Unipar Carbocloro S.A. (UNIP6) Earnings Call Transcript & Summary

Good evening, everyone. Welcome to Unipar Third Quarter of 2021 Results Conference Call. With us here today, we have Mauricio Russomanno CEO; Christian Schnitzlein, Chief Financial Investor Relations Officer and IR team. This event is being recorded. [Operator Instructions] This meeting is being broadcasted live via webcast. through MZiQ platform may be accessed in Unipar website at www.ri.unipar.com/ir, where the presentation is available. Participants may view the slides in any order they wish. The audio file will be available shortly at company's website after the event is concluded. [Operator Instructions] Before proceeding, let me mention that forward statements are based on the beliefs and assumptions of Unipar management and on information currently available to the company. Future considerations are not guarantee of performance and include risks and uncertainties and premises because they refer to future events and then depend on circumstances that may or may not occur. Investors and analysts should understand that conditions related to general and sectorial aspects may affect the future results of Unipar and may lead to results that differ materially from those experienced in such forward-looking statements. Now I would like to give the floor to Mauricio Russomanno, who will begin his presentation. Please, Mauricio, go on.

Thank you, Raquel. Good evening, everybody. Welcome to our conference call of 3Q '21. Our company registered in this period in 9M '21, operational financial positive results. And this performance happens because of the increase in sales, for increase in international prices in gain and efficacy in our operations. We also had positive impact concerning the recognition of CDS credit that we will detail during our meeting. Therefore, the market conditions that are favorable combined with the advancement of the projects investments in operational excellence are the engine that explain this growth. This direction of our work has been constructed in the last 2 years in a consistent way quarter-over-quarter. The discipline on looking at each improvement opportunity to support the team and look for this right people to contribute to the development. We focus on actions that may overcome an adverse scenario proposed by the pandemic for the company and for every and each person that makes Unipar happen. Our 3 productive units, 2 of them in Brazil and the third 1 in Argentina, are operating with high levels of reliability and capacity, guaranteeing that we can serve the growing demands of the market. For instance, Santo André and São Paulo reached, in this quarter, it is an utilization rate of 94%. We are facing a PVC production volume that's record in the unit since the beginning of the operation of the business by Unipar, Bahía Blanca reached the highest use in more than 2 years with 81% in Cubatão operated in equivalent levels equivalent to the last 2 quarters in spite of a program that in June, reaching 89%. And we go on and anchored in the 4 pillars of corporative strategies, people, operational excellence, focus in the customer business and sustainability. This discipline is paving efficiency gain, competitivity gain to make it feasible. The plan of the company of growing in a sustainable way in the next 10 years. With the results and the performance, the administration Board decided to pay extraordinary dividends to the shareholders at BRL 300 million. With this decision, our shareholders will receive a total of 650 in 2021. This is a combination of the exercise of [ 21 ], some to the investment. And we reinforce our focus and sustainability actions to contribute with the society as a whole and to the stakeholders, sustainabilities in itself a practice that has been incorporated in our DNA. We have firmed in this quarter, new commitments towards development. We work for the competetivity of business and for being responsible in the face of the community and society. Some examples, Unipar has signed in the prior year were a product of intentions for the goals in sustainable for the SDGs along with CDS, and we intend to establish an environmental impact generated by industrial actions. And we also began to contribute with the development of basic sanitation in the country by Saneamento Já, it's a port created to faster debate on waste and water treatment in the country in the social area. We have selected 12 projects, focusing in actions that help reducing the negative social impacts caused by the pandemic in more vulnerable communities, benefiting more than 3,000 people. And we inaugurated in September, the second class of Pescar project that offers social professional courses for young people in Santo André, São Paulo. And our collaborators may enroll to that. What was more gratifying was to have this sustainability initiatives recognized, receiving awards in economy and business media. We received an oil and chemical at the best in EXAME 2021. And also, we are among the 6th better in Época 350 (sic) [ 360º ]. And I want to thank the commitment of 1400 collaborators that with the sense of unit and passion that of what they do, they are firm with us towards a future of sustainable growth. I also thank our partners, customers, shareholders, suppliers and communities for their support and trust. And now I give the floor to our CFO and IRO, Christian Schnitzlein, for the presentation of the results.

Thank you, Mauricio. Good afternoon, good evening. I hope you're well and going back to normal with safety. If you're following the presentation on Slides 6, 7 and 8, we will present the results of 3Q '21 and the 9M '21 of the parent company and the other one. BRL 1.79 million in consolidated net operational revenue, 64% (sic) [ 54% ] more than 2Q '21. This because of more sales plus international price of caustic soda. The consolidated CPV had an increase because of more production and increase in price of some goods. Santo André unit had a stop for maintenance in the previous quarter of about 60 days that caused less use in that period. We show in this quarter a good consolidated EBITDA, BRL 1 billion, considering the investment of credits and the calculations by [ fixed cost fees ] and good operational performance in this period. Now on Slide 7, we present consolidated net operational revenue in the 9M '21 of BRL 4.3 billion, quite a considerable growth considering the period of last year. And this was because of the increase in the prices of PVC and caustic soda for the parent company, BRL 1 billion, a growth of 31% against last year. In 9M '21, we reached BRL 2 billion of consolidated EBITDA. This result besides reflecting the international movement and bringing BRL 420 million in calculation show the actions that are focused on efficiency and consolidation. This recognition of this credits in a net value of BRL 517 million have to do 3 processes, 2 from the parent company and 1 in Santo André. Of this value, as I said, BRL 420 million in positive EBITDA and BRL 97 million impact on financial results. Excluding the positive impact of this recognition, the EBITDA, 9 months '21 was 194.5% higher than same period of last year, showing a better performance than in 2020. Slide 8, we show the indebtedness of the company. We reached this month with negative indebtment considering all the financial consolidation, we have -- sorry. And following the financial pathway of the company in October, we issued debenture BRL 15 million (sic) [ BRL 500 million ] that will be due in 2021 -- '28, will mature in '28. And this value is not reflected on the cash position of 3Q '21. The funds will be used in the normal course of business, looking for an adequate capital structure and stretching of the debt. Good operational cash generation, we will allow to capture capital through OpEx and maintain marketability and supporting the strategy of the company. I would like to inform that in yesterday's RCA, we deliberated and approved, as Mauricio commented, distribution of dividends of a payout of BRL 300 million plus the buyback. It's the third buyback program of the company. Now we open for Q&A. In case we're not able to answer the webcast questions. Our team will reach you out later on.

[Operator Instructions] I'm going to read the questions. [indiscernible] asks, in the view of the leadership what's the perspective of volume of the industry for the next quarter and half. Do you believe that this price volume of commodities will be sustained in 2022?

Thank you, [indiscernible], for the question. We did not comment volumes, prices but we may talk a bit about the market segments. Our company has sales for civil construction, for industrial share and for the pharmaceutical industry. So we have to look at the performance of those sectors for the next months in years to try to estimate what may happen with the market demand. In relation to commodity price, it goes along the same lines. However, the price of commodities depend on international market. PVC and soda have to do with Asia and American prices. And we have to follow the offer development and availability and other events that happened in North America and Asia. To give you some examples, in the last months, we had an important meeting, which was the hurricane through the southern part of the U.S. and it generated floods and other complications that made -- that created difficulties to convey the soda or to have freights of soda and that interfered in price. And we also had other halts in the U.S. and Europe that made PVC less available And also have a recent factor China with energy and all the change of environmental policies that may also shake demand and offer of Asia.

One more question from [ Juan Wang ]. How is the company close to reach its -- since the company is close to achieve its capacity, what would you be as far as growing? Would you acquire more plants or improve the operational or invest in science and technology?

Thank you, Joe, for your question. Actually, you gave me many of the answers, but basically, our company has projects that we are thinking about ways of our company expanding, be it in growing our net revenue or our profitability. And there is a combination of topics here. We are studying projects for organic expansion, so increasing the capacity of our plants per investment or by investment. We also, in this last couple of years, we have had projects to improve our processes to reduce waste, increase productivity to rationalize goods. So we have raw material. So we have a long way to go in other ways to improve our development -- our performance, I mean, and at the same time, investment, as you mentioned, of self-sufficient energy. These 2 projects that we did, having the joint venture with AES or partnership with Atlas renewable. We have wind farm and sun farm. They're quite important for the company because they guarantee access to energy, to power that's quite relevant. We are self-sufficient, so we have economical benefit. And we also have benefits in sustainability, which is decarbonation. And we intend to keep advancing those projects. With these 2, we reached 50% of our metrics with clean energy, and we intend to reach 70% of the metrics with new projects. So it's a combination of projects, initiatives to continue growing the company in a sustainable way for the coming years.

Thank you, Mauricio. I think you answered also the next question from [ Fabio Que Mura ],who is an investor. In his strategy in the short or medium run to growth.

We have a strategy of growth, of course. We are looking for opportunities to expand our company in other geographies. In other regions, be in Brazil, South America, North America, we have a decision -- concrete decision that we will go to the northeastern part of Brazil. One of the reasons is sanitation because that will give us a good opportunity since there is much to be done there to keep developing in the region in M&As, maybe complementary or replace others. It would depend on the projects, on returning on the conditions that they present. And if they are favorable and make sense, we will expand with M&A or we will do greenfield or expansion in our own plants.

Thank you, Mauricio. I think this question also has to do with Gustavo [ Guskan ] that you just answered. Just read that he asks, are you still assessing the expansion in the Northeast? Mauricio has answered that. So we're checking whether there is any further questions. So this concludes today's question-and-answer session. I'd like to invite Mauricio for his final remarks.

Thank you all who participated on this call. I would like to finish once again, thanking the whole team -- Unipar team that has throughout this last 2 years in spite of the adversities and challenges that the pandemic brought to us they worked in a very committed way. They were relentless and always thinking about solutions in a way by which the company would keep operating. And with that, we could feed the market with the essential products in this fashion on a daily basis has inspired people in the leadership to always give their best. So thank you. I also want to thank our partners -- business partners, suppliers, customers, shareholders and other groups that work with us on daily basis for the trust, for the collaborative work in helping our company and the whole ecosystem to follow forward. We have the clear objective of sustainable growth, and we'll go on working for Unipar to remain as a leader in the sector and supporting this development of the industry, of the communities in Brazil and our Brazilian people. We, as company, see a future of many opportunities. [Statements in English on this transcript were spoken by an interpreter present on the live call.]