Camil Alimentos S.A. (CAML3) Earnings Call Transcript & Summary

Good morning. Welcome to Camil's video conference to discuss the results of the first quarter of 2026. Present here today are Mr. Luciano Quartiero, Director, President; Flavio Vargas, CFO and IR Officer; and the company's Investor Relations team. We would like to inform you that this event is being recorded [Operator Instructions] We would like to emphasize that any forward-looking statement that might be made during this conference call related to Camil's business outlook, projections and financial and operating goals are beliefs and assumptions of the company's management as well as information currently available. These may involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors must understand that such general economic industry conditions and other operating factors may affect Camil's performance and lead to results that differ substantially from those expressed in such forward-looking statements. We will now start the presentation with Mr. Quartiero followed by Flavio's presentation, and at the end, we will open for a Q&A. Thank you.

Hello, and welcome to the management's comments. On the first quarter of 2026 results for the period ended May 2026. On the second slide, we present a consolidated overview of our business segments and the key indicators for the quarter. Q1 of '26 was marked by an acceleration in volumes in Brazil and in our international operations. We reached 594,000 metric tons for the period, an 18% increase compared to the first quarter of 25%. In Brazil, volume grew by 14%, while the International segment grew by more than 25%. Despite deflationary pressure on rice prices, both in the domestic market and in Latin America, net revenue remained virtually stable at BRL 2.7 billion when compared to the first quarter of '25. This result demonstrates that economies of scale largely offset the impact of lower prices during the period. EBITDA totaled BRL 210 million with a margin of 7.9%. We now turn to the highlights of each segment. In the high turnover segment, comprising grains and sugar in Brazil, volume hit 333,000 metric tons up 14% over Q1 '25 with positive contributions from both grains and sugar. This performance reflects all the work we have been doing in recent quarters. Our brands continue to gain relevance. Commercial execution has improved consistently and the growth plans we have previously structured are yielding concrete results in terms of volume. As a result, the high turnover segment continues to consolidate its position through its scale and market reach. Net price was BRL 3.82 per kilogram, a 3.5% year-on-year decline in line with lower rice and sugar prices. On a quarter-over-quarter basis, however, we saw a recovery. Net price was up 16% from Q4 '25 and volume was up 14%. In the high growth segment, which includes pasta, cookies, coffee and fish, volume totaled 49,000 tons, a 15% increase year-over-year. The main drivers of growth were fish, coffee and cookies offsetting the decline in pasta. Coffee remains a standout category for the company. The initiative has been gaining momentum quarter-by-quarter. And we continue to innovate in our portfolio, expanding distribution, strengthening brand presence and consistently gaining market share. In cookies, revitalization efforts continue to yield results with year-over-year volume growth. Net price was BRL 17.52 per kilogram, a 15% increase over Q1 '25, reflecting the product mix and positioning in high-growth added category. This trend towards high growth reinforces the consistency of our value-added growth strategy. The International segment recorded a total volume of 211,000 tons, up 26% from Q1 '25 driven by performance in Uruguay, Paraguay and Chile and partially offset by a decline in volume in Ecuador and Peru during the period. The International segment, establishing itself as one of the company's strategic pillars for diversification and growth. The average net price fell by 32% year-on-year, in line with the trend of declining rice prices, which affects the entire supply chain in the region. To conclude my remarks, we believe that our portfolio of leading brands, our operating discipline, and a very clear value creation strategy, position us to sustain consistent growth over time as evidenced by the volumes reported for the period. I will now turn the floor over to Flavio, who will present the financial highlights for the quarter.

Well, thank you, Luciano. Thank you all for joining us in this earnings release presentation. Starting with the year-over-year comparison. Net revenue totaled BRL 2.7 billion, remaining virtually flat for the period. The cost of goods sold declined by 3% due to lower input prices, both in Brazil and abroad. As a result, gross profit rose to BRL 652 million with a gross margin of 24%, an increase of 1.9 percentage points year-over-year. Regarding operating expenses, SG&A accounted for 20% of net revenue, up by 3.9 percentage points compared to the first quarter of 25%. Sales expenses were 13% of revenue. This increase reflects higher transport volumes and freight rate adjustments during the period, including effects from route mix and the adjustments to ANTT's freight rate schedule as well as the ongoing commercial restructuring, which includes expanding the sales force and adopting more efficient operating models for the company's reps. As for general and admin expenses, which accounted for 7% of revenue, that increase was related to legal provisions totaling approximately BRL 22 million related to a settlement reached in a road toll voucher lawsuit, other provisions and expenses associated with personnel and technology. It's also important to note that the SG&A ratio to net revenue is impacted not only by the growth in expenses, but also by revenue dynamics. During the period, revenue was pressured by a cycle of low rice prices, but it may benefit from a potential return to more normalized price levels contributing to the natural dilution of these expenses as a proportion of net revenue. EBITDA for the quarter was BRL 210 million with a margin of 7.9% compared to the fourth quarter of '25, net revenue increased by 6.6%, while cost of goods sold rose by 3%. Gross profit grew by 20% with a gross margin increasing by 2.7 percentage points. EBITDA grew 8.9% from the previous quarter with a 0.2 percentage point increase in the margin. Now regarding the capital structure, net debt ended the quarter at BRL 4.2 billion with a leverage ratio of 4.7x net debt to EBITDA for the last 12 months. It is worth noting that Camil's working capital profile is structurally seasonal. The first quarter is historically the period of highest cash burn due to the buildup of inventory for the rice harvest. Over the course of the fiscal year, this capital is gradually released. For this reason, financial covenants are assessed at the end of the fiscal year, a time when leverage ratio historically declined. Moreover, we raised funds in Brazil to meet our obligations for the next 12 to 14 months under our amortization schedule totaling approximately EUR 600 million net. CapEx stood at BRL 78 million in the quarter, down by 35% year-over-year and 16% quarter-on-quarter reflecting the completion of construction on the new grain plant and the thermal power plant in Cambaí in the fourth quarter of '25 and the result in normalization of investments to maintenance levels. In closing and to reinforce Luciano's message, we are confident that our close relationships with our customers, investors, consumers and partners, combined with the quality of our execution we continue to drive solid results and strengthen our position as one of the leading food companies in Latin America. With that, we will open the floor for Q&A. Thank you all very much.

[Operator Instructions] Our first question comes from Gustavo Troyano with Itau BBA.

We have 2 questions. My first question is on gross margin. More specifically in Brazil, we drew our attention was the fact that you went back to a level that we hadn't seen for quite some time in terms of gross margin. My question relates to what led to the improvement in gross margin in Brazil? Was that one major driver? Or was it a combination of factors that led to this new gross margin level? And on the same note, I would like to hear whether this is the level of gross margin that we should expect going forward. This is question one. Question 2 is on working capital and leverage. We noticed a significant use of working capital. And I do understand the seasonal dynamics and maybe we should -- whether we should expect a further capital release going forward. Could you please quantify a bit better this expectation of working capital release? And maybe what you expect in terms of consumption for the whole year? And how comfortable you are with the leverage level that you expect to post by the -- until the end of the year, vis-a-vis your covenants. So whether we should still expect some nonorganic event if the leverage is not ideal for you.

Well, Gustavo, thank you for your questions. I think regarding gross margin composition, the beauty of being a company of multi-categories is because there is always a category that push things upwards and others that mitigate some negative effects. And especially coffee and fish, which posted very good profitability, but it has been hampered by grains mostly due to drops in rice prices. So considering what is helping and what is hurting us, I think this is a new level for the company. But obviously, there might be changes depending on the impact from prices. We have a mathematical effect on our gross margin. So if there are significant changes in prices. But I think this is also due to our better commercial expansion without giving you a lot of details, and this is reflected in the performance of volumes for high growth and high turnover segment. Now Flavio will talk about working capital. But I may say that the covenant for the year-end. It's not a concern for the company because we're very comfortable with our working capital. There is a significant release of working capital. In the fourth quarter, our covenant that was 3.5 is now 4. Therefore, the company is not concerned in terms of complying with the covenant. We are focusing on deleveraging the company by improving our operating efficiency. And this is what you see in these 2 categories is the result of that. So having said that, now I will turn the floor over to Flavio to talk about working capital performance.

Well, thank you for your question. And since you monitor us very quickly, you know how the dynamics of seasonality operates. But what is new about this year when compared to the same quarter of last year, is that now we have Villa Oliva that is part of our portfolio since last November, and that's why we needed additional working capital. But when we started the year, our budget or our planning also contemplated the fact that we knew that raw material prices would be lower, especially in regards to rice. But the company is focusing on volume to mitigate this lower price and mitigated by higher volumes. Therefore, what we anticipate in relation to working capital is that it should stand pretty much in line with what we had last year. Eventually, if there is any volume increase, I mean -- and on the other hand, you should expect a lower average price. We expect to come to year-end with a very consistent working capital release, very consistent with the past, with our historical numbers. So working capital will be very similar to what we saw last year. That's why we are not anticipating a heavy consumption of working capital even because there were movements in opposite directions, higher volumes but with lower prices. And this helps us out in this aspect. That's why we are not anticipating any surprises.

Next question comes from Julia Zaniolo with Bank of America.

I have 2 questions. My first question is related to higher volumes. I would just like to understand or hear from you how much of that has been related to you to your commercial strategy and the effort to gain scale? And how much of that or whether this also contemplates I mean, earlier purchases because maybe we can anticipate price improvement or price increases, particularly in grains, looking forward. I think prices were weak. Can you elaborate a bit more about what happened on the international segment that led to that? And what is your expectation in terms of EBITDA margin, thinking about expenses, given that we should see a price recovery that would lead to lower costs. If that does not materialize, what are you doing? Or how are you preparing yourselves to reach a better margin level?

Thank you for your questions. I mean, in fact, when you look at volumes, our new way of going to market and all of the strategy we deployed, which was part of a plan that we started focusing on since the second half of last year is now bearing fruits. These additional volumes stem from the strategy. And rather than the movement you mentioned of anticipating purchases, which happens at the end of the crop season, especially in grains and rice when they anticipate purchases and then April and May is when they resume their purchases. But this quarter does not reflect that even because this volume growth did not only happen with rice, but it also happened with sugar and almost all of the other categories of the high-growth segment. So this is part of this new commercial strategy. This space, the pace has been continuous. We are in the midst of the second quarter, and we are seeing the same kind of pace. So the quarter is not over yet, but we see the same performance and the same behavior. And as you put it quite well when it comes to the International segment, I mean the levels are below historic levels in that segment. And this is a reflection of price decline. And this is a similar effect of what we saw in Brazil, which has been mitigated by the other categories. So this drop in prices since has been long-standing, it happened for a long time and quite significantly, this hurt our profitability. And now the -- we believe that the worst moment is over in terms of rice prices here and abroad. So of course, we don't know how much El Nino will impact prices in the second half and how much we will be able to produce in South America or whether this would anticipate the expected spike in prices in the second half. But I think we already see a slight recovery in prices because the prices have reached bottom, and I think now we should expect some recovery. On the International segment, again, the countries posted important volume growth. There is the effect of the intra Paraguay, Uruguay by Paraguay and Chile are posting higher volumes. It's only in Peru and Ecuador that recorded a slight decline I mean, Ecuador has a different dynamics because they have 2 crop seasons. And then the impact of price drop is a bit different and it goes hand in hand with the results. But these are 2 countries that are detractors when we look at the LATAM operation. And with that, I think I was able to answer your questions, Julia.

Next question comes from Leonardo Alencar with XP.

Maybe I think I have a follow-up from Julio's question. I mean, about whether there will be an increase or whether you will be able to sustain the level of production. It even seems that this will not be a one-off scenario, but it may become a trend. But given the scenario and given the fact that part of the recovery of margins for the second half is very much related to how rice will perform, but you are in a good position to capture that. Could you please elaborate a bit more on rice prices? Or maybe you can tell me a little bit about the dynamics for the year going forward. Because I think there is room for some positive outlook for rice. My second point is whether you could give me some more color or some insights because we were surprised to see the margins. I understand that there is a little bit of nonrecurring factors. But within the first quarter, was that a ramp-up of this effect? Is there still some additional factors that will be carried over to the second quarter? Or what would be the outlook for sales expenses for the following quarters, not only in terms of recurring or nonrecurring expenses, but the pace of things.