4Q07 Presentation

1

4Q07 ResultsMarch 5th, 2008

2

Agenda

• 4Q07 Operational/Administrative Highlights

• 2008 Outlook

• 4Q07 Results

3

Conclusion of Kami 9 installation:

R$ 110 million investment;

Reicofil 4 ultimate machinery, unique in Latin America, with annual capacity of

15,000 tonnes; mainly intended for high performance medical nonwoven

production and specialty hygiene disposables;

Project executed on schedule and within budget;

Installation concluded in December; equipment, raw material and product testing

in progress;

Homologation of products with clients scheduled for March.

Operational/Administrative

Highlights

4

Isofilme Acquisition:

Optimization of production schedule with a focus on hygiene disposables for the

domestic market;

Conclusion of the integration process with Cia. Providência, especially in the

commercial and administrative areas;

Investments in reducing factory bottlenecks (rotary cutting blades, new rolling

machine, automating the cutting and packaging of rolls). Production expected to

reach 750-800 tons/month beginning in March/April 2008;

Sale of nonwoven scraps, which were part of the inventory as of the acquisition;

Increase in productivity/financial indicators (losses, elimination of short-term debt,

inventory reduction etc.)


Highlights

5

Investments and improvement in the Pipes and Fittings Division:

Hiring of a new management – start-up of the Division’s turnaround process;

Conclusion of investments for the expansion of the installed capacity to 5,000

tonnes a year, intended to large diameter pipes;

Reduction in the plant’s supervision structures;

Conclusion of investments in modernization and optimization of molds for fittings.


Highlights

6

Short-term debt restructuring:

Settlement of Isofilme’s short-term debt in the amount of R$ 25 million;

Early redemption of the Company’s promissory notes;

Contracting of Export Credit Notes in the amount of R$ 150 million, with 5 and 6-

year maturities and a 2-year grace period;

Issue of Debentures in the amount of R$ 150 million with a 5-year maturity;

Early redemption, in January, of Isofilme’s Eurobond in the amount of U$ 9.2

million.


Highlights

7

Short-term debt restructuring:

Net debt on December 31st, 2007: R$ 198 million


Highlights

8


Highlights

9

Closing down of Flexible Packaging Segment activities:

Revenue from machinery and facilities disposal: R$ 18.8 million

Closing down expenses (staff, commissions etc): R$ 2.0 million

Financial revenue from closing down: R$ 16.8 million

Recognizable income (sales minus recognizable expenses) from the closure

process: R$13.8 million (R$5.0 million in 2007 and R$8.8 million in 2008)


Highlights

10

Other:

New ERP (SAP) implementation project in progress, on schedule and within

budget. Start-up of operations on April 1, 2008;

Operational hedge transactions: result of lock-in forward foreign exchange

contracts on accounts receivable from the foreign market;

Hiring, in February 2008, of UBS Pactual CTVM as market maker;

Share buyback process;


Highlights

11

Agenda

• Operational/Administrative Highlights 4Q07

• 2008 Outlook

• 4Q07 Results

2008 Outlook

Expansion of 28% in the Nonwoven segment:

Production/sales increase of 15,500 tonnes, of which:

9,000 tonnes in Kami 9 (1,000 tonnes per month, as of April);

6,500 tonnes in Kami 10 (Isofilme).

Development of new products:

Introduction of nonwoven for clothes and high-performance medical disposables

with higher added value, unique in the domestic market;

Investment of R$ 18 million in the development of special nonwoven for the

hygiene disposable market.

12

2008 Outlook

Expansion in the Pipes and Fittings segment capacity:

As the result of investments made in 2007, the Company will increase its

production and sales of pipings by 23% in 2008;

Automation and staff training;

Logistic optimization (industrial and freight planning).

Improvement in the operational/administrative efficiency:

Development of management tools and administrative and operational processes

review, aimed at reducing costs and improving information generation and

disclosure;

Individual goals (managers) for reduction of certain budget accounts.

13

14

Agenda

• Operational/Administrative Highlights 4Q07

• 2008 Outlook

• 4Q07 Results

15

The Company keeps expanding production

and sales volumes in its core business;

Growth of 15% compared to 4Q06, and 7.3%

versus the 3Q07;

Numbers include Isofilme sales in 3Q07 (45

days) and 4Q07 (90 days);

In 4Q07, the packaging division stopped

contributing to sales volume, having ceased

operations in September.

Sales Volume

15.0%

Tonnes Thd

16

Gross Revenue

Increase of 4.2% versus the 4Q06

and 4% versus the 3Q07;

Revenues from the export market

grew 8% over 4Q06 and 7.6% over

3Q07. Rising prices in U.S. dollars and

increased volume partially offset by the

significant valuation of the Brazilian real

(17% in relation to 4Q06 and 6.8% in

relation to 3Q07);

Gross revenue grew 2.4% in the

domestic market, mainly due to the

volume sold, particularly in the

nonwoven segment.

4Q06 3Q07 4Q07

90.8 90.8 93.0

39.3 39.5

Domestic Export

130.1

135.5

130.3

42.5

R$ million4.2%

17

EBITDA and Ebitda Margin

Ebitda reached R$ 27.4 million

(margin of 23.8%) in the 4Q07,

13% up on the R$ 24.2 million

recorded in the 4Q06 (margin of

22.0%);

Adjust EBITDA of operational

hedges* totaled R$30.9 million

(EBITDA margin of 26.8%) in

4Q07, an increase of 4% over

adjusted EBITDA of R$29.6

million in 3Q07 (EBITDA margin

of 26.6%) and 27.7% over 4Q06

(EBITDA margin of 22.0%);

Compared with 3Q07, and

excluding operational hedging*,

EBITDA fell 4.2%, due mainly to

a decline in the results of the

Pipes and Fittings division.

Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivable from the export market.

18

Net profit and Net margin

Net profit amounted to R$ 7.2 million

in the 4Q07, with a net margin of

6.2%, reversing the negative R$ 2.5

million result recorded in the 3Q07;

4Q07 non-recurring expenses (IPO

and Isofilme aquisition) had no impact

on 3Q07 results.

The Company closed 2007 with net

income of R$5.2 million, despite

passing through a transitional phase

with a large number of nonrecurring

expenses and elevated financing costs

related to the acquisition.

(4,0)

(2,0)

-

2,0

4,0

6,0

8,0

10,0

4Q06 3Q07 4Q07

9.8

-2.5

7.2

R$ million

8.9%

-2.2%

6.2%

Net Margin

19

Nonwoven Segment

Net revenue amounted to R$ 92.7 million in the 4Q07,

a 13.6% growth in relation to the 4Q06, and 8.4% in

relation to the 3Q07;

The Real’s appreciation against the dollar in the 4Q07

(17% in relation to the 4Q06 and 6.8% in relation to the

3Q07), adversely impacted the growth of export

revenue;

Operational hedging* contributed to a reduction in the

impact of this devaluation on the division’s final results.

Volume reached 15,500 tonnes in the 4Q07, 29.2%

up on the 4Q06 and 12.3% up on the 3Q07;

Stronger growth in the export market;

Domestic market growth affected by Isofilme’s

negative performance of 600 tonnes below capacity.

4Q06 3Q07 4Q07

81.6

85.5

92.7

Net Revenue(R$ Million)

4Q06 3Q07 4Q07

12.0

13.8

15.5

Volume(Tonnes Thd)


20

Nonwoven Segment

Fixed costs rose 7.7% in the 4Q07 compared to the

3Q07, due to the collective pay agreement concluded in

November and retroactive to September;

The full incorporation of fixed costs of Isofilme also

had an impact on the 4Q07, compared to the 3Q07 (45

days);

However, fixed unit cost declined 4.5% in the 4Q07

versus the 3Q07, attesting to the Company’s capacity

to increase production/sales and maintain fixed costs.

4Q06 3Q07 4Q07

4.20

3.80 3.75

Unitary Variable Cost(R$ - raw material, comissions and freight)

4Q06 3Q07 4Q07

9.2 9.1

9.8

Fixed Cost(R$ Million)

Unitary Fixed Cost (R$)

0.630.66

0.77

Variable unit costs for 4Q07 were 10.7% lower than in

4Q06, and 1.3% lower than in 3Q07;

Because our contracts with raw materials suppliers

are indexed to the U.S. dollar, the strengthening of the

Brazil real offset upward pressure on the price of resins

in the export and domestic markets;

The cost reduction recorded in the 4Q07 compared to

the 3Q07 could have been greater, if it wasn’t for the

concentration of freight expenses occurred in the 3Q07

and booked in the 4Q07.

21

Taking into account the effect of operational hedging*

in 3Q07 and 4Q07, quarterly results were R$25 million

and 28.3 million, respectively;

Ebitda margin totals 30.5% in the 4Q07, above the

29.2% recorded in the 3Q07 and the 27% recorded in

the 4Q06.

Ebitda recorded in the 4Q07 was 12.2% higher

compared to the 4Q06, and 3.8% higher compared to

the 3Q07;

Ebitda margin stood at 26.7% in the 4Q07, basically

in line with the 4Q06 (27%), and slightly below the

3Q07 (28%), due to the appreciation of the real on

exports;

Nonwoven Segment

4Q06 3Q07 4Q07

22.1

25.0

28.3

Adjusted Ebitda Margin

Adjusted Ebitda (Hedge)(R$ Million)

30.47%

29.24%

27.03%


4Q06 3Q07 4Q07

6.4

5.7 5.6

Volume(Tonnes Thd)

4Q06 3Q07 4Q07

24.5

21.8

22.5

Net Revenue(R$ Million)

22

Pipes and Fittings

Net revenue totaled R$ 22.5 million in the 4Q07, an

8.2% decline in relation to the 4Q06, and a 3.2% growth

in relation to the 3Q07;

Despite the volume reduction recorded in the 4Q07,

net revenue was higher due to the partial pass through

of these increases, and mainly to the product mix, sold

at higher unit prices.

Volume reached 5.6 tonnes in the 4Q07, 12.5% down

on the 4Q06 and 1.8% down on the 3Q07;

Reduction in relation to the 4Q06 is due to lower

demand in the public sector, given than 2006 was an

electoral year;

As mentioned before, both the production and the

sales were affected by problems in the supply of our

main raw material, compared to the 3Q07.

4Q06 3Q07 4Q07

3.1 3.0

3.6

Fixed Cost(R$ Million)

4Q06 3Q07 4Q07

3.03

2.68

3.05

Unitary Variable Cost(R$ - raw material, comissions and freight)

23

Fixed costs grew 20% in the 4Q07 against 3Q07,

chiefly due to wage negotiations with unions concluded

in November, retroactive to September.

Variable unit cost in the 4Q07 was 0.7% higher in

relation to the 4Q06, and 13.8% higher in relation to the

3Q07;

PVC pipes resin, the primary raw material in this

segment, recorded an increase in the 4Q07 due to a

shortage in the product’s supply resulting from

suppliers’ technical problems;

This situation has been improved since December.

Pipes and Fittings

24

Given the income and expense scenario

presented above, 4Q07 EBITDA was 10%

lower than in 4Q06 and 50% lower than in

the preceding quarter.

Pipes and Fittings

25

The words “believe”, “anticipate”, “expect”, “estimate”, “will”, “plan”, “may”, “intend”, “foresee”, “project”, and other similar expressions, are

intended to indicate forward-looking statements. Such forward-looking statements involve uncertainties, risks and assumptions, since they include

information related to our possible or presumed 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 presentation with new information and/or future events .

IR ContactRubens Sardenberg IR OfficerPhone: +55 41 3381-7600 Fax: +55 41 3283-5909São José dos Pinhais – PR

[email protected]/ir

mailto:[email protected]

http://www.providencia.com.br/ri

4Q07 Presentation

Business

outlook 4q07 results2

outlook 4q07 results11

outlook 4q07 results14

4q07 resultsmarch

sales volume tonnes

isofilme sales

outlook expansion

thedomestic market conclusion