COMPANHIA DE TECIDOS NORTE DE MINAS - COTEMINAS CNPJ/MF Nº / NIRE Publicly Traded Company

Transcription

1 COMPANHIA DE TECIDOS NORTE DE MINAS - COTEMINAS CNPJ/MF Nº / NIRE Publicly Traded Company MANAGEMENT S DISCUSSION AND ANALYSIS Montes Claros, May 13, The following financial and operational information of Companhia de Tecidos Norte de Minas COTEMINAS ( Coteminas or Company ) are presented in a consolidated form and the comparisons refer to the first quarter of 2012, from continuing operations, except where stated otherwise. CTNM operates in three business areas: (i) Bedding, tabletop and bath and decorative products through its subsidiary Springs Global Participações S.A.; (ii) in the Denim and Jeans segment throughout its subsidiary Companhia Tecidos Santanense; and (iii) in the Agribusiness through its affiliated company Cantagalo General Grains S.A. R$497.3¹ 52.9%³ R$93.8¹ 52.6%³ R$479.5² 30.0%³ (Subsidiary) (Subsidiary) (Affiliated Company) ¹1Q13 net sales (R$ million) ² Non consolidated net sales (equity) ³ Ownership interest % (direct and indirect) The Company s gross sales were R$722.3 million in the first quarter of The table below includes the main financial highlights of the first quarter of 2013 when compared to the same period last year In millions of R$ Variance Consolidated financial information 1Q13 1Q12 % Net sales Cost of goods sold (455.9) (339.7) 34.2 Gross profit (% of net sales) 22.3% 25.8% SG&A expenses (124.5) (99.6) 25.0 Depreciation and amortization (3.4) Income from operations (43.1) (% of net sales) 2.5% 5.7% Net loss (22.2) (11.9) 86.6

2 Below are the individual comments of our subsidiary Springs Global Participações S.A. and indirect subsidiary Companhia Tecidos Santanense. Montes Claros, May 13, The Management

3 Results for the 1 st quarter of 2013 Springs Global ( Company ) presents the results for first quarter of 2013 (1Q13). The information is presented in a consolidated form under IFRS. The financial information below is presented in Reais (R$), and the comparisons refer to first quarter of 2012 (1Q12) Outlook Starting this year, the Company will release an outlook with earnings estimates for the current year. The information contained in this outlook is based on reasonable assumptions which are subject to several factors, many of which are not and will not be under the control of the Company. In 2013, the Company expects to reach consolidated net sales between R$2,000.0 and R$2,200,0 million, divided among its different business units, as follow: Business units On a consolidated basis, the Company expects to reach Operating Profit (EBIT) between R$100.0 and R$120.0 million, representing an Operating Margin (EBIT Margin) between 5.0% and 5.5%. The Company also projects a consolidated EBITDA for 2013 between R$170.0 and R$200.0 million, representing an EBITDA Margin between 8.5% and 9.1%. In 2013, investment (Capex) is expected to total R$ 55.0 million. Highlights of 1Q13: Amount (R$ million) Wholes ale - South America 1,010-1,110 Retail Wholesale - North America Total Net Sales 2,000-2,200 Springs Global ended the 1Q13 with a 35.5% net sales increase when compared to the same period of the previous year. In the first quarter of 2013, the Company s gross sales reached R$610.5 million. The South American operations represented 62.5% of the consolidated net sales (69.6% in the 1Q12). Revenues from the Company s retail operations increased by 16.9% when compared to the 1Q12. By the end of the quarter, Artex, MMartan, Casa Moysés stores totaled 230 points of sales (including e- commerce). 1

4 Summarized Information for Springs Global: Summary of results (R$ million) 1Q13 1Q12 var % Gross sales % Net sales % Gross profit % Gross margin % 21.4% 26.1% (4.7 p.p.) SG&A % % of net sales 21.2% 22.4% (1.2 p.p.) EBITDA (27.6%) EBITDA margin % 4.7% 8.8% (4.1 p.p.) Net sales (R$ million) 1Q13 1Q12 var % South America % Wholes ale % Retail % North America % Total net sales % Net Sales (R$ million) Volume (thousand tons) Average price (R$)/Kg Products Line 1Q13 1Q12 var % Q13 1Q12 var % Q13 1Q12 var % Bedding, tabletop and bath (tons) % % % Utility bedding (tons) % % % Intermediate products (tons) % % Retail % Total % % % Organizational Structure Summary: BRANDS Our brands represent an important competitive advantage. Spring s brands are all traditional and leaders in the segments in which they compete. Our brands and products are strategically positioned to target customers of different socioeconomic profiles, while reducing the risk of overlap and competition between them. The brands are: Casa Moysés (Brazil): Premium brand of bedding and bath textile products aimed at consumers who seek the highest standard of quality. It is a reference brand in the high-end luxury market, with presence and tradition since MMartan (Brazil): Desired brand in the bedding, tabletop and bath category. It is synonymous with quality, sophisticated and contemporary products, representing a major brand in the domestic bedding, tabletop and bath market. Artex (Brazil): Quality products under the concept of affordable luxury, updated with the latest fashion trends. Each collection includes textures, shapes and unique colors, all integrated in four different Home Life Styles: Actual, Relax, Trend, and Elegance. Santista (Brazil): Traditional brand of bedding, tabletop and bath products and bedding accessories. It features contemporary styles and designs, and focuses on different tastes and trends, with significant penetration in the budget consumer and institutional markets. 2

5 Springmaid (USA and Canada): Brand positioned in the affordable luxury segment. Primarily sold through large retailers in North America. Wabasso (Canada): Established in 1907 as a national brand of textile products in Canada. Wabasso is synonymous with quality, taste, style and comfort. Texmade (Canada): Traditional brand of bedding and bath products focusing on institutional clients in Canada. Palette (Argentina): Brand for quality products under the concept of affordable luxury. Products are updated with the latest fashion trends. Market leading brand with over 30 years of presence in the Argentinean market. Arco-Íris (Argentina): Brand offering traditional design and style, focusing on different tastes and trends, and with major market penetration. Fantasia (Argentina): Bedding and bath textile products for clients in the budget market segment. INDUSTRIAL ACTIVITIES Springs possesses an industrial park of home textile products with manufacturing facilities in Brazil, Argentina and the United States. The Company operates eight plants located in Brazil which are vertically integrated from spinning, through weaving, preparation, dyeing, printing, finishing and sewing of home textile products. Springs operates 5 plants in the United States and 1 in Argentina as well as a trading office in Shanghai, China. The Company s manufacturing activities are focused in three main segments: Bedding, tabletop and Bath ( CAMEBA ), Utility Bedding and Intermediate Products. Bedding, Tabletop and Bath (CAMEBA): The Company designs, manufactures and markets a complete line of coordinated products using its portfolio of brands and licenses in addition to private label, that are distributed through major retailers in their market. Products include bed sheets and pillowcases, tablecloths, towels, rugs and bath accessories. Utility Bedding: This product category includes pillows, mattress pads, and quilts. The manufacturing facilities of these products are located in the United States and Brazil. Intermediate Products: The Company manufactures and sells yarns and fabrics to clients represented mainly by small and medium garment, knitwear and weaving companies. The fabrics are sold in their natural state or dyed and printed. The Company and its subsidiaries operate in two distinct segments: "Wholesale" and "Retail". 3

6 WHOLESALE The Company's CAMEBA, Utility Bedding and Intermediate products are sold to multibrand clients in North and South America under a portfolio of traditional and leading brands, including: Artex and Santista (Brazil), Arco-Íris, Fantasia, and Palette (Argentina) and Springmaid and Wabasso (North America). The main customers in this segment are department stores, mass retailers, as well as small and medium sized shops specialized in CAMEBA products. RETAIL In Brazil, the Company operates owned and/or franchised monobrand stores under the Artex, MMartan and Casa Moysés brands that, combined, ensure a presence and coverage throughout the national territory to the Company. Each of its store brands operates specific and well defined store formats, including a portfolio of proprietary products and a set of marketing and merchandising strategies aimed at serving targeted consumer groups. Casas Moysés: Products sold under this brand are focused on consumers with high purchasing power who seek top quality products and superior customer service. Casa Moysés products are manufactured by the Company using high quality fabric imported from third parties and are sold exclusively through MMartan and Casa Moysés stores. MMartan: MMartan stores are focused on serving customers interested in high quality products and services. MMartan s products are manufactured by the Company using high quality fabrics and imported products. Artex: Artex stores are focused on serving customers interested in good quality products which are offered in a wide range of styles and colors, as well as competitive prices and efficient customer service. Artex s products are manufactured by the Company. Starting in the first quarter of 2013, the Company reports its results by geographic region, segregated between South America (Brazil and Argentina) and North America (United States and Canada). 4

7 Sales Performance In the first quarter of 2013, consolidated gross sales reached R$610.5 million against R$456.3 million in the first quarter of Consolidated net sales presented an increase of 35.5%, from R$367.1 million in the first quarter of 2012 to R$497.3 million in the first quarter of I. Net Sales South America: Net sales - South America (R$ million) 1Q13 1Q12 var % Wholesale % Intermediate % Bedding, tabletop, and bath % Retail % Total % In the first quarter of 2013, net sales in South America increased by 21.6%, from R$255.4 million in the first quarter of 2012 to R$310.6 million in the first quarter of 2013, representing 62.5% of total sales of the Company. In South America, we highlight the sales increase of 22.8% and 16.9% in the wholesale and retail segments, respectively, in the first quarter of 2013 when compared to the first quarter of I.A) Net Sales South America - Wholesale: Intermediate Products Net sales of this category presented an 8.3% increase in net sales, from R$53.9 million in the first quarter of 2012 to R$58.4 million in the first quarter of 2013, representing a lower contribution to consolidated net sales, from 14.7% in the first quarter of 2012 to 11.7% in the first quarter of The Company projects a lower contribution of intermediate products to its total sales, due to higher utilization of the installed capacity for the production of higher value-added finished products. Bedding, Tabletop and Bath Net sales of CAMEBA in South America presented an increase of 28.0% in the first quarter of 2013, from R$150.1 million in the first quarter of 2012 to R$192.1 million in the first quarter of I.B) Net Sales South America - Retail: Net sales for the Company s retail operation reached R$60.1 million in the first quarter of 2013, a 16.9% increase when compared to the first quarter of

8 Overall, the original sales forecasts in the retail segment for the first quarter of 2013 were partially impacted by some operating inefficiencies. Additionally, on January 1, 2013, the subsidiary American Sportswear Ltda. incorporated the subsidiaries Springs and Rossini Participações S.A. and MMartan Textile Ltda. This transaction will simplify the Company's organizational structure, optimizing the monobrand retail activities in general. Despite its successful completion in the early days of the year, the incorporation temporarily impacted part of the stores supply functions, until all systems and operational controls were fully integrated. MMartan The Company ended the first quarter of 2013 with 126 franchised and 48 owned MMartan stores, representing an increase of 6 stores when compared to the first quarter of During the first quarter of 2013, there weren t any new stores, in addition, 2 MMartan stores closed their activities. Mmartan 1Q13 1Q12 var % Number of s tores % - Franchis e % - Owned s tores % Artex In the first quarter of 2013, 1 Artex stores opened. When compared to the first quarter of 2012, there was an increase of 16 stores. It s important to mention that the majority of the stores are in the initial phase of operation. Artex 1Q13 1Q12 var % Number of owned s tores % II. Net Sales North America: Net sales in North America increased by 67.1%, from R$111.7 million in the first quarter of 2012 to R$186.7 million in the first quarter of In general, sales increase in the North American market reflects mainly three factors: (i) utility bedding sales increase; (ii) expansion of the product lines offered by the Company in this market; and (iii) 13.4% depreciation of the Brazilian Real on the conversion of the U.S. Dollar denominated sales into Reais when compared to the first quarter of Cost of Goods Sold Cost of goods sold increased by 43.9%, from R$271.5 million in the first quarter of 2012 to R$390.7 million in the first quarter of As a percentage of net sales, cost of goods sold increased from 74.0% in the first quarter of 2012 to 78.6% in the first quarter of The table below presents, for the periods indicated, materials costs, conversion costs and others, as well as depreciation costs for the production and distribution assets: 6

9 Cost of goods sold (R$ million) 1Q13 % COGS % NS 1Q12 %COGS % NS var % Materials % 49.5% % 45.3% 48.1% Convers ion costs and Others % 25.3% % 23.8% 44.1% Depreciation % 3.8% % 4.9% 4.0% Total % 78.6% % 74.0% 43.9% - Materials: Material costs increased by 48.1%, from R$166.4 million in the first quarter of 2012 to R$246.4 million in the first quarter of As a percentage of net sales, material costs increased from 45.3% in the first quarter of 2012 to 49.5% in the first quarter of This increase is due, primarily, to the greater contribution of sales from the North American market, which traditionally has higher material costs compared to the Brazilian operations. Gross Profit - Conversion Costs and Others: Conversion costs and others increased by 44.1%, from R$87.4 million in the first quarter of 2012 to R$125.9 million in the first quarter of Conversion costs as a percent of net sales increased from 23.8% in the first quarter of 2012 to 25.3% in the first quarter of Among the main costs that increased in the period, we highlight energy costs. - Depreciation: Depreciation expenses of production and distribution assets amounted to R$17.7 million in the first quarter of 2012 and R$18.4 million in the first quarter of Gross profit increased by 11.4%, from R$95.7 million in the first quarter of 2012 to R$106.6 million in the first quarter of There was a decrease of 4.7 percentage points in the gross margin, from 26.1% in the first quarter of 2012 to 21.4% in the first quarter of The consolidated gross margin decrease in the period is due mainly to: (i) change in the geographic mix of sales, in favor of the North American market, which traditionally has lower margin than the Company average; (ii) increase of some industrial costs in Brazil, particularly electric power; (iii) lower absorption of industrial fixed costs in the wholesale segment in South America; (iv) change in the mix of sales in North America, in favor of products with lower contribution margin, and (v) lower contribution of the retail segment, which traditionally has higher gross margin than average, to the Company net sales. The table below presents, for the periods and segments indicated, gross profit and gross margin: South America North America Total Wholesale Retail Wholesale Gross Profit (R$ million) 1Q13 1Q12 var % Q13 1Q12 var % Q13 1Q12 var % Q13 1Q12 var % Net sales % % % % (-) COGS (192.0) (150.0) 28.0% (32.4) (25.3) 28.1% (166.3) (96.2) 72.9% (390.7) (271.5) 43.9% Gross Profit % % % % Gross Margin 23.4% 26.5% (3.1 p.p.) 46.1% 50.8% (4.7 p.p.) 10.9% 13.9% (3.0 p.p.) 21.4% 26.1% (4.7 p.p.) I.A) South America - Wholesale: In the first quarter of 2013, gross profit of the wholesale segment in South America was R$58.5 million, an 8.3% increase when compared to the same quarter of the previous year. Gross margin in the first quarter of 2013 was 23.4%, a 3.1 percentage points decrease when compared to the same period of the previous year. In the first quarter of 2013, there was under absorption of fixed manufacturing costs with a significant increase in the price of electricity in the Brazilian spot market. The chart below shows the historical price of energy (Preço de Liquidação das Diferenças - PLD) in Brazil during the period from January 2010 to April 2013, for illustrative purposes only. 7

10 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Average Price R$/MWh Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Source: I.B) South America - Retail: Gross profit of the retail segment in South America increased by 6.1%, from R$26.1 million in the first quarter of 2012 to R$27.7 million in the first quarter of There was a 4.7 percentage points decrease in gross margin, from 50.8% in the first quarter of 2012 to 46.1% in the first quarter of 2013 due, in part, to the greater contribution of sales from Artex, which traditionally have lower margin than MMartan and Casa Moysés, in the total sales of the Company, coupled with the implementation of campaigns during the period to liquidate inventory of slow moving and/or obsolete products. II. North America: Gross profit in North America increased from R$15.5 million in the first quarter of 2012 to R$20.4 million in the first quarter of Gross margin in the first quarter of 2013 was 10.9%, a 3.0 percentage point decrease when compared to the gross margin of the same period of last year due, mainly, to the greater contribution of sales from products with lower margin in the North American market. Selling, General and Administrative Expenses (SG&A) SG&A (R$ million) 1Q13 1Q12 var % SG&A Total % South America % North America % SG&A South America % Selling - wholesale % Selling - retail % General and administrative % SG&A North America % - SG&A expenses increased by 28.1%, from R$82.3 million in the first quarter of 2012 to R$105.4 million in the first quarter of As a percentage of net sales, SG&A expenses decreased from 22.4% in the first quarter of 2012 to 21.2% in the first quarter of The increase in selling expenses associated with the retail operations in the first quarter of 2013 when compared with the first quarter of 2012 reflect, primarily, the growth in the number of owned stores (6 MMartan and 16 Artex). - Administrative expenses in the first quarter of 2013 for the domestic market include expenses necessary for the expansion of the retail activities. In total, these expenses increased by 6.5% compared to the first quarter of

11 - The increase in SG&A expenses in the North American market reflects, primarily, sales increase and the impact of exchange rate variation on foreign denominated expenses. EBITDA The table below presents the EBITDA breakdown for the indicated periods: EBITDA (R$ million) 1Q13 1Q12 var % Net los s for the year (31.6) (59.8) (47.2%) (+) Income and social contribution taxes (+) Financial res ults (2.8%) (+) Depreciation and amortization (4.2%) EBITDA 23.4 (2.9) - (+) Loss from dis continued operations (-) Depreciation and amortization from dis continued operations - (4.4) - Adjusted EBITDA (27.6%) Adjusted EBITDA margin % 4.7% 8.8% (4.1 p.p.) Adjusted EBITDA was R$23.4 million in the first quarter of 2013, a decrease of 27.6% when compared to the same quarter of the previous year. EBITDA margin for the first quarter of 2013 reached 4.7%, a 4.1 percentage point decrease relative to the margin of the same period of 2012 due, mainly, to the impacts in gross profit in the period previously mentioned. Financial Results Net financial expenses in the first quarter of 2013 totaled R$31.6 million, an decrease of 2.8% when compared to the previous year. The main factors that contributed to this variation were: 9

12 Financial results (R$ million) 1Q13 1Q12 var % Financial income (6.7%) Financial expenses - interests (16.1) (23.0) (30.0%) Financial expenses - bank charges and others (13.3) (12.8) 3.9% Exchange variation, net (5.0) Financial results (31.6) (32.5) (2.8%) - Financial income: Financial income decreased from R$3.0 million in the first quarter of 2012 to R$2.8 million in the first quarter of This decrease is due to lower average balance of cash invested in the financial market in the first quarter of 2013 compared to the first quarter of Financial expenses - interests: Interest expenses decreased from R$23.0 million in the first quarter of 2012 to R$16.1 million in the first quarter of 2013, due, in part, to lower average balance of loans and financing in the first quarter of 2013 compared to the first quarter of Financial expenses - bank charges and others: Bank charges and others increased from R$12.8 million in the first quarter of 2012 to R$13.3 million in the first quarter of Exchange variation, net: The balance of net exchange variations decreased from an income of R$0.3 million in the first quarter of 2012 to an expense of R$5.0 million in the first quarter of Net Income (Loss) In the first quarter of 2013, the Company reported a net loss of R$31.6 million, in comparison to a net loss of R$59.8 million (R$20.2 excluding discontinued operations) of the same period of the previous year. Capital Investments Our capital investments reached R$13.3 million in the first quarter of 2013 and R$7.9 million in the first quarter of 2012, respectively. During the first quarter of 2013, the capital investments in wholesale reflected, mainly, asset modernization. In retail, investments are associated with restructurings and improvements of its owned stores, in addition to investments related to stores that are planned to begin their operations in the coming months. Investment (R$ million) 1Q13 1Q12 var % Wholes ale % Retail % Total % Cash Availability and Debt Indebtness (R$ million) 1Q13 4Q12 var % Cas h and cas h equivalents (88.5) (109.3) (19.0%) Gross debt % - Gros s debt in domes tic currency % - Gros s debt in foreign currency (4.4%) Marketable securities (1.0) (1.6) (37.5%) Net debt % 10

13 Of the total debt due in 2013, approximately 75.0% has already been renegotiated, with maturities extended to 2014 and Working Capital The Company increased total working capital used in its operations by R$20.4 million in the first quarter of 2013 when compared to the same period of the previous year. Working capital (R$ million) 1Q13 1Q12 var % Accounts receivable % Inventories (2.1%) Advances to suppliers (13.1%) Suppliers (160.7) (186.5) (13.8%) Cash cycle % Corporate Development In June 2013, the Company will make available a new website aimed at the investor market. The new platform will contain updated information about the Company, its performance and development, allowing a more efficient and dynamic communication with investors and analysts in general. Additionally, as previously mentioned, starting this year the Company will release an outlook with earnings estimates for the current year. 11

14 Balance Sheet Assets (R$ million) 1Q Current asset 1, ,265.7 Cash and cash equivalents Marketable securities Accounts receivable Inventories Advances to suppliers Recoverable taxes Other receivables Noncurrent assets 1, ,202.2 Related parties Recoverable taxes Deferred income and social contribution taxes Property, plant and equipment held for sale Escrow deposits Others Permanent 1, ,067.2 Other investments Property, plant and equipment Intangible assets Total assets 2, ,468.0 Liabilities and Equity (R$ million) 1Q Current liabilities Loans and financing Debentures subscribed by the parent company Suppliers Taxes Payroll and related charges Government concessions Noneconomic lease Other payables Noncurrent liabilities Loans and financing Noneconomic lease Government concessions Employee benefit plans Miscellaneous accruals Other obligations Equity 1, ,217.6 Capital 1, ,860.3 Capital reserves Assets and liabilities valuation adjustment (34.1) (34.1) Cumulative translation adjustment (169.8) (168.4) Income reserves Retained deficit (583.6) (551.7) Noncontrolling interest Total liabilities and equity 2, ,

15 Income Statement Consolidated Income Statement ($ milllion) 1Q13 1Q12 var % Gross revenues % Net revenues % Cost of goods sold % % of net sales 78.6% 73.9% 4.6 p.p. Materials % Conversion costs and Others % Depreciation % Gross profit % % of net sales 21.4% 26.1% (4.7 p.p.) SG&A % % of net sales 21.2% 22.4% (1.2 p.p.) Selling expenses % % of net sales 15.0% 15.0% - General and administrative expenses % % of net sales 6.2% 7.4% (1.2 p.p.) Others, net (0.8) (0.6) 33.3% % of net sales (0.2%) (0.2%) - Income from operations (96.9%) % of net sales 0.1% 3.5% (3.4 p.p.) Financial result (31.6) (32.5) (2.8%) Loss from operations before taxes (31.2) (19.8) 57.6% Income and social contribution taxes (0.4) (0.4) - Net loss for the period from continuing operations (31.6) (20.2) 56.4% Loss from discontinued operations - (39.6) - Net loss for the period (31.6) (59.8) (47.2%) 13

16 Cash Flow Consolidated Statements of Cash Flow (R$ million) 1Q13 1Q12 Cash flows from operating activities Net loss for the period (31.6) (59.8) Depreciation and amortization Income and social contribution taxes (Gain) loss on disposal of property, plant and equipment (0.2) 0.1 Exchange variations - (3.5) Bank charges and interests Other accruals - (1.4) Changes in assets and liabilities Marketable securities Accounts receivable (14.7) (11.2) Inventories Advances to suppliers Suppliers (25.8) (21.3) Others Net cash used in operating activities (6.4) (6.7) Interest paid (9.5) (17.7) Income and social contribution taxes paid (2.0) (1.7) Net cash used in operating activities after interest and taxes (17.9) (26.1) Cash flows from investing activities In property, plant and equipment (11.3) (7.1) In intangible assets (2.0) (0.8) Impairment of property, plant and equipment Loans between related parties (0.4) (0.5) Net cash used in investing activities (13.3) (6.4) Cash flows from financing activities Proceeds from new loans Repayment of loans (50.9) (190.4) Net cash provided by (used in) financing activities 11.1 (7.8) Effect of exchange rate changes on cash and cash equivalents (0.7) (1.5) Decrease in cash and cash equivalents (20.8) (41.8) Cash and cash equivalents: At the beginning of the period At the end of the period Decrease in cash and cash equivalents (20.8) (41.8) 14

17 COMPANHIA TECIDOS SANTANENSE CNPJ/MF Nº / Publicly Traded Company Shareholders, We submit for your consideration the interim financial statements for the first quarter of 2013, accompanied by its Independent Accountant s report on review of interim financial information. Santanense s gross sales were R$117.1 million in the first quarter of The table below includes the financial highlights in the first quarter of 2013 compared to the same period of last year. R$ thousands Variance Consolidated Financial Highlight 1Q13 1Q12 % Gross sales 117, , Net sales 93,761 93, Cost of goods sold (69,259) (70,844) (2.2) Gross profit 24,502 22, (% of net sales) 26.1% 24.1% Selling, General and Administrative expenses (12,633) (12,521) 0.9 Depreciation and amortization 2,613 2,677 (2.4) Non-recurring income 804 6,941 - Recurring operational income 12,282 9, (% of net sales) 13.1% 10.4% Net income 8,549 9,764 (12.5) Basic and diluted earnings per share (R$/share): Common (12.5) Preferred (12.5) Net Sales Net sales in the first quarter of 2013 reached R93.8 million. Santanense s net sales increased by 0.5% in the quarter due to a 3.5% variance in production and sales volume and a 2.9% decrease in average price. Cost of goods sold Santanense reported a gross margin of 26.1% in the first quarter of 2013 and 24.1% in the first quarter of The decrease in raw material costs positively impacted the reduction in cost of goods sold. Selling, general and administrative expenses Selling, general and administrative expenses increased by 0.9% in the first quarter of 2013 when compared to the first quarter of 2012, which is compatible to sales volume

18 growth and with the consequent increase in freight expenses. Fixed expenses increased in line with inflation for the period, reflecting increases in wages. Operating income Recurring operating income totaled R$12.3 million in the first quarter of 2013, a 27.1% increase when compared to the same period of the previous year. Financial results, net In the first quarter of 2013, financial result, net was an expense of R$0.9 million, while in the first quarter of 2012, it was an expense of R$2.5 million. R$ millions Financial result 1Q13 1Q12 Financial expenses - interests (0.7) (1.8) Bank charges, discounts (0.6) (0.6) Financial income Exchange variation, net - (0.3) Financial result, net (0.9) (2.5) Working capital Working capital increased from R$126.6 million in December 31, 2012, to R$132.6 million in March 31, The current ratio in March 31, 2013 was 3.60, which means that for each R$1.00 in short-term liabilities, Santanense had R$3.60 in short-term assets. Financial assets and liabilities The net debt in March 31, 2013 totaled R$36.6 million compared to R$29.9 million in December 31, Debt, as of March 31, 2013, is shown below: Montes Claros MG, May 13, The Management R$ million Maturity short-term long-term to Total 42.9

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22 COMPANHIA DE TECIDOS NORTE DE MINAS - COTEMINAS BALANCE SHEETS AS OF MARCH 31, 2013 AND DECEMBER 31, 2012 (In thousands of Brazilian Reais) ASSETS Company Consolidated Note CURRENT: Cash and cash equivalents 3 1,505 1, , ,613 Marketable securities ,030 39,750 Accounts receivable , ,628 Inventories , ,364 Advances to suppliers ,601 57,750 Recoverable taxes 16.d 6,990 7,115 39,552 41,227 Debentures issued by subsidiary 15 11,606 11, Real estate held for sale - - 2,927 2,921 Other receivables 6,890 4,294 28,377 29, Total current assets 27,186 24,576 1,477,900 1,518, NONCURRENT: Long-term assets: Related parties 14 90,506 87,482 48,282 46,037 Recoverable taxes 16.d 13,552 13,552 39,490 43,784 Deferred income and social contribution taxes 16.c 8,629 8,629 71,941 71,981 Property, plant and equipment ,773 held for sale 8.b 40,585 Escrow deposits 17 78,283 78, , ,431 Other credits and receivables 6,926 2,056 19,165 16, , , , ,836 Investments in subsidiaries 7 777, , Investments in affiliated companies 7 151,316 56, ,316 56,229 Other investments 3,089 4,634 5,942 7,675 Property, plant and equipment 8.a 9,546 9,394 1,087,079 1,094,518 Intangible assets , , Total noncurrent assets 1,139,351 1,157,342 1,679,764 1,592, Total assets 1,166,537 1,181,918 3,157,664 3,110,364 ======== ======== ======== ======== The accompanying notes are an integral part of these interim financial statements.

23 COMPANHIA DE TECIDOS NORTE DE MINAS - COTEMINAS BALANCE SHEETS AS OF MARCH 31, 2013 AND DECEMBER 31, 2012 (In thousands of Brazilian Reais) LIABILITIES AND EQUITY Company Consolidated Note LIABILITIES CURRENT: Loans and financing 12 58,029 45, , ,188 Suppliers , ,618 Payroll and related charges ,486 55,540 Taxes ,872 13,980 Dividends payable ,251 1,335 Government concessions ,064 13,115 Noneconomic leases ,536 13,736 Other payables 4,873 6,736 86,874 76, Total current liabilities 63,487 53, , , NONCURRENT: Loans and financing , ,124 Noneconomic leases ,916 11,724 Related parties 14 15, Government concessions ,530 49,859 Employee benefit plans ,548 86,765 Miscellaneous accruals 17 65,168 64,938 92,114 99,331 Deferred income and social contribution taxes 16.c ,385 5,049 Other obligations ,955 26, Total noncurrent liabilities 81,532 66, , , EQUITY: 13 Capital 882, , , ,000 Capital reserves 294, , , ,308 Income reserves 431, , , ,721 Cumulative translation adjustment (109,556) (108,316) (109,556) (108,316) Assets and liabilities valuation adjustments 6,285 (18,019) 6,285 (18,019) Treasury shares (838) (838) (838) (838) Retained deficit (483,056) (398,490) (483,056) (398,490) Total equity attributable to shareholders of the Company 1,021,518 1,062,366 1,021,518 1,062, NONCONTROLLING INTEREST , , Total equity 1,021,518 1,062,366 1,702,883 1,651, Total liabilities and equity 1,166,537 1,181,918 3,157,664 3,110,364 ======= ======= ======= ======= The accompanying notes are an integral part of these interim financial statements.

24 COMPANHIA DE TECIDOS NORTE DE MINAS COTEMINAS STATEMENTS OF OPERATIONS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2013 AND 2012 (In thousands of Brazilian Reais) Company Consolidated Note NET REVENUES , ,784 COST OF GOODS SOLD (455,878) (339,645) GROSS PROFIT , ,139 OPERATING INCOME (EXPENSES): Selling expenses (82,319) (62,027) General and administrative expenses 22 (5,527) (4,008) (39,229) (35,204) Management fees 22 (503) (434) (2,992) (2,338) Equity in subsidiaries and affiliated companies 7 (9,951) (7,656) 7,955 1,114 Others, net , INCOME (LOSS) FROM OPERATIONS (15,976) (12,068) 14,897 26,194 Financial expenses interests (755) (1,163) (17,852) (26,548) Financial expenses bank charges and others (1,054) (337) (13,141) (12,153) Financial income 3,299 4,330 3,155 6,464 Exchange variations, net (296) (1,103) (5,294) (1,141) LOSS BEFORE TAXES (14,782) (10,341) (18,235) (7,184) Income and social contribution taxes: Current 16.b - - (3,690) (4,593) Deferred 16.b - - (307) (149) NET LOSS FOR THE PERIOD FROM CONTINUING OPERATIONS (14,782) (10,341) (22,232) (11,926) Equity from discontinued operations in subsidiaries 7 - (27,115) - - Loss from discontinued operations in subsidiaries (39,618) NET LOSS FOR THE PERIOD (14,782) (37,456) (22,232) (51,544) ======= ======= ======== ======== ATTRIBUTABLE TO: Shareholder of the Company In continuing operations (14,782) (10,341) In discontinued operations - (27,115) (14,782) (37,456) Noncontrolling interest In continuing operations (7,450) (1,585) In discontinued operations - (12,503) (7,450) (14,088) (22,232) (51,544) ======== ======== BASIC AND DILUTED LOSS PER SHARE R$ From continuing operations 24 (0.1207) (0.0887) (0.1207) (0.0887) From discontinued operations 24 - (0.2327) - (0.2327) Total 24 (0.1207) (0.3214) (0.1207) (0.3214) ======= ======= ======== ======== The accompanying notes are an integral part of these interim financial statements.

25 COMPANHIA DE TECIDOS NORTE DE MINAS COTEMINAS STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2013 AND 2012 (In thousands of Brazilian Reais) Company Consolidated NET LOSS FOR THE PERIOD (14,782) (37,456) (22,232) (51,544) Other comprehensive loss: Exchange variation on foreign investments (1,240) (481) (1,912) (405) (1,240) (481) (1,912) (405) COMPREHENSIVE LOSS FOR THE PERIOD (16,022) (37,937) (24,144) (51,949) ======= ======= ======= ======= ATTRIBUTABLE TO: Shareholders of the Company (16,022) (37,937) Noncontrolling interest (8,122) (14,012) (24,144) (51,949) ======= ======= The accompanying notes are an integral part of these interim financial statements.

26 COMPANHIA DE TECIDOS NORTE DE MINAS COTEMINAS STATEMENTS OF CHANGES IN EQUITY FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2012 (In thousands of Brazilian Reais) Capital reserve Income reserves Cumulative Assets and liabilities Total equity attributable to shareholders Tax Retained translation valuation Treasury Retained of the Noncontrolling Capital incentives Legal earnings adjustment adjustments shares deficit Company interest Total equity BALANCES AS OF DECEMBER 31, , ,308 33, ,400 (97,361) (14,173) (838) (258,251) 1,217, ,910 1,708,293 Comprehensive income: Net loss for the period (37,456) (37,456) (14,088) (51,544) Exchange variation on foreign investments (687) (687) - (687) Impact of subsidiaries- Exchange variation on foreign investments Actuarial gain on pension plans (223) Total comprehensive loss (481) (223) - (37,233) (37,937) (14,012) (51,949) BALANCES AS OF MARCH 31, , ,308 33, ,400 (97,842) (14,396) (838) (295,484) 1,179, ,898 1,656,344 ======= ====== ======= ======= ======= ======== ======== ======= ======= ======== ======== The accompanying notes are an integral part of these interim financial statements.

27 COMPANHIA DE TECIDOS NORTE DE MINAS COTEMINAS STATEMENTS OF CHANGES IN EQUITY FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2013 (In thousands of Brazilian Reais) Capital reserve Income reserves Cumulative Assets and liabilities Total equity attributable to Tax Retained translation valuation Treasury Retained shareholders of Noncontrolling Capital incentives Legal earnings adjustment adjustments shares deficit the company interest Total equity BALANCES AS OF DECEMBER 31, , ,308 33, ,423 (108,316) (18,019) (838) (398,490) 1,062, ,826 1,651,192 Deemed cost of affiliate company ,442 - (24,442) Amortization of the period (138) Comprehensive loss: Net loss for the period (14,782) (14,782) (7,450) (22,232) Exchange variation on foreign investments (note 2.1) (366) (366) - (366) Impact of subsidiaries- - Exchange variation on foreign investments (note 2.1) (874) (874) (672) (1,546) Total comprehensive loss (1,240) - - (14,782) (16,022) (8,122) (24,144) Shareholder s contribution (distribution): Purchase of ownership interest in subsidiary (note 7) ,866 14,866 (29,866) (15,000) Issuance of new shares by incorporation (note 13.a.1) 12,236 75, ,599 90,835-90,835 Redemption of shares (note 13.a.2) (66,582) (63,945) (130,527) 130,527 - Cancellation of redeemed shares (note 13.a.2) - (66,582) , Total shareholder s contribution (distribution) 12,236 8, (45,480) (24,826) 100,661 75, BALANCES AS OF MARCH 31, , ,726 33, ,423 (109,556) 6,285 (838) (483,056) 1,021, ,365 1,702,883 ======== ====== ====== ======= ======= ======= ======== ======= ======= ======== ======== The accompanying notes are an integral part of these interim financial statements.

28 COMPANHIA DE TECIDOS NORTE DE MINAS COTEMINAS STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2013 AND 2012 (In thousands of Brazilian Reais) Company Consolidated Cash flows from operating activities Net loss for the period (14,782) (37,456) (22,232) (51,544) Adjustments to reconcile net loss for the period to net cash provided by (used in) operating activities: Depreciation and amortization ,758 26,681 Equity in subsidiaries and affiliated companies: Continuing operations 9,951 7,656 (7,955) (1,114) Discontinued operations - 27, Income and social contribution taxes - - 3,997 4,742 (Gain) loss on sale of property, plant and equipment (7,407) Exchange variations (2,621) Impairment of property, plant and equipment - - (1,114) - Bank charges and interests (1,148) (1,840) 11,351 19,978 Other accruals - - (25) (1,216) (5,587) (3,689) 10,128 (12,501) Changes in assets and liabilities Marketable securities - (46) 5, Accounts receivable - - (32,361) (22,924) Inventories ,697 38,146 Advances to suppliers (184) (25) 7,149 12,468 Suppliers (203) (24) (18,424) (24,979) Others (1,740) (2,670) 18,547 4, Net cash provided by (used in) operating activities (7,714) (6,454) 3,480 (4,013) Interest paid - - (9,645) (19,248) Income and social contribution taxes paid - - (5,334) (2,654) Net cash used in operating activities after interest and taxes (7,714) (6,454) (11,499) (25,915) Cash flows from investing activities Acquisition of investments (15,000) - (15,000) - Acquisition of property, plant and equipment - - (13,604) (9,459) In intangible assets - - (2,013) (780) Proceeds from sale of property, plant and equipment - - 1,239 17,905 Loans between related parties 10,387 (4,920) (3,862) (5,146) Net cash provided by (used in) investing activities (4,613) (4,920) (33,240) 2, The accompanying notes are an integral part of these interim financial statements.

29 COMPANHIA DE TECIDOS NORTE DE MINAS COTEMINAS STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2013 AND 2012 (In thousands of Brazilian Reais) Company Consolidated Cash flows from financing activities Proceeds from new loans 12,568 11,450 89, ,797 Repayment of loans - - (79,795) (219,480) Dividends paid - - (84) (25) Net cash provided by (used in) financing activities 12,568 11,450 9,478 (15,708) Effect of exchange rate changes on cash and cash equivalents of foreign subsidiaries - - (1,755) (3,447) Increase (decrease) in cash and cash equivalents (37,016) (42,550) ======= ======= ======= ======= Cash and cash equivalents: At the beginning of the period 1,264 2, , ,878 At the end of the period 1,505 2, , , Increase (decrease) in cash and cash equivalents (37,016) (42,550) ======= ======= ======= ======= The accompanying notes are an integral part of these interim financial statements.

30 COMPANHIA DE TECIDOS NORTE DE MINAS COTEMINAS STATEMENTS OF VALUE ADDED FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2013 AND 2012 (In thousands of Brazilian Reais) Company Consolidated REVENUES Sales of products, goods and services , ,446 Gain on sale of real estate held for sale ,941 Loss on sale of property, plant and equipment - - (878) (150) , ,237 MATERIALS ACQUIRED FROM THIRD PARTIES Cost of goods and services sold - - (308,610) (319,922) Materials, energy, third party services, and others (4,223) (3,569) (143,301) (101,672) Impairment of property, plant and equipment - - 1, (4,223) (3,569) (450,797) (421,594) GROSS VALUE ADDED (4,223) (3,569) 230, ,643 RETENTIONS Depreciation and amortization (157) (7) (25,758) (26,681) (157) (7) (25,758) (26,681) NET VALUE ADDED PRODUCED BY THE COMPANY (4,380) (3,576) 205, ,962 VALUE ADDED RECEIVED BY TRANSFER Equity in subsidiaries and affiliated companies (9,951) (34,771) 7,955 1,114 Financial income 3,299 4,330 3,155 6,464 Exchange rate variation (139) (1,103) (754) (3,367) Royalties , (6,791) (31,544) 10,360 7, TOTAL VALUE ADDED FOR DISTRIBUTION (11,171) (35,120) 215, ,257 ======== ======== ======== ======== DISTRIBUTION OF VALUE ADDED Salary, wages and compensation , ,478 Taxes, duties and contributions 1, ,146 74,559 Payments to third parties 912 1,164 52,243 49,764 Equity Net loss (14,782) (37,456) (22,232) (51,544) VALUE ADDED DISTRIBUTED (11,171) (35,120) 215, ,257 ======= ======= ======= ======= The accompanying notes are an integral part of these interim financial statements.

31 1. OPERATIONS COMPANHIA DE TECIDOS NORTE DE MINAS COTEMINAS NOTES TO THE INTERIM FINANCIAL STATEMENTS AS OF MARCH 31, 2013 (Amounts in thousands of Brazilian Reais) Companhia de Tecidos Norte de Minas - COTEMINAS (the Company ) is a Brazilian publicly-held company, based in Montes Claros-MG, engaged in the production and marketing of yarns and fabrics in general, imports and exports, and may hold equity interest in other companies and acquire marketable securities in the capital market. The Company s shares are traded in BM&FBOVESPA Bolsa de Valores, Mercadorias e Futuros (Brazilian Stocks, Commodities and Futures Exchange), under the codes CTNM3 and CTNM4. The Company is the parent company of Springs Global Participações S.A. ( SGPSA ), which is the parent company of Coteminas S.A. ( CSA ) and Springs Global US, Inc. ( SGUS ), companies that focus their manufacturing operations on bed and bath linens previously carried out by the Company and by Springs Industries Inc. ( SI ), respectively. On April 30, 2009, SGPSA acquired a controlling interest in Springs e Rossini Participações S.A. ( SRPSA ), the parent of MMartan Têxtil Ltda ( MMartan ). Beginning in August 2011, the Company started its bed, tabletop and bath retail operations, under the brand Artex, through the subsidiary American Sportswear Ltda ( ASW ). On 1 January 2013, in order to consolidate the retail operations of the Company, the subsidiary ASW incorporated subsidiary SRPSA and indirect subsidiary MMartan, and changed its name to AMMO Varejo Ltda. ( AMMO ). The Company is also the parent company of Oxford Comércio e Participações S.A., which is the parent company of Companhia Tecidos Santanense ( CTS ), a publicly-held company, which operates in the textile and related industries, manufacturing and marketing clothing apparel, including professional uniforms, accessories and personal protective equipment for occupational safety. 2. PRESENTATION OF INTERIM FINANCIAL STATEMENTS The interim financial statements were approved by the Company s Board of Directors on March 13, The Company presents its consolidated interim financial statements, prepared in accordance with both Technical Pronouncement CPC 21 - Demonstração Intermediária and International Accounting Standard IAS 34 - Interim Financial Reporting issued by the International Accounting Standards Board ( IASB ) and presented in accordance with standards issued by Comissão de Valores Mobiliários ( CVM ) (Brazilian equivalent to the Securities and Exchange Commission), applicable to the preparation of the interim financial statements, and identified as "Consolidated". The individual interim financial statements were prepared in accordance with Technical Pronouncement CPC 21 Demonstração Intermediária and are presented in accordance with standards issued by the CVM, applicable to the preparation of the interim financial statements, and are identified as "Company". These practices differ from IFRS that are applicable to individual interim financial statements, only in relation to the recognition of investments in subsidiaries using the equity method, whereas under IFRS (International Financial Reporting Standards) the investment would be valued at cost or fair value 1