Votorantim Celulose net income decreased by 24% in 1Q 2005

Apr 18, 2005. /Lesprom Network/. Votorantim Celulose E Papel S.A. (NYSE:VCP) (BOVESPA: VCPA4) (VCP), one of the largest pulp & paper producers in Latin America, announced its earnings for the first quarter 2005 (1Q05). The operational and financial information in this release, unless otherwise indicated, is presented in consolidated numbers and in U.S. dollars in accordance with U.S. GAAP. All comparisons provided in this Release refer to the first quarter of 2004 (1Q04), unless otherwise indicated.

Mr. Valdir Roque, VCP's Finance and Investor Relations Director, commented, "During the first quarter of 2005, global pulp markets continued to perform as expected within the recovery process, with more discipline seen on the part of producers, with Chinese and European buyers maintaining their purchases in order to replenish inventories. This permitted VCP to announce additional increases in international eucalyptus pulp prices in January, March and April. The local economic situation continued to show signs of sustainable growth even during this challenging period, with increasing interest rates, declining exchange rates, inflationary pressures, increasing taxes and fiercer competition in the local paper market. The current macroeconomic situation leads us to expect an upward trend for the domestic paper market, although at more moderate rates than those presented in 2004, and more concentrated during the second half of the year.

"In spite of the challenging domestic environment when compared to the previous quarter, VCP improved the EBITDA margin from 37% to 38%, resulting from the efforts made to increase efficiency on production and control costs, despite the seasonal effect of lower sales volumes during the first quarter of each year. This performance resulted in net income of US$ 61 million for the quarter.

"Under this scenario, VCP reported net revenue of US$ 251 million for the quarter, up 2% when compared to 1Q04. This growth would be even higher had it not been negatively impacted by the increased PIS/COFINS tax rate on domestic sales, as well as lower export volumes. EBITDA in 1Q05 of US$ 96 million was 9% lower than in 1Q04, pressured by the drop in export volumes -- 11% lower -- the negative impact of a lower exchange rate in costs denominated in Reais, as well as higher prices of inputs, particularly of chemical inputs, which were impacted by increased oil prices.

"On March 31, we concluded the acquisition, jointly with Suzano Papel e Celulose S.A., of the capital stock of Ripasa S/A Celulose e Papel, held by the controlling shareholders, which will promote further growth and operational synergies for VCP."

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