Our Dividend Policy was recently remodeled with the objective of providing more transparency and predictability in the flow of dividend payments to shareholders, defining careful parameters that preserve the Company’s strategic and financial guidelines in the medium and long term, namely:
- Limits for Financial Leverage Index = Net Debt/EBITDA (“Leverage”);
- Maintenance of Available Cash Flow (“ACF” or “FDC”), with ACF being the cash generated by operating activities, less investments made (“CAPEX”) in the period (ACF = Operating Cash – CAPEX);
- Increase in distribution frequency from 1 event to at least 2 annual payment events.
Thus, considering the level of indebtedness, operating cash generation and the realized CAPEX, proposals for regular dividends will be calculated according to the criteria below:
In order to preserve the ability to make sustainable investments, the amounts calculated above, except for the mandatory dividend, will always be limited by the ACF. Additionally, the company will try not to exceed the 2.7x leverage.
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The table below shows more details about the history of the company’s dividends.
|Fiscal Year||Corporate Action||Distribute
|Preferred A||Preferred B
1 In advance
* Value declared at the 209th Ordinary Meeting of the Board of Directors, on December 09, 2020, and the position of shares with rights does not include the stock split in the proportion of 1 to 10, as per the Notice to Shareholders disclosed on 03/11/2021.
DIV – Dividend
IOC – Interest on Own Capital
We are required to hold an annual shareholders’ meeting by April 30th of each year at which, among other things, an annual dividend may be declared by decision of the shareholders on the recommendation of the management, as approved by the Board of Directors. The payment of annual dividends is based on the financial statements prepared for the fiscal year ending December 31st. Under Brazilian law, we must pay dividends within sixty days following the date of the shareholders meeting that declared the dividends to shareholders of record on such shareholders’ meeting. A shareholders’ resolution may set forth another date of payment, which must occur prior to the end of the fiscal year in which such dividend was declared. We are not required to adjust the amount of paid-in capital for inflation for the period from the end of the last fiscal year to the date of declaration or to adjust the amount of the dividend for inflation for the period from the end of the relevant fiscal year to the payment date.
Consequently, the amount, in real terms, of dividends paid to holders of Class B Shares may be substantially reduced due to inflation. According to our Bylaws, our management may declare interim dividends to be paid from profits in our semi-annual financial statements approved by our shareholders. Any payment of interim dividends may be set off against the amount of mandatory distributions relating to the net profit earned in the year in which the interim dividends were paid.
Pursuant to Brazilian law, we may pay interest on equity in lieu of dividends as an alternative form of making distributions to shareholders. We may treat a payment of interest on equity as a deductible expense for tax purposes, provided that it does not exceed the lesser of:
- the total amount resulting from (1) TJLP multiplied by (2) the total shareholders’ equity (determined in accordance with the Brazilian Corporation Law), less certain deductions prescribed by the Brazilian Corporation Law; and
- the greater of (1) 50.0% of current net income (after the deduction of social contribution on profits (CSLL) and before taking such distributions and any deductions for corporate income tax) for the year in respect of which the payment is made or (2) 50.0% of retained earnings and profit reserves for the year prior to the year in respect of which the payment is made. Shareholders who are not residents of Brazil must register with the Central Bank in order for dividends, sales proceeds or other amounts with respect to their shares to be eligible to be remitted in foreign currency outside of Brazil. The Class B Shares underlying the ADSs are held in Brazil by the Custodian, as agent for the Depositary, which is the registered owner of our shares.
Payments of cash dividends and distributions, if any, will be made in Brazilian currency to the Custodian on behalf of the Depositary, which will then convert such proceeds into U.S. dollars and will cause such U.S. dollars to be delivered to the Depositary for distribution to holders of ADRs. In the event that the Custodian is unable to convert immediately the Brazilian currency received as dividends into U.S. dollars, the amount of U.S. dollars payable to holders of ADRs may be adversely affected by devaluations of the Brazilian currency that occur before such dividends are converted and remitted.
Dividends with respect to a fiscal year are payable from (1) retained earnings from prior periods and (2) after-tax income for such period (reduced by losses carried forward from prior fiscal years) following the addition or subtraction of amounts allocated to legal and other reserves (as described below) (“Adjusted Net Profit”).
In accordance with Brazilian Corporation Law, we must maintain a legal reserve, to which we must allocate a minimum 5.0% of our net profits for each fiscal year until such reserve reaches an amount equal to 20.0% of our capital stock (calculated in accordance with the Brazilian Corporation Law).
However, we are not required to make any allocations to our legal reserve in a fiscal year in which the legal reserve, when added to our other established capital reserves, exceeds 30.0% of our total capital. At December 31, 2006, our legal reserve was R$ 268.3 million, or approximately 7% of our capital stock at that date.
In addition to deducting amounts for the legal reserve, under the Brazilian Corporation Law net profit may also be adjusted by deducting amounts allocated to two other reserves. One is a contingency reserve against future losses. The other is an unrealized profits reserve for specified categories of earnings that are currently required to be recognized, but that will be realized in subsequent periods. On the other hand, net profits may also be adjusted by reversing any amounts in any contingency reserve accounts that have been deposited in previous years and any amounts included in the unrealized profits reserve that have been realized in the relevant fiscal year and have not been used to offset losses. These reserves may only be established if they are proposed by the Board of Directors or management at a shareholders’ meeting and a resolution creating such reserves is adopted at that shareholders’ meeting.
The amounts available for distribution are determined on the basis of the Statutory Financial Statements prepared using the method required by the Brazilian Corporation Law, which differ from financial statements, such as the Consolidated Financial Statements included herein.
A Shares and Class B Shares
According to our Bylaws, Class A Shares and Class B Shares are entitled to receive annual, noncumulative minimum dividends, which dividend per share shall be at least 10.0% higher than the dividends per share paid to the Common Shares. Class A Shares have a dividend priority over the Class B Shares, and Class B Shares have a dividend priority over the Common Shares. To the extent funds are available therefore, dividends are to be paid in the following order:
- first, the holders of Class A Shares have the right to receive a minimum dividend equal to 10.0% of the total share capital represented by the Class A Shares outstanding as at the end of the fiscal year in respect of which the dividends have been declared;
- second, to the extent there are additional amounts to be distributed after all amounts allocated to the Class A Shares have been paid, the holders of Class B Shares have the right to receive a minimum dividend per share equal to (1) the Mandatory Dividend divided by (2) the total number represented by Class B Shares outstanding as at the end of the fiscal year in respect of which the dividends have been declared; and ·
- third, to the extent that there are additional amounts to be distributed after all amounts allocated to the Class A Shares and the Class B Shares have been paid, the holders of Common Shares have the right to receive an amount per share equal to (1) the Mandatory Dividend divided by (2) the total number of Common Shares outstanding as at the end of the fiscal year in respect of which dividends have been declared, provided that the Class A Shares and Class B Shares receive dividends per share at least 10.0% higher than the dividends per share paid to the Common Shares.
To the extent that there are additional amounts to be distributed after all amounts described in the preceding items have been paid and in the form therein described, any such additional amount will be divided equally among all our shareholders.
The General Shareholders Meeting is the forum in which shareholders have the power to decide on all matters related to the Company’s purpose and to take measures deemed appropriate for its defense and development.
Held in the first quarter of each year, the Annual General Meeting has some specific responsibilities set out in Article No. 132 of Federal Law 6,404 / 76, the Brazilian Corporate Law.
In addition to the Annual Meeting, shareholders can meet possibly where they deem necessary, at any time, at Extraordinary General Meetings.
Of all General Meetings are record in the book, which, upon proper registration in the the Board of Trade of the State of Paraná are published as required by Federal Law 6,404 / 76, the Brazilian Corporate Law.