Metalfrio Solutions S.A. (FRIO3) Earnings Call Transcript & Summary

Hello. Welcome, everyone, to the webcast of results for Metalfrio Solutions for the second, third and fourth quarters of 2022. I'm Luiz Eduardo Moreira Caio, the CEO and the IR Relations Officer for the company. Let me start by explaining why we are presenting those 3 quarters only now. What happened is that Turkey, which is a very important operation for the company, has gone through an inflationary scenario for a couple of years now, which forced us to change the currency of the company, to manage the company better, attend the numbers better and then plan better accordingly. So that took us a couple of months there in Turkey. We had to republish the numbers in euros and could not do the publishing of the mother company here in Brazil until those publications were finished. That's why we're here now presenting those 3 quarters, and I'll focus my comments on the full year of 2022 in comparison to the past year 2021, which I think is of more interest to everyone. The highlights for 2022 are: number one, a net revenue of BRL 1.99 billion for the year, consolidating a new level reached best year. The 2.7% drop year-on-year was due to the adverse economic conditions in Europe, in Eastern Europe and Western Europe, as you will see further down. All other regions showed growth. The Service segment expansion strategy continues to deliver good results. And by Service, remember that our services provided to our key customers in terms of product design, logistics, installation, moving products from one point of sale to another, leasing, taking care of the whole life cycle of the product, that's a strategy launched 10 years ago that is posing very, very good results, reaching a turnover this year of BRL 320 million, posing a growth of almost 20% in comparison to last year. In South America, the revenues from the Services already represent 23% of the turnover of the whole company, meaning the importance of this strategy to the overall organization. Adjusted EBITDA for the year 2022 came to the level of 220 -- I'm sorry, BRL 236 million, which represents the best result ever achieved by the company in its history, with all regions contributing positively. The adjustments refer to nonrecurring expenses and provisions for closing unprofitable operations, as detailed in this earnings release. We are presenting a loss for the year 2022 of BRL 63 million in the fourth quarter and BRL 195 million for the whole year versus a net loss of BRL 56 million in 2021, basically due to a higher financial expenses throughout 2022, added to write-offs and provisions made in the last quarter of the year. So 2022, as anticipated, was a year of great challenges for the organization. But in spite of that, we managed to maintain the new company turnover threshold of BRL 2 billion, which is a very important level for us. We operate in regions that were significantly affected by the conflict between Russia and Ukraine, which negatively impacted businesses, not only in these regions, which are already important in themselves, but also in the entire neighborhood, including Eastern and Western Europe. The strategy was to focus on products with highest average price and profitability. And as a result, wire units fell by 22%, and the turnover fell only by 15%. The commercial strategy remains for 2022, as volumes are coming still quite soft. And the economy already has its cost structures. The company has the cost structure adapted -- adjusted at the factories in Russia and Turkey to this new volume. In Central and North America, the scenario is totally different. The major internal restructuring of the Mexican operation provided opportunities to gain market share in the region, especially in North America. Sales grew 27.2% year-on-year, and gross profit went from minus BRL 2.3 million to plus BRL 5 million in the year 2022. The company is much better positioned to continue growing in the region. In South America, with the market leadership of the Brazilian operation, the strategy of maximizing operating cash flow resulted in a set of actions based on 2 key directions of great impact that made the difference in the year's results, focusing on the best segments for profitability and renewed dedication to the Services businesses, which includes LifeCycle and the subsidiaries [indiscernible]. As a result, sales in units for the region of South America, even down by 17% comparing to the past year, generated revenues almost 6% higher. The Service business in the region earned BRL 204 million as a result of a 24% growth year-on-year. As an economic result of this performance, the region, South America, again reached a gross margin of 18.5%, which is a record for the company. As a result of a major initiative created and launched in Brazil in April 2022 that will be deployed throughout all the regions during this year 2023, the company has adjusted its cost structure to continue the strategy of focusing on cash generation, which will be fundamental for the improvement of its capital structure. I invite you to look in detail of the results of Metalfrio in the earnings release or in the financial statements that are made available on our website, and we are here available at the company, at the IR department to address questions that you might have. Thank you very much for the interest in Metalfrio Solutions. Goodbye.