Unicasa Indústria de Móveis S.A. (UCAS3) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you for waiting. Welcome to Unicasa Indústria de Móveis S.A.'s conference call to discuss the results of the fourth quarter of 2021. Today with us, we have Mr. Gustavo Dall’Onder, CEO; and Guilherme Possebon de Oliveira, CFO and Investor Relations Officer. We would like to inform you that this event is being recorded. [Operator Instructions] Afterwards, we will hold a question-and-answer session when further instructions will be given. [Operator Instructions] This event is also being broadcast simultaneously on the Internet via webcast, and you may access it at www.unicasamoveis.com.br/investorrelations, where you will find the presentation for download as well. The slide selection will be managed by you. We wish to remind you that webcast participants may send their questions via webcast and they will be answered during the Q&A. Before proceeding, I would like to mention that forward-looking statements that might be made during this conference in relation to Unicasa's business perspectives, operating and financial targets, are beliefs and assumptions of the company's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events, and therefore, they depend on circumstances that may or may not occur. Investors and analysts should understand that general economic conditions, industry conditions and other operating factors may affect the future results of Unicasa and may lead to results that differ materially from those expressed in such forward-looking statements. Now I would like to turn the floor over to Mr. Guilherme Possebon de Oliveira to discuss the presentation.

Good afternoon. Let's go to Slide #5, where we have the highlights that will be the object of this presentation. In the fourth quarter, we had the lowest revenue growth. Same-store sales growth reached higher-than-expected results for the year and investments made in the export channel played a role in this expansion. Revenue growth could have been higher if it were not for the delay in the conclusion of projects that ultimately hindered the delivery of our product to the Corporate segment. On Slide 7 to 11, you can see the individual performance of each sales segment. Overall, all our brands delivered a significant growth in the quarter, the highlights being Dell Anno and Favorita, with a 34.5% increase. On Slide 12, we can see the 57% average productivity growth in the quarter for Dell Anno and Favorita soar, reaching BRL 117,000 per month, whereas New and Casa Brasileira grew 38%, reaching BRL 57,000 per month. On Slide 13, we show the evolution of our 2 given multi-brand points of sale and in the quarter with 203 exclusive stores and 106 multi-brand stores. On Slide 14, we can see that we closed the quarter with 76 Dell Anno and Favorita operations, 109 New and Casa Brasileira and 18 exclusive stores abroad. The apparent stability in the number of stores in the exclusive channels hides the qualitative changes that we carried out and that are still maturing. During 2021, we opened 21 New [ exclusive resales ], and we closed 26. Now turning to the operating expenses on Slide 16. We have a chart on the SG&A evolution, which went up by 30.5% in the quarter. The hike in payroll expenses was driven mainly by the headcount increase to support the U.S. operation. The average number of employees in the fourth quarter of '21 was 31% higher on a year-on-year comparison. U.S. operation expenses increased by BRL 1.9 million due to the selling and personnel expenses. Such as in the last 2 quarters, advertising expenses grew BRL 0.6 million, driven by the resumption of actions that were interrupted due to the pandemic. And the partial resumption of travel drove the BRL 0.5 million increase in this line of expenses. Marketing costs went up by BRL 0.4 million, mainly due to expenses related to revenue growth in the export market and especially those coming from freight and commissions. Consumer service expenses went down BRL 0.8 million, driven mainly by the nonrecurrence of provisions made in the fourth quarter of '20. On Slide 17, we have a summary of our 4Q '21 results. Unicasa's operating result was BRL 7.6 million, with an 11.1% operating margin and 14.7% EBITDA margin. Net income was BRL 9.6 million, with a 13.9% net margin. ROIC was 24.8%, 8.6 percentage point increase quarter-on-quarter, the highest ROIC reported by the company since its IPO. This improvement was driven by 2 factors, mainly lower working capital needs and higher prepayment by clients as explained in detail in the message from management and the quarter's release. During the year, we started the acquisition of machinery included in our strategic planning. The main objective is to increase the delivery of flexible products, aligning our manufacturing to the growing demand from consumers for more flexible solutions in customized projects. We estimated a EUR 14.9 million investment. Of total, EUR 7 million have already been approved by the Board of Director meeting held on May 28, 2021. And the remaining acquisitions are individually smaller, and they do not require a formal approval by the Board of Directors. We have already invested [ EUR 9 million ] for this year in these acquisitions and the next disbursement will occur as the equipment is delivered, which should occur between 2023 and 2025. About the destination of the 2021 results, management will be submitting a proposal to the shareholders meeting to be held in April to withhold BRL 17.5 million for investments and a dividend payment of BRL 7.1 million or BRL 0.1079 per share, a payout of 29% of the adjusted net income. Now I will turn the floor over to the operator who will start the Q&A session.

[Operator Instructions] [ Mathias Dietrich. ]

Guilherme, congratulations and with the best wishes for the position. And we -- if we look at the volume of sales, in the last quarter, it dropped 11%. I understand it has to do with the delivery problems that you mentioned to. Also and -- also deceleration of the market maybe. So maybe you could talk about the consumer behavior? And what about your supply chain costs? And there are almost BRL 2 million in additional expenses in the U.S. Is this a new one administered as financial expense? Or part of that has to do with investments? And will we be seeing a repetition of this amount again in the U.S. operations from now on?

Mathias, good afternoon. Thank you very much for your best wishes. And first, about the volume. This is very complex because it involves a lot of mix and prices and this makes the analysis more complicated when you look only at the percentage of variation. Overall, at the beginning of this year, your question about the sales, this has been improving gradually, meaning in February, January was -- it's tagged as late because people were late coming back from vacations. And there was also the problem of COVID and the Omicron variant, and it hindered the sales in January. You asked about expenses in the U.S. At the end of the quarter, we had some corporate projects that were delivered in the U.S., and this is the reason why we had higher freight expenses there. But when you draw a comparison with the previous year, you see also a growth in personnel expenses, the payroll expenses and so this is the reason why they are higher than 2020. Mathias, I don't know whether I have answered your -- all your questions?

Regarding prices adjustments and also the situation that we see in Europe now, do you think there will be an interruption in the chain because of the situation in Europe? And also the freight for the U.S., was there a very big and significant impact on your expenses?

Well, let's talk about prices first. In the message from management, we said that in 2021, we had 3 price increases and never before has really caused a [ setback ] ever since we -- our IPO, this was the first time. So there was the impact of inflation. So you can see that we already have quite a lot of pressure in our production, [ zooming in ]. And at the beginning of the year, we had an additional price increase. And regarding the situation in Europe and the situation in Ukraine, of course, we follow all the news and the impact on oil and corn and wheat, but up to now, we are not seeing any impact of that. And about the freight, we did have the impact, as well as the rest of the world. I mean, everybody has the same situation. But now specifically, because of the war, we have no additional impact so far. Thank you.

[Operator Instructions] [ Cardon Siliadan ]

Volumes went down quite steeply in the fourth quarter of '21. And do you believe this has to do with price increases or something seasonal subjacent to that?

Hello [ Cardon ], good afternoon. Reinforcing what I said in my answer to Mathias, volume has to do with the mix. This is a very big component. We have been launching more and more added value products consistently and this has an impact on the dynamic between the volumes. So the price increase has some impact on that, but the main factor is the mix.

[Operator Instructions] The Q&A session has come to an end, and we would like to turn the floor over to Mr. Guilherme Possebon de Oliveira for his closing remarks.

Thank you very much for your presence, and we wish you a very good day.

Unicasa's conference call has come to an end. Thank you very much for participating, and we wish you a good afternoon. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]