In a year characterized by two distinct scenarios, with the first two quarters heavily impacted by the global financial crisis, with a recovery then beginning in the second half of the year with a more optimistic outlook on the horizon, the merger of the two companies represented a major step in terms of our strategic growth strategy.

The merger, which should produce estimated synergy savings of R$95.8 million, has resulted in a more competitive company, with an already existing leadership position in the Southern Hemisphere in reconstituted wood panel production.

This comfortable position was not the only benefit of this transaction. The merger was also of two companies whose operations complement one another. Duratex was maintaining its production capacity of MDF, HDF and SDF (medium, high and super-density fiberboard panels) much superior to MDP (medium density particleboard). While at Satipel, the situation was the reverse. The combination of both companies allows a greater balance to be achieved between the production capacity of these panels.

Another positive outcome of the merger was in terms of network. Duratex’s operations were previously concentrated in the state of São Paulo and with the merger, they have been extended to Minas Gerais and Rio Grande do Sul, both important furniture manufacturing centres, providing the new Company with more distribution capacity under more favourable freight conditions.

On the stock market, the shares of the new company joined the Novo Mercado, the maximum level of corporate governance of BM&FBovespa, where for the second year running the Company has also been part of the ISE, the corporate sustainability index. We are aware that the market has perceived the significant advances we have made in terms of competitiveness, with our share price appreciating by 230% compared to a base taking of the sum-of-the-parts at the beginning of the period, increasing our market capitalization to R$7.4 billion.

All these achievements have not diminished our desire to invest on other fronts. During the year, we earmarked R$427 million to the Company’s Resource Application Plan, in which R$1.7 billion has been invested since 2007. In the Wood Division, three wood panel units were completed – two for the production of MDF, one at Agudos (SP) and the other at Uberaba (MG) and the other for the production of MDP, in Taquari (RS), the acquisition of land and plantations, as well as the maintenance of forestry areas. In the Deca Division, the capacity of existing units were expanded, plus two of our competitors in the vitreous chinaware segment were acquired back in 2008.

For 2010, R$420 million worth of investment is planned, of which 70% is earmarked for the Wood Division, for the planting of the Company’s own forests, the completion of a resin manufacturing plant, and the acquisition of peripheral equipment to enable it to cope with the new pressing capacity of 700,000 m3 a year at the Taquari plant. At the Deca Division, the funds will be spent on expanding capacity, making the most of the current buoyant conditions in Brazil’s construction sector.

We have the financial strength we need to press ahead with these investments, while we will also be seeking for acquisition opportunities that may arise. We also stand to benefit from a fortunate combination of events in Brazil, with the holding of the World Cup and the Olympic Games, both of which will involve a large quantity of building works.

With an eye on the market and its opportunities, we are also aware of the challenges which we face and the efforts that will be required in consolidating our position of absolute leadership in the domestic market. We believe that our clearly defined growth path will lead to continual expansion and the creation of value for our shareholders. More than just a leading world-class company that creates value for its shareholders, we also wish to be increasingly recognised for the adopting of good corporate citizenship practices. We are today a company which, in addition to sharing values, works to sustain and ensure the sustainability of our operations, as well as the market and communities in which we operate, with socio-environmental responsibility.

The commitments we have assumed in signing the United Nations Global Pact have been underpinned by the continuous development of actions in tune with our principles and initiatives. These principles have been strategic and fundamental in ensuring, promoting and maintaining ethical values in all our operations. Being an instrinsic component of the products we manufacture and the services we provide, they contribute to the buildingof an environmentally responsible and socially fair society.

 

Updated on May, 2010