Mills 4Q15 Results and Full Year 2015 results

8/19/2019 Mills 4Q15 Results and Full Year 2015 results

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The financial and operational information presented in this release, except when otherwise indicated, is in accordance with accounting policiesadopted in Brazil, which are in accordance with international accounting standards (International Financial Reporting Standards - IFRS).

Mills’ 4Q15 and Full Year 2015 results

Investor Relations BM&FBOVESPA: MILS3

Rio de Janeiro, March 9, 2016 - Mills Estruturas e Serviços de Engenharia S.A. (Mills) presents its results for the fourth quarter of 2015 (4Q15)

and for the Full Year 2015.

A challenging year in an adverse political and macroeconomic scenario

Net revenues of R$ 576.1 million in 2015, 27.5% lower than in 2014.

Increased idle capacity in the Construction business unit.

Recognition of a provision for impairment totaling R$ 57.1 million, of which R$ 30.9 million in Construction, and R$ 26.2 million in

investment in Rohr.

Restructuring costs of R$ 2.9 million in the fourth quarter of 2015 (4Q15), and R$ 21.9 million in 2015.

ADD amounted to 6.6% of the net revenue in 2015, against 5.3% in 2014.

EBITDA1, excluding non-recurring items

2, of R$ 186.7 million in 2015, with 32.4% EBITDA margin

Net loss of R$ 97.8 million in 2015.

Actions taken to preserve the financial health and face the recessive enviroment

Sale of assets: sales totaled R$ 53.9 million, of which R$ 29.1 million of semi-new equipment, 89.9% higher year over year (yoy), excluding

the sales of easyset in 2014.

Capex reduction: 85.8% lower, totaling R$ 28.2 million in 2015, being R$ 11.7 million for replacement of the mix of rental equipment.

SG&A reduction: the fall was 12.4% of the SGA, excluding ADD and impairment.

Cash flow generation: positive free cash flow of R$ 202.4 million in 2015.

Cash preservation: cash position of R$ 232.0 million as of December 2015 and net debt of R$ 388.8 million as of December 2015.

The Board of Directors approved, on February 5, 2016, a capital increase by private subscription up to the maximum amount of R$ 125

million.

1 Ebitda as the sum of the business units Construction and Rental and excluding the impairment of the Construction business unit (R$ 30.9 million)

2 Non recurring items: restructuring indemnities of R$ 8.6 million, branch closing of R$ 0.4 million and R$ 12.9 million of ADD regarding the investigations in course.


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24Q15 Mills Results

In R$ Million4Q14 3Q15 4Q15 (C)/(A) (C)/(B) 2014 2015 (E)/(D)

(A) (B) (C) % % (D) (E) %

Net revenue 181.9 136.5 127.9 -29.7% -6.3% 794.2 576.1 -27.5%

EBITDA1 55.6 35.1 30.2 -45.7% -13.9% 335.7 164.8 -50.9%

EBITDA margin (%) 30.6% 25.7% 23.6% 42.3% 28.6%

EBITDA ex-non recurring items1,3 55.6 38.5 33.1 -40.4% -13.9% 350.2 186.7 -46.7%

EBITDA margin ex-non recurring items (%) 30.6% 28.2% 25.9% 44.1% 32.4%

Net earnings (Loss) -6.2 -17.2 -57.9 831.6% 236.7% 64.3 -97.8-

252.2%

ROIC (%) 6.6% 0.8% -2.9% 6.6% -2.9%-

144.7%

Capex 22.6 9.5 2.6 -88.3% -72.3% 199.1 28.2 -85.8%

Message from CEO

2015 was full of uncertainties in the economic and political scenario, affecting directly on the markets that we operate, negatively impacting

our utilization rate, pricing and margins. Due to this scenario, we have revisited our organizational structure and made all actions in order to

turn the Company leaner, more agile and structured for this new environment.

During the year of 2015, we implemented several measures for Mills to be prepared to overcome the obstacles that will arise in the coming

years, in a recessive environment that can get worse. We realized several movements for horizontalizing the Company in many different

departments that have synergy, which ended in a consolidation of departments, in addition to this, improving productivity and obtaining

operational gains and cost reduction. Therefore, Heavy Construction and Real Estate commercial management have been brought together in

a single business unit.; Engineering and operational Officers functions were also consolidated, and the Investor Relations department was

integrated with the Finance department. Those changes reduced Company's hierarchy tiers and allows a greater team integration . In order to

support the organizational changes and consistently sustain the integration, providing the necessary orientation to our employees, we hired a

Human Resources executive.

Our focus is cash generation, through the sale of assets not considered strategic for the Company, cost reduction, cutting expenses and

investments. This year we have reduced all CAPEX substantially in equipment rental and corporate goods, by 85.8% when compared to the

previous year, and do not foresee any CAPEX in 2016, given the high idle of our business units.

We did also other actions with the objective of reducing costs and expenses, increasing our profitability as a result. Which include reduction of

our backoffice staff, renegotiation of the lease agreements for our depots, and shutting down five Construction branches and three Rental

branches . In 2015, we closed our Guarulhos branch. In October, we moved our head office from Barra da Tijuca to our address in

Jacarepaguá, where our warehouse is located

In an extremely challenging year such as 2015, we took the necessary actions to face this adverse scenario. Therefore, we are confident that

we ended 2015 better structured than we began it. And if 2016 brings us new challenges, we are better prepared to face them from

Company's internal perspective.

Business Perspective

We continue with low visibility in the infrastructure market. According to research conducted by the National Industry Confederation (CNI),

construction industry activity continues to deteriorate. The perspective indicator for the construction industry’s activity l evel in infrastructure

was 31.4 points in December 2015, while the value registered in December 2014 was 35.5. The National Development Bank (BNDES) disbursed

R$ 136 billion in investment projects in 2015, a reduction of 28% YoY, 40% of which was allocated to the infrastructure industry. The drop

follows the economy slowdown and Government's fiscal adjustment measures.


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34Q15 Mills Results

In June 2015, the Government announced a program of new concessions with estimated investments of R$ 198.4 billion. From the announced

concessions, the only one brought to fruition in 2015 was the lease of three areas in the Port of Santos. We believe that the auctions of the

four airports - Salvador, Fortaleza, Porto Alegre, and Florianópolis, with estimated investments of R$ 6.9 billion during the concession period,

will take place this year.

In the real estate market, the launches of the listed companies4 recorded a fall of 75.7% in 4Q15 YoY. According to ABECIP (Brazilian Real

Estate Credit and Saving Entities Association) the volume of loans granted for real estate purchase and construction was R$ 4.8 billion in

December, representing a reduction of 55.2% compared to the same period in 2014.

In the motorized access equipment market, 425 machines entered in market in 2015, a 90% reduction YoY. We believe in the growth drivers

for this market in the medium and long terms, and in the expansion in the use thereof due to safety and productivity gains. Falls from height

are the main cause of fatalities in construction sector, not only in Brazil but also in US, so aerial platforms are recognized as the safest method

for working at height, with the lowest accident index among different ways of access to heights. Therefore, aerial platforms should replace less

safe access equipment as safety concerns grow in Brazil.

Capital Increase

On February 5, 2016 the Board of Directors approved Company's capital increase, including the possibility of a partial ratification by means of

issuance, for private subscription, of at least 40,089,472 and no more than 47,528,517 new common shares, at the issuance price of R$ 2.63

per share, to a total amount of at least R$ 105.4 million and no more than R$ 125 million. The price was established taking into consideration

the average of daily closing prices weighted by the trading volume on BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros in the

trading sessions held between November 27th, 2015 (inclusive) and February 4th, 2016 (inclusive). Preemptive rights to the subscription of the

new shares have been secured to Company's shareholders with closing position on February 11, 2016, proportionally to the amount of shares

they held on that day.

As mentioned in the market announcement on the same date, the fundraising aims to to (i) strengthen Company's capital structure,

reinforcing its cash to secure the necessary capital in the medium and long terms to develop its activities; (ii) strengthen is liquidity levels,reducing Company's indebtedness indicators; and (iii) take advantage of market consolidation opportunities that may arise in the medium

term.

Company's controlling shareholders, the Nacht Family, have entered into an Investment Agreement with Axxon Brazil Private Equity Fund II

("Axxon" and "Investment Agreement").

The Investment Agreement provides, among other obligations, the undertaking of Controlling Shareholders to (1) subscribe and pay in

15,209,125 shares, at a total amount of R$ 40 million and (2) assign to Axxon preemptive rights corresponding to their remaining interest.

Axxon, in turn, undertook under the Investment Agreement to exercise the Preemptive Rights assigned to it, including the right to subscribe

shares left over, in order to subscribe and pay in shares to be issued in the scope of the Capital Increase representing up to 15% of Company's

capital after the Capital Increase. Controlling Shareholders' Contribution and Axxon's Subscription Undertaking are sufficient to ensure the

subscription of shares corresponding to the Minimum Subscription.

Revenue

Net revenue reached R$ 576.1 million in 2015, a 27.5% YoY drop. Rental revenues contributed with 84% of Company's net revenue.

4 Cyrela, Direcional, Even, Gafisa, Helbor and MRV.


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44Q15 Mills Results

In 4Q15 rental revenue was 5.2% lower compared to previous quarter, or R$ 6.0 million. The drop in price and mix, of both business units

accounted for R$ 2.3 million in the reduction: R$ 2.2 million in Construction and R$ 0.1 million in Rental. The rental revenue was also

negatively affected by the drop of Construction rented volumes in R$ 3.8 million, reflecting the reduction in the number of contracts. The price

reduction is caused by the worsening of the market, which results in lower demand and increased idleness.

Net Revenue Evolution

(In R$ million)

The utilization rate for the last 12 months ended December 31, 2015 was 49.9% in Construction, as a result of rented volume drop. In Rental,

the utilization rate for the last 12 months remained 61.9%, reflecting an improvement in the rental volume compared to prior quarter.

LTM 4Q15 average = 49.9%


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54Q15 Mills Results

Annual sales totaled R$ 53.9 million, of which R$ 29.1 million in semi-new equipment. Our sales margin was 35.7%. We will continue our

selling efforts in order to reach a reduction in our Construction net assets, especially of equipment intended to the real estate market. We

have established an active prospection through international distribution channels to sell this type of equipment.

Semi-new sales represented 53.9% of Company's sales. In Construction, we sold R$ 9.1 million and R$ 19.9 million in Rental, of which R$ 5.6

million (or EUR 1.3 million) under the EUR 8 million equipment sale contract executed in August 2015. The revenue will be recognized to the

extent the equipment is delivered in the port.

We had a 33.1% increase in quarter-over-quarter (qoq) sales, resulting from the increase in sales from both business units. Semi-new

equipment sales totaled R$ 8.6 million in 4Q15, 23.1% above 3Q15.

Costs

COGS (Cost of Goods Sold), excluding depreciation, totaled R$ 191.9 million in 2015, 8.6% below the previous year due to the lower cost

of sales in Construction and Rental business units, in line with the sales revenue reduction for the period.

Mills COGS broken down as follows:


(A) (B) (C) % % (D) (E) %

Costs of job execution/Equipment storage(g), (h)

37.1 39.4 36.4 -1.8% -7.6% 142.6 144.3 1.2%

Costs of sale of new equipment 6.9 3.0 3.1 -54.4% 3.9% 38.1 18.3 -52.1%

Costs of sale of semi-new equipment 3.6 3.8 5.6 55.6% 48.9% 15.0 16.4 9.2%

Costs of asset write-offs 3.9 3.0 1.9 -51.6% -36.6% 13.7 12.8 -6.6%

COGS total, ex-depreciation 51.5 49.2 47.1 -8.6% -4.3% 209.5 191.9 -8.4%

Between quarters, the 4.3% reduction in COGS, excluding depreciation, resulted from lower costs of job execution and equipment storage (-R$ 3.0 million) and assets write-offs (-R$ 1.1 million), partially offset by an increase in the cost of sales (+ R$ 2.0 million). The cost of sales

increased 28.9%, in line with sales growth for the period. As shown in the following chart, the proportion of sales costs and assets write-offs to

sales revenue and indemnities was 66.6%. The rise in that proportion results from our lower sales margin.

In the Construction business unit, COGS excluding depreciation, totaled R$ 25.3 million in 4Q15, 6.8% lower qoq. The rise in sales costs of this

business unit (+ R$ 0.4 million) was more than offset by lower direct work costs (- R$ 0.6 million) reflecting lower maintenance activities and

assets write off (- R$ 1.7 million). In the Rental business unit, COGS excluding depreciation totaled R$ 21.8 million in 4Q15, in line with previous

quarter.


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64Q15 Mills Results

COGS

Impairment

Applying the premises of Technical Pronouncement CPC-01 - Impairment of Assets, the Company performed impairment tests on its assets.

After said tests, it was verified that it was necessary to establish an impairment provision amounting to R$ 26.2 million for the investment in

Rohr and R$ 30.9 million for the Construction Cash Generating Unit. For the assets of the Rental business unit and other assets of the

Company, no need to perform impairment tests were identified.

The recoverable amount of those assets was determined based on economic forecasts for determining the market value of the investee, upon

through a revenue approach, through a 10-year term discounted cash flow forecast, for purposes of substantiating the amount paid,

considering the long maturity period of infrastructure and civil construction investments. The main assumptions included: (i) revenues were

forecast based on historical data and growth prospective for the segment and Brazilian economy; (ii) negative operating loss for 2015,

resulting from the reduced activity of the industry; (iii) performance of a continuous productivity improvement program and reduction of costs

and expenses will cause the evolution thereof to be lower than revenue growth percentage, (iii) the corresponding cash flows are discounted

at the average discount rate, obtained using a methodology typically applied by the market, taking into account the weighed average cost of

capital (WACC); (iv) a strict working capital evolution control policy, during the forecasted period.

Expenses


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74Q15 Mills Results

SG&A5, excluding depreciation, ADD, and Construction impairment, amounted to R$ 181.0 million in 2015, 12.4% lower when compared to the

amount registered in 2014, of R$ 206.7 million. In 4Q15 it totaled R$ 43.2 million, 2.4% below 3Q15 and 17.8% below 4T14, as a result of cost

reduction activities performed to this date.

This quarter we closed the Rental business branch in Guarulhos and started the process to close two other branches: Itaboraí and Sorocaba.

Most of labor dismissal costs are already reflected in the results, however, other expenses from closing the branches, including the

termination of lease agreements, will impact the first half of 2016.

We are on the way to close other five Construction branches, which served the real estate market: Campinas, Cuiabá, Goiânia Manaus, and

Ribeirão Preto.

As mentioned previously, many actions have been taken to reduce our SG&A costs, including (a) consolidation of certain Departments with the

consequent reduction in our executive, commercial, and administrative staffing, (b) closing eight branches, and (c) renegotiating the value of

utilities contracts, such as the rent of our warehouses, security and cleaning.

The restructuring effect this quarter generated an estimated annual saving of R$ 12 million. Adding the savings in the third quarter, we

anticipate an annual saving of approximately R$ 22 million.

Allowance for doubtful debt

In general, we recognize as ADD 50% of receivables with 61 to 90 days overdue balance, and pending of payment for up to 121 days, we

recognize the remaining 50%. 100% of debts under legal collection are allocated to the ADD account. Due to a more conservative posture in

relation to the possible scenarios of current investigations, we in the end of 2014 downgraded the credit risk of those clients and consortiums,

regardless as if they are majority or minority participants, who are somehow related to current investigations. This credit downgrade alone

increased substantially our ADD balance. According to our accounting practices, the ADD is reversed with the payment owned or, the timely

payment of the second installment of the debt acknowledgment instrument. In this last event, in case of another default by the client, the

entire outstanding debt will be reported as ADD.

In 2015, ADD total expense was R$ 38.4 million, 6.7% of net revenue, being R$ 12.7 million related to clients involved in lava-jato

investigation. Net receivables amounted to R$ 99.7 million, of which R$ 23.0 million related to the clients involved in the ongoing investigation.

ADD for 4Q15 totaled R$ 7.4 million, or 5.8% of net revenue, in line with the previous quarter. New provisions were established in the

Construction business unit, offset by reversals of the Rental business unit. The ADD for each business unit is as follows:


(A) (B) (C) % % (D) (E) %

Heavy Construction 9.6 2.9 5.1 -47.0% 77.1% 13.6 19.7 45.6%

% Net Revenue 18.3% 7.0% 16.1% 6.4% 11.9%

Real Estate 4.9 -0.3 1.5 -69.7% -529.8% 10.7 5.9 -45.0%

% Net Revenue 10.9% -1.3% 5.8% 5.0% 5.0%

Rental 7.6 5.4 0.8 -89.1% -84.7% 18.0 12.8 -29.2%

% Net Revenue 9.1% 7.9% 1.2% 4.9% 4.4%

Total ADD 22.2 7.9 7.4 -66.6% -6.6% 42.3 38.4 -9.2%

% Net Revenue 12.2% 5.8% 5.8% 5.3% 6.7%

5 SG&A corresponding to the sum of Rental and Construction business units.


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84Q15 Mills Results

The chart above shows the effect of doubtful debt provisions in ADD balance increase on Mills' overdue accounts receivable, including the

extended maturity securities, as well as on total Accounts receivable.

The following table shows the maturity schedule of the gross outstanding receivables.

EBITDACash generation, as measured by EBITDA, reached R$ 30.2 million in 4Q15, 45.7% lower than 4Q14 and 13.9% inferior than 3Q15, which is

mainly due to the price and mix effect (- R$ 2.4 million).

EBITDA margin was 23.6% in 4Q15, compared to 30.6% in 4Q14 and 25.7% in 3Q15. Excluding expenses to close the branchs, EBITDA would

totalize R$ 33.1 million, with EBITDA margin of 25.9% in 4Q15.

For 2015, EBITDA accumulated R$ 164.8 million. Excluding extraordinary items, such as restructuring indemnities (R$ 8.6 million), ADD related

to the pending investigation (R$ 12.9 million) and expenses related to branch office relocation/closing (R$ 0.4 million), EBITDA would amount

to R$ 186.7 million.


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94Q15 Mills Results

Financial income


(A) (B) (C) % % (D) (E) %

Financial Income 9.3 8.9 13.5 44.3% 51.6% 24.0 36.9 53.9%

Financial Expense -24.2 -24.1 -26.9 11.5% 11.8% -91.6 -100.1 9.2%

Financial Result -14.8 -15.2 -13.5 -9.2% -11.4% -67.6 -63.1 -6.6%

Financial income was negative in R$ 13.5 million in 4Q15, compared to negative R$ 15.2 million in 2Q15, as a result of the reduced net

indebtedness between quarters, despite the rise in the average cost of the debt in the period. For the year, the financial income was negative

in R$ 63.1, being 6.6% lower than the previous year.

Net result

For 2015, Mills reported a net loss of R$ 97.8 million, compared to a R$ 64.3 million net profit in 2014.

The net profit fall is explained by the reduction of R$ 170.9 million in EBITDA, R$ 57.1 million related to Impairment, increased depreciation

amounts (R$ 1.4 million), and lower financial income (R$ 4.5 million) and remaining expenses from the former Industrial Services business unit

(R$ 5.8 million)

Mills reported a net loss of R$ 57.9 million in 4Q15, negatively impacted by: (i) Impairment (BRL57.1 million) and (ii) non-recurring items

resulting from restructuring indemnities costs and closing of Guarulhos branch office (R$ 2.9 million). This quarter, an interest on equity of R$

1.8 million was recognized in Rohr investment.

ROIC

ROIC was -2.9% in 4Q15, compared to 0.8% in 3Q15, mainly impacted by lower rented volume and lower average prices for the period.

Debt and indebtedness indicators

Mills gross debt on December 31, 2015 was R$ 620.8 million. We ended the year with a net debt position of R$ 388.8 million, compared to R$

428.0 at the end of 3Q15.

Company's debt consists in 31% short-term debt, and 69% long-term debt with average term of 2.8 years and average cost of CDI+1.21%. In

terms of currency, the debt is entirely denominated in reais.

In 4Q15, leverage, measured by net debt/LTM EBITDA ratio was 2.1 times, excluding non-recurring items for the period. LTM EBITDA/Financial

income ratio was 3.0 times for the same period also excluding non-recurring items for the period.

Cash Flow

Operating cash flow, before the payment of interest and rental equipment purchase, summed R$ 63.1 million in 4Q15, the same level of the

amount presented in 3Q15, impacted by restructuring expenses. For 2015, it totaled R$ 288.3 million. The free cash flow, measured by

operating cash flow and investments, was positive in R$ 37 million in 4Q15, totaling R$ 202.4 million for the year.


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104Q15 Mills Results

Mills invested R$ 2.6 million in 4Q15, of which R$ 1.1 million in rental equipment. In 2015, Mills invested R$ 28.2 million, of which R$ 11.7

million in rental equipment, 85.8% below the amount invested in 2014.

Share buyback program

The Board of Directors approved, on November 10, 2014, a program to repurchase common shares of Mill's issuance, with the objective of

acquiring up to 4,000,000 shares, with a deadline of 365 days as of the date of approval, to be held in treasury and subsequent cancellation or

disposal. Company's last acquisition was in 1Q15, in the remaining quarters of 2015 no share was purchased, aiming at preserving Company's

cash generation.

A total of 2,285,300 shares have been acquired, for a total amount of R$ 19.8 million. The Board of Directors approved, in 2Q15, the sale of

6,878 shares, which were held in treasury, to attend the exercise of stock options. On December 31, 2015, Mills held 2,278,422 shares in

treasury.

Teleconference and Webcast

Date: March 11, 2016, Friday

Time: 10 am (NY time) / 12:00 pm Rio de Janeiro time / 3:00 pm London time

Teleconference:+1 786 924-6977 (Dial-in) or +1 888 700-0802 (Toll-free); Code: Mills

Replay: +55 11 3193-1012 ou +55 11 2820-4012, código: 8373264# ou www.mills.com.br/ri

Webcast: www.mills.com.br/ri


11/17


Tables

Table 1 – Net revenue per type

In R$ million4Q14 3Q15 4Q15 (C)/(A) (C)/(B) 2014 2015 (E)/(D)

(A) (B) (C) % % (D) (E) %

Rental 149,4 116,0 110,0 -26,4% -5,2% 663,3 484,4 -27,0%

Technical support services 1,3 2,6 1,8 47,1% -28,2% 8,1 7,9 -2,2%

Sales of new equipment 10,6 3,2 4,9 -53,7% 55,3% 45,7 24,8 -45,6%

Sales of semi-new equipment 8,0 7,0 8,6 8,1% 23,1% 34,8 29,1 -16,5%

Others 12,7 7,7 2,5 -80,0% -67,0% 42,3 29,9 -29,3%

Total net revenue 181,9 136,5 127,9 -29,7% -6,3% 794,2 576,1 -27,5%

Table 2 – Net revenue per market

In R$ million4Q14 % 3Q15 % 4Q15 % 2014 % 2015 %

Heavy construction 52,5 28,9% 41,2 30,2% 31,6 24,7% 211,0 26,6% 165,7 28,8%

Real estate 45,4 25,0% 26,5 19,4% 25,9 20,3% 212,4 26,7% 117,2 20,3%

Rental 83,9 46,1% 68,7 50,4% 70,3 55,0% 370,8 46,7% 293,2 50,9%

Total net revenue 181,9 100,0% 136,5 100,0% 127,9 100,0% 794,2 100,0% 576,1 100,0%

Table 3 – Cost of goods and services sold (COGS) and general, administrative and operating expenses (G&A), ex-depreciation

In R$ million4Q14 % 3Q15 % 4Q15 % 2014 % 2015 %

Costs of job execution/Equipment storage g ,(h)

37,1 29,4% 39,4 38,8% 36,4 37,3% 142,6 31,1% 144,3 38,0%

Costs of sale of new equipment 6,9 5,5% 3,0 3,0% 3,1 3,2% 38,1 8,3% 18,3 4,8%

Costs of sale of semi-new equipment 3,6 2,9% 3,8 3,7% 5,6 5,8% 15,0 3,3% 16,4 4,3%

Costs of asset write-offs 3,9 3,1% 3,0 3,0% 1,9 2,0% 13,7 3,0% 12,8 3,4%

COGS total, ex-depreciation 51,5 40,8% 49,2 48,5% 47,1 48,2% 209,5 45,7% 191,9 50,4%

Commercial, Operational and Administrative 37,7 29,8% 31,2 30,8% 28,4 29,1% 156,2 34,1% 125,6 33,0%

General services 9,9 7,8% 11,3 11,1% 10,7 10,9% 38,3 8,3% 42,9 11,3%

Others expenses 5,0 4,0% 1,7 1,7% 4,1 4,2% 12,2 2,7% -18,4 -4,8%

G&A, ex-depreciation and ADD 52,6 41,6% 44,3 43,7% 43,2 44,2% 206,7 45,1% 150,1 39,5%

ADD 22,2 17,6% 7,9 7,8% 7,4 7,6% 42,3 9,2% 38,4 10,1%

Total COGS + G&A 126,3 100,0% 101,4 100,0% 97,7 100,0% 458,5 100,0% 380,4 100,0%

Table 4 – EBITDA per business unit and EBITDA margin

In R$ million4Q14 % 3Q15 % 4Q15 % 2014 % 2015 %

Construction 22,4 40,3% 8,7 24,8% -2,1 -7,0% 139,0 41,4% 32,2 19,6%

Rental 33,2 59,7% 26,4 75,2% 32,3 107,0% 196,7 58,6% 132,6 80,4%

EBITDA Total 55,6 100,0% 35,1 100,0% 30,2 100,0% 335,7 100,0% 164,8 100,0%

EBITDA margin (%) 30,6% 25,7% 23,6% 42,3% 28,6%


12/17


Table 5 – Reconciliation of EBITDA


(A) (B) (C) % % (D) (E) %

Results of continuing operations -6,2 -17,2 -57,9 831,6% 236,7% 64,3 -97,8 -252,2%

Financial result -14,8 -15,2 -13,5 -9,2% -11,4% -67,6 -63,1 -6,6%

Income tax and social contribution expenses -3,0 5,5 26,6 -992,6% 382,3% -26,1 30,9 -218,6%

Operational Results before Financial Result 11,6 -7,5 -71,1 -712,1% 847,4% 157,9 -65,6 -141,5%

Depreciation 43,4 42,3 41,0 -5,4% -3,0% 168,3 169,6 0,8%

EBITDA 55,0 34,8 -30,1 -154,7% -186,5% 326,2 104,1 -68,1%

Expenses (revenues) related to the Industrialservices former business unit 0,7 0,3 3,1 369,9% 982,5% 9,5 3,7 -61,5%

Impairment 57,1 57,1

EBITDA 55,6 35,1 30,2 -45,7% -13,9% 335,7 164,8 -50,9%

Non recurring items 2,3 3,4 2,9 26,8% -14,2% 14,6 21,9 50,1%

EBITDA ex- non recurring items 57,9 38,5 33,1 -42,8% -13,9% 350,3 186,7 -46,7%

Table 6 – Investment per business unit

In R$ million4Q14 3Q15 4Q15 2014 2015 (B)/(A)

(A) (B) %

Rental equipment

Contruction 15,8 4,2 1,1 62,4 11,6 -81,5%

Rental 0,0 0,0 0,0 104,2 0,0 -100,0%

Rental equipment 15,9 4,2 1,1 166,5 11,7 -92,9%

Corporate and use goods 6,7 5,3 1,5 32,6 16,4 -49,5%

Capex Total 22,6 9,5 2,6 199,1 28,2 -85,8%

Table 7 – Rental financial indicators


(A) (B) (C) % % (D) (E) %

Net revenue

Rental 71,8 59,8 59,7 -16,8% -0,1% 324,0 254,1 -21,6%

Technical support services, sales and others 12,2 9,0 10,6 -12,8% 18,6% 46,8 39,1 -16,6%

Total net revenue 83,9 68,7 70,3 -16,2% 2,3% 370,8 293,2 -20,9%

COGS, ex-depreciation 25,5 22,1 21,8 -14,5% -1,3% 91,7 85,0 -7,2%

G&A, ex-depreciation and ADD 17,5 14,9 15,4 -12,3% 3,6% 64,4 62,8 -2,6%

ADD 7,6 5,4 0,8 -89,1% -84,7% 18,0 12,8 -29,2%

EBITDA 33,2 26,4 32,3 -2,7% 22,5% 196,7 132,6 -32,6%

EBITDA margin (%) 39,6% 38,4% 45,9% 53,0% 45,2%

ROIC (%) 11,5% -3,1% 5,5% 11,5% 5,5%

Capex 0,0 0,0 0,0 -100,0% -100,0% 104,2 0,0 -100,0%

Invested Capital 704,6 679,1 654,7 -7,1% -3,6% 704,6 654,7 -7,1%

Rental net PP&E 590,8 545,2 518,3 -12,3% -4,9% 590,8 518,3 -12,3%

Others 113,9 134,0 136,4 19,8% 1,8% 113,9 136,4 19,8%

Depreciation 21,0 20,8 19,0 -9,5% -8,7% 80,9 80,7 -0,2%


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Table 8 – Construction financial indicators


(A) (B) (C) % % (D) (E) %

Net revenue

Rental77,6 56,2 50,3 -35,2% -10,6% 339,3 230,3 -32,1%

Heavy Construction 43,4 33,4 29,1 -32,8% -12,7% 177,4 134,6 -24,1%

Real Estate 34,2 22,9 21,1 -38,3% -7,6% 161,8 95,6 -40,9%

Technical support services, sales and others 20,3 11,5 7,3 -64,2% -36,5% 84,1 52,7 -37,3%

Heavy Construction 9,1 7,8 2,5 -72,9% -68,3% 33,6 31,1 -7,4%

Real Estate11,2 3,7 4,8 -57,1% 31,6% 50,5 21,6 -57,2%

Total net revenue 98,0 67,7 57,5-41,3% -15,0%

423,4 283,0-33,2%

COGS, ex-depreciation 26,0 27,1 25,3 -2,8% -6,8% 117,8 106,8 -9,3%

G&A, ex-depreciation and ADD 35,0 29,4 27,8-20,6% -5,4%

142,2 149,24,9%

ADD 14,5 2,5 6,6 -54,8% 161,1% 24,3 25,6 5,6%

Heavy Construction9,6 2,9 5,1 -47,0% 77,1% 13,6 19,7 45,6%

Real Estate4,9 -0,3 1,5 -69,7% -529,8% 10,7 5,9 -45,0%

EBITDA 22,4 8,7 -2,1 -109,4% -124,4% 139,0 1,3 -99,0%

EBITDA margin (%) 22,9% 12,8% -3,7% 32,8% 0,5%

ROIC (%) 4,4% -3,1% -8,6% 4,4% -8,6%

Capex 16,5 5,8 1,8 -89,1% -69,1% 69,0 14,0 -79,7%

Invested Capital 817,6 743,9 716,6 -12,3% -3,7% 817,6 716,6 -12,3%

Rental net PP&E 569,7 521,3 502,4 -11,8% -3,6% 569,7 502,4 -11,8%

Others 247,9 222,5 214,2 -13,6% -3,7% 247,9 214,2 -13,6%

Depreciation 22,4 22,2 22,0 -1,5% -0,5% 87,3 88,9 1,8%


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Glossary

(a) EBITDA – EBITDA is a non-accounting measurement which we prepare and which is reconciled with our financial statement in

accordance with CVM Instruction 01/2007, when applicable. We have calculated our EBITDA (usually defined as earnings

before interest, tax, depreciation and amortization) as net earnings before financial results, the effect of depreciation of assets

and equipment used for rental, and the amortization of intangible assets. EBITDA is not a measure recognized under BR

GAAP, IFRS or US GAAP. It is not significantly standardized and cannot be compared to measurements with similar names

provided by other companies. We have reported EBITDA because we use it to measure our performance. EBITDA should notbe considered in isolation or as a substitute for "net income" or "operating income" as indicators of operational performance or

cash flow, or for the measurement of liquidity or debt repayment capacity.

(b) ROIC - (Return on Invested Capital) - Calculated as Operating Income before financial results and after the payment of income

tax and social contribution (theoretical 30% income tax rate) on this income, divided by average Invested Capital, as defined

below. ROIC is not a measure recognized under BR GAAP, and it is not significantly standardized and cannot be compared to

measurements with similar names provided by other companies.

ROIC LTM : ((Net earnings in the last twelve months – (30% IR) + (firms remuneration in which possess minority shareholding)/

(Average Invested Capital in the last thirteen months))

Annual ROIC: (Annual Operational Income – (30% Income Tax Rate) + remuneration from affiliates) / Average Invested Capital

of the last thirteen months

(c) Capex (Capital Expenditure) – Acquisition of goods and intangibles for permanent assets.

(d) Net cash flow - Net cash generated by operating activities minus net cash used in investing activities.

(e) Net Debt – Gross debt less cash holdings.

(f) Enterpr ise value (EV) – Company value at the end of the period. It is calculated by multiplying the number of outstandingshares by the closing price per share, and adding the net debt.

(g) Job execution costs – Job execution costs include: (a) labor costs from construction jobs supervision and technical

assistance; (b) labor costs for erection and dismantling of the equipment rented to our clients, when such tasks are carried out

by the Mills workforce; (b) equipment freight costs, when under Mills’ responsibility; (d) cost of materials used in the

maintenance of the equipment, when it is returned to our warehouse; and (e) cost of equipment rented from third-parties.

(h) Warehouse costs – Warehouse costs includes expenses directly related to the warehouse management, storage, repair and

maintenance of equipment to be rented and to be sold, including labor costs, PPEs used in the warehouse activities (handling,

storage and maintenance), materials needed (forklift fuel, gases for welding, plywood, paints, timber battens, among others)

and machines and equipment maintenance (forklifts, welding machines, water-blasting hoists and tools in general).

(i) Invested Capital – For the Company, invested capital is defined as the sum of its own capital (net equity or shareholders’

equity) and capital from third parties (total loans and other liabilities that carry interest, from banks or not), both being average

capital from the beginning to the end of the period considered. By business segment, it is the average of the capital invested by

the company weighted by the average assets of each business segment (net liquid assets plus PPE – Property, Plant and

Equipment). The quarter asset base is calculated as the average of the asset base of the last four months and the annual asset

base is calculated as the average of the last thirteen months.


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INCOME STATEMENT


16/17


Balance Sheet


17/17

Cash Flow

This press release may include declarations about Mills’ expectations regarding future events or results. All declarations ba sed upon future expectations. rather thanhistorical facts. are subject to various risks and uncertainties. Mills cannot guarantee that such declarations will prove to be correct. These risks and uncertainties includefactors related to the following: the Brazilian economy. capital markets. infrastructure. real estate and oil & gas sectors. among others. and government rules that aresubject to change without previous notice. To obtain further information on factors that may give rise to results different from those forecasted by Mills. please consult thereports filed with the Brazilian Comissão de Valores Mobiliários (CVM. equivalent to U.S. “SEC”).

Mills 4Q15 Results and Full Year 2015 results

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Transcript of Mills 4Q15 Results and Full Year 2015 results