3. Ownership Structure
Espírito Santo Shares in
AIG Capital Asas Group GG Group
Group Treasury
18.3% 17.7% 18.3% 9.1% 3.1% 33.5%
Total: 85.6 million
shares
100.0%
Isofilme
Independent private equity fund managed by Antônio Approx. US$7.8 billion in private equity investments in
AIG
GG Group Kandir, former Planning Minister emerging markets. Recent success stories include Gol
Capital and Fertilizantes Heringer, among others
Espírito Its private equity division is present in Portugal, Spain, Investment fund of Constantino family, founders and
Asas Group controlling shareholders of Gol, which recently
Santo Group France and Brazil with 32 companies in its portfolio acquired Varig
3
4. Overview
Providência operates two business divisions with over 1,000 employees
Major Key
Nonwovens: 82% of our Net Revenues*
End-uses Customers
#1 manufacturer of Diapers
nonwovens in Latin Feminine hygiene
America
Furniture & bedding
56% market share
in Brazil (hygiene Medical disposables
products)
Major Key
PVC: 18% of our Net Revenues*
End-uses Customers
#3 manufacturer Construction
of PVC pipes in Companies
Contractors
Brazil
Infrastructure
• 7% market
share
* On 2Q08
4
5. Our Focus:
The Nonwovens Segment
Nonwovens were created in the 50s from the combination of three technologies
What is a Nonwoven Fabric?
Paper
Created when paper, textile and
chemical technologies were
combined to produce new fabrics
and products with the attributes of
textiles, but at significant lower costs
Nonwoven
Polypropylene is the main raw
material
Plastic Textile • Approximately 87% of nonwovens
COGS
Providência has the best platform within the winning technology 5
6. Our Nonwovens Focus:
Consumer Goods Industry
Providência is focused on high value-added nonwoven products with high growth potential
(hygiene and medical disposables)
Product Mix (% of Nonwovens Net Revenues) Market Segmentation Outlook
Medical Value-added Operating Market Expected
0% products margin size growth
Medical Double
High Small
Disposables digit
Hygiene / Double
Consumer Medium Large digit
Goods
Single
Durables Low Medium
digit
6
8. Outlook in Brazil
Nonwovens demand can grow an additional 3x as a result of higher usage per diaper…
Estimated Disposable Diapers Penetration
Basic Diaper Share of Total Diaper Sales
70%
65% 65%
60% 60%
53%
40%
35% 35%
30% 30% 30%
Bolivia
Chile
Argentina
Colombia
Mexico
Peru
Venezuela
Ecuador
Brazil
Paraguay
Others
Uruguay
Evolution of Baby Diaper Penetration in
Brazil
Nonwovens Usage Per Diaper (m2/diaper)
0.54
0.33
0.17
Basic Diaper Mid Tier Premium Diaper
Brazil
…and Providência has the technology to lead this growth
9. Leading Market
Position & High Barriers to Entry
Providência is the leading manufacturer of nonwoven fabrics in South America with over 1.5x the
capacity of the second largest player
South American Main Spundbond Players: Total Capacity High Barriers to Entry
(2008 in tons)
80,000 7 lines R3/41 Scale to service major clients
Providência
Typical investment for a new entrant
PGI 48,000 4 lines R3/41
is approximately US$60 million
Fitesa 34,000 2 lines R3/41 24 months of project implementation
Certification process with major
Softbond 5,000
consumer companies can take up to
18 months to be concluded
Polystar 4,200
Know-how and highly specialized
Lord 4,200 workforce
Sulbrasil 3,000
Source:Technomic International
- 20,000 40,000 60,000 80,000 Providência achieved its leading position by adding
Note:
1. Hygienic Disposable Lines Reicofil 3 or 4 a new machine every two years since 1988
The update was made in accordance with market data and Providência’s estimates.
9
10. Agenda
• The Company
• The Nonwovens Sector
• 2Q08 Highlights
• 2Q08 Results
• Outlook
10
11. Operational and
Administrative Highlights
Operational startup of Kami 9:
Sales beginning on April;
World-class quality, in line with top international products;
Full capacity of 1,250 tons/ month reached on June;
Main products are ultrathin special hygienic disposables and medical disposables.
11
12. Operational and
Administrative Highlights
Isofilme Operations: EBITDA Margins higher than the
consolidated KAMI margins due to
End of investments and fiscal incentives in Minas Gerais State
improvements at Isofilme
production process;
Full capacity of 800
tons/month reached on
June/2008;
On the 2nd Quarter 2008 it
increased 2,300 tons of
hygienic disposables to the
domestic market.
12
13. Operational and
Administrative Highlights
Specialties in Hygienic Disposables:
Laminated nonwovens production line at full capacity in the 2Q08;
Projects to expand the production capacity of specialties in hygienic disposables
in progress, with 2008 total capital expenditures estimated at R$23 million and
startup operations on 4Q08.
Domestic Market Exports
Volume in tons of
laminated/
printed hygienic
disposables
Price premium of
printed hygiene
versus
commodity
hygienic
disposables
13
14. Operational and
Administrative Highlights
Other:
Repurchase of 2.9 million shares (92% of authorized) since the beginning of the
program until July 28, 2008, at a total cost of R$22.1 million;
Implementation (go live) of SAP system on July 1st, 2008.
Operation - Pipes and Fittings Division:
Start-up sales of large-diameter pipe extrusion line to the industrial segment with
installed capacity of 5,000 tons/year.
14
15. Agenda
• The Company
• The Nonwovens Sector
• 2Q08 Highlights
• 2Q08 Results
• Outlook
15
16. Sales Volume
Increase of 31.3% over 2Q07,
Total: 24.1 more significant in the Nonwovens
Total: 21.4 Division that increased 42.4% in the
Total: 18.4 same period, due to the expansion
in volume added by Isofilme,
acquired in August 2007, and at
KAMI 9, installed in 2007 and
operating since April 2008;
Increase of 12.5% in comparison
to 1Q08, having the Nonwovens
Division increased 18.8% in the
same period.
In thousands of tonnes
16
17. Gross Revenue
Increase of 25.7% in relation to
2Q07 and 10.9% when compared
to 1Q08:
Sales to the export market
increased 23.2% over 2Q07 and
3.2% in relation to 1Q08, even in a
scenario of significant appreciation
of the real against the dollar.
Sales to the domestic market
increased 26.8% over 2Q07 and
14.7% when compared to 1Q08,
due to the start-up of Line 9 and
Isofilme’s full capacity utilization.
In million of Reais
17
18. EBITDA (R$ million) and EBITDA Margin (%)
Adjusted EBITDA reached R$ 30.9
million (with margin of 24.2%), 17.5%
31.4 over 2Q07;
Increase of 17.3% in relation to
27.6 1Q08;
EBITDA Adjusted by the hedge
operation* totaled R$ 31.4 million (with
margin of 24.6%), 19.3% over 2Q07;
In relation to 1Q08, the growth was
13.7%, mainly due to the increase in
Sales volumes.
Operational hedge*: The result of exchange-rate lock forward contracts
on accounts receivables from the export market.
18
19. Net Income (R$ million) and Net Margin (%)
Net Income of R$ 13.8
million with net margin of
10.8%, reverting the loss
registered in 2Q07 due to the
financial expenses on account
of the promissory notes and
the exchange gains/losses
from the export market;
Increase of 40.6% over
1Q08, when was recorded a
profit of R$ 9.8 million and a
margin of 8.5%.
19
20. Nonwovens Division
Volume reached 17.9 thousand tonnes,
up 42.4% when compared with 2Q07.
The domestic market posted a growth of
15.5% (mainly Isofilme) and the External
Market registered a 33.7% increase due
to Kami 9;
Compared to 1Q08, the increment was
of 18.8%;
Net revenue totaled R$ 103.7 million in
2Q08, up 34.4% in relation to 2Q07 and up
17.3% in relation to 1Q08;
These results are mainly due to the
increase in sales and to the full capacity
utilization of Isofilme and Kami 9 (reached in
June 08) 20
21. Nonwovens Division
Unitary Fixed Cost in line with 2Q07;
In relation to 1Q08 there was a
reduction of 8.1% due to efficiency gains
and increased scale of production.
Reduction of 0.3% compared with 2Q07, thanks to
efficiency gains and increased scale of production,
despite the increase in petrochemical resin prices.
Indexation of the raw material supply contracts to the
dollar also contributed to partially compensating for the
upward pressure of resins on the external and domestic
markets.
In relation to 1Q08, there was a reduction of 2.7%, on
account of the fall in exports, which have a greater
21
logistics cost.
22. Nonwovens Division
EBITDA of R$ 27.9 million, with a margin of
26.9%, 17.5% increase over 2Q07.
Growth was 24.3% compared with 1Q08, due
to the increase of the domestic sales. .
Adjusted Ebitda through Operational
Hedge* was of R$28.4 million (Margin of
27.4%), 19.5% increase compared with
2Q07.
22
Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivable from the export market.
23. Pipes and Fittings Division
2Q08 volume was of 5.7 thousand tonnes
in line with 1Q08 and 14.2% over 2Q07.
Revenue of R$ 22.8 million, with a
17.6% growth when compared to 2Q07
and a 2.3% reduction when compared to
1Q08, due to the product mix change that
drove to a decrease in price (reduction of
approximately 3% over the average
price).
23
24. Pipes and Fittings Division
Growth of 7.8% in relation to 2Q07 due to a
new sales and operational structure in line with
the strategy of the Pipes and Fittings Division
Compared to 1Q08 there was a reduction of
3.5%.
0.3% increase in comparison with
2Q07 and 1.4% increase when compared
to 1Q08.
PVC’s resin prices presented a slight
increase when compared with those of
1Q08
24
25. Pipes and Fittings Division
EBITDA of R$ 2.9 million,
with a margin of 12.9%, na
increase of 27.6% over 2Q07
and a reduction of 23.6% over
1Q08.
Return to the historical
margins due to the resin price
stabilization and to the product
mix.
25
26. Consolidated net debt
Consolidated net debt
(R$ Million) March 31,2008 June 30, 2008
Total debt
Short term 15.8 6.7
Long term 386.9 377.7
Total 402.7 384.4
Cash and equivalents 178.6 175.5
Net debt 224.1 208.9
27. Shareholders’ Equity
Shareholders’ Equity
(R$ Million) March 31, 2008 June 30, 2008
Shareholders’ Equity 457.2 469.1
Social Capital 422.2 422.2
Capital Reserves 22.0 20.1
Profit Reserve 3.2 3.2
Accumulated Profit 9.8 23.6
28. Agenda
• The Company
• The Nonwovens Sector
• 2Q08 Highlights
• 2Q08 Results
• Outlook
28
29. Internationalization of the Company
Strategic Aspects:
• Become a Global Player by using the technological potential and the
Company’s knowhow in disposable hygienic and medical products.
• Participate in the global product development by locating next to the
leader manufacturers of disposable diapers.
• Take advantage on the high disposable adult diapers market growth
(7%per year) in the US.
Operational Aspects:
• Optimize logistical costs through the substitution of a local operation
in the US for the volume exported from Brazil to the NAFTA.
•Allow the Brazilian operation to redirect its sales volume to the South
American market in order to keep up with the demand growth for this
region in the next 3 years.
29
30. Providência USA, Inc.
Location:
• South East USA (in final stage of definition)
CAPEX:
• Production Equipment:
• KAMI 11: US$ 46.5 million (sep/08 to jun/09)
• KAMI 12: US$ 51.5 million (dec/08 to jul/10)
• Buildings/Installations/Utilities/Contingencies: US$ 22 million
(sep/08 to jul/10)
Estimated Return on Investment:
• IRR between 17 and 21%
• ROIC between 20% and 24%
30
31. Volume Perspectives
In tonnes
Nonwovens installed capacity 2008 2009 2010
Providência Brazil 73,000 80,000 80,000
Providência United States - 18,000 40,000
Total 73,000 98,000 120,000
Brazilian Nonwovens Market
+15% The increase in the
+5% Brazilian Nonwovens
Market tends to absorb the
whole volume currently
exported by the Company
to the USA. Providência
currently exports 12,000
tonnes to the USA, that will
be sold in the domestic
Sources: Company’s Estimates *Perspective market.
ABIQUIM
31
ABINT
32. CFO: Eduardo Feldmann Costa
IR Manager: Gabriela Las Casas
Phone: +55 (41) 3381-7600
Fax: +55 (41) 3283-5909
São José dos Pinhais – PR - Brazil
www.providencia.com.br/ir
The words “believe”, “anticipate”, “expect”, “estimate”, “will”, “plan”, “may”, “intend”, “foresee”, “project” and other similar expressions indicate
forward-looking statements. These forward-looking statements involve uncertainties, risks and assumptions, since they include information related
to our potential or assumed future operating results, business strategy, financing plans, competitive position in the market, industry environment,
potential growth opportunities and the effects of future regulations and competition. In addition, forward-looking statements refer only to the date
on which they were made and should not be taken as a guarantee of future performance. Providência is under no obligation to update this 32
presentation with new information and/or future events .
