1ST HALF 2020

MANAGEMENT REPORT 0

1ST HALF 2020

HALF-YEARLY ACCOUNTS

PART 1 MANAGEMENT REPORT ……………………………...…….………….………3

PART 2 DECLARATION REQUIRED UNDER ARTICLE 246.1 C) OF THE

SECURITIES CODE …………………....…………………..….………………..39

PART 3 LIST OF QUALIFYING HOLDINGS AS REQUIRED BY SUB-PARAS. C) OF

ARTICLE 9.1 OF REGULATION NO. 5/2008 OF THE SECURITIES CODE (CMVM)………………………………………………………….………...... 41

PART 4 INTERIM CONSOLIDATED FINANCIAL STATEMENTS…………………....43

PART 5 LIMITED REVIEW REPORT ON THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS……...……………………………….……….…162

MANAGEMENT REPORT 1 1ST HALF 2020

PART 1

MANAGEMENT REPORT

MANAGEMENT REPORT 3

1ST HALF 2020

CONTENTS

1. SEMAPA'S PERFORMANCE ...... 7

2. PERFORMANCE OF BUSINESS SEGMENTS ...... 9

3. OUTLOOK ...... 31

4. PERFORMANCE OF SEMAPA SHARES ON THE STOCK EXCHANGE ...... 35

MANAGEMENT REPORT 4

1ST HALF 2020

PERFORMANCE IN 1ST HALF 2020

Activity in the first half of 2020, particularly in Q2, reflected the impact of the Covid-19 pandemic, namely the different lockdown periods implemented in the parts of the world where Semapa Group carries out its business. The effects in operations in different business segments and geographies were felt differently, although more significantly in Pulp and Paper, with little impact on Cement and Other Building Material in Portugal and Brazil and improvement in the Environment segment. Strong action on cost and cash flow management enabled the strengthening of the financial position of the Semapa Group during the period.

HIGHLIGHTS 1ST HALF 2020 Pulp and tissue sales and cost and cash flow management ensure resilience of the Pulp and Paper business against the Covid impact in the UWF business. Good performance of the Cement markets in Portugal and Brazil and the Environment business. Negative exchange rate effects in Secil Brazil.

− Health and safety are among the Group’s top priorities. In the second quarter, the Group continued to take proactive and broad measures to guarantee the safety of employees and business continuity. − In the first half of 2020 the Semapa Group recorded consolidated revenue of 941.8 million euros (-15.9% from the same period in the previous year). Exports and foreign sales amounted to 660.1 million euros, accounting for 70.1% of revenue. − In the Pulp and Paper segment, it is worth noting the growth in pulp (+56%) and tissue sales (+10%) compared to the same period last year, with the impact of the lockdown in April and May being reflected, in particular, in the volume of UWF paper sales, which fell 17%, and also pulp and paper prices over the first half of 2019. The BHKP pulp index (in euros) fell 27.4% and the A4 paper index dropped 6.4%. − In the Cement and Other Building Materials segment, despite the context of a pandemic, revenue growth in the domestic market in Portugal (+5.2%) and Brazil (+13%, in local currency), should be highlighted. − EBITDA in the 1st half of 2020 amounted to 203.3 million euros (vs. 264.5 million euros year on year), 140.1 million euros generated by Pulp and Paper (vs. 207.0 in the first half of 2019), 58.5 million euros in Cement and 5.1 million euros in Environment. The positive development, in comparison with the same period of the previous year, in the segments of Cement (+7.4%), especially in Portugal, and Environment (+74.7%), should be noted. Additional effort was put in all business segments into optimising costs with significant results, in particular in the Pulp and Paper segment (lower fixed costs by 22 million euros). Nonetheless, the consolidated EBITDA margin stood at 21.6%, -2.0 p.p. below that in the same period in the previous year.

MANAGEMENT REPORT 5

1ST HALF 2020

− Net profit attributable to Semapa shareholders stood at 30.3 million euros (vs. 73.5 million euros year on year), impacted by both developments in EBITDA, and negative exchange rate effects in Secil (BRL) reflected in the financial results and positively influenced by tax. − Investment in the first half 2020 amounted to approximately 62 million euros, with particular emphasis on the Pulp and Paper segment of 48.7 million euros, of which 13.2 in environmental projects. The New Biomass Boiler in Figueira da Foz, with a total investment of 55 million euros over 2019 and 2020, will come into operation in the second half of 2020. The investment will allow for an 81% reduction in CO2 emissions at this unit and around 20% reduction in the Navigator universe (a decrease of approximately 155 thousand tonnes of CO2/year). Consequently, the plant will be 100% renewable concerning electrical power production. − In the context of the Covid crisis, the Group was still very focused on actively managing the working capital and restraining investment in order to guarantee cash flow. Consequently, during the first half of the year, net debt decreased in all business segments, and consolidated interest-bearing net debt totalled 1,345.7 million euros, 124.9 million euro less compared to the end of 2019.

2ND HALF OUTLOOK Although most of the markets where the Group carries out its business are coming out of the lockdown, the pace and slowdown of global economic growth result in a context of high degree of uncertainty for the 2nd half of 2020.

− Some recent positive signs in the Pulp and Paper segment point to a gradual, but probably slow, recovery of the UWF paper business in the third quarter of 2020, in line with the economic recovery and some uncertainty in relation to price. On the pulp side, the resilience in the first half of the year seems to show signs of slowing down, with the arrival of a seasonally weaker period. After a positive performance in the 1st half, the tissue business is expected to see some slowdown in demand in the At Home segment and a gradual recovery in the Away From Home sector, with the recovery of activity in Horeca channels and companies. − Cement and Other Building Materials, in particular in Portugal and Brazil, have suffered less from the anti-Covid measures, as is expected to continue in a framework of ongoing uncertainty that may be reversed in the 3rd and 4th quarters. There is a dynamics of recovery in Tunisia and strong challenges lingering in Lebanon given the overall situation in the country. − In the Environment segment, the information available suggests that the food market where ETSA operates will be less affected by the health crisis.

MANAGEMENT REPORT 6

1ST HALF 2020

1. SEMAPA'S PERFORMANCE

LEADING BUSINESS INDICATORS

H1 2020 H1 2019 Var. Q2 2020 Q2 2019 Var. IFRS - accrued amounts (million euros)

Revenue 941.8 1,119.2 -15.9% 417.8 567.9 -26.4% EBITDA 203.3 264.5 -23.1% 84.2 131.9 -36.2% EBITDA margin (%) 21.6% 23.6% -2.0 p.p. 20.1% 23.2% -3.1 p.p. Depreciation, amortisation and impairment losses (111.8) (112.2) 0.4% (54.7) (54.4) -0.4% Provisions (4.0) (1.5) -165.5% (1.7) (1.6) -5.6%

EBIT 87.5 150.7 -41.9% 27.8 75.9 -63.3% EBIT margin (%) 9.3% 13.5% -4.2 p.p. 6.7% 13.4% -6.7 p.p. Net financial results (43.4) (22.7) -90.8% (17.4) (13.5) -28.2%

Profit before taxes 44.2 128.0 -65.5% 10.5 62.3 -83.2% Income taxes (4.9) (27.3) 82.1% 4.6 (15.2) 130.4% Net profit for the period 39.3 100.7 -61.0% 15.1 47.1 -67.9% Attributable to Semapa shareholders 30.3 73.5 -58.8% 13.1 33.8 -61.3% Attributable to non-controlling interests (NCI) 9.0 27.1 -66.9% 2.0 13.3 -84.7%

Cash flow 155.0 214.4 -27.7% 71.5 103.1 -30.7%

Jun20 vs. 30/06/2020 31/12/2019 Dec19 Equity (before NCI) 931.9 960.9 -3.0%

Interest-bearing net debt 1,345.7 1,470.7 -8.5% Lease liabilities (IFRS 16) 78.3 75.2 4.2%

Total 1,424.1 1,545.8 -7.9%

LEADING OPERATING INDICATORS

Unit H1 2020 H1 2019 Var. Q2 2020 Q2 2019 Var.

Pulp and Paper

BEKP Sales (pulp) 1 000 t 193.2 123.6 56.3% 110.0 61.5 78.9%

UWF Sales (paper) 1 000 t 597.7 719.5 -16.9% 231.4 366.5 -36.9%

Total sales of tissue 1 000 t 52.0 47.2 10.1% 26.0 23.6 10.4%

Cement

Sales of Grey cement 1 000 t 2,164 2,419 -10.5% 1,133 1,215 -6.7%

Sales of Ready-mix 1 000 m3 843 861 -2.1% 425 434 -2.0%

Environment Collection of raw materials - Animal w aste 1 000 t 59.2 57.7 2.7% 28.4 29.2 -2.8%

MANAGEMENT REPORT 7

1ST HALF 2020

NET DEBT Pulp and Paper Cement Environment Holdings Semapa

1,470.7 1,424.1 1,345.7 Million euros 753.1 715.3 700.4

358.0 391.7 299.5 322.8 343.9 344.2

5.7 1.9 4.0

-14.8 -58.6 -3.8 -47.7 -124.9

31/12/19 30/06/20 Net Debt + IFRS 16

On 30 June 2020, consolidated net debt stood at 1,424.1 million euros, representing a reduction of 121.8 million euros over the amount ascertained at the close of financial year 2019. Excluding the effect of IFRS 16, net debt would have been 1,345.7 million euros, 124.9 million euros below the figure at the end of 2019. Besides the operating cash flow generated, these variations are explained by:

. Pulp and Paper: -14.8 million euros, including investments of about 48.7 million euros and distribution of 99.1 million euros in reserves; . Cement: -58.6 million euros, including investments of approximately 14.7 million, the result of sale of financial investments of 9.5 million euros and also the positive effect of foreign exchange denominated debt of approximately 31.2 million euros; . Environment: -3.8 million euros, in spite of the difficulty in collecting the amounts billed to the Government; and, . Holdings: -47.7 million euros, resulting namely from reserves received from Navigator (69.4 million euros) and the payment of dividends (10.0 million euros). At the end of the first half of 2020, total consolidated cash and equivalents amounted to 726.7 million euros, in addition to 256.9 million euros in contracted and undrawn credit facilities for the Group, thus ensuring strong liquidity at this uncertain moment.

MANAGEMENT REPORT 8

1ST HALF 2020

2. PERFORMANCE OF BUSINESS SEGMENTS

BREAKDOWN BY BUSINESS SEGMENTS Holdings and IFRS - accrued amounts (million euros) Pulp and Paper Cement Environment Consolidated Eliminations

H1 2020 20/19 H1 2020 20/19 H1 2020 20/19 H1 2020 20/19 H1 2020

Revenue - External 695.5 -18.6% 230.6 -8.5% 15.7 18.5% - - 941.8

Revenue 695.5 -18.6% 230.9 -8.5% 15.7 18.5% (0.3) 19.7% 941.8

EBITDA 140.1 -32.3% 58.5 7.4% 5.1 74.7% (0.4) -377.9% 203.3 EBITDA margin (%) 20.1% -4.1 p.p. 25.3% 3.7 p.p. 32.8% 10.6 p.p. 21.6%

Depreciation, amortisation and impairment losses (82.2) -4.4% (27.9) 12.6% (1.6) -3.9% (0.2) 3.3% (111.8) Provisions (1.9) 0.4% (2.1) -626.9% - - - - (4.0)

EBIT 56.0 -55.7% 28.5 24.0% 3.6 148.2% (0.6) -884.7% 87.5 EBIT margin (%) 8.1% -6.7 p.p. 12.3% 3.2 p.p. 22.9% 11.9 p.p. 9.3%

Net financial results (8.3) 14.7% (29.8) -334.8% (0.1) 20.1% (5.2) 14.1% (43.4)

Profit before taxes 47.8 -59.1% (1.3) -108.1% 3.5 169.5% (5.7) 5.6% 44.2

Income taxes (9.3) 66.1% 0.8 124.1% (0.8) -615.6% 4.3 19.3% (4.9)

Net profit for the period 38.5 -56.9% (0.5) -103.6% 2.7 127.2% (1.4) 42.0% 39.3 Attributable to Semapa shareholders 26.9 -56.7% 2.1 -83.1% 2.7 127.2% (1.4) 42.0% 30.3 Attributable to non-controlling interests (NCI) 11.6 -57.4% (2.6) <-1000% 0.0 125.4% - - 9.0

Cash flow 122.6 -27.9% 29.5 -33.0% 4.2 58.0% (1.2) 45.3% 155.0

Interest-bearing net debt 700.4 299.5 1.9 343.9 1,345.7

Lease liabilities (IFRS 16) 52.6 23.3 2.1 0.3 78.3 Total 753.1 322.8 4.0 344.2 1,424.1

Notes: • For the purpose of calculating the change in net debt the values of 31.12.2019 are used.

• Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.

The Navigator Company (“Navigator”) published its results on 28 July 2020, so only the highlights of that report will be presented herein. Secil and ETSA, which are not listed, did not publish their results. Therefore, their operations are described in more detail.

MANAGEMENT REPORT 9

1ST HALF 2020

PULP AND PAPER

% of consolidatedtotal % of consolidatedtotal EBITDA Revenue H1 2020 H1 2020

69% 74%

HIGHLIGHTS IN 1ST HALF 2020 (VS. 1ST HALF 2019)

Revenue

• Revenue amounted to 695.5 million euros, 854.1 18.6% below the figure for the first half of -18.6%

Million Euros 695.5 2019. • This trend reflects the fall in sales prices of both paper and pulp, combined with a higher sales volume of pulp and tissue.

H1 2019 H1 2020

MANAGEMENT REPORT 10

1ST HALF 2020

REVENUE BREAKDOWN BY SEGMENT:

73.0 4.6 695.5 70.4 79.6 468.0 Million Euros Million

Δ% 20/19 -23.4% +2.6% +7.0% -11.9% -72.6% -18.6%

UWF Paper BEKP Pulp Tissue Energy Others and H1 2020 eliminations H1 2019 611.1 77.6 65.7 82.8 16.8 854.1

• EBITDA amounted to 140.1 million euros EBITDA (vs. 207.0 million euros over the same EBITDA Mg period in the previous year). 207.0 • The significant reduction in variable -32.3% production costs and the strong Million Euros 140.1 containment of fixed costs (less 22 million euros) helped to mitigate the fall in sales 24.2% 20.1% prices and to achieve an EBITDA margin above 20%. This margin is higher than the H1 2019 H1 2020 19.8% recorded in the 2nd Half of 2019, when prices were more in line with the current ones.

MANAGEMENT REPORT 11

1ST HALF 2020

SUMMARY TABLE OF FINANCIAL INDICATORS

H1 2020 H1 2019 Var. Q2 2020 Q2 2019 Var. IFRS - accrued amounts (million euros)

Revenue 695.5 854.1 -18.6% 289.7 432.3 -33.0%

EBITDA 140.1 207.0 -32.3% 51.7 102.1 -49.4% EBITDA margin (%) 20.1% 24.2% -4.1 p.p. 17.8% 23.6% -5.8 p.p.

Depreciation, amortisation and impairment losses (82.2) (78.7) -4.4% (40.1) (37.4) -7.2% Provisions (1.9) (1.9) 0.4% (0.0) (0.6) 96.0%

EBIT 56.0 126.4 -55.7% 11.5 64.0 -82.0% EBIT margin (%) 8.1% 14.8% -6.7 p.p. 4.0% 14.8% -10.8 p.p.

Net financial results (8.3) (9.7) 14.7% (2.1) (5.7) 63.4%

Profit before taxes 47.8 116.7 -59.1% 9.4 58.3 -83.8% Income taxes (9.3) (27.3) 66.1% 1.2 (15.4) 107.9%

Net profit for the period 38.5 89.4 -56.9% 10.6 42.9 -75.1% Attributable to Navigator shareholders 38.5 89.4 -56.9% 10.7 42.9 -75.1% Attributable to non-controlling interests (NCI) 0.0 (0.0) 124.6% (0.0) (0.0) 76.9%

Cash Flow 122.6 169.9 -27.9% 50.8 80.9 -37.2%

30/06/2020 31/12/2019

Equity (before NCI) 855.7 818.9

Interest-bearing net debt 700.4 715.3 Lease liabilities (IFRS 16) 52.6 46.8 Total 753.1 762.1 Note: Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.

SUMMARY TABLE OF OPERATING INDICATORS

in 1 000 t H1 2020 H1 2019 Var. Q2 2020 Q2 2019 Var.

Pulp and Paper

FOEX – BHKP Usd/t 680 962 -29.3% 680 933 -27.0%

FOEX – BHKP Eur /t 617 851 -27.4% 619 830 -25.5%

BEKP Sales (pulp) 193.2 123.6 56.3% 110.0 61.5 78.9%

FOEX – A4- BCopy Eur/t 855 913 -6.4% 845 912 -7.3%

UWF Sales (paper) 597.7 719.5 -16.9% 231.4 366.5 -36.9%

Tissue

Total sales of tissue 52.0 47.2 10.1% 26.0 23.6 10.4%

In the first half of 2020, Navigator revenue totalled 695.5 million euros, paper sales accounting for around 67% (vs. 72%) of the revenue, pulp 11% (vs. 9%), tissue 10% (vs. 8%), and energy sales also around 10% (vs. 10%). The first half featured a significant drop in global paper consumption as a result of the Covid-19 pandemic. Navigator was able to partially make up for the decline in UWF sales by further diversifying its business, with growth in pulp and tissue sales.

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1ST HALF 2020

It is estimated that the global UWF paper market fell by about 13% in cumulative terms from the beginning of the year to May, with particularly significant falls in April and May (24%). In Europe, the estimated cumulative decrease is 14% and in the United States the figures point to a more significant drop of around 20%.

The steep fall in economic activity had a strong impact on the graphic paper industry but, despite the strong social restrictions resulting from the lockdown (e.g. telework and home schooling), it was not the consumption of reduced formats that was most impacted, but rather the printing industry segment, with the reduction in advertising and commercial printing activity, which hit the sheeted business specially hard. The reel business showed greater resilience, since it is also the one with greater versatility in terms of UWF uses. There have also been significant variations between European markets: some countries have implemented weaker anti-Covid-19 measures (such as Germany, Sweden, the Netherlands), undergoing less decline than those that have suffered more from these measures (such as the United Kingdom, Spain and Portugal).

May appears to have been the worst month in terms of falling UWF demand (-34% YoY), whereas June already showed some recovery (-19% YoY). In Europe and similarly to the rest of the world, demand for UWF proved to be more resilient than demand for other types of graphic paper, namely coated woodfree, whose demand in the second quarter decreased 46% vs. 25% for uncoated woodfree.

In this context, Navigator managed its UWF paper production in April, May and June in order to keep up with the fall in demand and to control stock levels. From the end of March to the end of June, the Group reduced its stocks by almost 20% (compared to the 6% estimated for the industry). Such management in production, together with action taken to attract more orders, allowed Navigator to end the first half with a 30-day order book, compared to the average 18-day portfolio of European competitors. In fact, Navigator has launched a wide range of innovative initiatives to support its distributors and sales forces in different parts of Europe and the rest of the world, which have made it possible to further increase significantly the order book, which is currently at around 40 days, i.e. the fourth highest (for the period) in the last 11 years.

Year-on-year performance of sales price reflects the adjustments started in the 2nd half of 2019, which continued throughout the 1st half of 2020. The A4 paper benchmark adjusted downwards by 6.4% YoY to an average price of 855 EUR/t, compared to 913 EUR/t in the first half of 2019.

Thus, UWF sales for the first half totalled 597.7 thousand tonnes, 16.9% less than in the same period last year and in line with the Group's forecasts which guided the decision to decrease production. The good performance of Navigator’s own brands in the period must be highlighted, namely in April when the weight of sheets was the highest ever. The sales value of Navigator's UWF business was negatively affected by the fall in price in the first 6 months, as revenue dropped around 23.4% to 468.0 million euros.

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1ST HALF 2020

In the first 5 months of 2020, the global pulp market proved to be quite resistant to the adverse context of less activity due to the pandemic. In several regions, the price showed signs of a timid recovery from the low price level at the end of 2019, a recovery supported by the balancing of stocks by producers, some shortage of supply due to the strikes in Northern Europe in early 2020, the reduction in production by Canadian and Indonesian producers, and the significant increase in demand for tissue products in March and April. Global pulp demand increased 8% from January to May 2020 vs. YTD 2019, driven by strong growth in China (+12%), but mostly in other Asian countries and Africa (+24%), Latin America (+22%) and Eastern Europe (16%). Demand in Europe and the USA remained stable. The increase is mostly attributable to hardwood pulp (+13%).

In this context, the price of BHKP pulp in Europe in USD remained stable throughout this period, at 680 USD/t, 29.3% below the price of 962 USD/t in the first half of 2019. The price of BHKP pulp in Euros fell by about 27.4%, standing at 617.5 EUR/t in the period vs. 851 EUR/t, as a consequence of the growing strength of the USD against the Euro. Pulp remains at a low point in the price cycle and, due to the impact of the pandemic on some of the pulp consuming industries, the expectation of a price increase in the 1st half was postponed until the end of the year.

In this period Navigator was able to record pulp sales to the market of 193.2 thousand tonnes, a significantly higher volume than in the same period of the previous year (+56.3%, in tonnes), the best half-yearly since 2010, by recovering sales in Europe and by diversifying sales to other markets, taking advantage of opportunities in the Tissue and Packaging segments and greater availability of pulp to market arising from less paper production.

The sharp increase in the quantities sold led to an increase in revenue to 79.6 million euros, compared with 77.6 million euros (+2.6%), against a background in which the price of pulp remained under pressure and showed a substantial reduction compared with the previous year.

The tissue business evolved favourably in the first half of the year, with sales in volume amounting to 52.0 thousand tonnes, which represents an increase of 10.1% over the first half of 2019.

As was the case in the first quarter of 2020, Navigator's tissue operations were able to react positively by taking advantage of the opportunity provided by the peak in demand triggered by Covid-19 for the At Home products (AH). However, it should be noted that higher sales to the At Home segment were offset by developments in the Away from Home (AfH) segment, which was affected by the Covid-19 pandemic. These products are largely directed to HORECA channels (Hotels, Restaurants and Cafés) and to companies, channels largely affected by the lockdown measures implemented from mid-March onwards. Sales in this segment decreased even further in the 2nd quarter, although Navigator still had a very positive performance as reel sales increased. This offset the reduction in sales of finished products, in a significant commercial effort to increase its activity in the At Home segment.

Consequently, Navigator’s tissue revenue grew around 7.0% to 70.4 million euros. The sales mix improved in relation to the same period in the previous year, as a result of the increase in the weight of finished products to 78% (vs. 76% in 2019), to the detriment of the weight of reels.

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1ST HALF 2020

In the first half of 2020, the revenue of electrical energy totalled 73.0 million euros, which represents a reduction of 11.9% year on year. In terms of sales volume in GWh, the reduction in the same period was 4.1%.

The decline results essentially from the lower sales value associated with the operation of the combined-cycle natural gas plant in Setubal, which in April moved to a new payment framework for the total sale of energy to the grid, subsequently reducing sales tariff.

In addition, there was the negative effect of the slowdown in production in May and June. In particular, the pulp mill in Aveiro came to a halt for 8 days in June and the new terms of the payment framework for the Renewable Cogeneration Pulp Plant in Setúbal in January brought down the sales tariff.

Revenue from the sale of electricity in the 2nd quarter of 2020 totalled 32.7 million euros, which represents a reduction of 18.6% compared to the 1st quarter, as a result of the factors mentioned above and the subsequent lower volume of sales from renewable cogeneration.

EBITDA in the first half decreased 32.3% year on year to 140.1 million euros, in a context of much lower pulp price (- 29.3%), smaller paper volumes due to the pandemic (-16.9%), and lower paper prices (-6.4%). EBITDA margin was 20.1%, 4.1 p.p. below the margin in the 1st half of 2019, but above the margin recorded in the 2nd Half of 2019 (19.8%), when prices were more in line with that of this period.

The period was marked by the positive changes in most variable and fixed production costs. In terms of the optimization in variable costs, the main improvement factors occurred in the cost of external fibres (due to the variation in the price of long and short fibre and the lower specific consumption), in the cost of wood (namely due to the lower specific consumption in the period), and the lower costs of chemicals, mainly due to the reduction in the price of some products and lower consumption in bleaching. It should be noted that a lot of effort has been put into reducing specific consumption by taking advantage of the reduction in production rates, despite the instability arising from these stoppages and changes in the pace of operations, and into the renegotiation of contracts for raw materials and consumables.

Significant containment may be observed over the first half in fixed costs, which stood at around 22 million euros below the level recorded in the same period in 2019, with positive evolution in personnel costs and running costs, in particular in the costs of corporate areas. This was in line with the cost reduction plan announced in the 1st quarter, intended to cut costs by 46 million euros in 2020.

Financing costs amounted to 8.3 million euros (vs. 9.7 million euros), down by 1.4 million euros.

Net profit for the first half amounted to 38.5 million euros (vs. 89.4 million euros in the first half of 2019).

MANAGEMENT REPORT 15 1ST HALF 2020

During the first half, Navigator managed working capital very efficiently by combining a strong capacity to convert customer balances into cash with a careful supplier management policy, under which it extended payment periods in association with financial solutions offered to support the liquidity of its partners.

Capital expenditure in the first half amounted to 48.7 million euros, compared to 68.2 million euros in the same period last year. This includes around 24 million euros in maintenance, efficiency improvements and others, 12.3 million euros in several environmental projects, in particular the New Biomass Boiler in Figueira da Foz amounting to 11.4 million euros, and 11.6 million euros in asset reconditioning projects. It should be noted that around 80% of all investment made in 2020 concerns maintenance and projects started in previous years.

Among the most relevant environmental projects in 2020, it is worth noting the construction of the new biomass boiler in Figueira da Foz, with a total investment of 55 million euros over 2019 and 2020, and which will come into operation in the 2nd half of 2020. This project will make it possible to cut CO2 emissions at this unit by 81%, and by 20% for Navigator as a whole (reduction in the order of 155 thousand tonnes of CO2/year). As a result, the mill will be 100% powered by renewables.

2nd Quarter 2020 vs. 2nd Quarter 2019

The 2nd quarter was marked by the low level of demand for printing and writing paper during the pandemic, which forced many producers to cut production in all continents. The European UWF market was down by 25% in Q2 vs. 4.1% in Q1 2020; the sheeted business, particular for use by printers, was the hardest hit while the reel business was the most resilient. The decrease in demand in the USA was steeper in Q2; forecasts hint at -32% YoY vs. -12% in Q1 2020, the sheet segment also evidencing the poorest performance.

Against this background, Navigator's revenue stood at 289.7 million euros, -28.6% compared with the 1st quarter of 2020 and -33.0% compared with the 2nd quarter of 2019. Navigator's management of UWF production in this quarter resulted in a 37% reduction in the volume sold (vs. 1st quarter and compared to the same quarter in the previous year), with a lower price level compared to the previous quarter, prices adjusting to the level of demand (especially in markets outside Europe), and pressured by the format/quality mix (growth in the weight of reels and economic products) and the deterioration of the market mix.

It was possible to offset the reduction in paper sales with a significant increase in pulp sales to the market to 110 thousand tonnes (+32.2% vs. the first quarter of 2020 and +78.9% vs. 2nd quarter of 2019), the best quarter since 2010, fostered by more commercial effort put into enhancing market diversification and less need to integrate pulp into paper.

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1ST HALF 2020

In the tissue business, the volume sold remained in line with the previous quarter, with reel sales offsetting the drop in finished product sales, hampered by the contraction in demand in the Away from Home segment.

Against a backdrop of strong decline in demand and significant deterioration of the UWF market, Navigator was able to grow in its other businesses and implement some strong cost control measures, which led to an EBITDA of 51.7 million euros in the quarter, vs. 102.1 million euros in the second quarter of 2019.

In view of the impact on UWF demand of the containment measures, Navigator temporarily and gradually suspended production on some of its paper machines in April, May and June, avoiding the accumulation of stocks in the value chain (thus also protecting price from further decline) and saving on working capital.

MANAGEMENT REPORT 17

1ST HALF 2020

CEMENT AND OTHER BUILDING MATERIALS

25% 29%

% of consolidatedtotal % of consolidatedtotal EBITDA Revenue H1 2020 H1 2020

HIGHLIGHTS IN 1ST HALF 2020 (VS. 1ST HALF 2019)

• Secil's accrued revenue in June 2020 amounted Revenue to 230.9 million euros, 8.5% less than that in the same period of the previous year. This decrease 252.3 -8.5% is mainly the result of the fall in some markets, 230.9 Million Euros associated with the instability experienced in some of these markets and accentuated by the effect of the pandemic, especially in the month of April. Some facilities had to suspend activity by government decree. H1 2019 H1 2020 • Additionally, the strong exchange rate depreciation of some currencies against the Euro in the countries where Secil operates (in particular the Brazilian real) had a negative impact of around 8.4 million euros.

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REVENUE BREAKDOWN BY COUNTRY 19.4 2.0 230.9 22.6 36.4 150.4 Million Euros Million

Δ% 20/19 -1.7% -9.4% -25.2% -18.6% -59.4% -8.5%

Portugal Brazil Lebanon Tunisia Others H1 2020 H1 153.0 40.2 30.3 23.8 5.0 252.3 2019 Note: Others includes Angola and Others

• EBITDA amounted to 58.5 million euros, up by EBITDA around 4.0 million euros year on year (+7.4%). EBITDA Mg 58.5 • Sale of surplus CO2 licenses amounted to 5.2 54.4 7.4% million euros less than sales year on year. Capital gains obtained from the sale of financial Million Euros investments (+5.2 million euros) also 21.6% 25.3% contributed positively to this EBITDA variation.

H1 2019 H1 2020

EBITDA BREAKDOWN BY COUNTRY

5.1 -0.7 58.5 3.9 8.7 41.4 Million Euros Million

Δ% 20/19 +19.0% -1.8% -42.5% +1.0% -39.5% +7.4%

Portugal Brazil Lebanon Tunisia Others H1 2020 H1 34.8 8.9 6.9 5.1 -1.1 54.4 2019 Note: Others includes Angola and Others

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• Secil's net financial results deteriorated from the same period in the previous year, from -6.9 million euros to - 29.8 million euros. The negative difference resulted from the combined effect of a favourable deviation in the net financing cost and a very unfavourable deviation in exchange rate differences, mainly due to the depreciation of the BRL, of accounts receivable and payable in foreign currency for intra-group loans. • Income taxes in the first half 2020 are positively influenced by a refund of 3.2 million euros in taxes following a decision favourable to Secil. SUMMARY TABLE OF FINANCIAL INDICATORS

H1 2020 H1 2019 Var. Q2 2020 Q2 2019 Var. IFRS - accrued amounts (million euros) Revenue 230.9 252.3 -8.5% 120.9 128.6 -6.0% EBITDA 58.5 54.4 7.4% 30.0 28.0 7.1% EBITDA Margin (%) 25.3% 21.6% 3.7 p.p. 24.8% 21.7% 3.0 p.p. Depreciation, amortisation and impairment losses (27.9) (31.9) 12.6% (13.7) (16.1) 15.4% Provisions (2.1) 0.4 -626.9% (1.7) (1.0) -70.5% EBIT 28.5 23.0 24.0% 14.6 10.9 34.9% EBIT Margin (%) 12.3% 9.1% 3.2 p.p. 12.1% 8.4% 3.7 p.p. Net financial results (29.8) (6.9) -334.8% (12.4) (5.2) -138.7% Profit before taxes (1.3) 16.1 -108.1% 2.3 5.7 -59.9% Income taxes 0.8 (3.5) 124.1% 1.2 (2.9) 140.3% Net profit for the period (0.5) 12.6 -103.6% 3.4 2.8 24.2% Attributable to Secil shareholders 2.1 12.6 -83.1% 4.6 2.5 87.7% Attributable to non-controlling interests (NCI) (2.6) 0.0 <-1000% (1.2) 0.3 -468.3% Cash flow 29.5 44.1 -33.0% 18.8 19.9 -5.6%

30/06/2020 31/12/2019 Equity (before NCI) 338.6 377.5 Interest-bearing net debt 299.5 358.0 Lease liabilities (IFRS 16) 23.3 26.4 Total 322.8 384.4

Note: Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.

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SUMMARY TABLE OF OPERATING INDICATORS

in 1 000 t H1 2020 H1 2019 Var. Q2 2020 Q2 2019 Var.

Annual cement production capacity 9,750 9,750 0.0% 9,750 9,750 0.0%

Production

Clinker 1,962 2,329 -15.8% 997 1,247 -20.1%

Cement 2,279 2,572 -11.4% 1,181 1,292 -8.6%

Sales

Grey cement 2,164 2,419 -10.5% 1,133 1,215 -6.7%

White cement 32 40 -21.9% 17 20 -15.1%

Clinker 149 224 -33.5% 126 118 6.7%

Aggregates 1,334 1,515 -11.9% 678 760 -10.7%

Precast 61 65 -5.3% 33 33 -2.0%

Mortars 102 101 1.2% 51 51 0.1%

Hydraulic lime 8 14 -44.4% 4 7 -42.3%

in 1 000 m3

Ready-mix 843 861 -2.1% 425 434 -2.0%

Note: Volumes excluding inter-segment sales.

PORTUGAL

Revenue EBITDA EBITDA Mg

153.0 -1.7% 150.4 Million Euros Million Euros

34.8 19.0% 41.4

22.7% 27.5%

H1 2019 H1 2020 H1 2019 H1 2020

In Portugal, FEPICOP has thus far not disclosed new forecasts that reflect the impact of the pandemic. However, according to the projections by the Bank of Portugal, Gross Fixed Capital Formation (GFCF) in the Construction sector is expected to be less impacted by the current crisis. The negative impact on GFCF in housing is expected to be relatively limited, in a context of maintaining favourable financing conditions and some attractiveness of this type of asset as an investment in savings and in demand by non-residents. Public investment is expected to show dynamic growth,

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benefiting from the increase in European fund receipts associated with the end of the current programming period, in particular in 2020-21.

Cement consumption in Portugal in the first half of 2020 was marked by positive monthly year on year variations, with particular emphasis on the month of June (projected positive variation of around 25%), and it is estimated that, in cumulative terms, the domestic cement market grew approximately 9% year on year.

The impact of the Covid-19 pandemic was felt mainly in the first weeks (from 18 March to 13 April) immediately after the State of Emergency was announced, but only lightly since virtually all facilities maintained regular operations.

Revenue of combined operations in Portugal stood at approximately 150.4 million euros, 1.7% down in relation to the same period in 2019.

In the Cement business unit in Portugal, domestic market revenue increased around 5.2% vis-a-vis H1 2019. This development is explained mainly by the increase in quantities sold (+6%, despite the increase in the weight of sales to other segments of the Group). However, the expansion was not enough to cope with the decline in sales to the external market, with cement revenue decreasing by about 9.4 million euros.

The surplus supply in Europe, the Mediterranean and West Africa continued to drive strong competition. In this context, the export business volume decreased around 36.0%, reflecting the decline in cement and clinker sales of -47.9%.

In the other business units with operations based in Portugal (Ready-mix concrete, Aggregates, Mortars and Precast), revenue in the first half of 2020 amounted to 69.8 million euros, up by 10.9% year on year.

This growth took place in almost all areas of building materials, benefiting from greater building dynamics, although it was higher in the Concrete business unit, which recorded 7.7% more sales volume.

EBITDA of total operations in Portugal increased by 19.0%, standing at 41.4 million euros vs. 34.8 million euros recorded for the same period in the previous year.

The Cement business unit had an EBITDA of 31.7 million euros, i.e. 22.3% more than in the same period in 2018. The increase in volumes sold on the domestic market and the reduction in variable costs, namely energy costs, and capital gains obtained from the sale of financial investments (+5.2 million euros) contributed positively to this variation. On the other hand, the sale of surplus CO2 licenses amounted to 5.2 million euros less than sales year on year.

The EBITDA of the building materials business units amounted to 9.6 million euros which, compared to 8.8 million euros in the first half of 2019, results in an increase of 9.2%. The upward variation was the result of the increase in revenue, despite the rise in variable production costs due to lower availability of ashes in the Concrete segment, and also the

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recording of capital gains on the sale of fixed assets (land) in the Pre-cast and Aggregates segment, which together represented 1.2 million euros.

BRAZIL

Revenue EBITDA EBITDA Mg

40.2 -9.4% 36.4 Million Euros Million Euros

8.9 -1.8% 8.7

22.1% 24.0%

H1 2019 H1 2020 H1 2019 H1 2020

After a first quarter with virtually zero growth, cement consumption in the 2nd quarter of 2020 showed surprising growth rates, especially in May and June. According to the SNIC (Sector Report - June 2020) sales per business day increased by +16.1% in June 2020 (vs. 2019), which offset the negative effects of the Covid-19 and enabled a cumulative growth of 3.6% at the end of the first six months.

Revenue of combined operations in the country stood at 36.4 million euros in the first half of 2020, 9.4% down on revenue recorded in the same period in 2019. However, discounting the effect of the exchange rate devaluation of the Real against the Euro, with a negative impact of around 9.0 million euros, revenue would have been higher by 5.3 million euros (+13.1%).

Cement sales increased by 13.1% in comparison with the same period in the previous year, with average sales prices in local currency rising by around 5%.

EBITDA totalled 8.7 million euros, which compares with the 8.9 million euros recorded year on year (i.e. only 1.8% decrease). It should be noted that EBITDA for the first half of 2019 included a gain of 3.4 million euros from sales tax refunds. Excluding this effect, and the very unfavourable exchange rate effect (-2.2 million euros), EBITDA would have increased by 23%, reflecting the good performance of commercial activity and the reduction in production costs.

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LEBANON

Revenue EBITDA EBITDA Mg

30.3 -25.2%

Million Euros 22.6 Million Euros

6.9 -42.5% 3.9

22.7% 17.5%

H1 2019 H1 2020 H1 2019 H1 2020

Since the last quarter of 2019, Lebanon plunged in a serious social and economic-financial crisis. Despite the efforts made by political forces to stabilise the situation, the outbreak of the Covid-19 pandemic aggravated an already precarious situation. The effects of the pandemic were felt sharply from mid-March onwards, with the publication of a presidential decree banning activities.

In this context, cement consumption was expected to continue to decrease. However, the magnitude of the reduction exceeded all expectations. Cement consumption in the first half of 2020 is indeed expected to have dropped 50% in relation to the same period in 2019, which had already declined 32% vis-à-vis 2018.

Consequently, the revenue of all operations in Lebanon fell by 25.2% to 22.6 million euros, compared to 30.3 million euros in the same period last year. This change benefited from a positive EUR/USD exchange rate effect of 557 thousand euros.

Cement sales in the domestic market decreased by 30.1% in comparison with the same period in the previous year, with a small rise in average sales prices. Consequently, revenue declined by approximately 28.1%. The export of 60 thousand tonnes of clinker partially made up for the loss in the domestic market.

Concrete revenue amounted to 1.4 million euros, down by an expressive figure of 41.4% over the same period in the previous year, due to the reduction in quantities sold (-46.9%), partially offset by an increase in the average sales price, and reflects the fact that the construction sector was one of the most affected by the current crisis.

EBITDA generated from operations in Lebanon stood at 3.9 million euros, down by 42.5% in relation to the same period of the previous year. This decrease is principally a result of the drop in quantities sold, being partially compensated for by control measures of fixed and variable costs.

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TUNISIA

Revenue EBITDA EBITDA Mg 23.8 -18.6% 19.4 Million Euros Million Euros

5.1 1.0% 5.1

21.2% 26.3%

H1 2019 H1 2020 H1 2019 H1 2020

Tunisia is still facing significant challenges, including high foreign and tax deficits, rising debt and insufficient growth to reduce unemployment. Some social unrest and pressure from union claims continue. Government deficit is reflected in public works and the real estate sector faces challenges due to difficulties in obtaining funding (in connection with the fragility of the banking sector), which impacts construction output.

The measures imposed by the government to contain the Covid-19 pandemic from spreading practically paralysed the country's economic activity from mid-March to early May, and construction activity was no exception.

In this context, it is estimated that the domestic cement market in the first half of 2020 was down by approximately 26% year on year. The cement market is still subject to strong competition, due to excess production capacity.

Revenue for combined operations in Tunisia showed a negative year-on-year variation of 18.6%, totalling 19.4 million euros and benefiting from a positive impact of the appreciation of the Tunisian dinar against the Euro by 1.4 million euros.

Revenue of the Cement business decreased around 18% to 17.3 million euros, reflecting the decline in cement sales in the domestic market (-37.3%), with sales to the external market slightly above the same period last year (+ 3 thousand tonnes). The positive variation in average sales prices on the domestic market (+14% in local currency) made it possible to mitigate the fall in revenue.

Concrete revenue fell 19.5% in relation to the same period of the previous year, due to declining quantities sold (-33.9%), offset by the positive variation in average selling price (+11.5%).

Despite the strong decrease in revenue, the EBITDA of the activities in Tunisia reached 5.1 million euro in the first half of 2020, i.e. a slight increase of 1.0% compared to the same period of 2019. This rise is justified by the increase in

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domestic sales prices, the decrease in fixed and variable costs (mainly due to the reduction in the price of solid fuels) and the appreciation of the Tunisian dinar against the euro which resulted in a positive impact of 379 thousand euros.

ANGOLA AND OTHERS Contrary to the growth estimate for the 1st quarter, according to the data available, the Angolan cement market showed negative cumulative variation in the 1st half of 24% in relation to the same period in 2019.

The efforts to contain the spread of the coronavirus may have contributed to the worsening of the economic situation, which had already been disrupted by the drop in oil prices since the beginning of the year.

In this context, the quantities of cement sold by Secil decreased 40.7% compared to the same period in 2019. In a context of strong inflation and significant depreciation of the Kwanza vis-à-vis the Euro, Secil Lobito has been implementing a strict price policy that can help it tackle significant increase in costs in the local currency and those arising from necessary imports. Under these conditions, the price of cement in local currency increased by about 14% year on year, partially offsetting the fall in quantities sold.

Consequently, revenue totalled 2.0 million euros, i.e. 59.4% below that in the same period in the previous year, being strongly affected by the currency depreciation, which produced a negative effect of 1.3 million euros.

EBITDA in the first half of 2020 amounted to a negative figure of 690 thousand euros, in contrast with the negative 1.1 million euros obtained over the same period in the previous year, which is a small improvement.

Expenditure was well managed by keeping the variable unit cost within the 1% decrease in local currency, mostly due to the lower clinker acquisition price (-13%). On the other hand, industrial fixed costs decreased 17% in local currency year on year which, considering the inflation in Angola and the acquisition of some conservation materials that are strongly pegged to the exchange rate, illustrate clearly the unit's efforts to control costs.

2nd Quarter 2020 vs. 2nd Quarter 2019

Despite being heavily impacted by the effects of the Covid-19 pandemic, EBITDA in the second quarter of 2020 was higher than EBITDA in the second quarter of 2019 by around 2.0 million euros. This rise was mainly due to positive variations in EBITDA of Brazil, Portugal and Angola.

The 2.0 million euro increase in Brazil resulted from the rise in cement consumption and in the average selling price, in spite of the strong depreciation of the Real.

In Portugal, the additional 1.6 million euros are largely due to the EBITDA of the Cement business, as a result of a combination of factors, such as growth in the domestic market and higher average sales price despite the decrease in CO2 sales (-2.7 million euros).

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In Angola, the positive developments in EBITDA of almost 1 million euros is related to the measures taken to control variable and fixed costs and the fact that EBITDA in the 2nd quarter of 2019 was impacted by a reclassification of operating income as financial income in the amount of 0.8 million euros.

The positive changes in these three geographies were partially offset by the declining performance in Tunisia and Lebanon, which was heavily hit by the effects of the pandemic response measures. In the particular case of Lebanon, this was in addition to the already weak economic and social situation that the country has been in since the last quarter of 2019. Further deterioration has been contained through tighter control of fixed and variable costs.

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ENVIRONMENT

2% 3% % of consolidatedtotal % of consolidatedtotal EBITDA Revenue H1 2020 H1 2020

HIGHLIGHTS IN 1ST HALF 2020 (VS. 1ST HALF 2019)

• ETSA recorded revenue of around 15.7 million Revenue euros in the period in analysis, which represented an increase of approximately 18.5% against the same period in 2019. 15.7 18.5%

Million Euros 13.2 • This variation results from an increase of about 17.7% in sales and around 19.5% in consolidated services rendered.

H1 2019 H1 2020

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EBITDA • EBITDA for ETSA totalled approximately 5.1 EBITDA Mg

million euros in the first six months of 2020, 5.1 representing a growth of about 74.7% in

Million Euros 74.7% comparison with the same period of the previous 2.9 year, essentially due to a higher revenue.

22.2% 32.8%

H1 2019 H1 2020

SUMMARY TABLE OF FINANCIAL INDICATORS

H1 2020 H1 2019 Var. Q2 2020 Q2 2019 Var. IFRS - accrued amounts (million euros) Revenue 15.7 13.2 18.5% 7.3 7.3 -0.5% EBITDA 5.1 2.9 74.7% 2.5 1.7 46.6% EBITDA margin (%) 32.8% 22.2% 10.6 p.p. 34.1% 23.1% 10.9 p.p. Depreciation, amortisation and impairment losses (1.6) (1.5) -3.9% (0.8) (0.7) -5.8% Provisions ------EBIT 3.6 1.4 148.2% 1.7 0.9 79.0% EBIT margin (%) 22.9% 10.9% 11.9 p.p. 23.2% 12.9% 10.3 p.p. Net financial results (0.1) (0.2) 20.1% (0.1) (0.1) 16.4% Profit before taxes 3.5 1.3 169.5% 1.6 0.9 87.9% Income taxes (0.8) (0.1) -615.6% (0.4) (0.2) -127.9% Net profit for the period 2.7 1.2 127.2% 1.2 0.7 78.2% Attributable to ETSA shareholders 2.7 1.2 127.2% 1.2 0.7 78.2% Attributable to non-controlling interests (NCI) ------Cash Flow 4.2 2.7 58.0% 2.0 1.4 40.6%

30/06/2020 31/12/2019

Equity (before NCI) 76.0 73.9 Interest-bearing net debt 1.9 5.7 Lease liabilities (IFRS 16) 2.1 1.7 Total 4.0 7.4 Note: Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.

ETSA recorded revenue of around 15.7 million euros in the period in analysis, which represented an increase of approximately 18.5% against the first six months of 2019.

This development was mostly caused by the following combined elements: (i) an increase in average sales price of class 3 fats and meal by about 28.6% and 5.9%, respectively, in comparison with the first half in 2019, and iii) an increase of

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about 19.5% in consolidated services rendered, essentially due to the increase in the collection of Class 1 and 2 by- products from slaughterhouses, the increased billing of animal carcass collection and the growing wholesale collection activity.

EBITDA for ETSA totalled approximately 5.1 million euros in the first six months of 2020, representing a growth of about 7.4% compared to the same period of the previous year, essentially due to a higher revenue mentioned, and costs evolved as a function of their variability in relation to y-o-y revenue.

The EBITDA margin stood at 32.8%, up by around 10.6 p.p. over the margin for the same period of 2019.

Financial results improved by about 20.1% in relation to the same period in the previous year, mostly due to the reduction in average debt.

The combined impact of these factors resulted in a Net Profit attributable to ETSA shareholders for the first half of 2020 of approximately 2.7 million euros, up by around 127.2% year on year.

2nd Quarter 2020 vs. 2nd Quarter 2019

ETSA recorded revenue of about 7.3 million euros in the 2nd quarter of 2020, which is a very similar figure to that of the same period in the previous year (down by 0.5%). A decrease of about 6.3% in sales and an increase of around 8.8% in consolidated services rendered have helped to maintain revenue levels.

EBITDA totalled approximately 2.5 million euros in the 2nd quarter of 2020, representing a growth of about 46.6% in comparison with the same period of the previous year, essentially due to cost reduction.

VENTURE CAPITAL In the first half of the year, Semapa Next, in partnership with Techstars, completed the second acceleration programme of 10 startups. The selected startups were from Portugal, the USA, France, Australia and Israel, operating in Industry, the Environment, Logistics, Tourism and Leisure. During this period, Semapa Next also made a direct investment in the company DefinedCrowd dedicated to solving an artificial intelligence problem - the need for continuous access to highly accurate data. This round of DefinedCrowd's Series B investment managed to collect 50.5 million US dollars globally and aims to enlarge existing solutions, launch new innovative subscription-based deals and expand its global reach.

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3. OUTLOOK

After the outbreak of Covid-19 at year end 2019 in China, following the declaration of an international public health emergency on 30 January 2020, the World Health Organization (WHO) announced on 11 March the new coronavirus outbreak a pandemic and the global socio-economic outlook changed radically. Considering the unknown duration of the pandemic, the different plans for ending lockdowns implemented by countries and their consequences, there is an unprecedented factor of uncertainty regarding the performance of businesses in 2020. Estimates of future impacts are highly dependent on the duration of the implemented measures and the way in which economic activity will resume. As such, it is difficult to provide a reliable quantification of the financial impacts for the Semapa Group.

PULP AND PAPER Some recent positive signs point to a gradual, but probably slow, recovery of the UWF paper business in the third quarter of 2020, in line with the economic recovery, albeit against the backdrop of much uncertainty and great volatility. After a major effort to prepare for the seasonally weak summer period, incoming orders at Navigator are currently close to normal for this time of year, with an order backlog in July of almost than 40 days (the fourth highest for the period in 11 years) and well above the industry average. In the current month all of the Group's paper machines are working again, and the Company is continuously monitoring market developments and continuing to adjust production to the level of demand, in a context where the instability of the markets remains very high.

There is still the risk of a second wave of the pandemic, particularly in the markets outside of Europe, with a negative impact on exporting companies like Navigator. The pressure on paper prices that has been felt throughout the 2nd quarter may continue, putting additional pressure on a traditionally weaker period in terms of activity.

The resilience of pulp in the first half of the year seems to be showing signs of slowing down, with the arrival of a seasonally weaker period and the cooling of demand for tissue and packaging products, after the unrestrained pace recorded at the beginning of the pandemic. As purchases of these products slow down and the supply chain recover completely, the demand for pulp is beginning to reflect the impact of the significant reduction in the production of graphic paper. Some containment on the production side is expected as maintenance stoppages are postponed to the 2nd half due to the pandemic. Analysts estimate that the performance of the segment in the third quarter will be more moderate, and they expect a recovery in the last months of the year.

After a positive performance in the 1st half, the tissue business is expected to see some slowdown in demand in the At Home segment and a gradual recovery in the Away From Home sector, with the recovery of activity in Horeca channels and companies. Navigator hopes to maintain the good level of industrial performance it has achieved in its tissue assets and to continue ramping up its operations.

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After an extremely adverse quarter, with unprecedented market conditions, a gradual recovery of the Company's activity is expected over the coming months. The pace and extent of recovery will obviously depend on the pandemic context, the widespread lifting of lockdown measures and the economic impacts of such measures. Navigator has done and continues to do everything in their power, namely operational and commercial planning, cost efficiency measures, the allocation of its cash flow and the effective management of its liquidity.

CEMENT AND OTHER BUILDING MATERIALS The Bank of Portugal (Economic Bulletin - June 2020) estimated that Portugal’s economy will contract by 9.5%, thus reviewing downwards the forecasts published in March: -3.7% in the baseline scenario and -5.7% in the adverse scenario.

Current projections are still surrounded by much uncertainty and reflect the strong negative impact of the pandemic in the first half of the year. In Q1 2020, GDP decreased 3.8% year on year. In the 2nd quarter of 2020, more affected by the pandemic and the impact of the containment measures, the quarter-on-quarter rate of change of activity is expected to decline by approximately 15%.

As the containment measures are gradually lifted while the pandemic is kept relatively under control, economic activity should improve from the Q3 2020 onwards, and GDP is projected to grow by 5.2% in 2021 and 3.8% in 2022.

The IMF’s World Economic Outlook Update (WEO), published in June, estimates that the world GDP in 2020 will suffer an actual decline of 4.9%, (downward review of the estimated 1.9% published in April), followed by an increase of 5.4% in 2021 (5.8% in April's estimates). The Euro Area is expected to contract 10.2% in 2020 (-7.5% in April 2020) and grow 6.0% in 2021 (4.7% in April 2020).

According to the same IMF Update, the outlook for Brazil in 2020 expects GDP to decline by 9.1% (-5.3% according to the projections in April), followed by 3.6% increase in 2021 (2.9% in the April projections).

After the sharp reduction in economic activity from the end of March (caused by the pandemic), several indicators hint at a resumption in economic activity growth from May onwards.

Despite the dynamics of cement consumption in the months of May and especially June, leveraged by the small construction projects but also by the resumption of real estate development projects, the SNIC warns about the reduction in the number of new projects in 2020, and fears that in the second half, especially in the last quarter, construction and consequently the cement industry may find itself again in dire straits.

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In Lebanon, the political and economic environment has faced much uncertainty since the last quarter of 2019, with the country plunged into a serious economic and social crisis. The measures implemented to contain the pandemic, which brought the country to almost a complete halt, made matters worse.

Displaying one of the World’s highest foreign debts, the country announced in March its first default after several months of declining foreign currency reserves and a depreciation of the Lebanese pound in the parallel market. In May, Lebanon initiated negotiations with the IMF following the request for external assistance, but no agreement has been reached so far.

According to the latest IMF estimates (World Economic Outlook, IMF April 2020) the scenario for the Lebanese economy is recession with a 12% drop in the GDP.

With regard to Tunisia, the most recent forecasts published by the IMF (World Economic Outlook, IMF April 2020) expect the Tunisian gross domestic product to decrease by 4.3% in 2020, followed by growth of 4.1% in 2021. Projected levels of inflation are 6.2% and 4.9% in 2020 and 2021, respectively. Tunisia already found itself in financial hardship and social instability, and the pandemic has increased uncertainty as to the country’s progress.

The measures adopted by the government to contain the spread of the pandemic - curfews from 17 March and a nationwide declaration of quarantine on 20 March - virtually paralysed the country's economic activity until early May, and the construction activity was no exception.

The outlook for Angola (World Economic Outlook, IMF April 2020) hints at a decline in real GDP of 1.4%, followed by a 2.6% increase in 2021.

The efforts to contain the spread of the coronavirus may have contributed to the worsening of the economic situation, which had already been disrupted by the drop in oil prices since the beginning of the year.

ENVIRONMENT The crisis caused by the Covid-19 pandemic has significantly altered the economic landscape in Portugal, as in Europe and the rest of the world, with consequences difficult to predict in several markets. The information available suggests that the food market where ETSA operates, given its nature, will be less affected by the health crisis when compared to other sectors of activity.

However, some effects for the sector may arise from, either lower purchase power of the Portuguese population, or expected lower oil prices. The first effect will bring the volumes of raw material collected down, and consequently the volumes of finished products sold, while the second effect will impact the operation of biodiesel plants in Europe and thus the quantities of, both Category 3 and Category 1, fat received.

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The current crisis also presents several short term opportunities that include: (i) concentrating on the horizontal expansion of its production and destination markets (exports accounted for around 48.7% of total sales on 30 June 2020), (ii) identifying new opportunities for vertical growth, channelling its investments to improving operational efficiency, extracting maximum value from the channels operated and retaining the loyalty of the main conventional and alternative collection centres, and (iii) focus on sustained innovation and research and development addressed at ensuring new profit thresholds for the business.

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4. PERFORMANCE OF SEMAPA SHARES ON THE STOCK EXCHANGE

The first quarter of 2020 was marked by the historic collapse of stock markets following the shock caused by the rapid spread of the Covid-19 worldwide and the measures adopted by governments to contain the virus in order to mitigate the impacts on public health, which resulted in the paralysis of many of the world's major economies.

Most countries took rapid action to mitigate the impact of the economic crisis caused by the pandemic. The key role played by the main central banks, which acted rapidly with sound commitment to the purpose in question, and more recently expanded the quantitative easing measures, should be highlighted.

Thus, in the 2nd quarter the stock markets reacted favourably to the set of tax and monetary incentives adopted, with most stock market indices recovering, although differently between regions and sectors of activity, and insufficiently to cancel out the strong falls recorded in the previous quarter. However, the 2nd quarter also had ups and downs: some sessions were highly volatile in reaction to the increase in the number of people infected by the virus, mainly in the US and Latin America. The good performance of the main Frankfurt stock exchange index and the Dow Jones is worthy of notice, both closing the 1st half of this year with depreciations below 10%, in contrast to most stock exchange indexes in other financial markets that accumulated losses of more than 2 digits.

In this crisis context, the value of Semapa shares in the period depreciated 41.0%, alongside the weak performance on the PSI20 (-15.8%) and the EFB (-15.0%) indexes, mostly driven by the performance of Navigator share price, that in turn was in line with the stock market evolution of the Pulp and Paper sector globally. Semapa shares recorded their lowest value of 7.08 euros on 19 March, trading at their highest value of 13.86 euros on the first trading day of 2020.

MANAGEMENT REPORT 35

1ST HALF 2020

Share price Volume

15.00 1,000,000 Max = 02-01: eur 13.86 Var. Period Semapa 14.00 -41.0% 900,000 Min = 19-03: eur 7.08

13.00 800,000

12.00 700,000

11.00 600,000 Average daily volume 10.00 500,000 97,987

9.00 400,000 Share price 8.00 300,000 02-01: eur 13.86 7.00 30-06: eur 8.09 200,000

6.00 100,000

5.00 0 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

110.00

100.00 Var. Period EFB

90.00 -15.0%

80.00 Var. Period PSI20

70.00 -15.8%

60.00 Basis 100: 31/12/2019

50.00 Var. Period Semapa 40.00 -41.0%

30.00 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

EFB – Euronext Family Business Index Note: Closing prices

MANAGEMENT REPORT 36

1ST HALF 2020

Lisbon, 30 July 2020

BOARD OF DIRECTORS

CHAIRMAN:

HEINZ-PETER ELSTRODT

MEMBERS:

JOÃO NUNO DE SOTTOMAYOR PINTO DE CASTELLO BRANCO

VÍTOR PAULO PARANHOS PEREIRA

RICARDO MIGUEL DOS SANTOS PACHECO PIRES

ANTÓNIO PEDRO DE CARVALHO VIANA BAPTISTA

CARLOS EDUARDO COELHO ALVES

FILIPA MENDES DE ALMEIDA DE QUEIROZ PEREIRA

FRANCISCO JOSÉ MELO E CASTRO GUEDES

JOSÉ ANTÔNIO DO PRADO FAY

LUA MÓNICA MENDES DE ALMEIDA DE QUEIROZ PEREIRA

MAFALDA MENDES DE ALMEIDA DE QUEIROZ PEREIRA

VÍTOR MANUEL GALVÃO ROCHA NOVAIS GONÇALVES

MANAGEMENT REPORT 37

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DEFINITIONS EBITDA = EBIT + Depreciation, amortisation and impairment losses + Provisions

EBIT = Operating profit

Operating profit = Earnings before taxes, financial results and results of associates and joint ventures as presented in the Income Statement in IFRS format

Cash-flow = Net profit for the period + Depreciation, amortisation and impairment losses + Provisions

Interest-bearing net debt = Non-current interest-bearing debt (net of loan issue charges) + Current interest-bearing debt (including debts to shareholders) – Cash and cash equivalents

.

MANAGEMENT REPORT 38

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PART 2

DECLARATION REQUIRED UNDER ARTICLE 246.1 C) OF THE SECURITIES CODE

DECLARATION REQUIRED UNDER ARTICLE 246.1 C) OF THE SECURITIES CODE 39

1ST HALF 2020

DECLARATION REQUIRED UNDER ARTICLE 246.1 C) OF THE SECURITIES CODE

Article 246.1 c) of the Securities Code requires that each of the persons responsible for issuers make a number of declarations, as described in this article. In the case of Semapa, a standard declaration has been adopted, which reads as follows:

“I hereby declare, under the terms and for the purposes of Article 246.1 c) of the Securities Code that, to the best of my knowledge, the condensed financial statements of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A., for the first half of 2020, were drawn up in accordance with the relevant accounting rules, and provide a true and fair view of the assets and liabilities, financial affairs and profit or loss of said company and other companies included in the consolidated accounts, and that the interim management report sets out faithfully the information required by Article 246.2 of the Securities Code.”

As required by this rule, we provide below a list of the names of the people signing the declaration and their functions in the company:

Name Function Heinz-Peter Elstrodt Chairman of the Board of Directors João Nuno de Sottomayor Pinto de Castello Branco Member of the Board of Directors Ricardo Miguel dos Santos Pacheco Pires Member of the Board of Directors Vítor Paulo Paranhos Pereira Member of the Board of Directors António Pedro de Carvalho Viana-Baptista Member of the Board of Directors Carlos Eduardo Coelho Alves Member of the Board of Directors Filipa Mendes de Almeida de Queiroz Pereira Member of the Board of Directors Francisco José Melo e Castro Guedes Member of the Board of Directors José Antônio do Prado Fay Member of the Board of Directors Lua Mónica Mendes de Almeida de Queiroz Pereira Member of the Board of Directors Mafalda Mendes de Almeida de Queiroz Pereira Member of the Board of Directors Vitor Manuel Galvão Rocha Novais Gonçalves Member of the Board of Directors José Manuel Oliveira Vitorino Chairman of the Audit Board Gonçalo Nuno Palha Picão Caldeira Member of the Audit Board Maria da Graça Torres Ferreira da Cunha Gonçalves Member of the Audit Board

DECLARATION REQUIRED UNDER ARTICLE 246.1 C) OF THE SECURITIES CODE 40

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PART 3

LIST OF QUALIFYING HOLDINGS AS REQUIRED BY SUB-PARAS. C) OF ARTICLE 9.1 OF REGULATION NO. 5/2008 OF THE SECURITIES CODE (CMVM)

LIST OF QUALIFYING HOLDINGS AS REQUIRED BY SUB-PARAS. C) OF ARTICLE 9.1 OF REGULATION NO. 5/2008 OF THE SECURITIES CODE (CMVM)41

1ST HALF 2020

LIST OF QUALIFYING HOLDINGS, INDICATING THE NUMBER OF SHARES HELD AND THE CORRESPONDING PERCENTAGE OF VOTING RIGHTS, CALCULATED IN ACCORDANCE WITH ARTICLE 20 OF THE SECURITIES CODE (WITH REFERENCE TO THE DATE OF THIS REPORT):

% non- % shares and voting Holder No. shares suspendedvoting rights rights

A - Sodim, SGPS, S.A. 16,293,884 20.049% 20.401% Directors of Sodim Filipa Mendes de Almeida de Queiroz Pereira 5,488 0.007% 0.007% Mafalda Mendes de Almeida de Queiroz Pereira 5,888 0.007% 0.007% Lua Mónica Mendes de Almeida de Queiroz Pereira 5,888 0.007% 0.007% Cimigest, SGPS, S.A. 3,185,019 3.919% 3.988% Cimo - Gestão de Participações, SGPS, S.A. 38,959,431 47.938% 48.779% Sociedade Agrícola da Quinta da Vialonga, S.A. 625,199 0.769% 0.783% Subtotal: 59,080,797 72.697% 73.972%

B - Bestinver Gestión, S.A., S.G.I.I.C. - - - Bestinver Global, F.P. 362,428 0.446% 0.454% Bestinver Plan Mixto, F.P. 91,556 0.113% 0.115% Bestinver Mixto, F.I. 97,233 0.120% 0.122% Bestinver Bolsa, F.I. 1,095,302 1.348% 1.371% Bestinfond, F.I. 1,016,934 1.251% 1.273% Bestvalue, F.I. 278,356 0.343% 0.349% Bestinver Empleo Ii, F.P. 1,963 0.002% 0.002% Bestinver Consolidacion EPSV 1,568 0.002% 0.002% Bestinver Futuro EPSV 8,776 0.011% 0.011% Bestinver Empleo Iii, F.P. 1,506 0.002% 0.002% Bestinver Hedge Value Fund, F.I.L. 932,756 1.148% 1.168% Bestinver Empleo, F.P. 11,068 0.014% 0.014% Bestinver Iberian SICAV 89,830 0.111% 0.112% Bestinver Bestinfund SICAV 40,613 0.050% 0.051% Bestinver Crecimiento EPSV 2,162 0.003% 0.003% Subtotal: 4,032,051 4.961% 5.048%

C - Norges Bank (the Central Bank of Norway) 1,699,613 2.091% 2.128%

Semapa - Sociedade de Investimento e Gestão, SGPS, S.A. holds 1,400,627 own shares, corresponding to 1.723% of its share capital.

LIST OF QUALIFYING HOLDINGS AS REQUIRED BY SUB-PARAS. C) OF ARTICLE 9.1 OF REGULATION NO. 5/2008 OF THE SECURITIES CODE (CMVM)42

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PART 4

INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 43 1ST HALF 2020

INTERIM CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2020

Amounts in Euro Note H1 2020 H1 2019 Q2 2020 Q2 2019 Unaudited Unaudited Revenue 2.1 941,795,340 1,119,235,878 417,763,372 567,911,521 Other operating income 2.2 48,696,743 50,328,308 13,494,458 27,206,149 Changes in the fair value of biological assets 3.7 (3,028,521) (3,076,228) (752,486) (1,777,543) Costs of goods sold and materials consumed 4.1.3 (362,551,852) (446,710,503) (153,728,900) (212,439,257) Variation in production 4.1.4 (7,370,985) 22,186,765 (12,590,626) (2,929,894) Supplies and services 2.3 (275,179,893) (318,872,944) (127,180,801) (161,993,836) Payroll costs 7.1 (111,127,929) (124,004,602) (51,058,959) (61,902,895) Other operating expenses 2.3 (27,936,859) (34,624,574) (1,772,179) (22,174,463) Net provisions 9.1 (4,020,428) (1,514,291) (1,696,154) (1,606,515) Depreciation, amortisation and impairment losses in non-financial assets 3.6 (111,752,030) (112,225,723) (54,660,414) (54,433,631) Operating results 87,523,586 150,722,086 27,817,311 75,859,636

Group share of (loss)/ gains of associated companies and joint ventures 10.3 1,269,879 408,080 453,861 195,900 Financial income and gains 5.11 15,165,065 7,837,314 4,163,924 1,879,716 Financial expenses and losses 5.11 (59,803,275) (30,979,083) (21,970,964) (15,613,674) Profit before tax 44,155,255 127,988,397 10,464,132 62,321,578

Income tax 6.1 (4,889,550) (27,331,246) 4,634,441 (15,246,467) Net profit for the period 39,265,705 100,657,151 15,098,573 47,075,111

Attributable to Semapa's shareholders 30,286,796 73,508,542 13,067,872 33,787,936 Attributable to non-controlling interests 5.6 8,978,909 27,148,609 2,030,701 13,287,175

Earnings per share Basic earnings per share, Euro 5.3 0.378 0.912 0.163 0.419 Diluted earnings per share, Euro 5.3 0.378 0.912 0.163 0.419

The following notes form an integral part of these interim consolidated financial statements.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 44 1ST HALF 2020

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2020

Amounts in Euro Note H1 2020 H1 2019 Q2 2020 Q2 2019 Unaudited Unaudited

Net profit for the period without non-controlling interests 39,265,705 100,657,151 15,098,573 47,075,111

Items that may subsequently be reclassified to the income statement Hedging derivative financial instruments Fair value changes 6.2 1,364,943 (4,327,567) 3,415,073 (1,173,698) Tax on items above (375,360) 1,189,272 (939,236) 314,699 Currency translation differences (39,763,452) 8,588,121 (12,401,632) (291,480) Other comprehensive income for the period 1,335,641 4,487,734 360,023 1,081,808

Items that may not subsequently be reclassified to the income statement Remeasurement of post-employment benefits Remeasurements 7.3.11 (4,696,260) (8,977,875) 10,314,950 4,081,170 Tax on items above 7.3.11 33,143 155,799 33,143 155,799 Other comprehensive income (net of taxes) (42,101,345) 1,115,484 782,321 4,168,298 Total comprehensive income for the period (2,835,640) 101,772,635 15,880,894 51,243,409 Attributable to: Semapa's shareholders (10,977,836) 79,518,131 11,138,653 38,579,068 Non-controlling interests 8,142,196 22,254,504 4,742,241 12,664,341 (2,835,640) 101,772,635 15,880,894 51,243,409

The following notes form an integral part of these interim consolidated financial statements.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 45

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INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 JUNE 2020

Amounts in Euro Note 30/06/2020 31/12/2019

ASSETS Non-current assets Goodwill 3.1 332,397,504 345,172,676 Intangible assets 3.2 313,278,176 310,157,999 Property, plant and equipment 3.3 1,910,110,066 2,025,009,116 Assets under right of use 3.5 79,575,701 75,664,260 Biological assets 3.7 128,741,320 131,769,841 Investment in associates and joint ventures 10.3 2,896,333 5,454,286 Investment properties 3.9 372,466 373,673 Other financial investments 8.3 9,005,310 4,066,072 Receivables and other non-current assets 4.2 35,288,976 64,466,459 Deferred tax assets 6.2 82,116,542 89,970,779 2,893,782,394 3,052,105,161 Current assets Inventories 4.1.1 320,929,854 306,397,256 Receivables and other current assets 4.2 376,765,403 369,233,838 Income tax 6.1 35,821,293 27,040,393 Cash and cash equivalents 5.9 726,664,351 259,241,194 1,460,180,901 961,912,681 Non-current assets held for sale 3.8 7,642,459 7,809,209 1,467,823,360 969,721,890

Total assets 4,361,605,754 4,021,827,051

EQUITY AND LIABILITIES Capital and reserves Share capital 5.2 81,270,000 81,270,000 Treasury shares 5.2 (15,946,363) (8,922,980) Translation reserve 5.5 (163,541,003) (122,926,540) Fair value reserve 5.5 (2,447,590) (3,030,775) Legal reserve 5.5 16,695,625 16,695,625 Other reserves 5.5 982,702,158 868,632,110 Retained eanings 5.5 2,846,905 5,098,854 Net profit for the period 30,286,796 124,053,720 Equity attributable to Semapa's shareholders 931,866,528 960,870,014 Non-controlling interests 5.6 307,324,738 300,848,910 Total Equity 1,239,191,266 1,261,718,924

Non-current liabilities Interest-bearing liabilities 5.7 1,437,569,617 1,396,732,169 Lease liabilities 5.8 66,193,782 62,744,733 Pensions and other post-employment benefits 7.3.6 13,990,334 9,495,358 Deferred tax liabilities 6.2 238,771,930 243,892,373 Provisions 9.1 53,190,477 52,086,093 Payables and other non-current liabilities 4.3 27,479,913 30,837,585 1,837,196,053 1,795,788,311 Current liabilities Interest-bearing liabilities 5.7 634,843,701 333,187,172 Lease liabilities 5.8 12,118,548 12,406,557 Payables and other current liabilities 4.3 580,601,708 562,177,462 Income tax 6.1 57,654,478 56,548,625 1,285,218,435 964,319,816 Total liabilities 3,122,414,488 2,760,108,127 Total equity and liabilities 4,361,605,754 4,021,827,051 The following notes form an integral part of these interim consolidated financial statements.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 46

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INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTHS PERIOD BETWEEN 1 JANUARY 2020 AND 30 JUNE 2020

Share Treasury Translation Fair value Legal Other Retained Net profit Non-controlling Amounts in Euro Note capital shares reserve reserve reserve reserves earnings for the period Total interests Total Equity as at 1 January 2020 81,270,000 (8,922,980) (122,926,540) (3,030,775) 16,695,625 868,632,108 5,098,856 124,053,720 960,870,014 300,848,910 1,261,718,924 Net profit for the period ------30,286,796 30,286,796 8,978,909 39,265,705 Other comprehensive income (net of taxes) - - (40,614,463) 583,185 - - (2,251,949) - (42,283,227) 181,882 (42,101,345) Total comprehensive income for the period - - (40,614,463) 583,185 - - (2,251,949) 30,286,796 (11,996,431) 9,160,791 (2,835,640) Application of 2019 profit for the period: - Transfer to other reserves 5.5 - - - - - 114,070,048 - (114,070,048) - - - - Dividends paid 5.4 ------(9,983,672) (9,983,672) - (9,983,672) Acquisition of treasury shares 5.2 - (7,023,383) ------(7,023,383) - (7,023,383) Dividends paid by subsidiaries to non-controlling interests 5.6 ------(2,684,658) (2,684,658) Total transactions with shareholders - (7,023,383) - - - 114,070,048 - (124,053,720) (17,007,055) (2,684,658) (19,691,713) Other movements - - - - - 2 (2) - - (305) (305) Equity as at 30 June 2020 81,270,000 (15,946,363) (163,541,003) (2,447,590) 16,695,625 982,702,158 2,846,905 30,286,796 931,866,528 307,324,738 1,239,191,266

Share Treasury Translation Fair value Legal Other Retained Net profit Non-controlling Amounts in Euro Note capital shares reserve reserve reserve reserves earnings for the period Total interests Total Equity as at 1 January 2019 81,270,000 (6,740,954) (129,296,945) (2,713,976) 16,695,625 780,089,232 18,496,568 132,554,337 890,353,887 367,236,794 1,257,590,681 Net profit for the period ------73,508,542 73,508,542 27,148,609 100,657,151 Other comprehensive income (net of taxes) - - 7,829,115 (2,178,955) - - (2,774,214) - 2,875,946 (1,760,462) 1,115,484 Total comprehensive income for the period - - 7,829,115 (2,178,955) - - (2,774,214) 73,508,542 76,384,488 25,388,147 101,772,635 Application of 2018 profit for the period: - Transfer to other reserves 5.5 - - - - - 88,542,879 - (88,542,879) - - - - Dividends paid 5.4 ------(41,267,948) (41,267,948) - (41,267,948) - Bonuses ------(2,743,510) (2,743,510) - (2,743,510) Acquisition of treasury shares 5.2 - (360,836) ------(360,836) - (360,836) Dividends paid by subsidiaries to non-controlling interests 5.6 ------(63,677,299) (63,677,299) Acquisitions/Disposals to non controlling-interests 5.6 ------(6,126,939) (6,126,939) (7,532,596) (13,659,535) Total transactions with shareholders - (360,836) - - - 88,542,879 (6,126,939) (132,554,337) (50,499,233) (71,209,895) (121,709,128) Other movements - - - - - 2,743,510 - - 2,743,510 12,576 2,756,086 Equity as at 30 June 2019 81,270,000 (7,101,790) (121,467,830) (4,892,931) 16,695,625 871,375,621 9,595,415 73,508,542 918,982,652 321,427,622 1,240,410,274

The following notes form an integral part of these interim consolidated financial statements.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 47 1ST HALF 2020

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2020

Amounts in Euro Notes H1 2020 H1 2019

OPERATING ACTIVITIES Receipts from customers 1,044,191,693 1,168,468,220 Payments to suppliers (740,116,835) (803,907,772) Payments to employees (87,619,013) (110,218,780) Cash flows from operations 216,455,845 254,341,668

Income tax received/ (paid) (5,055,179) (9,620,506) Other receipts/ (payments) relating to operating activities 33,435,236 (34,453,630) Cash flows from operating activites (1) 244,835,902 210,267,532 INVESTING ACTIVITIES Inflows: Financial investments 9,680,823 - Property, plant and equipment 1,585,291 747,355 Interest and similar income 3,680,933 820,497 Group share of (loss)/ gains of associated companies and joint ventures 772,089 979,703 Other assets - 229,410 15,719,136 2,776,965 Outflows: Financial investments (5,223,018) (15,030,087) Cash and cash equivalents - changes in consolidation perimeter - - Property, plant and equipment (72,213,538) (79,513,338) Intangible assets (743,949) - Other assets (199,049) - (78,379,554) (94,543,425) Cash flows from investing activites (2) (62,660,418) (91,766,460)

FINANCING ACTIVITIES Inflows: Interest-bearing liabilities 1,263,186,152 1,764,370,046 1,263,186,152 1,764,370,046 Outflows: Interest-bearing liabilities (891,273,059) (1,714,020,693) Amortisation of lease contracts 5.1 (9,742,965) (7,782,594) Interest and similar expense 5.1 (22,894,235) (25,690,057) Dividends 5.4 (40,848,042) (103,142,514) Acquisition of treasury shares 5.2 (7,023,382) (360,836) Other financing activities (123,294) - (971,904,977) (1,850,996,694) Cash flows from financing activities (3) 291,281,175 (86,626,648) CHANGE IN CASH AND CASH EQUIVALENTS (1)+(2)+(3) 473,456,659 31,874,424 Foreign exchange gains/ (losses) (3,432,953) (402,030)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 5.9 259,241,194 183,248,978 Impairment (2,600,549) (370,172) CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 5.9 726,664,351 214,351,200

The following notes form an integral part of these interim consolidated financial statements.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 48

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CONTENTS

1 INTRODUCTION ...... 51 1.1 INTRODUCTION ...... 51 1.2 RELEVANT EVENTS OF THE PERIOD ...... 52 1.3 SUBSEQUENT EVENTS ...... 54 1.4 BASIS FOR PREPARATION ...... 54 1.5 NEW IFRS ADOPTED AND TO BE ADOPTED ...... 58 1.6 MAIN ESTIMATES AND JUDGEMENTS...... 63 2 OPERATIONAL PERFORMANCE ...... 64 2.1 REVENUE AND SEGMENT REPORTING ...... 64 2.2 OTHER OPERATING INCOME ...... 70 2.3 OTHER OPERATING EXPENSES ...... 72 3 INVESTMENTS ...... 73 3.1 GOODWILL...... 73 3.2 INTANGIBLE ASSETS ...... 74 3.3 PROPERTY, PLANT AND EQUIPMENT ...... 76 3.4 GOVERNMENT GRANTS ...... 80 3.5 ASSETS UNDER RIGHT OF USE ...... 81 3.6 DEPRECIATION, AMORTISATION AND IMPAIRMENT LOSSES ...... 82 3.7 BIOLOGICAL ASSETS ...... 83 3.8 NON-CURRENT ASSETS HELD FOR SALE ...... 85 3.9 INVESTMENT PROPERTIES ...... 86 4 WORKING CAPITAL ...... 87 4.1 INVENTORIES ...... 87 4.2 RECEIVABLES AND OTHER CURRENT ASSETS ...... 88 4.3 PAYABLES AND OTHER CURRENT LIABILITIES ...... 90 5 CAPITAL STRUCTURE ...... 92 5.1 CAPITAL MANAGEMENT ...... 92 5.2 SHARE CAPITAL AND THEASURY SHARES ...... 92 5.3 EARNINGS PER SHARE ...... 93 5.4 DIVIDENDS ...... 94 5.5 RESERVES AND RETAINED EARNINGS ...... 94

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 49

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5.6 NON-CONTROLLING INTERESTS ...... 95 5.7 INTEREST-BEARING LIABILITIES ...... 97 5.8 LEASE LIABILITIES ...... 101 5.9 CASH AND CASH EQUIVALENTS ...... 102 5.10 CASH FLOWS FROM FINANCING ACTIVITIES ...... 102 5.11 NET FINANCIAL RESULTS ...... 103 6 INCOME TAX ...... 103 6.1 INCOME TAX FOR THE PERIOD ...... 103 6.2 DEFERRED TAXES ...... 106 7 PAYROLL ...... 108 7.1 SHORT-TERM EMPLOYEE BENEFITS ...... 108 7.2 REMUNERATION OF CORPORATE BODIES ...... 109 7.3 POST-EMPLOYMENT BENEFITS ...... 109 8 FINANCIAL INSTRUMENTS...... 117 8.1 FINANCIAL RISK MANAGEMENT ...... 117 8.2 DERIVATIVE FINANCIAL INSTRUMENTS ...... 125 8.3 OTHER FINANCIAL INVESTMENTS ...... 129 8.4 FINANCIAL ASSETS AND LIABILITIES ...... 130 9 PROVISIONS, COMMITMENTS AND CONTINGENCIES ...... 131 9.1 PROVISIONS ...... 131 9.2 COMMITMENTS ...... 134 9.3 CONTINGENT ASSETS AND LIABILITIES ...... 135 10 GROUP STRUCTURE ...... 137 10.1 COMPANIES INCLUDED IN THE CONSOLIDATION PERIMETER ...... 137 10.2 CHANGES IN THE CONSOLIDATION PERIMETER ...... 140 10.3 INVESTMENT IN ASSOCIATES AND JOINT-VENTURES ...... 141 10.4 TRANSACTIONS WITH RELATED PARTIES ...... 142 11 RISK MANAGEMENT ...... 143 11.1 STRATEGIC RISKS ...... 14 3 11.2 OPERATIONAL RISKS ...... 147 12 EXPLANATION ADDED FOR TRANSLATION ...... 161

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 50

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INTRODUCTION

(Translation of a report originally used in Portuguese)

The following symbols are used in the presentation of the Notes to the financial statements:

ACCOUNTING POLICIES

This symbol indicates the disclosure of accounting policies specifically applicable to the items in the respective Note.

MAIN ACCOUNTING ESTIMATES AND JUDGEMENTS

This symbol indicates the disclosure of the estimates and/or judgements made regarding the items in the respective Note. The most significant estimates and judgements are presented in Note 1.6.

REFERENCE

This symbol indicates a reference to another Note or another section of the Financial Statements where more information about the items disclosed is presented.

1.1. INTRODUCTION

The SEMAPA Group (Group) comprises Semapa — Sociedade de Investimento e Gestão, SGPS, S.A. (“Semapa”) and its subsidiaries. Semapa located at Av. Fontes Pereira de Melo, 14, 10º Piso, Lisboa was incorporated on 21 June 1991 and its corporate purpose is to manage holdings in other companies as an indirect form of performing economic activities. The Company has been listed on NYSE Euronext Lisbon since 1995 with ISIN PTSEM0AM0004.

Semapa leads an Enterprise Group with activities in three distinct business segments: pulp and paper, cement and derivatives, and environment, developed respectively through its subsidiaries The Navigator Company (former Portucel, S.A. named in the present document as “Navigator” or “Navigator Group”), Secil – Companhia Geral de Cal e Cimento, S.A. (“Secil” or “Secil Group”) and ETSA – Investimentos, SGPS, S.A. ("ETSA" or "ETSA Group").

During 2018, Semapa launched a new venture capital business unit through its subsidiary Semapa Next, S.A., whose objective is to promote investments in startups and venture capital funds with high growth potential.

A more detailed description of the Group activity in each business line is disclosed in Note 2.1 –

Revenue and segment reporting.

Semapa is included in the consolidation perimeter of Sodim — SGPS, S.A., which is its parent company and the final controlling entity.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 51

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1.2. RELEVANT EVENTS OF THE PERIOD

The activity in the first half of 2020, and particularly in the second quarter, reflected the effects of the Covid-19 pandemic, namely the different periods of lockdown implemented in several geographies where the Semapa Group operates. Its impact on operational activity was diverse in the different business segments and different geographies, with greater impact on the Pulp and Paper segment, with less impact on the Cement and Derivatives business in Portugal and Brazil, and improvement in the Environment Business.

In view of the impacts of the lockdown on UWF demand, the subsidiary Navigator temporarily and gradually suspended production on some of its paper machines from April until early July, avoiding the accumulation of stocks in the value chain and preserving its working capital.

Following the measures implemented by the Group with the objective of mitigating the impacts of the evolution of the pandemic, the semester was marked by the positive development of most variable and fixed production expenditure. There was also a strong containment of fixed costs, with the positive evolution of personnel costs and operating costs.

Semapa analysed the impact of the Covid-19 pandemic on its financial position, performance and cashflows:

Brands and goodwill recoverability:

The Group analysed whether there were signs of impairment arising from the impacts of COVID-19. Considering the lower impact of the pandemic in the Cement and Derivatives segments and improvement in the Environment, on 30 June 2020, no signs of impairment were identified.

In the Pulp and Paper segment, despite the significant declines that occurred, both in the global consumption of UWF paper and in pulp and paper prices, based on future performance estimates, based on projections of GDP growth and inflation in Portugal, according to the IMF and Banco de Portugal, no signs of impairment were identified on goodwill and brands, with a substantial gap compared to the book value of assets associated with that segment.

Recoverability, useful life and depreciation of property, plant and equipment:

The group assessed the existence of signs of impairment on its tangible fixed assets. Considering the performance of the Group's business segments and future prospects, despite the temporary suspension mentioned above in the subsidiary Navigator, which resulted in an impact of approximately 7.7 million euros in production stoppage costs, which are reflected in the results for the period, no signs of impairment were identified on tangible fixed assets.

Biological assets:

When calculating the fair value of forests, the present value of discounted cash flows method is used, with the discount rate, logging period and price being some of the main assumptions that may be subject to change due to the COVID-19 pandemic. In this regard, during the first 6 months, the cut-off plans were as expected and no significant impacts at the operational level were foreseen that could affect the fair value model.

As far as discount rates are concerned, the Group presents in Note 3.7 a sensitivity analysis to assess the impact of a potential change in the discount rate and considers the current discount rate as the Management’s best estimate in this respect.

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Inventories:

Given the impacts on demand, the Group considers that in view of the markups charged during the pandemic, the net realisable value of its inventories is higher than the book value and has concluded that no adjustments to the book values are required.

Recoverability of Trade and other receivables:

Impairment losses are recorded using the simplified model provided for in IFRS 9, with expected losses until being recorded until maturity. In Semapa Group, the impacts of IFRS 9 in the Statement of financial position are low, since most sales are insured or properly collateralised.

Even so, the Group periodically assesses expected credit losses and impacts on all financial assets measured at amortized cost. In this sense, the Group assessed the current exposure to credit risk and the possible impact of future economic forecasts, concluding that the impact of this component is low.

Actuarial assumptions

The Group assessed the discount rate applicable to the defined benefit plan for employees and other post- employment benefits. As a result of this assessment and based on the actuarial study on 30 June 2020, it decided to keep the discount rate unchanged, since it reflects management's best estimate in relation to the assumptions and discount rates used to evaluate these assets. In Note 7.3, the Group presents a sensitivity analysis that allows assessing the impact of a possible change in the discount rate.

Currency impact

The Semapa Group develops activities outside Portugal through its subsidiaries in the Pulp and Paper and Cement and Derivatives segments and is thus exposed to the foreign exchange risk of operating activities denominated in currencies other than its functional currency.

The limitations caused by the pandemic, particularly regarding circulation, impacted the economy and added uncertainty to the markets. Accordingly, there was a significant exchange rate impact during the first half of 2020, namely in the Cement and Derivatives segment, resulting from the conversion of assets and liabilities denominated in foreign currency recognized in equity under the foreign exchange conversion reserve (Note 5.5), as well as foreign exchange impacts resulting from the operation of the subsidiaries, which are recognized in the income statement.

Liquidity

The Group currently has a comfortable liquidity situation, as a result of a significant increase in its short-term funds and careful management of working capital, and the Board of Directors believes that the Group will overcome the negative impacts of this crisis, without jeopardizing the going concern principle, applied in the preparation of these financial statements.

Government grants

The Portuguese government has implemented several exceptional and temporary measures to support workers and companies affected by the Covid-19 pandemic, with a view to maintaining jobs and mitigating corporate crisis situations.

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The benefits in the income statement and in the improvement of cash flows arising from the contributions received by Navigator in the 2nd quarter of 2020 amounted to Euro 164,280, recorded in June 2020.

1.3. SUBSEQUENT EVENTS

Between 1 July 2020 and 30 July 2020 (Note 1.4) the following events occurred:

In early July, the subsidiary Navigator received confirmation from the US Court of International Trade ("Court") of the 1.63% rate proposed by the Department of Commerce (DoC) earlier this year for the sale of certain paper products in the US for the 1st period of review ("POR1").

In October 2018, Navigator was notified by the United States Department of Commerce that the final anti- dumping rate to be applied retroactively on paper sales to the United States for the period between August 2015 and February 2017 ("POR1") had been revised downwards from 37.3% to 1.75%. Following a subsequent complaint by the plaintiffs, Navigator's counter-arguments and subsequent court decisions, the Department of Commerce revised the rate down again in February 2020 to 1.63%. The Court has now confirmed the 1.63% rate, considering that the DoC's calculations of brokerage, handling and other fees were reasonable, as Navigator has always contested, thereby proving it right once again.

This important court decision can still be appealed by either party within 60 days. Should this not be the case, and the decision becomes final for the period mentioned, the Company expects to obtain a refund of excess deposits, estimated at USD 25.7 million. It should be noted that in June 2020, Navigator received an amount of USD 4.4 million resulting from the refund of the fee for the 2nd review period ("POR2") which had decreased from 7.80% to 5.96% and was then revised downwards to 4.37% (final rate).

1.4. BASIS FOR PREPARATION

AUTHORISATION TO ISSUE FINANCIAL STATEMENTS

These interim consolidated financial statements were approved by the Board of Directors and authorised for issue on 30 July 2020.

The Group’s senior management, which are the members of the Board of Directors who sign this report, declare that, to the best of their knowledge, the information contained herein was prepared in accordance with the applicable accounting standards, providing a true and fair view of the assets and liabilities, the financial position and results of the companies included in the Group’s consolidation perimeter.

ACCOUNTING FRAMEWORK

The Interim consolidated financial statements for the six months period ended 30 June 2020 were prepared in accordance with the International Accounting Standard 34 - Interim Financial Reporting.

The following Notes were selected in order to contribute to the understanding of the most significant changes in the Group's consolidated financial position and its performance in relation to the last annual reporting date as at 31 December 2019.

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BASIS FOR MEASUREMENT

The accompanying interim consolidated financial statements have been prepared on the going concern basis from the accounting books and records of the companies included in the consolidation (Note 10.1), and under the historical cost convention, except for biological assets (Note 3.7), and for financial instruments measured at fair value through profit and loss or at fair value through equity (Note 8.3), in which derivative financial instruments are included (Note 8.2).

BASIS FOR CONSOLIDATION

Subsidiaries

Subsidiaries are all the entities (including structured entities) over which the Company has control. The Company controls an entity when it is exposed to, or has rights to, the variable returns generated as a result of its involvement with the entity and has the ability to affect those variable returns through the power it exercises over the entity’s relevant activities.

Shareholder’s equity and net profit/(loss) of these companies, corresponding to the third-party investment in such companies, are presented under the caption Non-controlling interests, respectively in the Consolidated Statement of Financial Position, in a separate component of shareholder’s equity, and in the Consolidated Income Statement. Companies included in the consolidated financial statements are detailed in Note 10.1.

The purchase method is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued, and liabilities incurred or assumed on the date of acquisition.

The identifiable assets acquired and the liabilities and contingent liabilities undertaken in a business combination are initially measured at fair value at acquisition date, regardless of the existence of non-controlling interests. The excess of the acquisition cost, regarding the fair value of the Group’s share of identifiable assets and liabilities acquired, is recorded as Goodwill when the Group acquires control, as described in Note 3.1.

Subsidiaries are consolidated using the full consolidation method from the date on which control is transferred to the Group. In the acquisition of additional share capital in Companies controlled by the Group, the difference between the proportion of acquired net assets and respective acquisition cost is directly recognised in Equity under the caption Retained earnings (Note 5.5).

When, at the date of acquisition of the control, the Group already holds a previously acquired interest, the fair value of such interest contributes to the determination of goodwill or badwill.

When the control acquired is less than 100%, in the application of the purchase method, non-controlling interests can be measured at fair value or at the ratio of the fair value of the assets and liabilities acquired, being that option defined according to each transaction.

In the case of disposals of interests, resulting in a loss of control over a subsidiary, any remaining interest is revalued to the market value at the date of sale, and the gain or loss resulting from such revaluation, is recorded against income, as well as the gain or loss resulting from such disposal.

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Subsequent transactions in the disposal or acquisition of non-controlling interests, which do not imply a change in control, do not result in the recognition of gains, losses or Goodwill. Any difference between the transaction value and the book value is recognised in Equity, in Other equity instruments.

The acquisition cost is subsequently adjusted when the acquisition/allocation price is contingent upon the occurrence of specific events agreed with the seller/shareholder (e.g. fair value of acquired assets).

Any contingent payments to be transferred by the Group are recognised at fair value at the acquisition date. If the undertaken obligation constitutes a financial liability, subsequent changes in fair value are recognised in profit or loss. If the undertaken obligation constitutes an equity instrument, there is no change in the initial estimation.

The negative profit/ (loss) generated in each period by subsidiaries with non-controlling interests are allocated to the percentage held by them, regardless of whether they assume a negative balance.

If the acquisition cost is below the fair value of the net assets of the subsidiary acquired (Badwill), the difference is recognised directly in the Income statement, under the caption Other operating income. Directly attributable transaction costs are immediately recorded in profit and loss.

Intercompany transactions, balances, unrealised gains on transactions and dividends distributed between Group companies are eliminated. Unrealised losses are also eliminated, except where the transaction displays evidence of impairment of a transferred asset.

Subsidiaries’ accounting policies have been changed whenever necessary so as to ensure consistency with the policies adopted by the Group.

Associates

Associates are all the entities over which the Group has significant influence but does not have control, generally applied in the case of investments representing between 20% and 50% of the voting rights. Investments in associates are equity accounted.

In accordance with the equity accounting method, financial investments are recorded at their acquisition cost, adjusted by the amount corresponding to the Group’s share of changes in the associates’ shareholders’ equity (including net income/ (loss) and by dividends received).

The difference between the acquisition cost and the fair value of the associate’s identifiable assets, liabilities and contingent liabilities on the acquisition date, if positive, are recognised as Goodwill and recorded under the caption Investments in associates. If these differences are negative, they are recorded as income for the year under the caption Group share of (loss)/gains of associated companies. Transaction costs directly attributable are immediately recorded in profit and loss.

An evaluation of investments occurs when there are signs that the asset could be impaired, and any identified impairment losses are recorded under the same caption. When the impairment losses recognised in prior years no longer exist, they are reversed.

When the Group’s share in the associate’s losses is equal to or exceeds its investment in the associate, the Group ceases to recognise additional losses, except where it has assumed liability or made payments in the associate’s name. Unrealised gains on transactions with associates are eliminated to the extent of the Group’s share in the

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associate. Unrealised losses are also eliminated, except if the transaction reveals evidence of impairment of a transferred asset.

Associate’s accounting policies are changed whenever necessary to ensure consistency with the policies adopted by the Group. Investments in associated companies are disclosed in Note 10.3.

Joint ventures

Joint ventures are classified as joint operations or joint ventures, depending on the contractual rights and obligations of each investor. Joint ventures are accounted and measured using the equity method.

Joint operations are accounted in the Group’s consolidated financial statements, based on the share of jointly held assets and liabilities, as well as the income from the joint operation, and expenses incurred jointly. Assets, liabilities, income and expenses should be accounted for in accordance with the applicable IFRS.

A jointly controlled entity is a joint venture involving the establishment of a company, partnership or other entity in which the Group has an interest.

Jointly controlled entities are included in the consolidated financial statements under the equity method, according to which financial investments are recorded at their acquisition cost, adjusted by the amount corresponding to the Group’s interest in changes in shareholders’ equity (including net income) and dividends received.

When the share of loss attributable to the Group is equivalent or exceeds the value of the financial holding in joint ventures, the Group recognises additional losses if it has assumed obligations or if it has made payments for the joint ventures.

Unrealised gains and losses between the Group and its joint ventures are eliminated in proportion to the Group’s interest in joint ventures. Unrealised losses are also eliminated, unless the transaction gives additional evidence of impairment of the transferred asset.

The accounting policies of joint ventures are amended, when necessary, to ensure that they are applied consistently with those of the Group.

PRESENTATION CURRENCY AND TRANSACTIONS IN A CURRENCY OTHER THAN THE PRESENTATION CURRENCY

The items included in the financial statements of each of the Group entities included in the consolidation perimeter are measured using the currency of the economic environment in which the entity operates (functional currency).

These consolidated financial statements are presented in Euro.

All the Group’s assets and liabilities denominated in currencies other than the reporting currency have been translated to Euro using the exchange rates ruling at the statement of financial position date (Note 8.1.1).

Exchange differences arising from differences between the exchange rates in force on the date of the transaction and those in force on the date of collection, payment or the date of the consolidated statement of financial position are recorded as income and expenses for the period (Note 5.11).

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The income captions of foreign transactions are translated into the average exchange rate for the period. The differences arising from the application of these rates compared to the balance prior to the conversion are reflected in the Currency translation reserve in shareholders’ equity (Note 5.5). Whenever a foreign entity is sold, the accumulated exchange difference is recognised in the consolidated income statement as part of the gain or loss on the sale.

COMPARABILITY

These interim financial statements are comparable in all material respects to those of the previous year.

1.5. NEW IFRS STANDARDS ADOPTED AND TO BE ADOPTED

Other standards, amendments and interpretations adopted or to be adopted

STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED IN 2020 OR TO BE ADOPTED IN FOLLOWING PERIODS

Amendment Effective date

Standards and amendments endorsed by the European Union

Amendments to In March 2018, the International Accounting Standards Board (IASB) issued 1 January References to the a comprehensive set of concepts for financial reporting, the revised 2020 Conceptual Framework for Financial Reporting (Conceptual Framework), Conceptual which aim is to update, in existing Standards, references to, and quotes Framework in from, the existing version of the Conceptual Framework or the version that IFRS Standards was replaced in 2010 so that they refer to the revised Conceptual Framework.

The revised Conceptual Framework has an effective date of 1 January 2020 for companies that use the Conceptual Framework to develop accounting policies when no IFRS Standard applies to a particular transaction.

Definition of On 31 October 2018, the International Accounting Standards Board has 1 January Material issued amendments to its definition of material to make it easier for 2020 (amendments to companies to make materiality judgments. IAS 1 and IAS 8) The Amendments consist of (a) replacing the term ‘could influence’ with ‘could reasonably be expected to influence’; (b) including the concept of ‘obscuring’ alongside the concepts of ‘omitting’ and ‘misstating’ information in the definition of material; (c) clarifying that the ‘users’ referred to are the primary users of general purpose financial statements referred to in the Conceptual Framework; and (d) aligning the definition of material across IFRS publications.

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Amendment Effective date

Standards and amendments endorsed by the European Union

The amended definition of material therefore states that ‘Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity’.

Interest Rate On 26 September 2019, the IASB issued amendments to IFRS 9, IAS 39 and 1 January Benchmark IFRS 7. The amendments modify some specific hedge accounting 2020 Reform requirements to provide relief from potential effects of the uncertainty caused by the IBOR reform. Additionally, the amendments require (amendments to companies to provide additional information to investors about their IFRS 9, IAS 39 and hedging relationships which are directly affected by these uncertainties. IFRS 7) The Amendments provide exceptions so that entities would apply hedge accounting requirements assuming that the interest rate benchmark on which the hedged risk or hedged cash flows of the hedged item or cash flows of the hedging instrument are based is not altered as a result of the IBOR reform. The proposed exceptions apply only to the hedge accounting requirements and the Amendments do not provide relief from any other consequences arising from interest rate benchmark reform.

The Amendments are limited in scope. If a hedging relationship no longer meets the requirements for hedge accounting for reasons other than those specified by the Amendments, then discontinuation of hedge accounting is still required.

In addition, the Amendments clarify that if an entity designated interest rate benchmark-based cash flows as the hedged item in a cash flow hedge, the entity would not assume for the purpose of measuring hedge ineffectiveness that the expected replacement of the interest rate benchmark with an alternative benchmark rate will result in zero cash flows after the replacement. The hedging gain or loss should be measured using the interest rate benchmark-based cash flows when applying a present value technique, discounted at a market-based discount rate that reflects market participants’ assumptions about the uncertainty arising from the reform.

The Amendments are mandatory to all hedging relationships to which the exceptions are applicable.

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Amendment Effective date

Standards and amendments endorsed by the European Union

The amendments have an effective date of annual periods beginning on or after 1 January 2020. The amendments would be applied retrospectively to those hedging relationships that existed at the beginning of the reporting period in which the entity first applies the Amendments and to the gain or loss recognised in other comprehensive income that existed at the beginning of the reporting period in which an entity first applies the Amendments (i.e. even if the reporting period is not an annual period).

Covid-19-Related In May 2020, the International Accounting Standards Board (IASB) issued 1 June Rent Concessions Covid-19-Related Rent Concessions, which amended IFRS 16 Leases. If 2020 Amendment to certain conditions are met, the Amendment would permit lessees, as a IFRS 16 practical expedient, not to assess whether particular covid-19-related rent concessions are lease modifications. Instead, lessees that apply the practical expedient would account for those rent concessions as if they were not lease modifications, so that, for example, the amount of rent forgiven on or before 30 June 2021 is taken to income the same year that the concession is granted, instead of being allocated over the duration of the contract as would be the case were the practical expedient not allowed. The Amendment shall be applied for annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted, including in financial statements not yet authorised for issue at 28 May 2020.

The above standards, changes and interpretations had no impact on the financial statements.

Amendment Effective date

Standards and amendments not yet endorsed by the European Union

IFRS 3 – Business On 22 October 2018, the IASB issued the amendments to its business 1 January Definition definition. 2022 (amendments to IFRS 3 Business The amendments clarify that, to be considered a business, an acquired set Combination) of activities and assets must include at least one input and one substantive process that, together, contribute significantly to the ability to create outputs. The amendments also clarify that a set of activities and assets can qualify as a business without including all the inputs and processes necessary to create outputs, or including the outputs themselves, by replacing the term "ability to create outputs" with "ability to contribute to the creation of outputs".

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Amendment Effective date

Standards and amendments not yet endorsed by the European Union

It is no longer necessary to evaluate if the market players are capable of replacing inputs or missing proceedings (for example, by integrating activities and assets acquired) and continue to create outputs. The amendments focus on whether the acquired inputs and substantive processes together contribute significantly to the ability to create outputs.

The amendments shall be applied to transactions for which the acquisition date is on or after the beginning of the first annual reporting period starting on or after 1 January 2020, with early application permitted. If entities implement the amendments in advance, they shall disclose this fact.

Clarification of The IASB issued on 23 January 2020 an amendment to IAS 1 Presentation of 1 January requirements for Financial Statements to clarify how to classify debt and other liabilities as 2022 classifying current and non-current. liabilities as current or non- The amendments are intended to promote consistency in the application of current requirements to help companies determine whether, in the statement of (amendments to financial position, debt or other liabilities with an uncertain settlement date IAS 1 - should be classified as current (to be settled or potentially settled within Presentation of one year) or non-current. Changes include explanations on the debt Financial classification requirements that a company can settle by converting into Statements) equity.

This amendment is effective for periods after 1 January 2022.

Reference to the In May 2020, the IASB issued Reference to the Conceptual Framework, 1 January Conceptual which made amendments to IFRS 3 Business Combinations. 2022 Framework (Amendments to The amendments updated IFRS 3 by replacing a reference to an old version IFRS 3) of the Board’s Conceptual Framework for Financial Reporting with a reference to the latest version, which was issued in March 2018.

The Amendments shall be applied to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2022. Earlier application is permitted if at the same time or earlier an entity also applies all the amendments made by Amendments to References to the Conceptual Framework in IFRS Standards, issued in March 2018.

Property, Plant In May 2020, the IASB issued Property, Plant and Equipment—Proceeds 1 January and Equipment – before Intended Use, which made amendments to IAS 16 Property, Plant 2022 Proceeds before and Equipment. Intended Use,

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Amendment Effective date

Standards and amendments not yet endorsed by the European Union

Amendments to The Amendments would prohibit deducting from the cost of an item of IAS 16 Property, property, plant and equipment any proceeds from selling items produced Plant and while bringing that asset to the location and condition necessary for it to be Equipment capable of operating in a manner intended by management. Instead, an entity would recognise those sales proceeds in profit or loss.

The Amendments shall be applied retrospectively for annual periods beginning on or after 1 January 2022, with earlier application permitted.

Onerous In May 2020, the IASB issued Onerous Contracts—Cost of Fulfilling a 1 January Contracts - Cost Contract, which made amendments to IAS 37 Provisions, Contingent 2022 of Fulfilling a Liabilities and Contingent Assets. Contract The objective of the Amendments is to clarify the requirements of IAS 37 on onerous contracts regarding the assessment of whether, in a contract, the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

The Amendments shall be applied for annual periods beginning on or after 1 January 2022, with earlier application permitted.

Annual On 14 May 2020, the IASB issued Annual Improvements to IFRS Standards 1 January Improvements to 2018–2020 containing the following amendments to IFRS: 2022 IFRS Standards 2018 – 2020 a) permit an entity that is a subsidiary, associate or joint venture, who becomes a first-time adopter later than its parent and elects to apply paragraph D16(a) of IFRS 1 First-time Adoption of International Financial Reporting Standards, to measure the cumulative translation differences using the amounts reported by the parent, based on the parent’s date of transition to IFRSs;

(b) clarify that the reference to fees in the 10 per cent test includes only fees paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf;

(c) remove the potential confusion regarding the treatment of lease incentives applying IFRS 16 Leases as was illustrated in Illustrative Example 13 accompanying IFRS 16; and

(d) remove the requirement in paragraph 22 of IAS 41 Agriculture for entities to exclude cash flows for taxation when measuring fair value applying IAS 41.

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Amendment Effective date

Standards and amendments not yet endorsed by the European Union

The Amendments shall be applied for annual periods beginning on or after 1 January 2022, with earlier application permitted.

1.6. MAIN ESTIMATES AND JUDGEMENTS

The preparation of consolidated financial statements requires the use of estimates and judgments that affect the amounts of income, expenses, assets, liabilities and disclosures at the date of the consolidated financial position. To that end, the Board’s estimates and judgments are based on:

− the best information and knowledge of present events and in certain cases on the reports of independent experts; and − the actions that the Group considers it may have to take in the future.

On the date on which the operations are realised, the outcome could differ from those estimates.

MAIN ESTIMATES AND JUDGEMENTS

Estimates and judgements Notes

Recoverability of goodwill and brands 3.1 – Goodwill 3.2 – Intangible assets Uncertainty over the income tax treatment 6.1 – Income tax for the period 6.2 – Deferred taxes Actuarial assumptions 7.2 – Employee benefits

Fair value of biological assets 3.7 – Biological assets

Recognition of provisions 9.1 – Provisions Recoverability, useful life and depreciation of 3.3 – Property, plant and equipment property, plant and equipment

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OPERATIONAL PERFORMANCE

2.1. REVENUE AND SEGMENT REPORTING

ACCOUNTING POLICIES

SEGMENT REPORTING

An operating segment is a component of an entity:

i) which develops business activities that can generate revenues and incur expenses (including revenues and expenses related to transactions with other components of the same entity);

ii) whose operating results are regularly reviewed by the entity’s chief operating decision-maker for the purpose of making decisions about allocating resources to the segment and evaluating its performance; and

iii) for which different information is available.

Semapa’s Executive Committee and the different subsidiaries are the main responsible for the Group's operational decisions, periodically and consistently analysing the reports on the financial and operating information of each segment. The reports are used to monitor the operational performance of its businesses and decide on the best allocation of resources to the segment, as well as the evaluation of its performance and strategic decision-making.

The information used in segment reporting corresponds to the financial information prepared by the Group. All inter-segment sales and services are performed at market prices and eliminated on consolidation.

When aggregating the Group's operating segments, the Board of Directors defined as reportable segments those that correspond to each of the business areas developed by the Group:

Pulp and paper

The Navigator Group’s main business is the production and sale of writing and printing thin paper (UWF) and domestic consumption paper (Tissue), and it is present in the whole value added chain, from research and development of forestry and agricultural production, to the purchase and sale of wood and the production and sale of bleached eucalyptus kraft pulp – BEKP – and electric and thermal energy, as well as its commercialisation.

The Navigator Group has four industrial plants. BEKP, energy and UWF paper are produced in two plants located in Figueira da Foz and Setúbal. BEKP, energy and tissue paper are also produced in a plant located in Aveiro and the fourth plant, located in Vila Velha de Ródão, only produces tissue paper.

Wood and cork are produced from woodlands owned or leased by the Group in Portugal and Spain, and also form granted lands in Mozambique. The production of cork and pinewood are sold to third parties while the eucalyptus wood is mainly consumed in the production of BEKP.

A significant portion of the Group’s own BEKP production is consumed in the production of UWF and tissue paper in Aveiro. Sales of BEKP, UWF and Tissue paper are made to more than 130 countries around the world.

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Energy, heat and electricity are mainly produced from biofuels in three cogeneration plants. Heat production is used for internal consumption while electricity is sold to the national energy grid. The Navigator Group also owns another two cogeneration units using natural gas, integrated in the production of paper in Figueira da Foz and in Setúbal, and two separate units using biofuel. The production of the last two is entirely sold to the national energy grid.

Cement and derivatives

The Cement and derivatives segment is led by Secil - Companhia Geral de Cal e Cimento, S.A., which has a strong presence in the cement industry, being a business group with several operations in Portugal and in several countries around the world (Secil Group).

The main product marketed by the Secil Group is cement. The sale of ready-mixed concrete, aggregates, mortars and precast concrete constitutes a verticalization of the cement segment allowing the Group to obtain synergies.

Secil Group has 3 cement plants in Portugal, Secil-Outão, Maceira-Liz and Cibra-Pataias, and the cement is sold in its various forms (in bulk or bagged, on pallets or big bags) through the different trading hubs owned by the Group. The Secil Group also owns other factories located in Brazil, Tunisia, Lebanon and Angola.

A significant factor in the marketing of cement is the transportation cost, which is why the Secil Group maintains a private wharf in Secil-Outão, a sea terminal in Spain and a sea terminal in the Netherlands.

With regards to cement "derivatives", the ready-mixed concrete represents the greatest weight in the Group's revenue, with the Secil Group owning several production and marketing centres in Portugal, Spain, Tunisia, Lebanon and Brazil.

Secil Group has also the licence to exploit several quarries, from which it extracts materials for incorporation in cement production or commercialisation as aggregates.

Environment

The Environment segment is led by ETSA - Investimentos, S.G.P.S., S.A., whose operating activities in Portugal and Spain refer mainly to the rendering of services associated with the cumulative recovery of animal by- products and food products containing animal origin substances, and the sale of the products resulting from this recovery for incorporation in the production of fertilizers, animal feed and biodiesel ("ETSA Group").

The activities developed by the ETSA Group play a very important role in the defence of the population and the environment, providing new life to products that would otherwise be directed to landfills or undifferentiated waste treatment centres.

The main activities developed by the Group are:

− collection, packaging, sorting, unpacking and upgrading of animal by-products (categories 1, 2 and 3), other foodstuffs and waste oils, from collection sites such as slaughterhouses, cutting plants, butchers, municipal markets and modern retail; − the sale of animal fats, meal and used cooking oil.

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ETSA Group develops its activity through the transformation units located in Coruche and Loures, and the collection network is assured by its own road fleet, duly certified by the Portuguese National Authority for Food and Animal Health (Direção Geral de Alimentação e Veterinária - DGAV).

Holdings

This segment refers to the management activities of the Semapa Group, that is, the services rendered by Semapa to its subsidiaries in various areas such as strategic planning, legal, financial, accounting, tax, talent management, among others, while incurring in payroll expenses and the contracting of specialised services.

Since 2018, the new venture capital unit has been included in this segment, which is not yet reflected in the Group's financial information.

REVENUE

Revenue is presented by operating segment and by geographic area, based on the country of destination of the goods and services sold by the Group.

Revenue recognition in each operating segment is described as follows:

Pulp and Commercial contracts with customers refer essentially to the sale of goods such as paper, pulp, paper tissue and energy, and to an extent limited to the transportation of those goods, when applicable.

Paper revenue refers to sales made through Retail Stores (B2C) or Commercial Distributors (B2B) which include large distributors, wholesalers or commercial operators. Revenue is recognised at a specific time, when control is transferred in accordance with the agreed Incoterm, at the amount of the performance obligation satisfied, and the price of the transaction is a fixed amount invoiced based on quantities sold, less cash discounts and quantity discounts, which are reliably estimated.

Pulp revenue results from sales to international paper producers. Revenue is recognised at a specific time, by the amount of the performance obligation satisfied, the price of the transaction corresponding to a fixed amount invoiced on the basis of quantities sold, less cash discounts and quantity discounts, which are reliably determinable. On the export side, the transfer of control of the products occurs in general when there is a transfer of control to the customer, according to the Incoterms negotiated.

Tissue revenue results from sales of tissue paper produced for the private label of modern national and international retail chains. Revenue is recognised at a specific time by the amount of the performance obligation satisfied, and the price of the transaction corresponds to a fixed amount invoiced according to the quantities sold. Revenue is recognised against the delivery of the product, at which time the transfer of control over the product is deemed to take place.

The revenue from the sale of cork and pine wood to third parties is recognised on the date of delivery of the product to the customer by the amount of the performance obligation satisfied.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 66

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Cement and Cement derivatives A significant part of Secil Group revenue relates to the sale of grey cement, in bulk or bagged, in pallets or packets. The form of cement packaging and delivery point depends on the size of the customer.

Secil Group's main customers are industrial companies in the area of concrete, prefabricated and civil construction and consortia associated with the construction of highly complex technical works such as dams and bridges. The sale of bagged cement to the end consumer is residual and is assured through local resellers.

Secil supplies its products in its factories and trading hubs and ensures transport to the customer's premises by subcontracting the transport, in which case there are two performance obligations, to which Secil allocates the transaction price based on the sales price.

Revenue is recognised at a specific time, when the control is transferred, by the amount of the performance obligation satisfied. The transaction price results from the price lists in force adjusted by cash discounts and quantity discounts, granted to customers, depending on whether they are resellers or industrial customers, as described in the general terms and conditions of sale. For large customers and specific projects, the prices and discount conditions are fixed by contract, on an individual basis.

The discounts granted are a variable component of the price which is considered in determining the revenue recorded on the date of delivery of the product to the customer, which corresponds to the date of transfer of control of the products.

On the export side, the transfer of control of the products generally takes place when there is a transfer of control to the customer, according to the Incoterms negotiated.

Materials

The Materials business line concerns cement "derivatives": ready-mixed concrete, aggregates, mortars and prefabricated concrete.

Revenue from Materials is recognised, at a specific moment, on the date of delivery of the product to the customer, date when control over the product is deemed to exist, even if the contract involves phased deliveries, due to the different stages of the work and quantities to be moved.

Revenue is recognised by the amount of the performance obligation satisfied, the price of the transaction corresponding to a fixed amount invoiced on the basis of quantities sold, less cash discounts and quantity discounts, which are reliably estimated. With regards to mortars, the rental of site equipment for the storage, mixing and application of mortars corresponds to a separate performance obligation with a stand-alone sales price less any discounts granted.

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1ST HALF 2020

Prefabricated concrete essentially refers to the marketing of standard prefabricated materials, and there is no production of prefabricated materials at the specific request of customers. In this business area the Group recognises the revenue of all products at a specific moment with the delivery of the product to the customer.

Environment Revenue recorded by the Environment segment refers to the sale of products and the rendering of services.

Product sales are mainly lard, tallow, animal fat, flour (for the feed industry), and oils (for the biodiesel market). Revenue is recognised when the products are delivered to the customer's premises or location designated by the customer, at which time the transfer of control to the customer is considered to occur.

The main customers are national and international animal feed producers.

The services rendered by the ETSA Group refer mainly to the following:

− collection and treatment of Category 1 and 2 material from farmed and domestic animal carcases, in accordance with the contract with DGAV - Direcção Geral de Alimentação e Veterinária, as well as from slaughterhouses and other conventional collection centres; and − packing in refrigerated equipment, collection, transport, sorting and unpacking of Category 3 materials (meat and fish) and other foodstuffs (fresh or frozen), in bulk or packaged, in the network of modern retail shops and town markets.

Revenue recognition is made on a monthly basis for services rendered on a regular and uniform basis to the modern retail network. As for the contract with DGAV, revenue is recognised for each service rendered, as calculated on a monthly basis.

MAIN ACCOUNTING ESTIMATES AND JUDGEMENTS

SEGMENT REPORTING

When aggregating the Group's operating segments, the Board of Directors defined as reportable segments those that correspond to each of the business areas developed by the Group: Pulp and Paper, Cements and Derivatives, and Environment, consistent with the way the Semapa Group's management team monitors and analyses performance.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 68 1ST HALF 2020

FINANCIAL INFORMATION BY OPERATING SEGMENT FOR THE FIRST HALF OF 2020 AND 2019

H1 2020 Pulp and Cement and Within-Group Note Environment Holdings Total Amounts in Euro paper derivatives eliminations

Revenue 695,501,712 230,908,435 15,661,605 7,827,958 (8,104,370) 941,795,340 Other operating income (a) 2.2 and 3.7 13,613,811 31,889,558 164,114 739 - 45,668,222 Costs of goods sold and materials consumed 4.1 (289,236,682) (71,078,549) (2,236,621) - - (362,551,852) Supplies and services 2.3 (200,674,883) (74,304,569) (4,397,510) (3,907,301) 8,104,370 (275,179,893) Other operating expenses (b) 2.3 (79,117,804) (58,964,139) (4,054,796) (4,299,034) - (146,435,773) Depreciation and amortisation 3.6 (82,155,793) (27,811,998) (1,556,048) (186,856) - (111,710,695) Impairment losses 3.6 (821) (40,514) - - - (41,335) Provisions 9.1 (1,907,275) (2,113,153) - - - (4,020,428) Interest and similar expense 5.11 (7,292,345) (12,062,012) (66,731) (5,206,195) 6,067 (24,621,216) Group share of (loss)/ gains of associated companies and joint ventures 10.3 - 1,269,879 - - - 1,269,879 Other financial gains and losses 5.11 (974,683) (18,995,008) (62,837) 21,601 (6,067) (20,016,994) Profit before tax 47,755,237 (1,302,070) 3,451,176 (5,749,088) - 44,155,255 Income tax 6.1 (9,255,303) 846,614 (793,557) 4,312,696 - (4,889,550) Net profit for the period 38,499,934 (455,456) 2,657,619 (1,436,392) - 39,265,705 Attributable to Shareholders 26,936,844 2,129,022 2,657,322 (1,436,392) - 30,286,796 Non-controlling interests 5.6 11,563,090 (2,584,478) 297 - - 8,978,909

OTHER INFORMATION (30-06-2020) Total segment assets 2,640,226,750 1,462,731,216 83,976,099 192,976,306 (18,304,617) 4,361,605,754 Goodwill 3.1 122,907,528 173,067,042 36,422,934 - - 332,397,504 Intangible assets 3.2 152,311,726 160,966,450 - - - 313,278,176 Property, plant and equipment 3.3 1,294,181,351 592,237,941 22,918,177 772,597 - 1,910,110,066 Biological assets 3.7 128,741,320 - - - - 128,741,320 Defered tax assets 6.2 28,634,617 53,084,324 397,601 - - 82,116,542 Investments in associates and joint ventures 10.3 - 2,896,333 - - - 2,896,333 Cash and cash equivalents 5.9 316,897,525 241,743,768 2,454,894 165,568,164 - 726,664,351 Total segment liabilities 1,661,902,412 931,592,813 16,461,165 530,762,716 (18,304,618) 3,122,414,488 Interest-bearing liabilities 5.7 1,017,302,242 541,198,047 4,397,262 509,639,175 (123,408) 2,072,413,318 Adjustment of property, plant and equipment 3.3 48,685,912 14,423,712 954,489 16,999 - 64,081,112

H1 2019 Pulp and Cement and Within-Group Note Environment Holdings Total Amounts in Euro paper derivatives eliminations

Revenue 854,092,703 252,270,130 13,217,149 8,622,229 (8,966,333) 1,119,235,878 Other operating income (a) 2.2 and 3.7 14,194,900 32,858,342 108,226 122,572 (31,960) 47,252,080 Costs of goods sold and materials consumed 4.1 (366,034,149) (78,378,649) (2,297,705) - - (446,710,503) Supplies and services 2.3 (224,914,512) (94,868,972) (4,195,139) (3,892,614) 8,998,293 (318,872,944) Other operating expenses (b) 2.3 (70,387,331) (57,446,437) (3,892,365) (4,716,278) - (136,442,411) Depreciation and amortisation 3.6 (78,668,070) (30,074,640) (1,497,544) (193,236) - (110,433,490) Impairment losses 3.6 - (1,792,233) - - - (1,792,233) Provisions 9.1 (1,915,368) 401,077 - - - (1,514,291) Interest and similar expense 5.11 (5,229,125) (10,585,114) (96,991) (4,922,948) 4,603 (20,829,575) Group share of (loss)/ gains of associated companies and joint ventures 10.3 - 408,080 - - - 408,080 Other financial gains and losses 5.11 (4,458,664) 3,326,954 (65,195) (1,110,686) (4,603) (2,312,194) Profit before tax 116,680,384 16,118,538 1,280,436 (6,090,961) - 127,988,397 Income tax 6.1 (27,326,004) (3,508,058) (110,898) 3,613,714 - (27,331,246) Net profit for the period 89,354,380 12,610,480 1,169,538 (2,477,247) - 100,657,151 Attributable to Shareholders 62,213,103 12,603,280 1,169,406 (2,477,247) - 73,508,542 Non-controlling interests 5.6 27,141,277 7,200 132 - - 27,148,609

OTHER INFORMATION (31-12-2019) Total segment assets 2,529,630,358 1,406,630,218 81,664,460 126,138,845 (122,236,830) 4,021,827,051 Goodwill 3.1 122,907,528 185,842,214 36,422,934 - - 345,172,676 Intangible assets 3.2 155,994,689 154,163,310 - - - 310,157,999 Property, plant and equipment 3.3 1,330,613,540 670,148,857 23,380,740 865,979 - 2,025,009,116 Biological assets 3.7 131,769,841 - - - - 131,769,841 Defered tax assets 6.2 31,638,565 57,979,935 352,279 - - 89,970,779 Investments in associates and joint ventures 10.3 - 5,454,286 - - - 5,454,286 Cash and cash equivalents 5.9 161,880,403 96,907,045 310,561 143,185 - 259,241,194 Total segment liabilities 1,588,116,994 828,562,185 16,207,146 449,458,633 (122,236,831) 2,760,108,127 Interest-bearing liabilities 5.7 877,131,386 454,922,167 6,040,220 391,951,128 (125,560) 1,729,919,341 Adjustment of property, plant and equipment 3.3 157,943,129 42,611,040 2,005,615 342,295 - 202,902,079 (a) Includes "Other operating income" and "Changes in fair value of biological assets" (b) Includes "Variation in production", "Payroll costs" and "Other operating expenses"

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 69 1ST HALF 2020

REVENUE BY BUSINESS SEGMENT, BY GEOGRAPHIC AREA AND BY RECOGNITION PATTERN

Pulp Cement and Total Total Environment H1 2020 and paper derivatives amount % Portugal 143,888,813 126,241,673 11,514,897 281,645,383 29.91% Rest of Europe 326,345,754 17,868,645 3,869,530 348,083,929 36.96% America 68,757,542 36,532,006 - 105,289,548 11.18% Africa 76,591,728 28,514,215 - 105,105,943 11.16% Asia 79,726,195 21,475,483 277,178 101,478,856 10.78% Overseas 191,681 - - 191,681 0.01% 695,501,713 230,632,022 15,661,605 941,795,340 100.00%

Pulp Cement and Total Total Environment H1 2019 and paper derivatives amount % Portugal 169,708,218 117,187,758 8,917,290 295,813,266 26.43% Rest of Europe 435,167,064 21,183,300 3,774,344 460,124,708 41.11% America 93,037,234 40,221,079 - 133,258,313 11.91% Africa 88,174,462 42,512,756 - 130,687,218 11.68% Asia 67,862,267 30,821,133 525,515 99,208,915 8.86% Overseas 143,458 - - 143,458 0.01% 854,092,703 251,926,026 13,217,149 1,119,235,878 100.00%

In the first half of 2020 and 2019, the revenue presented in the different business and geographical segments corresponds to revenue generated with external customers based on the final destiny of the products and services commercialised by the Group, not representing any of them, individually, 10% or more of the overall revenue of the Group.

2.2. OTHER OPERATING INCOME

ACCOUNTING POLICIES

Operating subsidies and subsidies related to biological assets

Government grants are recognised only when there is a reasonable assurance that the grant will be received, and the Group will comply with all required conditions. Government grants related to operating costs are deferred and recognised in the income statement over the period that matches the costs with the compensating grants.

In the first half of 2020 and 2019, Other operating income is detailed as follows:

Amounts in Euro H1 2020 H1 2019

Grants - Co2 emission allowances 22,294,472 24,675,822 Gains on disposal of non-current assets 8,240,392 1,552,281 Compensation received 2,676,832 2,638,486

Disposal of Co2 emission allowances 2,532,870 7,710,095 Power interruption- REN 2,318,773 1,016,399 Operating subsidies 2,111,439 186,511 Supplementary income 964,609 320,729 Inventory gains 777,140 365,561 Own work capitalised 266,401 118,547 Income from waste treatment 225,558 320,960 Recovery/settlement of uncollectibles 17,045 8,610 PIS/COFINS Brazil Process - 3,353,029 Other operating income 6,271,212 8,059,055 48,696,743 50,328,308

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1ST HALF 2020

The amount shown under Grants - CO2 emission allowances refers to the recognition of the free allocation of emission allowances.

In the first half of 2020, the item Gains on the sale of non-current assets includes Euro 6.2 million corresponding to the capital gains recorded by the subsidiary Secil with the sale of: 1) 25% of the associate Setefrete (Euro 4.9 million) and 2) 50% of the subsidiary Allmicroalgae (Euro 1.2 million).

In the first half of 2020, the amount shown under Compensations received includes the compensation related with the failure of the combined cycle gas and steam turbine at the Setúbal plant (Navigator subsidiary). In 2019, this item included compensation related with the losses at the Figueira da Foz plant following Hurricane Leslie in 2018, as well as losses associated with the breakdown of the biomass boiler and the turbine alternator at the Setúbal plant, both also from the subsidiary Navigator.

The operating grants essentially include those attributed by the subsidiary Navigator as part of research and development projects carried out by the RAIZ Institute, such as the IPLANT, INPACTUS, FitoGlobulus and Proteus projects, as well as the amount of Euro 754,380 relating to the specialisation of the amount receivable from Institute of Employment and Professional Training (Instituto de Emprego e Formação Profissional - IEFP) concerning the Incentive for the Standardisation of Business Activity, as part of the support measures for companies affected by the COVID-19 pandemic.

In 2019, the amount of Euro 3,353,029 presented under the caption PIS/COFINS Brazil Process refers to the gain recognised by the subsidiary Supremo as a result of the decision rendered by the Brazilian courts towards not being subject to PIS and Confins taxes on the ICMS tax that is applied to sales. The gain corresponding to the refund of tax overpaid in previous years was therefore recognised. This refund will occur by deduction from tax payable in the future.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 71 1ST HALF 2020

2.3. OTHER OPERATING EXPENSES

In the first half of 2020 and 2019, Other operating expenses is detailed as follows:

Amounts in Euro Note H1 2020 H1 2019

Cost of goods sold and materials consumed 4.1.3 362,551,852 446,710,503

Variation in production 4.1.4 7,370,985 (22,186,765)

Supplies and services Energy and fluids 80,681,308 96,772,660 Inventory transportation 77,552,621 88,191,794 Specialised work 49,630,598 62,139,420 Repair and maintenance 25,338,727 26,216,117 Professional fees 2,546,453 3,160,580 Insurance 8,195,081 8,222,318 Subcontracts 1,054,653 995,284 Other 30,180,452 33,174,771 275,179,893 318,872,944 Payroll costs 7.1 111,127,929 124,004,602 Other operating expenses Membership fees 889,676 747,458 Donations 680,440 1,029,847 Costs with CO2 emission allowances 23,961,639 26,008,089 Impairment in receivables 1,940,264 1,398,120 Impairment losses in inventories 4.1.5 (5,240,343) (1,228,628) Other losses in inventories 509,435 1,432,991 Indirect taxes 3,219,229 2,748,500 Losses on disposal of non-current assets 172,269 668,731 Other operating costs 1,804,250 1,819,466 27,936,859 34,624,574

Provisions 9.1 4,020,428 1,514,291

Total operating expenses 788,187,946 903,540,149

In order to mitigate the expected drop in income resulting from the reduction in turnover due to the pandemic, the Group implemented several cost reduction measures, which explains the reduction in Supplies and services. The increase in Others is due to increased costs for hygiene, cleaning and comfort services, arising from the need to sanitise the premises, due to the COVID-19 pandemic.

The increase in Indirect taxes is the result of the increase of the water resources rate when compared to the homologous period, by the subsidiary Navigator, as well as the increase in the rate applicable to the current year's estimate.

The reversal in Impairment losses on inventories (presented at net value) resulted essentially from the sale of UWF (Euro 4,575,051) and Tissue (Euro 1,069,943) paper waste by the subsidiary Navigator.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 72

1ST HALF 2020

INVESTMENTS

3.1. GOODWILL

ACCOUNTING POLICIES

Goodwill represents the difference between the fair value of the cost of acquisition and the fair value of identifiable assets, liabilities and contingent liabilities of the subsidiaries included in the consolidation, by the full method on the acquisition date and is allocated to each Cash Generating Unit (CGU) or to the lower group of CGUs to which it belongs.

Amortisation Goodwill is not amortised. The Group carries out impairment tests on goodwill annually, and impairment or whenever there are signs of impairment. Recoverable amounts of cash generating units are determined, based on the calculation of value in use and fair value less cost of sale. Impairment losses on goodwill cannot be reversed.

Disposals and Gains or losses arising from the sale or loss of control over an entity or business to which loss of control Goodwill is allocated include the amount of the corresponding goodwill.

Acquisitions in a Goodwill generated on the acquisition of a foreign entity is recorded in the functional currency other currency of that entity and converted into the reporting currency of the Group (Euro), at than the the exchange rate prevailing at the balance sheet date. Exchange differences generated presentation in this conversion are recorded under Currency translation reserve (Note 5.5) as other currency comprehensive income.

Tax deductibility In accordance with the current tax legislation in Portugal, it is not expected that Goodwill generated and recognised will be tax deductible. In other geographies where the Group operates, a differentiated tax treatment is applied.

GOODWILL – NET AMOUNT

Goodwill is attributed to the Group’s cash generating units (CGU’s) that correspond to the operating segments identified in Note 2.1, as follows:

Amounts in Euro 30/06/2020 31/12/2019 Pulp and paper 122,907,528 122,907,528 Cement and derivatives 173,067,042 185,842,214 Environment 36,422,934 36,422,934 332,397,504 345,172,676

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 73

1ST HALF 2020

MOVEMENTS IN THE PERIOD

Amounts in Euro 30/06/2020 31/12/2019 Net value at the beginning of the period 345,172,676 346,170,987 Exchange rate adjustment (12,775,172) (998,311) Net value at the end of the period 332,397,504 345,172,676

3.2. INTANGIBLE ASSETS

ACCOUNTING POLICIES

Intangible assets are stated at cost of acquisition, deducted of accumulated amortisation and impairment losses. Depreciation is calculated using the straight-line method, over a period between 3 to 5 years and annually for CO2 emission rights.

CO2 EMISSION RIGHTS

Given the absence of accounting standards for the recognition and measurement of CO2 allowances, the policy defined by the Management is as follows:

Recognition of CO2 emission rights granted to the Group, under the European Union Emissions Trading free allowances Scheme (EU ETS) for the assignment of CO2 emission allowances at no cost, gives rise to and subsequent an intangible asset for the allowances, a government grant and a liability for the measurement obligation to deliver allowances equal to the emissions that have been made during the compliance period.

Emission allowances are only recorded as intangible assets when the Group is able to exercise control. At inception, they are initially measured at fair value (Level 1). When the market value of the emission allowances falls significantly below its carrying amount and such decrease is considered permanent, an impairment loss is recognised for emission allowances which the Group will not use in its operations.

The liability to deliver allowances is recognised based on actual emissions (Note 4.3 – Payables and other current liabilities). This liability will be settled using allowances on hand, being measured at the carrying amount of those allowances. Any additional emissions are measured using the market value as at the balance sheet date.

Recognition in the In the Consolidated Income Statement, the Group recognises as expenses, under Other income statement costs and losses, the emissions recorded at fair value on the grant date, except for acquired allowances, where the expense is measured at their purchase price.

Such costs will offset other operating income resulting from the recognition of the original government grant (also recognised at fair value at grant date) as well as any disposal of excess allowances.

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1ST HALF 2020

The effect on the income statement will, therefore, be neutral regarding the consumption of granted allowances. Any net effect on the income statement will result from the purchase of additional allowances to cover excess emissions, from the sale of effective consumption or from impairment losses booked to allowances that are not used at operational level.

BRANDS

Recognition and Whenever brands are identified in a business combination, the Group records them initial separately and these are measured at fair value on the acquisition date. measurement

Subsequent At cost less accrued impairment losses. Brands are not subject to amortisation as their measurement and useful life is indefinite. impairment The Group annually carries out impairment tests to the brands, or whenever there are signs of impairment.

INTANGIBLE ASSETS DEVELOPED INTERNALLY

Development expenses are only recognised as intangible assets to the extent that the technical capacity to complete the development of the asset is demonstrated and that it is available for own use or commercialisation. Expenses that do not meet these requirements, namely research expenses, are recorded as costs when incurred.

MOVEMENTS IN INTANGIBLE ASSETS

Research and Industrial development property and CO2 emission Assets under Amounts in Euro Brands expenditure other rights allowances construction Total Gross amount Balance as at 1 January 2019 277,967,321 11,737 14,636 26,660,892 3,512 304,658,098 Acquisitions/attributions - - - 64,986,846 300,734 65,287,580 Disposals - - - (5,999,298) - (5,999,298) Adjustments, transfers and write-offs - (11,737) 9,194 (23,916,258) (9,194) (23,927,995) Exchange rate adjustment 704,237 - - - - 704,237 Balance as at 31 December 2019 278,671,558 - 23,830 61,732,182 295,052 340,722,622 Acquisitions/attributions - - - 43,150,505 305,373 43,455,878 Disposals - - - 8,486,288 - 8,486,288 Adjustments, transfers and write-offs - - 4,335 (45,169,128) - (45,164,793) Exchange rate adjustment (5,338,115) - - - - (5,338,115) Balance as at 30 June 2020 273,333,443 - 28,165 68,199,847 600,425 342,161,880 Amortisation and impairment losses Balance as at 1 January 2019 (11,798,854) (10,844) (1,517) (1) - (11,811,216) Amortisation - - (13,222) - - (13,222) Impairment losses (16,843,328) - - (1,782,393) - (18,625,721) Adjustments, transfers and write-offs - 10,844 34 - - 10,878 Exchange rate adjustment (126,419) - 1,077 - - (125,342) Balance as at 31 December 2019 (28,768,601) - (13,628) (1,782,394) - (30,564,623) Amortisation (6,901) - (2,160) (828,231) - (837,292) Adjustments, transfers and write-offs - - - 2,610,625 - 2,610,625 Exchange rate adjustment (92,414) - - - - (92,414) Balance as at 30 June 2020 (28,867,916) - (15,788) (0) - (28,883,704)

Net book amount as at 1 January 2019 266,168,467 893 13,119 26,660,891 3,512 292,846,882 Net book amount as at 31 December 2019 249,902,957 - 10,202 59,949,788 295,052 310,157,999 Net book amount as at 30 June 2020 244,465,527 - 12,377 68,199,847 600,425 313,278,176

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 75

1ST HALF 2020

BRANDS

As at 30 June 2020 and 31 December 2019, the net value of the brands is detailed as follows:

Amounts in Euro 30/06/2020 31/12/2019 Pulp and paper Navigator 107,568,000 107,568,000 Soporset 43,919,000 43,919,000 Cement and derivatives Secil Portugal 71,700,000 71,700,000 Supremo (Brazil)* i) 14,972,202 20,337,644 Sibline (Lebanon)* i) - - Gabés (Tunisia)* i) 6,295,581 6,360,602 Other 10,744 17,711 244,465,527 249,902,957 * The value of these brands is subject to exchange rate adjustment.

CO2 EMISSION ALLOWANCES

As at 30 June 2020 and 31 December 2019, the Group held CO2 allowances recorded in accordance with the policy described above, as follows:

Amounts in Euro 30/06/2020 31/12/2019 CO2 allowances (ton) 2,948,001 2,782,955 Average unit value 23.47 21.54 68,199,847 59,949,788

Market price 26.97 24.52

3.3. PROPERTY, PLANT AND EQUIPMENT

ACCOUNTING POLICIES

Recognition and Property, plant and equipment acquired up to 1 January 2004 (date of transition to IFRS) initial are recorded at acquisition cost, or acquisition cost revaluated in accordance with the measurement accounting principles generally accepted in Portugal, up to that date, less depreciation and accumulated impairment losses.

Property, plant and equipment acquired after transition date are recorded at acquisition cost, less depreciation and impairment losses.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 76

1ST HALF 2020

ACCOUNTING POLICIES

Depreciation and The straight-line method is used from the moment the asset is available for use, using impairment the rates that best reflect its estimated useful life.

The depreciation of exploration lands results from the estimated average useful life of the land, considering the period of extraction of raw material.

Land 14

Buildings and other constructions 12 – 30

Basic equipment 6 – 25 Average estimated Transportation equipment 4 – 9 useful life (years): Tools 2 – 8

Administrative equipment 4 – 8

Returnable containers 6

Property, plant and equipment 4 – 10

The residual values of the assets and respective useful lives are reviewed and adjusted when necessary at the statement of financial position date. When the carrying amount of the asset exceeds its realisable value, the asset is written down to the estimated recoverable amount, and an impairment charge is booked (Note 3.6).

Subsequent costs Scheduled maintenance expenses are considered a component of the acquisition cost of property, plant and equipment and are fully depreciated by the next forecasted maintenance date.

Other expenses with repairs and maintenance are recognised as an expense in the

period in which they are incurred.

Spare and Spare parts are considered strategic as they are directly related to production maintenance parts equipment and their use is expected to last for more than two economic years. Maintenance parts considered as "critical spare parts" are recognised in non-current assets, as Property, plant and equipment. Respecting this classification, spare parts are depreciated from the moment they become available for use and are assigned a useful life that follows the nature of the equipment, where they are expected to be integrated, not exceeding the remaining useful life of these.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 77

1ST HALF 2020

ACCOUNTING POLICIES

Borrowing costs Borrowing costs directly related to the acquisition or construction of fixed assets are capitalised when their construction period exceeds one year, and form part of the asset’s cost.

During the years reported, no financial charges for loans directly related to the acquisition or construction of fixed assets were capitalised.

Write-offs and Gains or losses arising from write-offs or disposals are determined by the difference disposals between the proceeds from the disposals when applicable less transaction costs and the carrying amount of the asset, and are recognised in the income statement as Other operating income (Note 2.2) or Operating expenses (Note 2.3).

MAIN ACCOUNTING ESTIMATES AND JUDGEMENTS

Recoverability of Property, plant and equipment

The recoverability of property, plant and equipment requires the definition of estimates and assumptions by the Management, namely, when applicable, to the determination of the value in use to be considered in the impairment tests to the Group's cash generating units.

Useful life and depreciation

Property, plant and equipment present the most significant component of the Group's total assets. These assets are subject to systematic depreciation for the period that is determined to be their economic useful life. The determination of assets useful lives and the depreciation method to be applied is essential to determine the amount of depreciation to be recognised in the consolidated income statement of each period. These two parameters are defined according to the best judgement of the Board of Directors for the assets and businesses in question, also considering the practices adopted by companies of the sector at the international level and the development of the economic conditions in which the Group operates. Given the relevance of this estimate, the Group makes regular use of external and independent experts to assess the adequacy of the estimates used.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 78

1ST HALF 2020

MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT

Buildings and Equipment and Assets under Land other Total Amounts in Euro other tangibles construction constructions Gross amount Balance as of 1 January 2019 414,804,422 1,114,657,393 5,476,751,669 93,800,070 7,100,013,554 Changes of perimeter - - 7,333,037 - 7,333,037 Acquisitions 340,473 205,806 17,274,659 185,081,141 202,902,079 Disposals (1,342,670) (1,765,317) (13,193,628) - (16,301,615) Adjustments, transfers and write-offs 8,839,881 16,423,831 71,978,004 (124,209,737) (26,968,021) Exchange rate adjustment 2,381,379 418,603 7,438,621 (1,188,805) 9,049,798 Balance as of 31 December 2019 425,023,485 1,129,940,316 5,567,582,362 153,482,669 7,276,028,832 Changes of perimeter (9,137) - (662,550) (43,478) (715,165) Acquisitions 5 60,592 7,324,031 56,696,484 64,081,112 Disposals (1,361,500) (2,483,643) (7,526,211) - (11,371,354) Adjustments, transfers and write-offs 287,131 9,457 23,033,390 (33,772,770) (10,442,792) Exchange rate adjustment (14,275,971) (20,159,277) (41,042,188) (7,104,401) (82,581,837) Balance as of 30 June 2020 409,664,013 1,107,367,445 5,548,708,834 169,258,504 7,234,998,796 Accumulated depreciations and impairment losses Balance as of 1 January 2019 (73,207,107) (709,397,670) (4,270,025,877) (3,629,135) (5,056,259,789) Changes of perimeter - - (735,911) - (735,911) Depreciation for the period (5,374,007) (21,413,933) (193,416,433) - (220,204,373) Disposals 7,701 1,625,401 10,286,260 - 11,919,362 Impairment losses (178,598) 40,122 (3,571,994) (786) (3,711,256) Adjustments, transfers and write-offs (3,505,135) 846,294 28,225,243 - 25,566,402 Exchange rate adjustment (1,242,805) (714,784) (5,636,562) - (7,594,151) Balance as of 31 December 2019 (83,499,951) (729,014,570) (4,434,875,274) (3,629,921) (5,251,019,716) Changes of perimeter - - 6,550 - 6,550 Depreciation for the period (Note 3.6) (2,239,585) (10,082,437) (94,431,669) - (106,753,691) Disposals 149,420 2,103,095 7,711,336 - 9,963,851 Impairment losses (Note 3.6) (178,598) 40,122 (3,571,994) - (3,710,470) Adjustments, transfers and write-offs 491,853 1,645,911 7,609,683 508,005 10,255,452 Exchange rate adjustment 799,613 2,641,595 12,778,210 149,876 16,369,294 Balance as of 30 June 2020 (84,477,248) (732,666,284) (4,504,773,158) (2,972,040) (5,324,888,730)

Net book value as of 1 January 2019 341,597,315 405,259,723 1,206,725,792 90,170,935 2,043,753,765 Net book value as of 31 December 2019 341,523,534 400,925,746 1,132,707,088 149,852,748 2,025,009,116 Net book value as of 30 June 2020 325,186,765 374,701,161 1,043,935,676 166,286,464 1,910,110,066

As at 30 June 2020, investments in progress include investments associated with ongoing development projects, in particular those related to the pulp/paper business segment, where stands out the construction of the new biomass boiler at the Figueira da Foz plant (Euro 36,853,117), environmental plan (Euro 7,167,004), a new chip stack in Aveiro (Euro 6,014,257) and several improvements in production processes and asset maintenance (Euro 71,489,578) related to the subsidiary Navigator, as well as ongoing investments in the amount of Euro 41,323,681 in the subsidiary Secil, where the project under development by the Brazilian subsidiary Supremo for the installation of a crusher and conveyor belt are noteworthy.

During the first half of 2020 and the year 2019, no financial charges for loans directly related to the acquisition, construction or production of fixed assets were capitalised.

As at 30 June 2020 and 31 December 2019, there are no property, plant and equipment given as collateral.

The commitments made by the Group for the acquisition of property, plant and equipment are

detailed in Note 9.2 - Commitments.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 79

1ST HALF 2020

3.4. GOVERNMENT GRANTS

ACCOUNTING POLICIES

Government grants received to offset the Group for investments made in Property, plant and equipment, including those granted as tax credits, are classified as Deferred income (Note 4.3 – Payables and other current liabilities) and are recognised in income over the estimated useful life of the respective subsidised assets, and are associated with the depreciation of the period (Note 3.6), for presentation purposes.

Government grants repayable

Government grants, in the form of loans repayable at a subsidised rate, are discounted on the date of initial recognition based on the market interest rate at the date of grant, the value of the discount constituting the value of the grant to be amortised over the period of the loan or asset whose acquisition it is intended to finance, depending on the activities financed. These liabilities are included in Payables and other current liabilities (Note 4.3).

GOVERNMENT GRANTS - MOVEMENTS

Amounts in Euro 30/06/2020 31/12/2019 Opening balance 42,776,572 56,591,488 Charge-off (5,645,525) (13,936,371) Other 178,597 121,455 Closing balance 37,309,644 42,776,572 Of a financial nature 15,197,229 18,562,558 Of a fiscal nature 22,112,415 24,214,014

Incentive to increase pulp production capacity in Figueira da Foz

On 27 December 2018, an investment tax contract was signed between the subsidiary Navigator Pulp Figueira, S.A. and AICEP - Agência para o Investimento e Comércio Externo de Portugal (Agency for Investment and Foreign Trade of Portugal), related to the investment associated with the increase of pulp production capacity in Figueira of Foz, which includes a tax incentive up to the maximum amount of Euro 17,278,657, corresponding to 19.5% of the investment made, by means of the fulfilment of contractually defined objectives, until 31 December 2025.

Incentives for the expansion project of the Cacia pulp plant

On 18 June 2014, the subsidiary Navigator Pulp Cacia, SA., signed two financial and tax incentive agreements with AICEP - Agência para o Investimento e Comércio Externo de Portugal (Agency for Investment and Foreign Trade of Portugal) aimed at supporting the investment to be promoted by that company in the capacity increase project of Cacia pulp plant, with a total amount of Euro 49,3 million.

The incentives already approved amount to Euro 9,3 million, as a repayable financial incentive, and Euro 5,644 million, as a tax incentive, to be used until 2024, at the latest, but totally used since the end of 2016. The contract includes an award of achievement, corresponding to the conversion of up to 75% (Euro 6,947,450) of the refundable incentives granted into non-refundable incentives, by meeting the objectives set by the agreement, until 31 December 2023.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 80

1ST HALF 2020

GOVERNMENT GRANTS REPAYABLE

As at 13 December 2017, the subsidiary Navigator Tissue Cacia, S.A. entered into an investment agreement with AICEP, for the construction of the new Tissue plant in Cacia. This agreement comprises a financial incentive in the form of a reimbursable incentive, which includes a grace period of two years, without payment of interest, up to a maximum amount of Euro 42,166,636, corresponding to 35% on the amount of expenses considered eligible, which were estimated at Euro 120,5 million.

On 20 April 2018, the same entity was also awarded the assignment of a tax incentive granted through the fulfilment of contractually defined objectives, whose maximum amount will be Euro 11,515,870, corresponding to 10% of the expenses associated with the project investment.

3.5. ASSETS UNDER RIGHT OF USE

ACCOUNTING POLICIES

At the date the lease enters into force, the Group recognises a right-of-use asset at its cost, which corresponds to the initial amount of the lease liability adjusted for: i) any early prepayments; ii) lease incentives received; and iii) initial direct costs incurred.

To the right-of-use asset, the estimate of removing and/or restoring the underlying asset and/or the location where it is located may be added, when required by the lease agreement.

The right-of-use asset is subsequently depreciated using the straight-line method, from the start date until the lower between the end of the asset's useful life and the lease term. Additionally, the right-of-use asset is reduced of impairment losses, if any, and adjusted for any remeasurement of the lease liability. The useful life considered for each class of assets under right of use is equal to the useful life of Property, plant and equipment (Note 3.3) in the same class when there is a call option and the Group expects to exercise it.

Short-term leases and low-value asset leases

The Group recognises payments for leases of 12 months or less and for leases of assets whose individual acquisition value is less than USD 5,000 directly as operating expenses of the year (Note 2.3), on a straight-line basis.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 81 1ST HALF 2020

MOVEMENTS IN ASSETS UNDER RIGHT OF USE

Buildings and Industrial property Equipment and Amounts in Euro Land other Total and other rights other tangibles constructions Gross amount Balance as of 1 January 2019 (Note 1.5) 1,394,381 48,915,426 7,816,650 10,840,214 68,966,671 Acquisitions 3,763,633 3,871,205 1,020,796 7,324,537 15,980,171 Disposals - (478,296) - (6,445) (484,741) Adjustments, transfers and write-offs (3,946,051) 1,734,041 1,531,702 5,048,543 4,368,235 Exchange rate adjustment - (11,518) (25,274) (44,006) (80,798) Balance as of 31 December 2019 1,211,963 54,030,858 10,343,874 23,162,843 88,749,538 Acquisitions 197,639 2,177,927 1,410,013 8,389,167 12,174,746 Disposals - (16,078) - (16,636) (32,714) Adjustments, transfers and write-offs - (284,728) (570,721) (621,265) (1,476,714) Exchange rate adjustment - (102,882) (148,215) (445,997) (697,094) Balance as of 30 June 2020 1,409,602 55,805,097 11,034,951 30,468,112 98,717,762 Accumulated amortisations, depreciations and impairment losses Balance as of 1 January 2019 - - - - - Depreciation and impairment losses (Note 3.6) (233,138) (4,687,761) (2,357,804) (6,302,288) (13,580,991) Disposals - 7,703 - - 7,703 Adjustments, transfers and write-offs - 7,698 (221,259) 673,811 460,250 Exchange rate adjustment - 3,279 11,441 13,040 27,760 Balance as of 31 December 2019 (233,138) (4,669,081) (2,567,622) (5,615,437) (13,085,278) Depreciation and impairment losses (Note 3.6) (110,205) (2,372,381) (1,127,163) (3,636,289) (7,246,038) Disposals - 2,339 - 5,001 7,340 Adjustments, transfers and write-offs - 115,645 222,379 614,147 952,171 Exchange rate adjustment - 31,326 43,190 155,228 229,744 Balance as of 30 June 2020 (343,343) (6,892,152) (3,429,216) (8,477,350) (19,142,061)

Net book value as of 31 December 2019 978,825 49,361,777 7,776,252 17,547,406 75,664,260 Net book value as of 30 June 2020 1,066,259 48,912,945 7,605,735 21,990,762 79,575,701

The item Land essentially refers to rights to use land for forestry exploitation existing at the subsidiary Navigator, whose agreements usually have a duration of 24 years, and may be cancelled in advance if the 2nd harvest takes place before the 24th year of the term.

3.6. DEPRECIATION, AMORTISATION AND IMPAIRMENT LOSSES

In the first half of 2020 and 2019, the caption Depreciation, amortisation and impairment losses were detailed as follows:

Amounts in Euro Note H1 2020 H1 2019 Depreciation of property, plant and equipment for the period 110,152,804 110,197,505 Investment grants charge-off (5,971,994) (6,007,701) Depreciation of property, plant and equipment, net of subsidies used 104,180,810 104,189,804

Impairment in property, plant and equipment - losses (61,733) 814,924 Impairment in property, plant and equipment - reversals (127,753) (22,691) Impairment in property, plant and equipment for the period (189,486) 792,233

Amortisation in intangible assets for the period 3.2 837,292 7,550

Depreciation of assets under right-of-use for the period 3.5 7,246,038 6,933,723

Impairment on assets held for sale 230,000 1,000,000 Depreciation of investment properties 3.9 383 383 Impairment losses on investment properties 3.9 822 - ICMS - Value-added tax on goods and services included in depreciation (Brazil) (553,829) (697,970) 111,752,030 112,225,723

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 82

1ST HALF 2020

3.7. BIOLOGICAL ASSETS

ACCOUNTIG POLICIES

Biological assets are measured at fair value less estimated selling expenses at the time of harvest.

The Group’s biological assets mainly comprise the forests held for the production of timber, suitable for incorporating in the production process of BEKP or to sell in the market, mainly eucalyptus, also including other species such as pine and cork oak.

Fair Value (level 3 When calculating the fair value of forests, the Group uses the discounted cash flows of the IFRS 13 fair method, based on a model developed in house, regularly tested by independent value hierarchy) external assessments.

In the model developed, assumptions are considered corresponding to the nature of the assets under evaluation, namely, the development cycle of the different species, the productivity of the forests, the wood sales price (when there is an active market) less the cost of harvesting, the rents of own, leased land, replanting and transport, the costs of planting and maintenance, the cost inherent in leasing the forest land; and the discount rate.

The discount rate corresponds to a market interest rate without inflation, consistent with the structure of projections, determined on the basis of the Group’s expected rate of return on its forests, which are intended to be sold intra-group.

Concession areas All costs incurred in land preparation for first forestation are considered as a fixed asset, depreciated over their estimated useful life, which coincides with the concession period.

Change of Changes in estimates of growth, growth period, price, cost and other assumptions are estimates recognised in the income statement as fair value adjustments of biological assets.

Harvesting At the time of harvest, wood is recognised at fair value less estimated costs at point of sale or consumption, which corresponds to the initial carrying amount of the inventory.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 83

1ST HALF 2020

ESTIMATES AND JUDGEMENTS

ASSUMPTIONS

Assumptions corresponding to the nature of the assets being valued were considered:

− Productivity of forests; − Wood sales price (when there is an active market) less the cost of harvesting, rents for own, leased and concessioned land, replanting and transport, planting and maintenance costs, the cost inherent in leasing forest land; − Discount rate for 2020 corresponding to 3.73% (2019: 3.73%). Note that the Group incorporates the fire risk into the model's cash flows. If this risk were incorporated into the discount rate, it would be of 5.24%.

These values, calculated in accordance with the expected extraction of their productions, correspond to the following future production expectations:

30/06/2020 31/12/2019 Eucalyptus (Portugal) - Potential future of wood extractions k m3ssc 9,555 9,330 Pine (Portugal) - Potential future of wood extractions k ton 316 325 Pine (Portugal) - Potential future of pine extractions k ton n/a n/a Cork oak (Portugal) - Potential future of cork extractions k @ 603 591

Regarding Eucalyptus, the most relevant biological asset in the financial statements presented, in the first half of 2020, the Group extracted 324,895 m3ssc of wood from its owned and explored forests (2019: 650,593 m3ssc).

In addition, as at 30 June 2020 and 31 December 2019, i) there are no amounts of biological assets held and/or pledged as collateral for liabilities, or non-reversible commitments relating to the acquisition of biological assets, and ii) there are no government related subsidies with biological assets recognised in the Group's consolidated financial statements.

SENSITIVITY ANALYSIS

The Group considers the discount rate used in Portugal and the forward price of wood as the most significant variables.

Changes in assumptions may imply the valuation/depreciation of these assets:

Amounts in Euro 30/06/2020 31/12/2019 1) Increase of 0.5% in the discount rate in Portugal Devaluation of forestry assets in Portugal 6,634,000 5,936,000 2) Decrease of 3% in forward price Devaluation of forestry assets in Portugal 5,358,000 9,854,000

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 84

1ST HALF 2020

DETAIL OF BIOLOGICAL ASSETS

Amounts in Euro 30/06/2020 31/12/2019 Eucalyptus (Portugal) 119,942,704 123,314,343 Pine (Portugal) 4,136,907 4,201,000 Cork oak (Portugal) 4,268,701 3,883,727 Other species (Portugal) 393,008 370,771 128,741,320 131,769,841

MOVEMENTS IN BIOLOGICAL ASSETS

Amounts in Euro 30/06/2020 31/12/2019 Opening balance 131,769,841 119,614,567 Variation Logging (13,152,960) (12,820,837) Growth 1,210,823 2,462,223 New plantations 1,887,259 1,608,690 Other changes in fair value 7,026,357 5,673,696 Total variation (3,028,521) (3,076,228) Amount as at 30 June 128,741,320 116,538,339 Other quarters - 15,231,501 Closing balance 128,741,320 131,769,841

The amounts shown as “Other changes in fair value” correspond to actual costs of forest asset management foreseen and incurred in the period, changes in the general assessment assumptions (price of wood and cost of capital) and changes in expectations in relation to the annual model:

Amounts in Euro 30/06/2020 31/12/2019 Costs of assets management Forestry 2,047,681 2,444,652 Structure 1,527,024 1,950,233 Fixed and variable rents 5,589,383 4,119,661 9,164,088 8,514,546 Variation in other species 343,118 186,164 Other changes in expectations (2,480,849) (3,027,014) (2,137,731) (2,840,850) 7,026,357 5,673,696

3.8. NON-CURRENT ASSETS HELD FOR SALE

ACCOUNTING POLICIES

Non-current assets (or discontinued operations) are classified as held for sale if its value is realisable through a sale transaction rather than through its continuing use.

This is considered to be the case only when: (i) the sale is highly probable and the asset is available for immediate sale in its present condition, (ii) the Group has assumed a commitment to sell, and (iii) it is expected that the sale will take place within a period of 12 months.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 85

1ST HALF 2020

Measurement From the moment property, plant and equipment is classified as non-current assets held and for sale, they are measured at the lower of book value or at fair value less costs to sell and presentation their depreciation ceases. When the fair value less costs to sell is lower than the carrying amount, the difference is recognised in the income statement.

Disposals Gains or losses on disposals of non-current assets, determined by the difference between the sale price and the respective net book value, are recognised in the income statement as Other operating income (Note 2.2) or Operating expenses (Note 2.3).

As at 30 June 2020 and 31 December 2019, assets held for sale amounting to Euro 7,642,459 and Euro 7,809,209, respectively, essentially respect to property, plant and equipment of the Cement and derivatives segment.

3.9. INVESTMENT PROPERTIES

ACCOUNTING POLICIES

The Group classifies the assets held for the purpose of capital appreciation and/or the generation of rental income as investments properties in the consolidated financial statements.

Measurement An investment property is initially measured by its acquisition or production cost, including the transaction costs that are directly attributable to it. After initial recognition, investment properties are measured at cost less amortisation and impairment losses.

Subsequent expenditure is capitalised only when it is probable that it will result in future economic benefits to the entity comparing to those considered in initial recognition.

MOVEMENTS IN INVESTMENT PROPERTIES

Amounts in Euro 30/06/2020 31/12/2019 Opening balance 373,673 383,513 Disposals (2) (7,429) Net changes in fair value (1,205) (2,411) 372,466 373,673

These assets consist essentially of land and buildings held for rental and/or capital valuation purposes and are not related to the Group's operating activity nor do they have any future use determined.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 86

1ST HALF 2020

WORKING CAPITAL

4.1. INVENTORIES

ACCOUNTING POLICIES

Goods and raw Goods and raw materials are valued at the lower of their purchase cost or their net materials realisable value. The acquisition cost includes ancillary costs and it is determined using the weighted average cost as the valuation method.

Finished Finished and intermediate products and work in progress are valued at the lower of their products and production cost (which includes incorporated raw materials, labour and general work in manufacturing costs, based on a normal production capacity level) or their net realisable progress value.

The net realisable value corresponds to the estimated selling price, after deducting estimated completion and selling costs. The difference between production cost and net realisable value, if lower, are recorded as an operational cost.

4.1.1 INVENTORIES – DETAIL BY NATURE

Amounts net of accumulated impairment losses

Amounts in Euro 30/06/2020 31/12/2019 Raw materials 184,692,045 159,936,079 Goods 8,510,783 15,539,716 Sub-products and waste 624,799 1,245,789 193,827,627 176,721,584 Finished and intermediate products 122,599,952 123,641,384 Work in progress 4,502,275 6,034,288 127,102,227 129,675,672 Total 320,929,854 306,397,256

4.1.2 INVENTORIES – DETAIL BY SEGMENT AND GEOGRAPHY

Amounts in Euro 30/06/2020 % 31/12/2019 % Pulp and paper Portugal 213,079,997 87.6% 194,077,253 89.1% Rest of Europe 10,862,877 4.5% 10,068,303 4.6% America 19,174,201 7.9% 13,734,144 6.3% 243,117,075 100.0% 217,879,700 100.0% Cement and derivatives Portugal 30,443,457 39.4% 34,121,463 38.9% Rest of Europe 1,761,186 2.3% 2,521,564 2.9% America 8,335,643 10.8% 13,363,902 15.2% Africa 20,443,192 26.5% 17,073,028 19.5% Asia 16,251,080 21.0% 20,636,318 23.5% 77,234,558 100.0% 87,716,275 100.0% Environment - Portugal 578,221 801,281 320,929,854 306,397,256

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 87

1ST HALF 2020

The amount related to Portugal, from Pulp and Paper segment, includes Euro 7,857,923 (2019: Euro 14,808,269) relating to inventories for which invoices have already been issued but whose control has not been transferred to customers.

As of 30 June 2020, and 31 December 2019, there are no inventories in which ownership is restricted and/or pledged as collateral for liabilities.

4.1.3 COST OF GOODS SOLD AND MATERIALS CONSUMED DURING THE PERIOD

Amouns in Euro Note 30/06/2020 31/12/2019 Opening balance 176,725,286 181,839,638 Purchases 379,656,915 873,893,090 Closing balance (193,830,349) (176,725,286) Cost of goods sold and materials consumed 2.3 362,551,852 879,007,442

4.1.4 VARIATION IN PRODUCTON DURING THE PERIOD

Amounts in Euro Note 30/06/2020 31/12/2019 Opening balance (129,675,671) (132,071,825) Adjustments (4,797,541) 3,530,045 Closing balance 127,102,227 129,675,671 Variation in production 2.3 (7,370,985) 1,133,891

4.1.5 MOVEMENTS IN IMPAIRMENT LOSSES IN INVENTORIES

Amounts in Euro Note 30/06/2020 31/12/2019 Opening balance 24,918,865 16,935,199 Increases 634,100 2,149,174 Reversals (5,874,444) (2,169,288) Impact on results for the period 2.3 (5,240,343) (20,114) Other quarters - 7,834,524 Exchange rate adjustment (84,689) 165,135 Charge-off (81,020) 4,121 Closing balance 19,512,812 24,918,865

Inventory impairment recorded in 2020 and 2019 refer mainly to adjustments to the stock of UWF and Tissue paper.

4.2. RECEIVABLES AND OTHER CURRENT ASSETS

ACCOUNTING POLICIES

Trade and other receivables

Classification Trade receivables result from the Group's main activities and the business model followed is "hold to collect", although sometimes the Cement and Derivatives segment uses confirming. Balances from other debtors are typically from the "hold to collect" model.

Initial measurement At fair value

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 88

1ST HALF 2020

Subsequent At amortised cost, net of impairment losses. measurement

Impairment from Impairment losses are recorded based on the simplified model established in IFRS 9, trade receivables recognising the expected losses up to maturity. The expected losses are determined on the basis of the experience of historical actual losses over a statistically significant period and representative of the specific characteristics of the underlying credit risk.

Impairment form Impairment losses are recorded on the basis of the general estimated credit loss other debtors model of IFRS 9.

As of 30 June 2020 and 31 December 2019, Receivables and other current and non-current assets were as follows:

30/06/2020 31/12/2019 Amounts in Euro Note Non-current Current Total Non-current Current Total Trade receivables - Pulp and paper segment 8.1.4 - 132,245,300 132,245,300 - 156,030,741 156,030,741 Cement and derivatives segments 8.1.4 - 68,896,633 68,896,633 - 61,315,517 61,315,517 Environment segment 8.1.4 - 12,174,702 12,174,702 - 11,336,733 11,336,733 - 213,316,635 213,316,635 - 228,682,991 228,682,991 Receivables - Related parties 10.4 - 615,285 615,285 - 873,103 873,103 State - 48,219,630 48,219,630 - 63,505,218 63,505,218 Department of Commerce (EUA) - 24,654,013 24,654,013 25,680,258 4,055,993 29,736,251 Enviva Pellets Greenwood, LLC (EUA) 32,089,520 2,233,281 34,322,801 32,489,823 - 32,489,823 Accrued income - 19,817,629 19,817,629 - 21,589,560 21,589,560 Deferred costs - 17,382,405 17,382,405 - 12,778,784 12,778,784 Derivative financial instruments 8.2 - 14,759,734 14,759,734 - 4,095,499 4,095,499 Other 3,199,456 35,766,791 38,966,247 6,296,378 33,652,690 39,949,068 35,288,976 376,765,403 412,054,379 64,466,459 369,233,838 433,700,297

The amounts above are net of accumulated impairment losses. Analysis of impairment for

receivables and other current assets is presented in Note 8.1.4 - Credit risk.

Department of Commerce (EUA)

As of 30 June 2020 and 31 December 2019, the amount reflected in the Department of Commerce (USA) item corresponds to the amount receivable from this entity following the investigation of alleged dumping of UWF paper exports to the United States of America by the subsidiary Navigator.

The final rate for the review period from August 2015 to February 2017 ("POR1") was revised from 37.39% to 1.75% in October 2018, and the US Court of International Trade decided in November 2019 to request the DoC to review that result following Navigator's request. DoC recalculated the rate again downwards, setting it at 1.63%, a rate which was sanctioned by the US Court of International Trade in July this year and the amount was reclassified to current assets.

With regard to the second review period, from March 2018 to February 2019, following the audit performed last August by the Department of Commerce, the rate was set at 4.37%. Since the plaintiffs did not appeal against this decision, Navigator was reimbursed during the first half of 2020 the corresponding amount of Euro 4,055,993.

Enviva Pellets Greenwood, LLc (EUA)

Reflects the present value of the amount still to be received from the sale of the pellet business by Navigator (Note 2.2). The nominal receivable shall bear interest at the rate of 2.5% (Note 5.11).

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 89

1ST HALF 2020

As of 30 June 2020 and 31 December 2019, State is detailed as follows:

Amounts in Euro 30/06/2020 31/12/2019 Value added tax - Recoverable 3,432,826 12,209,136 Value added tax - Reimbursement requests 29,083,937 29,540,553 Tax on goods and services ((ICMS) 1,598,818 2,026,176 Industrialised products tax (IPI) 678,177 1,249,182 Social Security Financing contribution (COFINS) 2,089,357 4,081,090 PIS and COFINS credit on fixed assets 8,900,938 11,947,233 Other taxes 151,766 166,997 Amounts pending reimbursement (tax proceedings decided in favour of the Group) 2,283,811 2,284,851 48,219,630 63,505,218

As at 30 June and 31 December 2019, Accrued income and deferred costs were detailed as follows:

Amounts in Euro 30/06/2020 31/12/2019 Accrued income Energy sales 12,009,020 13,286,097 Compensation receivable 6,346,128 5,749,999 Other 1,462,481 2,553,464 19,817,629 21,589,560 Deferred costs Insurance 6,288,648 1,711,855 Rentals 6,160,574 5,771,218 Other 4,933,183 5,295,711 17,382,405 12,778,784 37,200,034 34,368,344

4.3. PAYABLES AND OTHER CURRENT LIABILITIES

ACCOUNTING POLICIES

Financial liabilities at amortised cost

Initial At fair value, net of transaction costs incurred. measurement

Subsequent At amortised cost, using the effective interest rate method. measurement The difference between the repayment amount and the initial measurement amount is recognised in the income statement over the debt period under "Interest on other financial liabilities at amortised cost" (Note 5.11).

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 90

1ST HALF 2020

As of 30 June 2020 and 31 December 2019, Payables and other current liabilities were detailed as follows:

Amounts in Euro Note 30/06/2020 31/12/2019 Trade payables 284,052,493 268,149,985 Trade payables - property, plant and equipment 6,369,326 12,304,533 State 74,510,128 47,089,600 Instituto do Ambiente 25,664,264 45,092,015 Related parties 10.4 2,919,698 32,098,312 Other creditors 5,252,838 8,632,475

Derivative financial instruments 8.2.2 8,550,743 7,815,817

Accrued costs - payroll costs 38,251,455 41,588,040 Other accrued costs 51,204,525 54,076,749

Non-repayable grants 76,150,258 42,694,968 Other deferred income - ISP 7,675,980 2,634,968 Payables and other liabilities - Current 580,601,708 562,177,462 Non-repayable grants 27,479,913 30,837,585 Payables and other liabilities - Non current 27,479,913 30,837,585 608,081,621 593,015,047

As of 30 June 2020 and 31 December 2019, State is detailed as follows:

Amounts in Euro 30/06/2020 31/12/2019 Personal income tax withhold (IRS) 7,618,396 3,409,983 Value added tax 40,915,028 19,141,854 Social Security contributions 6,310,171 4,389,857 Tax on goods and services (ICMS) 541,689 483,296 Programa de Desenvolvimento da Empresa Catarinense (PRODEC) 676,113 1,043,850 Programa Paraná Competitivo 15,092,832 17,040,791 Social Security Financing Contribution (COFINS) 177,807 26,292 Other 3,178,092 1,553,677 74,510,128 47,089,600

As of 30 June 2020 and 31 December 2019, there were no arrears debts to the State.

Non-repayable grants - Detail

Amounts in Euro Note 30/06/2020 31/12/2019 Investment subsidies 9,829,731 11,938,987 Grants - CO2 emission allowances 54,942,368 26,204,321 Other grants 11,378,159 4,551,660 Non-repayable grants - current 76,150,258 42,694,968 Investment grants 27,479,913 30,837,585 Non-repayable grants - non-current 27,479,913 30,837,585 103,630,171 73,532,553

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 91

1ST HALF 2020

CAPITAL STRUCTURE

5.1. CAPITAL MANAGEMENT

Capital management policy

The objectives of Semapa Group, when managing capital, are to safeguard the Group´s ability to continue as a going concern and value creation for shareholders, through a conservative dividend policy based on principles of financial strength. The aim has been to maintain a financial structure compatible with the Group´s sustained growth and different business areas, whilst maintaining sound solvency and financial autonomy indicators. Accordingly, capital for the purposes of capital management corresponds to shareholders equity and no financial liabilities are considered an integral part thereof.

In order to maintain or adjust its capital structure, the Group can adjust the amount of dividends payable to its shareholders, return capital to its shareholders, issue new shares or sell assets to lower its borrowings.

5.2. SHARE CAPITAL AND THEASURY SHARES

ACCOUNTING POLICIES

Semapa's share capital is fully subscribed and paid up, represented by shares with no nominal value.

Costs directly attributable to the issue of new shares or other equity instruments are reported as a deduction, net of taxes, from the amount received. The cost directly attributable to the issue of new shares or options for a business acquisition are included in the acquisition cost, as part of the purchase price.

Treasury shares

Recognition At acquisition value, as a reduction of equity.

Acquisitions by When any Group company acquires shares of the parent company, the payment, which Group company includes directly associated incremental costs, is deducted from the shareholders’ equity attributable to the holders of the parent company’s capital until the shares are cancelled, redeemed or sold.

Disposal of When shares are subsequently sold or repurchased, any proceeds, net of the directly treasury shares attributable transaction costs and taxes, is reflected in the shareholders’ equity of the company’s shareholders, under Other reserves (Note 5.5).

Extinction of The extinction of treasury shares is reflected in the consolidated financial statements, as treasury shares a reduction of share capital and in the caption Treasury shares at its nominal and acquisition cost, respectively. The differential between those amounts is recorded in Other reserves.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 92 1ST HALF 2020

SEMAPA’S SHAREHOLDERS

As of 30 June 2020 and 31 December 2019, Semapa's shareholders are detailed as follows:

30/06/2020 31/12/2019 Name No. of shares % No. of shares % Shares without par value Cimo - Gestão de Participações, SGPS, S.A. 38,959,431 47.94 38,959,431 47.94 Sodim, SGPS, S.A. 16,293,884 20.05 15,252,726 18.77 Bestinver Gestión, SGIIC, S.A. 4,032,051 4.96 4,032,051 4.96 Cimigest, SGPS, S.A. 3,185,019 3.92 3,185,019 3.92 Norges Bank (the Central Bank of Norway) 1,699,613 2.09 1,699,613 2.09 Sociedade Agrícola da Quinta da Vialonga, S.A. 625,199 0.77 625,199 0.77 Treasury shares 1,400,627 1.72 823,337 1.01 Other shareholders with less than 2% interest 15,074,176 18.55 16,692,624 20.54 81,270,000 100.00 81,270,000 100.00

TREASURY SHARES - MOVEMENTS

The movement in treasury shares, in the first half of 2020 and year 2019, were as follows:

30/06/2020 31/12/2019 Book value Book value Amounts in Euro No. of shares No. of shares (Euro) (Euro) Treasury shares held at the beginning of the period 823,337 8,922,980 640,666 6,740,954 Acquisition of shares by Semapa - Sociedade de Investimento e Gestão, SGPS, S.A. 577,290 7,023,383 182,671 2,182,026 Disposals in the period - - - - Treasury shares held at the end of the period 1,400,627 15,946,363 823,337 8,922,980

5.3. EARNINGS PER SHARE

ACCOUNTING POLICIES

The basic earnings per share are determined based on the division of profits or losses attributable to the ordinary shareholders of Semapa by the weighted average number of common shares outstanding during the period.

For the purpose of calculating diluted earnings per share, Semapa adjusts the profits or losses attributable to ordinary equity holders, as well as the weighted average number of outstanding shares for the purposes of all potential dilutive common shares.

Amounts in Euro H1 2020 H1 2019 Profit attributable to Company's shareholders 30,286,796 73,508,542

Total number of issued shares 81,270,000 81,270,000 Average treasury shares in the portfolio (1,083,435) (668,175) Weighted average number of shares 80,186,565 80,601,825

Basic earnings per share 0.378 0.912 Diluted earnings per share 0.378 0.912

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 93

1ST HALF 2020

5.4. DIVIDENDS

Dividends per share presented are calculated based on the number of shares outstanding on the grant date.

DIVIDENDS DISTRIBUTED IN THE PERIOD

Amount Dividends per Amounts in Euro Date allocated share Dividends distributed in 2020 Approval at the Semapa Annual Shareholder's Meeting of the payment of dividends relating to 2019 net 29 May 2020 9,983,672 0.125 profit on an individual basis in accordance with IFRS Dividends distributed in 2019 Approval at the Semapa Annual Shareholder's Meeting of the payment of dividends relating to 2018 net 16 April 2019 41,267,948 0.512 profit on an individual basis in accordance with IFRS

The difference between the amount of dividends paid included in the interim consolidated cash flow statement (Euros 40,848,042) and the amount attributed in 2020, refers to payments of dividends to non-controlling interests attributed in 2019, which were settled by subsidiaries in 2020.

5.5. RESERVES AND RETAINED EARNINGS

ACCOUNTING POLICIES

Fair value reserve

Fair value reserve refers to the accumulated change in fair value of derivative financial instruments classified as hedging instruments (Note 8.2), and financial investments measured at fair value through other comprehensive income (Note 8.3), net of deferred taxes.

Changes relating to derivatives are reclassified to profit or loss for the period (Note 5.11) as hedged instruments affect profit or loss for the period. The change in fair value of financial investments recorded under this item is not recycled to profit or loss.

Currency translation reserve

The exchange translation reserve corresponds to the cumulative amount related to the Group's appropriation of exchange rate differences resulting from the translation of the financial statements of the subsidiaries and associates operating outside the Euro zone, mainly in Brazil, Tunisia, Lebanon, Angola, Mozambique, the United States of America, Switzerland and United Kingdom.

Legal reserve

The Portuguese Commercial Company law prescribes that at least 5% of annual net profit must be transferred to the legal reserve, until this is equal to at least 20% of the share capital. This reserve cannot be distributed, unless in the event of the Company’s winding up. However, it may be used to absorb losses after the other reserves have been exhausted or it can be incorporated into the issued capital.

The legal reserve is constituted by its maximum amount in the periods presented.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 94 1ST HALF 2020

Other reserves

This caption corresponds to reserves that were constituted through the appropriation of prior year’s earnings and other movements. The part of the balance corresponding to the acquisition value of treasury shares held is not distributable (Note 5.2).

Amounts in Euro 30/06/2020 31/12/2019 Foreign exchange reserve (163,541,003) (122,926,540) Fair value of derivative financial instruments (2,447,590) (3,030,775) Fair value reserve (2,447,590) (3,030,775) Legal reserve 16,695,625 16,695,625 Other reserves 982,702,158 868,632,110 Retained earnings 2,846,905 5,098,854 Reserves and retained earnings 836,256,095 764,469,274

Foreign exchange reserve

The impact of exchange rate by currency (see Note 8.1.1 - Exchange rate risk) is as follows:

Amounts in Euro 30/06/2020 31/12/2019 Opening balance (122,926,540) (129,296,945) Brazilian Real (41,064,689) (3,448,566) Tunisian Dinar (577,938) 5,231,930 Lebanese Pound 217,022 1,306,101 American Dollar 888,033 833,854 Mozambican Metical (473,665) 1,069,483 Other currencies 396,774 1,377,603 Closing balance (163,541,003) (122,926,540)

During the first half of 2020, the variation in this reserve was essentially driven by the exchange rate devaluation in the Brazilian Real against the Euro and through the conversion of the financial statements of the subsidiary Supremo (belonging to the Cement and Derivatives segment) based and operating in Brazil.

5.6. NON-CONTROLLING INTERESTS

DETAIL OF NON-CONTROLLING INTERESTS, BY SUBSIDIARY

% Equity Net profit Amounts in Euro held 30/06/2020 31/12/2019 H1 2020 H1 2019 Pulp and paper The Navigator Company, S.A. 30.56% 256,970,890 245,917,318 11,560,667 27,151,125 Raiz - Instituto de Investigação da Floresta e Papel 3.00% 275,927 273,817 2,423 (9,848) Cement and derivatives Secil - Companhia Geral de Cal e Cimento, S.A. 0.00% 6,948 7,745 44 259 Société des Ciments de Gabés 1.28% 649,012 731,926 12,686 9,541 IRP - Indústria de Rebocos de Portugal, S.A. 25.00% 533,072 424,600 108,472 112,478 Secil - Companhia de Cimento do Lobito, S.A. 49.00% (2,760,266) (2,501,785) (749,122) (874,158) Ciments de Sibline, S.A.L. 48.95% 51,080,407 55,426,260 (1,956,047) 706,255 Madebritas - Sociedade de Britas da Madeira, Lda. 0.00% 59,970 59,970 - (3,288) Other 0.00% 500,288 500,799 (511) 56,114 Environment ETSA - Investimentos, SGPS, S.A. 0.01% 8,490 8,260 297 131 307,324,738 300,848,910 8,978,909 27,148,609

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 95

1ST HALF 2020

In 2014, the Navigator Group signed agreements with the International Finance Corporation for the entry of this institution into the share capital of the subsidiary Portucel Moçambique, S.A., thus ensuring the construction phase of the Group's forestry project in Mozambique. In 2015, this Company performed a capital increase from MZM 1,000 million to MZM 1,680,798 million subscribing MZM 332,798 million corresponding to 19.98% of the capital at that date.

In February 2019, occurred a reduction of the subscribed, underwritten and paid capital of the shareholder The Navigator Company, S.A. to MZM 456,596,000, which reflect 90.02% of the Company’s share capital, and the participation of the IFC was reviewed to MZM 50,620,000, which reflect 9.98% of the Portucel Moçambique’s share capital.

The surplus of the share capital reduction previously owned by The Navigator Company, S.A., of MZM 891,404,000 was employed to offset negative retained earnings. The differential between the MZM 332,798,000 previously subscribed by IFC and the MZM 50,620,000 which were paid in February 2019 were included in the share capital of Portucel Moçambique, as share premium.

At the reporting date, there are no rights of protection of non-controlling interests that significantly restrict the entity's ability to access or use assets and settle liabilities of the Group.

MOVEMENTS OF NON-CONTROLLING INTERESTS BY OPERATING SEGMENT

Cement and Pulp and paper Environment Total Amounts in Euro derivatives Balance as of 1 January 2019 302,540,845 64,688,044 7,905 367,236,794 Acquisitions/Disposals (10,041,989) (772,080) - (10,814,069) Dividends (90,725,305) (2,722,995) (67) (93,448,367) Translation reserve 567,449 2,345,922 - 2,913,371 Financial instruments (237,943) 3 - (237,940) Actuarial gains and losses (3,520,073) (856) - (3,520,929) Other movements in Equity 70,682 4 - 70,686 Net profit for the period 47,537,469 (8,888,528) 423 38,649,364 Balance as of 31 December 2019 246,191,135 54,649,514 8,261 300,848,910 Dividends - (2,684,591) (67) (2,684,658) Translation reserve 162,019 688,992 - 851,011 Financial instruments 283,287 - - 283,287 Actuarial gains and losses (952,405) (11) - (952,416) Other movements in Equity (305) - - (305) Net profit for the period 11,563,090 (2,584,479) 298 8,978,909 Balance as of 30 June 2020 257,246,821 50,069,425 8,492 307,324,738

In 2019, the decrease in Non-controlling interests in the Pulp and Paper segment results from the acquisition by the subsidiary Navigator of 5,452,882 treasury shares representing 0.76% of its share capital during 2019.

The accounting policies applicable to non-controlling interests, as well as the information about

the Group subsidiaries with non-controlling interests are disclosed in Note 10.1 - Companies included in the consolidation.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 96

1ST HALF 2020

5.7. INTEREST-BEARING LIABILITIES

ACCOUNTING POLICIES

Interest-bearing liabilities includes Bonds, Commercial Paper, bank loans and other financing.

Initial measurement At fair value, net of transaction costs incurred.

Subsequent At amortised cost, using the effective interest rate method. measurement The difference between the repayment amount and the initial measurement amount is recognised in the Income Statement over the debt period under "Interest expenses on other loans" in Note 5.11 - Financial income and expenses.

Fair value The carrying amount of short-term interest-bearing liabilities or loans contracted at variable interest rates are close to their fair value.

The fair value of interest-bearing liabilities that are remunerated at a fixed rate is disclosed in Note 8.4 - Financial assets and liabilities.

Presentation In current liabilities, unless the Group has an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date.

ESTIMATES AND JUDGEMENTS

Disclosure by operating segment

Given that treasury management is performed autonomously by each business segment, as disclosed in Note 8.1 - Financial Risk Management, the information on interest-bearing liabilities that is disclosed in this Note follows that structure.

Commercial paper

The Group has several commercial paper programmes negotiated; agreements with which issues with contractual maturity below one year and with a revolving nature are often made. Where the Group expects to extend these loans (roll over), it classifies them as non-current liabilities.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 97

1ST HALF 2020

INTEREST-BEARING LIABILITIES

30/06/2020 31/12/2019 Amounts in Euro Non-current Current Total Non-current Current Total Bond loans 662,142,857 214,571,429 876,714,286 692,428,571 168,571,429 861,000,000 Commercial paper 567,500,000 295,600,000 863,100,000 492,450,000 26,250,000 518,700,000 Bank loans 180,429,006 125,991,099 306,420,105 181,553,128 130,296,322 311,849,450 Loans related to charges (9,407,974) (1,495,793) (10,903,767) (9,489,369) (1,486,278) (10,975,647) Debt securities and bank debt 1,400,663,889 634,666,735 2,035,330,624 1,356,942,330 323,631,473 1,680,573,803

Short-term shareholder loans - 176,966 176,966 - 9,400,521 9,400,521 Other interest-bearing debts 36,905,728 - 36,905,728 39,789,839 155,178 39,945,017 Other interest-bearing liabilities 36,905,728 176,966 37,082,694 39,789,839 9,555,699 49,345,538 Total interest-bearing liabilities 1,437,569,617 634,843,701 2,072,413,318 1,396,732,169 333,187,172 1,729,919,341

In the first half of 2020, several commercial paper issues were made, a substantial part of which were aimed at setting up liquidity reserves, at a level that the Group considered appropriate to safely face the difficult environment caused by the outbreak of the pandemic.

Other interest-bearing debt mainly includes incentives from AICEP - Agência para o Investimento e Comércio Externo de Portugal, as part of a number of research and development projects, which includes the incentive under the investment agreement entered into with the Navigator Group subsidiary for the construction of the new Tissue plant in Aveiro. This agreement includes a financial incentive in the form of a repayable incentive up to a maximum amount of Euro 42,166,636, without interest, with a two-year grace period and maturing in 2027.

BOND LOANS

Amounts in Euro 30/06/2020 31/12/2019 Maturity date Interest rate Segment - Pulp and paper Navigator 2016 / 2021 100,000,000 100,000,000 April 2021 Fixed Navigator 2016 / 2021 45,000,000 45,000,000 August 2021 Indexed to Euribor 6M Navigator 2015 / 2023 200,000,000 200,000,000 September 2023 Indexed to Euribor 6M Navigator 2019 / 2025 50,000,000 50,000,000 March 2025 Indexed to Euribor 6M Navigator 2019 / 2026 50,000,000 50,000,000 January 2026 Fixed 445,000,000 445,000,000 Segment - Cement and derivatives Secil 2015 / 2020 - 80,000,000 May 2020 Fixed Secil 2016 / 2021 26,000,000 26,000,000 January 2021 Fixed Secil 2017 / 2022 20,000,000 20,000,000 October 2022 Fixed Secil 2016 / 2023 25,714,286 30,000,000 February 2023 Fixed Secil 2018 / 2023 20,000,000 20,000,000 June 2023 Fixed Secil 2019 / 2026 60,000,000 60,000,000 December 2026 Fixed Secil 2020 / 2023 50,000,000 - May 2023 Indexed to Euribor 6M Secil 2020 / 2027 50,000,000 - April 2027 Indexed to Euribor 6M 251,714,286 236,000,000 Holdings Semapa 2014 / 2020 80,000,000 80,000,000 November 2020 Indexed to Euribor 6M Semapa 2016 / 2023 100,000,000 100,000,000 July 2023 Fixed 180,000,000 180,000,000 876,714,286 861,000,000

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 98

1ST HALF 2020

COMMERCIAL PAPER

As of 30 June 2020, loans in the form of Commercial Paper were detailed as follows:

Contracted Amount used Maturity Interest amount Non-current Current Total date rate Segment - Pulp and paper 175,000,000 175,000,000 - 175,000,000 February 2026 Fixed 70,000,000 - 70,000,000 70,000,000 April 2021 Fixed 65,000,000 65,000,000 - 65,000,000 February 2026 Indexed to Euribor 6M 25,000,000 - 25,000,000 25,000,000 April 2021 Indexed to Euribor 6M 20,000,000 - 20,000,000 20,000,000 April 2021 Indexed to Euribor 6M 20,000,000 - 20,000,000 20,000,000 March 2021 Indexed to Euribor 6M 40,000,000 - 40,000,000 40,000,000 March 2021 Indexed to Euribor 6M 30,000,000 - 30,000,000 30,000,000 September 2020 Indexed to Euribor 6M 75,000,000 - - - July 2026 Indexed to Euribor 6M 520,000,000 240,000,000 205,000,000 445,000,000 Segment - Cement and derivatives 20,000,000 20,000,000 - 20,000,000 December 2022 Indexed to Euribor 6M 50,000,000 - - - December 2022 Indexed to Euribor 6M 25,000,000 25,000,000 - 25,000,000 July 2021 Indexed to Euribor 6M 50,000,000 50,000,000 - 50,000,000 January 2023 Indexed to Euribor 6M 20,000,000 - - - July 2021 Indexed to Euribor 6M 15,000,000 - 15,000,000 15,000,000 April 2021 Fixed 75,000,000 - 15,000,000 15,000,000 May 2021 Indexed to Euribor 6M 255,000,000 95,000,000 30,000,000 125,000,000 Segment - Environment 1,250,000 - 600,000 600,000 October 2020 Indexed to Euribor 6M 3,200,000 2,500,000 - 2,500,000 November 2022 Indexed to Euribor 6M 4,450,000 2,500,000 600,000 3,100,000 Holdings 100,000,000 95,000,000 - 95,000,000 September 2021 Indexed to Euribor 6M 90,000,000 - 50,000,000 50,000,000 November 2020 Indexed to Euribor 6M 25,000,000 25,000,000 - 25,000,000 February 2022 Fixed 40,000,000 30,000,000 10,000,000 40,000,000 August 2021 Fixed 50,000,000 40,000,000 - 40,000,000 October 2023 Indexed to Euribor 6M 40,000,000 40,000,000 40,000,000 May 2024 80,000,000 - - - July 2026 Indexed to Euribor 6M 425,000,000 230,000,000 60,000,000 290,000,000 1,204,450,000 567,500,000 295,600,000 863,100,000

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 99

1ST HALF 2020

As of 31 December 2019, loans in the form of Commercial Paper were detailed as follows:

Contracted Amount used Maturity Interest amount Non-current Current Total date rate Segment - Pulp and paper 70,000,000 70,000,000 - 70,000,000 April 2021 Fixed 65,000,000 50,000,000 - 50,000,000 February 2026 Indexed to Euribor 6M 75,000,000 - - - July 2026 Indexed to Euribor 6M 175,000,000 175,000,000 - 175,000,000 February 2026 Fixed 385,000,000 295,000,000 - 295,000,000 Segment - Cement and derivatives 50,000,000 - - - n.a. Fixed 140,000,000 35,000,000 - 35,000,000 2021 Indexed to Euribor 6M 30,000,000 15,000,000 15,000,000 30,000,000 2021 Fixed 20,000,000 - - - 2022 Indexed to Euribor 6M 50,000,000 - - - 2023 Indexed to Euribor 6M 290,000,000 50,000,000 15,000,000 65,000,000 Segment - Pulp and paper 1,250,000 - 1,250,000 1,250,000 2020 Indexed to Euribor 6M 3,200,000 3,200,000 - 3,200,000 2022 Indexed to Euribor 6M 4,450,000 3,200,000 1,250,000 4,450,000 Holdings 90,000,000 - - - 2020 Indexed to Euribor 6M 140,000,000 89,250,000 - 89,250,000 2021 Indexed to Euribor 6M 25,000,000 25,000,000 - 25,000,000 2022 Fixed 50,000,000 30,000,000 10,000,000 40,000,000 2023 Fixed 40,000,000 - - - 2024 Indexed to Euribor 6M 80,000,000 - - - 2026 Indexed to Euribor 6M 425,000,000 144,250,000 10,000,000 154,250,000 1,100,000,000 492,450,000 26,250,000 518,700,000

BANK LOANS

30/06/2020 31/12/2019 Amounts in Euro Non-current Current Total Non-current Current Total Pulp and paper - variable rate 24,791,666 10,416,667 35,208,334 30,000,000 10,416,666 40,416,666 Pulp and paper - fixed rate 59,444,444 2,777,778 62,222,222 60,833,334 2,777,778 63,611,112 Cement and derivatives - variable rate 56,077,252 84,124,281 140,201,533 51,219,794 99,900,985 151,120,779 Cement and derivatives - fixed rate 9,865,643 17,333,453 27,199,096 - 5,439,015 5,439,015 Environment - variable rate - 838,920 838,920 - 1,131,878 1,131,878 Holdings - variable rate 6,250,000 2,500,000 8,750,000 7,500,000 2,630,000 10,130,000 Holdings - fixed rate 24,000,000 8,000,000 32,000,000 32,000,000 8,000,000 40,000,000 180,429,006 125,991,099 306,420,105 181,553,128 130,296,322 311,849,450

LOAN REPAYMENT PERIODS

Amounts in Euro 30/06/2020 31/12/2019 1 to 2 years 324,575,304 445,114,674 2 to 3 years 290,116,296 139,780,741 3 to 4 years 479,294,964 456,906,652 4 to 5 years 96,302,696 100,336,335 Above 5 years 256,688,331 264,083,136 Total 1,446,977,591 1,406,221,538

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 100

1ST HALF 2020

FINANCIAL COVENANTS

For certain types of financing operations, there are commitments to maintain certain financial ratios within previously negotiated limits. The existing covenants are clauses of Cross default, Pari Passu, Negative pledge, Ownership-clause, clauses related to Group’s activities maintenance, financial ratios, mainly Net Debt/EBITDA, Interest coverage, Indebtedness and Financial autonomy and fulfilment of regular financial contracts’ obligations (operational, legal and tax obligations), common in loan agreements.

Additionally, as at 30 June 2020 and 31 December 2019, the Group complies with the financial ratios’ limits imposed under its financing contracts.

5.8. LEASE LIABILITIES

ACCOUNTING POLICIES

Initial At the start date of the lease, the Group recognises lease liabilities measured at the measurement present value of future lease payments, which include fixed payments less any lease incentives, variable lease payments, and amounts expected to be paid as residual value.

Lease payments also include the exercise price of call or renewal options reasonably certain to be exercised by the Group or lease termination penalty payments if the lease term reflects the Group's option to terminate the agreement.

In calculating the present value of future lease payments, the Group uses its incremental financing rate if the implied interest rate on the lease transaction is not easily determinable.

Subsequent Subsequently, the value of the lease liabilities is increased by the interest amount (Note measurement 5.11 - Financial income and expenses) and decreased by the lease payments.

As of 30 June 2020, and 31 December 2019, lease liabilities comprised the following:

30/06/2020 31/12/2019 Amounts in Euro Non-current Current Total Non-current Current Total Pulp and paper 47,146,114 5,503,134 52,649,248 42,450,826 4,396,971 46,847,797 Cement and derivatives 17,240,475 6,090,776 23,331,251 18,828,825 7,559,023 26,387,848 Environment 1,660,689 419,078 2,079,767 1,318,578 345,004 1,663,582 Holdings 146,504 105,560 252,064 146,504 105,559 252,063 66,193,782 12,118,548 78,312,330 62,744,733 12,406,557 75,151,290

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 101

1ST HALF 2020

5.9. CASH AND CASH EQUIVALENTS

ACCOUNTING POLICIES

Cash and cash equivalents include cash, bank accounts and other short-term investments with an initial maturity of up to 3 months, which can be mobilised immediately without any significant risk in value fluctuations.

For cash flow statement purposes, this caption also includes bank overdrafts, which are presented in the statement of financial position as a current liability, under the caption Interest-bearing liabilities (Note 5.7).

Amounts in Euro 30/06/2020 31/12/2019 Cash 4,096,338 479,924 Short-term bank deposits 594,805,246 223,281,396 Other short-term investments 136,106,488 41,219,744 Cash and cash equivalents in the consolidated cash flow statement 735,008,072 264,981,064 Impairment (8,343,721) (5,739,870) Cash and cash equivalents 726,664,351 259,241,194

As of 30 June 2020, and 31 December 2019, the amount presented under Other short-term investments corresponds to amounts invested by the subsidiary Navigator in a portfolio of short term financial assets with high liquidity and appropriate rating.

As of 30 June 2020, and 31 December 2019, there are no significant balances of cash and cash equivalents that are subject to restrictions on use by the Group companies.

5.10. CASH FLOWS FROM FINANCING ACTIVITIES

MOVEMENTS IN LIABILITIES FOR GROUP FINANCING ACTIVITIES

In the first half of 2020 and year 2019, the movements in liabilities for financing activities are detailed as follows:

Transactions not affecting cash and cash equivalents Cash flows from 01/01/2020 Exchange rate Exchange rate 30/06/2020 financing activities Lease recognition Accured interest adjustment differences Amounts in Euro Interest-bearing liabilities (Note 5.7) Bond loans 861,000,000 15,714,286 - - - - 876,714,286 Commercial paper 518,700,000 344,400,000 - - - - 863,100,000 Bank loans 311,849,450 24,768,079 - (30,197,424) - - 306,420,105 Charges with the issue of loans (10,975,647) (829,722) - - 901,602 - (10,903,767) Other interest-bearing liabilities 49,345,538 (12,262,844) - - - - 37,082,694 Lease liabilities (Notes 1.5 and 5.8) 75,151,290 (9,742,965) 9,968,224 - 2,935,781 - 78,312,330 Total 1,805,070,631 362,046,834 9,968,224 (30,197,424) 3,837,383 - 2,150,725,648

Transactions not affecting cash and cash equivalents Cash flows from 01/01/2019 Exchange rate Exchange rate 31/12/2019 financing activities Lease recognition Accured interest adjustment differences Amounts in Euro Interest-bearing liabilities (Note 5.7) Bond loans 911,000,000 (50,000,000) - - - - 861,000,000 Commercial paper 560,300,000 (41,600,000) - - - - 518,700,000 Bank loans 264,116,715 47,732,735 - - - - 311,849,450 Charges with the issue of loans (7,157,672) 6,751,570 - - (10,569,545) - (10,975,647) Other interest-bearing liabilities 3,667,686 45,677,852 - - - - 49,345,538 Lease liabilities (Note 5.8) 68,966,671 (14,585,261) 15,980,171 - 4,789,709 - 75,151,290 Total 1,800,893,400 (6,023,104) 15,980,171 - (5,779,836) - 1,805,070,631

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 102 1ST HALF 2020

5.11. NET FINANCIAL RESULTS

ACCOUNTING POLICIES

Borrowing costs relating to loans are generally recognised as financial costs, in accordance with the accrual accounting principle.

The Semapa Group classifies as Financial Income the income and gains resulting from cash-flow management activities such as: i) interest earned on surplus cash; and ii) changes in the fair value of derivative financial instruments negotiated to hedge interest and exchange rate risks on loans, irrespective of the formal designation of the hedge.

In the first half of 2020 and 2019, Net financial results are detailed as follows:

Amounts in Euro Note H1 2020 H1 2019 Interest paid on debt securities and bank debt (17,824,968) (20,829,575) Interest paid on borrowings (5,427) (4,769) Commissions on loans and expenses with credit facilities (5,318,347) (4,613,943) Interest expense by applying the effective interest method (23,148,742) (25,448,287) Interest paid on lease liabilities (1,472,474) (1,330,184) Financial expenses related to the Group's capital structure (24,621,216) (26,778,471) Financial discount of provisions 9.1 (14,830) (181,211) Unfavourable exchange rate differences (31,584,692) (1,291,037) Losses on hedging derivatives (1,532,980) (2,496,248) Other financial expenses and losses (2,049,557) (232,116) Financial expenses and losses (excluding changes in fair value) (59,803,275) (30,979,083)

Interest earned on financial assets at amortised cost 1,350,201 5,771,614 Gains from trading derivatives 13,539,349 1,735,631 Fair value gains on other financial investments 39,295 25,182 Other financial income and gains 236,220 304,887 Financial income and gains 15,165,065 7,837,314

Net financial results (44,638,210) (23,141,769)

The amount reflected in unfavourable exchange rate differences derives, essentially, from the exchange rate variation in financing in USD and Euros, held by the Brazilian subsidiaries of Secil, Supremo and Margem, due to the devaluation of the Brazilian Real against these currencies.

INCOME TAX

6.1. INCOME TAX FOR THE PERIOD

ACCOUNTING POLICIES

Current income tax is calculated based on net profit, adjusted in conformity with tax legislation in force at the consolidated statement of financial position date.

According to the legislation in force, the gains and losses relating to group and associated companies resulting from the application of the equity method are deducted from or added to, respectively, to the net income of the year for the purpose of calculating taxable income.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 103

1ST HALF 2020

Dividends are considered when determining the taxable income in the year in which they are received, if the instruments are held for less than one year or if investments represent less than 10% of the share capital.

Taxation group

Semapa Group is subject to the special tax regime for groups of companies, comprising companies in which the shareholding is equal to or more than 75% and which meet the conditions laid down in article 69 and following of the Corporate Income Tax Code (CIT Code).

Companies included within the tax business group, calculate and recognise corporate income tax (CIT) as though they were taxed on an individual basis. Liabilities are recognised as due to the dominant entity of the tax business Group, currently Semapa, SGPS, S.A., which is responsible for the Group’s overall clearance and payment of the corporate income tax. Where there are gains on the use of this regime, these are recorded in the dominant entity financial statements.

In the periods presented, the tax business group led by Semapa comprises Secil and ETSA Groups, as well as all the subsidiaries that meet the legal requirements of the Corporate Income Tax Code.

The Companies that comprise The Navigator Group integrate the tax business group led by The Navigator Company, S.A. In 2018, a tax group was also established in Spain, which includes the three subsidiaries of the group based in that country, held by more than 90%, and Bosques do Atlântico, S.L. is the dominant company in the tax group.

ESTIMATES AND JUDGEMENTS

The Group recognises liabilities for additional settlements that may result from tax authorities’ revisions of the different countries where the Group operates. When the final result of these situations is different from the amounts initially recorded, the differences will have an impact on income tax in the period in which they occur.

In Portugal, annual income statements are subject to review and possible adjustment by the tax authorities for a period of 4 years. However, if tax losses are presented, they may be subject to review by the tax authorities for a period of 6 years. In other countries in which the Group operates, these periods are different, usually higher.

The Board of Directors considers that any corrections to those declarations as a result of reviews/inspections by the tax authorities will not have a significant impact in the consolidated financial statements as at 30 June 2020, although the years up to and including 2015 have already been reviewed.

Uncertain tax positions

The amount of estimated assets and liabilities recorded on account of tax proceedings arises from an assessment made by the Group, at the date of the Consolidated Statement of Financial Position, regarding potential differences of interpretation against the Portuguese Tax Authorities, considering the developments in tax matters.

With respect to the measurement of uncertain tax positions, the Group takes into consideration the provisions of IFRIC 23 – “Uncertainty over income tax treatments”, namely the measurement of risks and uncertainties in defining the best estimate of expenditure required to settle the obligation, by weighting all possible results controlled by the Company and their related probabilities.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 104 1ST HALF 2020

Income tax recognised in the consolidated income statement

Amounts in Euro H1 2020 H1 2019 Current tax (8,600,068) (28,540,429) Variation of uncertain tax positions in the period 7,109,763 32,881,604 Deferred tax (Note 6.2) (3,399,245) (31,672,421) (4,889,550) (27,331,246)

The caption Variation in uncertain tax positions reflects a series of reversals of tax provisions, as a result of the closure of some tax inspection processes and court decisions favourable to the Group.

Nominal tax rate in the main geographies where the Group operates

H1 2020 H1 2019 Portugal Income tax treatment 21.0% 21.0% Municipal surcharge 1.5% 1.5% 22.5% 22.5% State surcharge - on taxable income between Euro 1,500,000 and Euro 7,500,000 3.0% 3.0% State surcharge - on taxable income between Euro 7,500,000 and Euro 35,000,000 5.0% 5.0% State surcharge - on taxable income above Euro 35,000,000 9.0% 9.0% Other countries Brazil - nominal rate 34.0% 34.0% Tunisia - nominal rate 25.0% 25.0% Lebanon - nominal rate 17.0% 17.0% Angola - nominal rate 30.0% 30.0%

Reconciliation of the effective income tax rate for the period

Amounts in Euro H1 2020 H1 2019 Profit before tax 44,155,255 127,988,397

Expected tax at nominal rate (22.5%) 9,934,932 28,797,389 State surcharge 1,539,038 4,675,314 Tax resulting from the applicable rate 11,473,970 33,472,703 Effect of applying the equity method (Note 10.3) (285,723) (91,818) Estimate changes arising from uncertain tax positions (11,233,530) (4,996,309) Recoverable tax losses (1,237,535) (696,945) Non-recoverable tax losses 5,736,731 1,589,698 Effect of the reconciliation of nominal rates of the different countries 994,664 (821,527) Tax benefits (1,864,604) (1,042,459) Other tax adjustments 1,305,577 (82,097) 4,889,550 27,331,246

Effective tax rate 11.07% 21.35%

Tax recognised in the consolidated statement of financial position

Amounts in Euro 30/06/2020 31/12/2019 Assets Corporate income tax (IRC) 33,847,701 19,842,307 Amounts pending repayment (tax proceedings decided in favour of the Group) 1,973,592 7,198,086 35,821,293 27,040,393 Liabilities Corporate income tax (IRC) 4,308,241 4,057,165 Additional tax liabilities 53,346,237 52,491,460 57,654,478 56,548,625

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 105 1ST HALF 2020

Detail of Corporate Income Tax - IRC (net)

Amounts in Euro 30/06/2020 31/12/2019 Income tax for the period 11,819,722 29,073,170 Exchange rate adjustment (18,192) 63,443 Payments on accounts, Special payments on accounts and Additional payments on accounts (2,002,576) (42,582,360) Withholding tax recoverable (680,756) (1,488,560) Income tax recoverable from prior years (38,657,658) (850,835) (29,539,460) (15,785,142)

Uncertain tax positions - liabilities

Amounts in Euro 30/06/2020 31/12/2019 Balance at the beginning of the period 52,491,460 24,938,625 Increases 3,712,018 56,886 Reversals (2,857,241) (10,813,923) Transfers (IFRIC 23) - 47,565,601 Charge-off - (9,255,729) Balance at the end of the period 53,346,237 52,491,460 Amount recognised in the income statement - (gain)/ loss (7,109,763) (32,881,604)

Taxes paid in litigation

As at 30 June 2020 and 31 December 2019, the additional tax assessments that are already paid and contested, not recognised in assets, refer to the Navigator Group and are summarised as follows:

Amouns in Euro 30/06/2020 31/12/2019 Pulp and paper segment 2005 Aggregate corporate income tax 10,394,386 10,394,386 2006 Aggregate corporate income tax 8,150,146 8,150,146 2016 State surcharge 3,761,397 3,761,397 2017 State surcharge 8,462,724 8,462,724 2018 State surcharge 12,223,705 12,223,705 2010 State surcharge 4,372,289 - 2017 Value added tax (IVA) 147,253 - IVA - interest compensation for late VAT refunds 136,048 - 47,647,948 42,992,358

6.2. DEFERRED TAXES

ACCOUNTING POLICIES

Deferred tax is calculated using the liability method, based on the temporary differences between the book values of the assets and liabilities and their respective tax base. The income tax rate expected to be in force in the period in which the temporary differences will reverse is used in calculating deferred tax. Deferred tax assets are recognised whenever there is a reasonable likelihood that future taxable profits will be generated against which they can be offset. Deferred tax assets are revised periodically and decreased, whenever it is likely that tax losses will not be used.

Deferred taxes are recorded as an income or expense for the period, except where they result from amounts recorded directly under shareholders’ equity, situation in which deferred tax is also recorded under the same caption. Tax benefits attributed to the Group regarding its investment projects are recognised through the income statement as there is sufficient taxable income to allow its use.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 106

1ST HALF 2020

MOVEMENTS IN DEFERRED TAXES

Income Statement As at 1 January Exchange rate Assets held for As at 30 June Equity 2020 adjustment Increases Decreases sale 2020 Amounts in Euro Temporary differences originating deferred tax assets Tax losses carried forward 81,798,374 (22,070,585) 4,118,429 - - - 63,846,218 Taxed provisions 36,081,917 (467,244) 645,503 (272,432) - - 35,987,743 Harmonisation of depreciation criteria 72,086,199 - 10,177,629 (16,714,065) - (230,000) 65,319,763 Pensions and other post-employment benefits 4,028,595 (1,102) 12,481 (239,469) (32,943) - 3,767,562 Financial instruments 8,588,917 - - - (1,364,943) - 7,223,974 Deferred accounting gains on intra-Group transactions 21,420,752 - 1,204,088 (2,798,876) - - 19,825,964 Investment subsidies 3,764,504 - - (266,504) - - 3,498,000 Fair value of business combinations 1,627,125 5,205 - - - - 1,632,330 Conventional capital remuneration 9,660,000 - - (1,610,000) - - 8,050,000 Other temporary differences 12,527,057 (2,368,579) 8,931,296 (1,528) - - 19,088,246

251,583,440 (24,902,305) 25,089,426 (21,902,874) (1,397,886) (230,000) 228,239,800 Temporary differences originating deferred tax liabilities Adjustment of property, plant and equipment (44,680,764) 11,271,939 - 230,906 - - (33,177,919) Pensions and other post-employment benefits (2,014,981) 2 (10,570) 184,416 157,869 - (1,683,264) Financial instruments 1,568,413 270,367 - (5,742,189) - - (3,903,409) Tax incentives (6,077,043) - - 536,289 124,592 - (5,416,162) Harmonisation of depreciation criteria (388,461,099) 10,809,100 (28,643,223) 7,757,695 - - (398,537,527) Deferred accounting losses on intra-Group transactions (26,741,562) - (11,730) 10,160 - - (26,743,132) Valuation of biological assets (25,999,474) - - 3,968,743 - - (22,030,731) Fair value of intangible assets - Brands (237,283,867) 3,849,971 - 1,366,195 - - (232,067,701) Fair value of property, plant and equipment (80,961,941) - - 7,635,775 - - (73,326,166) Fair value of business combinations (70,569,404) 1,759,698 - 1,070,326 - - (67,739,380) Other temporary differences (762,831) 67,144 (156,932) 1,465 - - (851,154)

(881,984,554) 28,028,221 (28,822,455) 17,019,781 282,461 - (865,476,545) Deferred tax assets 89,970,779 (8,470,400) 6,971,620 (5,907,852) (384,355) (63,250) 82,116,542 Deferred tax liabilities (243,892,373) 9,507,055 (8,048,386) 3,585,373 76,401 - (238,771,930)

Income Statement As at 31 As at 1 Exchange rate Assets held for Equity December January 2019 adjustment Increases Decreases sale Amounts in Euro 2019 Temporary differences originating deferred tax assets Tax losses carried forward 74,310,650 (1,734,980) 9,222,704 - - - 81,798,374 Taxed provisions 19,057,416 300,914 16,723,587 - - - 36,081,917 Harmonisation of depreciation criteria 108,230,103 - 27,059 (35,170,963) - (1,000,000) 72,086,199 Pensions and other post-employment benefits 4,230,997 4,726 7,821 (500,278) 285,329 - 4,028,595 Financial instruments 7,805,701 - - - 783,216 - 8,588,917 Deferred accounting gains on intra-Group transaction 41,418,523 (41) 423,318 (20,421,049) - - 21,420,752 Investment subsidies 4,305,779 - - (541,275) - - 3,764,504 Fair value of business combinations 1,596,394 30,731 - - - - 1,627,125 Conventional capital remuneration 9,240,000 - - (3,220,000) 3,640,000 - 9,660,000 Other temporary differences 12,124,135 20,644 1,473,506 (1,091,228) - - 12,527,057 282,319,699 (1,378,006) 27,877,995 (60,944,793) 4,708,545 (1,000,000) 251,583,440 Temporary differences originating deferred tax liabilities Adjustment of property, plant and equipment (46,092,976) 880,223 - 531,989 - - (44,680,764) Pensions and other post-employment benefits (1,302,868) (1,998) (2,430,295) - 1,720,180 - (2,014,981) Financial instruments 894,942 (35,308) - 708,779 - - 1,568,413 Tax incentives (7,439,158) - - 1,112,930 249,185 - (6,077,043) Harmonisation of depreciation criteria (357,205,626) (905,368) (48,913,750) 18,563,645 - - (388,461,099) Deferred accounting losses on intra-Group transactio (10,502,587) - (16,269,982) 31,007 - - (26,741,562) Valuation of biological assets (13,969,979) - (12,029,495) - - - (25,999,474) Fair value of intangible assets - Brands (251,627,510) 3,877,297 - 10,466,346 - - (237,283,867) Fair value of property, plant and equipment (96,233,491) - - 15,271,550 - - (80,961,941) Fair value of business combinations (77,672,116) (7,291,882) - 14,394,594 - - (70,569,404) Other temporary differences (1,577,326) 5,104 (1,109,206) 1,918,597 - - (762,831) (862,728,695) (3,471,932) (80,752,728) 62,999,437 1,969,365 - (881,984,554) Deferred tax assets 108,061,925 (526,167) 23,788,716 (42,371,936) 1,293,241 (275,000) 89,970,779 Deferred tax liabilities (235,715,323) (612,190) (13,086,161) 4,977,216 544,085 - (243,892,373)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 107 1ST HALF 2020

PAYROLL

7.1. SHORT-TERM EMPLOYEE BENEFITS

ACCOUNTING POLICIES

Entitlements – holiday and holiday allowance

In accordance with current legislation, employees are entitled to 22 working days leave, annually, as well as to a month’s holiday allowance, entitlement to which is acquired in the year preceding its payment.

Bonus

According to the current Performance Management System (Sistema de Gestão de Desempenho), employees may have the right to a bonus, based on annually defined objectives. The entitlement of this bonus is usually acquired in the year preceding its payment.

These liabilities are recorded in the year in which the Employees acquire the respective right, irrespective of the date of payment, whilst the balance payable at the date of the consolidated statement of financial position is shown under the caption Payables and other current liabilities.

TERMINATION BENEFITS

The benefits arising from termination of employment are recognised when the Group can no longer withdraw the offer of such benefits or in which the Group recognises the cost of restructuring under the provisions recording. Benefits due over 12 months after the end of the reporting period are discounted to their present value.

PAYROLL COSTS RECOGNISED IN THE PERIOD

Amounts in Euro H1 2020 H1 2019 Statutory bodies remuneration 6,749,417 8,894,728 Other remunerations 79,572,457 84,416,643 Post-employment benefits 1,533,161 2,564,802 Other payroll costs 23,272,894 28,128,429 Payroll costs 111,127,929 124,004,602

The decrease in Other remunerations, in the 6-month period ended 30 June 2020, is mainly explained by the reduction in the estimated amounts of bonuses payable to Group employees.

Other payroll costs

Amounts in Euro H1 2020 H1 2019 Social Security contributions 17,499,791 19,146,229 Insurance 2,787,424 2,296,136 Social welfare costs 3,234,734 3,208,067 Other payroll costs (249,055) 3,477,997 23,272,894 28,128,429

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 108 1ST HALF 2020

NUMBER OF EMPLOYEES AT THE END OF THE PERIOD

30/06/2020 31/12/2019 Var. 20/19 Pulp and paper 3,242 3,280 (38) Cement and derivatives 2,471 2,512 (41) Environment 276 272 4 Holdings and others 26 29 (3) 6,015 6,093 (78)

7.2. REMUNERATION OF CORPORATE BODIES

Amounts in Euro Note H1 2020 H1 2019 Semapa's Statutory Bodies Board of Directors 2,345,304 2,382,356 Audit Board 29,168 29,168 Remuneration Committee 12,000 6,000 General Meeting Board 4,000 4,000 2,390,472 2,421,524 Board of Directors of other Group companies 4,358,945 6,473,204 Total 7.1 6,749,417 8,894,728

Remuneration of the members of the Board of Directors

All details of the remuneration policy of the members of Semapa's Board of Directors are detailed in the Company's Corporate Governance Report, Part I - Section D.

With respect to post-employment benefits and as described in Note 7.3, as at 30 June 2020, the amount of liabilities related to post-employment benefit plans, related to one Board Member of the Navigator Group, amounted to Euro 995,369. In addition, three of Navigator's current directors are participants in Navigator Brands, S.A.'s pension plans, as a subsidiary of the Company, before joining management positions.

As at 30 June 2020 and 31 December 2019, for the members of the Board of Directors of Semapa, there were no (i) additional liabilities related to other long-term benefits, (ii) termination benefits, (iii) share-based payments, (iv) any outstanding balances.

7.3. POST-EMPLOYMENT BENEFITS

ACCOUNTING POLICIES

DEFINED BENEFIT PLAN

Some of the Group’s subsidiaries have assumed the commitment to make payments to their Employees in the form of complementary retirement pensions, disability, early retirement and survivors’ pensions, having constituted defined-benefit plans.

The Group has set up autonomous Pension Funds as a means of funding part of its liabilities. Based on the projected unit credit method, the Group recognises the costs with the granting of these benefits and when services are rendered by the employees. Accordingly, the Group’s total liability is estimated at least every six months at the date of the interim and annual financial statements, for each plan separately by an independent and specialised entity.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 109

1ST HALF 2020

The calculated liability is presented in the Consolidated statement of financial position, after deducting the fair value of the funds set up, under the caption Pensions and other post-employment benefits.

Actuarial deviations resulting from changes in the value of estimated liabilities, as a consequence of changes in the financial and demographic assumptions used and experience gains, plus the differential between the actual return on plan assets and the estimated share of net interests, are recorded directly in the statement of comprehensive income, under Retained earnings.

The net interest corresponds to the application of the discount rate to the value of net responsibilities (value of the responsibilities deducted of fund asset’s fair value) and is recognised under Payroll.

The gains and losses generated by a curtailment or settlement of a defined-benefit plan are recognised in the income statement when the curtailment or settlement occurs. A curtailment occurs when there is a significant reduction in the number of employees.

The costs relating to past liabilities, which result from the implementation of a new plan or additional benefits granted, are recognised immediately in the income statement.

DEFINED CONTRIBUTION PLAN

Some of the Group’s subsidiaries have assumed commitments, regarding contributing to a defined contribution plan with a percentage of the beneficiaries’ salary, in order to provide retirement, disability and survivors’ pensions.

For this purpose, Pension Funds were set up to capitalise those contributions, to which employees can still make voluntary contributions, but for which the Group does not assume any additional contribution liabilities or a pre- fixed return.

Therefore, the contributions made are recorded as expenses in the income statement in the period to which they relate, regardless of their settlement date.

7.3.1. PLANS | NAVIGATOR SUBGROUP

Navigator – Defined Benefit Plans

Description The Navigator Group has responsibilities with post-employment benefit plans for a reduced group of employees who have chosen to maintain the defined benefit plan or who have chosen to maintain a safeguard clause, the latter following the conversion of their plan into a Defined Contribution Plan.

In effect, the safeguard clause gives the employee the option, at the time of retirement, to pay a pension in accordance with the provisions laid down on the Defined Benefit Plan. For those who choose to activate the Safeguard Clause, the accumulated balance in the Defined Contribution Plan (Conta 1) will be used to finance the liability of the Defined Benefit Plan.

Navigator - Defined contribution plans

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 110

1ST HALF 2020

Description As at 31 December 2019, two Defined Contribution plans were in force, which covered 2,803 employees, including employees who chose to maintain a benefit safeguard clause.

7.3.2. PLANS | SECIL SUBGROUP

Secil - Retirement and survivors' pension supplement liabilities (defined benefit plans with funds managed by third parties)

Description Secil and its subsidiaries CMP — Cimentos Maceira e Pataias, S.A., Unibetão — Indústrias de Betão Preparado, S.A., Cimentos Madeira, Lda., Betomadeira, S.A. and Societé des Ciments de Gabès have assumed the commitment to pay their employees amounts by way of complementary old age, disability, early retirement and survivor’s pensions and a retirement subsidy.

The liabilities arising from these plans are guaranteed by independent funds, administered by third parties, or covered by insurance policies.

These plans are valued every six months, at the dates of closing of the interim and annual financial statements, by specialised and independent entities, using the projected unit credit method.

Secil - Retirement and survivors' pension supplement liabilities (Group defined benefit plans)

Description The responsibilities of Secil’s retired employees in 31 December 1987 (date of incorporation of the Pension Fund) are guaranteed directly by Secil. Similarly, the liabilities assumed by Secil Martingança, S.A. are guaranteed directly by this entity.

Since 26 June 2012, the responsibilities of Cimentos Madeira, Lda. and Betomadeira — Betões e Britas da Madeira, S.A. related to all retirees and pensioners that were receiving a pension, were transferred to Cimentos Madeira defined benefit pension plan, incorporated in Secil’s Pension fund.

These plans are also valued every six months by specialised and independent entities, using the method for calculating capital coverage corresponding to single premiums of the immediate life annuities in the valuation of the liabilities to current pensioners and the projected unit credit method for valuing liabilities relating to current employees.

Secil - Liabilities for health care (defined benefit plan)

Description The subsidiary Cimentos Madeira, Lda. provides to their employees a healthcare scheme which supplements the official health services and which is available to their families, pre- retired and retired staff and widows, through an insurance contract.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 111

1ST HALF 2020

Secil – Liabilities for retirement and death (defined benefit plan)

Description The subsidiary Societé des Ciments de Gabès (Tunisia) assumed the commitment to its employees to pay an old-age retirement and disability subsidy, according to the terms of the General Labour Agreement, Article No. 52, representing: (i) 2 months of the last salary if the worker has less than 30 years’ service to the company, and (ii) 3 months of the last salary, if the worker has 30 years or more service to the company.

Secil and CMP — Cimentos Maceira e Pataias, S.A., assumed the commitment to its employees to pay a subsidy on death of current employee, equal to one month’s last salary earned.

Secil - Defined contribution plans

Secil and CMP Secil and CMP Plans include all workers who, as of 31 December 2009, had an open-ended Plan employment contract (and who were covered by the defined benefits plan in force in the companies) and who have opted for the transition to these Plans and all the workers admitted under an agreement without term, as of 1 January 2010, also being applicable to the members of the Board of Directors.

Unibetão and Unibetão and Britobetão Plans include all workers who, as of 31 December 2009, had an Britobetão unlimited contract of employment, executed under the CCT between APEB and FETESE, and Plan all workers admitted under a contract without term, as of 1 January 2010, with the exception of Unibetão Employees who are covered by the CCT entered into between APEB and FEVICCOM, who continue to benefit from the defined benefit Plan, and also apply to the members of the Board of Directors.

Betomadeira Beto Madeira Plan includes all workers who, as of 31 December 2010, had an open-ended Plan employment contract and were covered by the CCT between APEB — Portuguese Association of Concrete Ready Companies and FETESE — Federation of Workers' Unions of Services and others.

Secil Britas Secil Britas Plan includes all workers who, as of 31 December 2009, had an open-ended Plan contract of employment and all workers admitted under a permanent contract, as of 1 January 2010, and are also applicable to the members of the Board of Directors.

Cimentos Cimentos Madeira Plan includes all employees who, as of 1 January 2012, had an open- Madeira Plan ended employment contract (and who were covered by the defined benefits plan in force in the company) and all employees admitted under a contract without expiration, from that date, and shall also apply to the members of the Board of Directors.

Brimade Plan Brimade Plan includes all workers who had as of 1 July 2012 an unlimited contract of employment and all employees who will be admitted to service after that date.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 112

1ST HALF 2020

Secil – Liabilities for long-service awards

Description Secil and its subsidiary CMP, have assumed the commitment to pay their Employees bonuses to those who attain 25 years of service, which are paid in the year that the employee reaches the number of years of service within the company.

7.3.3. RISK MANAGEMENT POLICY ASSOCIATED WITH DEFINED BENEFIT PLANS

The Group's exposure to risk is limited to the number of existing beneficiaries and will tend to decrease, since there are no defined benefit plans available to new employees in the Group.

The most significant risks to which the Group is exposed through defined benefit plans include:

− Risk of change in longevity of participants; − Market rate risk - rate changes affects the rate used to discount liabilities (technical interest rate) which is based on yield curves of highly rated bonds with maturities similar to the maturity dates of the liabilities and the fixed rate of return on assets; − Risk of change in the rate of growth of wages and pensions.

The financing level of the fund may vary depending on the risks listed and on the profitability of the fund's financial assets. Despite the fund's conservative profile (consisting mostly of fixed income assets), the verification of the aforementioned risks may lead to the need for additional contributions to the fund considering the nature of the defined benefit.

The Group aims to keep a 90% level of liability coverage.

ESTIMATES AND JUDGEMENTS

7.3.4. ACTUARIAL ASSUMPTIONS

30/06/2020 31/12/2019 Social Security benefits formula Decree-Law no. 187/2007 of May 10 Disability table EKV 80 EKV 80 Mortality table TV 88/90 TV 88/90 Wage growth rate 1.00% 1.00% Technical interest rate - cement segment 1.50% 1.50% Technical interest rate - other segments 1.75% 1.75% Pensions growth rate - cement segment 0.45% 0.45% Pensions growth rate - other segments 0.75% 0.75% Reversibility rate of Semapa pensions 50.00% 50.00% No. of Semapa's complement annual payments 12 12

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 113

1ST HALF 2020

7.3.5. SENSITIVITY ANALYSIS

The Group considers the technical interest rate and the expected wage growth rate as the most significant variables in the calculation of liabilities for defined benefit plans.

As at 30 June 2020, a decrease of 0.25 percentage points in the discount rates used to calculate pension liabilities would result in an increase in liabilities of approximately Euro 7 million (31 December 2019: Euro 7,9 million).

7.3.6. NET PENSION LIABILITIES

Net liabilities reflected in the consolidated statement of financial position and the number of beneficiaries of the defined benefit plans in force in the Group are detailed as follows:

Pulp and paper Cement and derivatives Holdings Total 30 June 2020 No. of Benef. Amount No. of Benef. Amount No. of Benef. Amount No. of Benef. Amount Group liabilities for past services Active 478 73,852,094 64 45,565 - - 542 73,897,659 Former employees 118 20,303,150 - - - - 118 20,303,150 Retired employees 533 84,075,291 700 18,824,725 1 955,366 1,234 103,855,382 Market value of the pension funds - (166,898,850) - (17,117,929) - - - (184,016,779) Capital insured - - - 215,999 - - - 215,999 Insurance policies - - - (149,597) - - - (149,597) Reserve account* - - - (626,266) - - - (626,266) Unfunded pension liabilities 1,129 11,331,685 764 1,192,497 1 955,366 1,894 13,479,548 Other unfunded liabilities Healthcare assistance - - 5 44,455 - - 5 44,455 Retirement and death - - 407 104,395 - - 407 104,395 Total post-employment liabilities 1,129 11,331,685 1,176 1,341,347 1 955,366 2,306 13,628,398 Long-service award liabilities - - 407 361,936 - - 407 361,936 Total net liabilities 1,129 11,331,685 1,583 1,703,283 1 955,366 2,713 13,990,334 * Overfunding due to the change to a defined contribution plan

Pulp and paper Cement and derivatives Holdings Total 31 December 2019 No. of Benef. Amount No. of Benef. Amount No. of Benef. Amount No. of Benef. Amount Group liabilities for past services Active 481 75,583,410 64 47,958 - - 545 75,631,368 Former employees 130 23,358,802 - - - - 130 23,358,802 Retired employees 522 80,938,541 700 19,890,940 1 1,008,908 1,223 101,838,388 Market value of the pension funds - (173,292,676) - (18,000,254) - - - (191,292,930) Capital insured - - - 223,392 - - - 223,392 Insurance policies - - - (163,567) - - - (163,567) Reserve account* - - - (626,266) - - - (626,266) Unfunded pension liabilities 1,133 6,588,076 764 1,372,203 1 1,008,908 1,898 8,969,187 Other unfunded liabilities Healthcare assistance - - 5 44,253 - - 5 44,253 Retirement and death - - 407 99,044 - - 407 99,044 Total post-employment liabilities 1,133 6,588,076 1,176 1,515,500 1 1,008,908 2,310 9,112,484 Long-service award liabilities - - 407 382,874 - - - 382,874 Total net liabilities 1,133 6,588,076 1,583 1,898,374 1 1,008,908 2,310 9,495,358 * Overfunding due to the change to a defined contribution plan

Historical information - last five years

Amounts in Euro 2016 2017 2018 2019 30/06/2020 Present value of liabilities 175,766,292 176,018,521 177,168,200 201,578,121 198,782,976 Fair value of plan assets and reserve account 165,680,869 167,895,186 166,390,298 192,082,763 184,792,642 Surplus/ (deficit) 10,085,423 8,123,335 10,777,902 9,495,358 13,990,334 Remeasurements (11,626,310) 2,657,177 (13,696,791) (15,257,474) (4,696,260)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 114

1ST HALF 2020

7.3.7. CHANGES IN PENSION AND OTHER POST-EMPLOYMENT BENEFITS

30 June 2020 Exchange rate Change in Income and Actuarial deviations Opening balance Payments Closing balance adjustment assumptions expenses (7.2.5) Amounts in Euro Pulp and paper segment Pensions with autonomous fund 179,880,751 - - 1,582,882 (636,913) (2,596,185) 178,230,534 Cemend and derivatives segment Pensions assumed by the Group 3,428,821 - - 23,651 (33,096) (242,500) 3,176,876 Pensions with autonomous fund 16,510,078 - - 117,547 (153,083) (781,127) 15,693,415 Capital insured 223,392 (2,190) - 12,651 809 (18,663) 215,999 Retirement and death 99,044 (402) - 5,924 (172) - 104,394 Healthcare assitance 44,254 - - 321 (119) - 44,456 Long-service award 382,874 - - 23,726 - (44,664) 361,936 Holdings Pensions assumed by the Group 1,008,908 - - 11,715 - (65,257) 955,366 201,578,122 (2,592) - 1,778,416 (822,574) (3,748,396) 198,782,976

31 December 2019 Exchange rate Change in Income and Actuarial deviations Opening balance Payments Closing balance adjustment assumptions expenses (7.2.5) Amounts in Euro Pulp and paper segment Pensions with autonomous fund 154,456,238 - 17,318,638 4,812,772 8,682,165 (5,389,063) 179,880,750 Cement and derivatives segment Pensions assumed by the Group 3,697,924 - - 67,999 225,978 (563,080) 3,428,821 Pensions with autonomous fund 17,236,510 - - 328,191 848,193 (1,902,816) 16,510,078 Capital insured 142,667 16,393 - 15,074 83,787 (34,529) 223,392 Retirement and death 89,851 2,625 - 6,318 250 - 99,044 Healthcare assitance 43,164 - - 593 3,301 (2,804) 44,254 Long-service award 385,856 - - 47,492 - (50,474) 382,874 Holdings Pensions assumed by the Group 1,115,990 - - 23,431 - (130,513) 1,008,908 177,168,200 19,018 17,318,638 5,301,870 9,843,674 (8,073,279) 201,578,121

The average expected duration of the defined benefit liabilities is 7 years for the Cement segment plans and 16 years for the Pulp and Paper segment plans.

7.3.8. CHANGES IN FUNDS ALLOCATED TO THE DEFINED BENEFIT PENSION PLANS

30/06/2020 31/12/2019 Amounts in Euro Autonomous fund Capital insured Autonomous fund Capital insured Opening balance 191,292,930 163,567 165,608,398 173,804 Exchange rate adjustment - (1,447) - 16,456 Contribution for the period - - 18,001,328 - Interest 1,391,033 6,140 4,222,946 7,836 Return on plan assets (5,136,494) - 10,598,760 - Pensions paid (3,377,307) - (7,291,877) - Retirements paid - (18,663) - (34,529) Other (153,383) - 153,374 - Closing balance 184,016,779 149,597 191,292,930 163,567

Contributions to the defined benefit plans presented above were fully realised by the Group's subsidiaries and no contributions were made by the participants.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 115 1ST HALF 2020

Funds allocated to defined benefit plans - estimated contributions for the next period

The expected contributions for the next reporting period depend, among other factors, on the profitability of the funds’ assets.

7.3.9. COMPOSITION OF THE ASSETS OF THE FUNDS ALLOCATED TO DEFINED BENEFIT PLANS

Amounts in Euro 31/12/2019 % 31/12/2018 % Listed securities in active market Bonds 114,831,780 62.4% 112,278,950 58.7% Shares 40,617,878 22.1% 48,474,285 25.3% Public debt 22,667,868 12.3% 13,724,039 7.2% Liquidity 3,228,855 1.8% 14,043,616 7.3% Real Estate 2,516,336 1.4% 2,700,038 1.4% Other treasury investments 154,062 0.1% 72,002 0.0% 184,016,779 100.0% 191,292,930 100.0% The amounts shown in Bonds, Shares and Public Debt categories refer to the fair values of these assets, fully determined based on observable prices in active net (regulated) markets at the date of the Consolidated Statement of Financial Position.

7.3.10. EXPENSES INCURRED WITH POST-EMPLOYMENT BENEFIT PLANS

H1 2020 Impact in net Current services Expected return on Period contributions Interest expenses Other expenses profit for the expenses assets (DC Plans) Amounts in Euro period(Note 7.1) Pensions assumed by the Group - 35,366 - - - 35,366 Pensions with autonomous fund 34,370 1,666,059 (1,620,242) - 709,134 789,321 Insurance policies 4,036 8,615 (6,203) - - 6,448 Retirement and death 4,456 2,214 - - - 6,670 Healthcare assistance - 321 - (745) - (424) Long-service award 16,741 4,063 - 2,922 - 23,726 Contributions to defined contribution plan - - - - 672,054 672,054 59,603 1,716,638 (1,626,445) 2,177 1,381,188 1,533,161

H1 2019 Impact in net Current services Expected return on Period contributions Interest expenses Other expenses profit for the expenses assets (DC Plans) Amounts in Euro period(Note 7.1) Pensions assumed by the Group - 45,716 - - - 45,716 Pensions with autonomous fund 922,699 1,698,648 (1,534,095) - - 1,087,252 Insurance policies 2,334 5,052 (6,170) - - 1,216 Retirement and death 3,217 1,708 - - - 4,925 Healthcare assistance - 418 - - - 418 Long-service award 13,405 3,915 - - - 17,320 Contributions to defined contribution plan - - - - 1,407,955 1,407,955 941,655 1,755,457 (1,540,265) - 1,407,955 2,564,802

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 116

1ST HALF 2020

7.3.11. REMEASUREMENTS RECOGNISED DIRECTLY IN OTHER COMPREHENSIVE INCOME

30 June 2020 Expected return on Impact on Equity Gains and losses Gross amount Deferred tax plan assets (Note 5.5) Amounts in Euro Post-employment benefits Pensions assumed by the Group 33,096 - 33,096 (9,101) 23,995 Pensins with autonomous fund (4,500,375) (229,272) (5,172,397) 42,268 (5,130,129) Retirement and death 172 - 172 - 172 Healthcare assistance 119 - 119 (24) 95 (4,909,738) (229,272) (5,139,010) 33,143 (5,105,867)

31 December 2019 Expected return on Gains and losses Gross amount Deferred tax Impact on Equity plan assets Valores em Euros Post-employment benefits Pensions assumed by the Group (225,978) - (225,978) 62,108 (163,870) Pensins with autonomous fund (16,098,596) 1,070,651 (15,027,945) 407,431 (14,620,514) Retirement and death (250) - (250) 147 (103) Healthcare assistance (3,301) - (3,301) 677 (2,624) (16,328,125) 1,070,651 (15,257,474) 470,363 (14,787,111) FINANCIAL INSTRUMENTS

8.1. FINANCIAL RISK MANAGEMENT

As a holding company, Semapa develops direct and indirect managing activities over its subsidiaries. Accordingly, the fulfilment of the obligations undertaken by the Company depends on the cash flow generated by its subsidiaries, which include the distribution of dividends, the payment of interest, the repayment of loans granted and other cash flows generated by those companies.

The ability of Semapa’s subsidiaries to make funds available will depend, partly, on their ability to generate positive cash flows and, on the other hand, on the respective earnings, available reserves for distribution and financial structure.

The Semapa Group has a risk-management program, which focuses its analysis on the financial markets with a view to mitigate the potential adverse effects on the Semapa Group’s financial performance. Risk management is undertaken by the Financial Management of the holding and main subsidiaries, in accordance with the policies approved by the Board of Directors and monitored by the Risks and Control Commission.

The Group adopts a proactive approach to risk management, as a way to mitigate the potential adverse effects associated with those risks, namely the foreign exchange rate risk and interest rate risk.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 117

1ST HALF 2020

8.1.1. CURRENCY RISK

EXCHANGE RATE RISK MANAGEMENT POLICY

Pulp and paper

Regarding the Pulp and Paper segment, a significant portion of its sales is denominated in currencies other than Euro. Thus, its development could have a significant impact on cash flows obtained with future sales of the Group, mainly regarding USD exposure. Also, sales in Sterling Pound (GBP), Polish Zloty (PLN) and Swiss Franc (CHF) have some expression, as sales in other currencies are less significant.

Purchases of certain raw materials are made in USD, particularly the share of imports of wood pulp and softwood; therefore, variations in this currency may have an impact on acquisition values.

Furthermore, and although there is a partial natural hedge, once a sale is made in a currency other than in Euro, the Group takes on an exchange risk up to the time it receives the proceeds of that sale, if no hedging instruments are in place. Therefore, the Group is permanently exposed to currency risk trough a significant amount of receivables and albeit with lesser significance payables.

Cement and derivatives

The currency risk inherent to the segment of Cement and derivatives is mainly due to the current investments held in Brazil and to the purchases of fuel and freight ships, both paid in USD. This segment continued its policy of maximizing the potential of covering their foreign exchange exposure. This segment also comprises assets located in Tunisia, Angola and Lebanon, therefore any change in these countries’ exchange rates could have an impact on Semapa’s consolidated statement of financial position.

The segment analyses its currency exposure from a consolidated perspective at the Secil Group level, and its policy is to maximise natural hedging of flows in a currency other than the presentation currency.

Use of financial derivative instruments

Occasionally, when considered appropriate, the Group manages foreign exchange risks through the use of derivative financial instruments, in accordance with a policy that is subject to periodic review, the prime purpose of which is to limit the exchange risk associated with future sales and purchases and accounts receivable and payable, which are denominated in currencies other than the Euro. However, when a unit trades in a currency other than the Group's presentation currency or its functional currency, immediate hedging is performed.

In the periods presented, the Group holds derivatives that hedge the foreign exchange risk of future operations in currencies other than the reporting currency (see Note 8.2 - Derivative financial instruments).

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 118

1ST HALF 2020

EXPOSURE OF FINANCIAL ASSETS AND LIABILITIES TO FOREIGN EXCHANGE RISK AND SENSITIVITY ANALYSIS

Other currencies 30 June 2020 American Dollar Sterling Pound Brazilian Real Tunisian Dinar Angolan Kwanza (Euro)

Exchange rate at the end of the period 1.120 0.912 6.153 3.209 678.643 Valuation/ (devaluation) over the previous period (0.32%) 7.24% 35.84% 1.03% 20.28% Average exchange rate in the period 1.102 0.875 5.420 3.151 616.223 Valuation/ (devaluation) over the previous period (1.56%) (0.33%) 22.77% (3.99%) 46.72%

Amounts in Foreign Currency Cash and cash equivalents 53,032,888 445,000 173,694,054 14,338,142 119,682,520 367,855 Receivables 86,213,519 7,550,211 39,399,437 4,671,781 51,963,615 2,863,953 Other assets 9,387,010 - 66,429,188 484,889 6,572,000 48 Total financial assets 148,633,417 7,995,211 279,522,679 19,494,812 178,218,135 3,231,856 Interest-bearing liabilities (14,363,769) - (351,504,145) (68,372,537) (1,512,504,436) (2,079) Payables (14,502,507) (24,525) (564,085,835) (11,935,276) (451,848,786) (115,122) Total financial liabilities (28,866,276) (24,525) (915,589,980) (80,307,813) (1,964,353,222) (117,201)

Net financial position in foreign currency 119,767,141 7,970,686 (636,067,301) (60,813,001) (1,786,135,087) Net financial position in Euro 106,954,046 8,735,668 (103,373,470) (18,953,126) (2,631,921) 3,114,655 Impact of +10% in the foreign exchange rate (9,723,095) (794,152) 9,397,588 1,723,011 239,266 (283,150) Impact of -10% in the foreign exchange rate 11,883,783 970,630 (11,485,941) (2,105,903) (292,436) 346,073

Other currencies 31 December 2019 American Dollar Sterling Pound Brazilian Real Tunisian Dinar Angolan Kwanza (Euro)

Exchange rate at the end of the period 1.123 0.851 4.530 3.176 564.241 Valuation/ (devaluation) over the previous period (1.89%) (4.89%) 2.06% (9.08%) 55.94% Average exchange rate in the period 1.120 0.878 4.415 3.282 419.996 Valuation/ (devaluation) over the previous period (5.20%) (0.81%) 2.46% 5.03% 38.39%

Amounts in Foreign Currency Cash and cash equivalents 75,189,406 278,152 16,187,443 8,547,794 308,715,342 232,148 Receivables 159,594,179 7,691,503 234,262,440 36,270,084 3,494,874,385 2,198,121 Other assets 4,320,324 - 5,141,612 347,732 4,652,000 1,424 Total financial assets 239,103,909 7,969,655 255,591,495 45,165,610 3,808,241,727 2,431,693 Interest-bearing liabilities (20,910,756) - (369,140,562) (50,311,246) (1,745,376,394) (3,435) Payables (89,115,406) (177,133) (490,000,056) (40,731,841) (3,634,480,741) (280,250) Total financial liabilities (110,026,162) (177,133) (859,140,618) (91,043,087) (5,379,857,135) (283,686)

Net financial position in foreign currency 129,077,747 7,792,522 (603,549,123) (45,877,477) (1,571,615,408) Net financial position in Euro 114,899,187 9,159,053 (133,239,685) (14,445,959) (2,785,362) 2,148,008 Impact of +10% in the foreign exchange rate (10,445,381) (832,641) 12,112,699 1,313,269 253,215 (195,273) Impact of -10% in the foreign exchange rate 12,766,576 1,017,673 (14,804,409) (1,605,107) (309,485) 238,668

8.1.2. INTEREST RATE RISK

INTEREST RATE RISK MANAGEMENT POLICY

A significant share of the Group’s financial liabilities cost is indexed to short-term reference interest rates, which are reviewed more than once a year (generally every six months for medium and long-term debt). Accordingly, changes in interest rates can have an impact on the Company’s income statement.

The interest rate risk management strategy is periodically reviewed by the Group. Given the current level of interest rates, the Group has focused on contracting fixed rate debt.

Where the Board considers appropriate, the Group relies on the use of derivative financial instruments (Note 8.2), namely interest rate swaps to manage the interest rate risk, and these tools aim to fix the interest rate on loans it obtains, within certain parameters, considered appropriate by the Group's risk management policies.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 119

1ST HALF 2020

ESTIMATES AND JUDGEMENTS

SENSITIVITY ANALYSIS

Semapa carries out sensitivity analysis in order to assess the impact on the income statement and equity caused by an increase or decrease in market interest rates, considering all other factors unchanged. This is a mere illustrative analysis, since changes in market rates rarely occur separately.

The sensitivity analysis is based on the following assumptions:

(i) Changes in market interest rates affect interest income and expenses arising from financial instruments subject to floating rates;

(ii) Changes in market interest rates affect the fair value of derivative financial instruments as well as other financial assets or liabilities;

(iii) Changes in fair value of derivative financial instruments and other financial assets and liabilities are measured using the discounted cash flows method, with market interest rates at year end.

EXPOSURE TO INTEREST RATE RISK

The fixed rate (which does not expose the Company to interest rate risk) and variable rate (which expose the Company to interest rate risk) financial assets and liabilities are detailed as follows:

Amounts in Euro Below 1 month 1-3 months 3-12 months 1-5 years Above 5 years Total As at 30 June 2020 Assets Non-current Other non-current assets - - 10,796,052 - - 10,796,052 Current Cash and cash equivalents 677,721,400 17,752,565 35,490,773 - - 730,964,738 Total financial assets 677,721,400 17,752,565 46,286,825 - - 741,760,790 Liabilities Non-current Interest-bearing liabilities 89,600,797 143,012,032 209,580,066 724,093,815 244,243,283 1,410,529,993 Other liabilities - - - 18,399,000 18,048,598 36,447,598 Current Interest-bearing liabilities 52,212,111 17,643,642 566,483,738 - - 636,339,491 Other liabilities ------Total financial liabilities 141,812,908 160,655,675 776,063,804 742,492,815 262,291,881 2,083,317,082

Net financial position 535,908,492 (142,903,110) (729,776,978) (742,492,815) (262,291,881) (1,341,556,292)

Amounts in Euro Below 1 month 1-3 months 3-12 months 1-5 years Above 5 years Total As at 31 December 2019 Assets Non-current Other non-current assets ------Current Cash and cash equivalents 230,032,447 18,452,072 14,887,186 1,609,358 - 264,981,064 Total financial assets 230,032,447 18,452,072 14,887,186 1,609,358 - 264,981,064 Liabilities Non-current Interest-bearing liabilities 111,750,000 20,000,000 - 991,807,638 243,332,408 1,366,890,046 Other liabilities - - - 18,399,000 20,932,496 39,331,496 Current Interest-bearing liabilities 34,485,425 14,685,009 285,503,016 - - 334,673,450 Other liabilities ------Total financial liabilities 146,235,425 34,685,009 285,503,016 1,010,206,638 264,264,904 1,740,894,992

Net financial position 83,797,022 (16,232,937) (270,615,830) (1,008,597,280) (264,264,904) (1,475,913,929)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 120

1ST HALF 2020

8.1.3. LIQUIDITY RISK

LIQUIDITY RISK MANAGEMENT POLICY

The Group manages liquidity risk in two ways:

(i) ensuring that its financial debt has a high medium and long-term component with maturities appropriate to the characteristics of the industries in which its subsidiaries operate, and (ii) through the contracting with financial institutions of credit facilities available at all times, for an amount that guarantees adequate liquidity.

CONTRACTUAL MATURITY OF FINANCIAL LIABILITIES (undiscounted cash flows, including interest)

Amounts in Euro Below 1 month 1-3 months 3-12 months 1-5 years Above 5 years Total As at 30 June 2020 Liabilities Interest-bearing liabilities (Note 5.7) Bond loans - - 222,620,175 518,278,753 163,467,500 904,366,428 Commercial paper - 31,498,203 268,366,250 469,929,367 100,000,000 869,793,819 Bank loans 1,323,609 656,324 123,860,123 144,409,671 40,621,587 310,871,314 Other liabilities - - 4,668,107 4,767,055 3,235,313 12,670,475 Lease liabilities (Note 5.8) 27,017 53,280 12,292,408 19,673,438 39,117,142 71,163,285 Payables and other current liabilities (Note 4.3) Derivative financial instruments (Note 8.2) - 945,357 778,243 5,119,980 - 6,843,581 Other financial liabilities - - - 458,343 - 458,343 Total liabilities 1,350,626 33,153,164 632,585,306 1,162,636,607 346,441,542 2,176,167,245

As at 31 December 2019 Liabilities Interest-bearing liabilities (Note 5.7) Bond loans 448,252 3,497,102 177,050,259 609,988,107 113,280,733 904,264,453 Commercial paper - 1,671,880 28,654,280 460,714,930 37,754,022 528,795,112 Bank loans 4,134,965 494,583 138,589,205 201,191,092 41,658,058 386,067,903 Other liabilities 20,939 40,948 12,946,858 24,954,269 41,748,707 79,711,721 Payables and other current liabilities (Note 4.3) Derivative financial instruments (Note 8.2) - 2,090,980 923,276 4,997,845 (16,330) 7,995,771 Other financial liabilities - 9,555,699 - 458,343 - 10,014,042 Total liabilities 4,604,156 17,351,192 358,163,878 1,302,304,586 234,425,190 1,916,849,002

The contractual maturity of interest-bearing liabilities requires the compliance with financial

covenants, as detailed in Note 5.7 – Interest-bearing liabilities.

AVAILABLE AND UNDRAWN CREDIT FACILITIES

Amounts in Euro 30/06/2020 31/12/2019 Undrawn credit facilities Holdings 144,750,000 280,370,000 Pulp and paper 102,026,413 110,450,714 Cement and derivatives 122,003,941 284,950,362 Environment 16,661,081 15,668,122 385,441,435 691,439,198

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 121

1ST HALF 2020

8.1.4. CREDIT RISK

ACCOUNTING POLICIES

IMPAIRMENT OF FINANCIAL ASSETS

The Group assesses, on a prospective basis, the expected credit losses associated with its financial assets measured at amortised cost as detailed in Note 8.4.1 - Categories of financial instruments of the Group.

Trade receivables and other current assets

Impairment losses on trade receivables and other current assets are recorded based on the simplified model established in IFRS 9, recognising the expected losses up to maturity. The expected losses are determined on the basis of the experience of historical actual losses over a statistically significant period and representative of the specific characteristics of the underlying credit risk.

The model adopted for the impairment assessment in accordance with IFRS 9 is as follows:

1. Calculate the total credit sales made by the Group during the last 12 months as well as the related total amount of bad debts; 2. Determine the customers’ payment profile and other short-term creditors, by setting buckets of receipt frequency; 3. Based on 1 above, estimate the probability of default (i.e., the amount of bad debts calculated at 1 compared to the balance of outstanding sales in each bucket calculated at 2); 4. Adjust the percentages of future projections obtained in 2; 5. Apply the default percentages as calculated in 3 to trade receivables and other current receivables still outstanding at the reporting date.

The Group also recognises impairment on a case-by-case basis, based on specific balances and specific past events, considering the historical information of the counterparties, their risk profile and other observable data in order to assess whether there are objective indicators of impairment for these financial assets.

CREDIT RISK MANAGEMENT POLICY

The Group is exposed to credit risk in the credit it grants to its customers and, accordingly, it has adopted a policy of managing such risk within present limits, by serving insurance policies with a specialised independent company. The deterioration in global economic conditions or adverse situations, which only affect economies at the local level, could give rise to situations in which customers are unable to meet their commitments.

The Group has adopted a credit insurance policy for most trade receivables. Accordingly, the Group's effective exposure to credit risk is considered to be mitigated at acceptable levels with respect to sales.

However, the worsening of global economic conditions or adversities affecting only economies on a local scale may lead to deterioration in the ability of the Group’s customers to meet their obligations, leading entities providing credit insurance to significantly decrease the amount of credit facilities that are available to those customers. This scenario may result in limitations on the amounts that can be sold to some customers without directly incurring credit risk levels that are not compatible with the risk policy in this area.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 122

1ST HALF 2020

Cash and cash equivalents

The Group has a strict policy of approving its financial counterparties, limiting its exposure according to an individual risk analysis and previously approved ceilings.

As at 30 June 2020 and 31 December 2019, Trade receivables showed the following ageing structure, considering the due dates for the open balances, before impairment charges:

Pulp and Cement Total Amounts in Euro paper and derivatives Environment 30/06/2020 31/12/2019 Not overdue 112,269,275 44,830,825 3,328,869 160,428,969 190,475,611 1 to 90 days 19,445,768 13,846,987 3,421,555 36,714,310 31,695,215 91 to 180 days 490,252 3,920,264 3,034,432 7,444,948 2,887,005 181 to 360 days 33,125 4,487,023 1,086,172 5,606,320 3,181,428 361 to 540 days - 725,018 145,842 870,860 1,227,279 541 to 720 days 6,880 876,525 290,142 1,173,547 712,693 above 721 days - 14,688,890 1,247,849 15,936,739 6,070,160 132,245,300 83,375,532 12,554,861 228,175,693 236,249,391 Litigation - doubtful debts 2,102,580 11,960,329 - 14,062,909 20,946,051 Impairment (2,102,580) (26,439,228) (380,159) (28,921,967) (28,512,451) Trade receivables balance (Note 4.2) 132,245,300 68,896,633 12,174,702 213,316,635 228,682,991

The amounts shown above correspond to the amounts outstanding according to the contracted due dates. Despite some delays in the settlement of those amounts, that does not result, in accordance with the Group’s available information, in the identification of impairment losses other than the ones considered through the respective losses. These are calculated based on the information regularly collected on the financial behaviour of the Group's customers, which enables, together with the experience gathered in the analysis of the portfolio and with effective credit losses, in the portion not attributable to the credit insurer, to quantify the losses to be recognised in the period.

The analysis of the ageing of receivables already overdue is as follows:

Amounts in Euro 30/06/2020 31/12/2019 Fair value of credit Fair value of credit Gross amount insurance Gross amount insurance Account receivables overdue but not impaired Overdue - below 3 months 36,676,795 16,091,594 31,628,835 14,308,767 Overdue - above 3 months 16,210,872 1,677,804 6,595,357 978,666 52,887,667 17,769,398 38,224,192 15,287,433

Account receivables overdue and impaired Overdue - below 3 months 72,932 - 66,379 - Overdue - above 3 months 28,849,035 - 28,446,072 - 28,921,967 - 28,512,451 -

In accordance with the above-mentioned, it should be noted that the Group adopted a policy of credit insurance for a significant part of the accounts receivable from costumers. Thus, it is considered that the effective Group’s exposure to the credit risk has been mitigated and is within acceptable levels.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 123 1ST HALF 2020

The table below represents the quality of the Group’s credit risk, as at 30 June 2020 and 31 December 2019, for financial assets (Cash and cash equivalents and Derivative financial instruments), whose counterparts are financial institutions:

Amounts in Euro 30/06/2020 31/12/2019 AA- - 19,875,888 A+ - 1,533,255 A 69,317,665 2,140,986 A- 68,227,202 1,032,252 BBB+ 70,097,816 23,639,102 BBB 326,101,513 114,302,414 BBB- 34,015,648 526,065 BB+ - 502,834 BB 10,546,493 11,148,620 BB- 28,214,772 3,558,995 B+ 2,114,658 1,331,790 B 9,001,120 772,429 B- 245,165 106,958 CCC+ 6,078,614 15,991,556 Other 106,951,068 62,298,126 730,911,734 258,761,270

The caption Others comprise short-term investments in Angola and Mozambique financial institutions, on which it was not possible to obtain the ratings with reference to the presented dates.

The maximum exposure to the credit risk in the Consolidated financial position as at 30 June 2020 and 31 December 2019 is detailed as follows:

Amounts in Euro 30/06/2020 31/12/2019 Non-current Other financial investments (Note 8.3) 9,005,310 4,066,072 Receivables and other non-current assets (Note 4.2) 35,288,976 64,466,459 Current Receivables and other current assets (Note 4.2) 296,400,912 288,850,637 Derivative financial instruments (Note 8.2) 14,759,735 4,095,499 Cash and cash equivalents (Note 5.9) 722,568,013 258,761,270 1,078,022,946 620,239,937

IMPAIRMENT OF TRADE AND OTHER RECEIVABLES

Movements in accumulated impairment losses on trade and other receivables

Trade receivables Other receivables Amounts in Euro H1 2020 H1 2019 H1 2020 H1 2019 Accumulated impairment at the beginning of the period 28,512,452 27,255,350 5,983,354 6,179,727 Changes due to: Increase 1,036,381 414,555 1,214,358 3,040 Reversals (245,121) (227,989) (65,354) - Changes recognised in the income statement (Note 2.3) 791,260 186,566 1,149,004 3,040 Exchange rate adjustment (261,884) 25,946 (896) 16,710 Charge-off (119,860) (141,485) - (102,586) Adjustments and transfers - (566,941) 83,069 566,941 Accumulated impairment at the end of the period 28,921,968 26,759,436 7,214,531 6,663,832 Other quarters - 1,753,016 - (680,478) Accumulated impairment 28,921,968 28,512,452 7,214,531 5,983,354

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 124

1ST HALF 2020

8.2. DERIVATIVE FINANCIAL INSTRUMENTS

ACCOUNTING POLICIES

The fair value of derivative financial instruments is included under the caption Payables and other current liabilities (Note 4.3), if negative, and in the caption Receivables and other current assets (Note 4.2), if positive.

According to IFRS 9 – Financial instruments, the Group chose to continue to apply the hedge accounting requirements of IAS 39 – Financial instruments, until there is greater visibility of the Dynamic Risk Management current macro-hedging project.

Whenever expectations of changes in interest or exchange rates justify it, the Group seeks to hedge against adverse movements through derivative instruments, such as interest rate swaps (IRS), exchange interest rate collars, exchange forwards, among others.

DERIVATIVE FFINANCIAL INSTRUMENTS | TRADING

Although the derivative financial instruments contracted represent effective economic hedging instruments, not all of them qualify as hedging instruments, in accordance with the applicable rules and requirements. Instruments that do not qualify as hedging instruments are recorded in the Consolidated Financial Position at their fair value and changes in fair value are recognised in Net financial results (Note 5.11), when related to financing operations, or in Supplies and Services (Note 2.3) or Revenue (Note 2.1), when related to foreign exchange risk on the purchase of raw materials or cash flows from sales in currencies other than the reporting currency.

DERIVATIVE FINANCIAL INSTRUMENTS | HEDGING

The derivative financial instruments, used for hedging purposes, may be classified as hedge instruments provided that they fulfil, cumulatively, with the conditions set out in IAS 39.

Cash-flow hedge (interest rate and exchange rate risks)

In order to manage the risk of interest and exchange rates, the Group enters into cash flow hedge.

Those transactions are recorded in the Statement of interim financial position at their fair value and, to the extent that they are considered effective hedging, changes in fair value are initially recorded in the statement of other comprehensive income for the year. If hedging transactions are deemed to be ineffective, the gain or loss arising therefrom is recorded directly in profit or loss.

Accumulate amounts recognised in equity are transferred to profit or loss when, the hedged item affects the income statement (for example, when the hedged future sale materialises). The gain or loss corresponding to the effective component of interest rate swaps that are hedging variable rate financing is recognised under the caption Net financial results (Note 5.11). However, when the future hedged transaction results in the recognition of a non-financial asset (e.g. inventories or property, plant and equipment), the previously gains and losses deferred in equity are included in the initial measurement of the cost of the asset.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 125

1ST HALF 2020

When a hedging instrument matures or is sold, or when it no longer meets the criteria required to be recognised as a hedge, the cumulative gains and losses on equity are recycled to the income statement, except when the hedged item is a future transaction with related cumulative gains and losses included in equity at that date remain in equity. In such case, they will only be recycled to the income statement when the transaction is recognised in the income statement.

Net investment hedging (Exchange rate risk)

In order to manage the exposure of its investments in foreign subsidiaries to fluctuations in the exchange rate (Net investment), the Group enters into exchange rate forwards, which are recorded at fair value in the consolidated statement of financial position.

Those exchange rate forwards arranged for investments in foreign operations, are recorded in a similar way to the cash flow hedges. Gains and losses on the hedging instrument related to its effective hedging component are recognised in the comprehensive income for the year. Gains and losses related to the ineffective hedging component are recognised in the income statement. The accumulated gains and losses on equity are included in the income statement if and when the foreign subsidiaries are disposed.

PULP AND PAPER SEGMENT

Foreign exchange trading derivatives

The Navigator Group has a currency exposure on sales invoiced in foreign currencies, namely US dollars (USD) and sterling pounds (GBP). Since the Group’s financial statements are translated into Euro, it is exposed to an economic risk on the conversion of these currency flows to the Euro. The Group is also obliged, albeit to a lesser degree, to make certain payments in those same currencies which, for currency exposure purposes, act as a natural hedge. Thus, the hedge is aimed at safeguarding the net value of the statement of financial position items denominated in a currency other than the presentation currency against the respective currency fluctuations.

The hedging instruments used in this operation are foreign exchange forward contracts, covering the net exposure to other currencies other than the presentation currency, for the same maturity dates and the same amounts of these documents. The nature of the risk hedged is the change in the carrying amount of sales and purchases expressed in currencies other than the presentation currency. At the end of each month, customer and suppliers’ balances expressed in foreign currency are updated, with the gain or loss offset against the fair value change of the forwards negotiated.

Cash flow hedge | Exchange rate risk EUR/USD and EUR/GBP

The Group uses derivative financial instruments in order to limit the net exchange risk associated with sales and future purchases estimated at USD and GBP.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 126

1ST HALF 2020

Cash flow hedge | Interest rate

The Navigator Group hedges its future interest payments on loans, commercial paper and bond loans, by engaging in an interest rate swap, in which it pays a fixed rate and receives a variable rate. This instrument is designated as hedges of cash flows from the commercial paper program and the bond loan.

Cash flow hedging | Commodities - BHKP

The Navigator Group uses derivative financial instruments with the purpose of minimising the exposure risk associated with the variation of the pulp price, indexed to PIX, in USD.

CEMENT AND DERIVATIVES SEGMENT

Foreign currency risk hedging in the export and purchase of fuels

The Secil Group carries out occasionally sales hedging transactions in a currency other than the presentation currency and hedges future fuel acquisitions, particularly petcoke.

Cash flow hedge | Interest rate on loans to foreign operations

When a foreign transaction of the Secil Group takes loans in a currency other than the functional currency in the country of activity of that operation, the Group carries out hedging operations so that the exposure reflects the functional currency.

ESTIMATES AND JUDGEMENTS

Fair value of derivative financial instruments

Whenever possible, the fair value of derivatives is estimated, based on quoted instruments. In the absence of market prices, the fair value of derivatives is estimated based on the discounted cash flow method and option valuation models, in accordance with the assumptions generally used in the market.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 127

1ST HALF 2020

Detail and maturity of derivative financial instruments by nature

30 June 2020 Positive Negative Notional Currency Maturity Net total Amounts in Euro (Note 4.2) (Note 4.3) Hedging Exchange rate forwards (future sales) 144,500,000 USD 2020 284,281 (188,626) 95,655 Exchange rate forwards (future sales) 36,000,000 GBP 2020 838,235 - 838,235 Interest rate swaps (SWAP's) 330,000,000 Euro 2025 - (7,255,995) (7,255,995) Non Deliverable Forward (NDF) (154,000,000) BRL 2020 - - - BHKP Pulp 9,480,000 USD 2020 1,091,867 - 1,091,867 2,214,383 (7,444,621) (5,230,238) Trading Exchange rate forwards 78,378,946 USD 2023 378,362 (1,106,122) (727,760) Exchange rate forwards 3,300,000 GBP 2020 72,226 - 72,226 Exchange rate forwards 1,325,000 CHF 2020 4,055 Cross currency interest rate swap 48,950,000 USD 2020 7,513,051 - 7,513,051 Interest rate swaps (SWAP's) 6,673,340 USD 2020 1,496,816 - 1,496,816 Future purchase of CO2 allowances 1,944,000 Euro 2020 1,294,657 - 1,294,657 Non Deliverable Forward (NDF) 24,900,000 Euro 2020 1,786,184 - 1,786,184 12,545,351 (1,106,122) 11,435,174 14,759,734 (8,550,743) 6,204,936

31 December 2019 Positive Negative Notional Currency Maturity Net total Amounts in Euro (Note 4.2) (Note 4.3) Hedging Exchange rate forwards (future sales) 224,439,394 USD 2020 1,512,853 (11,549) 1,501,304 Exchange rate forwards (future sales) 97,611,111 GBP 2020 252,153 (217,046) 35,107 Interest rate swaps (SWAP's) 330,000,000 Euro 2025 - (6,365,558) (6,365,558) Non Deliverable Forward (NDF) (14,404,766) BRL 2020 5,939 - 5,939 BHKP Pulp 18,960,000 Euro 2020 448,894 - 448,894 2,219,839 (6,594,153) (4,374,314) Trading Exchange rate forwards 105,663,053 USD 2023 740,596 - 740,596 Exchange rate forwards 8,350,000 GBP 2020 - (204,561) (204,561) Cross currency interest rate swap 41,000,000 USD 2020 979,191 (955,353) 23,838 Interest rate swaps (SWAP's) 6,673,340 USD 2020 - (61,750) (61,750) Non Deliverable Forward (NDF) 15,000,000 Euro 2020 155,873 - 155,873 1,875,660 (1,221,664) 653,996 4,095,499 (7,815,817) (3,720,318)

PULP AND PAPER SEGMENT

Cash flow hedge | Exchange rate risk EUR/USD and EUR/GBP

In this context, during the last quarter of the 2019 period and in January 2020, the Group contracted a set of financial structures to cover the total net exchange rate exposure of the estimated sales in USD for 2020. The derivative financial instruments in force are Options and Zero Cost Collar, in an overall amount of USD 144,500,000 and GBP 36,000,000, which expire on 31 December 2020.

CEMENT AND DERIVATIVES SEGMENT

Derivatives at fair value through profit or loss

In October 2019, the subsidiary Margem undertook the following external financing in the amount:

− in Euro equivalent to BRL 30,000,000 with maturity in October 2020, with a single repayment at maturity. On the same date, a cross currency interest rate swap agreement was entered into to hedge the exchange rate exposure. This derivative allowed Margem to set the nominal value of the financing in BRL and the payment of interest at the ID rate plus a spread, fully replicating the amortisation plan of the financing in EUR;

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 128

1ST HALF 2020

− of EUR 5,000,000 with maturity in October 2020, with a single repayment at maturity. On the same date, a Non-deliverable Forward in the total amount of EUR 5,000,000 due in October 2020; − of USD 7,000,000 with maturity in December 2020, with a single repayment at maturity. On the same date, a cross currency interest rate swap agreement was entered into with the purpose of hedging exposure to the exchange rate. This derivative allowed Margem to set the nominal value of the financing in BRL and the payment of interest at the Interbank Deposit (ID) rate plus a spread, fully replicating the amortisation plan of the financing in USD.

In February 2020, the subsidiary Margem contracted external financing in the amount of USD 16,000,000 from a Brazilian financial institution, maturing in February 2021, with a single repayment at maturity. On the same date, a cross currency interest rate swap contract was entered into in order to hedge the exchange rate exposure. This derivative allowed Margin to fix the nominal value of the financing in BRL and to pay interest at the ID rate plus a spread, fully replicating the repayment plan of this financing in USD.

In October 2019, the subsidiary Supremo contracted with a Brazilian financial institution for external financing in the amount of USD 18,000,000 maturing in December 2020, with a single repayment at maturity. On the same date, a cross currency interest rate swap agreement was entered into with the purpose of hedging exposure to the exchange rate. This derivative allowed Margem to set the nominal value of the financing in BRL and the payment of interest at the ID rate plus a spread, fully replicating the amortisation plan of the financing in USD.

In March 2020, the subsidiary Supremo contracted two external loans of approximately the same amount:

− of Euro 10,000,000 with maturity in March 2021, with a single repayment at maturity. A Non- Deliverable Forward contract was signed on the same date. This derivative allowed Supremo to fix the nominal value of the financing in BRL and the respective interest;

− of USD 7,950,000 with maturity in March 2022. On the same date, a cross currency interest rate swap contract was entered into with the purpose of hedging the exchange rate exposure. This derivative allowed Supremo to fix the nominal value of the financing in BRL and to pay interest at the ID rate plus a spread, fully replicating the repayment plan of this financing in USD.

8.3. OTHER FINANCIAL INVESTMENTS

ACCOUNTING POLICIES

This Note includes equity instruments held by the Group relating to companies over which it has no control or significant influence. Financial investments are measured at fair value through profit or loss when the Group holds them for trading purposes. The Group records the remaining financial investments as financial assets at fair value through other comprehensive income.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 129

1ST HALF 2020

As at 30 June 2020 and 31 December 2019, Other financial investments is detailed as follows:

Amounts in Euro 30/06/2020 31/12/2019 Financial assets at fair value through other comprehensive income Defined Crowd 3,572,066 - Techstar Corporate 1,964,637 2,144,964 5,536,703 2,144,964 Financial assets at fair value through profit or loss Alter Venture Partners Fund I 2,738,940 1,454,165 FCR Armilar Venture 648,229 424,801 Mor-Online, SA 18,619 12,234 Ynvisible, SA 62,819 29,908 3,468,607 1,921,108 9,005,310 4,066,072

In the first half of 2020, Semapa Next made an investment in the amount of USD 3,999,999 in the company Defined Crowd, which operates in the field of Artificial Intelligence and Machine Learning.

8.4. FINANCIAL ASSETS AND LIABILITIES

8.4.1. Categories of the Group’s financial instruments

The financial instruments included in each caption of the statement of financial position are classified as follows:

Financial assets at Financial assets at Derivative fair value through fair value through Hedging derivative financial Financial assets at Non-financial Note profit or loss other financial instruments at fair Total amortised cost assets (derivatives comprehensive instruments value through Amounts in Euro excluded) income profit or loss 30 June 2020 Other financial investments 8.3 - 3,468,607 5,536,703 - - - 9,005,310 Receivables and other current assets 4.2 373,566,111 - - 2,214,382 12,545,352 23,728,533 412,054,379 Cash and cash equivalents 5.9 726,664,351 - - - - - 726,664,351 Total assets 1,100,230,462 3,468,607 5,536,703 2,214,382 12,545,352 23,728,533 1,147,724,040 31 December 2019 Other financial investments 8.3 - 1,921,108 2,144,964 - - - 4,066,072 Receivables and other current assets 4.2 411,076,015 - - 2,219,839 1,875,660 18,528,783 433,700,297 Cash and cash equivalents 5.9 259,241,194 - - - - - 259,241,194 Total assets 670,317,209 1,921,108 2,144,964 2,219,839 1,875,660 18,528,783 697,007,563

Financial assets at Financial assets at Derivative fair value through fair value through Hedging derivative financial Financial assets at Note profit or loss other financial instruments at fair Total amortised cost (derivatives comprehensive instruments value through Amounts in Euro excluded) income profit or loss 30 June 2020 Interest-bearing liabilities 5.7 2,072,413,318 - - - - 2,072,413,318 Lease liabilities 5.8 - - - - 78,312,330 78,312,330 Payables and other current liabilities 4.3 490,040,372 7,444,621 1,106,122 109,490,506 - 608,081,621 Total liabilities 2,562,453,690 7,444,621 1,106,122 109,490,506 78,312,330 2,758,807,269 31 December 2019 Interest-bearing liabilities 8.3 1,729,919,341 - - - - 1,729,919,341 Lease liabilities 4.2 - - - - 75,151,290 75,151,290 Payables and other current liabilities 4.3 494,777,275 6,594,153 1,221,664 90,421,955 - 593,015,047 Total liabilities 2,224,696,616 6,594,153 1,221,664 90,421,955 75,151,290 2,398,085,678

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 130

1ST HALF 2020

8.4.2. Fair value of financial assets and liabilities

ACCOUNTING POLICIES

The fair value of financial instruments is classified in accordance with the fair value hierarchy of IFRS 13 - Fair value measurement:

Level 1 Fair value is based on active markets quotations, at the reporting date.

Level 2 Fair value is determined using valuation models, whose main inputs of the models used are observable in the market.

Level 3 Fair value is determined using valuation models, whose main inputs are not observable in the market.

ESTIMATES AND JUDGEMENTS

Fair value of interest-bearing liabilities remunerated at fixed interest rate

The fair value of these liabilities is calculated using the discounted cash flow method at the reporting date, using a discount rate in accordance with the characteristics of each loan, belonging to level 2 of the fair value hierarchy of IFRS 13.

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT AMORTISED COST

The Group considers that the carrying amount of loans at variable rates, as well as financial assets and liabilities measured at amortised cost in the remaining captions (Note 8.4.1), is close to their fair value.

PROVISIONS, COMMITMENTS AND CONTINGENCIES

9.1. PROVISIONS

ACCOUNTING POLICIES

Recognition and Provisions are recognised whenever: initial measurement (i) the Company has a legal or constructive obligation, as a result of past events; (ii) it is likely that a cash outflow and/or resources will be required to settle the obligation; and (iii) and the amount has been reliably estimated.

Capitalisation of The Group incurs expenditures and assumes liabilities of an environmental nature. expenditures Accordingly, expenditures on equipment and operating techniques that ensure compliance with applicable legislation and regulations (as well as on landscape recovery and reduction of environmental impacts to levels that do not exceed

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 131

1ST HALF 2020

those representing a viable application of the best available technologies, on those related to minimising energy consumption, atmospheric emissions, the production of waste and noise) are capitalised when intended to serve the Group's business activity in a sustainable way, and relate to future economic benefits allowing to extend its useful life, increase capacity or improve the safety or efficiency of other assets held by the Group.

Subsequent Provisions are reviewed on statement of financial position date and are adjusted measurement so as to reflect the best estimate at that date.

Landscape recovery provisions are re-measured according to the effect of the time value of money, against the caption "Financial discount of provisions" in Note 5.11 - Financial income and expenses and consumed by the expenses made by the Group with the recovery, at the date they occur.

Landscape recovery and other environmental expenditures

Some of the Group's companies are responsible for the environmental and landscape recovery of the quarries affected by the exploration, in accordance with applicable legislation. Rehabilitation works mainly includes cleaning and regularisation of areas for recovery, modelling and preparation of the land, transport and spreading of rejected materials for landfill, fertilisation, execution of the general plan for coating with hydro-sowing and plantation, and maintenance and conservation of the areas recovered after implantation.

ESTIMATES AND JUDGEMENTS

LEGAL PROCEEDINGS

These provisions were made in accordance with the risk assessments carried out internally by the Group with the support of its legal advisors, based on the likelihood of the decision being favourable or unfavourable to the Group.

The balances of additional liabilities for the Group’s uncertainty over income tax are disclosed in Note 6.1 - Income tax.

ENVIRONMENTAL RECOVERY

The extent of the work required and the costs to be incurred were determined based on the quarrying plans and studies prepared by independent entities, and the total liability was measured by the expected value of the future cash flows, discounted to present value.

Value judgements and estimates are involved in the formation of expectations about future activities and the amount and period of time of the associated cash flows. These perspectives are based on the existing environment and current regulations.

Quarries whose reconstitution is only possible at the closure of operations, the Group has requested independent and specialised entities to quantify those obligations, having for this purpose recognised a provision under the caption Provisions.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 132

1ST HALF 2020

MOVEMENTS IN PROVISIONS

Legal Tax Amounts in Euro Environmental Other Total proceedings proceedings recovery 1 January 2019 4,785,975 35,970,211 7,583,185 30,140,033 78,479,404 Increases 1,507,622 - 2,475,690 8,402,032 12,385,344 Reversals (817,625) - (1,951,727) (5,557,463) (8,326,815) Impact on profit/ (loss) for the period 689,997 - 523,963 2,844,569 4,058,529 Changes in perimeter - - - 28,414 28,414 Cha rge-off - - (174,450) (3,669,134) (3,843,584) Exchange rate adjustment - - (2,016) 217,879 215,863 Financial discounts - - 265,628 - 265,628 Transfers and adjustments 30,923 (35,970,211) 8,959,394 (138,267) (27,118,161) 31 December 2019 5,506,895 - 17,155,704 29,423,494 52,086,093 Increases 1,664,075 - 275 3,787,451 5,451,801 Reversals (90,033) - (97,588) (1,243,752) (1,431,373) Impact on profit/ (loss) for the period 1,574,042 - (97,313) 2,543,699 4,020,428 Cha rge-off - - (212,919) (2,684,947) (2,897,866) Exchange rate adjustment (145,370) - (381) (689,297) (835,048) Financial discounts (Note 5.7) - - 14,830 - 14,830 Transfers and adjustments - - - 802,040 802,040 30 June 2020 6,935,567 - 16,859,921 29,394,989 53,190,477

Environmental recovery

This caption includes the provisions recorded corresponding to quarries with "continuous and progressive reconstruction of the freed spaces" and refers to quarries exploited by the Secil company in Outão.

Other provisions

The amount presented includes provisions to cover risks related to events of a different nature, the resolution of which may result in outflows of cash, in particular organisational reorganisation processes, complements to the Lebanese social security national fund, risks of contractual positions assumed in investments, among others.

As of 30 June 2020, the increases in Other provisions includes the amount of Euro 13,6 million related to the Mozambique project of the Navigator subsidiary. As reported to the market on 9 July 2018, Portucel Mozambique and the Government of Mozambique signed a Memorandum of Understanding (MoU) regarding the recasting of the investment project, which will be developed in two phases. Initially, this will involve the setting-up of a forestry base of approximately 40,000 hectares which will guarantee the supply of a unit (to be built) for the production of eucalyptus wood chips for export (approximately 1 million tons per year), in an estimated global investment of USD 140 million. Although the Memorandum of Understanding (MoU) signed with the Mozambican Government provided for a "best effort" commitment to create the necessary conditions to carry out the investment until 31 December 2018, that was not possible, and both parties continued to work towards that goal.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 133

1ST HALF 2020

9.2. COMMITMENTS

GUARANTEES PROVIDED TO THIRD PARTIES

Amounts in Euro 30/06/2020 31/12/2019 Garantees provided Garantias Navigator para os financiamentos com o BEI 35,208,333 70,416,667 AT - Autoridade Tributária e Aduaneira 16,215,003 1,063,282 Agencia de Desenvolvimento e Coesão 5,708,912 1,047,365 IAPMEI 3,397,674 4,593,908 APSS - Admi. dos Portos de Setúbal e Sesimbra 2,618,100 2,605,009 Agência Estatal de Administ. Tributaria Espanhola 1,033,204 1,033,204 CCRLVT 948,840 948,840 APDL - Administração do Porto de Leixões 720,657 720,657 Agencia Portuguesa do Ambiente 707,072 - Simria 338,829 338,829 Instituto de Conservação da Natureza - Arrábida 668,688 474,444 Comissão de Coordenação e Desenv. Regional LVT 298,638 298,638 Secretaria Regional do Ambiente e Recursos Naturais 274,595 274,595 IAPMEI (âmbito do PEDIP) 209,305 209,305 Comissão de Coordenação e Desenv. Regional Centro 789,647 869,647 Comissão de Coordenação e Desenv. Regional Algarve 534,620 534,620 Comissão de Coordenação e Desenv. Regional Norte 236,403 236,403 Customs clearance of products 1,250 1,250 Other 3,182,344 3,595,121 73,092,114 89,261,783 Other commitments Mortgages on property, plant and equipment 62,305,714 62,943,024 135,397,828 152,204,807

PURCHASE COMMITMENTS

Amounts in Euro 30/06/2020 31/12/2019 Purchase commitments Property, plant and equipment - Manufacturing equipment 37,676,039 29,055,512 Wood 168,340,301 147,600,000 Energy supply 5,688,190 10,287,430 Raw materials - Petcoque and coal 1,428,827 6,105,205 Other 2,339,884 3,116,577 215,473,241 196,164,724

OTHER COMMITMENTS

The Navigator Group has made a commitment to achieve carbon neutrality by 2035, with a total investment planned of Euro 158 million.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 134

1ST HALF 2020

9.3. CONTINGENT ASSETS AND LIABILITIES

TAX MATTERS - CONTINGENT ASSETS

Public debt settlement fund

According to Decree-Law No. 36/93 of 13 February, tax debts of privatized companies related to periods prior to the privatization date (25 November 2006) are the responsibility of the Public Debt Regularization Fund (FRDP). On 16 April 2008, The Navigator Company filed an application to the Public Debt Settlement Fund to request payment of tax debts previously paid by the Portuguese Tax Authorities. On 13 December 2010, it filed a new application requesting the payment of the debts settled by the Tax Authorities related to the years 2006 and 2003, which was supplemented, on 13 October 2011, with the amounts already paid and not disputed relating to these debts, as well as expenses directly related thereto, pursuant to the Judgement dated 24 May 2011 (Case No. 0993A / 02), which confirmed the Company's position regarding the enforceability of such expenses.

On 13 December 2017, The Navigator Company, S.A. entered into an extra-judicial agreement with the Treasury, in which the FRDP was recognised as having responsibility for recovering the amount of Euro 5,725,771 corresponding to the amount of Corporate Income Tax (CIT) improperly paid, resulting from the alleged qualification/incorrect consideration by the tax administration of the tax loss accruing as a result of the operations carried out by Soporcel, SA in 2003, as well as to promote restitution to Navigator of said amount.

In this context, FRDP will be responsible for the amounts detailed as follows:

Proceedings Requested Decrease due decided in Outstanding Period amounts to RERD favour of the amounts Amounts in Euro Group Proceedings confirmed in court Corporate income tax 2002 18,923 - - 18,923 Corporate income tax (RF) 2004 3,324 - - 3,324 Corporate income tax 2004 766,395 - (139,023) 627,372 Expenses 314,957 - - 314,957 1,103,599 - (139,023) 964,576 Proceedings not confirmed in court Corporate income tax 2005 11,754,680 (1,360,294) - 10,394,386 Corporate income tax 2006 11,890,071 (1,108,178) - 10,781,893 VAT 2003 2,509,101 - - 2,509,101 26,153,852 (2,468,472) - 23,685,380 27,257,451 (2,468,472) (139,023) 24,649,956

Regarding the aggregate corporate income tax proceedings of 2005 and 2006, if Courts come to a decision in favour of Navigator Group, the Group will withdraw the request made to FRDP.

In accordance with IFRIC 23, the Group assessed the degree of uncertainty of the tax proceedings related to income tax. Considering the expected and/or most likely value, the Group concluded that these proceedings should remain classified as contingent assets.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 135

1ST HALF 2020

Pledges

In 2019, the companies of the Navigator Group took an Administrative Action on Civil Liability against the Ministry of Finance which aims at the recognition of their right and in consequence, convict the Ministry of Finance to pay a compensation for the charges incurred by them, in 2018, related to the collaboration provided to the Portuguese Tax Authorities within the context of pledges in tax enforcement proceedings.

NON-TAX MATTERS - CONTINGENT ASSETS

Infrastructure enhancement and maintenance fee

Under the licensing process no. 408/04 related to the new paper mill project, the Setúbal City Council issued a settlement note to Navigator regarding an infrastructure increase and maintenance fee (TMUE), amounting to Euro 1,199,560, with which the company disagrees.

This situation regards the amount collected under this levy in the licensing process mentioned above, for the construction of a new paper mill in the industrial site of Mitrena, Setúbal. Navigator disagrees with the amount charged and filled an administrative claim against it on 25 February 2008 (request no. 2485/08), followed by an appeal in Court against the rejection of the claim on 28 October 2008. On 3 October 2012, this claim had an adverse decision, and on 13 November 2012 an appeal to the Administrative Supreme Court (STA) was performed, which has brought down the action to Central Administrative Court (TCA) on 4 July 2013, pending decision.

Public debt settlement fund

In addition to the tax matters described above, a second request to the Public Debt Settlement Fund was submitted on 2 June 2010, which called for the reimbursement of various amounts, totalling Euro 136,243,939. These amounts were related to adjustments in the financial statements of the group after its privatisation, that have not been considered in formulating the price of such privatisation, as they were not included in the documentation made available for consultation by the bidders.

On 24 May 2014 the Court denied the Navigator Company Group’s proposal to present testimony evidence, alternatively proposing written submissions. On 30 June 2014 Navigator Company Group appealed against this decision, but continuously presented written evidence. The Court subsequently confirmed the Navigator Company Group’s views on this matter, both parts appointed experts and the partial expert report was issued on July 2017, being required either by The Navigator Company, S.A. either by the Ministry of Finance, the attendance of both designated experts in court hearing, in order to provide oral explanations on the issued reports. The date of the court hearing is still to be appointed.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 136

1ST HALF 2020

GROUP STRUCTURE

10.1. COMPANIES INCLUDED IN THE CONSOLIDATION PERIMETER

ACCOUNTING POLICIES

GROUP-CONTROLLED ENTITIES

Semapa controls an entity (subsidiary) when it is exposed to, or has rights to, the variable returns generated as a result of its involvement with the entity and has the ability to affect those variable returns through the power it exercises over its relevant activities.

Shareholder’s equity and net profit/ (loss) of these companies, corresponding to the third-party investment in such companies, are presented under the caption Non-controlling interests items (Note 5.6).

BUSINESS COMBINATIONS

The purchase method is used in recording the acquisition of subsidiaries. The cost of an acquisition is measured by the fair value of the assets transferred, the equity instruments issued and liabilities incurred or assumed on the acquisition date.

The identifiable assets acquired and the liabilities and contingent liabilities assumed in a business combination are measured at fair value on the acquisition date, regardless of the existence of non-controlling interests. The excess of the acquisition cost relative to the fair value of the Group’s share of the identifiable assets and liabilities acquired is recorded as goodwill (Note 3.1).

The acquisition cost is subsequently adjusted when the acquisition/attribution price is contingent upon the occurrence of specific events agreed with the seller/shareholder (e.g. fair value of acquired assets).

Any contingent payments to be transferred by the Group are recognised at fair value at the acquisition date. If the assumed obligation constitutes a financial liability, subsequent changes in fair value are recognised in profit or loss. If the assumed obligation constitutes an equity instrument, there is no change in the initial estimation.

If the acquisition cost is lower than the fair value of the net assets of the acquired subsidiary (negative goodwill or badwill), the difference is recognised directly in the income statement under Other operating income and gains (Note 2.2). Transaction costs are immediately recognised in the income statement.

When, at the date of acquisition of the control, the Group already holds a previously acquired interest, the fair value of such participation contributes to the determination of goodwill or badwill.

Initial measurement of non-controlling interests

When the control acquired is lower than 100%, in the application of the purchase method, non-controlling interests can be measured at fair value or at the ratio of the fair value of the assets and liabilities acquired, being that option defined according to each transaction.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 137

1ST HALF 2020

CONSOLIDATION

Subsidiaries are consolidated using the full consolidation method with effect from the date that control is transferred to the Group. In the acquisition of additional share capital of controlled entities, the excess between the proportion of acquired net assets and respective acquisition cost is directly recognised in Equity (Note 5.5).

Subsidiaries’ accounting policies have been changed whenever necessary so as to ensure consistency with the policies adopted by the Group.

Intercompany transactions, balances, unrealised gains on transactions and dividends distributed between Group companies are eliminated. Unrealised losses are also eliminated, except where the transaction displays evidence of impairment of a transferred asset.

SUBSEQUENT TRANSACTIONS OF SUBSIDIARIES

Disposals with loss of control

In the case of disposals of interests, resulting in a loss of control over a subsidiary, any remaining interest is revalued to the market value at the date of sale, and the gain or loss resulting from such revaluation, is recorded against income, as well as the gain or loss resulting from such disposal.

Transactions without loss of control

Subsequent transactions of disposal or acquisition of shares with non-controlling interests with no impact in control take place, no gain, loss or goodwill is determined, and the differences between the transaction cost and the book value of the share acquired are recognised in Equity. The negative profits generated in each period by subsidiaries with non-controlling interests are allocated to the percentage held by them, regardless of whether they assume a negative balance.

10.1.1. Semapa Group subsidiaries

HOLDING COMPANIES INCLUDED IN THE CONSOLIDATION

Direct and indirect % held by Semapa Company Head Office Direct Indirect 30/06/2020 31/12/2019 Parent Company: Semapa - Sociedade de Investimento e Gestão, SGPS, S.A. Lisbon Subsidiaries: Seinpar Investments, B.V. Amsterdam 100.00 - 100.00 100.00 Semapa Inversiones S.L. Madrid 100.00 - 100.00 100.00 Celcimo S.L. Madrid - 100.00 100.00 100.00 Semapa Next, S.A. Lisbon 100.00 - 100.00 100.00 Aphelion, S.A. Lisbon 100.00 - 100.00 100.00

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 138

1ST HALF 2020

CEMENT AND DERIVATIVES COMPANIES INCLUDED IN THE CONSOLIDATION

Direct and indirect % of equity % of equity effectively held by held by Secil Semapa

Company Head Office Direct Indirect Total 30/06/2020 31/12/2019 Parent Company: Secil - Companhia Geral de Cal e Cimento, S.A. Portugal 100.00 - 100.00 100.00 100.00 Subsidiaries: Betotrans II - Unipessoal, Lda. (Ex - Hewbol, S.G.P.S., Lda. Portugal 100.00 - 100.00 100.00 100.00 Betotrans - Transportes e Serviços, Lda. Portugal - - - - 100.00 Secil Cabo Verde Comércio e Serviços, Lda. Cape Verde 99.80 0.20 100.00 100.00 100.00 ICV - Inertes de Cabo Verde, Lda. Cape Verde 75.00 25.00 100.00 100.00 100.00 Florimar- Gestão e Participações, S.G.P.S., Lda. Portugal 100.00 - 100.00 100.00 100.00 Secil Cement, B.V. (ex Seciment Investments, B.V.) The Netherlands 100.00 - 100.00 100.00 100.00 Serife - Sociedade de Estudos e Realizações Industriais Portugal 100.00 - 100.00 100.00 100.00 Silonor, S.A. France 100.00 - 100.00 100.00 100.00 Société des Ciments de Gabés Tunisia 98.72 - 98.72 98.72 98.72 Sud- Béton- Société de Fabrication de Béton du Sud Tunisia - 98.72 98.72 98.72 98.72 Zarzis Béton Tunisia - 98.52 98.52 98.52 98.52 Secil Angola, SARL Angola 100.00 - 100.00 100.00 100.00 Secil - Companhia de Cimento do Lobito, S.A. Angola - 51.00 51.00 51.00 51.00 Unibetão - Indústrias de Betão Preparado, S.A. Portugal 100.00 - 100.00 100.00 100.00 Secil Britas, S.A. Portugal 100.00 - 100.00 100.00 100.00 Secil Martingança - Aglomerantes e Novos Materiais para Portugal 100.00 - 100.00 100.00 100.00 IRP - Industria de Rebocos de Portugal, S.A. Portugal - 75.00 75.00 75.00 75.00 Argibetão - Sociedade de Novos Produtos de Argila e Bet Portugal 99.53 - 99.53 99.53 99.53 Ciminpart - Investimentos e Participações, S.G.P.S., S.A. Portugal 100.00 - 100.00 100.00 100.00 ALLMA - Microalgas, Lda. Portugal - 70.00 70.00 70.00 70.00 Secil Brasil Participações, S.A. Brazil - 100.00 100.00 100.00 100.00 Supremo Cimentos, SA Brazil - 100.00 100.00 100.00 100.00 Margem - Companhia de Mineração, SA Brazil - 100.00 100.00 100.00 100.00 Secil Brands - Marketing, Publicidade, Gestão e DesenvoPortugal 100.00 - 100.00 100.00 100.00 CMP - Cimentos Maceira e Pataias, S.A. Portugal 100.00 - 100.00 100.00 100.00 Ciments de Sibline, S.A.L. Lebanon 28.64 22.41 51.05 51.05 51.05 Soime, S.A.L. Lebanon - 51.05 51.05 51.05 51.05 Cimentos Madeira, Lda. Portugal 57.14 42.86 100.00 100.00 100.00 Beto Madeira - Betões e Britas da Madeira, S.A. Portugal - 100.00 100.00 100.00 100.00 Brimade - Sociedade de Britas da Madeira, S.A. Portugal - 100.00 100.00 100.00 100.00 Madebritas - Sociedade de Britas da Madeira, Lda. Portugal - 51.00 51.00 51.00 51.00 SPB, SGPS, Lda. Portugal 100.00 - 100.00 100.00 100.00 Secil Prébetão, S.A. Portugal - 100.00 100.00 100.00 100.00 Cementos Secil, SLU Spain 100.00 - 100.00 100.00 100.00

ENVIRONMENT COMPANIES INCLUDED IN THE CONSOLIDATION

% of equity effectively held Direct and indirect % held in ETSA by Semapa

Company Head Office Direct Indirect Total 30/06/2020 31/12/2019 Parent Company: ETSA - Investimentos, SGPS, S.A. Loures 99.99 - 99.99 99.99 99.99 Subsidiaries: ETSA LOG,S.A. Loures 100.00 - 100.00 100.00 100.00 SEBOL – Comércio e Industria de Sebo, S.A. Loures 100.00 - 100.00 100.00 100.00 ITS – Indústria Transformadora de Subprodutos Animais, S.A. Coruche 100.00 - 100.00 100.00 100.00 ABAPOR – Comércio e Industria de Carnes, S.A. Coruche 100.00 - 100.00 100.00 100.00 BIOLOGICAL - Gestão de Resíduos Industriais, Lda. Loures 100.00 - 100.00 100.00 100.00 AISIB – Aprovechamiento Integral de Subprodutos Ibéricos, S.A. Spain 100.00 - 100.00 100.00 100.00

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 139

1ST HALF 2020

PULP AND PAPER COMPANIES INCLUDED IN THE CONSOLIDATION

Direct and indirect % of equity % of equity effectively held by held by Navigator Semapa

Company Head Office Direct Indirect Total 30/06/2020 31/12/2019 Parent Company: The Navigator Company, S.A. Portugal 36.00 33.97 69.97 69.97 69.97 Subsidiaries: Navigator Brands , S.A. Portugal 100.00 - 100.00 69.97 69.97 Navigator Parques Industriais, S.A. Portugal 100.00 - 100.00 69.97 69.97 Navigator Products & Tecnology, S.A. Portugal 100.00 - 100.00 69.97 69.97 Navigator Paper Figueira, S.A. Portugal 100.00 - 100.00 69.97 69.97 Empremédia RE , AC Ireland 100.00 - 100.00 69.97 69.97 Pulpchem Logistics, A.C.E. Portugal 50.00 - 50.00 34.99 34.99 Raiz - Instituto de Investigação da Floresta e Papel Portugal 75.00 22.00 97.00 67.87 67.87 Raiz Ventures , S.A. Portugal - 97.00 97.00 67.87 67.87 About the Future - Essential Oils, S.A. Portugal - 97.00 97.00 67.87 67.87 Enerpulp – Cogeração Energética de Pasta, S.A. Portugal 100.00 - 100.00 69.97 69.97 Navigator Pulp Figueira, S.A. Portugal 100.00 - 100.00 69.97 69.97 Ema Cacia - Engenharia e Manutenção Industrial, ACE Portugal - 92.20 92.20 64.51 64.51 Ema Setúbal - Engenharia e Manutenção Industrial, ACE Portugal - 90.20 90.20 63.11 63.11 Ema Figueira da Foz- Engenharia e Manutenção Industrial, ACE Portugal - 90.00 90.00 62.97 62.97 Navigator Pulp Setúbal, S.A. Portugal 100.00 - 100.00 69.97 69.97 Navigator Pulp Aveiro, S.A. Portugal 100.00 - 100.00 69.97 69.97 Navigator International GmbH Germany 100.00 - 100.00 69.97 69.97 Navigator Tissue Aveiro, S.A. Portugal 100.00 - 100.00 69.97 69.97 Navigator Tissue Ródão , S.A. Portugal - 100.00 100.00 69.97 69.97 Navigator Tissue Ibérica, S.A. Spain - 100.00 100.00 69.97 69.97 Portucel Moçambique - Sociedade de Desenvolvimento Florestal e Industrial, Lda Mozambique 90.02 - 90.02 62.99 62.99 Navigator Internacional Holding SGPS, S.A. Portugal 100.00 - 100.00 69.97 69.97 Navigator Financial Services Sp. Z o.o. Poland 25.00 75.00 100.00 69.97 69.97 Navigator Forest Portugal, S.A. Portugal 100.00 - 100.00 69.97 69.97 EucaliptusLand, S.A. Portugal - 100.00 100.00 69.97 69.97 Sociedade de Vinhos da Herdade de Espirra - Produção e Comercialização de Vin Portugal - 100.00 100.00 69.97 69.97 Gavião - Sociedade de Caça e Turismo, S.A. Portugal - 100.00 100.00 69.97 69.97 Afocelca - Agrupamento complementar de empresas para protecção contra incênPortugal - 64.80 64.80 45.34 45.34 Viveiros Aliança - Empresa Produtora de Plantas, S.A. Portugal - 100.00 100.00 69.97 69.97 Atlantic Forests, S.A. Portugal - 100.00 100.00 69.97 69.97 Bosques do Atlantico, SL Spain - 100.00 100.00 69.97 69.97 Navigator Africa, SRL Italy - 100.00 100.00 69.97 69.97 Navigator Paper Setúbal, S.A. Portugal 100.00 - 100.00 69.97 69.97 Navigator North America Inc. USA - 100.00 100.00 69.97 69.97 Navigator Paper World, S.A. Portugal - 100.00 100.00 69.97 69.97 Navigator Afrique du Nord Morocco - 100.00 100.00 69.97 69.97 Navigator España, S.A. Spain - 100.00 100.00 69.97 69.97 Navigator Netherlands, BV The Netherlands - 100.00 100.00 69.97 69.97 Navigator France, EURL France - 100.00 100.00 69.97 69.97 Navigator Paper Company UK, Ltd UK - 100.00 100.00 69.97 69.97 Navigator Italia, SRL Italy - 100.00 100.00 69.97 69.97 Navigator Deutschland, GmbH Germany - 100.00 100.00 69.97 69.97 Navigator Paper Austria, GmbH Austria - 100.00 100.00 69.97 69.97 Navigator Paper Poland SP Z o o Poland - 100.00 100.00 69.97 69.97 Navigator Eurasia Turkey - 100.00 100.00 69.97 69.97 Navigator Rus Company, LLC Russia - 100.00 100.00 69.97 69.97 Navigator Paper Mexico Mexico - 100.00 100.00 69.97 69.97 Navigator Middle East Trading DMCC Dubai - 100.00 100.00 69.97 69.97 Navigator Egypt, ELLC Egypt 1.00 99.00 100.00 69.97 69.97 Navigator Participações Holding ,SGPS, S.A. Portugal - 100.00 100.00 69.97 69.97 Empremédia - Corretores de Seguros, S.A. Portugal - 100.00 100.00 69.97 69.97 Navigator Abastecimento de Madeira, ACE Portugal 97.00 3.00 100.00 69.97 69.97

10.2. CHANGES IN THE CONSOLIDATION PERIMETER

During the six-month period ended 30 June 2020, the consolidation perimeter was changed against the previous period by the following corporate restructuring operations:

− Merger by incorporation of Navigator Paper World, S.A. into Navigator Paper Setubal, S.A. − Disposal of 50% of Allmicroalgae – Natural Products, S.A. becoming a jointly controlled entity − Merger by incorporation of Betotrans II into Betotrans.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 140

1ST HALF 2020

10.3. INVESTMENT IN ASSOCIATES AND JOINT-VENTURES

ACCOUNTING POLICIES

Associates are all the entities in which the group has significant influence but does not have control, generally applied in the case of investments representing between 20% and 50% of the voting rights. Joint ventures are agreements which provide the Group joint control (established contractually) and for which the Group holds an interest in net assets. Investments in associates are equity accounted.

When the Group’s share in the associate or joint-venture’s losses is equal to or exceeds its investment in the associate, the Group ceases to recognise additional losses, except where it has assumed liability or made payments on their behalf. Unrealised gains on transactions with associates are eliminated to the extent of the Group’s share in the associate. Unrealised losses are also eliminated, except if the transaction reveals evidence of impairment of a transferred asset.

30/06/2020 31/12/2019 Amounts in Euro % held Book value % held Book value Associates Setefrete, SGPS, S.A. 25.00% - 25.00% 3,413,276 MC - Materiaux de Construction 49.36% 1,561 49.36% 1,578 J.M.J. - Henriques, Lda. 50.00% 364,476 50.00% 364,476 Ave, S.A. 35.00% 94,394 35.00% 212,318 Joint ventures Utis - Ultimate Technology To Industrial Savings, Lda 50.00% 1,924,699 50.00% 1,462,638 Allmicroalgae - Natural Products, S.A. 50.00% 511,203 0.00% - 2,896,333 5,454,286

During the first half of 2020, the subsidiary Secil sold its 25% interest in Setefrete, SGPS, SA.

Movements in associates and joint ventures

Amounts in Euro 30/06/2020 31/12/2019 Opening balance 5,454,286 4,714,744 Changes in perimeter 1,637,320 - Disposals (4,340,856) - Appropriate net result 1,269,879 1,719,099 Dividends (1,124,280) (979,701) Exchange rate adjustment (16) 144 Closing balance 2,896,333 5,454,286

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 141

1ST HALF 2020

10.4. TRANSACTIONS WITH RELATED PARTIES

BALANCES WITH RELATED PARTIES

Receivables Payables and Interest- Receivables Payables and Interest- and other other current bearing and other other current bearing current assets liabilities Lease liabilities current assets liabilities Lease liabilities Amounts in Euro (Note 4.2) (Note 4.3) liabilities (Note 5.7) (Note 4.2) (Note 4.3) liabilities (Note 5.7) Shareholders (Note 5.2) Sodim, SGPS, S.A. 120 - - 6,886 - - - 1,913,507 Cimigest, SGPS, S.A. 2,390 - - - 2,390 - - - Cimo SGPS, S.A. - 1,507 - 170,080 - 1,160 - 7,487,014 Associates and joint ventures (Note 10.3) Grupo Setefrete - Soc. Tráfego Cargas, S.A. - - - - - 394,921 - - Ave-Gestão Ambiental, S.A. 85,468 389,048 - - 182,785 392,192 - - J.M.J. Henriques, Lda. 104,759 - - - 131,925 - - - Other related parties Sonagi - Imobiliária, S.A. (ex. Cimilonga, S.A.) - - - - 85,382 - - - Hotel Ritz, S.A. - - - - - 2,033 - - Sonagi, SGPS, S.A. - - - - - 17,062 33,745 - Refundos, SGFII, S.A. - - - - 93,430 74,664 - Cotif Sicar - 92,951 ------Enermontijo, S.A. ------Inertogrande 188,289 - - - 219,303 - - - Minority shareholder of Ciment de Sibline - - - - - 1,227,832 - - UTIS, Lda 20,446 8,645 - - 250,353 - - - Members of governing bodies 584 - - - 965 - - - Other shareholders of subsidiaries 213,229 2,427,547 - - - 29,969,682 - - 615,285 2,919,698 - 176,966 873,103 32,098,312 108,409 9,400,521

TRANSACTIONS WITH RELATED PARTIES

1S 2020 1S 2019 Sales and Other Sales and Other Purchase of services operating Net financial Purchase of services operating Net financial Amounts in Euro services rendered income results services rendered income results Shareholders (Note 5.2) Sodim, SGPS, S.A. - - - (505) - - - (99) Cimigest SGPS, S.A. (53,870) - - - (53,870) - - - Cimo SGPS, S.A. - - - (4,089) - - - (4,503) (53,870) - - (4,594) (53,870) - - (4,602) Associates and joint ventures (Note 10.3) Ave-Gestão Ambiental, S.A. (966,964) 22,697 100,275 - (1,164,101) 27,528 68,600 - Grupo Setefrete - Soc. Tráfego Cargas, S.A. - - - - (1,063,141) - - - (966,964) 22,697 100,275 - (2,227,242) 27,528 68,600 - Other related parties Sonagi - Imobiliária, S.A. (ex. Cimilonga, S.A.) (398,163) - - (665) (398,223) - - - Hotel Ritz, S.A. (12,029) - - - (12,225) - - - Refundos, SGFII, S.A. - - - - (330,667) - - - Soc. Agrícola Herdade dos Fidalgos, Lda. (3,564) ------Bestweb, Lda. (11,011) - - - (22,411) - - - CLA - Caldas, Lopes, Almeida & Associados (18,000) - - - (18,000) - - - UTIS, Lda. (32,152) - 66,500 - - - - - José António do Prado Fay (12,926) ------Letras Criativas, Unipessoal, Lda. (30,000) ------Other - 3,319 297,474 (168) (15,438) - - (167) (517,845) 3,319 363,974 (833) (796,966) - - (167) (1,538,679) 26,016 464,249 (5,427) (3,078,078) 27,528 68,600 (4,769)

The balances and transactions with Shareholders relate essentially to short-term treasury operations that bear interest at market rates.

In previous years, lease agreements were signed between Semapa and Sonagi - Imobiliária, S.A. (which also entered into a lease agreement with Navigator Paper Figueira, S.A.) relating to the lease of several office floors in the building which it owns and operates the headquarters of Semapa, SGPS, S.A., at Av. Fontes Pereira de Melo, No. 14, in Lisbon.

In connection with the identification of related parties, for the purposes of financial reporting, AVE, S.A. was also referred to as related party, because it is an associated Company of the subsidiary Secil, to which the Group acquires waste treatment services and alternative fuels.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 142 1ST HALF 2020

Other related party disclosures

In 2018 the Group, through its subsidiary Semapa Next, SA, entered into an agreement to perform an investment of USD 12 million in the "Alter Venture Partners Fund I", entity in which a member of the executive team is also a non-executive board member of Semapa.

The remuneration of the Company’s key management personnel is detailed in Note 7.2 – Remuneration of corporate bodies.

RISK MANAGEMENT

11.1. STRATEGIC RISKS

As an economic agent, Semapa is exposed to risks inherent to its activity, which can have a decisive impact on the value of its assets. The performance of Semapa as a holding company is also closely linked to the results of its subsidiaries.

Notwithstanding the objectives and levels of results defined, Semapa promotes autonomy and accountability among its subsidiaries. This combination of demand and autonomy is reflected in the exposure to a set of risks that impact not only each of its subsidiaries but can also spread to the Holding and other companies in the Group.

Regarding risk management, during 2019, Semapa undertook a restructuring of its risk management and control systems based on best practices and methodological references such as COSO, ISO 31000 and follow-up to the recommendations of the Code of Corporate Governance (Código de Governo das Sociedades) issued by the Instituto Português de Corporate Governance (IPCG) and the Portuguese Securities Market Commission (CMVM).

In this context, the risk-taking policy approved by Semapa’s Board of Directors defines qualitativity the level of risk that Semapa is willing to accept in order to achieve its business objectives and strategy. This policy is also aligned with the main material topics for Semapa, ensuring the consistency of the risk management and control system.

The governance model defined in terms of risk monitoring and management is adjusted to Semapa's structure, defining the main focuses and the allocation of responsibility for the different players in the risk management and control system. The Control and Risk Committee are responsible for controlling and monitoring risks through a system that makes it possible to promote, monitor and evaluate the risk framework and the existing and necessary measures for its mitigation.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 143

1ST HALF 2020

The risks considered strategic for the Group in this financial year were monitored as follows:

RISK DESCRIPTION/IMPACT RISK MANAGEMENT

PORTFOLIO Semapa's mission is to be a benchmark in Venture capital investment investment management in core sectors of the economy. Permanent analysis of investment opportunities in different companies and sectors Maintaining a diversified portfolio of financial investments is vital to mitigate the level of dependence on certain sectors or activities, which, in adverse context scenarios, may negatively Plan for monitoring the fundamental variables of impact the Group's operating and financial existing businesses performance. Ongoing monitoring of the level of indebtedness to ensure investment capacity

Promotion of the diversification of the subsidiaries’ activities

BUSINESS The Group is exposed to different markets that Implementation of measures to make companies operate in a competitive environment. more efficient than competitors Maintaining the consumption levels of the Group's products in markets where it operates and the Expansion of the business into markets with efficiency of the cost structure necessary for its greater support and growth potential production are a constant challenge and requires ongoing monitoring. Diversification of production and marketing of new by-products Changes in these components may result in a significant reduction in turnover and respective results generated, as well as negatively impact the operating and financial performance of the Group.

REPUTATIONAL The maintenance and continued strengthening of Development of own and joint communication the Group's reputation capital is essential to plans with its subsidiaries CAPITAL increase the general perception of the market and other stakeholders regarding its reputation Engagement with the communities in which the and to mitigate the risk of impact produced by subsidiaries are present potential negative events, both in its operating and financial performance and in the valuation of Strengthening of the positioning and its assets. commitment to environmental sustainability matters

Promotion of an organisational climate based on strong values and ethical principles

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INVESTMENT The objective of generating value through the Analysis by centralised team of the major DECISION- management, investment and divestiture of investment decisions of the Group and its MAKING interests in subsidiaries should be guaranteed by a subsidiaries strong and efficient investment management process, policy and government. Presence of a governance model with delegation of powers and definition of the investment A poor investment decision-making structure may decision-making process result in an inability to maximise the value of the existing portfolio and value creation.

TALENT Maintaining and strengthening an effective people Maintenance of a talent management area of the monitoring and management system is crucial to Group connected with its subsidiaries ensure proper implementation of the Group's strategy. Existence of attractive and competitive remuneration policies for key functions Limitations on the ability to retain people and strengthen knowledge and skills in critical areas Existence of human resource development and of the business may jeopardise differentiation talent management policy against competitors as well as condition the implementation and scope of the strategies set Identification and mapping of critical human for the Group. resources of the Group

Dissemination of the Group’s culture and values

LEGAL AND The Group is exposed to the entire Portuguese Monitoring of the activity and definition of a REGULATORY regulatory and legal framework to the extent that regulatory agenda by the subsidiaries FRAMEWORK IN a significant part of its industrial sites is located in Portuguese territory. PORTUGAL

Changes that may occur in the legal framework with the implementation of more restrictive measures of a fiscal, environmental, labour or economic nature may negatively impact the Group's operational and financial performance.

EXTERNAL SHOCK The Group operates in a global context, with Ongoing analysis and monitoring of the exports accounting for a significant weight in its macroeconomic context both at the level of the turnover. geographies where the Group operates and at global level The presence of significant or disruptive changes in the external environment, with serious adverse Contingency plans effects on markets (demand, prices), production factors (energy, chemicals and raw materials) or Insurance policies and contracts adequate to the people, may negatively impact the Group's operations of the subsidiaries operating and financial performance.

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FRAUD Due to its size, the Group interacts permanently Existence of good corporate governance with a wide range of entities and people, both practices external and internal, and is therefore exposed to situations or events that may negatively affect its Existence of a code of ethics, integrity and reputation and/or lead to failure to report or conduct losses in its financial position. Existence of internal audit departments at the level of subsidiaries

Existence of policies and manuals of procedures at the level of its subsidiaries

ACCESS TO RAW The Group is active in sectors where access to raw Permanent research and diversification of MATERIALS materials is a critical variable to maintain its geographies for the acquisition of raw materials business. Ongoing monitoring of own raw material The reduction of the raw material available in the reserves and stock levels domestic and international markets, its availability at prices that are economically impracticable given the cost structure, or restrictions to its access by regulatory or legal enforcement, may negatively impact the operational and financial performance of the Group.

CYBER SECURITY The Group's production processes depend on IT Allocation of responsibilities in the field of systems which are essential to the maintenance of security of information management systems its activity. Existence of cyber-security policies and Interruptions in IT systems, security breaches or strategies implemented in the subsidiaries events leading to the loss of data may negatively impact the Group's operations, expose Robust software available to support all confidential information and lead to operational, information that is handled by the Board of property and reputational damage. Directors

ENVIRONMENTAL The Group carries out its activity aware of its Existence of an engagement letter from the DISASTERS environmental responsibility and the principles of Group for a sustainable action sustainable development. Existence of regular audits of industrial sites and The Group's operations are carried out through testing to contingency plans industrial activities that are prone to events that may have an impact on the environment. Emergency, protection and action plans available in the event of accidents The likelihood of a serious environmental event occurring due to causes internal or external to its Appropriate insurance cover policies operations, may lead to significant losses from a financial, reputational, staff, operational and Existence of monitoring processes and environmental perspective. compliance with regulatory and environmental obligations

Maintenance plans available for factories, forest areas and quarries available

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11.2. OPERATIONAL RISKS

As a result of the Covid-19 pandemic, the Group's priority, particularly in the second quarter of 2020, was to respond to the challenge inherent in the pandemic. The mobilization of the various teams and the internal and external management of information was carried out in order to anticipate and manage the impact of the pandemic situation on the Group's activity, employees and business.

The Group is active in the pulp and paper, cement and derivatives and environmental sectors, which are subject to several risks that may have a significant effect on its activities, operating results, cash flows and financial position.

The operational risk factors analysed in this chapter can be structured as follows:

i. Risks relating to the pulp and paper segments ii. Risks relating to the cement and derivatives segment iii. Risks relating to the environment segment iv. Risks relating to the entire Group

RISKS RELATING TO THE PULP AND PAPER SEGMENTS

Risks associated with the forestry sector

As at 30 June 2020, the Navigator Group managed approximately 109 thousand hectares distributed in mainland Portugal, Azores and Galicia (Spain), in about 1,300 Management Units in 166 municipalities in Portugal, and 6 Management Units distributed in 9 municipalities in Galicia, Spain, in accordance with the principles expressed in its Forestry Policy. Eucalyptus and areas under ongoing afforestation with this sort of species occupy 74% of this area, namely the Eucalyptus globules species, deemed to have the perfect fibre for high-quality papers. For the remainder and in addition to conservation areas that account for about 11% of the total area under management, pine and cork oak forests are among the largest privately-owned national producers.

The Navigator Group was allocated with 246,000 hectares located in Mozambique, in the provinces of Manica and Zambezia, composed by 45 plots, made available under an Investment Agreement signed with the Mozambican Government, of which approximately 13.6 thousand hectares are planted. The agreement also provides for the construction of an industrial BEKP production unit meant to produce BEKP pulp and generation of electric energy in that country. In July 2018, the Mozambican Government and Portucel Mozambique signed a Memorandum of Understanding through which they agreed on a set of preceding requirements necessary for the progress of the investment, which will be developed in two phases. At first, a forestry base of approximately 40,000 hectares will be created, which will guarantee the supply of a unit (to be built) for the production of eucalyptus wood chips for export (approximately 1 million tons per year), in an estimated additional investment of USD 140 million.

Navigator and the Mozambican Government have been working under the terms of the MoU signed in 2018, namely on the theme of land and development, and have advanced with the first Forest Development programme in Mozambique, a government initiative with funding from the World Bank. The aim is to promote small- and medium-scale sustainable commercial forest plantations and the recovery of degraded areas, with about 550 ha having been installed in the 2019-2020 campaign. Portucel Mozambique played an active role in the construction of the Programme and has developed several supports such as the definition of the forestry

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model, the supply of clonal plants at subsidised prices and access to inputs. Later, at the time of harvest, Portucel Mozambique will have an option to purchase the wood.

In recent public statements, the Minister of Agriculture and Rural Development confirmed the strategic importance of the construction of the Port of Macuse for the country and Zambezia for the development of agriculture and commercial forestry.

The forest management of most of its forest assets located in Portugal and Spain is certified by FSC® (Forest Stewardship Council) and by PEFC (Programme for the Endorsement of Forest Certification schemes), recognition that the management of these areas is done in an environmentally, economically and socially responsible way that follows a strict and internationally recognised criteria.

The main risk factor threatening the eucalyptus forests lies in the low productivity of Portuguese forest and in the worldwide demand for certified products, considering that only a small proportion of the forests are certified. It is expected that this competitive pressure will remain in the future. As an example, at the end of 2019 the forestry area managed by the Navigator Group represented nearly 3% of Portugal’s total forested area, 39% of all certified Portuguese forests according with PEFC standards and 23% of all certified Portuguese forests according with FSC standards. However, this area has developed very positively, as a result, among others, of the effort to promote certified forest management in Portugal undertaken with greater intensity by the Company from 2016 onwards. The Company has been increasing the area of certified forest in Portugal between 2016 and 2019 both via FSC® (from 370,000 ha to 473,000 ha) and PEFC (from 260,000 ha to 278,000).

As mentioned, the Group initiated in 2016 a project aiming to promote forest certification in areas owned by private owners, seeking to guarantee that, by 2020, eucalyptus wood processed by the Group will be provided by partners with a certified activity. In 2019, 52% of wood from national sources, excluding self-sufficiency, already came from properties that had their forest management certified (2018: 42%). By 30 June 2020, this figure had risen to 60%.

Thus, the year 2020 witnessed the stabilisation of the turning trend started in 2019, when for the first time most of the wood delivered by national suppliers to our plants came from properties with certified forest management. It should also be noted that, within this initiative, the Group has seen a significant increase (to 70% of the total) in the number of wood supplier chain of custody certification, representing a step further on the development of a supplier’s portfolio with certificated management forest properties.

In addition, the Group is working to proactively promote good forest management practices to help improve the productivity of third-party forest areas. This effort, which has been developed through CELPA (Associação da Indústria Papeleira, representing the main industrial groups in the industry) with the Best Eucalyptus Program was reinforced in 2018 with additional supporting measures, in addition to the technical support already provided. In 2019, this line of work had the first campaign of the Limpa & Aduba program, under which the CELPA, at their own cost, fertilize the private plots that applied to this program, and clean their eucalyptus forest properties. This measure, empowering productivity, also allows the reduction of fire hazard by the reduction of the fire load in the lands, having been carried out in 6,300ha in 2019. In the first half of 2020, the Group will manage a 12,000ha area, and an additional programme, Replantar, is still under development, aimed at providing owners with direct financial support in replanting their eucalyptus forest plots.

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The main risks related with the industry are the ones related to the production capacity of the plantations, the risk of wildfires and plant health as well as the regulatory risk, given the entry into force on 1 January 2018, of Law No. 77/2017, of 17 August, which makes the first amendment to the legal regime applicable to afforestation and reforestation with the use of forest species (RJAAR), approved by Decree-Law No. 96/2013, dated 19 July.

The combination of all these factors, in recent years without any strategic measures of the State in the industry, has forced the import of raw material, a process conditioning the profitability of the industry.

The Navigator Group’s activity is exposed to risks related to forest fires, including:

− Destruction of current and future wood inventory, belonging to the Navigator Group as well as to third parties; − Increasing costs of forestry and subsequent land preparation for plantation.

In this respect, the manner the Group manages its woodlands is the front line for mitigating this risk.

Among the different management measures undertaken by the Group, the strict compliance with biodiversity rules, a proper planning of the forest facilities to be implemented and the construction and maintenance of roads and access roads to each of the areas under development are particularly relevant in mitigating the fire risk.

In addition, the Navigator Group has a share in the Afocelca grouping – an economic interest grouping between the Navigator Group and the ALTRI Group, whose mission is to provide assistance in the fight against forest fires at the grouped companies’ properties, in strict coordination and collaboration with the National Civil Protection Authority (Autoridade Nacional de Protecção Civil – ANEPC). This grouping manages an annual budget of about Euro 3 million, without public funds, and has created an efficient and flexible structure which implements practices aimed at reducing protection costs and minimizing the losses caused by forest fires to the ACE companies, which own and manage more than 200 thousand hectares of forests in Portugal.

The Group has also a research institute, RAIZ, whose activity is focused on 3 main areas: Applied Research, Consulting and Training. In the forestry research area, RAIZ seeks:

− To improve the productivity of eucalyptus forests; − To enhance the quality of the fibre produced from that wood; − To implement a sustained forestry management program from an economic, environmental and social perspectives; − To foster practices and processes aimed at reducing wood production costs.

Risks associated with the production and sale of BEKP pulp, UWF paper rand Tissue paper

Supply of raw materials

Self-supply of wood for BEKP pulp production is only about 15% of the Group's needs. For this reason, there is a regular need for the company to purchase wood on the domestic market (insufficient), using the Spanish market and non-European (outside the Iberian Peninsula) markets, mainly Brazil, Uruguay with an added cost to the domestic market.

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The supply of wood from international markets, namely eucalyptus, is subject to price variations mainly due to the exchange rate effect, which consequently has repercussions on the production cost of Navigator and BEKP pulp companies. In addition, the volatility of the logistic costs of transporting wood to the plants also has impacts essentially due to fuel prices used, the oil price, less scarcity of large ships without optimisation of returns and fluctuation of maritime freight.

The development of new forest plantations are subject to the authorisation of the relevant entities and to a policy of restrictions on area additions, which may limit the national production potential, notwithstanding the many initiatives to help forest producers, including support in wood certification to meet the commercial demand for certified products (paper and pulp), and increase the productivity of existing areas, for greater availability of raw material on the domestic market, the use of imports will always be an unavoidable need in the short, medium and long-term.

Due to insufficient quantities of domestic wood production, in particular certified wood, the Company is required to increase the amount of imported wood, either from Spain or from other more distant markets, in order to ensure unrestricted supplies to the plants over the next decade(s).

It should be noted that, since wood is one of the main costs of pulp production, any increase in the cost of m3 of eucalyptus wood consumed in the production of BEKP pulp always represents a negative impact on the company's operating results.

On 30 June 2020, a 10% decrease in the cost per m3 of eucalyptus wood consumed in BEKP pulp production would have had a negative impact in the Group’s operating results of approximately Euro 14,300,000 (30 June 2019): Euro 15,090,000).

For other raw materials, including chemicals, the main risk identified is the scarcity of products under the growing demand for these products in emerging markets, particularly in Asia and markets supplying them, which can create occasional imbalances of supply and demand.

In this regard, the Navigator Group, together with the Altri Group, established in 2018 a Complementary Grouping of Companies - Pulp Chem, ACE – intended for the joint acquisition of chemical products, benefiting from economies of scale and thus mitigating this risk.

The Group seeks to mitigate these risks through proactive sourcing, by identifying sources of supply geographically dispersed, whilst seeking to secure long-term supply contracts that ensure volume, price and quality levels consistent with its requirements.

As at 30 June 2020, a 10% increase in the price of chemical products would have represented a negative impact on the Group's operating results of approximately Euro 4,700,000 (30 June 2019: Euro 5,900,000).

Finally, another resource required for the production process is water. As water is a finite resource and given its relevance to the pulp and paper production process, the Group has taken on a special concern for its preservation and, over the last few years, investments have been made to reduce the use of this important resource. At the same time, as a result of investments in the implementation of BATs in the production processes and in improving the efficiency of its effluent treatment plants (WWTP), it was also possible to significantly improve the quality of the effluent returned to the receiving environment. Between 2005 and 2018 there was a reduction of more than 25% in the specific use of water (cubic metres used for the production of one tonne of product) and in the same period there was a reduction of more than 20% in the load emitted for the vast majority of the parameters monitored, which is reflected in the minimisation of the Group's environmental impact.

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Market price for UWF paper, BEKP pulp and Tissue paper

The increase in competition, caused by an imbalance of supply and demand in the BEKP pulp, UWF or Tissue paper markets may have a significant impact on prices and, as a consequence, in the Navigator Group’s performance. The market prices of BEKP pulp, UWF and Tissue paper are defined in the world global market in perfect competition and have a significant impact on the Group’s revenues and on its profitability. Cyclical fluctuations in BEKP pulp, Tissue paper and UWF Paper prices mainly arise from both changes in the world supply and demand and the financial situation of each of the international market players (producers, traders, distributors, clients, etc.), creating successive changes in equilibrium prices and raising the global market’s volatility.

The BEKP pulp and UWF paper markets are highly competitive. Significant variations in existing production capacities could have a strong influence on world market prices. These factors have encouraged the Group to follow a defined marketing and branding strategy and to invest in relevant capital expenditure to increase productivity and generate high-quality products. It should be noticed that currently the pulp used to produce Tissue paper was mainly acquired to third parties until the end of 2018.

On 30 June 2020, a 10% drop in the price per ton of BEKP pulp and of 5% in the price per ton of UWF paper and Tissue paper sold by the Navigator Group in the period, would have represented a negative impact on its operating results of approximately Euro 8,000,000 and Euro 26,900,000, respectively (30 June 2019): Euro 7,760,000 and Euro 33,830,000, respectively).

Demand of Group’s products

Notwithstanding the references below to the concentration of the portfolio of the Group’s customers, any decrease in demand for BEKP, UWF and tissue paper in the European and the United States markets could have a significant impact on the Group’s turnover. The demand for BEKP produced by the Group also depends on the evolution of the capacity for paper production in the world, since several of the Group’s major customers are themselves paper producers.

The demand for uncoated printing and writing paper has been historically related with macroeconomic factors (e.g., GDP growth, employment, particularly in white collar jobs, confidence indices), technological (e.g., penetration of information technology and hardware / software, and demographic (e.g., population, average level of education, age structure of society). The evolution of these factors drives the demand for paper positively or negatively, and in the recent past, the trend of paper consumption is negative in the more developed countries and positive or stable in the emerging / developing countries. Naturally, the performance of the Navigator Group also depends on the evolution of demand in the various markets in which it operates.

The withdrawal of the United Kingdom from the European Union (Brexit) may affect the Group's activity in this market. The potential effect of changes in import/export taxes or delays in the supply chain may have some impact on Group sales to this market. The withdrawal agreement and any new commercial agreement that may be established may also result in changes in the applicable tax laws.

Regarding the demand for eucalyptus market pulp, this is largely dependent on the production progress in the non-integrated producers of printing and writing paper, tissue and specialty papers. Chinese demand for this type of pulp represents more than 1/3 of the world's demand, making China one of the most breakthrough drivers of demand.

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Regarding Tissue segment, the key variables affecting the demand are:

− Expected future economic growth; − Population growth and other demographic changes; − Product penetration levels; − Developments in the quality of Tissue paper and product specifications; and − Substitution effects.

Tissue paper consumption is not very sensitive to cyclical economic changes, although it tends to grow faster with higher economic growth.

The importance of economic growth for the consumption of Tissue is more obvious in developing countries. When the level of the income per capita is very low, the consumption of Tissue tends to be low. There is a threshold after which consumption accelerates. Economic growth allows greater penetration of the product, which is one of the main drivers of demand for such paper in the population with lower incomes. Tissue paper is a product that does not face major threats of substitution by other materials, and there are no expected changes at this level.

Consumer preferences may have an impact on global paper demand or in certain particular types of paper, such as the demand for recycled products or products with certified virgin fibre.

Regarding this matter, and in the particular case of UWF and Tissue paper, the Navigator Group believes that the marketing strategy and branding that has been followed, combined with the significant investments made to improve productivity and produce high quality products, allow it to deliver its products in market segments that are less sensitive to variations in demand, resulting in a lower exposure to this risk.

Energy

The pulp and paper production process is dependent on the constant supply of electric and steam energy. The Group has several cogeneration units, which provide this supply, and redundancies have been planned between the various units in order to mitigate the risk of any unplanned shutdowns.

Part of the electricity production is sold to the supplier of last resort at regulated tariffs, based on a legal framework that lays down the special regime production from renewable resources and cogeneration. The remuneratory legal framework provides for a progressive tariff reduction over the applicable time period, implying that the central banks will tend to operate in a self-consumption regime. This fact can be proven by both the reduction shown in revenues associated with the electric power generation activity in recent years and by the reduction of electric energy and natural gas consumption.

As at 30 June 2020, a 10% worsening in the market price of electricity would have represented a negative impact on the Group's operating results of approximately Euro 4,500,000 (30 June 2019: Euro 5,100,000).

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Country risk - Portugal

The Navigator Group has a strong presence in Portugal. Its activity is based on assets whose main location is Portugal. Likewise, about 20% of its raw material comes from Portuguese forests.

The Group is the third largest exporter in Portugal and the largest generator of National Added Value, accounting for approximately 1% of national GDP, around 3% of national exports of goods, close to 6% of total containerised cargo exported by national ports.

Although open to the world, the strong dependence of its country of origin in terms of production factors exposes the Group to Portugal's risk index.

Country risk - Mozambique

Due to the investment in the Mozambican project, the Navigator Group is exposed to the specific risk in this country. This means that the planning of investments, in terms of timing, choice of suppliers / partners and geographic location is made considering this effect. The Group monitors the achievement of each step by reasonably assuming, that there will be no effects arising from that risk conditioning them.

At this moment, the Mozambique project is essentially a forestry project, with an option to develop an industrial project. At this moment, the Mozambique project is essentially a forestry project, with an option to develop an industrial project. The planned investment will be implemented in two phases, the first being a ship production (woodchip) project and a second phase the construction of a large-scale pulp mill. The Group is, however, prepared to move forward with the forestry plan foreseen, once the necessary conditions - most of which are under discussion with the Mozambican authorities - are met.

Until 30 June 2020, the expenditure with this project amounted to Euro 110,9 million (31 December 2019: Euro 106,4 million), mainly related to plantation, land preparation and forest maintenance, the social development programme, land management, environmental and social licensing and the construction of what is now one of Africa's largest forest nurseries.

Nevertheless, the Group's more conservative approach led to the record of several impairments against the investment in Mozambique. Moreover, a provision in the amount of Euro 13 million was also recorded in order to reflect the stage of development of the project.

Country risk - USA

The US market has a significant weight in the total turnover of UWF paper, increasing the exposure to the country’s specific risk.

This exposure requires a careful evaluation of the impacts resulting, for example, from changes in regulations and taxes, or even from their application and interpretation by governmental entities and tax authorities.

Concerning UWF paper imports, together with producers from other countries (Australia, Brazil, China and Indonesia), the Group has been subject to Anti-dumping measures imposed by the US Department of Commerce since 2015, and its products are subject to anti-dumping duties as defined by the United States Department of Commerce – see Note 4.2.

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Competition

Increased competition in the paper and pulp markets may have a significant impact in price and consequently, in the Group’s profitability.

The pulp and paper markets are highly competitive and therefore the entry into the market of new plants with an increase in available production capacity could have a major impact on world prices.

As paper and pulp markets are highly competitive, new capacities may have a relevant impact in prices worldwide.

BEKP producers from the southern hemisphere (namely from Brazil, Chile, Uruguay and Indonesia), with significantly lower production costs, have been gaining weight in the market, undermining the competitive position of European pulp producers.

These factors have forced the Group to make significant investments in order to keep production costs competitive and produce high-quality products as it is likely that this competitive pressure will remain strong in the future.

Other highlight is the divestment in the papermaker sector in the USA, with announcements by some UWF producers of closure/conversion of installed capacity to take place by 2020, in a clear attempt to adjust supply according to the negative evolution of demand. On the contrary, investments in new UWF capacity in the Middle East and in China and in the short and medium-term are expected.

The Group has been adjusting its commercial strategy to the evolution of regional consumption patterns. The Group has a significant presence in the US, accounting for about half of European producer sales to this market. The turnover intended to the European markets represented 59% (2019: 62%), achieving particularly strong market shares in Western European countries and relevant market shares in the other main European markets.

Concentration of customers’ portfolio

As at 30 June 2020, the Group’s 10 main BEKP customer groups accounted for 12% of the period’s production of BEKP pulp (2019: 18%) and 40% of external sales of BEKP pulp (2019: 64%). This asymmetry is a result of the strategy pursued by the Navigator Group, consisting of a growing integration of the BEKP pulp produced into the UWF paper produced and sold. Nevertheless, the Group believes there is little exposure to risks of customer concentration in the marketing of BEKP pulp.

In 2020, the Navigator Group made progress in reducing its dependence on its 10 largest UWF customer groups, which accounted for 42% of the group's sales volume (48% in 2019). When considering individual customers, the merger reduced to 22% of turnover (24% in 2019). The Navigator Group recorded 13 new customers with sales in 2020. Also, regarding UWF paper, the Group follows a strategy of mitigating the risk of concentration in its customer portfolio. The Group sells UWF papers to over 130 countries and territories and has over 1,000 individual customers, thereby allowing the risk of sales concentration to be spread over a small number of markets and/or customers.

Tissue sales amounted to Euro 70,3 million in the first half of 2020 (2019: Euro 65,3 million). Commercial activity is mainly focused on the Iberian Peninsula, which represents 68% of its sales, and the French and UK markets, which represent 25% of sales. Tissue’s top 10 customers represent about 53% of total sales (2019: 45%).

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The Group continues to expand its commercial activity in Tissue to the foreign market, namely by increasing Navigator's presence in Spain and the rest of Western Europe.

Environmental legislation

In recent years, EU environmental legislation has become more restrictive with regard to the control of environmental emissions. The companies of the Navigator Group comply with the prevailing legislation, in its various parameters (VLEs).

On September 2014, the Commission's implementing decision 2014/687/EU approved the BREF (Best Available Technologies Reference Documents) – Conclusions on Best Available Techniques of the Reference Paper – for the paper and pulp sectors containing the new limits and requirements for these sectors. The companies have four years to promote the required adjustments to its practices and equipment. Furthermore, the technical discussion on the Large Combustion Facilities Reference Document was finalized and published. This document has an impact on the Navigator Group’s equipment, particularly in boilers and combustion facilities, which will be covered by the new legislation, therefore requiring new investments, such as particle filters for biomass boilers.

As such, the Group has been following the technical development of this matter, trying to anticipate and plan the necessary improvements to their equipment so to comply with the limits to be published. There is a possibility that the Group may need to perform additional investments in this area in order to comply with any changes in limits and environmental regulations which may be approved.

To date, the legislative changes that are known relate to the evolution of the Scheme for Greenhouse Gas Emission allowance trading of CO2 emission rights (CELE), established by Directive 2003/87/CE, and amended by Directive 2009/29/CE, which outlines the legal framework of the CELE for the period 2013-2020 and which was transposed into the national law by Decree-Law 38/2013 of 15 March.

EU Directive 2018/410 of 14 March was aldo adopted, amending Directive 2003/87/EC to increase the cost- effectiveness of emission reductions and investment in low-carbon technologies. EU 2018/410 Directive sets out, among other things, the new CELE period to be in force between 2021-2030, which will show a reduction in the amount of CO2 emission allowances allocated free of charge.

This development will bring increased costs for the transformation industry in general and in particular for the paper and pulp industry, without any compensation for the CO2 that, annually, is absorbed by the forests of this industry.

In order to mitigate the impact of this change, the Group has long undertaken a series of environmental investments that, among other advantages, have allowed the continuous reduction of CO2 emissions, despite the fact that, in recent years, there has been a steady increase in production volumes. In addition, the group has a Carbon Neutral Company Program that aims to implement, by 2035, changes in its production processes in order to minimize the use of fossil fuels and consequently reduce their CO2 emissions.

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In 2015, an environmental strategic plan was analysed and established, aiming to adapt Navigator Group to a set of new and future requirements in the environmental area, namely to the reference document for the sector (Conclusions on Best Available Techniques of the Reference Document for the sector - BREF. Commission Implementing Decision 2014/687/EU) and for Large Combustion Facilities. The reference documents correspond to the implementation of Directive 2010/75/EU on industrial emissions. Projects are underway to implement the appropriate technological changes, as well as a new version of the Environmental Master Plan, which incorporates new environmental challenges that have arisen in the meantime.

The Environmental Strategic Plan aimed for areas other than the environmental covered by this document. It was possible to confirm that Navigator Group is broadly in compliance with this future referential and to identify some areas for improvement as well as technological solutions such as atmosphere emissions from biomass boilers.

On the other hand, under the terms set in Decree-Law 147/2008, dated 29 June that transposed directive 2004/35/CE to the national law, the Navigator Group secured the environmental insurances demanded by that law, thus guaranteeing compliance and reducing exposure to environmental risks.

Risks associated with the production of energy

Energy is an activity of growing importance in the Group allowing the use of endogenous renewable resource which is the biomass generated in the BEKP production. The energy generation assets also allow the Group’s wood suppliers to generate additional income from the sale of biomass and contributing to the reduction of the risk of fires in the country.

As a way of boosting the use of forest residual biomass made available by the forestry sector, two biomass thermoelectric plants to produce renewable electric energy were built by the Group in 2009 and are fully operational.

The Group has played a pioneering role and has been developing a market for the sale of biomass for supplying its renewable cogeneration power stations and biomass power plants. The fostering of this market in a phase prior to the start-up of the new power-generating units has enabled it to secure a sustained raw-material supply network.

The incentives in place in Portugal only consider the use of residual forest biomass, rather than the use of wood to produce electrical power.

In addition, there are the following legal provisions:

− Decree-Law 68-A/2015 of 30 April, establishing provisions on energy efficiency and cogeneration and amending Decree-Law 23/2010 and Order 140/2012, revised by Order 325-A/2012, applicable to the Special Regime Production in cogeneration;

− For units powered through residual forestry biomass (CTB), dedicated to the production of electricity, the legal framework is provided by Decree-Law 33-A/2005, revised by Decree-Law 225/2007, that extends from 15 to 25 years the guaranteed tariffs under the PRE (Special Regime Production). For these assets, the legal framework thus supports a tariff framework that is expected to be stable over the coming years.

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− More recently, Decree-Law 120/2019 of 22 August created a special and extraordinary regime for the installation and operation of new biomass recovery plants, located near forest areas considered critical in terms of fire risk.

As a result of the measures taken under the Financial Adjustment Program to which Portugal was subject, the entire remuneration system of the national electricity sector was revised, being the major impact in the electricity produced from cogeneration, recognised as an energy efficiency measure already which represents one of the most efficient forms of energy production.

The Group represents a significant part of the energy produced in Portugal. The units owned and operated by the Group under the Cogeneration regime, supported by a review of the electric energy sales prices, over a period that began temporarily in 2012 and which will end progressively between 2025 - 2030.

The progressive tariff reduction associated with the sale of electricity in special regime, affects the economic sustainability of the sale to the electricity grid, therefore after the applicable legal periods, the cogenerations tended to operate on a self-consumption basis, i.e. directly supplying the units which has already occurred at the natural gas cogeneration plant at Figueira da Foz since February 2016.

The constant search for optimisation of production costs and efficiency of generating units and the analysis of new projects for the production of energy from renewable sources are the ways in which the Group seeks to mitigate this risk. In this respect, the Group is currently completing the construction of a new biomass boiler at the Figueira da Foz industrial site, is evaluating the development of a new biomass recovery plant under Decree- Law No. 120/2019 and has implemented several solar photovoltaic projects on a self-consumption basis.

RISKS RELATING TO THE CEMENT AND DERIVATIVES SEGMENT

Supply of raw materials

Regarding the segment of Cement and derivatives, the main raw materials in the manufacturing process of cement are limestone and clay or marl, the extraction of which is carried out in its own quarries, located within the factory, with reserves that ensure the Group sustained operation in the coming years.

Sale price

Since the Cement and Derivatives segment operates in geographically different markets, the prices charged depend essentially on the economic climate and competition in each country.

Demand of Group’s products

The segment of Cement and derivatives’ turnover is dependent on the level of activity in the building sector in each one of the geographic markets in which it operates. The construction sector tends to be cyclical, in particular in mature economies, and depends on the level of residential and commercial building, as well as on the level of investments in infrastructures.

The construction sector is sensitive to factors such as interest rates and therefore a downturn in economic activity in any specific economy may lead to a recession in this industry.

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Despite the Group considering that its geographical diversification is the best means to stabilise earnings, its business, financial situation and operating profit can be negatively affected by a downswing in the construction sector, in any of the significant markets in which it operates.

Competition

The companies of the segment of Cement and derivatives develop its activity in a strong competitive environment. In the Portuguese market, and in the current context, which has led to a strong decline in the sector, any excess capacity of national operators together with imports, may affect the performance of this segment.

The same applies in Brazil, a country under recession and currently with excess installed capacity that has negatively impacted prices. In Tunisia, oversupply has also pushed down prices.

Energy costs

A significant part of Secil Group’s costs is dependent on energy costs. Energy is a cost factor with a substantial weight on the business carried on by Secil and its subsidiaries. The Group performs hedges, to a certain degree, against the energy price risk through the usage of alternative fuels at its factories and long-term electric power supply contracts for certain of its energy requirements. However, significant fluctuations in electricity and fuel costs can have a negative impact on the Group’s business, financial situation and operating profit.

Country Risk – Brazil, Tunisia, Lebanon and Angola

Secil is exposed to the country risk of Brazil, Tunisia, Lebanon and Angola, where the Group holds investments in production units.

Lebanon’s case requires deeper analysis given the severity of its current economic, political and social situation. The existing crisis has given rise to strong social upheavals that have focused on the alleged corruption of its government members and have been leveraged by the influx of Syrian migrants, high unemployment and the cost of living. These upheavals led to the fall of the government in October 2019. On the economic side, performance continued to deteriorate in late 2019 and early 2020.

More recently, the country has taken important steps to stabilise its situation, notably the appointment of a new prime minister, the approval of the state budget by parliament and the principle of agreement with the IMF to obtain technical (rather than financial) support to study and help implement a package of structural economic reforms that hold down inflation and restore confidence and stability to the financing, trade and payments systems.

As a result of the context presented above, the main risks identified by the World Economic Forum for the country are unemployment, the country's lack of governance, fiscal crises and breakdown or crisis of the state.

Environmental legislation

In recent years, EU environmental legislation has become more restrictive with regard to the control of environmental emissions. It is an integral part of the Integrated Policy of the Secil Group, the strict compliance with the legal requirements on the Environment that apply to it, as well as the continuous improvement of its performance.

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In 2013, the BREF (Best Available Technologies Reference Documents) — Conclusions on Best Available Techniques of the Reference Document — for the cement, lime and magnesium oxide sectors containing, the new limits and requirements for these sectors was approved, with companies being limited to four years, regarding the promotion of the necessary adaptations to their practices and equipment. Such requirements were set out in the Environmental Licenses that regulate the activity of quarrying and cement production.

As such, the Secil Group has been following the technical development of this matter, seeking to anticipate and plan the necessary improvements in its equipment to make them comply with the limits to be published, thus allowing the Group to make additional investments in this area if needed, in order to comply with any changes in the limits and environmental rules that may be approved.

To date, the known legislative changes are also related to the evolution of the European Greenhouse Gas Emission Trading Scheme, established by Directive 2003/87/EC, as amended by Directive 2009/29/EC (new CELE Directive). This scheme presents the legal framework of the CELE for the period 2013-2020 and was transposed into the national legal order by Decree-Law 38/2013 of 15 March, which resulted in reducing the scope of free allocation of CO2 emission allowances. The revision of this latter directive has been under discussion at the European Community level to frame the post-2020 period, i.e. the period from 2021 to 2030.

EU Directive 2018/410 of 14 March was also adopted, amending Directive 2003/87/EC to increase the cost- effectiveness of emission reductions and investment in low-carbon technologies. EU 2018/410 Directive sets out, among other things, the new CELE period to be in force between 2021-2030, which will show a reduction in the amount of CO2 emission allowances allocated free of charge.

This evolution will bring new challenges for the cement industry. In order to mitigate the effects resulting from successive revisions of this legislation, the Group has long undertaken a series of environmental investments that, among other advantages, have allowed the continuous reduction of CO2 emissions, with emphasis on the investment in equipment that enables energy valorisation of alternative fuels, cements with less clinker incorporation, and the investment in equipment of lower energy consumption.

Existing technologies are not expected to reduce emissions to ensure current production capacities through free emissions, undermining the competitiveness of clinker and cement exports. Several research projects are under way to capture, store and reuse CO2, none of which has been confirmed to be economically feasible, despite the existence of solutions that will be introduced for new types of cement. We believe that the solutions will only be implemented in 2020 after the disclosure of the CO2 allowances that will be granted to the installations for the period between 2021 and 2030. In Portugal, a collaborative laboratory will be created between companies, universities and research centres, with the objective of ensuring the development of lines of research to reduce CO2 emissions.

Aware that the exploitation of quarries has significant impacts on the landscape, alteration of relief, removal of soil and vegetation cover and reduction of refuges/food for fauna. The Group assumes the minimisation of these impacts and acceleration of the process of natural colonisation, not only through programs to recover the composition and structure of the plant and animal communities, but also the recovery of the functions and natural processes of the ecosystem.

On the other hand, complying with Decree-Law No. 147/2008 of 29 June, which transposed Directive 2004/35/EC into national legislation, the Group ensured the environmental insurance required by that legislation, ensuring compliance with the regulations in force, and mitigating the environmental risks to which it is exposed.

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RISKS RELATING TO THE ENVIRONMENT SEGMENT

Supply of raw materials

The supply of raw materials for the segment of Environment, developed by the subgroup ETSA, is conditioned by the availability of animal carcasses and waste from the food industry, particularly in slaughterhouses. This market is relatively vulnerable to the deterioration of the economic situation, as well as changes in consumption habits and ease of substitution between food products, which could limit the activity of this subgroup.

Sale price

Given its nature, ETSA’s business is exposed to volatility in prices of soft commodities on international markets (cereals and cereal products), since these are substitute products to those transacted by ETSA.

The correlation between ETSA’s selling prices and movements in prices of soft commodities on international markets is an additional risk factor for the activity.

Demand of Group’s products

A decrease in demand or diminished level of activity in animal feed industry, agriculture exploitations, pet food and biodiesel may have a significant impact on group ETSA’s turnover.

Competition

ETSA Group develops its activity in a market where it competes with other companies operating in the collection and recovery of animal by-products and other companies that produce substitutes for these products such as industries related to the production of cereals and edible oils. In this framework, any increase or decrease in competition will be reflected in the levels of profitability of the Group.

Other risks

ITS subsidiary has a service contract with the Portuguese State regarding SIRCA, which in the year of 2017 represented approximately 22.5% of the consolidated turnover of the ETSA Group. This contract has a limited term and its continuity depends not only on competitive factors, since it is promoted by public tender, but also on regulatory factors, since its existence and regime depend on strategic options of the Portuguese State.

RISKS RELATING TO THE ENTIRE GROUP

Technological replacement

The Group's industrial units are subject to risks of technological as well as those inherent to any industrial economic activity, such as accidents, breakdowns or natural catastrophes that may lead to losses in the Group's assets or temporary shutdown in the production process.

Likewise, these risks may affect the Group's main customers and suppliers, which would have a significant impact on profitability levels if it were not possible to find other customers in order to guarantee sales levels or suppliers that would make it possible to maintain the same cost structure.

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Legal risks

It should be noted that legal risks result mainly from tax and regulatory risks which are covered by the analysis of risks of an operational nature, and specific risks of overall responsibility or risks associated with the negotiation and conclusion of contractual arrangements.

These risks are controlled by legal advisory measures which are in place either at Semapa's level as a shareholding or at its subsidiaries’ level, and by outsourcing external lawyers whenever the specificity of the matter, its value or other specific factors so recommend.

12. EXPLANATION ADDED FOR TRANSLATION

These financial statements are a free translation of the financial statements originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.

BOARD OF DIRECTORS

CHAIRMAN:

HEINZ-PETER ELSTRODT

MEMBERS:

JOÃO NUNO DE SOTTOMAYOR PINTO DE CASTELLO BRANCO

VÍTOR PAULO PARANHOS PEREIRA

RICARDO MIGUEL DOS SANTOS PACHECO PIRES

ANTÓNIO PEDRO DE CARVALHO VIANA BAPTISTA

CARLOS EDUARDO COELHO ALVES

FILIPA MENDES DE ALMEIDA DE QUEIROZ PEREIRA

FRANCISCO JOSÉ MELO E CASTRO GUEDES

JOSÉ ANTÔNIO DO PRADO FAY

LUA MÓNICA MENDES DE ALMEIDA DE QUEIROZ PEREIRA

MAFALDA MENDES DE ALMEIDA DE QUEIROZ PEREIRA

VÍTOR MANUEL GALVÃO ROCHA NOVAIS GONÇALVES

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PART 5

LIMITED REVIEW REPORT ON THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. Edifício FPM41 - Avenida Fontes Pereira de Melo, 41 – 15º 1069-006 Lisboa - Portugal +351 210 110 000 | www.kpmg.pt

LIMITED REVIEW REPORT ON INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(This report is a free translation to English from the original Portuguese version. In case of doubt or misinterpretation the Portuguese version will prevail.)

Introduction We have performed a limited review of the accompanying interim consolidated financial statements of Semapa – Sociedade de Investimento e Gestão, S.G.P.S., S.A. (the Group), which comprise the interim consolidated statement of financial position as of 30 June 2020 (that presents a total of Euro 4,361,605,754 and total equity attributable to the shareholders of Euro 931,866,528, including a consolidated net profit attributable to the shareholders of 30,286,796), the interim consolidated statements of income, comprehensive income, changes in equity and cash flows for the six month period then ended, and the accompanying explanatory notes to these interim consolidated financial statements. Management’s responsibilities Management is responsible for the preparation of this interim consolidated financial statements in accordance with IAS 34 – Interim Financial Reporting as adopted by the European Union, and for the implementation and maintenance of an appropriate internal control system to enable the preparation of interim consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibilities Our responsibility is to express a conclusion on the accompanying interim consolidated financial statements. Our work was performed in accordance with the international standards on review engagements and further technical and ethical standards and guidelines issued by the Portuguese Institute of Statutory Auditors (“Ordem dos Revisores Oficiais de Contas”). These standards require that we conduct the review in order to conclude whether anything has come to our attention that causes us to believe that the interim consolidated financial statements are not prepared in all material respects in accordance with the IAS 34 – Interim Financial Reporting as adopted by the European Union. A limited review of interim consolidated financial statements is a limited assurance engagement. The procedures that we have performed consist mainly of making inquiries and applying analytical procedures and subsequent assessment of the evidence obtained. The procedures performed in a limited review are substantially less that those performed in an audit conducted in accordance with International Standards on Auditing (ISA). Accordingly, we do not express an audit opinion on these interim consolidated financial statements.

KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of Capital Social: 3.916.000 Euros - Pessoa Colectiva Nº PT 502 161 078 - independent member firms affiliated with KPMG International Cooperative Inscrito na O.R.O.C. Nº 189 - Inscrito na C.M.V.M. Nº 20161489 (“KPMG International”), a Swiss entity. Matriculada na Conservatória do registo Comercial de Lisboa sob o Nº PT 502 161 078

Conclusion Based on the work performed, nothing has come to our attention that causes us to believe that the accompanying interim consolidated financial statements of Semapa – Sociedade de Investimento e Gestão, S.G.P.S., S.A. on 30 June 2020, are not prepared, in all material respects, in accordance with the IAS 34 – Interim Financial Reporting as adopted by the European Union.

29 September 2020

SIGNED IN THE ORIGINAL

KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. (registered at CMVM under the nr. 20161489 and at OROC under the nr. 189) represented by Paulo Alexandre Martins Quintas Paixão (ROC n.º 1427)

2

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