the company makes income provisions from the Biological Asset Revaluation according
to expected growths. Nevertheless, it is during the fourth quarter of the year when a physical inventory takes place and
the final value of the year’s revaluation is registered along with the corresponding adjustments.
Following international accountable standards (IFRS), a forestry Company must register the value of its Biological Assets
(m3 of wood) in time according to its age following the subsequent rules:
1. Wood from plantations under 3 years are registered by historical cost.
2. For plantations over 8 years and when the diameter measured at breast height (DBH) is at least 20cm, the wood
will be valued according to a physical inventory where trees are measured in the field and market prices are used
according to the wood quality (Teak prices depend on the log size).
3. For plantations between 3 and 8 years, the reasonable value of the wood is determined with growth curves
based on inventories. Volume at 8 years is estimated and the company’s discount rate is used for the cash flow. Discount
rate is determined each year according to internal and macroeconomic conditions. In 2017, the discount rate was
adjusted from 12.0% to 11.3%.
In the case of Eucalyptus plantations, only mechanisms 1 and 2 are used, and the price remains the same despite quality
or size.
533
895
2016 2017
Sales YoY(MxP MM)
56
112
161
204
258
215 214 209
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Historic Sales per quarter(MxP MM)
7
Revaluation in 2017 totaled MxP 122MM, MxP 99MM correspond to natural growth and valuation methodology and MxP
23MM correspond to the discount rate actualization.
In addition to this income, Proteak has 1,170ha of Teak as part of a society in which Proteak owns 50%. Income from
revaluation of this area is recognized as income in subsidiaries. The amount of the 2017 revaluation for Proteak’s
participation was of MxP 26MM.
Cost of goods sold, general expenses and net income
In the Q4 2017, MDF business unit cost was MxP 145MM. This cost reflects the improvement in the production cost per
m3, related to the production stabilization, improvement in resin cost, as well as a benefit from annual depreciation due
to a revision of the productive life of the MDF assets. By isolating the depreciation effect by quarter, the cost of Q4 2017
is 15% lower than Q4 2016.
Teak costs reflect fixed operating costs; however, we are optimizing the business structure to maintain its size in line with
the operation level.
Gross margin of the quarter was 35%, improving 28pp vs the Q4 2016. Mainly, we continue to work on the production
process to reach optimal cost levels through the resin plant stabilization, turbine integration to the process and the EvoJet
system for resin application, which will continue to support the improvement of the operating margin.
General expenses in the quarter totaled MxP 69MM, 11% over the Q4 2016. This includes MxP 25MM of MDF boards
distribution and sales expenses, which increased 44% vs Q4 2016 and will continue to increase as MDF boards sales and
exports grow. On the other side SG&A decreased 10% vs Q4 2016, mainly driven by the effort on expenses control and
the impact of some non-recurrent expenses related to the start-up of the plant in 2016.
In 2017 the EBITDA was MxP 81.6MM vs MxP 4.0MM in 2016.
As of December 2017, the Company reported an exchange rate profit of MxP 33MM, which offsets the reported loss in
the 2016 year-end results. As mentioned, the company’s FX exposure is balanced between the USD denominated credits
and the Teak Biological Assets, whose functional currency is USD.
The combination of these effects results in a period net after tax loss of MxP 198MM.
II. Balance sheet analysis
Assets
As of December 2017, the total assets for the Company amounted to MxP 6,249MM, 2% over the 2016 year-end figures,
mainly driven by the capital increase in Q1 2017.
Clients closed with MxP 115MM reflecting a decrease of MxP 15MM in comparison to year-end 2016, reflecting the
recovery of accounts receivable.
8
Inventory closed at MxP 244MM reflecting an increase of 91MM compared to December 2016, mainly due to the
inventory of finished product constructed in Q3 2017 and the Eucalyptus wood for board production harvested ahead of
the rainy season.
Long Term Assets kept for sale includes mainly non-strategic land that will be sold in the medium term. These assets are
in Costa Rica and their value as of this quarter is MXP 6MM; the decrease of MxP 77MM compared to year-end 2016
figures stems mainly to the sale of these assets that occurred in March. 98% of these assets have been sold so far.
Real Estate, Plant and Equipment totals MxP 3,226MM, showing a 67MM decrease compared to 2016 year-end figures,
including the MDF Plant depreciation for the period.
The value of Proteak’s plantations is mainly driven by four factors: (i) capitalized forestry expenses, (ii) exchange rate, (iii)
revaluations representing the growth of biological assets, and (iv) wood outflows to cost of sales. The Biological Assets
(Current and Non-Current) has an increase of MxP 51MM or 3% compared to December 2016.
Throughout the year we have registered the following impacts: (i) MxP 107MM in capitalized forestry expenses for
maintenance of existing plantations and preparation of new ones, with the purpose of improving their expected return
by maintaining above average growth rates; (ii) MxP (75)MM due to USD depreciation that impacts only Teak assets in
Mexico, Costa Rica and Colombia; (iii) MxP 122MM in revaluation (growth) of the biological assets; and (iv) MxP (103)MM,
from wood outflows to cost of sales mainly due to a harvested volume of 306M m3, including harvests and thinnings.
Liabilities and Equity
Current Liabilities increased 3% compared to December 2016, mainly driven by the natural increase in working capital
due to the production level.
Other current liabilities consider the pending payment to Dieffenbacher, the main supplier of the MDF plant equipment.
This payment is secured by the credit line with AKA/Commerzbank, which has not been disbursed and do not represents
additional cash flow to the company.
Other interest-bearing liabilities decreased MxP 29MM vs December 2016, mainly because of the impact of the USD
depreciation of the period. With the substitution of the FND by IFC/Proparco, as of today over 84% of the interest-bearing
liabilities are denominated in US dollars.
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014 2015 2016 2017
Debt/EquityEquity Liabilities
-
2
4
6
2010 2011 2012 2013 2014 2015 2016 2017
Historic Total Assets
506%
9
During 2017 deferred taxes increased MxP 21MM. This concept is non-cash; however, the company reserves it based on
the result of the year.
Total Equity of the Company at the end of the quarter totals MXP 3,128MM, MxP 52MM higher than the 2016 year-end
figure, reflecting mainly the 16MM CPO’s capital increase as well as the conversion effect due to the USD depreciation
and the results of the exercise. Proteak continues with strong liquidity and with a solid Equity to Liabilities ratio of 1 to 1.
III. Cash Flow analysis
The cash flow of the period is in line with the operation of the plant. Cash Flow position totaled MxP 253MM, and during
the quarter it recorded a net decrease of MxP 93MM vs 2016 year-end figures. Even when the cash flow was impacted
by the following factor the MDF plant operation is break even at cash level: i) construction of finished inventory to supply
the market; ii) Interest and debt service of interest-bearing liabilities; iii) and the cost of maintenance forestry operations
and the Teak business.
10
Environmental and social development
During the quarter we continue to actively participate to promote social and environmental development in Tabasco.
Proteak supported 5 schools and a total of 301 students of preschool, elementary school and secondary school in the
communities of Benito Juarez and Zanapa. Schools in Benito Juarez received books and materials, schools in Zanapa
received gifts and toys for its Christmas festivities.
Regarding environmental development the annual audits of the FSC® Forest Management Certificate concluded
positively for eucalyptus and teak plantations in Mexico. During the audits none major non-conformities were generated.
Also, we sold 100,100 CO2 credits to the company ENI Shipping through broker South Pole.
Additionally, Proteak was selected as part of the secretariat of the Alianza Mexicana de Biodiversidad y Negocios
(AMEBIN) in which over 30 companies and ONGs participate.
11
Stock development
During the fourth Q4 2017, TEAK CPO remained between MxP 16.09 and MxP 19.78 with an operated volume 3.5x over
the Q3 2017 and 2.3x over the Q4 2016.
Investor relations
Independent analyst
As part of the independent analyst program, follow-up of Proteak’s CPO is performed by:
Ernesto Gustavo O’Farrill Santoscoy [email protected] Tel: (55) 5531 0042 Bahía de todos los santos #26 Col. Verónica Anzures Delegación Miguel Hidalgo C.P. 11590, México, D.F.
Teak CPO Coverage
Armando Rodriguez [email protected] Tel: (55) 6237-0861 / 0862
Investor Relations agency
Alejandro Ramírez Arcia
Tel: +52 (55) 5980 – 9923
12
Financial statements
The following table presents the consolidated Balance Sheet as of the fourth quarter 2017 in MXP MM, and its comparison
with 2016 year-end figures.
February 27th, 2018 Mexico City. Today, Proteak Uno S.A.B. de C.V. (BMV: TEAK) published its Q4 2017 results. This
information is presented according to Financial Reporting Standards (NIF) in nominal terms.
Dec '17 Dec '16 ( 1 ) Δ Dec '17
vs Dec '16%
Cash & Equivalents 252.9 159.6 93.3 58%Accounts Receivable (Clients) 114.8 129.7 (14.9) (12)%
Other Accounts Receivable 141.6 136.6 5.1 4%
Inventory 243.7 153.1 90.7 59%
Biological Inventory 214.9 199.4 15.5 8%
Assets Available for Sale 6.1 82.6 (76.5) (93)%
Other Assets 16.9 8.8 8.2 93%
CURRENT ASSETS 990.9 869.7 121.2 14%
Plant and Equipment 3,225.5 3,292.6 (67.0) (2)%
Biological Assets, mature and inmature 1,806.3 1,770.7 35.5 2%
Deferred Income Tax 3.4 14.2 (10.8) (76)%
Other 159.0 135.8 23.1 17%
Prepaid Expenses 64.2 38.5 25.7 67%
NO N-CURRENT ASSETS 5,258.4 5 ,251.9 6 .6 0%
ASSETS 6,249.4 6 ,121.6 127.8 2%
Accounts Payable 111.1 87.6 23.5 27%
Payable Taxes 1.9 11.8 (9.9) (84)%
Other Current Liabilities 408.9 342.2 66.6 19%
Current Debt 113.2 102.7 10.4 10%
CURRENT LIABILITIES 635.1 544.3 90.7 17%
Long Term Debt 1,855.9 1,895.1 (39.2) (2)%
Deferred Taxes 623.0 601.8 21.2 4%
Other 7.9 4.5 3.4 76%
LO NG TERM LIABILITIES 2 ,486.8 2 ,501.4 (14 .6) (1 )%
LIABILITIES 3 ,121.9 3 ,045.7 76.2 3%
Capital Stock 2,738.5 2,346.2 392.3 17%
Accumulated Earnings (Losses) (468.3) (264.7) (203.7) 77%
Conversion Effect 540.1 649.3 (109.3) (17)%
Revaluation Surplus 195.8 195.8 (0.0) (0)%
Other Comprehensive Income 121.5 149.2 (27.7) (19)%
TO TAL EQUITY 3,127.5 3 ,075.9 51.6 2%
TO TAL LIABILITIES + EQUITY 6,249.4 6 ,121.6 127.8 2%(1) 2016 Audited Financial Statements
Balance Sheet