Scenario

The Brazilian GNP and industrial production rose by some 3% in 2006, the same rate seen in the chemicals-for- industrial-use segment, in which the Company operates.

Exports and imports of chemicals grew by 21% and 13%, respectively, with a negative balance of trade – US$ 8.4 billion.

The international annual average prices of oil (US% 66/barrel) and naphta (US$ 560/t) increased by 18% in 2006, having oscillated at this high level between peaks of US$ 75/barrel and US$ 658/t and lows of US$ 62/barrel and 475/t. Used as a reference for local prices by the petrochemical industry, these prices made the industry´s operating margins fall leading it to a poor performance.

Operations

The total 468 thousand tonnes shipped in 2006 represent a 2% increase influenced by the good exports performance. The shipment of organic products was 16% higher, despite the stoppage at the alcohols plants for early replacement of catalyzers in the 1st semester. Nevertheless, the shipment of inorganic products fell by 9%, due to the regular biannual stoppage for maintenance of the sulphuric acid plant, in the 1st semester.

Exports in 2006 – 53 thousand tonnes – more than doubled in relation to the previous year, the 2nd semester being worth mentioning, with a 79% increase over the 1st semester. Also worth noting is the fact that we export to 29 countries in which we compete with international petrochemical industries.

The following figures and graphics show the evolution of the expeditions, the growth of the exportations, the diversification and consequently the dilution of risk due to the multiplicity of markets reached by the company.

In thousand tonnes	2005	1st S 06	2nd S 06	2006	Var. 06/05
Total Shipments	459	209	259	468	2%
Organic products (*)	202	110	125	235	16%
Inorganic products	257	99	134	233	(9%)
Exports (only organic products)	26	19	34	53	104%
Number of countries to which the Company exports	28	23	25	29	4%

(*) Including organic products exported

Market Segmentation Based on Net Revenue Figures

Strategic Management of Physical Resources and Investments

In pursuit of an optimum utilization of its industrial complexes and reduction of logistic costs, in July 2006 the Company discontinued the production of plasticizers at the Taubaté-SP complex, without interrupting services to customers from this segment.

The R$ 25 millions invested in 2006 were concentrated on completing the expansion for aldehide-for-alcohols production, now at 150 thousand tonnes a year, and modernization and automation in the two remaining industrial complexes.

Economic Results

The poor results at the end of 2006, with 5.6% return on the shareholders´ equity and 7.6% of EBITDA margin on net revenues, were brought about by the reduced average unit contribution margin - 20% for organic products and 48% for inorganic products. This reduction, in turn, was due to the soaring prices of raw materials and electric and thermal energy.

The recovery of profitability have been more evidenced in the last quarter, with the improvement of the average unit contribution margin, in organic products (90% of sales) this contribution margin was 37% superior in comparison with the first three quarters.

R$ million	2005	1st S 06	2nd S 06	2006	Var. 06/05
Gross Revenue	838	405	492	897	7%
Net Revenue	655	320	400	720	11%
Exports	69	47	95	142	104%
Contribution margin	170	60	83	143	(16%)
Operating Income	53	(3)	21	18	(67%)
Net Income	43	(3)	22	19	(56%)
EBITDA	82	14	41	55	(34%)

Human Resources

At the end of 2006, Elekeiroz´s co-workers numbered 739, on whom R$43,1 million was spent in the year, by way of direct compensation and payroll taxes, plus R$ 6.7 million of supplementary benefits such as meals; transportation allowances; life and personal accident insurance; as well as supplementary retirement pension.

Over 35,000 hours were spent on internal training and development programs. Also, 43 scholarships were granted for technical studies in chemistry, graduate and post-graduate courses, languagues and other subjects. Apart from the monetary value of the time spent on these programs, investments in socially-oriented programs amounted to R$ 272 thousand a year.

Dividends

Subject to ratification at the General Shareholders´ Meeting, on December 26, 2006, the Company´s Administrative Council declared, due to the 2006 income, dividends in the form of Interest on Own Capital in the amount of R$ 5,6 million (R$ 4.7 million net of withholding tax at 15%)

The interest on own capital declared corresponds to R$ 8.82 per thousand-share lot (and R$ 7.50 net of withholding tax).

“CVM” Instruction 381

Directa Auditores did only financial and independent auditing work, having provided no other services to the Company in the year.

Acknowledgements

We are grateful to all co-workers, clients, suppliers and shareholders for their efforts, partnership and trust during one more year of work. Special thanks go to our independent auditors, for their invaluable assistance throughout the period of their engagement. As required by CVM Instruction 308/99, in the 2007 these auditores will be replaced.