Greenyard NV (GREEN) Earnings Call Transcript & Summary

Okay. Let's try again. Apologies for the delay. We'll pick up immediately in the segment and Marc will give you some highlights also the operational review, financial review, and then also carry on with the outlook. Let me give the floor to Marc Zwaaneveld, our co-CEO. Marc, floor is yours.

Thank you, Dennis. Apologies for the technical issues on our side. I will give the third attempt to start telling this straight to you. First of all, I want to emphasize on the strong results we have in volume growth and that we were able to compensate the inflation actually in both of our segments in Fresh and the Long Fresh. Long Fresh is focused and prepared so the parent products. And we increased that primarily like-for-like 11%. If you look at EBITDA level, we increased by about 12%. That was mainly also thanks to strong processing and Long Fresh and further also process efficiencies. Within Fresh, we had a new integrated customer relationship with an important client. This is if you follow us, this is one of our strengths, is our model of further partnerships. And you see that the industry is really tempting and tending to more cooperation in the chain. We also expect another new ICR in the course of this fiscal year, and we are working even on our third one. So there is momentum in the industry for this different way of working. The good news also is that we have further increased our leverage ratio, well, improved it increases from 2.7% to 2.4%, and that is a further reduction of our debt. And you have to take that into consideration that we also needed a few tens of millions in order to pay for the higher price of our stock in Long Fresh because of inflation, the stock built up during the summer was, of course, against the higher price, and that also resulted in more working capital needed for that. Despite that, we were able, as I told you, of improving our net financial debt. Looking more into Fresh and Long Fresh, what I said to you, our ICR revenues are now going up from 74% to 78%. So a very substantial amount is secured with long-term and an intimate working with certain clients. We have 2.4% higher volumes, and we had almost 8% higher prices. More in particular, we have good efficiencies in Poland, but we also faced some more start-up costs for the new ICR in Germany, and we had a little bit negative season for Citrus in America, which we see that as one-offs. On Long Fresh, volumes were a little bit down, but not that much. And also, you have to bear in mind that sometimes our clients are a little bit shifting those volumes over the quarter. Prices, we went up with the loss also necessary because of high inflation, for example, the packaging glass and other packaging and of course, also we have to compensate our growers for higher projects on their side. On Long Fresh, we also benefited from full assortment. You have to bear in mind that we, of course, are delivering not only fresh products, but also frozen and, for example, Carrefour. And if you see that, for example, if there is a little bit less demand in Fresh, then we compensate it, for example, in frozen and prepared products. The other good benefit of the first half year is that we benefited from higher crop yields, especially in the frozen area. And that also meant to higher cost absorption as we could benefit from that. And last but not least, we are further investment, doing investments in convenience products as that is a relatively higher margin area. From a sustainability point of view, all sustainability targets are rich. We are monitored for that. You can find a little of information about those sustainability in our annual report, and I invite you to read through if you are interested. And of course, we are strictly monitoring on all the entities to reach on the sustainability levels as we are monitoring for and last year's progress also proved that we are quite advanced compared to, let's say, some peers in our industry. And before I hand over to Nicolas, our new CFO, I also want to tell you a little bit about what is happening in society and in our industry, and it's very interesting to speak out. You all know if you follow all the news, there are some big topics in the world. And this is, of course, climate, then is health and the cost for health care. And third, very important is the ability for people to have a decent life and to be able to pay their bills. And actually, Greenyard is pure plant products are in the heart to really have a part of the solution to these topics. Of course, we cannot do it alone. It must be done a lot more. But if you think about our products and the need to eat more fresh fruit and vegetables, but also what I said, the frozen and the chem products, you see that by doing that, you automatically can say on climate issues. I give you one example. If you look to, for example, nutrition value or, for example, meat compared to certain of our products, like avocados, like beans, you see that the nutrition value is more or less comparable and not many people know that. But if you look at the price in shops, you see that our products are far cheaper. So if the end consumer needs to save money, there is a logical shift to partially to our products. And I think that more and more the society and consumers retailers are understanding this, and we need to further educate people that they can save their money and they can also save also climate pollution by shifting from processed foods for meat, et cetera, to more a pure plant diet. And that is also, of course, important if you look not only for the planet and for the costs for the end consumer, but also for the health care, making more pure plants will also be preventive for health cost. So we have an answer. The good news is that, of course, we already talked long about this, and everybody understand that, I think. But you see now more and more that in society, it is recognized. You see at politics that we are talking about, for example, going on VAT to 0%. We are talking about maybe a penalty on sugar, those kinds of things. We are advising to eat more. You see also new generations wanting to have a healthier diet. And I believe that if Vito, our clients, if we talk in the industry, you see an acceleration of retailers understanding that this is something they have to offer more and more. And you can do that with the current products, but you can also do that with innovative new products. For example, we are really investing now and scaling up our innovation because we believe that we also have to make it easy, convenient for people to eat the healthy food, but also it, of course, has to be tasty and it should be attractive to do that during the day, for example, healthy snacks, et cetera. So this year, we launched the new ice, which is called Gigi. And that is a pure plant ice, and that is very tasty. It is made by vegetables and fruit. It is without any extension. And it is also seen by quite some retailers to pick it up for the next season. We already introduced it halfway this season and it was positively accepted in the market. And we are also innovating other products instead of burger, a meat burger, we are working on a celery burger. We're working on a beef burger but in a high-quality level, the people really like it, that they are, it's not something you have to do with, no you like to do it. And that is what we are accelerating in. And I think by doing that, we can really pick up when the market is changing. And we believe that in the next 2, 3 years, there will be a momentum change coming up. And I think that is very, very good potential also, of course, for our company in the heart of this change. So that is a bit, let's say, my introduction and what we see in the market. Nicolas, please take the floor for the financial part.

Thank you, Marc. Nice to meet you all through this medium as well. Glad to be here in my first earnings call as CFO of Greenyard. The revenue increased with more than 11%, thanks to the combination of volume and price. The volume component was 1.7% and the price component was 9.6%. That we will see on the next slide, volume was only in the Fresh segment and the Long Fresh segment, it was purely price. When we see how this revenue evolution translates into EBITDA, we see a sharper increase or higher increase in EBITDA than on the revenue of more than 12%. Taking into account that last year, we had a onetime recuperation of water fees of EUR 3.4 million and the EUR 80 million EBITDA last year, the actual increase of the result was more than 17%. Nevertheless, this translates to the same net profit as last year, EUR 7 million due to higher depreciations and higher interest. Depreciation is mainly due to half of it increased investments. We see that we continue to invest in the company, 52% in maintenance repair 48% in new investments, for example, new citrus lines and mango lines and et cetera, are invested in to facilitate our customers. Interest increased from EUR 14 million to EUR 26 million, EUR 5.8 million of the EUR 26 million is IFRS 16 interest linked to the right-of-use assets, but EUR 20 million are cash interest on factoring and on the financial costs of the company. On average, we had a 4.3% interest rate on our debt, but we do see that due to the increase of the EURIBOR as from September last year, where in the first half year last year, we had easy cohort difficult comparables is the way you described it. It was EURIBOR was lower than 1% in the first 6 months of last year and between 2% to closer to 3% in the first 6 months of our accounting year '23, '24. And currently, EURIBOR is even closer to 4%. Combination of less of the EBITDA and the decrease of the net financial debt from EUR 328 million to EUR 360 million led to an important decrease of the leverage ratio of 2.7%, same period last year to 2.4%. As you will probably know, our big debt levels in our company or in Q4 of the calendar year or the third quarter of our accounting year end of October, beginning of November is mostly the big debt levels at 30th of September reporting is quite high on debt. If you look at the segments, you will see I said that the sales increased in the Fresh segment to 10% with 2.4% on the volume side, also thanks to more ICR customers. As already mentioned, we grew the ICR business from 74% to 78% in the Fresh segment and 7.6% coming from higher prices, despite some significant price pressure, especially in the German market and in some other European markets. The adjusted EBITDA increased by EUR 2.7 million, thanks to the result of Fresh Poland, inflation and interest compensation measures with several ICRs. This allowed us to keep the margin in Fresh relatively stable. In Long Fresh, where we have, of course, the prepared and the frozen segment, the net sales increased by almost 17%, small decrease in volume of 1.7%, but strong inflation mitigation measures. Especially in the Long Fresh segment, we saw an important increase of the EBITDA, thanks to the very good crop year and a very strong PC in the U.K. The first half of the first months of the year started difficult given the drought. But during summer, we had ideal weather with a combination of sun and rain, which resulted in a very strong PC that we saw as well in the month of October still. But in the month of November, we will have some negative impact as well in frozen as well in prepared, of the continuous rain and land that is under water in North of France and the West France, but also in the Limburg and the North Holland area, we see some impact on, for example, potato harvest of the weather conditions, but nothing that will affect our outlook. When we look to the detailed P&L and the net result evolution, you see that the gross margin increased by 10 basis points compared to last year due to the already mentioned higher crop yields and efficiencies and Long Fresh overhead increase of 10%, but that's mainly due to the fact that last year, we had a EUR 3.4 million contribution. That's in the overhead line. So without the EUR 3.4 million contribution in H1 last year, we only had a 6% increase in overhead, and that's completely linked to the double-digit inflation figures. EBITDA margin slightly increased to 3.6% and the nonrecurring items as a gain on assets sold in Brazil and U.K. As said, higher CapEx level resulted in a higher depreciation, half of it right-of-use assets, IFRS 16 depreciation how we did more investment in the current business and we already elaborated on the interest costs. Income taxes is a combination of actual cash taxes and deferred tax assets resulted in a 25% effective tax rate and leading to the net result of EUR 7 million. If you look to the bridge of the net financial debt year-over-year, so not compared to 31st of March, but compared to same period last year, you see a decrease of EUR 12 million of EUR 328 million to EUR 360 million. Important here to mention, we did not mention that yet when discussing the net financial debt and the leverage is that, again, in the Long Fresh segment, inventory levels increased by EUR 44 million. So the good accounts receivable, accounts payable, management of our working capital was EUR 44 million compensated or negatively compensated by increased inventory levels, meaning that in a steady-state business, the cash flow conversion of our EBITDA to free cash flow should increase without having that big impact on inventory levels due to inflation and increased business. We kept on investing. So you see the EUR 66 million CapEx, of which close to EUR 30 million was in this accounting year. On the next slide, you will see the evolution of the leverage ratio, which is important for the financial cost of the company, again, below 2.5. Talking about close to peak debt levels, which is a very good result compared to the 2.7 that we had lost accounting yield which prevents us to further increase our interest in the second half of our accounting year. And with a 2.4% pre-IFRS leverage, we have a very good result compared to last year, as mentioned. We utilize, of course, our cash for further investments. As said, 52% in invested maintenance, 48% of further growth of the business and expansion leverage at 2.4%. And in the month of October, we paid a EUR 0.10 dividend to our shareholders a long time ago that we paid dividends during the crisis and before the COVID crises even that we have dividend paid out. So very small dividend. No, if there are questions about that, no dividend, future dividend policies yet decided upon, so this is not yet an announcement of future lifted payments nor that we say that we are stopping dividends not yet officially decided to. We also confirmed that we said also in the press release that we remain interested as a company in the further consolidation of the market. And Marc already announced that we are looking to further increase our ICR business. We did the acquisition of Gigi, which was a small one and an important one given the fact that we are focused on that pure plant experience but also given the difficulties in the market we see room for further consolidation. That was my part, Marc, if you want to say something about the outlook still?

Yes. The only thing, thank you, Nicolas. It's for the outlook. It is unchanged compared to previous announcements. So we keep our guidance as we have said on the short term and midterm. So that ends our introduction and Dennis it's time and open for any questions people might have.