Risks Related to Eucatex Businesses

  • Liquidity Risk: Eucatex liquidity is strongly tied to the exchange rate fluctuation. Banks have loan/financing facilities approved in R$ (Reais), but loans have been originally granted in US$ (dollar), they do not allow the increase of their exposition, that is, they want to keep the same amount of the loans in R$ (Reais), without taking into account the exchange rate fluctuation;
  • Credit Risk: the companies sales policy is subordinated to credit norms imposed by their respective management boards, with the intent to minimize eventual problems caused by any of its clients’ default. This objective is obtained by means of clients selection according to its payment capacity and by means of diversification on its receivable accounts (risk distribution);
  • Price Risk: Because Eucatex exports represent 6% of the Company’s net revenue forecasted for 2012, eventual volatility of exchange rate represents a price risk that may affect forecasted results;
  • Seasonality Risks: Eucatex operational results are subject seasonal effects, and it may represent a sales distribution of up to 50% on the first semester and 50% on the second semester.