Rubis (RUI) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Rubis Q1 2023 Trading Update Call. [Operator Instructions] Please note that today's conference is being recorded. I would now like to hand over the conference to your speaker, Bruno Krief, CFO. Please go ahead, sir.

Thank you, [ Madam ] . Good afternoon, ladies and gentlemen. I am Bruno Krief from Rubis and I am talking to you with Clemence Mignot, already introduced as our Head of Investor Relation at Rubis. So we will present to you this quarter and then the Q&A section. So you received a few minutes ago, I believe very detailed PR providing you with a full set of data and very in-depth information on the quarter. I won't go over it, but I will just give you a short summary and try to provide you with some color on the past 3 months. So first, we notice or you have noticed stable volumes in the Retail & Marketing and while almost 50% increase in volumes for the Support & Services operations, it is fair to say that the Retail & Marketing has been challenged by a strong 2022 basis. We note also another increase in the gross margin during this quarter. By March, you will note and this is developed in the PR, an adjusted increase of 10% in gross margin -- gross amount in million euros and a 2% increase when including some potential ForEx exposure in Africa during this quarter. And this clearly in the Retail & Marketing operations. While in Support & Services, gross margin has recorded an advance of 64%. For sure, this achievement has been facilitated by lower fuel prices index, both year-on-year, 3% to 5% decrease but accelerating in Q1 versus Q4 with statistics showing an 18% reduction in price quotation. I would underline that the Caribbean region has managed to improve further its gross margin by 18%, thanks to optimization of logistics and managed to access to competitive supply. When taking the additional margin, which has been generated both at Retail & Marketing and Support & Services, so on the cumulative level, we found Rubis with an additional gross margin production of a bit more than EUR 30 million, EUR 31 million precisely, which compared to Q1 2022, this show a 15% increase. This performance is helping us to more than cover inflation costs that we are facing, as you know, here and there. These are fundamentally the reason why we can state that the company model is particularly solid. It is also interesting to note how the model has behaved over the past 3 years. I would -- but I would clarify of years of risk, uncertainties and big challenges in the emerging countries in Africa or the Caribbean in terms of GDP developments or threats in purchasing power caused by inflation. But taking together the core part of the business, supposed to be, I would say, the most resilient, i.e., the sum of LPG plus petrol station volumes, which together do present some 16% of total volumes of Retail & Marketing. We have shown again and again the formidable resiliency. If we compare these volumes together, again, LPG plus petrol station in '23 versus 2020, we are flat [ 4% ] If we compare '23 versus '22, 2% and you are well aware relative to the risks and fragility all these economies have experienced over this periods. In one word, Rubis metrics of niche market diversified by geographies and its mix of B2C and B2B customers makes it extremely solid. This was a general comment on Rubis Energie. Regarding our JV, Rubis Terminal, nothing to say but a buoyant activity during this quarter and the similar increase in rental revenues of 16% speaks for itself. So very good positioning and you will see the comments on the PR. On the new energies and more specifically, the photovoltaic business, we are in line with expectations with an 8% increase in the secured portfolio, while the pipeline, the development of the pipeline was up 6%. I must underline that the development team has been boosted since last year, very busy and it also includes dedicated team to work on development approach. I would simply deliver to you again that we are, given those numbers and in terms of volumes and profitability, we are in the position today to reiterate our trust in generating an increased net profit for the full year, of course, adjusted for goodwill impairment, which was recorded last year. So these are the main developments, I would like to talk to you about. And I suggest we start the Q&A session, given that you have had some time before to review it. I know it's quite long and indexed in terms of information but Clemence and myself are pleased to review it or to bring any clarification. Thank you.

[Operator Instructions] We are now going to proceed with our first question. The questions come from the line of Emmanuel Matot from ODDO BHF.

Yes, do you hear me?

Perfectly.

Three questions for me. Maybe can we have an update on the situation in IT first? Have you seen some improvement or not at all? And are there some further risk of goodwill depreciation in that country for Rubis. Second, you are mentioning first development of Photosol outside of France in Q2. Does that mean that you have been successfully in finding partners to promote that business? Or are you going to do everything, I mean, organically without any partners? And third, maybe about M&A, how is the pipe for acquisitions regarding Rubis Energie? Do you have some opportunities or not at all?

Okay. These are good questions, which are encompassing the activity of the group. IT, I will be short. It's a stability in the cars and no specific news from -- compared to what the recent comments last March when we disclosed the full set of results. So this is where we are. And it's true to say that volumes were down during the first quarter by 40%. The good news is that the unit margin was increasing. So that's out of lower volumes. So this is where we are today. We don't have more visibility on this 4th of May compared to when we talked to you last March 16, this is where we are. Regarding Photosol, this is true that we have started looking at developments abroad. And as presented to you, we have a dedicated team to look at that. We are looking at Spain and Italy currently. And in Spain, we have put in place an agreement with a developing team, and we have set up a sort of partnership with local players to work on the Spanish operation. So the routes that we have chosen is not to purchase tickets, new tickets, purchase a company with the associated goodwill and costs. But it's more partnering with local specialists entrepreneur involved and has good experience in the development of pipeline. And we have an agreement to remunerate them with the various milestones. So this is when we have effective results, effective -- which are the milestones, but we can deliver -- showing that they have delivered and that we can pay for the work we have achieved. So this is the route we have chosen. We are also looking at developments on the Italian Peninsula. And for that, we have been invited to [indiscernible] To look at a portfolio of operations in an early stage. So we are in the course of valuing these operations and see how it can -- we can operate and it is going on with the construction of this pipeline. So this is where we are. So no purchase of company that's partnering with existing players on the development side. Last question was M&A in general. I'm not -- and you are witnessing that's like us, the market is for M&A. And put aside the photovoltaic business. But I think you were referring to the historical business, the fuel distribution, it's dry. It's quite dry currently. There must be a sort of cyclicity, but we are in the low activity cycle probably in terms of M&A in this sector. Nevertheless, but we have reached a certain critical size in all the countries we are present in. So this doesn't jeopardize whatever ideas or existing position. And of course, if there are some opportunities to complement or to enter new geographies in our neighborhoods, we will size those opportunities. But these days it's very dry. So this is Emmanuel, how I can answer your question.

[Operator Instructions] The questions come from the line of [indiscernible].

Yes. Hello, can you hear me?

Yes, perfectly.

Okay. I have 2 questions. The first one would be about Photosol. I was wondering if you could give us the sales growth on a year-over-year basis just to compare the cash evolution. And the second question would be on the outlook, just to understand the hypothesis on which it is based. And basically, I was wondering if you were expecting the same growth in adjusted gross margin, I mean a kind of 10% growth in adjusted gross margin in the coming quarter? Or you expect to slowdown this pace?

You mean the Photosol again.

Yes. No, no for the global company.

For the company [ geography]. Okay, Clemence, if you want to answer on the Q1...

I'm not sure I understood perfectly your question about Photosol. You want Q1 next year?

Yes.

So Q1 2022...

Since this was not consolidated.

It was not consolidated but the revenue I have here in my figures are about EUR 6 million revenue.

EUR 6 million.

Does that answer the question?

Yes, yes. And how many megawatts installed?

Wait a second. We'll come back to you.

I'm not sure I catch perfectly the second question. Can you repeat?

Basically, my second question was, do you expect the adjusted gross margin to keep growing at 10% in the coming quarter like it did in the first quarter of 2023? Or do you expect a slowdown?

The 10%, it's an adjusted number, the number which gives more color is the 2%. The 2% is taking the adjusted number of 10% and incorporating the potential ForEx losses and notably in Kenya. As you know, Kenya is in sort of currency crisis currently. So we have some potential losses which are in the P&L, but of course, below the margin and EBITDA in the financial results. And as a specialist, you have had the opportunity to look at the 2022 account. There is a sort of discrepancy today between the margin or the numbers at the EBITDA level and the ForEx elements. So that's why I prefer to giving you the full picture and incorporating some extent the bottom chart ForEx impact within the gross margin. So you have here 2% which takes into consideration the ForEx risk fully. And this is -- it shows again this kind of resiliency of the gross margin, we can come back to the fundamental of Rubis. It's a way to show you again the stability of the gross margin. So that's why don't expect the 10% to be there again to be renewed. We have never experienced such volatility in gross margin.

I have found the assets in operation at the end of March 2022 for Photosol. There were [ 313 ] megawatt pretty well through.