Earnings Call: Q3 2020

Jan 10, 2020

Good morning, ladies and gentlemen. Welcome to the Q And A session for investors and analysts related to the results of the third quarter 2019 of Kamiliensis. Here today are Mr. We'll see you on the part of you, our Director, President, Fabio Vargas, CFO and Head of IR, and the company's Investor Relations team. The audio is being played simultaneously in the company's IR website. The management's comments on the results of the quarter and the Q and A session may contain forecast about future events that are subject to risks and uncertainties that could lead to expectations that may or may not occur or could cause results different substantially from what was expected. We will now initiate the Q And A session for investors and analysts. Ladies and gentlemen, please hold. Our first question It's from Isabella Simonato from Bank of America. Good morning. Can you hear me well? I have two questions. First of all, I would like to learn more about the working capital because we saw a worsening of the cash days was worse than that expected and also if you could elaborate a bit more about receivables. I'll let me interrupt you. Our line was Can you hear me now? My first question is about working capital, because I think that the name of the financial cycle is below what was expected, especially regarding to your receivables line. So can you please elaborate on that a little bit that could give me an idea of what could we expect looking forward? And the second question, it's a more operational question is whether you could elaborate a bit on the margin improvement. We saw a sounder performance in terms of your sugar segment and cost expectation. Could you please shed some light in that area and what could be the expected profitability if sugar prices are recovering, whether we have more to more further performance to expect looking forward. All right. In regards to working capital, we do have a few comments. First of all, in relation to receivables because of the snapshot of our closing, we had a major sale at the end of November that it's still to be received. And this changed a bit our closing figures. And this is certainly related to the recovery of sales from Uruguay and Brazil We also had receivables that is very much related to our pace of sales. And there was an impact in the Brazil inventories as we anticipated this small inventory from 1 season to the we thought that there could be a small pressure on the demand side. So here in Brazil, our inventory levels are slightly above the regular levels and these levels should go back to normal levels in the second quarter, both in terms of receivables and inventory. So there is nothing new or no changes in our truck, in our working capital structure. Now in terms of margin improvement, the company was already seeking for further efficiency, seeking for further expense and cost reductions. We also put a lot of efforts in the distribution and logistics, great business is still in progress. Therefore, the results are now beginning to show. And as you well noted, in the Sugar segment, we had a good performance and good profitability in the quarter. And we do believe that this performance should remain, good in the next quarter. And in the case of rights where where we had mismatch your prices throughout the year. This is alongside the process that we commented on the previous call, which is along the lines of our gradual recovery. There was a recovery in the third quarter, and we do believe that this recovery should remain in progress throughout the next quarters. Therefore, this is a gradual recovery of the grain profitability. And we do believe that it will continue to occur, but at a gradual pace. That's very clear. Thank you very much. Next question from Pedro Daniel Danielle from convergent Good morning, and thank you for taking my question. Do you see any macro improvement that would allow you to end up with trading down that we've seen in the last quarter and the possibility of transferring price, particularly in the rice segment. I think that the recovery process is beginning, but it's still gradual, we will this price transfer will occur gradually. As I said before, this system of price transfer in this segment follows what has happened in the past, you know, weekly and monthly tables. The math that led the margins to go down in the first half of the year. I mean, we started to see this recovery on the third quarter, and we feel that will continue. We will not be able to recover the entire grain margin from 1 quarter to the next, but We believe that in the next 3 or 4 quarters, this will be 100% result. So In terms of the macro recovery, it will be slow, but we will end up by recovering our margins at the end. Star 1. As there are no further questions, we would like to now conclude the Q And A session. I turn the floor back to Mr. Pleasure, sorry, to Mr. Luciano for his final remarks. I would just like to put the company landscape into perspective, speaking a little bit about each segment and each country where we operate and also talk a little bit about working capital and net debt over or the debt ratio. I mean, we believe that things are happening, and we believe that recovery will happen gradually. Price levels of price of rice and beans should we higher levels when compared to last name's prices in the in terms of sugar. The Superbaha plant is almost at the efficiency level, we anticipated it. We are at the end of the ramp up process, and the plant has performed according to plan. Economies and gains, savings and gains will begin I mean, are beginning to show and the expectation in terms of sugar margins in the next quarter because of the new season, should perform well, and there should be a landscape review. In terms of fishing, we are in the pre land season and there should be a higher concentration of sales in the last 18 months. The company is working hard to gain more efficiencies in the fishing side. And we are now reaping the benefits and and seeing the results of our efforts in terms of other countries, Chile is performing well. And it is delivering an important growth in Peru. There has been a recovery, whereas there has been a change in the terms of variable rights for all products in the rice category. And this brought about some additional competitiveness in the company is now seeing the reflections of that in our sales numbers, and this new level should remain in progress next year. And you're why it's more challenging because the profitability in the entire chain is not so good. But this This year tends to be very similar to the past 2 years, speaking about Uruguay in particular. Now I'm going to work in cap though in prices to answer Isabella's question, it should be normalized on the fourth quarter. Our leverage or net debt over EBITDA margin was high because of working capital and cash relief. They usually take place in the fourth quarter. So we expect that this leverage should remain below 3 times. And the company continues to look for further acquisitions. So that's what I wanted to say as my final remarks. I would like to Conil's conference call is now concluded. I would like to thank you all for participating and have a very good day.