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

Everyone, welcome to the results from third semester from our Ouro Fino Saúde Animal Participações S.A communication team, and it's a pleasure to be here with you guys, so we can conduct this meeting. This transmission is being recorded and it's going to be available in our site. And our relationship site with investors re.odofino.com and also in our YouTube channel, YouTube.com/Ouro Fino Saúde Animal Participações S.A. [Operator Instructions] I'm actually going to this presentation brief declaration over events or future events they are subject to risks and uncertainties. Such declarations as a base, as a position of our administration and information from which the company actually has access to declarations over further events, including information over our intentions, beliefs or expectations or current expectations just as the ones from the administrative board and the company factor. Notifications related [indiscernible] information over the future always include information over operational results that have been expected, such as declaration has been preceded followed or include words, believe, will, is going to continue, predict, intense, plans, estimates or similar explosions. Information on the declaration over future are not a performance guarantee. They involve risks, uncertainties and suppositions because they are related to future events, depending, of course, of our circumstances that may not or may occur future results and value creation for shareholders are actually going to have a significant way from those expressed or suggested for declaration regarding it. Many of the factors that will determine these results and the values are beyond our capacity or our provision control. So we can conduct the presentation. We can't with the presence of our CEO, Kleber Gomes of our involvement Director and new business, [indiscernible] and our Manager, assistant Manager for investors, Bruno Menegazzo. So we can start our presentation, I'm going to have the Board of the CEO. Good morning, Kleber.

Thank you a lot. Thank you, everyone. [indiscernible] is going to be absent [indiscernible] at home today, but is actually watching us. going to make the presentation over with Bruno. Everybody already knows him. I'm happy for trimester, it's been very productive our quality with positive margins part of what we had aligned before we had a very productive second semester very good one and a positive second trimester. And we've actually been very steady. Our purpose actually delivered a very good year just as been years of '20 and '21. And in the semester beyond a very good result that we are following it very good actions with very expansion of knowledge base, and we can explore it a lot during the presentation with you. But first of all, I'm going to make a few highlights. First of all, we're a company that actually focusing about Animal Health and Agrobusiness is now actually our main point. And we've got the necessity, the reinforce all the positive actions inside the [indiscernible] inside the market. We've been building a very positive market campaign with regards to positive we'd actually been working a lot on our turner expertise regarding marketing, we've been to enter the fair where [indiscernible] and also the stack for the power main campaign, which means to bring out for the general public in general, not only the agri business, but for the people in general, the importance of agro in our daily business and everything that we do we see agro so we're going to make available a lot of pieces, but a company that there's no actual release date to actually make it and so everyone can help bad on this positive politics that we are actually in sight. And we have actually inside Brazil. We have a very pet participation in [indiscernible] in the market, and this kind of initiatives are going to help us further this cause. We've got a lot of people who've gotten knowledge in the line of what's been already going on regarding the people that have been involved inside the market and the weather that we have received and HPW ranking that we have participated as well. We took first place in agro category the third place in countries out of Sao Paulo for the national category. We've been inside the scope of 1,000 9,000 collaborators inside companies for 150 best companies for the market. When it comes to earn knowledge that we have assembled. It's something around more than 100 companies that have been actually taking part of this fair and to be top 3 inside these companies is something really actually to feel proud of even so when you're actually being inside of the top 50 position inside the presentation. I'm pretty happy with all the knowledge that we have provided all the people and experiences we've had, the practices that we have been working on inside our databases. We have the renouncement from POC, we have been renowned, but I'm in a very cool way for a very good place actually in pharmaceutical field to work on. We took 13th position inside of all companies and is ranking it's a very good action that number between 8 positions between the category for big enterprises and the best one and pharmaceutical sector. Inside these animal pharmaceuticals and the human pharmaceuticals market, we've been actually taking a place so we've been actually very happy with the first place. We've been working on the open innovation sectors while seeking the [indiscernible] of the world in a basis that we can allow us to produce [indiscernible] in the market. We are one of the biggest companies that make connections with standups in the whole market. We took second place in that ranking when it comes to agribusiness. We have embeds well it was the bar for other business in Brazil and we are ahead of many bigger enterprises inside the business. We have already made over 45 contracts with many start-ups. Considering the recent acquisition from the technology platform from stem cells in the business we're very happy with the condition of our recent product releases we had throughout the year, many very good products, we're going to recalculate all these things along the meeting, but I wanted to highlight the most recent releases that are [indiscernible] energetic it's pretty innovative. The first molecule from benefits being already been market in veterinary market. And we counted with the help further our cost, to get the approval inside our market. This is one of the many solutions that we have come in the market to make it useful. Now we have a natural audited antibiotics that is actually 40% natural and we've been doing a very good process with our Asian enterprises inside the business and a strategic business that we have and these additives will make a trend for rational use for probiotic use in the production of birds and akin a very complete line. It's already been available and a long time is going to gain some relevance in a market gross profit. And at the end, but not less important, everybody knows we've been communicated with the market social evolution, it's been a very exciting process we had amazing features that we had Mitsui in Japan, along with opportunity, we had a very nice opportunity with ones. We're very happy to receive a consortium from Mitsui. Century over age from Mitsui, one of the biggest in Japan on the biggest in Asia as well. It's a company with more than $120 billion in investment in more than 500 units working in relationship an intense thing to actually come about. We have the honor to actually be renowned at a market as a vehicle as a new division in animal health care, and we're being pioneers in this area and it's a very good thing here in Latin America. We tend to expand our business to Asia, Europe. We have a very good result, a very good response on that over the market. Worldwide, and we've been expecting very good results in mid long term. Our summer time has been very turbulent but in the way that we like, a very smooth way and a very rush with excellent productivity, knowledge being spread out. But as always, we're always planting into the future. We work in a very aligned with all the sectors inside us [indiscernible] the patience that we need along the way. Thank you very much. I'm going to give the word back to Ju, so she can continue with the presentation. I'll be back with you questions Q&A round.

Thank you a lot, Kleber. Remember, at the end of the presentation, we're going to open for a Q&A round. So you can make a question since now right over here in the Zoom section on the Q&A sector. We've been counting with Angelo Melo, the presence of our Director for positions for new business to present the new solutions of our portfolio. Good morning, Angelo.

Good morning, Juliana, everyone. we're here again to talk about releases of new as we have committed before on the beginning of the year. Portfolio management and the release of new products is extremely important for our rigid plan because they are the source of growth and gross profit, it's the most important thing. In sort of in a day, we've actually been bearing 14 new products that has already been released. The last product being natural add by the end of this month. But we've done with 2x the cross patent product for nominee product control. We were the first in the market actually to release this product ever, the release being made after the second semester and results are actually being fantastic what we see in the market. We've been actually being renowned in the market for this and it actually is a beacon for a good initiative when it comes to animal produce owners and questions of produce safety and quality and technical services. So it's a very important market that we need to point out for. We also released a long the third semester supplements for animals. We've been actually releasing 6 products of any supplements are inside the concept of troponin as a concept what moms and father of pets do the same with their human kids, they would like to have the same kind of treatment with their pets. So supplement markets, it's a very prudent market when it comes to human health care, and we are actually trying to replicate the same scenario to animal market. It's a very powerful burden for growth inside of business inside our strategic plan because it's a very expanding its many very fast market with few players, few segmented players in it. So we're pretty trustee that these 6 products are actually going to come with a lot with new things coming over [indiscernible]. At the beginning of the third semester as well, we've been with the release of the product with this bene product indicated for extreme primly over presurgery and postsurgery, completely handled by the veterinarian. It's got an indication for cats and dogs. So the same kind of product actually covers both a species, which financially for us is more important because it helps the opportunity of actually gross profit increase. The thing is the veterinary can actually work with the same product for both species. It makes the lives of our clients a lot more easier, the most important thing [indiscernible] We're the first company ever to bring [indiscernible] to the market that we can actually show our capacity to innovate, to detect problems and actually direct this products to the animal world and another very important thing that this specific product means innovation and inside a line of market for FastTrack, and we have the Ministry of Health actually looking over this. There is a few nuances that needs approval inside a product in a worldwide market, and this regulation system actually make a fine point. They made a product deep inside the rules and side of fast track norm and [indiscernible] product data has actually been inside of the industry. The whole process actually took almost a year, and 11 months and a few days. We almost took 2 years to make everything viable so we actually shown a lot of expertise in terms of time consuming time saving releasing the specific product. And for the last bit, we're actually releasing now this month, the natural additives, nonantibiotic additives [indiscernible] it's a globalized market worldwide. Brazil is the biggest exporter when it comes to this kind of product pig meat and chicken meat, so we're completely focused on that market. So these products are actually being in line according to the market currency side and the demand comes to antibiotics. These products have been developed inside the concept of client side the core inside committee for specialists and not the other apartments included. So we actually wanted to make sure that their demands were met when it comes to the performance additive market. It was a market that UC used to have the use of a lot of antibiotics in the market, but now it's been reusing. So we're trying to make it fast in a way possible and more effective. So we actually met your necessities previously were not met with the clients. And starting from that, we actually design these products along with them and we're going to look for other global partners to actually to make our values connected to the world. So we have identified partners around the world in Asia and Europe, and we're releasing 6 products. These products are probiotics, essential oils, combined products with oil organic assets which have no prescription or which have no bureaucracy regarding the release date of those products. They're actually compromised to meet equilibrium inside [indiscernible] inside the animal world. These products have been developed with our global partners. We've worked with 3 Brazilian universities, [indiscernible] and London University as well. At these universities we made 8 clinical studies and at several stages when it comes to growth animal stages and the positioning that we have, we created along with our clients ,there was an excellent performance inside all these stages and what we have predicted inside our design, our project. So we've been bringing a full package when it comes to technology and how to use this technology in the field and how to make productivity increase in a general. So finishing here before getting back to Juliana we really wanted to reinforce our commitment with innovation of product release that we talked about in our [indiscernible] we're actually releasing 40 new products. Thank you so much. Back to Juliana.

Thank you for your participation as well for your presentation as well, for your presentation. Regarding to our portfolio, we come to our results. Today, we've actually been accounting with the [indiscernible] making his friend is here with us, although he's pretty known to all of us, all of the team, Bruno is our Financial Manager and relationship with investors, Bruno welcome. Thank you so much for your presence, have a good presentation for you.

Thank you, Ju. Thank you, everyone, good morning, let's talk about our financial highlights that we have. It's pretty important that we wanted to bring to you guys overview of how we're standing in financial terms since we made a strategic plan in 2019 and we had late 6 work fronts and actually been waiting and being delivering them to the Director's Board with very good numbers when it comes to releases, with the commitment with products such as like [indiscernible], but mainly here, I wanted to provoke out the financial outcomes that we had Grasse. We had a 13% growth since 2019, and there's a new cycle that has begun. We have an accumulated growth actually along the ease years for 70%. Our gross profit has actually reached more than 51% showing the resilience of our business, a part challenges that we had throughout the market for the last calls that we had and generation for the profit is actually the operational profit is more, there's been on many million on that the stimulated norms with that, we can bring Ouro to boost to more than 1.3x from midpoint. The loss calls from 10% a year under selling underselling when it comes to retaking the UNAS make for a very elongated period instead of 79% when it comes to long term. A few of the results that we have accumulated a 70% of growth of the company along this month since 2019 represented a growth of 19.5%. The management of rentability and site average pre master has actually made a dense 19% growth for longer years and at a very as also for the other ones. Going to our ETUs, we have production animal sector with very expressive growth numbers as well since 2019 has come up to 66% with a gross profit recovery when it comes to the terms, apart from all the logistic challenges that we have and this third trimester, we made ahead of the stale production period, and it's always good to bring that up on our talks because it's been a successful that would help us on our overall numbers. And about the 9 months that I have supported before in our talk, we still have the also vaccines that are being sold on the second trimester, but are now on the fourth trimester for the subsequent trimester. We have sales that occurred in the last few days is according to what we had foreseen in our business or company animals we had a very important growth from trimester to trimester growth mean expected same 2019 in the house of 30%. And we have supplement as well outside our market to the diagnostic kits, just like we pointed out last year, we've received those kits we've made sales. So we're working towards an lining here although we're placing challenges in set of families that we have committed before instead of actually going to the pet market going for other [indiscernible] that do not have the same kind of development for the past year, just like 2020 or 2021. And the other side of the understander drive, but a conductor is something very valid given the fact that our products have been very well versed in the market and recurrence actually from the supplement part superficial [indiscernible]. We've always committed a lot of challenges that we had it wasn't different this trimester. When it comes to volatility, it's a very high volatility. On the other hand, it ended up impacted the gross profit boards have been dropping in a local market as well inside, our expectations are our nations, especially when it comes to Colombia and Mexico. Mexico, we have been facing a greater challenge, but for the release date, we have a macroeconomical scenario and the unfolding economical issues in [indiscernible] needs a bit of attention. On the other hand, our growth from other countries although the current scenario that we're facing right now has been very positive, just like we have committed before for a matter of container occupation, we've been actually replacing this a very good strategy inside the market. This DNA inside the company, SG&A instead of what we have of the effort that we made through the administration of the minis and actually lowering our numbers for the production, even for the whole year, even if it's compared to the trimester, even when it comes to the site from last year, we still had a betterment from inflation even though we had a very negative scenarios that are political scenario even though with all those challenges, we managed to lower the cost of productivity inside our company. And when it comes to PND, we've seen a slightly raised, but when it comes to actually making fast for the acceleration of the products inside the market, Kleber and Angelo have been working on a lot. And we've been doing a very good margin for the products released Juliana has been helping a lot. It is the product for P&E together, altogether, they actually make for the company's growth that we have something a bit more tangible instead of house of 8% when it comes to raising it above the average of what we have in historical for 7.5%. But inside our passing plan for the new technologies program and advanced plans that we have been investing in spite the company. In the end, we've been shown resilience numbers including if we take it to make a comparison for the past 3 years, and how was 79% now we have 120% for EBITDA accumulated since 2019 that shows a lot of something that we had commented before when it comes to strategic projects for commercial synergy the many positive things that actually made a result in our company, which is the final result of the growth that we have, and we're pretty excited for the rest of the year with the results that we have achieved so far. Important to actually mention when it comes to gross profit again we've been doing a very good job which is worth mentioning, the exchange of our debt first, we had an operational issue [indiscernible], even though we had a very good stockpile going on outside our warehouse before Marcello and I have actually told us last year, we did not accomplish all the business inside the market for the ECD, it's a strategy to actually leave a more flexible place inside a company, so we did not even have to go through this economic crisis the democracy involved, out of the company was not a very good thing. And now, at first trimester we actually make for something around 74 million and the city market. And look for the next year, we actually make it a for semester. We hope to reach the house of capitation for 100 million so we expect these numbers to be slightly positive until the end of the year. The only that we have exchanged and optimized process inside the NDS for long-term negotiations, but we actually showed that we made actually, we were able to meet the exchange in a very successful way and that's [indiscernible] in this graphic over here the percentage of [indiscernible] that actually been grew 66% and made it now 78% inside a gross profit that we had, doing only a fourth of what we have inside our debt inside the company, 12% inside our average selling along the year 2022, where we can actually have an average cost in the house of 10% that it's a product of the strategy and any of our company, and we're pretty excited about it. And a good thing about the profit generation actually is it Bruce administration inside our company along the semester for the year, although we have a very hype logistics and lot when it comes to the distribution of products. And our agent Capital is making for a depth growth class been composed of 79% on the year and 44% above 5 year expense, but when it comes to the initial income from BNS. We're going to evaluate even more. It's been aligned to the planned strategic of the company so our development in research apartment can be regulating further but requires the capital structure when it comes to a long-term proposition, so we can actually are trying to negotiate this but more than management and everything else. [indiscernible] a question about it. Give back to Juliana so we actually can begin the Q&A route. Thank you so much for the comparison.

[Operator Instructions] We already have a question in our space here, and I'm going to switch over to Kleber so he can conduct a specific moment Kleber, the word is yours.

Thank you Ju, well, we have one question. Please could you shed us a light about any changes that have been received in the first few weeks from Saude, the other side business capital and meet long-term decided company for the business that we been a very recent operation yet, but we already have a relationship with Mitsui, there's been a negotiation with the shareholders inside of the company that actually has been a very long relationship with in terms of licensing, but as soon as this reduction was actually ended, and it's been very well received in Japan. And for webinar media enterprise as well with many other professional contacts in touch with us we didn't have time yet to explore many partnership opportunities. We've already been receiving poles from Mitsui as well. We're not still discussing about the future prices inside the market, but we have a very good perspective on it. We have some meetings scheduled with some Japanese companies, along with Mitsui to actually explore the potential of what we have. So this is going to be something very dynamic. Auto networking is actually is going to be worked on. I myself is actually going to Japan at the beginning of the year, so we can actually understand Mitsui, so we can have the opportunity to leave our director board so we can have the opportunity to have to have someone working on the place and working on the bureaucracy inside the company in there that actually work and look for opportunities and we have the windows above yes, so we have. It's a very important moment for us to manage short, mid or long term, we'll bring ODMs we have I'm not really sure about the technology, about the licensing and the bureaucracy whole process, but it would be a very positive thing. And I hope that we can explore but a good partner with Mitsui the exponential of the quality of our product inside Asia as well. Any more questions, I don't have any questions here showing up in the chat, if there's any questions available, you'll get the board to Juliana so she can conduct, Q&A round.

Give them more couple of minutes so everyone can actually [indiscernible] if there's any more questions to be made. While I really wanted to make a few notifications. The investor team is actually available to everyone for any unlikely that you guys need of on the transmission and actually, for a few days as well. We have a question from Bernardo Carbo I'm actually going to answer it.

Thank you for your question. I'm actually going to translate it to everyone about a competitive scenario that we have. The competitive scenario issue is something pretty fitful. Actually, we've been have global players inside of the market. They've actually been a printing over a market that's been on about the whole world. The protein production to the market as lives actually searching for keeping for the better results in general terms, what we have available here in the market but less trimester for a bit more consolidation movements that we have in a sector of distribution and logistics for production animals in general and a few transactions over it. You are based in investment acquiring participations in the market, important participations portable leasing sector. It's a very polarized market. It's been directly to the [indiscernible] of the production in agro business as well, very strong groups are actually involved in it. But inside a very pulverized context, it's been developed like this so we had a few moments as well. And what we understand is in these movements that we will have improved the growth inside the supply chain as a whole, there's been another question from Gustavo here. According to field research are you actually guys looking for the projection of increase rate of your production? When it comes to specific market is a very good market been growing a lot long years of 2020, 2021. We had expected a kind of a finite market, they have come from create their income, but a distribution with when it comes to the restaurant sector, the beauties it's been pretty channel to animal. The reduction in tax was actually being reduced a lot. Taking a step further on for the next year, we expect the market to actually get back to normality, it's a very positive thing to actually been told by we expect it to be something like 15%, 16% inside of the market, and we expect this kind of growth to actually have a net so it is a very good market when it comes to the income always been positioned when it comes to the solution terms and in terms of an works recent releases that we have regarding supplements has been pretty good. We also have our platforms our technology platform that's been already presented to the customers as well on outside of market. And we're always trying to reinforce our team. We don't have a great movement in terms of staff increase something that's always been inside our planning our strategic plan inside the company, but I thank you lot for the question onto the next now. I believe there's another question in here. Could you please give a further explanation about biological products? Yes. We could mention that we have a very hard work and a finalization of specific stages and the development of a few vaccines. We managed to actually create pilots from our plans from organize if we need to do inside the enterprise rebadge that need to be concluded by the implemented organs. So we can write so we can actually do the dossiers for Health Ministry so that's almost the final stage of inclusion of what we have here regarding the super [indiscernible] and we actually advanced a lot in that field, so we've been walking with this kind of engagement. The release of [indiscernible] vaccine from [indiscernible] And we have advanced a lot this year with a lot of important vaccines. It's important you your question was a very important thing explanation.

I think we don't have any more questions [indiscernible] we don't have any so much the gentleness of everyone who actually made questions. Remember pointing out that the transmission is going to be available on re.otofuno.com and in our 2 channels, youtube.com/Ouro Fino [indiscernible]. Inside YouTube, you'll find materials over this moment, our TV programs, Ouro Fino Saude, program, [indiscernible] turned on for Basics. I'm going to send the word over to Kleber to make your final considerations. And thank you for the opportunity to actually being around with you today.

I just wanted to point out 2 very important things, may last October, we had released a corporate platform for development issues it's a base training for this more modern modality, something like of our [indiscernible], but auto train is actually being listed on videos. And beyond that, we're actually releasing it's a very recent thing our first secret for Veterinary and industry inside of pad. So we have a channel have actually been agreed with 16 25,000, 182,000, that would be the correct number of producers mainly the lesser products who are actually facing when it comes to access ore and support types they can actually get within work hours in touch with a specialized return area to actually get orientation. So it's a very competitive thing is art out of market, and I believe they're going to have the right kind of support. And at the end so that were actually motivated to look forward for the fourth semesters. We have base elections. We have faced we World Cup, but we've been working under any kind of context. We've been available for or you guys also bringing us very good results. We've been very strong for the second semester. We closed the year in a very successful way. Thank you everyone for the trust for the trust that you've spent here with us. See you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]