Cris-Tim Family Holding S.A. (CFH) Earnings Call Transcript & Summary

Good afternoon, and welcome to Cris-Tim Family Holdings conference call, where we will be presenting the financial results for the first half of 2026. Before we begin, please note that this call is being recorded and that the recording will be made available on our website later today. By joining the video conference as indicated in the call invite, you have automatically and implicitly consented to being recorded. If you do not wish to be recorded, we kindly ask you to leave the call. I would like to mention that we might be making forward-looking statements today during this teleconference regarding the future performance of Cris-Tim Family Holdings and that the actual results may differ materially. We encourage you to review the disclaimer, which you can see right now on your screen. This disclaimer applies equally to all statements made in today's call. My name is Zuzanna Kurek, and I'm Investor Relations Manager at Cris-Tim Family Holding and your moderator during today's teleconference. I am joined today by Radu Timis, Jr., Chief Executive Officer; and Razvan Furtuna, Chief Financial Officer of Cris-Tim Family Holdings. Regarding the setup of this call, let me walk you through it. Firstly, Radu Timis will deliver the opening remarks, highlighting key financial and operational KPIs and the progress made on the -- and later, he will discuss the progress made on the Investalim projects as well as the budget. On his end, Razvan Furtuna will present a detailed overview of the financial results for the first 6 months of 2026. [Operator Instructions] I will be moderating the Q&A session, and for the benefit of those watching the replay of this teleconference, I will read each question aloud before it is addressed. Your questions today will be answered by Radu Timis, Jr. and Razvan Furtuna. Thank you for your patience. And now I will pass the floor to Radu to start this presentation.

Good afternoon, everybody, and thank you for being present today at the presentation of our first S1 results for 2026. Looking at the results, we are glad to see and to resume a great first semester of 2026, where the results indeed have outperformed our expectations. If we look at the financial performance of the organization, we see a growth in revenue of 6% year-on-year, a growth of 28% in terms of EBITDA year-on-year, an EBITDA margin of 19.5% compared to 16.1% in the first semester of 2025 and a growth in net profit of 34% year-on-year. Moving on to the segment evolution in our different business units. We see a growth in revenue in Cold Cuts of 7%. We see a decrease in revenue in Ready Meals of 2%, a growth -- especially the biggest growth recorded by any of our brands has been recorded by Matache Macelaru, our premium brand, which is in line with the commercial strategy we have set up at the beginning of the year, focusing on premiumizing our portfolio and products with higher added value and margin. All sales channels have been recording growth in revenue with the greatest increase in international key accounts, branded segment and private labels. The result of the first semester and basically being already in the beginning of the second semester, we have been able to foresee how the market conditions would look like in the second semester, especially on the cost side. As a few months ago, many of these things were not clear regarding the differences in some OpEx categories, especially if we look at utility costs and energy costs. So we are able to provide a revised outlook of the results for 2026, basically rebudgeting for the whole year, which will allow us to achieve the following results as seen on the table, a 19.8% EBITDA margin for the end of the year 2026, compared to 17.1% in our initial budget set up at the beginning of the year, an increase of 14% compared to the initial budget. In terms of EBITDA up to RON 213 million and a growth of 19% compared to the initial budget of the gross profit moving up to RON 173.9 million, while our CapEx plan exposed at the beginning of the year will remain stable at RON 226.8 million and is divided into both investment objectives, which are the Investalim program with the first two components and an additional -- and part of RON 50 million, which represents extra investments in technology and production capacities in our current production facilities. Moving forward to the key commercial highlights of the first semester of the year. We will start with the Cold Cuts with the sales and the volume evolution. As you may well see, the growth in turnover has come almost entirely from a growth in volumes and sales of 7%. Basically, the price is almost completely flat compared to last year. We have only a growth of 1% on our net prices, our net selling prices. We see this growth as being very healthy because we continue to increase our market share significantly. Just as a -- to have a good representation, the Cold Cuts market in terms of volumes, the one which is entirely measured, meaning the international key accounts has been growing by 2% from the beginning of the year, and we have grown by over 8% on international key accounts. So the growth is healthy and means that we are capable to continue innovating, developing our product assortment ranges and provide a healthy volume growth. If we look on the revenue side, our main brand, Cris-Tim, has increased by 4% in terms of revenue, Matache Macelaru has increased by 24%, and all the other brands in our portfolio, including private label have provided a 9% increase in revenue. This means that our portfolio of brands is resilient. We have been able to grow also in all subcategories of products, basically making sure that our assortment delivers on our customers' needs. Also we have seen a great increase in market share coming from our new innovations, which we provided in the S-1 report. Our new product launches, which -- the two product launches which we have made in the sausage category, which have become very fast, the best-selling products in all retail in this category. One other very important thing we did is that compared to last year, to semester 1, we have increased our marketing spend by around 40% compared to what was planned initially. Marketing expenditure will continue to grow as we consider this a very key point in the attraction of new consumers and strengthening basically our market authority and representation. If we look at the sales channels on the next -- on this slide, we see the growth on all the different sales channels. As mentioned before, international key account branded sales and private labels have grown by 8% in terms of revenue, while the traditional trade channel, which is a channel which is decreasing in Romania in terms of sales and representation, in our case, it's continuing to grow and has been doing so for the past few years. So we are very happy that in the sales channel that is also decreasing, we are continuing to grow our sales and presence. If you look at the revenue breakdown, there aren't many important changes. International key account brands are growing more in terms of share of revenue; private label is growing slightly; traditional trade is decreasing slightly in terms of share; and export very slightly as well. If you look at the overall, the split between the domestic market and foreign markets, we see a growth in revenue of 6% in both geographical areas.

Turning to the financials -- hello, everybody, from my side also. Turning to the financials, as already stated by Radu earlier, we have an increase of 7% on Cold Cuts, minus 2% in terms of turnover on the Ready Meals and plus 14% on other segments, which are less important. On the EBITDA side, we have reached 18.5% EBITDA margin. RON 93 million versus RON 33 million last year, an increase of 28% overall, and on the Cold Cuts also. On the Ready Meals segment, we have increased to 27.3% EBITDA margin, although the turnover was minus 2%, decrease in sales and we kept prices quite high. This represents an increase versus last year of 11%. In terms of OpEx, obviously, raw materials are lower than last year, minus 6%, RON 285 million versus -- compared to RON 304 million last year. On the employee benefit expenses, we have an increase of 13%, while the number of employees' headcount grew almost 4%. We also adapted our salaries to the new regulation. Actually, we did it starting from the beginning of the year. And this is why we have an increase of 13%. Depreciation and amortization, 40%, this is reflecting actually the investment plan. Third-party services, 41%, with the most part coming from advisory and marketing expenses. Other costs, they are almost flat. We had a minus 3% decrease in repairs and almost flat on the utilities for the first half of the year. We expect higher costs on the second part of the year on utilities, which were embedded in our new plan, which we published already. In terms of percentage out of sales, the total raw material and consumables decreased from 56.8% last year to 50.2%, which is a clear situation related to the raw material prices. Although on the meat side, the prices are quite stable from the beginning of the year, which is something unusual. On other costs related to the packaging, the prices are higher due to the geopolitical risks coming from Iran war. And we are expecting also -- also on the fuel side, we had higher costs related to the same period the last year and expecting for the second half of the year very volatile prices in terms of fuel. On the -- the net debt breakdown shows actually the fact that we had two components which moved from year-end 2025. One is related to the stocks, which is something very normal for our business model, higher stocks at mid-year. And also related to the investments. We continued -- we'll discuss more about the investment agreement and other CapEx items later. So basically, we moved to a net debt of RON 160 million compared to a negative net debt, basically a cash position of RON 6 million. But this is coming mainly from the two components: stock and financing the stock. On the equity ratio, it's the same situation. Basically, we have total assets higher than end of the last year, both from PPE and from raw material stocks.

Just like -- my apologies because I skipped in the last discussion about the commercial side, the Ready Meals, and I'll go back. The Ready Meals, the revenues by brand, so we saw a decrease in brand of 5% in terms of revenue and a growth of 3% in other brands, meaning private label. We have a decrease in volumes as well, mainly, as mentioned, at the end of Q1 as well, we have exited or, let's say, did not participate anymore into some specific projects, either as private label or in HORECA because of very, very low profit margins with some specific competitors that decided to offer the same product at the level which we consider unsustainable. So we decided to -- that our priority is to keep the profitability. And as we continue to develop new projects to change this trend into going into the second semester. We don't -- of course, we don't want to slip -- the growth in terms of volumes. But again, we do not want to sacrifice profitability at the exchange of pure volume growth. There will be many news here in the second semester regarding revenue development, but we will keep them for that moment. All right. Regarding the 2026, the new outlook and profitability, in terms of the revenue target, it has been, slightly modified by RON 20 million compared to the initial budget, which is a very, very small decrease, 0-point-something. This is because of the fact that we have -- we are seeing some changes in portfolio sales. There is a slight, slight decrease in terms of quantity compared to the initial budget. In terms of profitability, we are seeing growth, of course, because operating expenses, the raw materials are much significantly lower than we expected them to be. Operating expenses are growing, but very slightly, as mentioned before, mainly because of fuel gas and electricity assumptions.

And Marketing.

And marketing. CapEx remains unchanged, which allows us basically to increase our profitability as reflected into the indicators above. Moving to an EBITDA margin of 19.8%, which is the highest margin ever recorded by our organization. Of course, we are struggling to keep this, and we are fighting to keep this margin as much as possible at this level in the coming period. And of course, this depends very much also on the evolution of the market in terms of cost, in terms of labor cost, in terms of raw materials, these are things which are changing. For example, regarding raw materials, we expected them to grow significantly in the past few months. This didn't happen. Prices are low. This does not only help us, but helps, of course, the entire competition in the market. All our main competitors are benefiting from the same low price of raw material. This price of raw material, in fact, has also provided a great benefit to the market. The fact that companies invested a lot of the extra profit generated from a smaller raw material cost into promotions, into growing market share. And contrary to many categories -- product categories in FMCG, in the first 6 months of the year, talking categories such as, for example, soft drinks and beer, confectionery and so on, which are seeing significant decreases in volume, this category of products, cold cuts, seeing an increase in volumes. And this is something that is a positive sign because will allow us to continue growing. In terms of the investment projects that we have ongoing. For our high bay freezer, we are at a physical execution of roughly 50% and financial execution of 45%. Regarding the development of the logistics hub, similar percentages in terms of execution on the level. Our main production facility will begin -- construction will begin in 2027 with the aim of finalizing by the end of 2029. This is why, of course, at the moment, financial execution only refers especially to the project and engineering costs for the facility engineering, architecture and so on. As mentioned before, we expect these objectives to be ready by year-end. Could be -- we could be seeing a maximum delay of probably 1 month or 2 months in worst-case scenario, as we've had some issues with the weather in the past period, which created a bit of burden in the construction site. But otherwise, we are in line with these investments, and we expect them to start producing and bringing in results starting with next year. Thank you very much. This is all from my side, and we'll be glad to answer questions.

Thank you very much, Radu. This concludes the first part of our call.

[Operator Instructions] So question number one, how will the company maintain the growth rate of its key indicators amid a stagnant economy and the population's declining purchasing power?

Well, to answer this question, of course, the economy is stagnant and is actually decreasing. As I mentioned before, we are lucky that we are in a category that is continuing to grow in terms of volumes. It is a category with, let's say, a very good ratio between price quality for these types of products. It is one of the cheapest proteins available on the market. Generally speaking, we have seen that this industry is very resilient in terms of turbulent economic times. In fact, not only is the market growing in terms of volumes, but it is also keeping its level of assortment stable, meaning that the market, the consumer is not downgrading into categories which are cheaper. It is obvious that we are seeing the biggest increase in terms of volumes is indeed in private label. And if we look in absolute terms and percentages, in our sales, private label is growing the most. Of course, the base quantity is very small, so percentage is very big. While the branded market is slightly decreasing, by 2% in the first 6 months of the year, but the fact that consumers are not downgrading and the market is continuing to grow is a healthy signal.

Also, we have very good results on Matache Macelaru, which Radu mentioned earlier, which means there might be new customers towards -- moving towards the Cold Cuts category and they move towards high-end products.

Also in the same time, we continue to innovate. We have fantastic product launches. This is the fifth year in a row, again, when we are continuing to grow our market share and our sales level above the level of the market growth. So we are optimistic that we will be able to continue maintaining this trend in the period -- in the upcoming period.

The next question, what are the main factors that will influence Cris-Tim's growth over the next 6 months?

I think I touched this point in the last question.

We can move on. How do you expect the Investalim grant to affect the company's capital expenditure? Will the grant be disbursed in tranches or as a lump sum? And are there any milestones or thresholds that must be met before the funding is received?

Investalim was touched during the IPO and the prospectus -- including the prospectus and including information linked to Investalim. Basically, the initial project was around RON 380 million, out of which RON 226 million state aid. So we already started to send to AFIR payment request, and we already received for one agreement payments from AFIR. So basically, this is going to be done mostly beside the specific equipments based on the level of development of each of the projects. So we'll receive money based on our development -- our implementation development and requests.

The next question, how do you intend to finance the remaining portion of the 2026-2030 investment program? Will you rely on bank financing or other sources of funding?

On Investalim, there is already -- we already signed a financing contract with a bank. And we didn't touch that facility yet, so we are expecting September, October to see how the political risks are developing, and there will be another depreciation of the currency. So basically, so far, we didn't touch that, we didn't draw anything out of this facility. This is why in our balance sheet, there is almost nothing related to long-term loans. Almost everything is on the current side. So almost everything is going to be financed through bank loans, but we also take into consideration for other investments other financing solutions.

The next question, could you explain the volatility in company's short-term and medium to long-term borrowings?

I think half of the question was already answered. The second half is related to the stocks. Basically, we buy raw material stocks at beginning of the year, and this is financed through short-term loans.

How do you expect payroll and raw material costs to evolve over the 2026-2030 period? Are there any key factors that could significantly affect these costs?