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

Hello, everyone, and welcome to the webcast of Metalfrio Solutions in reference to the third quarter of 2024. I invite you all to follow the set of slides that are made available on our website for this very purpose. I will then start with Slide #2, where you can see some highlights of the period, and we are happy to show the operational leverage capability of the company in this quarter. You can see there, net revenues growing 15.1% from BRL 462 million to BRL 532 million, whereas gross profit improved 26.1%. Gross margins reaching almost 20%, 19.1%, which is a very good figure. EBITDA growing from BRL 52 million to BRL 66 million, a full 26.6% and EBITDA margin reaching 12.4% in the quarter that compares with 11.3% in the previous quarter or in the quarter -- the previous quarter of last year. And finally, we are reporting a net profit of BRL 800,000, which compares with a net loss of BRL 28 million in the same period -- in the same quarter of last year. In Slide #3, we show the deployment of the net revenues for the quarter. You can see the same figures there, the growth of 15.1%, reaching BRL 532 million and the biggest contribution coming from the region that we call EMEA with BRL 63.3 million growth in comparison to the same quarter of last year. Central and North America contributing with BRL 5.1 million as well. And South America a little over BRL 1 million in terms of contribution for this quarter. Good performance of the Turkish organization, increased the participation of the EMEA region in the total pie of the company to 43%. And South America dropping to 40%, whereas Central and North America kind of stable around 17%. As per the figures accumulated in the 9 months of the year or 3 quarters. Total revenues reaching BRL 1.6 billion almost, coming from BRL 1.4 billion in the same period of last year, a 9.9% growth. And the contribution of the different geographies, as you see there, BRL 110 million coming from EMEA, BRL 45.6 million come from Central and North America and a small drop coming from Brazil. Brazil is facing a tough market this year with key accounts, especially postponing placements. And that's the reason why there was this small drop on a year-to-year basis. In Slide #5, we show the net revenues evolution per geography deployed by services and products starting with South America, pretty much stable figure, growing only 0.7%, which is a combination of a drop in products versus an increase on services, a drop of 7.4% in products, an increase of 22.1% in services. Reason being the non-key accounts customers offsetting the decline in demand for key accounts. Moving on to Central America. You see a 6% growth, reaching BRL 90 million in the period. Which is a combination of 11% growth in products and a very strong decrease in services of 41.1%, and that's due to postponement of the contract with ABI in Mexico, which is affecting the -- on a comparative basis, the figures for services. And finally, Europe, Middle East and Africa, growing 38.1% in revenues, reaching BRL 229 million in the quarter, which is a combination of 28% growth on products alone and 96.8% growth in services. We are strategically putting a lot of effort on the development of the service division in Turkey, like we do in other geographies. EBITDA for the quarter displayed in Slide #6, a growth from BRL 52 million last year to BRL 66 million this year, 26.6% growth coming BRL 11.4 million from South America BRL 3.2 million from Central and North America and a small drop of BRL 700,000 from EMEA. In terms of EBITDA margin, we are moving from 11.3% on the third quarter of 2023 to 12.4% in the third quarter of this year. In Slide #7, we show the EBITDA figures for the 9 months of the year. We are growing from BRL 149 million last year to BRL 164 million this year, growing by 10.2%. South America contributing with BRL 16.7 million, Central and North America contributed with BRL 12 million, whereas EMEA is posting a figure that is worth BRL 13.6 million in comparison to the same period of last year. In terms of EBITDA margin, the figure is stable in both periods with 10.4%. In Slide #8, we show the picture of our balance sheet effective at the end of the third quarter of 2024. The highlight here is the evolution of the robustness of the balance sheet for the capital increase that was made earlier this year, which dropped the total loans to BRL 754 million, which is about half -- 50% of what it was before the capital increase. And the total shareholders' equity reaching BRL 430 million by the end of the quarter. In Slide #9, our operational cash flow, I'd like to highlight two figures in this chart. Number one, the OCF, operating cash flow of BRL 151 million in the quarter, with big contribution coming from Brazil and Turkey and EMEA. And for the whole period accumulated a positive figure of BRL 73 million. In this case, a big contribution coming from Brazil with a positive cash flow across the whole year. And finally, to the bottom right portion of the slide, you see our leverage level, our leverage multiple measured in terms of net debt versus adjusted EBITDA, reaching a 2.73% figure, which is among the best figures we had over time. And finally, last Slide #10, showing the working capital evolution. You all know that we have a strong focus on cash generation. And you see the beautiful picture there on cash cycle, reducing from 90 days a year ago to 71 days this year. And that is an effort that is spread all over the regions, and that requires a lot of attention from the management to reduce our debt by generating cash in all our operations. Thank you very much for your time and attention, and your interest in Metalfrio Solutions. We are here at any time to clear doubts and answer possible questions. Thank you very much, and have a good day.