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

Hello, everyone. Thank you for joining us at the webcast related to the first quarter of 2024 results of Metalfrio Solutions. I kindly invite you to follow slides that are made available at our website, which were made for the very purpose of this call. I will start with Slide #2, please. In this quarter, with the conclusion of our capital increase, we are able to announce a net profit for the whole organization of BRL 1.1 million, which -- if it were not for hyperinflation, noncash adjustment in Turkey, it would have been at the level of BRL 10.8 million. Other than that, in spite of a revenue drop of 7.8%, the company managed to adjust itself and generate better results. So we are happy to announce in spite of that volume drop, a gross profit increase of 6% coming to the level of 18.8%, which is a very good level for the whole industry. And in terms of adjusted EBITDA, the growth was 25.2% coming to a very good level of BRL 44.3 million for this quarter. Now I invite you to move to Slide #3, where we can see the net revenue per region. Starting to look at those 2 pizzas above. You see the growth in participation of the North American operation, especially with the good performance of our Mexican factory. In terms of the whole organization, moving from 15% of the whole total revenue to 20% from BRL 69.8 million to an impressive BRL 86.9 million in this quarter. Brazil going from BRL 182.9 million to BRL 192.4 million, whereas Turkey dropped from BRL 218 million to BRL 155 million, which drove the company all in together from BRL 471 million last quarter, the quarter of last year, to BRL 434 million in this quarter 2024. The drop of Turkey that you see there, it's a combination of local macroeconomic conditions but very much because of postponements of deliveries that took place in the second half of the month of March. That will be pretty much compensated in the second quarter. Moving on to Slide #4, where we can see the evolution of the turnover, or the net revenues per region with the split between Products and Services. A beautiful picture for South America, consistent growth to the left-hand side of the slide, consistent growth in Services, growing almost 20% in the quarter, whereas Products remain stable. Looking at Central and North America, beautiful performance as well for the organization, growing 24.5%, mainly in the Products sector, whereas Services dropped substantially 35.5% -- 35.6%, I'm sorry, quarter-on-quarter for specific occasional reasons of, again, postponement of orders from customers. As per Europe, Middle East and Africa, regions served by our factory in Turkey, everything decreasing in comparison to the same quarter of last year, as earlier explained. The projections for the second quarter is far better than what we see in this quarter. In Slide #5, now, you can see again, the evolution of net revenues in the quarter, the split between Products and Services. But now we bring also the picture of the gross margins. And as you see there, gross margins are improving in terms of Products from 14.8% to 16.5% and in terms of Services from 23.6% to 28%. In Slide #6, we are happy to show the full extent of the impact of the capital increase that was concluded in this quarter and I'll call your attention to the total shareholders' equity growing from a negative BRL 330 million by the end of the fourth quarter of '23 to BRL 423 million positive this year. Therefore, we are able to show a much stronger balance sheet which opens opportunities in different sectors for the company. At Slide #7. I will call your attention for the OCF line, which is operating cash flow, of BRL 17 million, which is due to a huge positive contribution of the Brazilian operation. And a small dilution from the other regions, but coming into this positive figure of BRL 17 million. And to the bottom right-hand side of the slide, the reduction on our -- of the leverage of the company in terms of net debt EBITDA from 6.4x by the end of last year to 2.64x now by the end of the first quarter '24. Now moving on to my last slide, #8, where you can see the changes in working capital. The overall picture show stability below the level of 90 days, which is a good thing, a good result. But in between, what's worth mentioning is the growth in stocks, in inventories that was due mainly for the postponement of invoicing that took place in Turkey in the second half of March, as I mentioned earlier. That brings me to the end of the presentation. Thank you for your interest at Metalfrio Solutions. And for any doubt, we remain here available to clear them through the IR section in our website. Please feel free to get in there and get in contact with us. Thank you very much. Goodbye.