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

Hello, everyone. Welcome to the webcast of Metalfrio Solutions for the second quarter of 2024. I invite you to follow the slides that are made available in our website, which were put together for the purpose of this call. I will start with Slide #2, where we list some highlights for the period. We are reporting a net loss of BRL 9.8 million in the second quarter. That compares with a net profit of BRL 31.6 million in the second quarter of '23. If it weren't for the exchange rate variation of Euro, which accounted for 10.3% devaluation in this period. The company would have posted a pretax profit of BRL 5.5 million in the quarter. The net revenues grew 21.9% in this quarter in comparison to last year, driven by the recovery of volumes in the EMEA region and Central and North America, with Brazil posting a small drop. Gross profit in absolute numbers grew to BRL 94.8 million. from BRL 90.9 million, a 4.3% increase quarter-on-quarter. Adjusted EBITDA for the quarter was BRL 54 million with a margin of 8.9%. That compares with BRL 35.3 million with a margin of 18.3% in the same period of last year. Moving on to Slide #3, please. You see the picture of net revenues for the quarter. BRL 113.2 million in this quarter. That compares with BRL 89.7 million last year in the same quarter. As I said, 21.9% growth being 50% this year. Central -- I mean, South America with 50%, EMEA with 32%, North and Central America, with 19%. In the bars down below, we see -- you will see the contribution in the revenues per region. You see there, BRL 109.8 million growth in the EMEA region that served by the factories of Turkey and Russia. Moving on to Slide #4, please. You see the same picture of net revenues now for the semester. We go from BRL 970 million last year to BRL 1.042 billion this year. More or less same picture, growth in Central and North America and growth in EMEA and a slight drop in Brazil. In Slide #5, you see the performance in the quarter per region. Starting with South America, you see the drop of 11% that's due to a shift from our volumes for exports from the first quarter to first and second quarter, probably to the second half of the year and some reduction on key accounts especially in Brazil that were not replaced by non-key accounts to the full extent. In Central America, the picture is very good, growing 26.1% in the period, compared with the same period last year due to participation in the growth of some of the key accounts locally, and sales increases in the distribution channel for general purposes. For EMEA, out of the Turkish factory and Russian factory, you see there quarter-on-quarter a growth of 57.1% in revenues, which is a recovery from last year, in the whole region, especially in Africa and especially with key accounts in the region. In Slide #6, we see the EBITDA picture for the quarter. And here, there is a drop from BRL 62 million last year to BRL 54 million this year. And this is a combination of growth in Brazil, growth in Central America and North America and a drop coming from EMEA, mainly from Turkey, given the situation of the FX rates in comparison to the local inflation, which has affected our gross margins there. Moving on to Slide #7. You see the same picture for half of the year. Now EBITDA in absolute terms is about the same year-on-year. Margins about the same as well, 10% versus 9.4% and the picture of the different contributions region by region looks like the previous slide, where South America contributed positively, Central and North America as well and a drop from -- coming from Europe out of the factory in Turkey mainly. Looking at our balance sheet for the quarter in Slide #8, you will see the impact of increase in volumes that affects the working capital in general and the impact of the capital increase done by the end of the year. You see there in the line of total loans moving from [ BRL 1.5 billion ] almost to BRL 836 million, which significantly affected the overall picture of the balance sheet coming to a shareholder equity of BRL 438 million for the second quarter. In Slide #9, we will show the operational cash flow for the period. You'll see there at the line of OCF, a consumption of BRL 94 million. In fact, this is a combination of positive cash flows coming from Brazil and Mexico and negative cash flows or cash generation from the other regions. All in, combining that with increased interest rates, our net debt grew from BRL 567 million to BRL 703 million, which leveraged our leveraging figure from 2.64x net debt to EBITDA to 3.4x in the second quarter. That brings me to my last Slide, #10, where we are happy to show the good management of the working capital measured in days for the cash cycle. You see an improvement comparing quarter-on-quarter, year-on-year. I mean second quarter '23 versus second quarter '24, days of receivable coming from 92 days to 79 days, days of stocks from 81 down to 74, days of suppliers growing from 77 to 81. All-in cash cycle second quarter last year, 96 days versus second quarter this year 72 days, which is an improvement of full 24 days of working capital cycle. Thank you very much for your interest in the company. We will be available at any time in the company to clarify potential doubts that you might have. Goodbye, and thank you.