Traceability services were the Mint’s primary sources of revenue in fiscal 2015 and 2016, accounting for total revenue of R$ 3.35 billion in the period

Gross revenue remained largely level in the period, with especially positive revenue from tracking services for the Federal Tax Authority’s Beverage Production Control System (SICOBE) and Production Tracking Control System (SCORPIOS). Due to the Central-Bank’s budget restrictions, these services accounted for more than 75% of total sales in 2015 and 2016.

Changes in revenue [GRI G4-9]

Revenue breakdown comparing 2014/2015/2016

Source: Annual Financial Statements

Cost of products and services [GRI G4-9]

Experts are working to upgrade banknote production capacity without the need for new machinery acquisitions

Brazilian banknotes and coins

Material sourcing and quality issues prevented the Mint from fully meeting its program projections for 2015. The initial Production and Sales Program projected estimated sales of 1.05 billion banknotes and 600.3 million coins to the Brazilian Central Bank in 2016, well within our plants’ annual production capacity. In October 2016, the Mint hired expert printing machinery engineers to assess banknote production line productivity and the condition of plant equipment. Based on this assessment, studies have been initiated toward upgrading production capacity without the need to invest in new machinery.

Banknote and coinage production in 2016

Passports

Passport demand remained relatively stable in 2015 and 2016 at 2.3 million units, confirming a trend continuing from early in the decade. With the start of production of passports with a 10 year validity period, a significant reduction in demand is expected from 2020, when regular five-year passports are expected to all have been replaced with new passports.

Passports sold in 2016

Tracking stamps

Stamp production volumes for the SICOBE (beverage) and SCORPIOS (cigarette) systems were lower than originally estimated.

Revenue from cigarette stamps has decreased since 2012, reflecting a global decline in the consumption of tobacco products due to their adverse health effects. Government efforts to curb smoking also played a role, including laws prohibiting smoking in public places, educational campaigns and higher taxes on the tobacco industry.

Product volumes supplied to the SICOBE have remained stable since 2010, after increasing significantly from 2009 to 2011. The increase was largely due to a change in the tax enforcement methods adopted by the Federal Tax Authority.

In October 2016, the Federal Tax Authority published a resolution releasing industrial beverage bottlers from the requirement to use the SICOBE system. The resolution negatively impacted our revenues. The Mint is developing an alternative approach to be submitted to the Tax Authority and implemented within 2017.

Number of products invoiced in 2016

Innovation Projects

The organization of our innovation and product development programs has changed following a reorganization in 2015. As part of these changes, the Security Print and Passport Department (SPPD) and the Information Technology and Communications Department (ITCD) were both involved in a project to develop a new chip for Brazilian passports with fully homegrown technology, led by Centro Nacional de Tecnologia Avançada S.A. (CEITEC).

Created in July 2015, the Stamp Development and Technology Department (SDTD) has focused on enhancing versatility and developing new applications for revenue stamps. The department has initiated a process to vertically integrate automation and information technology processes (TI) previously handled by third-party service providers. A separation of the production processes will also help expand the Mint’s technology provider base.

The production team responsible for producing Brazil’s new 10-year passports

Investment in equipment

R$ 18.3 million was invested in new equipment and R$ 11.2 million in repairs and upgrades in 2015 and 2016. Projects included the initial phase of construction of a new vacuum furnace for the thermal treatment of coinage dies, new letterpress printers for individual banknote replacement, and new pad printing machines for color printing of numismatic coins.

Historical investment in technology Total invested (R$ million)

The Mint invested a total of R$ 49.3 million in manufacturing plant technology from 2014 to 2016

Statement of added value G4-EC1

Gross revenue from new additions to our solutions portfolio has increased substantially in recent years, with particularly strong revenues from our track and trace revenue stamp lines for cigarette and cold beverage products. A rising revenue trend ended in 2014 largely due to shrinking demand from the Brazilian Central Bank. However, revenues improved in 2015 on the back of higher services demand.

In 2014 and 2015, employee profit-sharing bonuses were 9.0% of net income for each year. In those same years, dividend payments to the Federal Government were 38.2% of net income for each year, less legal reserves.

Corporate income tax incentives under the Rouanet Act and the Worker's Nutrition Program are not used by the Mint due to an income tax credit balance accrued as a result of the exclusion from our tax base of 98% of revenues derived from monopoly products. [G4-EC4]

Economic value generated by the Mint – historical series

Source: Statement of Added Value