REPORT AND ACCOUNTS 2017 WorldReginfo - d81ff46f-9d7a-4f8a-bbf4-6db946f0b0a2 REPORT AND ACCOUNTS 2017 REPORT AND ACCOUNTS 2017 PART 1 MANAGEMENT REPORT……………………………….…..….....3 PART 2 CORPORATE GOVERNANCE REPORT…………………….......48 PART 3 NON‐FINANCIAL STATEMENTS ‐ SUSTAINABILITY INFORMATION...……………………………………..…………115 PART 4 CONSOLIDATED FINANCIAL STATEMENTS………..............143 PART 5 STATUTORY AUDITOR CERTIFICATE AND REPORT OF THE AUDIT BOARD ON THE CONSOLIDATED ACCOUNTS……………............................................................268 PART 6 INDIVIDUAL FINANCIAL STATEMENTS……….....................282 PART 7 STATUTORY AUDITOR CERTIFICATE AND REPORT OF THE AUDIT BOARD ON THE SEPARATE ACCOUNTS……….……344 SEMAPA – SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A. SOCIEDADE ABERTA AV. FONTES PEREIRA DE MELO, NO.14, 10TH FLOOR, 1050‐121 LISBON COMPANY’S REGISTRY AND CORPORATE PERSON NO.: 502 593 130 SHARE CAPITAL: € 81,270,000 WorldReginfo - d81ff46f-9d7a-4f8a-bbf4-6db946f0b0a2 REPORT AND ACCOUNTS 2017 PART 1 MANAGEMENT REPORT MANAGEMENT REPORT 3 OF 353 WorldReginfo - d81ff46f-9d7a-4f8a-bbf4-6db946f0b0a2 REPORT AND ACCOUNTS 2017 CONTENTS 1 ECONOMIC BACKGROUND .................................................................................................................................................. 6 2 OVERVIEW OF SEMAPA GROUP OPERATIONS ................................................................................................................... 7 3 PAPER AND PAPER PULP BUSINESS AREA ..................................................................................................................... 12 3.1 LEADING BUSINESS INDICATORS .............................................................................................................. 12 3.2 LEADING OPERATING INDICATORS ........................................................................................................... 12 3.3 OVERVIEW OF THE PAPER AND PAPER PULP BUSINESS AREA ........................................................................ 13 3.4 BUSINESS REVIEW ................................................................................................................................. 15 3.4.1 PULP .................................................................................................................................................. 15 3.4.2 PAPER ................................................................................................................................................. 15 3.4.3 TISSUE ................................................................................................................................................ 16 3.5 DEVELOPMENT ..................................................................................................................................... 17 3.6 RESOURCES AND SUPPORTING FUNCTIONS ................................................................................................ 18 3.6.1 SUSTAINABILITY .................................................................................................................................... 18 3.6.2 FORESTRY AND TIMBER SUPPLY ............................................................................................................... 19 3.6.3 ENERGY .............................................................................................................................................. 20 3.6.4 ENVIRONMENT ..................................................................................................................................... 21 3.6.5 INNOVATION, RESEARCH AND DEVELOPMENT ............................................................................................ 21 4 CEMENT AND OTHER BUILDING MATERIALS ................................................................................................................. 22 4.1 LEADING BUSINESS INDICATORS .............................................................................................................. 22 4.2 LEADING OPERATING INDICATORS ........................................................................................................... 23 4.3 OVERVIEW OF OPERATIONS OF CEMENT AND OTHER CONSTRUCTION MATERIALS ........................................... 23 4.4 BUSINESS REVIEW ................................................................................................................................. 24 4.4.1 PORTUGAL ........................................................................................................................................... 24 4.4.2 LEBANON ............................................................................................................................................ 27 4.4.3 TUNISIA .............................................................................................................................................. 28 4.4.4 BRAZIL ................................................................................................................................................ 30 4.4.5 ANGOLA .............................................................................................................................................. 32 4.5 RESOURCES AND SUPPORTING FUNCTIONS ................................................................................................ 33 4.5.1 SUSTAINABILITY AND ENVIRONMENT ........................................................................................................ 33 5 ENVIRONMENT BUSINESS AREA ..................................................................................................................................... 34 5.1 LEADING BUSINESS INDICATORS .............................................................................................................. 34 5.2 LEADING OPERATING INDICATORS ........................................................................................................... 34 5.3 OVERVIEW OF THE ENVIRONMENT BUSINESS AREA..................................................................................... 35 5.4 RESOURCES AND SUPPORTING FUNCTIONS ................................................................................................ 35 5.4.1 SUSTAINABILITY AND ENVIRONMENT ........................................................................................................ 35 5.4.2 INNOVATION, RESEARCH AND DEVELOPMENT ............................................................................................ 35 6 SEMAPA GROUP HUMAN RESOURCES ............................................................................................................................ 36 7 SOCIAL RESPONSIBILITY IN THE SEMAPA GROUP .......................................................................................................... 37 8 SEMAPA GROUP – FINANCIAL AREA ............................................................................................................................... 38 8.1 INDEBTEDNESS ..................................................................................................................................... 38 8.2 FINANCIAL RESULTS ............................................................................................................................... 39 8.3 RISK MANAGEMENT .............................................................................................................................. 39 8.4 LISTED SHARE PRICE .............................................................................................................................. 39 MANAGEMENT REPORT 4 OF 353 WorldReginfo - d81ff46f-9d7a-4f8a-bbf4-6db946f0b0a2 REPORT AND ACCOUNTS 2017 8.5 DIVIDENDS .......................................................................................................................................... 41 8.6 NET INCOME ........................................................................................................................................ 41 9 SUBSEQUENT EVENTS ..................................................................................................................................................... 42 10 OUTLOOK ........................................................................................................................................................................ 43 11 ACKNOWLEDGEMENTS ................................................................................................................................................... 45 12 PROPOSED ALLOCATION OF PROFITS ............................................................................................................................ 46 MANAGEMENT REPORT 5 OF 353 WorldReginfo - d81ff46f-9d7a-4f8a-bbf4-6db946f0b0a2 REPORT AND ACCOUNTS 2017 1 ECONOMIC BACKGROUND The IMF estimates that in 2017 the world economy grew 3.7% vs. 3.2% in 2016, (World Economic Outlook, IMF, January 2018), one of the highest figures since 2010. Over the course of the year, growth forecasts were reviewed upwards systematically and across the regions. The role of the central banks in the economic recovery was relevant, by injecting liquidity into the financial markets, assuming accommodative monetary policies through non‐conventional monetary measures. The European economy was estimated to grow 2.4% in 2017, well above the 1.8% recorded in 2016 (World Economic Outlook, January 2018). The United Kingdom was the great exception, as a result of the fears and uncertainty generated by the United Kingdom's decision to exit