LUPA3 ITR IFRS 20100512 EN - Lupatech S.A.lupatech.infoinvest.com.br/ptb/1570/LUPA3 ITR IFRS...

(A free translation of the original in Portuguese)

FEDERAL PUBLIC SERVICECVM - BRAZILIAN SECURITIES AND EXCHANGE COMMISSIONQUARTERLY FINANCIAL INFORMATION - ITRCOMMERCIAL, INDUSTRY & OTHER TYPES OF COMPANY

IFRSMarch 31, 2010

REGISTRATION WITH CVM SHOULD NOT BE CONSTRUED AS AN EVALUATION OF THE COMPANY.COMPANY MANAGEMENT IS RESPONSIBLE FOR THE INFORMATION PROVIDED.

01.01 - IDENTIFICATION

1 - CVM CODE 2 - COMPANY NAME 3 - CNPJ (Corporate Taxpayer’s ID)

02006-0 LUPATECH S.A. 89.463.822/0001-12

4 - NIRE (Corporate Registry ID)

43300028534

01.02 - HEADQUARTERS

1 - ADDRESSRUA DALTON LAHM DOS REIS

2 - DISTRICTD. INDUSTRIAL

3 - ZIP CODE95112-090

4 - CITYCAXIAS DO SUL

5 - STATERS

6 - AREA CODE54

7 - TELEPHONE2992-7000

8 - TELEPHONE 9 - TELEPHONE-

10 - TELEX

11 - AREA CODE54

12 - FAX2992-7601

13 - FAX-

14 - FAX-

15 - [email protected]

01.03 - INVESTORS RELATIONS OFFICER (Company Mailing Address)

1- NAMETHIAGO ALONSO DE OLIVEIRA

2 - ADDRESSRUA PEQUETITA 145 CJ 44

3 - DISTRICTVILA OLIMPIA

4 - ZIP CODE04552-060

5 - CITYSAO PAULO

6 - STATESP

7 - AREA CODE11



10 - TELEPHONE-

11 - TELEX

12 - AREA CODE11

13 - FAX3848-9599

14 - FAX-

15 - FAX-

15 - [email protected]

01.04 – ITR REFERENCE AND AUDITOR INFORMATION

CURRENT FISCAL YEAR CURRENT QUARTER PREVIOUS QUARTER

1 - BEGINNING 2 - END 3 - NUMBER 4 - BEGINNING 5 - END 6 - NUMBER 7 - BEGINNING 8 - END

01/01/2010 12/31/2010 1 01/01/2010 03/31/2010 4 10/01/2009 12/31/2009

4 - INDEPENDENT ACCOUNTANTDELOITTE TOUCHE TOHMATSU AUDITORES INDEPENDENTES

5 - CVM CODE00287-9

6 - TECHNICIAN IN CHARGEFERNANDO CARRASCO

7 - TECHNICIAN’S CPF (INDIVIDUAL TAXPAYER’SREGISTER)041.702.178-02


1 - CVM CODE 2 - COMPANY NAME 3 - CNPJ (Corporate Taxpayer’s ID)

02006-0 LUPATECH S.A. 89.463.822/0001-12



IFRSMarch 31, 2010

01.05 – CAPITAL STOCK

Number of Shares(in thousands)

109/30/2009

206/30/2009

309/30/2008

Paid-up Capital

1 - Common 47,674 47,674 47,581

2 - Preferred 0 0 0

3 - Total 47,674 47,674 47,581

Treasury Stock

4 - Common 0 0 0

5 - Preferred 0 0 0

6 - Total 0 0 0

01.06 - COMPANY PROFILE

1 - TYPE OF COMPANYCommercial, Industry and Others

2 - STATUSOperational

3 - NATURE OF OWNERSHIPDomestic Private

4 - ACTIVITY CODE1010 – Oil and Gas

5 - MAIN ACTIVITYProduction of equipment and rendering of services for the oil and gas industry, industrial valves and microcasting parts

6 - CONSOLIDATION TYPENot stated7 – TYPE OF REPORT OF THE AUDITORS

01.07 - COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS

1 - ITEM 2 - CNPJ (Corporate Taxpayer’s ID) 3 - COMPANY NAME

01.08 - CASH DIVIDENDS DELIBERATE AND/OR PAID DURING AND AFTER THE QUARTER

1 - ITEM 2 - EVENT 3 - APPROVAL 4 - TYPE 5 - DATE OFPAYMENT

6 - TYPE OF SHARE 7 - AMOUNT PER SHARE

01.09 – SUBSCRIBED CAPITAL AND CHANGES IN THE CURRENT FISCAL YEAR

1 - ITEM 2 – DATE OFCHANGE

3 – CAPITALSTOCK

(In thousandsof Reais)

4 – AMOUNTOF CHANGE

(In thousandsof Reais)

5 – NATUREOF

CHANGE

6 – NUMBER OFSHARES ISSUED

(Thousands)

7 – SHARE PRICE WHENISSUED

(In Reais)

01.10 – INVESTORS RELATIONS OFFICER

1 – DATE 2 – SIGNATURE



IFRSMarch 31, 2010


1 - CVM CODE02006-0

2 - COMPANY NAMELUPATECH S.A.

3 - CNPJ (Corporate Taxpayer’s ID)89.463.822/0001-12

02.01 – CONSOLIDATED BALANCE SHEET - ASSETS (in R$ thousands)

1 - CODE 2 - DESCRIPTION 3 – 03/31/2010 4 – 12/31/2009

1 Total Assets 1,494,251 1,477,442

1.01 Current Assets 571,944 554,419

1.01.01 Cash and Cash Equivalents 136,904 131,160

1.01.01.01 Cash 136,904 131,160

1.01.02 Credits 247,382 230,194

1.01.02.01 Clients 198,687 184,659

1.01.02.02 Sundry Credits 48,695 45,535

1.01.02.02.01 Recoverable Taxes 48,695 45,535

1.01.03 Inventories 156,868 164,015

1.01.04 Other 30,790 29,050

1.01.04.01 Prepaid expenses 759 879

1.01.04.02 Securities-restricted 21,002 20.577

1.01.04.03 Other accounts receivable 9,029 7,594

1.02 Non-current Assets 922,307 923,023

1.02.01 Long-term Assets 93,953 96,007

1.02.01.01 Sundry Credits 88,921 90,811

1.02.01.01.01 Judicial Deposits 1,611 1,214

1.02.01.01.02 Accounts receivable 4,721 3,457

1.02.01.01.03 Recoverable taxes 20,472 23,432

1.02.01.01.04 Deferred Income Tax and Social Contribution 62,117 62,708

1.02.01.02 Credit w ith Related Parties 0 0

1.02.01.02.01 Direct and Indirect Associated Companies 0 0

1.02.01.02.02 Subsidiaries 0 0

1.02.01.02.03 Other Related Parties 0 0

1.02.01.03 Other 5,032 5,196

1.02.02 Permanent Assets 828,354 827,016

1.02.02.01 Investments 2,301 2,386

1.02.02.01.01 Direct and Indirect Associated Companies 2,179 2,264

1.02.02.01.02 Direct and Indirect Aff iliate Companies 0 0

1.02.02.01.03 Others 122 122

1.02.02.02 Fixed Assets 319,887 317,960

1.02.02.03 Intangible 506,166 506,760

1.02.02.03.01 Goodw ill 489,941 489,941

1.02.02.03.02 Other Intangible 16,225 16,729



IFRSMarch 31, 2010


1 - CVM CODE02006-0



02.02 – CONSOLIDATED BALANCE SHEET - LIABILITIES (in R$ thousands)

1 - CODE 2 - DESCRIPTION 3 – 03/31/2010 4 - 12/31/2009

2 Total Liabilities 1,494,251 1,477,442

2.01 Current Liabilities 186,498 150,572

2.01.01 Loans and Financing 46,472 40,471

2.01.01.01 Loans and Financing 34,652 29,711

2.01.01.02 Perpetual Bonds - Interest Payable 11,820 10,760

2.01.02 Debentures 25,646 16.313

2.01.03 Suppliers 49,783 35,897

2.01.04 Taxes, Fees and Contributions 19,121 17,648

2.01.05 Dividends Payable 0 0

2.01.06 Provisions 13,695 8,782

2.01.06.01 Provisions Payroll 13,695 8,782

2.01.07 Debts w ith Related Parties 0 0

2.01.08 Other 31,781 31,461

2.01.08.01 Payroll Payable 5,004 5,398

2.01.08.02 Advances from Customers 8,994 8,126

2.01.08.03 Employees’ Profit Sharing 520 930

2.01.08.04 Accounts payable related to Investment Purchase 2,255 2,240

2.01.08.05 Other accounts payable 9,053 9,101

2.01.08.06 Other obligations 5,955 5,666

2.02 Non-current Liabilities 1,035,136 1,039,610

2.02.01 Long-term Liabilities 1,035,136 1,039,610

2.02.01.01 Loans and Financing 657,201 649,327

2.02.01.01.01 Loans and Financing 171,645 174,304

2.02.01.01.02 Perpetual Bonds 485,556 475,023

2.02.01.02 Debentures 338,384 340,228

2.02.01.03 Provisions 32,020 42,682

2.02.01.03.01 Deferred Income Tax and Social Contribution 24,663 34,822

2.02.01.03.02 Provision for Contingencies 7,357 7,860

2.02.01.04 Debts w ith Related Parties 0 0

2.02.01.05 Advance for Future Capital Increase 0 0

2.02.01.06 Other 7,531 7,373

2.02.01.06.01 Taxes Payable 3,389 3,291

2.02.01.06.02 Other obligations 1,635 1,622

2.02.01.06.03 Accounts Payable / Purchase of Investment 2,507 2,460

2.03 Future results 0 0



IFRSMarch 31, 2010


1 - CVM CODE02006-0



02.02 – BALANCE SHEET - LIABILITIES (in R$ thousands)

1 - CODE 2 - DESCRIPTION 3 – 03/31/2010 4 - 12/31/2009

2.04 Minority Interest 0 0

2.05 Shareholders’ Equity 272,617 287,260

2.05.01 Paid-up Capital 311,525 311,525

2.05.02 Capital Reserves 12,265 11,002

2.05.02.01 Stock Options 12,265 11,002

2.05.03 Revaluation Reserves 0 0

2.05.03.01 Ow n Assets 0 0

2.04.03.02 Subsidiaries/ Direct and Indirect Associated Companies 0 0

2.05.04 Profit Reserves 0 0

2.05.04.01 Legal 0 0

2.05.04.02 Statutory 0 0

2.05.04.03 For Contingencies 0 0

2.05.04.04 Unrealized Profit 0 0

2.05.04.05 Profit Retention 0 0

2.05.04.06 Special for Non-Distributed Dividends 0 0

2.05.04.07 Other Profit Reserves 0 0

2.05.05 Assets Evaluation Adjustments (30,252) (30,497)

2.05.05.01 Cash and Cash Equivalents Adjust. 0 0

2.05.05.02 Cumulative Conversion Effects (30,252) (30,497)

2.05.05.03 Combined Business Adjustments 0 0

2.05.06 Retained Earnings/Accumulated Losses (20,921) (4,770)

2.05.07 Advance for Future Capital Increase 0 0



IFRSMarch 31, 2010


1 - CVM CODE02006-0



03.01 – CONSOLIDATED STATEMENT OF INCOME (In R$ thousands)

1 – CODE 2 – DESCRIPTION 3 - 01/01/2010 a 03/31/2010 4 - 01/01/2010 a 03/31/2010 5 - 01/01/2009 a 03/31/2009 6 - 01/01/2009 a 03/31/2009

3.01 Gross Revenue from Sales and/or Services 166,672 166,672 171,505 171,505

3.01.01 Local Market 135,118 135,118 139,796 139,796

3.01.02 Exports 31,554 31,554 31,709 31,709

3.02 Deductions for Gross Revenue (19,548) (19,548) (20,288) (20,288)

3.02.01 Value-added, sales and other taxes (19,548) (19,548) (20,288) (20,288)

3.03 Net Revenue from Sales and/or Services 147,124 147,124 151,217 151,217

3.04 Cost of Goods Sold and/or Services Rendered (105,886) (105,886) (100,413) (10,413)

3.05 Gross Profit 41,238 41,238 50,804 50,804

3.06 Operating Income/Expenses (63,052) (63,052) (65,609) (65,609)

3.06.01 Selling (15,477) (15,477) (12,642) (12,642)

3.06.02 General and Administrative (11,281) (11,281) (14,233) (14,233)

3.06.02.01 General and Administrative (10,543) (10,543) (13,693) (13,693)

3.06.02.02. Management Compensation (738) (738) (540) (540)

3.06.03 Financial (34,027) (34,027) (32,513) (32,513)

3.06.03.01 Financial Income 36,810 36,810 15,698 15,698

3.06.03.01.01 Exchange Variation Gains 29,529 29,529 12,308 12,308

3.06.03.01.02 Other Financial Income 7,218 7,218 3,390 3,390

3.06.03.02 Financial Expenses (70,837) (70,837) (48,211) (48,211)

3.06.03.02.01 Exchange Variation Losses (39,996) (39,993) (18,796) (18,796)

3.06.03.02.02 Other Financial Expenses (30,841) (30,841) (29,415) (29,415)

3.06.04 Other Operating Income 634 634 397 397

3.06.05 Other Operating Expenses (2,991) (2,991) (6,810) (6,810)

3.06.06 Equity Pick-Up 90 90 192 192

3.07 Operating Income (21,814) (21,814) (14,805) (14,805)



IFRSMarch 31, 2010


1 - CVM CODE02006-0



03.01 – CONSOLIDATED STATEMENT OF INCOME (In R$ thousands)

1 – CODE 2 – DESCRIPTION 3 - 01/01/2010 a 03/31/2010 4 - 01/01/2010 a 03/31/2010 5 - 01/01/2009 a 03/31/2009 6 - 01/01/2009 a 03/31/2009

3.08 Non-Operating Income 0 0 0 0

3.08.01 Income 0 0 0 0

3.08.02 Expenses 0 0 0 0

3.09 Income Before Tax/Holding (21,814) (21,814) (14,805) (14,805)

3.10 Provision for Income Tax and Social Contribution (3,905) (3,905) (4,071) (4,071)

3.11 Deferred Income Tax and Social Contribuition 9,568 9,683 6,347 6,347

3.12 Statutory Holding/Contributions 0 0 0 0

3.12.01 Holdings 0 0 0 0

3.12.02 Contributions 0 0 0 0

3.13 Reversal of Interest on Ow n Capital 0 0 0 0

3.14 Minority Interest 0 0 0 0

3.15 Income/Loss for the Period (16,151) (16,150) (12,529) (12,529)

No. SHARES, EX-TREASURY (in thousands) 47,674 47,674 47,581 47,581

EARNINGS PER SHARE(in Reais)

LOSS PER SHARE(in Reais) (0.33878) (0.33876) (0.26332) (0.26332)



IFRSMarch 31, 2010


1 - CVM CODE02006-0



04.01 – CONSOLIDATED STATEMENT OF CASH FLOW – INDIRECT METHOD (in R$ thousands)

1 – CODE 2 – DESCRIPTION 3 - 01/01/2010 a 03/31/2010 4 - 01/01/2010 a 03/31/2010 5- 01/01/2009 a 03/31/2009 6 - 01/01/2009 a 03/31/2009

4.01 Cash flow s from operation activities 29,814 29,814 (3,495) (3,495)

4.01.01 Cash from operations 20,250 20,250 24,528 24,528

4.01.01.01 Net result (16,151) (16,151) (12,529) (12,529)

4.01.01.02 Depreciation and amortization 7,512 7,512 7,818 7,818

4.01.01.03 Negative goodw ill on acquisition of investment 0 0 0 0

4.01.01.04 Equity pick-up (90) (90) (192) (192)

4.01.01.05 Cost of w rite-off or sale of fixed assets 92 92 996 996

4.01.01.06 Financial expenses and exchange variation 37,192 37,192 34,084 34,084

4.01.01.07 Expenses w ith stock option 1,263 1,263 698 698

4.01.01.08 Deferred income tax and social contribution (9,568) (9,568) (6,347) (6,347)

4.01.02 Changes in assets & liabilities 9,564 9,564 (28,023) (28,023)

4.01.02.01 (Increase) Decrease in accounts receivable (13,274) (13,274) (12,044) (12,044)

4.01.02.02 (Increase) Decrease in inventories 8,169 8,169 (2,812) (2,812)

4.01.02.03 (Increase) Decrease in recoverable taxes 476 476 (5,161) (5,161)

4.01.02.04 (Increase) Decrease in other assets (908) (908) (2,948) (2,948)

4.01.02.05 (Increase) Decrease in suppliers 12,909 12,909 (8,807) (8,807)

4.01.02.06 (Increase) Decrease in taxes payable 1,492 1,492 (440) (440)

4.01.02.07 (Increase) Decrease in accounts payable 700 700 4,189 4,189

4.01.03 Others 0 0 0 0

4.02 Cash flow s from investing activities (8,926) (8,926) (42,574) (42,574)

4.02.01 Investments 0 0 (20,164) (20,164)

4.02.02 Acquisition of fixed assets (8,779) (8,779) (21,532) (21,532)

4.02.03 Addition to intangible (147) (147) (1,239) (1,239)

4.02.04 Dividends and interest on ow n capital received 0 0 0 0

4.02.05 Cash & Mkt Securities – restricted account 0 0 361 361



IFRSMarch 31, 2010


1 - CVM CODE02006-0



04.01 – CONSOLIDATED STATEMENT OF CASH FLOW – INDIRECT METHOD (in R$ thousands)

1 – CODE 2 – DESCRIPTION 3 - 01/01/2010 a 03/31/2010 4 - 01/01/2010 a 03/31/2010 5- 01/01/2009 a 03/31/2009 6 - 01/01/2009 a 03/31/2009

4.03 Cash flow s from financing activities (15,159) (15,159) 16,650 16,650

4.03.01 Proceeds from loans and financing 6,182 6,182 60,209 60,209

4.03.02 Proceeds from debentures 0 0 0 0

4.03.03 Proceeds from perpetual bond 0 0 0 0

4.03.04 Capital increase 0 0 0 0

4.03.05 Payments of loans and financing (21,341) (21,341) (43,559) (43,559)

4.04 Exchange variation on cash and cash equivalents 15 15 (2,265) (2,265)

4.05 Increase (Decrease) in cash and cash equivalents 5,744 5,744 (31,684) (31,684)

4.05.01 Cash and cash equivalents at the beginning of period 131,160 131,160 316,874 316,874

4.05.02 Cash and cash equivalents at the end of period 136,904 136,904 285,190 285,190



IFRSMarch 31, 2010


1 - CVM CODE02006-0



05.01 – CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FROM 01/01/2010 TO 03/31/2010 (in R$ thousands)1 - CODE 2 - DESCRIPTION 3 – CAPITAL

STOCK

4 – CAPITAL

RESERVES

5 – REVALUATION

RESERVES

6 – PROFIT

RESERVES

7 - ACCUMULATED

PROFIT/LOSS

8 – EQUITY

ADJUSTMENTS

9 - TOTAL PARENT

COMPANY 'S

INTEREST

10 - NON-

CONTROLLING

INTERESTS

11 - TOTAL

SHAREHOLDER’S

EQUITY

5.01 Opening Balance 311,525 11002 0 0 (4,770) (30,497) 287,260 0 287,260

5.02 Previous Years Adjustments 0 0 0 0 0 0 0 0 0

5.03 Adjusted Balance 311,525 11,002 0 0 (4,770) (30,497) 287,260 0 287,260

5.04 Income/Loss of Period 0 0 0 0 (16,151) 0 (16,151) 0 (16,151)

5.05 Allocations 0 0 0 0 0 0 0 0 0

5.05.01 Dividends 0 0 0 0 0 0 0 0 0

5.05.02 Interest on capital 0 0 0 0 0 0 0 0 0

5.05.03 Other Allocations 0 0 0 0 0 0 0 0 0

5.06 Realization of Reserves 0 0 0 0 0 0 0 0 0

5.07 Assets Evaluation Adjustments 0 0 0 0 0 245 245 0 245

5.07.01 Cash and Cash Equivalents adjustments 0 0 0 0 0 0 0 0 0

5.07.02 Cumulative Conversion Ef fects 0 0 0 0 0 245 245 0 245

5.07.03 Combined Business Adjustments 0 0 0 0 0 0 0 0 0

5.08 Increase/Decrease in Capital Stock 0 0 0 0 0 0 0 0 0

5.09 Constitution Capital Reserves 0 0 0 0 0 0 0 0 0

5.10 Treasury Shares 0 0 0 0 0 0 0 0 0

5.11 Other Capital Transactions 0 0 0 0 0 0 0 0 0

5.12 Others 0 1,263 0 0 0 0 1,263 0 1,263

5.12.01 Stock Options 0 1,263 0 0 0 0 1,263 0 1,263

5.13 Ending Balance 311,525 12,265 0 0 (20,921) (30,352) 272,617 0 272,617



IFRSMarch 31, 2010


1 - CVM CODE02006-0



05.02 – STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FROM 01/01/2010 TO 03/31/2010 (in R$ thousands)1 - CODE 2 - DESCRIPTION 3 – CAPITAL

STOCK

4 – CAPITAL

RESERVES

5 – REVALUATION

RESERVES

6 – PROFIT

RESERVES

7 - ACCUMULATED

PROFIT/LOSS

8 – EQUITY

ADJUSTMENTS

9 - TOTAL PARENT

COMPANY 'S

INTEREST

10 - NON-

CONTROLLING

INTERESTS

11 - TOTAL

SHAREHOLDER’S

EQUITY

5.01 Opening Balance 311,525 11002 0 0 (4,770) (30,497) 287,260 0 287,260

5.02 Previous Years Adjustments 0 0 0 0 0 0 0 0 0

5.03 Adjusted Balance 311,525 11,002 0 0 (4,770) (30,497) 287,260 0 287,260

5.04 Income/Loss of Period 0 0 0 0 (16,151) 0 (16,151) 0 (16,151)

5.05 Allocations 0 0 0 0 0 0 0 0 0

5.05.01 Dividends 0 0 0 0 0 0 0 0 0

5.05.02 Interest on capital 0 0 0 0 0 0 0 0 0

5.05.03 Other Allocations 0 0 0 0 0 0 0 0 0

5.06 Realization of Reserves 0 0 0 0 0 0 0 0 0

5.07 Assets Evaluation Adjustments 0 0 0 0 0 245 245 0 245

5.07.01 Cash and Cash Equivalents adjustments 0 0 0 0 0 0 0 0 0

5.07.02 Cumulative Conversion Ef fects 0 0 0 0 0 245 245 0 245

5.07.03 Combined Business Adjustments 0 0 0 0 0 0 0 0 0

5.08 Increase/Decrease in Capital Stock 0 0 0 0 0 0 0 0 0

5.09 Constitution Capital Reserves 0 0 0 0 0 0 0 0 0

5.10 Treasury Shares 0 0 0 0 0 0 0 0 0

5.11 Other Capital Transactions 0 0 0 0 0 0 0 0 0

5.12 Others 0 1,263 0 0 0 0 1,263 0 1,263

5.12.01 Stock Options 0 1,263 0 0 0 0 1,263 0 1,263

5.13 Ending Balance 311,525 12,265 0 0 (20,921) (30,352) 272,617 0 272,617

A free translation of the original in Portuguese)


IFRSMarch 31, 2010

02006-0 LUPATECH S.A. 89.463.822/0001-12

06.01 - NOTES TO FINANCIAL STATEMENTS

1. Operating Context

Lupatech S.A. (the “Company”) and its subsidiaries (jointly, the “Group”), is a group comprised of 31 unitsand has three business segments: Energy Products, Flow Control and Metallurgy. The Company has3,097 employees.

The Company is a corporation with headquarters in Caxias do Sul, State of Rio Grande do Sul, and islisted on the Sao Paulo Stock Exchange (“BOVESPA”).

In the Energy Products Segment, the Company offers high added value products and services for the oiland gas industry, such as anchorage ropes for deepwater platforms, manual and automated valves foruse in applications of exploitation, production, transportation and oil refining and hydrocarbon chain,equipment for completion of oil wells allowing oil and gas production, linings of drilling and productionpipes, equipment lease and offshore services and VNG compressors through the “Lupatech MNA”,“Lupatech CSL”, “Lupatech Tecval”, “Lupatech Oil Tools”, “Lupatech Esferomatic”, “Lupatech Oil & GasServices”, “Lupatech Tubular Services”, “Lupatech Monitoring Systems”, “Aspro”, “Sinergás” and“Norpatagonica” brands.

In the Flow Control Segment, the Company is the Mercosur market leader in the manufacture and salesof industrial valves, mainly for the chemical, pharmaceutical, pulp and paper, food, civil construction andmachine and equipment industries, through the “Lupatech Valmicro”, “Lupatech Mipel”, “ValBol” e“Jefferson”.

Through the Metallurgy Segment, the Company holds a prominent position in the international market,and is specialized in the development and manufacture of parts, complex parts and sub-assemblies aimedmainly at the international automobile industry through precision casting and steel injection processes, inwhich the Company is the pioneer in Latin America. The Company also operates in the casting ofcorrosion-resistant metal alloy parts, aimed at the industrial valves and pumps sectors, mainly forapplications in oil and gas industry processes.

2. Presentation of interim consolidated financial statements

2.1 Basis of presentation

The conclusion of these interim consolidated financial statements was authorized by the Administration ofthe Company on April 23, 2010 and will be available for approval by the Board of Directors.

The interim consolidated financial statements of the Company and its subsidiaries were prepared for thequarter ended March 31, 2010 and 2009 and are presented in accordance with the InternationalAccounting Standards (IAS) Nr.34, which deals with the interim financial reports. These interimconsolidated financial statements should be read together with the consolidated financial statements ofLupatech SA for the year ended, December 31, 2009, which were prepared in accordance withInternational Financial Reporting Standards (IFRS).

These consolidated financial statements are presented in accordance with IFRS in place of the quarterlyconsolidated financial statements according to BRGAAP, as permitted by Instruction No. 457 of 13 July2007, and Ofício-Circular/CVM/SEP/No. 004/2007 of 06 November 2007.



IFRSMarch 31, 2010

02006-0 LUPATECH S.A. 89.463.822/0001-12


The preparation of interim financial statements in accordance with IAS 34 requires the use of certaincritical accounting estimates and also the use of judgment by the Company’s Management in theapplication process of the Group’s accounting practices.

The same accounting policies and calculation methods were followed in these interim consolidatedfinancial statements such as were applied to the consolidated financial statements of December 31, 2009,except for the impact of the adoption of standards and interpretations of standards described below.

2.2 New procedures and interpretations of the IFRIC (International Financial Reporting

Interpretations Committee of the IASB) which may be applicable by the Company

(a) Standards and Interpretations in force and/or adopted in advance

IAS 27 – Consolidated and Separate Financial Statements

In January 2008, the IASB issued a revised version of IAS 27, whose changes are related, primarily, toaccounting for noncontrolling interests and the loss of control of a subsidiary. This amended Standardmust be applied to years beginning on or after July 1, 2009. The revision of these standard did not havean effect on the consolidated statements of the company and it take effect in accounting treatment anddisclosures only for new purchases of subsidiaries that take place from 2010.

IFRS 3 – Business Combinations

In January 2008 the IASB issued a revised version of IFRS 3, which deals with the recognition andmeasurement in financial statements of the assets acquired and liabilities assumed and participation ofnon-controlling shareholders, apart from the exchange originated in a business combination anddisclosures relating to the subject, the changes are effective for years beginning on or after July 1, 2009.The revision of these standard did not have an effect on the consolidated statements of the company andit take effect in accounting treatment and disclosures only for new purchases of subsidiaries that takeplace from 2010.

IAS 39 – Financial Instruments: Recognition and Measurement

In July 2008, the IASB issued a revised version of IAS 39 which deals with items eligible for hedge. Thechanges are effective for years beginning on or after July 1, 2009. The adoption of this amendment didn'timpact Consolidated Quarterly Financial Information of the Company.

IFRIC 17 – Distributions of Non-cash Assets to Owners

In November 2008, the IFRIC issued Interpretation 17, which deals with the distributions of non-cashassets to the owners. The entity is required to implement this Interpretation for years that begin on or afterJuly 1, 2009, but earlier adoption is permitted. The adoption of this amendment did not impact theConsolidated Quarterly Financial Information of the Company.

IFRIC 18 – Transfers of Assets from Customers

In January 2009, the IFRIC issued Interpretation 18, which deals with the transfer of assets fromcustomers to the Company. The entity is required to prospectively implement this Interpretation for assetsreceived from customers on or after July 1, 2009 and earlier adoption is permitted. The adoption of thisInterpretation did not impact the Consolidated Quarterly Financial Information of the Company.



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IAS 39 e IFRIC 9 Embedded Derivatives

In March 2009, the IASB revised IAS 39 and IFRIC 9, which deal with aspects related to the recognition ofderivatives. The entity is required to implement these changes for years beginning on or after June 30,2009. The adoption of this Interpretation did not impact the Consolidated Quarterly Financial Informationof the Company.

(b) IFRS Annual improvements of April 2009

In April 2009, the IASB revised various standards and interpretations as follows: IFRS 2, IFRS 5, IFRS 8,IAS 1, IAS 7, IAS 17, IAS 18, IAS 36, IAS 38, IAS 39, IFRIC 9 e IFRIC 16. The changes in the standardsIFRS 2 and IAS 38 and interpretations IFRIC 9 and IFRIC 16 are effective for years beginning on or afterJuly 01, 2009. The other changes in standards are effective for the years beginning on or after January01, 2010. The alteration of this norms did not impact the Consolidated Quarterly Financial Information ofthe Company.

IFRS 2 – Share-based Payment

In June 2009, the IASB revised rule IFRS 2, which deals with share based payments settled in cash orother assets, or by the issuance of equity instruments. This change is effective for years beginning on orafter January 01, 2010. The alteration of this norms did not impact the Consolidated Quarterly FinancialInformation of the Company.

IFRS 1 – Additional Exemptions for First time adopters

In July 2009, the IASB revised standard IFRS 1, which deals with additional exemptions for first-timeIFRS’ adopters. This change is effective for years beginning on or after January 01, 2010. Because theCompany has already adopted the IFRS, the alteration of this norms did not impact the ConsolidatedQuarterly Financial Information of the Company.

(c) Standards and Interpretations of standards not yet in force

IAS 32 – IFRS Classification of Rights Issues: Amendment to IAS 32

In October 2009, the IASB revised IAS 32, which deals with contracts that will or may be settled in theentity’s own equity instruments and establish that rights, options or warrants to acquire a fixed number ofthe entity’s own equity instruments for a fixed amount of any currency are equity instruments. This changeis effective for years beginning on or after February 01, 2010. The Company is evaluating the effects ofimplementing the change of this standard.

IAS 24 – Related Party Disclosures

In November 2009, the IASB revised IAS 24, which deals with disclosures of transactions with relatedparties and relationships between parents and subsidiaries. This change is effective for years beginningon/or after January 01, 2011. The Company is evaluating the effects of implementing the change of thisstandard.

IFRS 9 – Financial Instruments

In November 2009, IASB issued IFRS 9, which aims to replace IAS 39 - Financial Instruments:Recognition and measurement, over three phases. This standard represents the first part of Phase 1 ofreplacement of IAS 39 and addresses the classification and measurement of financial assets. This



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standard is effective for years beginning on/or after January 01, 2013. The Company is evaluating theeffects arising from the application of this standard and any differences from IAS 39.

IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments

In November 2009, IFRIC issued interpretation 19, which deals with the issue of equity instruments for anentity to its creditors in order to settle liabilities. This interpretation is effective for years beginning on/orafter July 1, 2010. The adoption of this Interpretation will not have an impact on the Consolidated FinancialStatements of the Company.

IFRIC 14 – Prepayments of a Minimum Funding Requirement – Amendments to IFRIC 14

In November 2009, IFRIC issued changes to interpretation 14, which are applicable in limitedcircumstances when an entity is subject to minimum requirements for provision of funds and makes anadvance payment of contributions to cover these requirements. These changes are effective for yearsbeginning on/or after January 1, 2011. The adoption of this Interpretation will not have will not have animpact on the Consolidated Financial Statements of the Company.

IFRS 1 e IFRS 7 – Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopter

In January 2010 the IASB issued changes to IFRS 1 and IFRS 7, which address issues of disclosure ofcomparative information of financial instruments. These changes are effective for years beginning on/orafter July 1, 2010. The adoption of this Interpretation will not have an impact will not have an impact on theConsolidated Financial Statements of the Company.

3. Interim condensed consolidated finacial statements

The interim condensed consolidated financial statements include Lupatech SA and its majority ownedsubsidiaries.

Subsidiaries

The Company had no change of shareholdings in subsidiaries for the period ended March 31, 2010.

Jointly-owned subsidiaries

The Company had no change of shareholdings in jointly-owned subsidiaries for the period ended March31, 2010.

Associate companies

The Company had no change of shareholdings in associated companies for the period ended March 31,2010.



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4. Cash and cash equivalents and marketable securities

Cash and cash equivalents

Cash and cash equivalents are broken down as follows:

03/31/2010 12/31/2009

Cash and banks

Brazil 18,755 32,372

Abroad 14,432 10,666

33,187 43,038

Financial investments

Bill of Exchange Agribusiness 10,000 -

Time deposits (CDI) 93,717 88,122

103,717 88,122Cash and cash equivalent 136,904 131,160

The financial investments have immediate liquidity and refer to funds invested in fixed-rate securities, billof exchange agribusiness and bank deposit certificates, carried out to optimize the Company’s short-termfunds. Yield rates of financial investments in bills of exchange in agribusiness and bank depositcertificates are in accordance with the characteristics of the application with CDI's parameter.

Securities – restricted account

Marketable securities - restrict

Scroll deposit 21,002 20,577Marketable securities - restrict 21,002 20,577

This refers to a deposit guarantee for payment of performance in company acquisitions, with maturity onOctober 31, 2010, which is remunerated at 102% of the Interbank Deposit Certificate (CDI). The balanceon March 31

st, 2010 is R$ 21,002 (R$ 20,577 in Decemeber 2009), recorded in current assets. In case the

contract performance targets for payment of additional cost are not met, these funds will be released onbehalf of the Company on their date of maturity.



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5. Inventories

03/31/2010 12/31/2009

Finished goods 27,973 26,975

Goods for resale 13,143 15,651

Work in progress 42,189 51,383

Raw material 73,563 70,006

156,868 164,015

6. Fixed Assets

Land 25,505 24,692

Building and construction 109,078 109,214

Machinery and equipment 220,348 218,054

Molds and matrixes 17,159 16,923

Industrial facilities 20,495 20,391

Furniture and fixtures 8,736 8,601

Data processing equipments 8,000 7,836

Improvements 6,606 6,606

Vehicles 4,033 3,932

Casks 124 124

Advances for fixed assets acquisitions 7,922 4,086

Construction in progress 11,397 10,175

Depreciation (119,516) (112,673)Total 319,887 317,961

03/31/2010 12/31/2009

The value of interests and exchange variation capitalized to construction in progress in the first quarter of2010 was zero (R$ 1.978 in 2009).

Synthesis of movement of permanent assets- during the semester ended on the 31st of March 2010, theacquisitions of permanent assets came to a total of R$ 8.779 (R$ 21.532 on the 31

stof March 2009) and

the lows came to a total of R$ 92 (R$ 996 on the 31st

of March 2009).

The value attributed to fixed assets in guarantee of liabilities on March 31, 2010 is as follows:

Taxation (Tax Executions) 11,498

Loans and Financing (note 9) 21,835

Total 33,333

In this quarter the Company performed the first periodical analysis of the remaining economic life cycle ofthe permanent and intangible assets with effects registered from the 1

stof January 2010.As a

consequence of the revision of this accounting estimative that aimed at realigning the remaining life cycle



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of the assets and consequently, the remaining depreciation of the rest of the life cycle of the assets, areduction of cost was determined with depreciation in the quarter of R$ 1.564, in comparison to thedepreciation cost calculated on the basis of the economic life cycle used until December, 31

st2009. The

cost with depreciation on the quarter ended on the 31st

of March 2010 was R$ 7.512 (R$ 7.818 in thequarter ended on the 31

stof March 2009).

7. Intangíveis

03/31/2010 12/31/2009

Goodwill 493,365 493,365

Software and other licenses 11,465 11,377

Projects development 19,466 19,389

Accumulated depreciation (18,129) (17,461)

Total 506,166 506,670

(a) Development of new products

It refers to the costs with the development of new products, processes and equipment by the Researchand Development Center (CPDL) of the Company.

The amortization of these projects, whose term does not exceed 5 years, is recorded as debt in income forthe year, in the cost of products sold account.

(b) Software and other licenses

It includes all the data processing systems and usage license, which are registered by the acquisition costand are amortized linearly.

The amortization of software is recorded as debt in income for the year, in the cost of products sold andoperating expenses account, for a 5-year term.

(c) Goodwill on acquisitions

Goodwill is allocated to business segments for which cash flows may be identified (Cash Generating Units- UGC). No other relevant intangible assets were indentified in the acquisitions other than goodwill forallocation of a portion of the acquisition cost.

The recoverable value of a UGC is determined based on calculations of the asset in use. Thesecalculations use cash flow projections before the calculation of income tax and social contribution basedon financial budgets approved by the management.

The goodwill is not subject to amortization, and should be evaluated by impairment test, at least on annualbasis or whenever there are indications of possible loss of value. The test did not indicate impairmentlosses for goodwill and other intangible, and therefore there is no accounting effect arising for thisdetermination in the financial statement.



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Key assumptions used in cash flow projection for impairment test:

Discount rate: 12.37%, based on the weighted cost of capital of the Group and the business segment towhich it belongs considering scenario of the year-end 2009, adjusted for inflation and adjusted whennecessary to reflect market assessments of specific risks of the asset.

Growth rate of operations: between 8.59% and 25% for determining the flow of the next 5 years.Additionally, the perpetuity has been calculated considering the stabilization of operating margins, levelsof working capital and investment and with zero growth. The growth rates used vary according to eachmarket's expectation that the cash-generating units are submitted. The inflation rates in the projectionwere not considered.

Below is a summary of the allocation of net goodwill of accumulated amortization, recorded until March 31,2010, by Cash Generating Unit (UGC) level:

03/31/2010 12/31/2009

Metallurgy Segment

Itasa Unit 16,588 16,588

Flow control Segement

Carbonox and Valmicro (Group of units) 6,065 6,065

Lupatech S/A - Metalurgica Ipê Unit 22,927 22,927Worcester Unit 82,943 82,943

Jefferson Unit 39,680 39,680

Energy Products Segment

Lupatech S/A - CSL Unit 105,414 105,414

Lupatech – Equipamentos de Serviços para

Petróleo - Oil Tools Unit 9,100 9,100


Petróleo Unit 59,546 59,546


Petróleo – Tubular Services Unit 14,524 14,524

Aspro Unit 48,726 48,726

Tecval Unit 55,680 55,680


Petróleo – Monitoring Systems Unit 9,315 9,315

Fiberware Unit 14,038 14,038

Norpatagonica Unit 5,395 5,395489,941 489,941

UGCs

The goodwill allocated to the group of Carbonox and Valmicro units is not relevant in the comparison withthe goodwill’s total book value. Therefore, individual information referring to these UGC is not beingpresented.

In addition, some acquisitions have contingent price clauses based on EBITDA targets for each acquiredcompany. The total value of the additional payment, in the case the EBITDA targets are reached, is asfollows:



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Company Amount of contingent payment:Lupatech S/A - CSL 100% of the EBITDA that exceeds the value

agreed between the parts related to theaccumulated EBITDA between 04/03/2007and 06/30/2010.

Lupatech – Equipamentos de Serviçospara Petróleo Ltda

Maximum additional payment if minimumEBITDA targets are met during the periodbetween 07/01/2007 and 06/30/2010:R$16,240

Lupatech – Equipamentos de Serviçospara Petróleo Ltda – Tubular Services

Maximum additional payment if minimumEBITDA targets are met during the periodbetween 01/01/2008 and 12/31/2011:R$22,396

Jefferson Sudamericana S/A. 25% of the amount that exceeds the EBITDAagreed between the parts for each fiscal yearof 2008 to 2010.

Fiberware Equipamentos Serviços paraIndústria Ltda.

50% of net income to be generated in 2009and 2010 and 35% of net income to begenerated in 2011.

Tecval S/A Válvulas Industriais. 50%, 40% and 30% respectively of 2009 to2011 that exceeds the 2007 EBITDAreference.

Lupatech – Equipamentos de Serviçospara Petróleo Ltda – Monitoring Systems

50% for 2009 to 2012 that exceeds theagreed EBITDA between the parts adjustedby the IGPM.

Norpatagonica S.R.L. 12,2% of the amount that exceeds theEBITDA agreed between the parts for eachfiscal year of 2009, 2010 and 2011.

On the 31st of March 2010 are acknowledged in the liabilities complementary values to the cost of theoriginal acquisition by reaching EBITDA of performance in the Aspro and Fiberware companies, in thetotals of R$ 1.463 and R$ 3.237 respectively, registered as an addition to the value of Goodwill. For therest of the companies, whose contracts include terms of contingent payments, as mentioned above,considering that the goals of EBITDA were not reached, no additional obligation of payment wasregistered. Such additional contingent payments will be registered as a complement to goodwill value,when it is considered to be probable that they become a payable obligation. In January 2008, IASB issueda revised version of IFRS 3, which determines the accounting of provision for additional payments basedon their mensuration to the fair value on the date of acquisition. The changes are effective for yearsbeginning on or the 1

stof July 2009. The group will apply the revised IFRS 3 in its consolidated financial

statements for its new acquisitions.



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8. Loans, financings and Perpetual Bond

(a) Loans and financings

Index Weighted Não Non

Descrição interest rates Current Current Total Current Current Total

Moeda nacional

Working capital / expansion Pré-Fixado 11,75% p.a. - - - 23 - 23

Working capital / expansion BNDES TJLP 7,04% p.a. 19,666 89,287 108,953 15,761 91,545 107,306

Working capital / expansion BNDES USD 3,01% p.a. 8 879 887 188 679 867

Working capital / expansion BNDES FIXO 4,50% p.a. 190 50,067 50,257 276 50,000 50,276

Financing of fixed assets purchase TJLP 3,80% p.a. 2,346 3,147 5,493 2,434 3,728 6,162

Financing of fixed assets purchase CDI 13,95% p.a. 127 1 128 127 28 155

Financing of fixed assets purchase FIXO 13,72% p.a. 600 12 612 783 20 803

Financing incentives to research and technology TJLP -3.50% 901 2,208 3,109 881 2,632 3,513

23,838 145,601 169,439 20,473 148,632 169,105

Moeda estrangeira

Working capital / expansion US Dollar Libor + 2,50% a.a. 1,076 218 1,294 1,329 385 1,714

Working capital / expansion US Dollar 7,01% p.a. 5,304 18,011 23,315 4,202 17,639 21,841

Working capital / expansion US Dollar 3,50% p.a 1,613 - 1,613 1,830 - 1,830

Working capital / expansion Peso ARS 4.14% 2,599 995 3,594 1,416 979 2,395

Financing of fixed assets purchase US Dollar 5,60% p.a. - 6,820 6,820 57 6,670 6,727

Financing of fixed assets purchase Peso ARS 17,00% p.a. 41 - 41 51 - 51

Financing of fixed assets purchase US Dollar Libor + 8,71% p.a. 181 - 181 352 - 352

10,814 26,044 36,858 9,237 25,673 34,910

34,652 171,645 206,297 29,711 174,304 204,015

03/31/2010 12/31/2009

Maturities for non-current financing installments are distributed as follow:

Maturity 03/31/2010 12/31/2009

2011 52,366 65,445

2012 56,305 50,362

2013 23,453 22,802

2014 22,911 22,401

2015 14,880 11,675

2016 1,604 1,500

2017 126 120

171,645 174,304

The guarantees for loans and financings were granted as follows:



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Guarantee Amount

Local currency

Working capital / expansion Promissory note 62,500

Working capital / expansion Mortgage / Building 39,266

Working capital / expansion Companies guarantee 34,697

Financing of fixed assets purchase Companies guarantee 9,737

Financing of fixed assets purchase Own financed asset 15,933

Financing incentives to research and technology Bank guarantee 7,972

170,105

Foreign currency

Working capital / expansion Companies guarantee 23,249

Financing of fixed assets purchase Own financed asset 5,902

29,151

Total 199,256

Over some financing contracts, the Company and its Affiliates are subject to complying to some restrictiveclauses (“covenants”), which are related to the maintenance of the indexes (a) Net Debt / EBITDA until3.5x, (b) EBITDA / Adjusted Net Operating Income at least 20% (twenty percent) (c) quick ratio (currentassets / current liabilities) at least of 1.5, all based in the last twelve months of operation.

In addition, our indirect joint subsidiary Aspro do Brasil has “covenants” related to financing contract whichrequires the maintenance of (a) minimum quick ratio of 1.2; (b) debt/shareholders equity until 1.5x and (c)Gross operational cash generation minimum of 1.3x the debt service.

In the case of these covenants not being followed by the Company and its affiliates, the financial institutioncan require the anticipated debt clean-up. The company does not present a situation of "Default" inrelation to these contracts on the date of this quarterly information.

(b) Bônus Perpétuos

As of July 11th, 2007 and June 30

th, 2008, through its subsidiary affiliated to the branch abroad Lupatech

Finance Limited, the offering of senior perpetual bonds abroad remunerated at 9.875% p.a. (bonds) wasconcluded in the total amount of US$ 200 million and US$ 75 million, respectively. The yield rates of theperpetual bonds are paid on a quarterly basis. These operations were guaranteed by sureties provided bythe Company and its subsidiaries

In case of Company interest, the Perpetual Bonds may be redeemed, parity in the face value, in aquarterly bases, since July 2012, ie five years after the emission. The Perpetual Bonds have not due datefor the principal, but may become payable in specific situations, as defined under Perpetual BondsAgreement, if a break up of any of such of obligations is verified. Currently the Company complies fullywith its obligations relating with the Perpetual Bonds.

The Bonds were neither registered at the Securities and Exchange Commission of Brazil (CVM) nor underthe U.S. Securities Act of 1933 (Securities Act). The bonds were offered only to institutional investorsqualified under Rule 144A and to non-American persons outside the United States, except in jurisdictions



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where such offering or sale is forbidden, in accordance with Regulation S. bonds are listed on theLuxemburg Stock Exchange.

Resources obtained through the offer are being used to finance the Company’s growth plan.

9. Debentures

To obtain the recourses for the acquisition of companies, strengthening the capital structure and workingcapital, modernization and expansion of production capacity and social investments, the Board ofDirectors approved at the Extraordinary General Meeting (AGE) held on 15 April 2009, the issuance of320,000 (three hundred and twenty thousand) debentures, in a single series, for private placement.The debentures convertible into common shares, with floating guarantee and nominal value per unit ofR$1, with the maturity of 9 years, with total amount of up to R$320,000 are remunerated to the variation ofthe IPCA + 6.50% per year. The debentures may be converted into common shares, issued by theCompany, the sole discretion of the debentures, at any time from the second year on, considering the dateof issue. The remuneration will be paid annually, always on 15, with the first payment from April 15, 2010,and the subsequent payments, all on 15 April the following year, and the interest until April 15, 2018.

The debentures will be paid in 3 installments, from the date of issuance on, and (i) the first, in proportion of47.5% of principal value, on April 15, 2016, (ii) the second, in proportion of 47.5% of the principal value, onApril 15, 2017, (iii) the third, in proportion of 5% of principal value, on 15 April 2018.

If all or part of the debentures are not converted into shares and the condition of early redemption is notreached, they will be entitled to conversion of non-premium equivalent to R$ 423.75 (four hundred andtwenty three dollars and seventy-five cents), updated by the IPCA.The maturity premium, with the remuneration of IPCA + 6.5% per year, increases the annual return inIPCA + 10%.

The company may redeem the debentures in advance from the 2nd year on, from the date of issuance on,ie, from April 15, 2011, provided that the following condition occurs, and except for the conversion ofdebentures. The condition for the redemption of debentures in advance occurs whenthe weighted average price of 180 (one hundred eighty) calendar days from issuance of common shares ofthe Company, calculated in sessions of BM& F BOVESPA and raised daily by the trustee of the privateissue is greater than or equal to the maximum achieved at the price negotiated updated by IPCA ,multiplied by the premium on the price and capitalized by 14% p.a., and the maximum value reached by thenegotiated price ( "MAXPAN") will be the higher value found by moving average of 120 (one hundredtwenty) calendar days from common shares issued Company's stock as calculated on the BM & FBOVESPA to be raised daily over the first 2 years from the date of issue, with a minimum R$17.50(seventeen Brazilian Reais and fifty cents) per share, this value will not be updated, and maximum value,R$35.00 (thirty-five Brazilian Reais), updated for 2 years from the date of issue.

The commitments of redemption, conversion of debentures into shares and redemption without conversionwere identified by Management of the Company as contractual components which have the characteristic,alone, to constitute an embedded derivative.Due to this fact, they were separated from the main contract and valued at fair value on initial recognitionand subsequently at fair value through results.

On December 31, 2009 and on 31 March, 2010, the value of the embedded derivative was valued at R$423.19 and R$ 417.43, respectively, for each debenture in amount of R$ 1,000 face value. The change infair value of embedded derivative in the period totaled R$ 1,843, recorded in the market change, optiondebentures and as a debt on income statement.



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The main characteristic of the debentures are as follows:

SeriesDate of issuance:Date of final maturity:Quantity:Nominal value:

First Issuance04/15/200904/15/2018

320,0001

03/31/2010 12/31/2009

Debt instrument - Debentures 204,807 204,807

Embedded derivative instrument 133,577 135,421

Interest on Debentures 25,646 16,313

Current 25,646 16,313

Non Current 338,384 340,228

364,030 356,541

The debentures are subject to calculation of financial "covenants", a) Net debt / EBTIDA: equal or lowerthan 3.5 (three and a half), b) EBTIDA / ROL: higher than or equal to 20% (twenty percent); and c) CurrentLiquidity Index: higher than or equal to 1.5 (one and a half full). The covenants are calculated on a yearlybasis, on December 31

stof each year, which is the settlement period to the calendar year, which began on

January 1st

and ended on December 31st.

In the 4th quarter of 2009, the Company did not meet the financial covenants clause on the debentures. AsFirst Amendment to the Private Deed of the 2nd issue of Debentures concluded on December 30

th, 2009,

these covenants will not be required for the fulfillment of the special rule in writing, the default woulddetermine acceleration of the debentures at the closing of the fiscal year 2009, provided that the Companymakes payment to debenture holders of "waiver fee" until January 31

st, 2010. To release the Company of

the situation of default, the Company management made on January 15th, 2010, the payment of R$ 3,691to the title of waiver fee.

10. Realted Parties

The transactions are made according to the conditions agreed among the parties. The credits and debitswith the related parties are remunerated to the taxes applied by the financial market.

a) Guarantees granted

The aval guarantees and sureties rendered by the group’s companies (Company and subsidiaries) forown or related-party financing are presented in Notes 8.



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b) Price and charge conditions

Loan contracts among companies in Brazil are monetarily restated according to the DI-Cetip monthly ratefor funds obtained in the market.

c) Management compensation

Lupatech S.A. paid its managers, between wages and variable compensation, a total amount of R$ 738 inthe first quarter ended March 31, 2010 (R$ 540 in the quarter ended March 31, 2009) , the limit amount ofR$ 3,600 having been approved for the year. Additionally the cost of options granted related to themanagement, amounted in the 3 months ended March 31, 2010 R$ 1,263 (R$ 689 in the quarter endedMarch 31, 2009).

11. Income Tax and Social Contribuition

For companies headquartered in Brazil, depending on the situation of each company, if levied by taxableprofit, the provision for income tax is calculated and accounted at the 15% rate over the taxable income,plus an additional 10%, and the social contribution at the 9% rate, calculated and accounted over theincome before income tax, adjusted pursuant to tax laws. The companies levied based on presumed profitcalculate their income tax at the rate of 15%, plus an additional 10%, and social contribution at the rate of9%, over presumed profits from 8% to 32% for income tax and 12% for social contribution on subsidiaries’gross income from selling and services, pursuant to the fiscal rules in force. Operations of subsidiarieslocated in Argentina are taxed at a 35% rate on adjusted profit for tax purposes.



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(a) Deferred income tax and social contribution

03/31/2010 12/31/2009

Assets

Contingence provisions 2,991 3,181

AVP - Adjustments to equity value 1,218 1,829

Deferred write-off - research projects 177 189

Tax losses 38,481 37,486

Negative base of the CSLL 13,399 13,548

Allowance for doubtful accounts 486 485

Debentures 3,316 3,943

Gaap difference on the valoriazation of inventories 2,026 2,011

Other non-deductable provisions 23 36

Deferred income tax and social contribution (CSLL) 62,117 62,708

Passivo - calculado sobre:

Surplus Value of fixed assets of the acquired company 348 347

Goodwill amortization 14,524 9,267

Fair value of fixed assets 6,908 6,963

Perpetual bonds expenses deferred 861 931

Exchange variation taxable by cash basis 2,023 17,314

Imposto de renda e contribuição social diferidos - não circulante 24,663 34,822

(b) Estimate of deferred tax assets realization amounts

The tax benefits recognized on tax losses and negative basis of social contribution are supported byprojections of taxable income on the basis of technical feasibility studies, submitted annually to theManagement of the Companies. These studies consider the historical profitability of the Company and itssubsidiaries and the prospect of maintaining current profitability in the future, allowing an estimate ofrecovery of credits. The remaining claims, which are based on temporary differences, mainly taxcontingencies as well as provision for losses, were recognized as the expectation of its realization.

The tax credit recovery, in the Parent Company and Consolidated, is based on taxable income projectionsfor the following years:



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Year

2010 2,617

2011 5,367

2012 8,570

2013 12,375

2014 18,306

2015 a 2018 11,891

Indeterminate 2,991

62,117

The collection of tax debts, in the parent company and consolidated, will be practically according to (i) thematurity of the loan, denominated in foreign currency, due to the deferral of taxation of foreign exchangefor the time of settlement, (ii) the realization of goodwill on acquisition of subsidiaries and (iii) amortizationof the fair value of fixed assets.

Year

2010 2,196

2011 174

Indeterminate 22,293

24,663



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(c) Reconciliation of income tax and social contribution:

03/31/2010 03/31/2009

Gain (Loss) before taxes and participations (21,814) (14,805)

Additions and exclusions

Equity pick-up (90) (192)

Effects of subsidiaries taxed by presumed profit (647) 1,296

Difference of social contribution and income tax rate of 1% in subsidiaries

based abroad 254 214

Exchange variation effects and financial results of subsidiaries abroad that

not affect the tributary profit 1,120 8,628

Options granted expenses 1,263 697

Goodwill amortization before incorporation (deductible after incorporation) - -

Other 3,258 (2,532)

Calculation basis (16,656) (6,694)

Combined tax rate 34% 34%

Income tax and social contribution by the combined tax rate 5,663 2,276

Deferred income tax and social contribution 9,568 6,347

Current income tax and social contribution (3,905) (4,071)

Considering the fact that the goodwill is not more subject to accounting amortization from 2009, the effectof the amortization made only for tax purposes, creates the constitution of provision for deferred taxliabilities on the accounting and tax bases, according to the item (a) of this note.

12. Contingencies

(a) Contingent liabilities

The Company, through their attorneys, has been discussing some tax, labor and civil issues in courts. Theprovision for contingencies was determined by the Management based on available information andsupported by the opinion of the Company’s attorneys as to the expected decision, in an amount deemedsufficient to cover losses considered likely to occur, which may occur in view of unfavorable courtdecisions.



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Possible Probable

Tributários (i) 18,709 5,114

Trabalhistas (ii) 3,129 2,084

Cíveis (iii) 11,987 159

Total 33,825 7,357

(-) Depósitos Judiciais - -

Total em 31 de março de 2010 33,825 7,357

Total em 31 de dezembro de 2009 33,139 7,860

Loss probability

The provision for the resources involved in legal disputes in the amounts above presented and relating tothe spheres listed below takes into account the probable loss, which is set when an outflow of economicbenefits is presumed on the subject under discussion, worthy of trials in each demand and jurisprudentialunderstanding of each case.

These figures R$ 22,825 and R$ 7.375 include all the Group companies in Brazil and abroad and includefigures under litigation and administrative as well as situations where incurred even without the existenceof release or formal questioning by the authorities, would give rise to risk further losses.

The demands with possible risk of loss are excluded from the provision, behold, there is an equal chancefor both success and loss for these actions.

The lawsuits are divided into three levels, namely:

(i) Tax – issues regarding state and federal taxes, among these IRPJ (corporate income tax), PIS (socialintegration program), COFINS (contribution for social security financing), INSS (Brazilian Social SecurityInstitute), ICMS (value-added tax) and IPI (tax on manufactured products). There are legal proceedings inall phases, from lower courts to higher courts, STJ (Higher Court of Justice) and STF (Higher FederalCourt).

(ii) Labor – several labor claims mostly related to suits for damages.

(iii) Civil – civil claims regarding ordinary, provisional and execution claims, among others.

(b) Contingent assets

Tax 2,276

Civil 561

Balances at March 31st, 2010 2,837

Balances at December 31st, 2009 2,675

Probability of probable gain



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Tax – discussions related to city, state and federal tax rights.

The Company did not record contingent gains, for it only records them after the claims are final andunappeasable or upon the effective inflow of funds.

13. Shareholders’ equity

(a) Capital stock

Current integrated capital stock only comprises common shares with 100% tag-along right, asfollows:

03/31/2010 12/31/2009

Ordinary shares payment 47,674,118 47,674,118

Total 47,674,118 47,674,118

According to the Bylaws, the Board of Directors may further increase the capital stock regardless ofamendments to the bylaws in more 118,047,939 common shares.

(b) Dividends

The distribution of minimum mandatory dividends corresponding to 25% of the adjusted net revenue isensured to shareholders on annual basis, in accordance with the Brazilian Corporate Law.

(c) Cumulative Translation Adjustment

The Company records in this item the effect of foreign exchange variations on investments in subsidiariesabroad. This accumulated effect will be transferred to income for the year as profit or loss only in case ofinvestment disposal or write-off.

(d) Options granted

The Company records in this item the effect of the recognition of the fair value of stock options to whichsome executives are entitled, as mentioned in Note 16.

14. Financial instruments

14.1. Financial risk management

14.1.1. Financial risk factor

The Group’s activities expose it to several financial risks: market risk (including currency risk, fair valueinterest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’sprogram for global risk management is focused on the unpredictability of financial markets and seeks tominimize potential adverse effects on the Group’s financial performance through the use of derivativefinancial instruments to protect certain risk exposures.



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Risk management is carried out by the Group’s treasury according to approved policies, except for jointly-owned subsidiaries, which are shared with the other controlling shareholders. The Group’s treasuryidentifies, evaluates and protects the Company against possible financial risks in cooperation with theGroup’s operating units. The Board of Directors sets forth principles for global risk management, as wellas for specific areas such as foreign exchange risk, interest rate risk, use of derivative and non-derivativefinancial instruments.

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk resulting from exposure tosome currencies, mainly the US dollar and the Argentine Peso.

Foreign exchange risk results from trade and financial operations, recorded assets and liabilities and netinvestments in overseas operations.

The Management has established a policy that requires that the Group’s companies manage their foreignexchange risk related to their functional currency. In order to manage their foreign exchange risk resultingfrom trade operations, the companies seek to balance their balance of trade between purchases and salesin currencies different from their functional currency.

In funding operations through debts with no maturity date (perpetual bonds) no instruments for foreignexchange protection were used, since there was no principal settlement flow involved and, therefore, norelevant effect on the cash position. The accounting and equity exposure to these fluctuations continue tobe recorded in the financial statements. Financial debts with maturity date, in which there is the exposureto currency variation in relation to cash, are protected by rate and index swap operations, which are“perfect” in relation to the amount protected, maturity date and valuation indicators, removing foreignexchange risk completely.

The Group has certain investments in overseas operations whose net assets are exposed to foreignexchange risk.

On March 31st, 2010 and 2009 the Company had assets and liabilities denominated in US dollars, asshown in the table below:

Items 03/31/2010 12/31/2009

Cash and cash equivalents 4,987 3,010

Other assets 70,443 66,972

Liabilities (11,449) (25,470)

Perpetual bonds (280,689) (283,952)

Total (216,708) (239,440)

Amounts in US dollar



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In addition, in 1Q 2010 our exposure to Argentina pesos is as below:

Itens

Cash and cash equivalents

Financial applications

Accounts and notes receivable

Inventories

Fixed Assets

Intangible

Other assets

Suppliers

Loans and Financings

Advances from Customers

Total

-

(2,175)

114,884

(2,335)(7,229)

(2,754)

615

128,096

12,744

66,557

34,155

10,550

(7,088)

15,479

63,822

34,192

10,501

(13,623)

12,374

2,700

12/31/200903/31/2010

12,995

1,500

Amounts in P$ thousands

On March 31, 2010 the US dollar (“dollar”) rate in relation to the Brazilian Real was US$1.00 = R$ 1.781(On December 31, 2009 US$ 1.00 = R$ 1.741). If the Real depreciates 10% in relation to the official dollarrate at the end of the year and all the other variables remain equal, the impact on income, after thecalculation of income tax and social contribution, is a loss of approximately R$ 25,473. In this scenario,the impact on liquidity would be positive, i.e., the Company would have a net cash increase from loansand financings of approximately R$ 888 since the major dollar-denominated debt – perpetual bonds, inthis case – has no maturity date and does not require disbursement.

Analysis of the sensitivity of foreign currency and variation of interest rate

As presented in the note 9 and 11, the Company is exposed to risks of fluctuation of interest rates andforeign currencies (other than its functional currency, the "Real"), mainly the U.S. dollar on their loans andfinancing.There are any derivative transactions outstanding at the date of these financial statements, so inthis fact the sensitivity analysis was performed for the exposure of financial loans to exchange ratefluctuation and interest rates fluctuation. The sensitivity analysis considers 3 scenarios of interest ratefluctuation and exchange rate fluctuation.To define the scenarios used, the Company’s Management believes that the following assumptions maybe fulfilled, with their respective likelihoods; however, it is worth pointing out that these assumptions arebased on judgments of the Company’s Management and that they may vary significantly in relation to theactual results due to market conditions, which cannot be estimated with certainty on this date for the fullestimation profile.

Scenario involving a probable interest rate parity of US Dollar in comparison with Brazilian Realestimated by the Management:Interest rate for the year 2010: Increase of 10%US$: 1,80

Scenario involving a possible interest rate parity of US Dollar in comparison with Brazilian Realand a twenty-five percent (25%) impairment in the risk variable considered likely:Interest rate for the year 2010: Increase of 12%US$: 2,25



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Scenario involving a remote interest rate parity of US Dollar in comparison with Brazilian Real anda fifty percent (50%) impairment in the risk variable considered likely:

Interest rate for the year 2010: Increase of 15%US$: 2,70

The impact shown in the table below refers to the period of 1 year of projection:

Operation Risk Probable Possible Remote

Loans, financing and perpetual bond US$ hike 6,247 154,210 302,172

Loans, financing and perpetual bond Interest Rate hike 726 908 1,089

TOTAL 6,973 155,118 303,262

Scenario as per description above

(ii) Cash flow risk or fair value associated with interest rate

The Group’s interest rate risk arises from long-term loans. The loans issued at variable rates expose theGroup to cash flow interest rate risk. The Group’s loans at variable rates were mainly denominated inReais.

The Group analyzes its interest rate exposure dynamically. Several scenarios are simulated taking intoconsideration refinancing, renewal of existing positions, and alternative financing and hedge. Based onthese scenarios, the Group determines a reasonable change in the interest rate and calculates the impacton income. For each simulation, the same change in interest rate is used for all currencies. The scenariosare prepared only for liabilities representing the main interest-bearing positions.

Based on the simulations and considering the Group’s indebtedness profile in December 2009, the impacton income, after the calculation of income tax and social contribution, with a variation of around 0.25percentage points in variable interest rates and with all the other variables remaining constant, wouldcorrespond to an approximate increase/decrease of R$ 199 in interest expenses for the year. Thesimulation is conducted quarterly to ascertain whether the maximum loss potential is within the limits setforth by the Management.

(iii) Credit risk

Credit risk is managed within the company. It arises from cash and cash equivalents, derivative financialinstruments, deposits in banks and financial institutions and exposure to client credit. For banks andfinancial institutions, securities from entities classified by the Company’s Management as prime areaccepted. Individual risk limits are determined based on internal or external classifications, according tolimits set forth by the Management. The use of credit limits is monitored regularly and recorded whenapplicable the allowance for doubtful accounts.

Client selection and the monitoring of the periods for financing sales by business segments and individualposition limits are procedures adopted in order to minimize potential default in its accounts receivable. Ourrevenues are more concentrated, directly and indirectly, on the client Petrobras, which in 1Q2010accounted for approximately 50% (54% in 2009) of the Company’s and its subsidiaries’ total revenues.(iv) Liquidity risk

The cautious management of liquidity risk implies keeping enough cash and securities, availability offunding through conditional credit lines and the ability to settle market positions. Due to the dynamicnature of the Group’s businesses, the treasury keeps funding flexible by maintaining conditional creditlines.



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The Management monitors the level of the Group’s liquidity, considering the expected cash flow, whichcomprises the unused credit line, cash and cash equivalents. This is generally conducted locally within theGroup’s operating companies, according to the practice and the limits set forth by the Group. These limits

vary according to the region in order to take into account the liquidity of the market where the organizationoperates. Additionally, the Group’s liquidity management policy involves the projection of cash flows in themain currencies and the consideration of the level of net assets required to achieve these projections, themonitoring of the balance sheet’s liquidity index in relation to the internal and external regulatoryrequirements and the maintenance of debt financing plans.

14.1.2. Capital risk management

The Group’s objectives when managing its capital are to ensure the Group’s ability to continue offeringreturn to shareholders and creditors, in addition to maintaining an ideal capital structure to maximize itsweighted average cost.

The Group monitors its capital based on the financial leverage index. This index corresponds to net debtdivided by total capital. Net debt, in turn, corresponds to total loans (including short- and long-term loans,as demonstrated in the consolidated balance sheet), subtracted from the amount of debts with no maturitydate (perpetual bonds), from cash and cash equivalents and from securities. Total capital is calculated byadding the capital stock to net debt, as demonstrated in the consolidated balance sheet.

14.1.3. Fair value estimate

The fair value of financial assets and liabilities that have terms and conditions and traded in active marketsis determined on the basis of observed prices in these markets (including perpetual bonds).

The fair value of other assets and liabilities (excluding derivative instruments) is determined by pricingmodels generally accepted. These models use based on the estimated discounted cash flows from theprices of similar instruments applied to transactions in a current market observable.

The fair value of derivative instruments is calculated using quoted prices. When those prices are notavailable, is used the analysis of discounted cash flows using the yield curve, apply according to theduration of the derivative instruments to no options. For derivatives containing options models are used forpricing options. The exchange rate swaps are measured at present value of future cash flows estimatedand discounted based on yield curves applicable price, based on interest rates.

The Company’s main financial assets and liabilities are described below, as well as the criteria for theirvaluation/assessment:

(a) Cash, cash equivalents, banks and securities held to maturity

Balances in cash and cash equivalents and securities have a similar value to the accounting balances,considering their turnover and liquidity. The table below shows this comparison:



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Items Book Value Fair Value

Cash and cash equivalents 136,904 136,904

Marketable securities 21,002 21,002

Total 157,906 157,906

(b) Loans and financings

The estimated market value was calculated based on the present value of future cash disbursement,using interest rates available to the Company, and the evaluation indicates that the market values, inrelation to the accounting balances, are as follows:


Loans and financing 206,297 197,469

Total 206,297 197,469

(c) Bônus Perpétuo

The estimated market value was calculated based on the bond’s market quotation on March 31, 2010.This evaluation indicates that market values, in relation to accounting balances, as follows:


Perpetual bonds 497,376 462,187

Total 497,376 462,187

(d) Debêntures

The Company's Management identified the commitments of the early redemption of debentures,conversion of debentures into shares and redemption without conversion as contractual components thathave the characteristic of an embedded derivative. They were separated from the main contract, valued atfair value on initial recognition and subsequently at fair value through results. The evaluation of assets andliabilities is based on assumptions and criteria which, in some cases includes estimates of the exerciseprice, conversion period, interest rate, volatility of action, expected dividends, etc. The model used forpricing and valuation of these derivative instruments was the method of Monte Carlo simulation.

On December 31st, 2009 and on March 31, 2010 the value of the embedded derivative was valued at RS

423.19and R$ 417.43, respectively, for each debenture R$ 1,000 face value.The change in fair value of embedded derivative in the period totaled R$ 1,843, recorded in the marketchange, the option debentures income.



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The value of the debt instrument of debenture is presented at book value because there is not asignificant volume of transactions in the secondary market in order to characterize a market valuation.Additionally were issued in 2009 and therefore we are assuming that the amount recorded reflects themarket value on March 31, 2010.

(e) Measurement of fair value

IFRS 7 defines fair value as the price that would be received for an asset or paid for transferring a liability(exit price) in the principal or most advantageous market for the asset or liability in a regular transactionbetween market participants on the day of calculation. IFRS 7 also establishes a hierarchy of three levelsfor the fair value, which prioritizes information when measuring the fair value by the company, to maximizethe use of observable information and minimize the use of nonobservable information. IFRS 7 describesthe three levels of information to be used to measure fair value:

Level 1 - quoted prices (not adjusted) in active markets for identical assets and liabilities.

Level 2 - Inputs other than quoted prices included in Level 1 available, where (non-adjusted) quoted pricesare for similar assets and liabilities in non-active markets, or other data that is available or may becorroborated by market data for substantially the full term of the asset or liability.

Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservableinputs) because market activity is insignificant or does not exist.

As of December 31, 2009, the Company had the derivate embedded in debenture contracts which the fairvalue measurement is required on a recurring basis, using the Level 3.

Derivative embedded at the date of issue 135,421

Variation of fair value (1,843)

Derivative embedded on December 31, 2009 133,578

15. Insurance coverage (unaudited by independent auditors)

It is the Company’s policy to maintain insurance coverage for fixed assets and inventories subject to risks,under the type “Comprehensive Corporate Insurance”, and for amounts deemed as sufficient to cover therisks involved. The company also has general Civil Liability Insurance, as well as Directors and OfficersLiability Insurance. In the oil segment, it covers the national transportation and risks involving oilequipment.

Insurance purpose Amount Secured

- Corporate Understanding Insurance R$ 334,956- General Civil Responsibility Insurance R$ 10,000- Management D&O Responsibility Insurance R$ 15,000- Oil Equipment Risk Insurance US$ 7,852



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16. Stock option plan

With the purpose of promoting the Company’s expansion and achieving the corporate goals established,allowing the Company to obtain and keep its top executives and promote the good performance of theCompany and shareholders’ interests upon the long-term commitment by the Management, theExtraordinary General Meeting held on April 19

th, 2006 approved the Authorization Plan for the Option

Granted (Plan).

The Board of Directors has defined the eligible persons to the programs set forth in the Plan, including thebeneficiaries, the amount of shares entitled for subscription with exercise of call option and the means ofpayments of shares.

The option provided pursuant to the Plan will represent each year the maximum of 5% of the total amountof shares representing the Company’s capital on the concession date plus existing shares, should allstock options offered pursuant to the Plan be exercised. The shares distributed will entitle to the samerights as the other which already comprise the capital stock.

The obtainment of the right to exercise the Option will occur in installments annual and constant during 5(five) years, ie, 20% (twenty percent) at the end of the first year and then 20% (twenty percent) everybirthday. The beneficiary may defer the payment of the option for up to one year and should exercise theiroption within 7 (seven) years from the Contract Option date on. The exercise price will be adjusted by theIGPM-FGV variation, plus six percent (6%) per year, calculated on a pro rata temporis basis up to theeffective date of subscription and/or acquisition.If the beneficiary will leave the Company due to its sole intention or due to the initiative of Company,automatically will be extinguished all options granted to him that are not yet at the time, options that mayalready be exercised.The Company has no legal or constructive obligations to repurchase or settle the options in cash.

The beneficiary may exercise the option upon cash payment or extend exercise for one year andaccumulate the payment regarding this exercise with the payment of the options which the beneficiary isentitled to in the following year.

The programs issued and their respective approvals are as follows:

First Program: At the Board of Directors meeting held on 20 July 2006 was approved the First Program ofOptions Granted.

Second Program: The Second Program of Options Granted was approved at the Board of Directorsmeeting held on 19 April 2007.

Third Program: The third program of Options Granted was approved at the Board of Directors meetingheld on January 16, 2009.

Additive to the First and Second Program ("Fourth Program"): On April 30, 2009, the Board ofDirectors approved the increase in the amount of shares of the Company to be issued within first andsecond program for stock options purchase of shares ("Fourth Program"), up to 477,000 (four hundredand seventy-seven thousand) new common shares of the Company issued and 414,000 for the FirstProgram and 63,000 options for the Second Program.

The number of shares object of the fourth program will be calculated according to the valuation of theshares on the IBOVESPA, in the period from 31 December 2008 to 31 December 2012. After that period,it will be determined, based on the percentage of recovery, the number of shares subject of the new optionthat can be subscribed / purchased by the recipient, considering that (i) if the valorization of shares in theperiod from 31 December 2008 to 31 December 2012 is lower than 70% (seventy percent) of valorization



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of IBOVESPA for the same period, the beneficiary may not exercise any options in the Fourth Program;(ii) the percentage of valorization of shares is higher than 70% (seventy percent) and up to 180% (onehundred eighty percent) of the valorization of IBOVESPA for the same period, will be given to thebeneficiary the quantity of shares the subject of new options anticipated, multiplied by the percentage ofvalorization of actions and (iii) the percentage of valorization of the shares will be higher than 180% (onehundred eighty percent), shall be limited the amount of shares the subject of the new option that thebeneficiary can subscribe to 180% (one hundred and eighty percent ) of the quantity anticipated.

The option may be exercised on all or a part of the shares during the exercise period of the option. Theexercise period of the option will be 01 January 2013 to March 31, 2013. The purchase price per sharesubject of the new option will be the same as the stock on the first program and the second program,according to the allocation for each beneficiary.

Variations in the Programs:

Variations in the number of options for purchase of outstanding shares and their corresponding weightedaverage strike prices are presented below:

First issuanceWeightted average strike price

per store Options

Weightted average strike price

per store Options

At the beginning of the period 16.21 198,913 13.93 319,778

Cancelled - - 16.21 (28,493)

Exercised - - 16.21 (92,372)

At the end of the period 16.89 198,913 16.21 198,913

Exercisable at the end of the period 16.89 101,818 16.21 4,723

Second issuanceWeightted average strike price

per store Options


per store Options

At the beginning of the period 35.00 322,142 32.34 359,286

Cancelled - - 35.00 (37,144)

At the end of the period 36,46 322,142 35.00 322,142

Exercisable at the end of the period 36,46 182,522 35.00 112,712

Third issuanceWeightted average strike price

per store Options


per store Options

At the beginning of the period 35.00 307,000 - -

Grantee - - 35.00 307,000

At the end of the period 36.46 307,000 35.00 307,000


Fourth issuanceWeightted average strike price

per store OptionsWeightted average strike price

per store Options

At the beginning of the period 18.69 477,000 - -

Grantee - - 18.69 477,000

At the end of the period 19,47 477,000 18.69 477,000

Exercisable at the end of the period - - - -

ConsolidatedWeightted average strike price

per store Options


per store Options

At the beginning of the period 26.17 1,305,055 23.67 697,064

Grantee - - 25.08 748,000

Cancelled - - 26.84 (65,637)

Exercised - - 16.21 (92,372)

At the end of the period 27.27 1,305,055 26.17 1,305,055


1Q2010 2009

1Q2010 2009

1Q2010 2009

1Q2010 2009

1Q2010 2009

Out of the 1,305,055 outstanding options, 182,039 options were exercisable (48,106 in 2009). The optionsexercised in 2009 resulted in the issue of 92,372 shares for the weighted average price of R$16.21



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each.The share’s respective weighted average price on the stock exchange at the time of exercise wasR$ 25.05 per share (R$ 52.50 in 2008).

The options for purchase of outstanding shares at the end of the year have expiration dates and strikeprices as presented in the following table. Additionally, the weighted average fair value of the optionsgranted, determined based on the Black-Scholes pricing method (except fourth issuance based on MonteCarlo method) was as demonstrated in the table below:

Average exercise price Fair value of options

Maturity date - May per share in R$ on grantee date in R$ 03/31/2010 12/31/2009

2009 34.50 6.84 - 178,835

First issuance 16.21 11.66 - 4,723

Second issuance 35.00 10.15 - 112,712

Third issuance 35.00 0.38 - 61,400

2010 31.57 9.08 407,140 228,305

First issuance 16.89 11.96 101,818 97,095

Second issuance 36.46 11.43 182,522 69,810

Third issuance 36.46 3.20 122,800 61,400

2011 28.14 10.44 228,305 228,305

First issuance 16.89 12.23 97,095 97,095

Second issuance 36.46 12.47 69,810 69,810

Third issuance 36.46 5.30 61,400 61,400

2012 36.46 10.34 131,210 131,210

Second issuance (*) 36.46 13.31 69,810 69,810

Third issuance (*) 36.46 6.97 61,400 61,400

- - - -

2013 21.41 20.60 538,400 538,400

Second issuance (*) 36.46 8.35 61,400 61,400

Third issuance (*) 19.47 22.18 477,000 477,000

1,305,055 1,305,055

Shares

(*) Fundação Getulio Varga’s General Market Price Index (IGPM-FGV) + 6% p.a. will be added tothis amount

Significant data included in the model were:

First Second Third Fourth

Share weighted average price R$ 21.40 R$ 33.35 R$ 23.42 R$ 27.56

Dividend yield - - - -

Option's expected life 5 years 5 years 5 years 4 years

Annual risk-free interest rate (*) Selic Rate Selic Rate Selic Rate Selic Rate

Volatility 28.38% 36.05% 57.86% 57.30%

Issue

Strike price: price defined in the program approved by the Board of Directors restated by 6% p.a. plus theprojected IGPM-FGV for the exercise periods. Volatility was measured by the standard deviation of sharereturns considering the history of the Company’s daily quotations since its IPO, as well as the weightedaverage of the behavior of shares of other companies in the same segment during the same period.

The percentage of equity interest dilution to which current shareholders are potentially submitted in caseof exercise of all the options is approximately 2.07%.



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On March 31st, 2010 the stock option reserve balance was R$ 11,265 (R$ 11,002 on December 31

st,

2009). The effect of this program on income for the quarter ended March 31st, 2010 was R$ 1,263 (R$

389 in quarter, ended March 31, 2009)

17. Gain (Loss) per Share

(a) Basic

The basic gain per share is calculated by dividing the gain (loss) attributable to the Company’sshareholders by the weighted average number of common shares issued during the year.

Items 03/31/2010 03/31/2009

Loss attributable to shareholders' of the Company (16,151) (12,529)

Weighted average number of ordinary shares outstanding (thousands) 47,640 47,493Basic loss per share - R$ (0.34) (0.26)

(b) Diluted

The diluted gain (loss) per share is calculated by adjusting the weighted average number of outstandingcommon shares to presume the conversion of all potential diluted common shares. Concerning stockoptions, a calculation is made to determine the number of shares that could have been acquired by fairvalue (determined as annual market average price of Company share), based on the monetary value ofsubscription rights linked to outstanding stock options. The amount of shares calculated as previouslyoutlined is compared to the number of shares issued, presupposing the exercise of stock options.

Items 03/31/2010 03/31/2009

Loss attributable to shareholders' of the Company - IFRS (16,151) (12,529)

Weighted average number of ordinary shares outstanding (thousands) 47,670 47,493

Adjusted by:

Exercisable stock option 44 12

Weighted average number of ordinary shares outstanding (thousands) 47,684 47,504Diluted loss per share - R$ (0.34) (0.26)



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18. Financial Results

Itens 03/31/2010 03/31/2009

Financial Income

Financial investments income 2,657 1,218

Related-party interest income (mutual contract) - -

Present value adjustment 250 1,810

Embedded derivative instrument - debentures 1,843 -

Other financial income 2,468 362

TOTAL Financial Income 7,218 3,390

Financial Expenses

Interest on loan and financing (4,174) (12,804)

Interest on debentures (12,597) (14,793)

Related-party interest expenses (mutual contract) (12,286) -

IOF, Banking expenses (108) (1,584)

Other financial expenses, banking expenses (1,676) (234)

TOTAL Financial Expenses (30,841) (29,415)

Gain on exchange variation 29,592 12,308

Loss on exchange variation (39,996) (18,796)Exchange variation, net (10,404) (6,488)

19. Other Operating Expenses (Income)

Items 03/31/2010 03/31/2009

Provision for loss of legal proceeding 19 3,298

Stock Options expenses 1,263 697

Other 1,075 2,418

2,357 6,413

20. Expenses by Type

As required by IFRS, the detailing of the consolidated result by type of expenses is summarized asfollows:



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Items 03/31/2010 03/31/2009

Depreciation and amortization 7,512 7,818

Salaries, social charges and benefits 35,582 41,024

Raw material 56,057 62,124

Freights 1,669 1,378

Other expenses 34,181 21,357

135,001 133,701

Classified as:

Cost of sales 105,886 100,413

Selling expenses 15,477 12,642

General and administrative 11,281 14,233

Other operating expenses 2,357 6,413

135,001 133,701

21. Information by Business Segment

The Company has adopted IFRS 8 (Operating Segments) as of 01/01/2009, to replace IAS 14(Presentation of segment information) that had been adopted until the year 2008.

The Management defined the Group’s operating segments, based on reports used in strategic decision-making processes, reviewed by the Board of Directors.

The Management analyzes the business, by segmenting it under the product application marketperspective, and also under the geographic viewpoint. Performance markets are segmented in EnergyProducts, Flow Control and Metallurgy, same composition reported in Note 1.

Accounting criteria and practices adopted when preparing information by segment presented belowobserve the accounting practices adopted in Brazil.

Geographically, the Management considers the performance of Brazilian, Argentine markets and other.The distribution by region takes into account the location of Group’s companies and not client’s location. Inview of a solid relationship with Oil and Gas segments in Brazil and Argentina, by means of itssubsidiaries located in that country, the geographic analysis is directly focused on this structure.

Revenues generated by operating segments mainly derive from:

a) Energy Products: platforms mooring cables in deep waters, manual and automated valves foruse in the exploitation, production, transportation and oil refining and hydrocarbon chain,oil wellcompletion equipment, drill pipe coatings and production, equipment rental, offshore services,natural gas compressors, sensors by optic fiber and leasing of gas compression kits.

b) Flow Control: production and commercialization of industrial valves, mainly for chemical,pharmaceutical, pulp and paper, food, home building, machinery and equipment industries.

c) Metallurgy: development and production of parts, complex parts and sub-sets mainly directed tothe automotive industry, in the casting of parts with metal alloys highly resistant to corrosiontargeting industrial valves and pumps sectors, mainly to be used in processes for the oil and gasindustries.



IFRSMarch 31, 2010

02006-0 LUPATECH S.A. 89.463.822/0001-12


Inter-segments sales were made as arm’s length transactions.Revenues from external partiesinformed to the Board of Executive Officers were measured consistely with those revenuesreported in the statement of income. The column of eliminations and adjustments includes saleseliminations among segments applicable to the Company within the context of the consolidatedfinancial statements, as well as IFRS adjustments in relation to the accounting practices adoptedin Brazil.

The amounts provided to the Board of Executive Officers in relation to total assets are compatiblewith balances recorded in the financial statements. These assets are allocated based on thesegment operations and physical place of assets.

The amounts provided to the Board of Executive Officers in relation total liabilities are compatiblewith balances recorded in the financial statements. These liabilities are allocated based on thesegment operations.

The Company's revenues have higher concentrations involving the customer Petrobrás, directlyand indirectly, which responded in the first quarter of 2010 by approximately 50% (54% in 2009) ofthe total revenue of the Company and its subsidiaries.

The information by segment and by geographic region is as follows:

:



IFRSMarch 31, 2010

02006-0 LUPATECH S.A. 89.463.822/0001-12


03/31/2010 03/31/2009 03/31/2010 03/31/2009 03/31/2010 03/31/2009 03/31/2010 03/31/2009 03/31/2010 03/31/2009

Net sales 100,331 106,111 34,345 34,135 14,443 14,394 (1,995) (3,423) 147,124 151,217

Cost of sales (74,095) (70,912) (19,769) (20,470) (13,857) (14,061) 1,835 5,030 (105,886) (100,413)

Gross profit 26,236 35,199 14,576 13,665 586 333 (160) 1,607 41,238 50,803

Selling expenses (9,994) (8,052) (4,257) (3,214) (1,227) (1,376) - - (15,477) (12,642)

General and administrative (6,576) (9,053) (2,043) (3,416) (1,924) (1,224) - - (10,543) (13,693)

Management fees - (382) - (111) (738) (47) - - (738) (540)

Equity pick-up 90 192 - - - - - - 90 192

Negative goodwill - - - - - - - - - -

Other operating income (expenses), net (908) (6,205) 224 (149) (1,674) (59) - - (2,357) (6,413)

Income before financial results 8,849 11,700 8,501 6,775 (4,977) (2,374) (160) 1,607 12,212 17,706

Financial income 6,262 25,888 435 1,569 26,912 1,608 11,183 (13,367) 44,792 15,697

Financial expense (8,886) (48,996) (621) (1,870) (55,548) (9,881) (13,764) 12,537 (78,819) (48,210)

Income (loss) before income tax 6,225 (11,407) 8,315 6,474 (33,613) (10,647) (2,740) 777 (21,814) (14,805)

Current (1,724) (1,796) (1,956) (2,381) (225) 106 - - (3,905) (4,071)

Deferred (1,599) 251 (121) - 11,162 5,905 126 191 9,568 6,347

Net income (loss) for the year 2,902 (12,952) 6,237 4,093 (22,676) (4,636) (2,614) 968 (16,151) (12,529)

03/31/2010 03/31/2009 03/31/2010 03/31/2009 03/31/2010 03/31/2009 03/31/2010 03/31/2009 03/31/2010 03/31/2009

Identifiable assets (1) 877,750 946,753 251,727 278,193 117,946 125,194 12,850 12,794 1,260,274 1,362,934

Identifiable liabilities (2) 123,594 392,620 13,054 6,822 119,451 238,117 - - 256,099 637,559

Depreciation and amortization (4,252) (4,189) (1,096) (1,230) (2,003) (2,238) (161) (161) (7,511) (7,818)

Fixed assets acquisition 7,496 17,373 264 622 1,146 3,537 - - 8,906 21,532

1 - Identifiable assets : accounts receivable, inventories, fixed assets and goodwill, recoverable income taxes, Marketable securities - restrict

2- Identifiable liabilities : accounts payable and loans and financing

Energy Products Flow Control Metallurgy Adjustments and Consolidated - IFRS

Energy Products Flow Control MetallurgyAdjustments and

eliminationsConsolidated



IFRSMarch 31, 2010

02006-0 LUPATECH S.A. 89.463.822/0001-12


03/31/2010 03/31/2009 03/31/2010 03/31/2009 03/31/2010 03/31/2009 03/31/2010 03/31/2009 03/31/2010 03/31/2009

Net sales 114,050 115,457 32,114 36,124 2,211 1,211 (1,250) (1,574) 147,124 151,217

31/03/2010 31/03/2009 31/03/2010 31/03/2009 31/03/2010 31/03/2009 31.03.2010 31.03.2009 31.03.2010 31.03.2009

Identifiable assets (1) 934,114 1,006,366 313,309 343,774 - - 12,850 12,794 1,260,274 1,362,934

1 - Identifiable assets : accounts receivable, inventories, fixed assets and goodwill, recoverable income taxes, Marketable securities - restrict

Brazil Argentina OtherAdjustments and


Brazil Argentina OtherAdjustments and




IFRSMarch 31, 2010

22. Statement of Comprehensive Income

03/31/2010 03/31/2009

Net income (loss) of period (16,151) (14,805)

Other comprehensive income of period

Exchange variation on investments abroad 245 (9,539)

Total comprehensive income of period (15,905) (24,344)

23. Additional Information

(a) Reconciliation of shareholders’ equity and net income for the year, consolidated, fromaccounting practices adopted in Brazil (BR GAAP) to IFRS

The Company recorded the effects of transition to the adoption of IFRS and their impacts on shareholders’equity and the results for the quarter ended March 31, 2010 and 2009, as shown below:

03/31/2010 12/31/2009 03/31/2010 03/31/2009

Parent Company - BR GAAP 184,474 199,263 (16,297) (11,429)

Capitalization costs in business combination 3,726 3,726 - -

Fair value depreciation on fixed assets of acquired companies (1,354) (1,194) (161) (161)

Deferred income tax on fair value amortization 466 411 55 55

Reversal of goodwill amortization 99,692 99,692 - -

Deffered income tax on deductable amount of goodwill amortization at BRGAAP(1,230) (1,230) - -

Issuance costs of perpetual bond capitalized 2,532 2,740 (210) (400)

Deferred income tax on issuance cost capitalized of perpetual bond (861) (931) 71 136

Other 168 168 - -

Income tax and social contribution goodwill amortized in GAAP before business

combination (13,776) (13,776) - -

Total IFRS Adjustments 89,363 89,606 (244) (369)

Unrealized profit on intra group transactions (1,221) (1,609) 389 (730)

Consolidated - IFRS 272,616 287,260 (16,151) (12,529)

Shareholders’ equity Net Income (Loss) for the

quarter



IFRSMarch 31, 2010

12.01 – MANAGEMENT COMMENTS

Dear Sirs,

Lupatech S.A. (“Company”) presents the Management Report and the Company’s Consolidated QuarterlyFinancial Statements for the first quarter ended on March 31, 2010 (1Q10), drawn up in line with theinternational accounting standard established by the International Accounting Standards Board – IASB(IFRS).

It is recommended to read this material together with the Notes to the Consolidated Financial Statements.

COMPANY AND BUSINESS PROFILE

Lupatech S.A. has three business segments: Energy Products1, Flow Control

2and Metallurgy

3, and

3,097 employees.

The Energy Products Segment offers high value-added products and services for the Oil & Gas sector,including deepwater platform anchoring ropes, valves, oil wells completion tools, coating, VNGcompressors, sensors and well intervention services through “Lupatech MNA”, “Lupatech CSL”, “LupatechTecval”, “Lupatech Oil Tools”, “Lupatech Esferomatic”, “Lupatech Oil & Gas Services”, “Lupatech OilfieldServices”, “Lupatech Tubular Services”, “Lupatech Monitoring Systems”, “Aspro”, “Sinergás” and“Norpatagonica” brands.

The Flow Control Segment heads the national rankings in the Mercosul in the production and sale ofindustrial valves, primarily for the chemical, pharmaceutical, pulp and paper and construction industries,under “Lupatech Valmicro”, “Lupatech Mipel”, “ValBol” and “Jefferson” brands.

The Metallurgy Segment is among the international leaders in the development and production of parts,complex parts and sub-assemblies, mainly for power train systems to the global auto industry. It employsthe precision casting and steel injection processes, techniques that it pioneered in Latin America. It alsoproduces high-corrosion-resistant cast-alloy housings for industrial valves and pumps, chiefly forapplications in the oil and gas industry under “Microinox”, “Steelinject” and “Itasa” brands.

[The remaining of this page was left in blank intentionally]

1Former Oil & Gas

2Former Flow

3Former Metal



IFRSMarch 31, 2010

MESSAGE TO SHAREHOLDERS AND MARKET AGENTS

Dear Shareholders and Market Agents,

Lupatech S.A. presents its results for the first quarter of 2010.

In the 1Q10 the Company presented a significant recovery of the Consolidated Net Revenues whencompared to the previous quarter (4Q09) in most of its business units.

Consolidated Net Revenues (R$ thousand) 4Q09 1Q10 % Change

Energy Products Segment 66,670 100,339 50.5%

Flow Control Segment 28,034 33,537 19.6%

Metallurgy Segment 13,114 13,248 1.0%

Total 107,818 147,124 36.5%

The recovery of the Net Consolidated Revenues contributed to a better dilution of the Company’s fixedcosts, which together with the efforts to improve cost management, contributed to the growth of theConsolidated Gross Profit in 82.3%, well above of the Net Consolidated Revenues growth (36.5%).

Along with the improvement of the Consolidated Gross Profit, the effects of the reduction of the Generaland Administrative Expenses began to be noticed, which fell by 3.7% and contributed to the improvementof the Consolidated EBITDA in 189.8% and the Consolidated EBITDA Margin, that grew from 6.4% to13.6%.

The Operating Cash Flow Generation during the period reached R$29.8 million, composed by animprovement of the operational indexes mentioned above as well the improvement in Working Capitalmanagement. The new contracts being signed by the Company have payment clauses that will help themanagement of the capital allocated to the business cycle.

It is also important to highlight the bidding process or quotations that the Company has participatedthrough the Energy Products and Flow Control segments have already began to reflect positively on theCompany's backlog, today at record levels, which impacts will be better noticed in the financial statementsthroughout the second half of 2010 and subsequent periods.

With these improvements, it is estimated that the development projects of oil fields in Brazil, mainly theones related to the construction of oil and gas production platforms, begin to be presented to suppliers ofequipment and services, what makes the Company believe that during the second half of 2010, newbidding processes, and consequently, new contracts will contribute to the growth of the backlog, which willcreate even better operational conditions for the year of 2011.




IFRSMarch 31, 2010

OVERVIEW OF THE BUSINESS SEGMENTS

ENERGY PRODUCTS SEGMENT

The Energy Products segment has verified business recovery related to oil and gas production, mainly inBrazil. The Company’s units in this segment participated in several quotations related to valves and pipelining which are already reflected in the backlog, pushing it to record levels, and will be converted intorevenues over the next quarters. In addition to the current backlog there are also services and anchoringropes contracts to be signed.

The business units that presented progress in this quarter were the units of valves, well completion tools,services, pipe lining and gas compressors.

This segment continues to have a significant backlog for the next periods, with some important contractsstill to be signed and other quotations that the Company is participating.

It is estimated that new projects in the development of oil and gas fields, which are additional businessopportunities for the Company, should start being negotiated with suppliers throughout the second half of2010.

FLOW CONTROL SEGMENT

The Flow Control segment has shown increasing recovery in each quarter, a result of the industrial activityrecovery mainly in Brazil, and in a slower pace in Argentina. This segment has verified during the 1Q10significant commercial activity as well as an increase of the capacity utilization, in addition to theimprovement of the products mix, reflecting better operating indexes.

METALLURGY SEGMENT

The Metallurgy segment has shown a slow recovery, mainly due to the automotive sector in Europe andUSA, despite de recovery of the automotive sector in Brazil. The positive performance of this segmentduring the 1Q10, although modest, is due to powder injection molding unit.

In the case of the investment cast division, mainly for the automotive sector, it was verified a businessslowdown mainly due to seasonality of purchases in this sector in the first months of the year.

EXPOSURE OF THE COMPANY TO THE OIL AND GAS SECTOR

The Company is exposed to several phases of the oil and gas sector, which is divided in three stages:upstream, midstream and downstream.

Upstream

Upstream is related to the exploration, development and production of oil and gas.

The exploration involves a study of all the available geological and geographical information of a proposedlocation. This process involves independent oilfield service companies as well as the global integratedcompanies and it is divided into two phases – surveying and preliminary drilling to confirm discoveriesmade in the surveying phase. Lupatech has no exposure to this stage.



IFRSMarch 31, 2010

The development phase refers to the installation of the required infrastructure to permit full productionscale. It is when Lupatech starts to have exposure to the sector supplying equipments for the constructionof the production infrastructure.

The production phase is related to the continual extraction of hydrocarbons and their preparation fortransportation. Lupatech also has exposure to the production phase, supplying services and equipment forreplacements.

Midstream and Downstream

The midstream relates to the transportation of crude oil from where it was extracted to the refinery where itis processed.

The downstream comprises the refining and marketing of the oil. Refining refers to the processing of crudeoil whilst marketing entails the distribution and sale of the refined product.

Lupatech is exposed to both stages above in the refining and distribution with valves and compressors.

Lupatech exposure to each of the stages mentioned above is presented below:

Upstream

Exploration

SpecialtyServices &

Lease ofEquipments

Development

Services: EPCEquipments:

Infrastructure

AnchoringRopes, Valves,

CompletionTools, Sensors,

Coatings

Production

Services:Maintenance

Well Services

Equipments:Replacement

& Revamps

AnchoringRopes, Valves,

CompletionTools, Sensors,

Coatings

Mid & Downstream

Refining

Services:EPC &

Maintenance


& Revamps

Valves,Compressors

Distribution

Services:EPC &

Maintenance


Valves,Compressors

Yes NoIs LUPA exposed:

Exposure

Therefore, the Company has no exposure to the exploration stage, with most of its revenues concentratedin development and production, in refineries and distribution of oil and gas.

COMMERCIAL ACTIVITY AND BACKLOG

The Company and its business units have verified constant improvement in the commercial activity relatedmainly to the maintenance of oil and gas production activities. The Company expects improvements in thetotal backlog for the coming months, assuring the industrial activity for the next periods.

The Company's backlog on March 31, 2010 was R$653.3 million, being R$429.8 million in services andR$225.7 million in products.

On May 6, 2010 the Company signed new contracts for valves supply called AFMG (Authorization for



IFRSMarch 31, 2010

Global Supply of Materials) in the approximate amount of R$155,0 million and a tenor of two years. Thesecontracts are related to the maintenance and/or replacement of ball, gate, globe and check valves indifferent alloys, and will be supplied directly to Petrobras. With the signing of these contracts, theCompany's backlog was changed as follows:

Backlog – as of March 31, 2010 (R$ million)Equipments 223.5Services 429.8Total 653.3

Conversion in12 months 370.7Conversion in over 1 year 282.6

New AFMGs for valves (May/2010) 155.0

New Backlog - as of May 12, 2010 (R$ million)

Equipments 378.5Services 429.8Total 808.3

Conversion in12 months 448.2Conversion over 1 year 360.1

LUPATECH OILFIELD SERVICES CREATION

On March 29, 2010 it was announced by the Company through a Material Fact to the market, the creationof Lupatech Oilfield Services ("LOFS"), a company focused operationally to provide well interventionservices.

The creation of Lupatech Oilfield Services sets a new phase for this sector in Latin America, as is theemergence of a regional player in the area of specialized services for oil and gas. LOFS's maincompetitive differentials are three: is the first regional player with structure and portfolio diversification;brings together the biographies of executives with extensive industry experience in all countries where thecompany will operate, and has a project aligned with the needs of the oil and gas industry to use localcontent.

Lupatech Oilfield Services is the result of the sum of experiences between Lupatech S.A. and Penta, aservice company that brings experienced oil industry professionals, such as João Carlos de Luca a formerprofessional of Petrobras and Repsol and that current holds the position of president of the BrazilianPetroleum Institute - IBP, Cesar Paolini a former professional of Schlumberger in several countries andCarlos Portela a former professional of British Petroleum and Atlantic LNG.

Lupatech will control 85% of the new company. The remaining 15% will be owned by the above mentionedexecutive team, with the possibility to increase the stake up to a limit of 30% after the investments madeby Lupatech returns over 17% per year accumulated in U.S. dollars.

The business plan was set to have Brazil, Colombia and Mexico as the first markets to be developed,which were chosen because of their size and excellent growth prospects. The company seeks to meet agrowing demand for solutions that integrate services and equipments. Lupatech already has a wide rangeof equipments and is a player in services not related to well intervention, so there will be no competitionwith LOFS.

Lupatech Oilfield Services will start its operations in Colombia, through HS (Hydrocarbon ServicesSociedad por Acciones Simplificada), company acquired on April 30, 2010. HS reported in 2009 netrevenues of US$11.7 million and EBITDA of US$2.25 million.



IFRSMarch 31, 2010

The goal of Lupatech Oilfield Services is to work in areas where there is demand, with controlledtechnologies and where it can be a differentiated player in quality and price. Another differential is theexperience that the executives can bring to the company, which is the client perception of how to do andwhat to expect from theses services as a client and how to conduct the operation.

The size of the target market of this segment is estimated in US$4.3 billion for Latin America, withpotential to reach US$5.7 billion by 2015, in accordance to market estimates. Lupatech Oilfield Servicesintends to have a market share between 10% and 12% in 5 years.

ELECTION OF THE BOARD OF DIRECTORS, BOARD OF EXECUTIVE OFFICERS AND FISCAL COUNCIL

ESTABLISHMENT

On April 30, 2010, during the Annual Shareholders Meeting, the Board of Directors of Lupatech waselected with a one year tenor mandate.

The new constitution of the Board of Directors has the same number of members of the previous Board,seven members, of which three are independents.

It is important to mention that six of the seven members were re-elected, considering that BNDESPAR,acting in accordance with practices to renew their representatives in the Board of Directors of companieswhere it invests, has chosen to appoint Mr. Armando Mariante Carvalho Júnior, Vice President of BNDES,to replace Mr. Marcelo Cabrera da Costa, to whom the Management is grateful for the large dedication tothe Lupatech project since 2001.

Board of Directors constitution:

Name Position

Nestor Perini Chairman

Alcinei Cardoso Rodrigues Board Member

José Teófilo Abu-Jamra Board Member

Armando Mariante Carvalho Junior Board Member

Clóvis Benoni Meurer Independent Board Member

José Mauro Mettrau Carneiro da Cunha Independent Board Member

José Coutinho Barbosa Independent Board Member

Ivan Magalhães Junior Substitute Member

Teresa Rodrigues Cao Substitute Member

The Board of Directors at the meeting held on April 30, 2010, reelected all the Board of Executive Officers,which is composed by four officers:

Name Position / Designation

Nestor Perini Chief Executive Officer

Gilberto Pasquale da Silva Officer

José Teófilo Abu-Jamra Officer

Thiago Alonso de Oliveira Investor Relations Officer



IFRSMarch 31, 2010

Establishment and Constitution of the Fiscal Council

Also at the Annual Shareholders Meeting held on April 30, 2010, it was established the Fiscal Council inorder to attend a requirement of the two largest shareholders of the Company, Lupapar and Petros.

The elected Fiscal Council is composed by three members and its respective substitutes, being two ofthem independent members, Mr. Egon Handel and Mr. Amoreti Franco Gibbon and the third elected byPetros, Mr. Humberto Santamaria.

Name Position / Designation

Amoreti Franco Gibbon Member

Egon Handel Member

Humberto Santamaria Member

Bruno Oliva Girardi Substitute Member

Eduardo Grande Bittencourt Substitute Member

Juliano Puchalski Teixeira Substitute Member

The Management believes that the Fiscal Council is an important step towards the improvement of thecorporate governance practices of the Company, which now can count on experienced members, whoseprofessional resumes are presented below:

Amoreti Franco Gibbon. Mr. Gibbon holds a bachelor Degree in Accounting from Faculdade deAdministração e Ciências Contábeis São Judas Tadeu - Porto Alegre (RS), he worked for companiessuch as Máquinas e Moto-Peças Wallig S.A., Indústria de Celulose Borregaard S.A. and Grupo Peixotode Castro (Gravataí - RS). He was also a partner of PricewaterhouseCoopers Auditores Independentes.He was a professor at the Faculdade de Administração e Ciências Contábeis São Judas Tadeu - PortoAlegre (RS). From 2005 to 2007 he was a member of the Fiscal Council of the Brazilian North AmericanCulture Institute, from 2006 on he was a corporate and tax consultant, and since 2007 he is a member ofthe Fiscal Council of Forjas Taurus S.A..

Egon Handel. Mr. Handel holds a Master in Business Administration with emphasis in Accounting fromMichigan State University - USA - 1969, has an specialization degree and teaching practice in industrialand Agricultural accounting from University of Rio Grande do Sul - 1966 and holds a bachelor degreeAccounting from the University Federal do Rio Grande do Sul - 1965. He was the Director of BANRISUL –Destribuidora de Títulos e Valores Mobiliários S.A. from 1982 to 1983, was a professor at UFRGS andHead of the Accounting and Actuarial Sciences Departament, he was also a teacher at the GraduationCourses (Master and specializations) and Administration, Actuarial Science, Economics and AccountingCourses from 1966 to 1992. He was the President of ICARGS - Institute of Accountants and Actuaries ofRio Grande do Sul from 1971 to 1972. He is currently a member of the Board of Directors of Lojas RennerS.A. since April 1991 and member of the Fiscal Council of listed companies such as Marcopolo S.A. andGerdau S.A. since 2005 and 2002, respectively.

Humberto Santamaria. Mr. Santamaria holds a bachelor degree in Economics from the UniversidadeEstadual de Campinas (UNICAMP),1985 and concluded the course of Master of Business Administration(MBA) from Anglia Polytechnic University - Cambridge / England in 1998. He was an economist atUnibanco S.A. from 1986 to 1993, held various economist positions of the economics department ofHamburg, he worked at Dresdner Bank Lateinamerika AG - Hamburg, Germany from March 2000 toDecember 2005 in Deutsch-Süd GmbH Transfergesellschaft DSB-Germany January 2006 to December2006 and since 2008 he is the Executive Manager of Investment Planning of the Fundação Petrobrás deSeguridade Social – PETROS.



IFRSMarch 31, 2010

FINAL REMARKS

The Management would like to reaffirm the long-term commitment to clients, shareholders, creditors,employees and the capital markets.

The independent auditor, DELOITTE TOUCHE TOHMATSU AUDITORES INDEPENDENTES (Deloitte)which analyzes the financial statements since 2008, has offered only external auditing services toLupatech S.A., related to the financial statements auditing.

The comments on the Company’s consolidated performance are available on its websitewww.lupatech.com.br/ir.

The Company is subject to the rules of the Market Arbitration Panel pursuant to the arbitration clause inthe Company’s Bylaws.

Caxias do Sul, May 12, 2010.

Board of DirectorsNestor PeriniAlcinei Cardoso RodriguesArmando Mariante Carvalho JuniorJosé Teófilo Abu-JamraClóvis Benoni MeurerJosé Coutinho BarbosaJosé Mauro Mettrau Carneiro da Cunha

Substitute Board MembersIvan Magalhães JuniorTeresa Rodriguez Cao

DirectorsNestor PeriniJosé Teófilo Abu-JamraGilberto Pasquale da SilvaThiago Alonso de Oliveira




IFRSMarch 31, 2010

MANAGEMENT COMMENTS ON CONSOLIDATED ECONOMIC AND FINANCIAL PERFORMANCE – IFRS

NET REVENUES

Net Revenues (in R$ thousand) 4Q09 1Q10 % Change

Energy Products 66,670 100,339 50.5%

Energy Products - Local Market 39,233 73,459 87.2%

Energy Products - Exports 27,437 26,880 -2.0%

Flow Control 28,034 33,537 19.6%

Flow Control - Local Market 26,488 31,655 19.5%

Flow Control - Exports 1,546 1,882 21.7%

Metallurgy 13,114 13,248 1.0%

Metallurgy - Local Market 10,633 10,397 -2.2%

Metallurgy - Exports 2,481 2,851 14.9%

Total 107,818 147,124 36.5%

% Energy Products 61.8% 68.2%

% Energy Products - Local Market 58.8% 73.2%

% Energy Products - Exports 41.2% 26.8%

% Flow Control 26.0% 22.8%

% Flow Control - Local Market 94.5% 94.4%

% Flow Control - Exports 5.5% 5.6%

% Metallurgy 12.2% 9.0%

% Metallurgy - Local Market 81.1% 78.5%

% Metallurgy - Exports 18.9% 21.5%

The Net Consolidated Revenues of 1Q10 grew 36.5% when compared to 4Q09, reaching R$147.1 millionversus R$107.8 million in the 4Q09. The Net Consolidated Revenues growth is due to the progressverified in the Energy Products and Flow Control Segments.

The Net Revenues of the Energy Products Segment in the 1Q10 reached R$100.3 million, growth of50.5% when compared to the 4Q09 when it reached R$66.7 million. The growth verified during the 1Q10is a consequence of higher industrial activity in valves, gas compressors, services, pipe lining andcompletion tools.

The Net Revenues of the Flow Control Segment in the 1Q10 reached R$33.5 million, growth of 19.6%when compared to the 4Q09 when it reached R$28.0 million. This growth is a result of higher industrialactivity in valves units in Brazil and also Argentina, reflecting the recovery of the industrial sectors of bothcountries.

The Net Revenues of the Metallurgy Segment in 1Q10 reached R$13.2 million, growth of 1.0% whencompared to the 4Q09 when reached R$13.1 million.




IFRSMarch 31, 2010

REVENUE BREAKDOWN

BY GEOGRAPHIC REGION – TOTAL 1Q10 NET CONSOLIDATED REVENUES

68.1%

7.0%

9.4%

9.2%1.1% 2.5%

2.7%

Brazil Repetro Argentina Asia

Europe North America Other

BY INDUSTRIAL SECTOR – TOTAL 1Q10 NET CONSOLIDATED REVENUES

58.7%

17.9%

7.8%1.7% 13.9%

Energy Capital Goods Automotive

Civil Construction Others

BY INDUSTRIAL SECTOR – 1Q10 GROSS REVENUES PER SEGMENT

Oil & Gas

14%

Chemical9%

Construction13%

Machines &Equipments

35%

Food

8%

Other21%

Automotive58%

Oil & Gas10%

Automation

4%

Food22%

Dental1%

Other5%

Oil & Gas96%

Other4%

Energy Products Flow Control Metallurgy



IFRSMarch 31, 2010

COSTS OF GOODS SOLD

COGS (in R$ thousand) 4Q09 1Q10 % Change

Energy Products 55,115 74,025 34.3%

Flow Control 16,846 18,756 11.3%

Metallurgy 13,238 13,105 -1.0%Total 85,199 105,886 24.3%




COGS/Net Revenues Total 79.0% 72.0%

COGS/Net Revenues Energy Products 82.7% 73.8%

COGS/Net Revenues Flow Control 60.1% 55.9%

COGS/Net Revenues Metallurgy 100.9% 98.9%

The Consolidated Cost of Goods Sold (COGS) in the 1Q10 reached R$105.9 million, up 24.3% whencompared to the 4Q09 when reached R$85.2 million. The growth in the Consolidated COGS during the1Q10 is a direct consequence of the growth of Net Consolidated Revenues of 36.5% in the same period.

The COGS of the Energy Products Segment in the 1Q10 reached R$74.0 million, up 34.3% whencompared to the 4Q09 when reached R$55.1 million. The growth in the COGS of the Energy ProductsSegment during the 1Q10 is a direct consequence of the growth of the Net Revenues in 50.5% over thesame period. The smaller growth of the COGS in comparison to the growth in the Net Revenues is aconsequence of the reduction of costs in accordance with the cost management improvements initiated bythe Company in the second half of 2009.

The COGS of the Flow Control Segment in the 1Q10 reached R$18.8 million, up 11.3% when comparedto the 4Q09 when reached R$16.8 million. The growth in the COGS of the Flow Control Segment in the1Q10 is a direct consequence of the growth of 19.6% in the Net Revenue over the same period. Thesmaller growth in the COGS of the Flow Control Segment when compared to the growth of the NetRevenues is also a consequence of the cost management improvements.

The COGS of the Metallurgy Segment in the 1Q10 reached R$13.1 million, down 1.0% when compared tothe 4Q09 when reached R$13.2 million.




IFRSMarch 31, 2010

COST STRUCTURE

The following table shows the behavior of fixed costs between the 2Q09 and 1Q10.

Cost Structure (in %) 2Q09 3Q09 4Q09 1Q10

Energy Products:

Raw Material 60.6 52.0 37.5 58.8

Labor 20.6 25.5 32.5 24.3

Manufacturing Expenses 13.8 15.1 21.4 11.1

Depreciation 5.0 7.4 8.6 5.8

Flow Control

Raw Material 66.1 63.5 61.2 68.2

Labor 18.7 18.8 23.7 19.7


Depreciation 6.0 5.3 6.2 4.9

Metallurgy:

Raw Material 36.4 39.5 36.9 38.2

Labor 29.8 30.0 29.5 30.7


Energy 6.5 5.2 5.9 5.8

Depreciation 14.9 13.9 12.8 11.5

COGS – MAIN COMPONENTS OF TOTAL RAW MATERIAL IN THE 1Q10

18.8%

27.4%12.5%

41.3%

Stainless Steel Carbon Steel

Polyester Wax for casting & Others




IFRSMarch 31, 2010

GROSS PROFIT AND GROSS MARGIN

Gross Profit (in R$ thousand) 4Q09 1Q10 % Change

Energy Products 11,555 26,314 127.7%

Gross Profit Margin - Energy Products 17.3% 26.2%

Flow Control 11,188 14,781 32.1%

Gross Profit Margin - Flow Control 39.9% 44.1%

Metallurgy (124) 143 215.3%

Gross Profit Margin - Metallurgy -0.9% 1.1%

Total 22,619 41,238 82.3%

% Total Gross Profit Margin 21.0% 28.0%



% Metallurgy -0.5% 0.3%

The Consolidated Gross Profit in the 1Q10 reached R$41.2 million, up 82.3% when compared to the 4Q09when reached R$22.6 million, due to the 36.5% growth in the Consolidated Net Revenues and a lowergrowth of the Consolidated COGS of 24.3%.

The Gross Profit of the Energy Products Segment in the 1Q10 reached R$26.3 million, up 127.7% whencompared to the 4Q09 when reached R$11.6 million, due to the 50.5% growth of the Net Revenues andlower growth of the COGS in 34.3%.

The Gross Profit of the Flow Control Segment in the 1Q10 reached R$14.8 million, up 32.1% whencompared to the 4Q09 when reached R$11.2 million, due to the 19.6% growth of the Net Revenues andthe lower growth in the COGS of 11.3%.

The Gross Profit of the Metallurgy Segment in the 1Q10 totaled R$0.1 million, growth of 215.3% whencompared to the 4Q09 when reached a negative amount of R$0.1 million due to the 1.0% growth of theNet Revenues and the reduction of the COGS in 1.0%.




IFRSMarch 31, 2010

EXPENSES

Expenses (in R$ thousand) 4Q09 1Q10 % Change

Total Sales Expenses 14,859 15,477 4.2%

Total Administrative Expenses 12,056 10,543 -12.5%

Energy Products 17,396 17,338 -0.3%

Sales expenses 9,490 9,993 5.3%

Administrative expenses 7,906 7,345 -7.1%

Flow Control 7,329 6,530 -10.9%

Sales expenses 4,077 4,257 4.4%

Administrative expenses 3,252 2,273 -30.1%

Metallurgy 2,190 2,153 -1.7%

Sales expenses 1,292 1,227 -5.0%

Administrative expenses 898 926 3.1%

Total Sales & Administrative 26,915 26,020 -3.3%

Management Salary 870 738 -15.2%

Total Sales, Administrative & Management Salary 27,785 26,758 -3.7%




Sales expenses/Net Revenues 13.8% 10.5%

Administrative expenses/Net Revenues 11.2% 7.2%

Management Salary/Net Revenues 0.8% 0.5%

Expenses/Net Revenues Total 25.8% 18.2%

Expenses/Net Revenues Energy Products 26.1% 17.3%

Expenses/Net Revenues Flow Control 26.1% 19.5%

Expenses/Net Revenues Metallurgy 16.7% 16.2%

The Consolidated Sales, General and Administrative Expenses and the Management Salary decreased3.7% in the 1Q10 and reached R$26.8 million, versus R$27.8 million in the 4Q09. This change isexplained by the 12.5% reduction of the Consolidated Administrative Expenses in the 1Q10, due to thecost management improvement process initiated by the Company in the second half of 2009. TheConsolidated Sales Expenses in the 1Q10 grew 4.2% when compared to the 4Q09, a consequence of thevariable sales expenses, necessary for the improvement of the Consolidated Net Revenues in 36.5%.

The Sales, General and Administrative Expenses of the Energy Products Segment decreased 0.3% in the1Q10 and reached R$17.4 million, versus almost the same amount reported in the 4Q09. This smallchange is due mainly to the growth of Sales Expenses of this segment by 5.3% when compared to the4Q09, although it has been verified a decrease in the Administrative Expenses of this segment of 7.1% inthe same period. The increase of the Sales Expenses is a result of Net Revenues growth of this segmentin 50.5%.

The General Sales and Administrative Expenses of the Flow Control Segment decreased 10.9% in the1Q10 and reached R$6.5 million, versus R$7.3 million reported in the 4Q09. This decline is mainly due tothe 30.1% decrease of the Administrative Expenses in this quarter, although the Sales Expenses hasgrown 4.4% due to growth of the Net Revenues of this segment in 19.6%.

The Sales, General and Administrative Expenses of the Metallurgy Segment in the 1Q10 decreased by1.7% and reached R$2.2 million, versus almost the same amount reported in the 4Q09. This small changeis due to the reduction in the Sales Expenses of this segment by 5.0%, despite a growth of 3.1% in theAdministrative Expenses.



IFRSMarch 31, 2010

OPERATING INCOME AND EXPENSES AND EQUITY PICK-UP RESULT OVER AFFILIATES

Operating Income & Expenses (in R$ thousand) 4Q09 1Q10 % Change

Operating Income 3,859 634 -83.6%

Operating Expenses (6,909) (2,991) -56.7%

Operating Expenses (6,482) (2,700) -58.3%

Operating Expenses - Non-recurring (427) (291) -31.9%

Equity Pickup Result 92 90 -2.2%

Total (2,958) (2,267) -23.4%

Other Operating Income totaled R$0.6 million in the 1Q10 versus R$3.9 million in the 4Q09. TheOperating Income is related to tax credits, tax recovery, sales of fixed assets, among others.

Other Operating Expenses totaled R$3.0 million in the 1Q10 versus R$6.9 million in the 4Q09. Theseexpenses are related to obsolescence of inventory, cost of fixed assed write-off and costs from the stockoption program, as well as non recurring expenses in the amount of R$0.3 million.

The Equity Pickup result decreased 2.2% in the 1Q10 when compared to the 4Q09, reaching R$0.1million due to the results of the affiliates Aspro Carwal and Aspro Services.

Other Operating Income and Expenses verified in the 1Q10 reached the negative amount (expense) ofR$2.3 million, versus an expense of R$3.0 million in the 4Q09, which represents a reduction of 23.4%.

FINANCIAL RESULT

Net Financial Result (R$ thousand) 4Q09 1Q10 % Change

Interest Income 1,425 2,657 86.5%

Present Value Adjustment 3,908 250 -93.6%

Embedded Derivative (Convertible Debentures - premium) - 1,843 n.a.

Others 2,044 2,468 20.7%

Financial Income (excluding EV*) 7,377 7,218 -2.2%

Interest Expense (22,225) (29,057) 30.7%

Embedded Derivative (Convertible Debentures) (11,597) - n.a.

Financial Taxes (397) (108) -72.8%

Others (6,005) (1,676) -72.1%

Financial Expense (excluding EV*) (40,224) (30,841) -23.3%

Net Financial Result (excluding EV*) (32,847) (23,623) -28.1%

Exchange Variance Income 15,394 29,592 92.2%

Exchange Variance Expense (23,405) (39,996) 70.9%

Net Exchange Variance (8,011) (10,404) 29.9%

TOTAL Net Financial Result (40,858) (34,027) -16.7%

*Exchange Variation

The Total Financial Income (excluding Exchange Variation) of the Company in the 1Q10 reached R$7.2million versus R$7.4 million in the 4Q09. This reduction is mainly due to variance of the present valueadjustment over the Accounts Receivable balance.



IFRSMarch 31, 2010

The Total Financial Expenses (excluding Exchange Variation) of the Company in the 1Q10 reachedR$30.8 million versus R$40.2 million in the 4Q09. The main variation in the Financial Expenses is relatedto the performance of the Convertible Debentures options fair value and the maturing premium applied tothem, which in the last quarter generated financial expenses and in this quarter it had an oppositeperformance generating financial income. The Interest Expense increased due to the growth of the IPCAwhich moved up the cost of the Convertible Debentures.

The Company has assets and liabilities denominated in foreign currency, mainly the US Dollar, which cangenerate gains or losses due to Exchange rates fluctuation.

The Net Exchange Variation in the 1Q10 resulted in expense of R$10.4 million versus expense of R$8.0million in the 4Q09. This result is explained by the variation of the Brazilian currency (Real) against the USDollar during the months of the 1Q10 of 2.3%.

ADJUSTED EBITDA4

EBITDA Adjusted (in R$ thousand) 4Q09 1Q10 % Change

Energy Products 1,313 11,003 738.0%

EBITDA margin - Energy Products 2.0% 11.0%

Flow Control 7,828 9,297 18.8%

EBITDA margin - Flow Control 27.9% 27.7%

Metallurgy (2,216) (228) 89.7%

EBITDA margin - Metallurgy -16.9% -1.7%

Total Adjusted EBITDA 6,925 20,072 189.8%

EBITDA margin - Total 6.4% 13.6%



% Metallurgy -32.0% -1.1%

The Consolidated Adjusted EBITDA grew 189.8% in the 1Q10 when compared to the 4Q09, reachingR$20.1 million, versus R$6.9 million in the 4Q09. The Consolidated EBITDA Margin reached 13.6% in the1Q10 versus 6.4% in the 4Q09. The increase of the Consolidated EBITDA Margin is a direct result of the82.3% growth of the Gross Profit and the 12.5% reduction of the Administrative Expenses as previouslypresented.

The Adjusted EBITDA of the Energy Products Segment grew 738.0% in the 1Q10 when compared to the4Q09, reaching R$11.0 million versus R$1.3 million in the 4Q09. The EBITDA Margin of the EnergyProducts Segment reached 11.0% in the 1Q10 versus 2.0% in the 4Q09. The increase of the EBITDAMargin in this segment is a direct consequence of the 127.7% growth of the Gross Profit and the 7.1%reduction of the Administrative Expenses.

The Adjusted EBITDA of the Flow Control Segment grew 18.8% in the 1Q10 when compared to the 4Q09,reaching R$9.3 million versus R$7.8 million in the 4Q09. The EBITDA Margin of the Flow ControlSegment reached 27.7% in the 1Q10 versus 27.9% in the 4Q09, practically stable.

The Adjusted EBITDA of the Metallurgy Segment reached the negative amount of R$0.2 million versus thenegative amount of R$2.2 million in the 4Q09. The EBITDA Margin of the Metallurgy Segment reached the

4EBITDA is calculated adjusting the net income by the equity pick-up result, employees participations, income tax and social contribution (also

deferred), non recurring expenses related to operational activities of the Company (expenses with acquisitions, expenses with funding issuance foracquisitions, etc.), goodwill amortization and the depreciation and amortization. EBITDA is not a measure used in Brazilian accounting practices anddoes not represent cash flow for the periods under review. It should not be considered as an alternative for net income, as an indicator of operatingperformance or as an alternative for cash flow in the form of an indicator of liquidity. EBITDA does not have a standardized meaning and the Company’sdefinition of EBITDA may not be comparable with the adjusted EBITDA of other companies. While in accordance with accounting practices used inBrazil EBITDA does not provide a measure of operating cash flow, management uses it to measure operating performance. In addition, the Companyunderstands that certain investors and financial analysts use EBITDA as an indicator of the operating performance of a company and/or its cash flow.The EBITDA as calculated by the Company is reconciled in the Attachment II of this report.



IFRSMarch 31, 2010

negative amount of 1.7% in the 1Q10 versus the negative amount of 16.9% in the 4Q09. The increase ofthe EBITDA Margin in this segment is a direct consequence of the 215.3% growth of the Gross Profit.

Below is available the Adjusted EBITDA reconciliation per segment, as calculated by the Company.

ADJUSTED EBITDA RECONCILIATION IN THE 1Q10

Components (in R$ thousand)Energy

Products Flow Control Metallurgy Total

Gross Profit 26,314 14,781 143 41,238

SG&A (17,338) (6,530) (2,153) (26,020)

Management Salary (504) (166) (68) (738)

Depreciation and Amortization 4,308 1,138 2,066 7,512

Operating Income (except non-recurring) 109 399 126 634

Operating Expense (except non-recurring) (1,895) (462) (342) (2,700)Elimination - Provision PPR (variablecompensation) 9 137 - 146

Adjusted EBITDA 11,003 9,297 (228) 20,072

RESULT BEFORE TAXES AND NET RESULT

Net Result (in R$ thousand) 4Q09 1Q10 % Change

Result Before Taxes and Participations (48,982) (21,814) -55.5%

Current Income Tax & Social Contribution (5,592) (3,904) -30.2%

Deferred Income Tax & Social Contribution 7,502 9,567 27.5%

Participations - - n.a.

Net Result (47,072) (16,152) -65.7%

Net Profit/Loss per 1000 shares -0.99 -0.34 -65.6%

The Consolidated Result Before Taxes and Participations in the 1Q10 was a negative amount of R$21.8million versus the negative amount of R$49.0 million in the 4Q09. The 55.5% improvement of the ResultBefore Taxes and Participations in the 1Q10 when compared to the 4Q09 is due mainly to the 82.3%growth of the Gross Profit, improvement of 12.5% in the Administrative Expenses and the improvement of16.7% in the Net Financial Result.

The taxable result by the Income Tax and Social Contribution differs from the Result Before Taxes andParticipations, and its calculation basis is described in the Note 11. With the calculation basis according tothe accounting records, it was accrued Income Tax and Social Contribution on the Result - Current in theamount of R$3.9 million in the 1Q10, 30.2% lower than the accrued in the 4Q09 which amounted to R$5.6million.

The Consolidated Net Result in the 1Q10 was a loss of R$16.2 million, reducing the loss by 65.7% whencompared to the 4Q09.




IFRSMarch 31, 2010

MANAGEMENT COMMENTS ON THE BALANCE SHEET PERFORMANCE

The comments over the Balance Sheet performance, except when otherwise stated, refer to the firstquarter of 2010 (1Q10), comparatively to the 4Q09.

Working Capital (R$ thousand) 4Q09 1Q10%

Change Nominal Change

Accounts Receivable 188,116 203,408 8.1% 15,292

Inventories 164,015 156,868 -4.4% (7,147)

Accounts Payable 35,897 49,783 38.7% 13,886

Advances from Clients 8,126 8,994 10.7% 868

Employed Working Capital 308,108 301,499 -2.1% (6,609)

Employed Working Capital Variation (82,082) (6,609)

The balance of Accounts Receivable grew R$15.3 million in the 1Q10, 8.1% higher than the balance of the4Q09. The growth of the Accounts Receivable is mainly due to higher revenues booked in this quarter(36.5%).

The Inventories balance decreased R$7.1 million in the 1Q10, representing 4.4% less than the balance ofthe 4Q09 due to a better inventories management policy that has been implemented in the last months.

The Accounts Payable (suppliers) increased R$13.9 million in the 1Q10, or 38.7% over the 4Q09 balance,as a result of the improvement in the conditions of raw material purchase.

Advances from Clients recorded an increase of R$0.9 million in the 1Q10, or 10.7% when compared to the4Q09. This increase is due to higher commercial activity on projects that include advances from clients.

The Operating Working Capital variance in the 1Q10 resulted in a cash generation of R$6.6 million. Theratio of Working Capital invested over the Net Consolidated Revenues of the Company in the last fourquarters improved from 55.5% in the 4Q09 to 54.7% in the 1Q10.

Below it is presented a chart with the quarterly trend of the working capital usage as a percentage of theNet Consolidated Revenues of the last twelve months.

WORKING CAPITAL UTILIZATION AS A PERCENTAGE OF THE CONSOLIDATED NET REVENUES OF THE

LAST TWELVE MONTHS

460556

673704

716 719646

555 551

48.6%45.9%

49.9%

55.2% 56.6%54.8%

60.4%

55.5% 54.7%

-5%

5%

15%

25%

35%

45%

55%

65%

-

100

200

300

400

500

600

700

800

900

1,000

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10

R$ m

Net Revenues (LTM) WC as % of Net Revenues



IFRSMarch 31, 2010

CASH POSITION

Cash and Cash Equivalents (In R$thousand) 4Q09 1Q10

%Change Nominal Change

Cash & Cash Equivalents 131,160 136,904 4.4% 5,744

During the 1Q10 the operating cash generation reached R$29.8 million, or 20.3% of the Consolidated NetRevenues. With the resources from the operating cash generation the Company funded its investmentplan in R$8.9 million, as well as net amortizations of financing lines of R$15.2 million. With that, theConsolidated Cash and Cash Equivalents of the Company in the 1Q10 reached R$136.9 million, growth ofR$5.7 million when compared to the 4Q09.

DEBT

Debt (R$ thousand) 4Q09 1Q10%

Change Nominal Change

Short Term 56,784 72,118 27.0% 15,334

Long Term 174,304 171,645 -1.5% (2,659)

Debentures 340,228 338,384 -0.5% (1,844)

Perpetual Bond 475,023 485,556 2.2% 10,533

Total Debt 1,046,339 1,067,703 2.0% 21,364

Cash & Marketable Securities 131,160 136,904 4.4% 5,744

Net Debt Position (915,179) (930,799) 1.7% (15,620)

The Consolidated Short Term Debt in the 1Q10 reached R$72.1 million, an increase of 27.0% whencompared to the 4Q09 mainly due to interest accrual that will be amortized in the next four quarters andcredit lines to finance working capital in the Energy Products Segment.

The Long Term Debt, which does not include the Perpetual Bonds and the Convertible Debentures,decreased 1.5% or R$2.7 million in the 1Q10.

The balance of the Convertible Debentures was practically stable during the 1Q10. The conversion pricefor the Convertible Debentures has not been defined yet, with a deadline date of April 15, 2011. Due tothe calculation of the moving averages, the minimum price on which the premium will be added, increasedfrom of R$17.50 to R$26.93, thereby reducing the percentage of dilution in the event of conversion of theConvertible Debentures.

The Perpetual Bonds balance in the 1Q10 increased 2.2% reaching R$485.6 million when compared to4Q09, due to the exchange variance verified during the period. The Company does not hedge the FXexposure on the principal of the Perpetual Bonds.

The balance of the total debt grew 2.0% in the 1Q10 reaching R$1.1 billion versus R$1.0 billion in the4Q09.

Thus, the Consolidated Net Debt of the Company reached at the end of the 1Q10 the level of R$930.8million, an increase of 1.7% versus the 4Q09, mainly due to the growth of the Total Debt.

The Consolidated Net Debt with maturity (excluding the Perpetual Bonds and including the ConvertibleDebentures), reached R$445.2 million, change of 1.2% when compared to the 4Q09.



IFRSMarch 31, 2010

DEBT WITH MATURITY, AMORTIZATION SCHEDULE AND VOLUME (IN R$ MILLION)

* ST: Short TermLTM: Long Term with MaturityLTD: Long Term with Maturity – Debentures

The Total Debt with maturity of the Company is R$582.1 million, being R$72.1 million with short termmaturity (next twelve months). In this amount is already included R$11.8 million related to quarterlyamortization of Perpetual Bonds’ interest, which payment was made on April 10, 2010, R$25.6 million ofinterest related to annual amortization of Convertible Debentures which payment was made on April 15,2010, and the remaining related to amortizations of financing lines.

The Debt with maturity represented 54.5% of the Total Debt by the end of the 1Q10. The Short Term Debtrepresented 6.8% of the Total Debt and 12.4% of the Debt with maturity. The Long Term Debt, excludingthe Convertible Debentures, represented 16.1% of the Total Debt and 29.5% of the Debt with Maturity.The Convertible Debentures represented 31.7% of the Total Debt and 58.1% of the Debt with maturity.

The maturity of the Long Term Debt, in the amount of R$171.6 million, is scheduled to be amortized afterApril 2011 and is basically related to financing lines from development banks.

CAPITAL STRUCTURE



IFRSMarch 31, 2010

The Debt of the Company has a long term maturity, except for 6.8% of the Total Debt or 5.4% of thecapital structure, which matures in the next twelve months. This amount also includes the interest on thelong term debt.

Adjusting the Equity to the Perpetual Bonds (stable source of financing for the Company), the debt (withmaturity) represents 43.4% of the Company’s Capital Structure.

INVESTMENTS (FIXED ASSETS)

Investments (R$ thousand) 4Q09 1Q10 % Change Nominal Change

Investments in Affiliates 2,386 2,301 -3.6% (85)

Fixed Assets 317,960 319,887 0.6% 1,927

Intangible 506,670 506,166 -0.1% (504)

Total 827,016 828,354 0.2% 1,338

The Total Investments of the Company grew 0.2% in the 1Q10, reaching R$828.4 million versus R$827.0million in the 4Q09, due mainly to the changes of the net fixed assets, which grew R$8.9 million due to theexecution of the investment plan (capex) and the depreciation, which amounted R$7.5 million.




IFRSMarch 31, 2010

ATTACHMENT I – INCOME STATEMENT (IN R$ THOUSAND)

Consolidated Income Statement 1Q10 4Q09 % Change

Gross Sales and Services 166,672 121,369 37%

Sales Taxes & Deductions from Gross Sales (19,548) (13,551) 44%

Net Sales and Services 147,124 107,818 36%

Cost of Goods and Services Sold (105,886) (85,199) 24%

Gross Profit 41,238 22,619 82%

Operating Revenues/Expenses (63,052) (71,601) -12%

Sales (15,477) (14,859) 4%

General and Administrative (11,281) (12,926) -13%

Net Financial Result (34,027) (40,858) -17%

Financial Income 7,218 7,377 -2%

Exchange Variance - Income 29,592 15,394 92%

Exchange Variance - Expense (39,996) (23,405) 71%

Financial Expenses (30,841) (40,224) -23%

Other Operating Revenues 634 3,859 -84%

Other Operating Expenses (2,991) (6,909) -57%

Equity Pickup 90 92 -2%

Operating Result (21,814) (48,982) -55%

Earnings Before Income Tax (21,814) (48,982) -55%

Provision for Income Tax and Social Contribution (3,905) (5,592) -30%

Deferred Income Tax 9,568 7,502 28%

Minority Interest - - n.a.

Current Result (16,151) (47,072) -66%

ATTACHMENT II – ADJUSTED EBITDA RECONCILIATION5

(IN R$ THOUSAND)

EBITDA Reconciliation 1Q10 4Q09 % Change

EBITDA 20,072 6,925 190%

Depreciation and Amortization (7,512) (10,243) -27%

Non-recurring operationg expenses (291) (427) -32%

Operationg expenses* - (4,257) n.a.

Net Financial Result (34,027) (40,858) -17%

Income Tax and Social Contribution (3,905) (5,592) -30%

Deferred ncome Tax and Social Contribution 9,567 7,502 28%

Workforce expenses (146) (213) -31%

Equity pick-up result 90 92 -2%

Net Income (16,151) (47,071) -66%

*Non-cash expenses related to the Stock Option Program and AVP


5Reconciliation starting from the Net Consolidated Result of the Company



IFRSMarch 31, 2010

ATTACHMENT III – BALANCE SHEET (IN R$ THOUSAND)

Consolidated Balance Sheet 1Q10 4Q09 % Change

Total Asset 1,494,251 1,477,442 1%

Current Assets 571,944 554,419 3%

Available 136,904 131,160 4%

Cash and Cash Equivalents 136,904 131,160 4%

Credits 247,382 230,194 7%

Clients 198,687 184,659 8%

Other Credits 48,695 45,535 7%

Recoverable Taxes 48,695 45,535 7%

Deferred Income Taxes and Social Contribution - - n.a.

Inventories 156,868 164,015 -4%

Other 30,790 29,050 6%

Non-current Assets 922,307 923,023 0%

Other Credits 88,921 90,811 -2%

Judicial Deposits 1,611 1,214 33%

Clients 4,721 3,457 37%

Recoverable Taxes 20,472 23,432 -13%

Deferred Income Taxes and Social Contribution 62,117 62,708 -1%

Other 5,032 5,196 -3%

Investiments 2,301 2,386 -4%

Fixed Assets 319,887 317,960 1%

Intangible 506,166 506,670 0%

Total Liabilities and shareholders´equity 1,494,251 1,477,442 1%

Current Liabilities 186,498 150,572 24%

Borrowings 34,652 29,711 17%

Interest on Perpetual Bonds 11,820 10,760 10%

Interest on Debentures 25,646 16,313 57%

Suppliers 49,783 35,897 39%

Income Tax and Social Contribution 19,121 17,648 8%

Dividends - - n.a.

Provisions 13,695 8,782 56%

Other Liabilities 31,781 31,461 1%

Accounts Payable from Investments 2,255 2,240 1%

Payroll 5,004 5,398 -7%

Client Advances 8,994 8,126 11%

Profit Sharing Programs 520 930 -44%

Other 15,008 14,767 2%

Non-current Liabilities 1,035,136 1,039,610 0%

Borrowings 171,645 174,304 -2%

Perpetual Bonds 485,556 475,023 2%

Debentures 338,384 340,228 -1%

Provisions 32,020 42,682 -25%

Provision for Contingencies 7,357 7,860 -6%

Provision for Income Tax & Social Contribution 24,663 34,822 -29%

Others 7,531 7,373 2%

Non Controlling Shareholder Stake - - n.a.

Shareholders Equity 272,617 287,260 -5%

Capital Stock 311,525 311,525 0%

Revaluation Reserves - - n.a.

Capital Reserves 12,265 11,002 11%

Profit Reserves - - n.a.

Equity Evaluation Adjustment (30,252) (30,497) -1%

Current Result (20,921) (4,770) 339%




IFRSMarch 31, 2010

ATTACHMENT IV – CASH FLOW STATEMENT (IN R$ THOUSAND)

Consolidated Cash Flow (ended in): 1Q10 1Q09 % Change

Net Income (loss) in the period (16,151) (12,529) 29%

Adjustments to reconcile the income to cash equivalents from operating activities

Depreciation of fixed assets 7,512 7,818 -4%

Negative goodwill - - n.a.

Equity pick-up result (90) (192) -53%

Cost of write-off or sale of fixed assets 92 996 -91%

Financial expenses and exchange variation 37,192 34,084 9%

Expenses with stock option exercise 1,263 698 81%

Income Tax and Social Contribution - Deferred (9,568) (6,347) 51%

Changes in assets & liabilities 9,564 (28,023) -134%

(Increase) Decrease in accounts receivable (13,274) (12,044) 10%

(Increase) Decrease in inventories 8,169 (2,812) -391%

(Increase) Decrease in recoverable taxes 476 (5,161) -109%

(Increase) Decrease in other assets (908) (2,948) -69%

(Increase) Decrease in suppliers 12,909 (8,807) -247%

(Increase) Decrease in taxes payable 1,492 (440) -439%

(Increase) Decrease in accounts payable 700 4,189 -83%

Net cash equivalents invested in operating activities 29,814 (3,495) -953%

Cash flow from investment activities

Investments - (20,164) -100%

Aquisition of fixed assets (8,779) (21,532) -59%

Addition to intangible (147) (1,239) -88%

Sale of fixed assets - - n.a.

Cash & Marketable Securities of acquisitions - 361 -100%

Net cash equivalents used in operating activities (8,926) (42,574) 0%

Cash flow from financing activities

Borrowings and financing contracted 6,182 60,209 -90%

Issuance of Debentures - - n.a.

Issuance of Perpetual Bonds - - n.a.

Capital payment - - n.a.

Borrowings and financing paid (21,341) (43,559) -51%

Net cash equivalents generated (invested in) financing activities (15,159) 16,650 -191%

Effects of exchange variation over cash and cash equivalents of subsidiaries abroad 15 (2,265) -101%

Increase (Decrease) in cash equivalents 5,744 (31,684) -118%

At the beginning of the year 131,160 316,874 -59%

At the end of the year 136,904 285,190 -52%




IFRSMarch 31, 2010

01.01 – IDENTIFICATION

1 - CVM CODE02006-0



20.01 – OTHER INFORMATION

The information contained in the tables below is based on data as of March 31, 2010, except whenstated otherwise.

The Company has only common shares in the total amount of 47,674,118 of which 33,565,599 composethe Free Float.

Commom

Shares

Preferred

Shares Total Shares(In units) (In units) (In units)

Diffused controller 11,961,831 25.09 0 0 11,961,831 25.09

LUPAPAR 11,961,831 25.09 0 0 11,961,831 25.09

Management 2,146,688 4.50 0 0 2,146,688 4.50

Board 2,064,754 4.33 0 0 2,064,754 4.33

Directors 81,934 0.17 0 0 81,934 0.17

Fiscal council 0 0.00 0 0 0 0.00

Treasury stock 0 0.00 0 0 0 0.00

With more than 5% of the total 12,610,238 26.45 0 0 12,610,238 26.45

BNDESPAR 5,460,039 11.45 0 0 5,460,039 11.45

Fundação PETROS 7,150,199 15.00 0 0 7,150,199 15.00

Other shareholders 20,955,361 43.96 0 0 20,955,361 43.96

Total 47,674,118 100.00 0 0 47,674,118 100.00

Free-float 33,565,599 70.41 0 0 33,565,599 70.41

Shareholder %

CONSOLIDATED SHAREHOLDING AND MANAGEMENT POSITIONOF COMMOM SHARESPosition in 03/31/2010

% %

Notes:

1. The Company does not has a controlling shareholder ou shareholders’ agreement.2. The Fiscal Council is not installed

Shareholders’ Agreement: ( ) Yes ( x ) No

Shareholders with more than 5% that own Lupapar Negócios e Empreendimentos Ltda:

Entity/Individual Nationality Quantity % of Capital StockLuiz Fernando Perini Brazilian 4,490,000 49.89%Paulo Henrique Perini Brazilian 4,490,000 49.89%



IFRSMarch 31, 2010

Commom

Shares

Preferred

Shares Total Shares(In units) (In units) (In units)

Diffused controller 11,961,831 25.14 0 0 11,961,831 25.14

LUPAPAR 11,961,831 25.14 0 0 11,961,831 25.14

Management 2,168,212 4.56 2,168,212 4.56

Board 2,098,216 4.41 0 0 2,098,216 4.41

Directors 69,996 0.15 0 0 69,996 0.15

Fiscal council 0 0.00 0 0 0 0.00

Treasury stock 6,113 0.01 0 0 6,113 0.01

With more than 5% of the total 10,256,639 21.56 10,256,639 21.56

BNDESPAR 5,460,039 11.48 0 0 5,460,039 11.48

Fundação PETROS 4,796,600 10.08 0 0 4,796,600 10.08

Dynamo Adm. de Recursos Ltda 2,376,800 5.00 0 0 2,376,800 5.00

Other shareholders 23,188,951 48.73 0 0 23,188,951 48.73

Total 47,581,746 100.00 0 0 47,581,746 100.00

Free-float 33,445,590 70.29 0 0 33,445,590 70.29

Position in 03/31/2009

Shareholder % % %

CONSOLIDATED SHAREHOLDING AND MANAGEMENT POSITIONOF COMMOM SHARES

The Company is subject to arbitration of the Market Arbitration Chamber according to thecommitment clause set forth in its bylaws, reproduced below:

“Article 53, The Company, its shareholders, Management and members of the Fiscal Council are liable toresolve by means of arbitration, all and any controversy which may arise among them, related to orderiving from, especially, the enforcement, validity, enforceability, interpretation, breach and its effects,from the provisions contained in the Corporate Law, in the Company’s bylaws, in the rules enacted by theNational Monetary Council, by the Central Bank of Brazil and by the Brazilian Securities and ExchangeCommission (CVM), as well as in the other regulations applicable to the operation of the capital market ingeneral, in addition to those contained in the Listing Regulation of Novo Mercado (New Market), in theAdhesion Regulation of Novo Mercado, and the Arbitration Regulation of the Market Arbitration Chamber,pursuant to the latter,

Sole Paragraph, The Brazilian law shall be the only one applicable on the matter of all and anycontroversy, as well as on the enforcement, interpretation and validity of this commitment clause, Theboard of arbitration shall comprise arbitrators appointed pursuant to article 7,8 of the ArbitrationRegulation, The arbitration proceedings shall take place in the city of São Paulo, state of São Paulo,where the arbitration award shall be issued, The arbitration proceeding shall be administered by theMarket Arbitration Chamber itself, and conducted and adjudged pursuant to the relevant provisions of theArbitration Regulation,”



IFRSMarch 31, 2010

IINNDDEEPPEENNDDEENNTT AAUUDDIITTOORRSS’’ RREEPPOORRTTTo Shareholders and Management of

LUPATECH S.A.

Caxias do Sul – RS

1. We reviewed the Interim Condensed Consolidated Financial Statements of Lupatech S.A. and

subsidiaries ("Company") for the quarter ended March 31, 2010, which comprises the condensed

consolidated balance sheet, the condensed consolidated statements of income, of comprehensive

income, changes in equity and cash flows corresponding to the quarter ended March 31, 2010,

and the notes to financial statements and the performance report, prepared under the

responsibility of its Management.

2. Our review was conducted in accordance with specific standards established by the Brazilian

Institute of Auditors (IBRACON), jointly with the Federal Accounting Council (CFC), and mainly

comprised: (a) inquiries and discussions with the administrators responsible for the accounting,

financial and operating areas of the Company, as to main criteria adopted in the preparation of the

Quarterly Information and; (b) review of the information and subsequent events that have or may

have significant effects on the company’s financial position and operations of the Company and its

subsidiaries.

3. Based on our review, we are not aware of any material modifications that should be made toInterim Condensed Consolidated Financial Statements, referred to in the paragraph 1, that theywill be in accordance with International Accounting Standard - IAS 34 "Interim FinancialReporting" issued by International Accounting Standards Board - IASB

4. Accounting practices adopted in Brazil vary in certain significant respects, the accountingpractices in accordance with international accounting standards issued by the InternationalAccounting Standards Board - IASB. Information relating to the nature and the effect of suchdifferences is presented in Note 23 of the Interim Condensed Consolidated Financial Statements.

5. Previously, we examined the consolidated balance sheet at December 31, 2009 prepared inaccordance with international accounting standards issued by the International AccountingStandards Board - IASB, presented for comparison purposes, over which we have issued auditopinion, unqualified opinion, dated March 19, 2010.

Porto Alegre, May 6, 2010.

DELOITTE TOUCHE TOHMATSU Fernando Carrasco

Auditores Independentes Accountant

CRC nº. 2 SP – 011.609/O-8 F-RS CRC nº. 1SP 157.760/T/RS

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