Ouro Fino Saúde Animal Participações S.A. (OFSA3) Earnings Call Transcript & Summary

Welcome to this meeting. Welcome to the Ouro Fino Saúde Animal to share our results in this [indiscernible] semester 2021 and accumulated during the [ year. ] I'm Juliana Matthes, and I'm part of communication team from Ouro Fino. It's a pleasure to be here again to conduct this meeting. [Operator Instructions] We have a disclaimer I will read for you. This presentation brings statements about future events that are subject to risks and uncertainties. Such statements are based on our measurements, beliefs and assumptions and information that the company currently has set true. Statements about future events include information regarding intentions, beliefs or current expectations as well as those of the members of the Management Board and company directors. Disclaimings according to the statements and the information about the future also include information about possible or presumed operational results, as well as a statement [ preceded by ] or followed by or including the words believes, may, will, continue, expects, anticipates, intends, plans, estimates or similar expressions. These statements and information are not guarantees of future performance. They involve risks, uncertainties and assumptions because they are related to the future events therefore, depending on the circumstances that may or may not occur, future results and value creation for our shareholders may differ materially from those expressed or implied by the statements made about the future. Many factors that we will determine, these results and values are beyond our ability to control or predict. So to conduct the presentation, we count on our CEO and President, Kleber Gomes; and our CFO and Relation Investor, Marcelo Silva. Thank you for present both. And to continue, now, Kleber Gomes. Good morning, Kleber.

Good morning, Juliana. Good morning, everyone. Good morning, Marcelo. We will start with our [ discussion ] 2021, and I start to say that we are the [indiscernible] because at this moment we will want to say that we will have [ busy management ] [ next ] months because started first [day ] 2021. We have opportunities to close 2 [ exercises ], positive exercise We had our [ positive ] record in 2020 and now we have new results in 2021. We grow in 2021, 32% and net profit. And when we saw these both years, we are about -- we had 46% in net revenue and 141% in net profit. We are very focused day by day to [ exert ] or [ propose ] to reimagine our health animal and the sectors and more [ the news ] to lead our 3 values: play to win, connect to the world -- play to win, take care of the people and connect the world. And this was the first action that we took at our management and new cultures and give us excellent results. We have people who are engaged and our team are doing the best that they can to get the excellent results. And we are showing the 2 years -- the last 2 years. And I want to reinforce what we have in the company excellent drivers [ on board ]. And we understand that this is very important, and there is no doubt that we have an [ necessity ] to have efficient [ as the ] livestock and [ production ] animals. And this is regarding the technology and the best process. We have 2 years, we had 2 years, very positive because it [ demos ] our exportation are growing, mainly Asia and the [ producers ] are -- requests [ modern ] technologies, and the company animals, the humanization of pets regarding the pandemic. Because of the pandemic hit, the families now are looking for more animals. And for the emotional side, so the pets are so important regarding this. And this marketing are growing regarding this, regarding pandemic. And so we force our drivers [ first ] in our business. I want to say too that more than these results regarding these last years, I have -- I'm more confident for the future [indiscernible]. And we are [indiscernible] our homework so hard. And we are follow our strategic planner, and this gives to us a certainty to have the best foot during this year. I want to bring through a little bit from [ our organization ] inside the company. At the first meeting that I made like a CEO, [indiscernible]. I replied that our intent is to have a best [ company ] to work with good products. And I think we are reaching this, and I will bring this to you now. We have he our [ COO ]. We are very proud because we are recognized for IHS Markit. And they made an annual valuation for the animal health of the world. So we are recognized like the best company from the Latin America and South America. We are very happy because of this. The first part of our ambition is this. We want to be more originated for the Latin America and South America. And besides this, I believe that we reached the financial objective. Only if we have the people that believes in us and like to work, and the people will care about our business. We have a good result. We turn to participate on GPTW, where we see a very good note. And recently we are elected the best company in [indiscernible] Sao Paulo state and the best company of the Brazil, the big industry in Brazil. We are participate again on this [ business request ]. And this shows us that [Audio Gap] We have some partnership that is a part of our pillars -- strategic pillars. I'm very happy to mention that our products involve launched this year, the [indiscernible] is a part or platform of biologics, but there is a lot of things in the future. But we launched the Safesui to attract the [indiscernible]. We are not doing another [ vaccine ] vesting, but the best vaccine in the market consider this authorization in characteristics and the vaccine Ourovac for rabies is a protection of the cows. And besides this, we reimagine that another thing in the marketing is [ Acertou Na Mosca ] Brinco Na Mosca that we have in our portfolio. So it is evidence that we launched this internally, working both incentivated through the partnership. And this week, we are distributing another vaccine in other pharmaceutical companies, and the laboratory pharmaceutical laboratory utilization of ours. We are sending our vaccine Supravac 10, our reproductive vaccine, that this is matched with our protocols. So the vaccine is a part of our protocols, and we are distributing another vaccine from Colombia, showing our force to them. Besides that, we launched, lining with our strategic planning, Conclue kit, a diagnostic kit for -- this kit is very aligned with our -- the best diagnostic care for the pets. And we have a partnership with a Korean company, with our marketing that we have a Conclue line to launch more things in this line. Now, it is evident that these 3 events that we bring to launch products and the best way to work. Now we have in the same line to present to you some strategic plans about organic movements. I'm very happy in 2021. We have our first acquisition. We have Regenera [indiscernible] of biotechnology innovation for stem cells, and this is very aligned with our objective to have your participation -- more participation at the companion animals of the total receipts of the companies, and shows the partnership that believes in our potential at the market. So it's an innovator technology and has the first product to register at the Agricultural Ministry. And I will explore this in other solutions and to make this a big business. So I'm very happy for this. And I cannot -- I need to mention about our expansion to international. This is for a long time, we have a strategic plan. We had Mexico and Colombia, and we're really happy because I saw they are engaged in line with us. We have some positions there because in Colombia, for example, we are the first [ the production work ], we have more space to have our [indiscernible]. And we intend to expand our portfolio because we are working very hard to have our register [ in their ] companies. So we are heavily consistent internationally. We are [ending ] with our current clients. In 2021, we reinforced our culture like our clients being the center of our activities. And we are working hard in this aspect. We are always looking for our clients to get better, the points to be aligned at the clients in the Latin America. We create in 2021 an area like client experience, and this will give us a good fruit. We have client segmentation now, and we are looking forward to understand very hard, very deeply our clients. And we are always looking for -- to have more prices, better prices to supply the inflation that will come. We are very involved at our ESG. We have this seal about [ Mais Integridade ] from the Ministry of Agriculture, but we are the first laboratory that received this seal from the ministry. So this shows our -- like we have ethical integrity about our work. So we are very happy about this, and beside that we have recognized about ABRASCA like best reporting of system [ problem ] for 2021. Regarding the company in the regularities for 2021, with revenues up to [ BRL 3 billion ]. So we are very transparent in our actions by using ESG. Besides that, I want to bring a little bit on visions. In the next future, we want bring a carbon neutrality at our production in [indiscernible]. A review, we had a review at our ESG, and we had 6 things, material 6 things to explore in line with our strategy, and we are working in a very good way. We are advancing in the digital platform. We create an area of [ trials ] in our company. So [ we trust ] in our business to understand better opportunities. And besides that, we are advanced some solutions, digital solutions that will put us more near our clients to try and to find more solutions, more digital solutions. And this will be launched in the first semester 2022. So 2022 will be a complex year like the other years. But 2022 will be inflationary pressure, but not in Brazil, but in the world. And you have some uncertainties regarding the political scenario in Brazil and in Latin America, and we will start now a complete moment. But I want to report that we are very -- we know about everything and we are always looking forward to be able to do everything to be better. We have a strategic planner, looking for the perfection. We have a [indiscernible] perspective to be to have our 2022 lined with everything that we presented. Now I want to finish the first [indiscernible] this first time. Thank you for everything. Thank you for the people that help us, our team, that's always working so hard to do better our clients. I want to thank you for our clients because it -- and our partnership because they are continue working with [indiscernible]. So I want to thank you. I'll talk more at the end of the section.

Thank you, Kleber. Now at the end of the presentation, we will have our Q&A? Some people have some quick questions at the Q&A. So we will stop all the presentation -- finish the presentation to start to reply. Now Marcelo Silva will present the results from our Ourofino. Good morning, Marcelo.

Good morning, Juliana. Thank you, Kleber. So let's start the results for the [indiscernible] 2021. We grow 24%, we're under a base that both [ 17% ] from 2020 is accumulated. There is not only growth from net revenue, but last 2 years are strong growth. But we grow with -- with a cost -- less cost, and we are very strong that in 2022, we will be continue. We have solid drive, consistent drivers are very good strategy. So [ the cheapest for our group ] thanks to our clients and I think for all the expectative for the group, we have a growth from 2020 24%. We had 2 years of the accumulated growth. We had some challenge. We had a lot of challenge in 2021 that pressured the margin. We bring this reparable scenario that impacts our costs on the importation rates and we have industrial pressure, mainly in the high dollar, the commodities price, some energy price and [ inflection ] price. So the seller request was 11% against 4.8% from 2020. So this is result for the inflection salary from 2022. This impacted the results for 2021 in May in the first semester because the [indiscernible] salary was the best in November. So this is necessary to [ equality ]. And looking at all of this, the company was taking another -- it's trying to have some points to take. We are working continually to have a good execution in expenses and to keep the rolling of the growth very strong. So the company is working 2022. And as soon as we grow and the companion animals, we bring a good margin to the company. The production animal, we grew 24% and 23% in the [ year ]. We continue to grow in the segments in [indiscernible], [indiscernible] and production. We apply our capacity to have good products in 2021. And we will start 2022 with this capacity. And this work [indiscernible] 50% of the sales force are contributed to us to gain high space in some segments that when we had [ first class ] [indiscernible]. So the expected [indiscernible] of the production animals are very positive for 2022. To companion animals, to talking about them, they have excellent increase. And 2020 is the -- in the first and second semester was more affected by the pandemic. We involved at the second semester when we compare the second semester from 2021. For the second meter 2020 is comparing adjusted [indiscernible]. For domestic 2020, we have 26%. So we have recuperated the loss at this semester. The reduction center, we need to say that we grew 26%. And in 2021, we give 21% [ marketable ]. Companion Animals suffered a lot of pressures, but we are increasing our margin. We are going to be keeping the margin. According to 2020, we need to be a normalization to make an analysis. As with international operations, we have the dealers line is at the strategic plans. We were 45% in the year, 32% in Mexico, Colombia and other countries and brings a little bit more of composition as position as we define in 2019 our strategic plan at Latin America. We had revenue and 38%, now [ 115 ]. And this reflected the results of the results about the launch of the new products because we launched 26 new products, and we have a lot of new -- we'll have a lot of new problems for just in the next few years. And everything that we did in development in Brazil, we are leaving -- taking for Colombia in Mexico and other countries of Latin America. Regarding SG&A expenses, we have 29.9% to 25.5%. commercial administrative expenses. The growth in the year is 4.3% less inflection. And here, the component of the expenses, it grew 24%. Expense -- administrative expense growth less than inflection. And this is a work in the company to have a less expenses. With research and development, we apply our investments, prove that we invest in research and development since the pandemic time. We are always saying about that we are looking for the efficiency. Mainly the investments in area of the new products and we are [indiscernible] in investments in digital transformation. So in the BRL 80 million at the semester and BRL 59 million at the year. The total expenses with research and development is showing another opportunity. We have a growth [ of EBITDA ] 33% -- 32%, 13%, and we invest more in research and development. We have BRL 172 million in 2021. And the financial results, I represent our expenses because they have a company about [ debits ] some contracts like FINEP. So our investment cost is under the static. And the adjustment revenue, just the net profit reflect the growth with financial results less than [indiscernible] and the management of the company in generation cash -- we generate cash of BRL 17 million in 2021. We have some payments of products, additional funds with the 2021, BRL 15 million of [indiscernible] we declare and pay in the next year. But we decided to [ stay ] and we made a plan [ exit ] BRL 5 million. So we have this [ province ]. So we have the cash in BRL 161 million, but bringing capital structure, very comfortable. We are working to have so long this business structure. We've finished 2021 with 78% of these [ benefits ]. We had [ growth ], but we had a big participation using [ FINEP ] and with alignment condition with our process. And this date and time, in the account [indiscernible]. In December, we had another contract with FINEP because we had a contract in 12 years, with TLJP was [ 35% ]. In 2021, we have BRL 58 million from FINEP and some about [ BNDES ] with about CapEx regarding the second semester 2021, is a comfortable and future financial [ situation ]. We had a leverage, a not so big leverage. So looking for the age of the investments. In research and development, we have [ BRL 79 million ]. Under the [indiscernible] from the years and we are expecting to keep this growth and to have accelerated the new products. And this is the most dealers from the Latin America. I want to thank you, everyone, and I want to say that we are very committed to have good management, always looking to generate value. Thank you.

Thank you to Marcelo for your participation. So as I promised, we will start our Q&A. We have some questions now. I will pass to Kleber to conduct this moment. Kleber?

Thank you, Jule. Thank you to everyone that may have questions. So we have one question now from [indiscernible]. He asked, with all these problems in the international area, how we are solving the [ company points ]. We are -- I want to say that we are attentive because we have some imported raw material from Asia. And Marcelo [ mentioned ] generation [indiscernible]. We have a decision [indiscernible] to have more stock, so even for the supply chain, even for the logistical areas. So I know this year, we take the decision because the change of [ stable ] always have been at the end of the year. [indiscernible], I'm having [indiscernible]. We always see that in our process [indiscernible] are looking for this repair [ surprises ], not only for [indiscernible] because everyone are looking for the increase of the prices. So we know about the pressure, but we can't wait and expect to have a good margin. We saw some space for fixed costs is the second part of the question of [indiscernible]. See, we saw excellent opportunity about fixed costs, and we have a very good structure team. But [indiscernible] mainly the company is very stricter and the question about the [indiscernible] capacity. We have one of the best sites of the Latin America was constructed looking by area was very complex, but we have a very good capacity for the next year. And we can make some change, some improvements in machines in the future, but now with the utilized capacity, it's not a problem to us. We have another question, I will pass to Marcelo. Marcelo will reply, a question thinking about should be in another field in the animal market.

Thank you, Kleber, thank you for the question. In 2019 [indiscernible] very stable. We make segment by segment to evaluate the uncertainties and to look at the opportunities. And we're looking for the animals, and we saw a lot of opportunities. The market changed a lot. The animals are more, more [indiscernible]. For example, we have a diagnostic kit and treatment for osteo [indiscernible] and osteoarthritis. And Regenera is the side in health that is booked by the welfare of the animal. We will offer the treatment with a good cost benefit for the [ tutors ]. So it's less invasive therapy without the complication from the operating, for example. And give to us a good benefit cost. So we believe that these markets will expand so hard in [indiscernible].

So thank you, Marcelo. And we have a last question. We have some reports from [indiscernible] to get more [indiscernible]. I want to communicate first to make the evaluation of the paper. It took 12.3%, and we decide the first moment about the financial institution to access first. So now this [indiscernible]. So I believe that we have a lot to present [indiscernible], but I believe that we don't have any more questions.

Thank you, Kleber. [Operator Instructions] We have a site. It's www.ourofino.com. There you can see our values and some development guides and our corporative packs. We are always in social areas. We are in LinkedIn, that you can see our practice. And we are in Instagram, in Facebook and it's a space to talk about our production animal. We have [indiscernible] Ourofino Pets to talk about companion animals. So I believe that we don't have any questions. So I want to thank you for everyone. Kleber, I'll pass to you to finalize our meeting. Thank you.

So thank you for everyone to participate at this meeting, and I want to give the invite for our event with investors, Ourofino Day. It's in 9th of March. So anyone will receive the details, but now is the invite to you to pass to you a new opportunity to be together and to [ pass ] more information. I want to thank you for all directors at Ourofino that are working hard. We have directors -- now, there [indiscernible] with professionals with a lot of experience, a young professional, [indiscernible] so this makes us strong, so I want to thank you for everyone and investors that will be with us at Ourofino Day. Thank you for everyone.