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

Hello, everyone. Welcome to the webcast of Metalfrio Solutions referring to the results of the third quarter of 2024. I invite you -- I'm sorry, 2023.I invite you to follow the set of slides that are made available in our website, which I will use to run this speech. Starting with Slide#2, highlights for the period. The net revenue of the company increased 14% quarter-on-quarter coming to BRL 462.3 million and still points to the annual revenue level of BRL 2 billion reached by the company in the last 2 years. The service divisions continued a good performance, posting a net revenue of BRL 57.7 million, growing 14% over the third quarter of '22 and now representing over 27% of the business in South America. EBITDA for the period reached BRL 51.4 million with a margin of 11.1%, which is growth of 30% in comparison to the same quarter of last year. Given the weak debt situation, still we post a net loss in the quarter of BRL 28.1 million versus a loss of BRL 32 million in the same period of 2022. Looking at the slide still, the Slide #2. [indiscernible] takes us to the box in the bottom to the growth improvement on the gross margin coming from 15.6% last year in the second quarter to 17.4% in this quarter, which is a very relevant growth. Slide #3 now, where we show the breakdown of this growth per region. You'll see there from BRL 404 million in the third quarter of '22 to BRL 462 million in the third quarter of '23 and all regions posing a growth. In the [ pizzas ] up above, you'll see the growth over the years of the participation of Central & North America, which drew fundamentally by the good performance of the Mexican operation. In Slide#4, we see the revenues breakdown, not only for region, but also between services and products. So that 14% growth in net revenues quarter-on-quarter is a combination of a growth of 7.8% in South America; a 42% growth in North America; and 11.7% in Middle East and Africa and Europe, EMEA. Services grew in South America as well to the tune of 14.1%. Whereas in the other regions, there was a slight drop that also affect the margins of the service business as a whole as you see further down. In Slide #5, there's a breakdown of net sales per segment, again, showing also here a gross margin perspective. So as per services, there was a growth in the period of 5.3% that was basically given by the Brazilian operation and the margin drop from 21.5% to 15.7%. And as I said, that was basically due to the poor performance of services in the other regions. Nothing structural there, but it did happen in this quarter that the performance was poor. Now the portion of the chart to see the growth in products of 16.7% turnover and the margin growth moving from 14% to 17.8%, a full 3.8 percentage points, which is very substantial. In Slide #6, you'll see the picture of the cash flow. And if you look at the bottom of the slide, you see pretty much stable situation in our net debt. But I would like to call your attention to the operational cash flow, which is something that the company is putting a lot of effort with a positive cash generation of BRL 37 million in this quarter of '23, which is basically a combination of positive figures from Brazil and Mexico and negative figures from the other regions, but still a solid [ BRL 37 million ] in the quarter. Coming to the next slide, which is the last one, #7. For our tight cash management strategy, you see the improvement on our working capital position quarter-on-quarter the reduction of 3 days. But year-on-year, a substantial reduction of 45 days, which is very, very important for the company at this stage. And my final message is related to the debt conversion to equity that's been announced. The news is that negotiation continues successfully, and we expect to come to a close by the end of the first quarter of next year. So all the formal steps are being taken. And beginning next year, it's going to come to an end, finally. Thank you very much for the interest in Metalfrio Solutions. Feel free to come to us at any time. Goodbye.