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

Good morning, everyone, and welcome to the webcast of Metalfrio Solutions related to the second quarter of 2022. I am Luiz Eduardo Moreira Caio, the Global CEO of the company, and I invite you to follow the charts that are made available in our website specifically for this webcast. We'll start with Slide #2, where you can see the highlights for the period. And I'm going right to the good news for the period, which is a net profit that the company is posting of BRL 31.6 million in comparison to a loss of BRL 96 million in the same period of last year. You'll see that in spite of the volume decrease of 14.9% in terms of revenues from BRL 586 million to around BRL 500 million. In spite of that drop, all the other lines are posting an increase and improvement. Gross profit, it's growing 17.6%. Gross margin, 37.9%, EBIT 17.8% and EBITDA 13.7%, reaching BRL 61.6 million for the period with a margin of 12.3%, which is a very good figure for this industry and compares with 9.2% in the same period of last year, posting therefore, an improvement of some 3 percentage points. In Slide #3, you see the data of the company's performance for this quarter, the second quarter of the last 3 years. And there you see the problems, the -- what we call EMEA region is suffering basically out of the factories in Turkey and Russia. Recently, we had the earthquake in Russia, I mean, in Turkey. And the conflict between Russia and Ukraine, those 2 things are affecting quite a bit the performance of the markets in the region as a whole. You see that with the exception of EMEA, the other regions are posting growth over the last 2 years coming all the way to this second quarter of 2023. We've almost BRL 500 million turnover. You see in the [ pizza ] chart in the upper portion of the slide, that because of the poor performance of EMEA, the South American region is gaining relevance in the share of the business of the company. In Slide #4, you see the revenue performance per region with the split between products and services. The message here is, again, South America and Central and North America are growing in this quarter in comparison to the same quarter of last year. And EMEA, Europe, Middle East and Africa suffering from the problems that I just described. The performance of our service divisions spread across all the geographies, it's been very satisfactory. We are very happy that the strategy is really posing good results. I would call your attention in this slide to the growth of the Mexican operation. As we've been announcing, we've been doing several improvements in the factory to make the factory more effective, more productive. And we are starting to carve those results. And things are still on the way, and we expect good results through across the whole year. In Slide 6 -- I'm sorry, 5, you'll see the global consolidated performance for the whole company in terms of net revenue and gross profit for this quarter, split between services and products. And the message is in line with what I just mentioned, which is that in spite of the diminished volumes of revenue, we managed to increase gross profit in both services and products. Services specifically, we went from 19% margin to 23.6% margin, whereas in products, we went from 12.1% to 17.2% in spite of the poor performance of the EMEA region. Moving to Slide #6 now, where you see the number for operational cash flow. And the important message here is that given the difficulty in accessing new credit lines, the strategy in the company has been to focus on cash generation, operating cash generation. So I call your attention to this line that we call OCF, operating cash flow. You see a positive figure for the quarter of BRL 53 million and accumulated for the semester of BRL 10 million. Important message as well here for the second quarter, is that we we did this BRL 53 million of OCF. All the regions contributed positively in spite of the difficulties in the respective markets. Moving on to Slide #7, which is the last one. You'll see the picture of the working capital measured in cycle days. And the message here is that the loss of days of suppliers has been highly compensated by the better inventory management, done by the company. And my last comment is related to the negotiations with the Brazilian financial institutions to resolve the short-term debt, which are ongoing and the formal steps are being taken to carry on the capitalization of the respective credits according to a notice to the market that the company disclosed recently. Thank you very much for your time and interest at Metalfrio Solutions. We are available to clarify any possible issues at the company or with the information in our website. Thank you very much, and have a good day.