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Clarifications on recent reports about asbestos.

Clarifications on recent reports about asbestos.
CLARIFICANTIONS ON RECENT REPORTS ABOUT ASBESTOS

ETERNIT S.A.
C.N.P.J. nº 61.092.037/0001-81

ANNOUNCEMENT TO THE MARKET

With respect to a series of reports in the newspaper, O Globo, during the course of last week, Eternit S.A., (BM&FBOVESPA: ETER3, OTC: ETNTY), a company with 72 years of activity and the market leader in  roof coverings with operations in the bathroom chinaware and metallic fittings segments and components for construction systems, believes that the following clarifications are warranted:

The Federal Supreme Court (STF) in its decisions  has still to rule on the merit of the use of asbestos. The only exceptions have  been with respect to rulings on laws 10.831/01 and 2.210/01 enacted by the states of São Paulo and Mato Grosso do Sul, respectively, prohibiting the use of asbestos in those states. The merit of these cases was ruled unconstitutional on May 8, 2003. Eternit believes it prudent not to anticipate the position of the supreme court judges and to await their ruling on the merit as to the use of asbestos, expected following the holding of a public hearing scheduled for next August in the Supreme Court.

The Eternit Group regularly undertakes investments at its plants with a view to the full and longlasting operation of its businesses. Consequently, in the past five years, Eternit has invested approximately R$ 60 million in its mining subsidiary, SAMA.

Fiber cement in Brazil has a social function. A house of 50 square meters destined for low income families can be covered using fiber cement roofing containing chrysotile asbestos at a cost of R$ 800.00 - including material and labor. Consequently, this durable material of excellent quality and cost-benefit is the first product to which low income groups resort after black canvas.Fiber cement roofing thus makes a significant contribution to reducing the Brazilian housing shortage.

According to the statements by Eternit’s leading competitor, which produces its own synthetic fiber, manufacturing costs of cement are between 8% and 12% higher. This suggests that other manufacturers, on using the new reinforced synthetic fiber, will see production costs increase by somewhere in the order of 30%. And this ignores the fact that to produce fiber cement from synthetic fiber, significant investments for adapting production lines are required, not to mention the necessary outlay on research and development into these products.

It is worth remembering that according to the Escola Politécnica of the Universidade de São Paulo – USP, this new technology involves a product which has a significantly lower durability in relation to those containing chrysotile asbestos. A 2006 technical report published by the Technological Research Institute – IPT shows that fiber cement roofing manufactured more than 70 years ago was still in perfect condition.

On the other hand, synthetic fibers are petroleum-based, a highly polluting activity, and according to the International Agency for Research on Cancer – IARC, a body under the umbrella of the World Health Organization  – WHO, deemed as respirable and highly biopersistent. The inherent risk involving their inhalation was considered as inconclusive given the lack of studies and/or research into their innocuousness or otherwise.

Eternit S.A. is a Brazilian publicly held company listed on the Novo Mercado, the highest level of Corporate Governance on the BM&FBOVESPA. It has no relationship with Eternit in other countries including Italy. The intellectual property right to and use of the brand name are adopted in a distinct manner by different companies in various countries.

In Brazil, Eternit employs chrysotile asbestos  as a reinforcing fiber in the production of fiber cement roofing using modern manufacturing techniques. In addition to other countries in Europe, Italy has used various  types of asbestos including the amphibole variety (500 times more cancerous), for various applications, including spraying, without due protection to workers, under conditions involving more than 1,500 fibers in suspension per cubic meter (c³) of air. Brazilian law requires that working environments should have at the most 2 fibers per c³ of air and that the production chain should operate with 0.1
fibers per c³.

Use of fiber cement products, water tanks and roofing with chrysotile asbestos presents no health risk. There are no reports in Brazil of a single case of a resident who has contracted any disease as a result of residing in any one of the more than 25 million homes where fiber cement roof coverings containing asbestos are used. This fact is corroborated by a nationwide survey conducted by a renowned medical team drawn from the main Brazilian universities, the project and final report for which were approved by the National Council for Scientific and Technological Development - CNPq, and  which is available at the site http://www.sectec.go.gov.br/portal/Â

There is also no record of asbestos-related  respiratory illnesses among employees hired over the past 30 years by the Eternit Group’s mining company or its fiber cement plants

Eternit wishes to make it clear that it has issued 15 Labor Accident Notifications – CATs with respect to ex-employees hired since January 1, 1980 due to alterations in radiological imagery compatible with pleural plaque where there is a suspicion that this may have arisen as a result of exposure to asbestos. It should be noted that it is only by performing a biopsy that the origin of such adhesions can be verified. In suspect cases, the issue of a CAT is mandatory by law.Â

Out of the 15 employees for whom CATS notifications were issued, 8 were hired during the course of 980 when there was still considered to be a risk to the activity and when techniques, only becoming known at that time, were being implemented to protect the working environment and gradually leading to an improvement in subsequent years.

Of the other 7 (seven) ex-employees hired after 1980, in 3 (three), pleural pulmonary alterations related to asbestos exposure were not confirmed while in the other four 4 (four), exposure-related pleural alterations were suspected. It is worth pointing out that in these 15 cases, there was no resulting respiratory dysfunctionÂ

According to what can be gleaned from the specialized medical literature, pleural plaque involves processes of a fibrotic nature originating from various causes – thoracic or costal trauma, inflammatory diseases and/or infections such as tuberculosis for example, besides exposure to asbestos. The presence of fat in juxtaposition with the pleural tissue is also very frequently interpreted as pleural plaque.

Finally, it is also worth noting that the information that 300 individual court actions on the part of ex-employees alleging illnesses related to the working environment are pending judgment is without foundation. Currently, only 93 actions are awaiting rulings throughout the country. To the present time, the appropriate provision has been made in all cases where our legal counsel and independent auditor  expect a ruling against the Company.

In a “study” recently reported by other media vehicles pertaining to the same O Globo group, a public health physician from the Oswaldo Cruz Foundation  stated that there were 2,414 reported cases of mesothelioma (a form of cancer) in Brazil between 1980 and 2003. All reports of plural tumors to the Ministry of Health were treated as if  they were mesothelioma when there is no technical and scientific basis for such a conclusion since the pleural membrane is subject to innumerous other tumors unrelated to mesothelioma.

The same physician  now reports the existence of 3,720 cases of mesothelioma in Brazil between 1980 and 2010 without stating the source of such data and above all, without indicating whether the mistake in the first study has been corrected or whether  any pleural tumor will continue to be termed as mesothelioma.

There is also no consensus as to the  Oswaldo Cruz public health official’s claim that scientific studies attribute 90% of such tumors to asbestos exposure. For example, in the United States there are also scientific studies showing that up to 40% of all cases of mesothelioma have no known cause in spite of exhausting all the possibilities linking such conditions to eventual exposure to asbestos. Such cases are known as idiopathic mesothelioma since none of the various causes of  mesothelioma have been  iscovered as being present.

On the other hand, should all 3,720 cases in fact be diagnosed as mesothelioma, this would be very low in relation to the expected number  of occurrences over the course of 30 years – 1980 to 2010.

The specialist literature shows that this tumor is rare and affects on  average between two and three out of one million inhabitants per year in the population as a whole. The incidence among males until the nineties was 20 cases per million/year, a number which has been  declining (WHO-IARC data for 2004) while other studies show the incidence at between 14 and 30 cases per million inhabitants over the age of 15.

If we take a rate of 3 cases per million inhabitants and assuming an average population in Brazil for the period of 154 million inhabitants then there would have been 462 cases per year totaling 13,860 cases over 30 years.

Since the IARC itself accepts that exposure to amphiboles  (crocidolite represents a risk which is 500 times greater than chrysotile in causing tumors) leads to higher levels of tumors, it is clear that the incidence in Brazil is lower due to the greater use of chrysotile mineral and is tending to diminish with the exclusive use of this raw material.

With 72 years of activities in Brazil, Eternit guarantees the quality and safety if its products. In these circumstances, the company underscores its belief in the Brazilian courts of law and trusts that the technical and scientific evidence will be taken into account in the ruling on the merit of the actions and laws, ignoring pressure from lobby groups favorable to a ban on chrysotile asbestos merely in the basis of the unsuccessful European experience.

São Paulo, May 29, 2012.
Élio A. Martins
Chairman and Investor Relations Officer of the Eternit Group
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