Earnings Call: Q4 2020

May 13, 2020

Welcome to the management's comments and the results of the 4th quarter 2019 of Camilla Innapes. Before talking about the results of the period, I would like to say a few words about the current moment involving the global crisis of COVID 19. As a company operating in the food industry, Camille must ensure that consumers have access to food while at the same time, not losing sight of the health and safety of its employees and our surrounding communities. To that end, we put together a contingency plan that contemplates a series of measures to face the virus with the intent to guarantee the continuity of our business and the safety of our employees as well as our operations and the company's liquidity position. We are complying with all guidelines set forth by the Ministry of Health And Government Authorities from Brazil, Uruguay, and And with that in mind, we adopted our routine to protect an educator and believe about the threats posed by COVID 19. One of these measures include a crisis committee that every day evaluates all the actions necessary to ensure the safety of our employees providing overwhelming communication about and leave of absence for a please of higher risk, personnel hygiene techniques, and the use of sanitary barriers in the operating unit. Furthermore, we reinforce inventory management practices for raw materials, inputs, and finished goods, reorganizing our production an area in taking the necessary precautions to guarantee a safe distancing between employees. In addition to preventing agglomerations, we are also introducing initiatives to avoid unnecessary commuting suspending the participation of employees in all corporate events, on-site meetings and trips, and ethical office, everyone is working from home. In addition to the initiatives to preserve the health and safety of employees and ensure folks supply to population in the midst of the pandemic. Camille will also strengthen its short term financial liquidity. We acted preventatively to guarantee Camille's financial needs for 2020 by taking loans in March April 2020 that will provide us the necessary funds to finalize the acquisition of the Packford Business Unit of Enpesa, in Chile that we announced in the fourth quarter. We continue to operate and reinstate our commitment with the safety of our employees guaranteeing the service for our customers to make sure there is no scarcity of food in the communities and regions we serve in South America. We would like to remind you that the credit pandemic scenario in Brazil started in March 2020 And, therefore, it does not affect the results we are discussing today related to Camille's annual closing dated February 2020. Moving to the highlights and results of the year, Camille faced a very competitive 2019 and because of the the company is now better prepared and more robust to seize our future opportunities. We advanced in different initiatives to reduce costs and expenses strengthening our operations, being more consistent in the execution of our strategy to pursue organic growth and expansion through acquisitions. In the year, we experienced volume growth in our operations, both in Brazil and abroad, with gross revenue above 6,200,000,000 BRL 6,200,000,000 and a double digit growth vis a vis the previous year due to higher sales volume and the incorporation of SLC at the maintenance that allowed us to look spend our leadership in the grains market in Brazil. Reinforcing the company's strategy for international expansion into new regions. We announced the acquisition of the pet food business unit from Enpesa Zienza in Chile. The acquisition represents an important step towards the expansion into new categories of Camille's operations in Chile And this shrinking of its competitive position in the country where Camille already has a continued history of growth and profitability in its 2 Copel subsidiaries. The year started with an increase in raw material prices in the grains and sugar categories in Brazil, enhance competition and difficulties to transfer prices to the market. With that backdrop, we have to adopt measures to face a competitive landscape and minimize the negative effects of our profitability, which brought positive results. Even with increased volumes in the landscape of time prices of freight in the market, we were able to reduce the share of sales expenses in our net revenue in the year. The same effect was achieved with SG And A as a result of initiatives to reduce costs with expenses made by the company in the last year. Our focus in the pricing model and improvements to processes and systems also helped us to make decisions more efficiently and at the same time minimize the impact of increased competition despite that scenarios of continuous difficulties to transfer prices. On the industrial side, we adjusted our operations and inaugurated two important units. 1 in swaps, the number to to produce rice, beans, and sugar and another one, in the state of Sao Paulo for the production and packaging of sugar only. We invested in modern and more automated plans, which helped us to grow and strengthen our presence in the northeast. Thus increasing our competitiveness and efficiency in sugar. In the international market, we maintain our favorable dynamic and positive results. We noticed the recovery of exports in Uruguay resumed sales growth in Peru and the continuous positive performance of our operations in Chile, both in volume and profitability. Now moving to the main indicators of the period, it's important to highlight that the comparative phase of the year 2018 is influenced by the consolidation of SLC Olementos starting in 4Q18 as well as nonrecurring effects. Taking these facts into consideration, we posted the following figures for the quarter and year. Net revenue of 1 point 5,000,000,000 BRLs in the quarter up 12% when compared to the same period as the previous year and 5,400,000,000 BRLs in the year, up 14%. Gross profit of 338,000,000 BRL, up 5% vis a vis the same period of the year before with margin of 22.6 percent in the quarter. In the year, the same indicator reached 1,300,000,000 growing 2% with a margin of 23.2 percent. We emphasize that margins were still under pressure in the period due to difficulties of transfer prices throughout the year, mainly in the grains category in Brazil. Every time of 137,000,000 barrels, up 19% vis a vis the same period of the year before, with a margin of 9.2% in the quarter and 442,000,000 barrels in the year, down by 9% with margins of 8.2%. It is also worth mentioning in the comparative phase that in 2018, the company recognized tax credits in its results among other nonrecurring effects, comparing the same indicator, excluding the nonrecurring effects from the previous year, EBITDA grew 57% and 9% in the quarter quarter and year respectively. Net income of 84,000,000 barrels, down by 17% with margin of 5.6% in the quarter, and 240,000,000 barrels in the year, a decline of 34% with a margin of 4.4%. It is worth mentioning that the effect of nonrecurring expenses mentioned before also impacts comparison of net income in the period. Net of this effect, net income posted growth of 8% in the quarter and a drop of 2% in the year. Starting the analysis of the quarter and year with our operating results in the rice category, volume A 172,000 tons, down 13% on the quarter, and 4 and 743,000 tons in the year. Up 18%. Here on year, growth was boosted by the acquisition of SLC. And you may boost it at it a 198,000 tons in the period. Excluding the volume from the acquired company, volume grew 545,000 tons, down 6% in the year. The result was affected by lower sales the Camille brand and lower pricing brands in the quarter, whereas the year was impacted by the growth of the lower pricing brands. The average market price of raw material was 49.34 BRLs per bag in the quarter, up twenty 23% and 5th 45.17 Rubs per bag in the year. A 12% growth. Gross price in the quarter was 2.63 BRL4 kilogram, up 7% and net price of 2.32 BRL per kilogram growing 8%. In the year, gross price reached Jurizon.51¢ per kilogram, 1.2%, and that price was to BRLs in 25¢ per kilogram, up by 3%. We noticed increased competition in all niches and regions for the wise category in Brazil as well as compressed margins due to difficulties to transfer the increase in raw material costs to prices. Now in the beans category, volume totaled 20,000 tons, down 15% in the quarter, and 92,000 tons in the year up by 15%. Year on year growth was boosted by volumes coming from the acquisition of SLC, which added 23 1000 tons in the period. Excluding the volume from the acquired company, volume reached 69,000 tons, down by 9% in the year. The result was influenced by sales reduction of the Camille brand and lower pricing brands in both periods. The average market price of raw material was 204 BRLs and 66.66 per bag in the quarter an increase of 7% and a 192.88 BRLs per bag in the year, a growth of 57%. Gross price in the quarter was 4 BRL.87 per kilogram, up 5%. And that price of 4.58 BRL per kilogram, up by 6%. In the year, gross price reached 4 rales 46¢ per bag, which is an increase of 21% and net price of 4 rales 12¢ per kilogram being, a growth of 23%. Variations to growth and net prices are lower than market prices mentioned above due to difficulties to transfer prices to the market, which is the same effect experienced in the rice category. We noticed the return of volatility in the prices of beans reflecting the climate impact and variations in the beans crop season in the period. In the sugar category, volume was a 128,000 tons, down 5% in a quarter and 516,000 tons in the year, down 2%. The result was influenced by the reduction of sales of the Unilone brand and lower pricing brands in both periods. Furthermore, the year result was impacted by the temporary traction of raw material supply in the second quarter with a gradual recovery of volumes after things were back to normal. The market average price of raw material reached 74.29 barrels per bag in the quarter up 8% 66.87 barrels per bag in the year, a growth of 11%. In the quarter, gross price totaled 2.39 barrels per kilogram, growing 18% whereas net price was 2.04 bureaus per kilogram, a growth of 19%. In the year, gross price, was 2.21 BRL per kilogram, up 8% and net price of 1.91 BRL per kilogram up 9%. As in by the prices, we emphasize that despite the highly competitive landscape and temporary intra in raw materials applied during the year. The company maintained the profitability of the category and saw a positive response in the price transfer scenario in the period. In the fish category, volume totaled 16,000 tons, up 30% in the quarter and 39,000 tons in the year, up 10%. This result was influenced by the growth coming from Hokkaido and Fascadero brands in both periods. Gross price was $20.94 per kilogram, a gross of 3% and net price of 15.80 bureaus per kilogram, up 3% in the quarter. In the year, gross price reached 20.61 barrels per kilogram. A growth of 1% and that price was 15.60 barrels per kilogram, up 1 that. In the year, we continue to face difficulties with local fishing and cost pressure of imported raw materials due to foreign exchange variations in the period. In the international segment, the sales volume totaled 200 3000 tons in the quarter, up 19% 635,000 tons in the year, which is an increase of 2% with sales growth in all countries. In your required volume totaled a 161,000 tons, up 23% in a quarter and 462,000 tons in the year, growing 1% due to increased exports with sales recovery in the second half of 2019. In Chile, volume totaled 19,000 tons, up 4% on the quarter and 84,000 tons in the year, up by 6%. We continue to post volume growth and positive profitability in Chile and are now waiting for the approval from the Chile and comp competition authorities. Systemonica, among other usual conditions imposed by this type of transaction to finalize the acquisition of the pet food business unit from Impe Salcianca announced by the company during the first quarter. The acquisition is aligned with Camille's strategy and aims at further strengthening our competitive position in Chile where whereas at the same time, expanding the multi category model we have in Brazil into other countries. And Peru sales volume grew 22,000 tons, up 4% in a quarter and 89,000 tons in the year, growing 6%. Water recovery in the periods was boosted by the increase in the number of POSs and their recovery of package price consumption in the period. After a time of political and economic instability in the country in the past year. Camille continues to have confidence in the food market in Latin America as it combines resilience and growth opportunities. When analyzing the future outlook, sustainable growth remains our major priority, with strong brands, a differentiated platform and leadership position, We have multiple opportunities to grow in the segments with serve developing new markets and entering into new categories. We started a new year with a challenging pandemic scenario. However, with renewed energy to proceed focus We proceed focus on our strategy. To contribute to build up the company's strategy for the next coming years. And we are even more confident that this is the new way to anticipate trends and strengthen our position of consolidator of the food industry in South America. To elaborate further on the financial performance of the quarter and year, I would like to get the floor now to Flavu. Flavu, you may proceed, please. Thank you, Luciana. Welcome to the comments on the results of the fourth quarter year of 2019. Starting with the analysis of the financial performance, growth. Gross revenue reached 1,700,000,000 URLs in the quarter, up 13% and 6,200,000,000 URLs in the year, which is an increase of 14% mainly due to the combined effect of volume prices and exchange rate in the period. Net revenue of 1,500,000,000 bureaus in the quarter of 12 percent 5 400,000,000 barrels in the year, up 14%. It is worth mentioning that it that the year on year comparison is by the consolidation of SLC remansals that only occur as of the fourth quarter of 2018. Cost of sales and services in the quarter reached 1,200,000,000 BRL, up by 14% mainly attributed to 14% growth in cost of goods sold in Brazil, driven by an increase on average market prices. This result was also impacted by an international increase of 22% in cost of goods sold, driven by higher sales volume in the segment. And the year, cost of sales and services totaled 4,100,000,000 BRL up 18%, mainly attributed to a 21% increase in COGS in Brazil, driven by higher average market prices. This result was also impacted by an 8% growth in international cost of goods sold, driven by higher sales growth in the settlement foreign exchange impact and higher prices in the period. Taking all of that into account, Gross profit reached 338,000,000 BRL, up 5% vis a vis the same period of the previous year with a margin of 22.6 percent in the quarter. In the year, the same indicator totaled 1,300,000,000 BRL growing 2% with margin of 23.2%. As Luciano mentioned, before the margins were still pressured in the period due to difficulties to transfer prices during the year, mainly in the grains category in Brazil. By adopting additional measures to face such a competitive landscape and to accelerate our growth process with the balanced projects and adopted short term measures to resume our competitive space and efficiency in our operation. With that, we moved to the performance of SG And A in the quarter that reached 244,000,000 BRL, down by 7%. The equivalent to 16.4 percent of the net revenue in the period. This represents a reduction of 3.4 percentage points in the share of revenue when compared to the same period of the year before. The reduction in the quarter was mainly attributed to SG and A Brazil that posted an 11% decline due to lower volumes in the period and the initiatives to reduce costs and expenses in the last year. This result was partially compensated by a 2% increase in international SG And A, higher volumes and the foreign exchange impact in the period. In the year, SG and A reached 955,000,000 BRL, growing 3 percent equivalent to 17.7 percent of net revenue. This accounts for a reduction of 1 point and growth in the year occurred mainly in SG And A, Brazil, with higher volumes in the period and the consolidation of the results from SLC Alimento in compare in the comparative base as of the fourth quarter of Now I would like to emphasize that the lower share of SG And A in the net revenue of the quarter and year reflects the company's improved efficiency stemming from our plan to control costs and expenses in the period, mainly the control of freight costs and admin expenses. As for other operating expenses, they reached Point 8,000,000 BRLs in the quarter when compared to a revenue of 29,000,000 URLs in the same period of the year before and 3,000,000 in the year vis a vis revenue of 85,000,000 in 20 8 The comparative phase of last year was affected by the recognition of tax credit revenues among other nonrecurring effects. Taking that into consideration, EBITDA was a 137,000,000 up 19% year on year with margin of 9.2 in the quarter. In the year, EBITDA reached 442,000,000, down 9% with margins of 8.2%. Comparing the same indicator, excluding the nonrecurring effects of the previous year, EBITDA was up 57%. And 9% in the quarter and year, respectively. I would like to highlight that as of January 2019, the company has been presenting its accounting figures with the effects from IFRS 16. EBITDA, excluding the impact of IFRS 16, steady from the increase in rental expenses converted into depreciation and interest reached a 127,000,000 Bureaus with a margin of 8 point 5% in the quarter and 4 102,900,000 BRLs with a margin of 7.5% in the year. In regards to the financial performance or P and L, expenses totaled 14,000,000 bureaus in the quarter down 18% mainly attributed to the result with derivatives partially offset by the recognition of interest on lease in the period. In the year, Nat P and L had expenses of 62,000,000 URLs when compared to 16,000,000 in 2018. It is important to remember that the comparative phase of 2018 was impacted by nonrecurring financial expenses related to the recognition of monetary updates to the tax credits recognized in the period. Income tax and social contribution reached 1,200,000 barrels in the quarter and 3,500,000 in the year. Partially due to the effects of the exclusion of subsidies on investments related to ICMS credits and payment of interest on equity in the period. On that note, net income totaled 84,000,000 bureaus, down 17% with margin of 6 of 5.6% in the quarter and 240,000,000 in the year, down by 34% with margin of 4.4%. The previously mentioned, the fact of nonrecurring expenses also had an impact on the comparison of net income in the period. Excluding these effects, the same indicator posted growth of 8% in the quarter and a 2% decline in the year. Earnings per share came to point 23 BRLs or 23¢, 19% higher in the quarter and 65¢ in the year, meaning a 5% increase. It is worth highlighting the reduction in the company's total shares to 370,000,000 common shares when compared to 410,000,000 in the previous year, attributed to the cancellation of the total balance of Treasury shares after the conclusion of the 3rd buyback program in November 2019. In regards to the company's debt position, our net debt total 1,000,000,000 bureaus up 12% vis a vis the previous year. This growth between periods was due to the issuance of CRE of the company in the amount of 600,000,000 bureaus in April of last year. And also the 3rd stock buyback program concluded in November 2019. The buyback was then in three stages, totaling approximately 30,600,000 shares helping an investment fund from Waldorf Tankers. Total liquidity in the period was 570,000,000 barrels And with that, we ended the quarter with a net debt over EBITDA ratio of 2.3 times. Now moving to working capital, Working capital reached 1,500,000,000 barrels, a 0.5% increase year on year. This increase was mainly attributed to 23% higher advanced payment of suppliers because of the growth of the grains promotion program in Brazil. The 5% increase in accounts payable caused by higher revenue and fish volume. And finally, the 22 percent increase in the supplier's line resulting from the increase in raw material acquisition costs in Brazil and Abroad. CapEx reached 31,000,000 BRLs in the quarter, down 89% and a 135,000,000 in the year, meaning a 66% reduction, mainly attributed to the acquisition of SLC Alimentos, in the 2018 comparative base. Net of this effect, CapEx posted growth after the conclusion of the sugar packaging process project, Superbaja. Investments in the Ita team storage and drying plant and other technology corporate projects, including the final implementation of the new sale system as FA the BI systems and the new Aruba supply system. Before concluding, I would like to reinstate a point made by Luciano about the adaptations and initiatives of the company to face COVID 19. In addition to preserving and ensuring the safety our employees and our operations, Camille solidified in short term financial liquidity, thus supporting the financial needs of Camille for the year 2020 with loans amounting to approximately 1,300,000,000 bureaus in March April of 2020, including the funding necessary to conclude the acquisition of the, packed food business in Chile. Still pending approval by the local regulatory agencies. Since the onset of the pandemic, the company has acted in preventive manner to ensure the continuity of the business during the quarantine. And although the company's operations have not been significant can be affected on the financial front. And do you know we cannot yet predict the occurrence of future events related to the pandemic? That's why we are protecting ourselves in regards to our people, operations, and liquidity, and we'll continue to closely monitor the future financial impact and evaluate the actions they need to be taken. Luciana, the IR team and myself will be available to answer your questions about the results appeared on May 13th at 11 AM for zoom fine. The link for the webcast and connection information are available in the Investor Relations website. It is worth mentioning that in view of the difficulties imposed by COVID 19 and in compliance with the guidelines, by the Ministry of Health, the company suspended its participation in all corporate events and meetings and canceled international and domestic travel. At the corporate office level. People are working from home, but we remain available for meetings over the phone, apps, or video conferencing. To schedule a meeting, please contact our investor relations team through our IR website via phone or email. Thank you very much, everyone.