Companhia Brasileira de Alumínio : Dados Econômico-Financeiros

EARNINGS

RELEASE

4Q21 Earnings Release

São Paulo, March 15, 2022 - Companhia Brasileira de Alumínio, "CBA" or "Company" (B3: CBAV3) hereby announces its results for the fourth quarter of 2021 (4Q21). The Company's consolidated financial statements are presented in Reais (R$), in accordance with IFRS (International Financial Reporting Standards) - and the accounting practices adopted in Brazil. Totals may differ due to rounding of numbers.

Key events in 4Q21

Average aluminum price on the LME (London Metal Exchange) of USD

2,762/tonne (+44% vs. 4Q20)

Aluminum sales volume of 122 thousand tonnes (+3% vs 4Q20)

Net revenue of R$ 2.4 billion (+54% vs. 4Q20)

Net revenue from aluminum sales of R$ 2.3 billion (+60% vs. 4Q20)

Net income of R$ 615 million (vs. loss of R$ 498 million in 4Q20)

Adjusted EBITDA of R$ 501 million (+198% vs. 4Q20)

Adjusted EBITDA margin of 21% (+10 p.p. vs. 4Q20)

Leverage of 1.08x (1.89x in 3Q21)

Foreign exchange and LME

	Mar/20	Jun/20	Sep/20	Dec/20	Mar/21	Jun/21	Sep/21	Dec/21
Closing	5.20	5.48	5.64	5.20	5.70	5.00	5.44	5.58
USD/BRL rate
Closing LME	1,489	1,602	1,737	1,978	2,213	2,523	2,851	2,806
USD
	1Q20	2Q20	3Q20	4Q20	1Q21	2Q21	3Q21	4Q21
Average	4.47	5.39	5.38	5.39	5.48	5.29	5.23	5.59
USD/BRL rate
Average LME	1,690	1,497	1,704	1,916	2,096	2,400	2,648	2,762
USD

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4Q21 was a quarter of historic results for CBA, achieving net revenue of R$ 2.4 billion, net income of R$ 615 million and adjusted EBITDA of R$ 501 million, records in this quarter.

The energy crisis in Europe and China continued taking its toll on the aluminum market, resulting in higher energy prices and capacity cuts in these two regions, which led to a meaningful increase in the LME aluminum prices (London Metal Exchange) in 4Q21, which peaked at their highest level in the last 13 years, USD 3,180/t in October 2021, closing the quarter at an LME average aluminum price of USD 2,762/t.

The water crisis in Brazil had a smaller impact on CBA's results. Improved streamflow levels from the second half of September and the recovery of reservoir levels over 4Q21 owing to higher than average rainfall led power prices to fall significantly over the course of 4Q21.

In November 2021 the Company announced it had acquired 80% of the share capital of Alux do Brasil, to reinforce CBA's position in the recycling market, fostering the circular economy and helping produce aluminum with an ever-smaller carbon footprint. This transaction was concluded in January 2022.

In November 2021 CBA also inaugurated a Sidewell furnace at Metalex, increasing the billet production capacity from 75 thousand to 90 thousand tonnes/year, in what is the first stage of a total investment of R$ 115 million comprising the strategy announced in the IPO of expanding CBA's recycled aluminum production.

In December 2021 CBA made a green debentures issuance for a total of R$ 230 million. The funds raised will be allocated to projects to improve the environmental performance of the Company's production structure.

In addition, in December 2021 the Company redeemed USD 50 million in outstanding bonds to reduce maturity concentration in 2024 and optimize our debt profile, closing the quarter with a leverage of 1.08x, which reinforces CBA's financial discipline.

4Q21 Earnings Release

Market Performance

Aluminum | Global Market Overview

In 4Q21 the energy crisis in Europe and China continued being the main factor impacting the aluminum market, resulting in higher energy prices and capacity cuts in these two regions. In China, in addition to the crisis triggered by droughts and shortages of coal to fuel thermal power plants, the electricity consumption control policy imposed by the government was a factor that drew the attention of markets as it placed energy-intensive industries like aluminum firmly in the spotlight.

According to the consultancy firm CRU, the industry's costs (CRU Business Cost) rose by 14% on the previous quarter and 52% compared to 4Q20, influenced not only by power prices but also alumina prices, where these two raw materials jointly accounted for roughly 70% of the average cash cost for primary aluminum in the industry. The alumina price (CRU Alumina Price Index), in turn, rose from USD 325/t in 3Q21 to USD 416/t in 4Q21, an increase of 28%. Comparing to 4Q20, the increase was 48%.

The global demand for primary aluminum rose by 1.7% in 4Q21 compared with the same period last year. However, when compared with 3Q21 there was a decrease of -0.6%, which indicates stability in metal demand, reflecting a consolidation of economic activity following a period of growth.

The firm demand for aluminum and lower supply led to a worsening deficit in the global market, rising from -108kt in 4Q20 to -229kt in 4Q21. Inventories continued on a downward trend, closing the year at 52 days of consumption, one of the lowest on record.

A tightening physical market, logistics costs and sharp rises in power prices in Europe led to higher regional premiums in the USA the Midwest Duty Unpaid premium rose 269%, from USD 101/t in 4Q20 to USD 372/t in 4Q21. In Europe the Rotterdam Duty Unpaid premium gained 145%, hitting USD 258/t in 4Q21.

Unsurprisingly, the LME aluminum price gained considerable momentum in 4Q21, averaging USD 2,762/t, 44% more than the average of USD 1,916/t in 4Q20. In October the LME aluminum price hit USD 3,180/t, the highest figure in the last 13 years.

4Q21 Earnings Release

Aluminum | Brazilian Market Overview

In 4Q21 aluminum demand (excluding cans) eased off slightly, but remained extremely healthy. In the period, exchange devaluation and higher LME aluminum prices boosted the industry's profits.

For most of the year, the aluminum demand in the consumer goods and self-construction segments was driven by government income transfer policies and behavioral changes due to the pandemic. Following the end of emergency benefits and resumption of activities, aluminum consumption in the segments dipped modestly in 4Q21. However, other sectors maintained favorable growth in the period such as transportation, propelled by truck production (for e-commerce, mining and agribusiness) and buses production, a segment which experienced a recovery due to the returning of trips following the vaccine roll-out. The packaging segment (excluding cans) enjoyed stable consumption on the previous quarter, with the flexible packaging subsegment leading the pack, recording substantial growth in the period.

In 4Q21, aluminum imports rose in multiple primary and downstream products, reflecting strong domestic growth. Over the year producers in the chain sought to replenish their inventory, which had dropped to critical levels in early 2021. This led to a relatively buoyant supply in 4Q21, which ultimately kept increases in national premiums in check, which did not rise as much as international premiums. DDP SE (Platts), for example, rose from USD 344/t in 3Q21 to USD 408/t in 4Q21, an increase of 19%. The premium increase in relation to 4Q20 was 23%.

Energy | Overview of Brazil's Electricity Sector

In 2021 Brazil's energy sector was negatively impacted by a water crisis. The volume of rainfall between September 2020 and August 2021 was the lowest in the last 91 years affecting reservoir storage levels and the reliability of the National Grid.

In the second half of September, streamflow levels began to improve. In 4Q21 reservoir levels recovered rapidly on the back of higher-than-recent-average rainfall and continued dispatching of thermal power plants out of merit order.

Southeast and Midwest reservoirs closed the year at 26% of their capacity, higher than 19% and 20% in respectively 2020 and 2019. However, continued out-of-merit-order dispatching led to higher systems security fees (ESS), ultimately borne by consumers.

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