2018 Annual report Interactive content Use the index as the navigation menu. About this report From anywhere in the report, click the heading to return to the index. In the GRI Summary navigate to the content by clicking on the pages indicated in the “pages and/or links” The online report is available at column. votorantim.com/annualreport By clicking on an external link, the indicated site will open automatically in your browser. For the eighth consecutive year, ● Votorantim Cimentos the United Nations Sustainable investment holding company ● Nexa Resources Development Goals (SDGs). Votorantim S.A. (Votorantim) ● Companhia Brasileira de 102-50 | 102-52 | 102-54 publishes its Annual Report for Alumínio (CBA) PwC limitedly assured this stakeholders, showcasing its ● Votorantim Energia report, which does not contain operating model, initiatives, ● Acerías Paz del Río changes to scope and limitation. advances, challenges, and ● Acerbrag The online and complete version social, environmental and ● Citrosuco of this document is available operating performance, as well ● Banco Votorantim on a microsite, and includes as consolidated economic and The practices and results the Consolidated Financial financial results as audited by presented herein reflect only Statements and GRI Content PwC. This report also addresses part of the results reported by Index. Comments about this Votorantim’s influence on its each investee; for further details, report can be forwarded to investees. please read their respective [email protected]. Economic and financial Annual Reports. 102-45 | 102-56 102-48 | 102-49 | 102-51 | 102-53 | information, and the social, 102-55 This document refers to fiscal environmental and operating year 2018, except for Citrosuco, performance reported herein whose data is relative to the consolidate the results of season beginning July 2017 and the following investees in ending June 2018. This report Votorantim’s portfolio: adopts the Global Reporting Initiative (GRI) Standards, Core option. It has also been prepared based on guidance by the International Integrated Reporting Council (IIRC), and on VOTORANTIM 2018 ANNUAL REPORT 1 Materiality Materiality 102-21 | 102-32 | 102-40 | 102-42 | 102-43 | 102-46 is the process used to identify the material themes for the company to report on. Materiality assessment is a 1 2 3 process to identify relevant Analysis of internal documents Comprehensive interviews with Analysis of data and information Four topics were identified as Materiality was approved by topics that substantively of different departments and of the following: collected from documents and material for Votorantim and Votorantim’s Executive Board, influence the assessments and the investees. ● Votorantim executives. interviews. investees: Strategy and results, and the identified topics provide decisions of stakeholders, so ● Members of sustainability Environment, Governance, and the basis for this report’s Given the diversity of the these are included and discussed and governance teams of the Social issues, in addition to content and the GRI indicators business portfolio, the topics in further detail in the Annual investees. specific topics. 102-47 | 102-44 reported on. were structured as follows: Report. Revision of material ● Finance and sustainability topics was conducted in 2018 specialists. (a) material for both Votorantim and investees, and (b) specifically by an external advisor in three Governance ● Scholar specialists. material for each business in the stages: ● Local and international Ethics and compliance portfolio. market investors. Tailings dams Energy use Best corporate governance practices and tailings dams Corporate risk management Strategy Energy use New investments and results Material for Long-term vision Votorantim and investees Specifically material Capital allocation Energy use Financial performance Social issues Health and safety Land use Environment Community relations Biodiversity and pesticides and deforestation Climate change Innovation Water resources and customer relations 2 VOTORANTIM 2018 ANNUAL REPORT VOTORANTIM 2018 ANNUAL REPORT 3 2018 Highlights 102-10 Celebration of Development of Net revenue of Net income of 100 years of history innovation projects R$31.9 billion, R$2.0 billion, at the Center of Excellence (CoE) up 19% year-on-year up 141% year-on-year Economic & People Social uestes Economic & People Social uestes Corporate financial management environmental Corporatesociais financial management environmental sociais issues issues Incorporation of long Acquisition steel operations in Brazil by of Companhia ArcelorMittal Energética Adjusted EBITDA of Leverage of de São Paulo R$6.9 billion, 1.91x (Cesp) up 47% year-on-year net debt/adjusted EBITDA Business combination of Fibria and Suzano Votorantim Partnership for Education (PVE) expanded to 104 Brazilian cities, over twice as many as Reinforcement of the in the previous year Internship Program Reservas Votorantim Legado das Águas’ started operating the project for the Statutory Nature Reserve genetic mapping Compensation business of Atlantic Forest plants Economic & People Social uestes Economic & People Social uestes Corporate financial management environmental sociaisCorporate financial management environmental sociais issues issues For the first time, the company Vototalks Festival offered Legado Verdes do “Voter's Guide” was included in the Best 20 online lectures, Cerrado’s launch: Workplaces survey conducted by which together attained nearly Agroforestry 184,000 app Great Place to Work 10,000 views project downloads 4 VOTORANTIM 2018 ANNUAL REPORT VOTORANTIM 2018 ANNUAL REPORT 5 Contents 1 About this report 23 INNOVATION AND 45 PEOPLE 69 PORTFOLIO TECHNOLOGY 2 Materiality 46 Human and Organizational 70 Portfolio transformation 24 Established innovation ecosystem Development (DHO) 4 2018 Highlights 71 Real estate investments 25 Center of Excellence (CoE) 47 Attractiveness, engagement and 8 Message from the Board of Directors communication 72 Votorantim Cimentos 10 Message from the Executive Board 74 Nexa 49 Development 29 CORPORATE GOVERNANCE 76 CBA AND RISK MANAGEMENT 50 Votorantim Academy 13 PROFILE 78 Votorantim Energia 30 Governance model 52 Remuneration and benefits 14 The investment holding company 80 Long Steel: Acerbrag and Acerías Paz del Río 34 Compliance Program 15 Votorantim DNA 82 Citrosuco 37 Risk management 55 SOCIAL DEVELOPMENT 16 Strategy and management 84 Banco Votorantim 56 Social commitment 17 Votorantim’s identity 39 ENVIRONMENTAL 57 Votorantim Institute 86 Assurance Report 18 Portfolio DEVELOPMENT 20 Recognition 40 Environmental conservation 63 ECONOMIC AND 88 GRI DISCLOSURES 21 Centennial year 41 Management of environmental assets FINANCIAL PERFORMANCE 43 Innovation in biodiversity 64 Investor Relations 106 GRI Summary 65 2018 Results 122 CONSOLIDATED FINANCIAL STATEMENTS 286 Credits 6 VOTORANTIM 2018 ANNUAL REPORT VOTORANTIM 2018 ANNUAL REPORT 7 MESSAGE MESSAGE Message Message from the Board of Directors 102-14 Left to right: Marcelo Medeiros, Luis Ermírio de Moraes, Cláudio Ermírio de Moraes, Raul Calfat, José Roberto Ermírio de Moraes, Pedro Wongtschowski, and Oscar Bernardes. 2018 was a very special After four consecutive years of When it comes to the Capital allocation decisions were The way we are, and how In Brazil, we are about to see an year for us at Votorantim. downturn in the Brazilian cement transformation of our portfolio, made in a turbulent scenario of we operate and manage our agenda of important reforms In addition to celebrating our industry, Votorantim Cimentos we focused on reducing our uncertainty in Brazil. We operate investees—based on the for the country, focusing on 100th anniversary, which is reported positive operating exposure to cyclical commodities, in capital intensive industries, values of the family controlling government debt sustainability, uncommon for a company not results. Our investees Nexa, and increased our exposure to and make long-term investment shareholder—are also key consistent economic growth, only in Brazil but globally, we CBA and Citrosuco benefited sectors that have a more stable decisions. to the businesses, which are and job creation. In this scenario, made important changes to our from the increase in average cash generation. Examples of ethically conducted and rely Votorantim has started 2019 Our corporate governance— portfolio. At the same time, our commodity prices, combined changes in our portfolio were the on compliance processes with its companies adjusted in which is in line with listed investees’ performance led us to with the appreciation of the business combination of Fibria and internal controls. We are terms of capital structure, which companies in terms report more robust consolidated dollar against the Brazilian and Suzano, and the acquisition committed to adhering to our will enable it to focus even more of transparency, risk results than in the previous real. Better selling prices for of Companhia Energética de principles while continually on value creation. management, and stakeholder year—net revenue rose 19% to long steel in Argentina and São Paulo (Cesp), company that evolving our governance— communication—also contributes Raul Calfat R$31.9 billion, adjusted EBTIDA Colombia contributed to the owns three hydroelectric power necessary in an ever-changing to our business model. We Chairman of the Board of went up by 47% to R$6.9 billion, results of this business. In plants—the primary plant is Porto business environment.