Earnings Call: Q1 2021

Jul 7, 2020

Earnings release

Welcome to the management's comments on the results of the first quarter 2020 of Camille United. Before going over the results for the period, I want to talk about the current COVID crisis caused by COVID 19. In 60 years of history, we never faced such unprecedented times in our business, and we had to act swiftly and responsibly. As a food company, we have a unique responsibility to serve our customers, ensuring that all regions and communities serve in South America, receive all the food they need, never losing sight of the safety of our employees and customers, which has always been our priority. In the early days of the pandemic, we set up a crisis committee to drop and monitor critical actions to preserve the safety of our employees and ensure the continuity of our businesses. We intensified our internal communications with information on COVID 19 and disease prevention. High risk employees were put on a temporary leave of absence. We reinforce personal hygiene routines and the use of sanitary barriers in the operating units. For guaranteed production and meet the demand marked by high sales volume and higher raw material cost We focus on managing inputs and finished products inventory levels in addition to making adjustments to the schedule, logistics, and transportation of employees who ensure safe distancing and prevent crowding in our plants. Together with the operational initiatives to guarantee supply, we straighten our short term financial liquidity and funding of approximately 1,200,000,000 BRLs in the quarter. In addition to the initiatives related to the pandemic and the safety of our employees, customers, businesses, and liquidity. We are also it on another important commitment of the company given this scenario. Our social commitment to the local communities Our long history of growth has been based on the core values imprinted in our DNA, like trust, proximity, and accountability. As one of the largest food companies in South America, we reaffirm our commitment to society by helping mitigate impacts of COVID 19 in the communities where we operate, and that involves the purchase of equipment and supplies to the health care sector In the municipalities, we serve and have production facilities, and we distributed more than 200 tons of products for the most vulnerable population. Moving to the results and highlights how quarter. In the last few years, Camille has focused on measures to reduce costs and expenses. And as a consequence, the company is even better positioned to compete in this new environment. The company's actions to enhance efficiency in the landscape of growing demand and increase sales volume and the sharp increase in raw material prices allowed for the dilution of costs and expenses and their return to our historical profitability levels. In the international market, we remain in a favorable position posting positive results. We noticed an improvement in exports from Uruguay year on year sales growth rebound in Peru and a continuous positive volume and profitability performance in Chile. Moving to the main indicators of the period, the quarter posted 21% annual growth of consolidated volume in all categories and countries we operate. Net revenue of 1,700,000,000 BRLs in the quarter, up 40% vis a vis the same period of the previous year. Gross profit of 414,000,000 BRL, up 44% with a margin of 23.9 percent in a quarter up point 7 percentage points year on year. We would also like to point out the gradual improvement in our capacity transfer increases in raw material prices to market prices and the dilution of costs. EBITDA was a 197,000,000 barrels, up 137 percent year on year, with a margin of 11.4% in a quarter growing 4.7 percentage points. The highlight is the improved profitability with a gradual improvement of the gross margin and dilution of costs and SG and A expenses. And net income of a 109,500,000 BRL up a 119.8 percent visavisthe same period of the year before with a margin of 6.3 percent going 2.3 percentage points. It is worth highlighting that profitability improved in the period together with a better contribution margin and quarter and the year with our operating results, we point out that the volume growth posted in all categories reflect a sharp increase in demand during the pandemic of COVID 19, especially in the early days of the pandemic. In March 2020 when sales reached an all time high, becoming more stable by the end of the quarter. In the rice category, volume was 208,000 tons, up 11% of the quarter with increased sales of the Camille brand and low pricing brands coupled with the impact from a spike in demand in this pandemic landscape. The average market price of raw material was 55 BRLs per bag in the quarter, growing 32%. Gross price in the quarter was 2.86 BRLs per kilogram, up 19% and net price of 2.56 per kilogram, up 23%. We noticed a gradual improvement in the price transfer dynamics when compared to previous quarters. In the beans category, volume was 24,000 tons, up 1% in a quarter with increased sales of the premiere branded low pricing brands. Combined with the impact from the spike in demand in this pandemic landscape. Volumes were adversely impacted by the high volatility of prices in the category in the period. The average market price of raw material was 265 barrels per bag in the quarter up 4%. Gross price was 6.09 barrels per kilogram, up 20% in that price of 5.73 per kilogram growing 25%. In the sugar category, volume totaled 146,000 tons growing 6% in the quarter with a sales increase of Unilem brand and the lower pricing brands. The average market price of raw material was 77 BRLs per bag in the quarter up 12%. Gross price was 2.34 VRLs per kilogram up 19% and net price of 2 rails and 5¢ per kilogram growing 22%. And the fish category volume totaled 7,500 tons, growing 7% in the quarter, mostly due to higher sales of Cocqueda and Pescabilla brands. Gross profit was 20.72 per kilogram, up 1% in net price of 16.06 per kilogram, growing 10% in the quarter. It's worth highlighting the improvement in local tuna and sardine fishing. In the Internet sales volume totaled 177,000 tons in the quarter, up 60% with sales increasing all countries attributed to a sharp increase in demand, amidst the COVID 19 pandemic in addition to the following effects. In Uruguay, volume was a 126,000 tons, up 82% in the quarter due to increased exports in the period. In Chile. The volume was 24,000 tons, up 16% in the quarter. We continue to post volume growth and positive profitability in that country. And in Peru, the volume was 26,000 tons, up 28% at quarter with volume recovery boosted by an increase in the number of points of sale when compared to the year before. Camille continues to believe in the food market in South America as it combines resilience, growth opportunity, and tends to be a relevant industry in this pandemic environment. Looking forward, sustainable growth continues to be our biggest priority. Our strong brands, a distinguished platform, and leadership position. We have here multiple growth opportunities in the segments we serve, developing new markets and entering into new categories. We initiated a new site or reinforcing our responsibility and agility in the pandemic scenario. We are even more confident the company is on the right track to anticipate trends and strengthen our position as a consolidator of the food industry in South America. Now I'll give the floor to Slavio to elaborate on the financial performance of the quarter and year. Bob, you may proceed, please. Thank you, Luciano. Welcome to the comments on the results of the first quarter 2020. I will start the analysis of the financial performance talking about the gross revenue that reached 2,000,000,000 barrels in the quarter of 35 percent, mainly driven by the combined effects of higher volume, prices, and exchange rate in the period. Net revenue was 1,700,000,000 in the quarter of 40%, driven by higher sales of grains, sugar, and fish in Brazil, the foreign exchange effect and sales growth in Uruguay, Chile and Peru. Cost of sales and services in the quarter total 1,300,000,000 BRL growing 38 percent, mainly due to an increase in the cost of goods sold sold in Brazil of 28 percent, driven by the growth of sales volume and higher raw material acquisition costs. This result was also impacted by a 22% increase in COGS in the international segment, driven by higher sales volume and the foreign exchange effect in the period. Picking all those factors into account, grow profit was 414,000,000 BRL, up 44% year on year, with a margin of 23.9% in the quarter growing 0.7 percentage points. Please note the annual and sequential recovery of the gross margin with a gradual improvement in our capacity to transfer prices in Brazil. SG and A in the quarter was 260,000,000 barrels up 9% with the equivalent of 15% of the net revenue in the period. This represents a reduction of 4.2 percentage points in revenue year on year. Nominal growth was impacted by a 27% increase in international SG And A due to the foreign exchange impact in the period and increased sales expenses in the countries. This result was partially compensated by a 2% reduction in SG And A in Brazil, lower sales expenses stemming from a reduction in promotional and advertising activities and a decrease in commuter transport in the period. On the other hand, general and administrative expenses in Brazil were up 0.9% due to increased expenses related to stock option provisions and depreciation. It's worth mentioning that this G And A growth in Brazil was partially offset by expense reductions with storage, traveling, and severance pay. Furthermore, there was a reduction of 4.2 percentage points in the SG and A percentage of net revenue. Reflecting a dilution of costs and expenses in the period and lower sales expenses in Brazil stemming from the company's initiatives to reduce costs and expenses implemented in the past year. Other operating nonrecurring revenues from claims. Taking that into consideration, EBITDA was a 197,000,000 barrels, up a 137 percent year on year with a margin of 11.4 percent in the quarter, up 4.7 percentage points. Regarding the financial result, we had expenses of 17,000,000 bureaus in the quarter, 50 practicing higher due to higher financial expenses attributed to foreign exchange variation. Income tax and social contribution amount to 29,000,000 barrels in the quarter, 21.2 percent of the result before taxes mainly attributed to the effects of the exclusion of subsidies on investments related to ICMS credits. Taking all that into accounts, net income was a 109,000,000 barrels, up a 120% with a margin of 6.3% in the quarter, accounting for an increase of 2.3 percentage points vis a vis the net margin of Q1 'nineteen. Earnings per share was stability of the company and the reduction in the total number of shares to 370,000,000 common shares when compared to $410,000,000 in the year before due to the cancellation of the total balance of treasury stocks after the conclusion of the 3rd buyback program in November 2019. The company's total debt position reached 3,000,000,000 bureaus, up 50% as a result of the new funding in Brazil and international, totaling approximately 1,200,000,000 Bureaus to pay for short term maturities and finance the acquisition of Papsud from Entreza's Yamsa in Chile. It is worth highlighting that the foreign exchange depreciation in the international segment also led to higher indebtedness in the period. Net debt amounted to 1,200,000,000 Bureaus and net debt over EBITDA in the last 12 months was 2.2 times, flat year on year. CapEx stood at 19,000,000 barrels in the quarter down 36% due to the conclusion of the sugar packaging internationalization process and the consequence launch of our Superbaha sugar plant in Bahamita, Sao Paulo. In regards to working capital, it increased year on year, mainly attributed to higher inventory levels with increased raw material acquisition costs, but also necessary to guarantee imports during the pandemic, mainly for grains in Brazil and abroad. The result was also driven by an increase in advanced payments to suppliers. The expansion of the assistance programs in the 0 and Uruguay and higher cost of the raw material acquisition in addition to the impact of foreign exchange depreciation in the international market. Accounts receivable also grew in the period with increased sales in Brazil and abroad, and the suppliers by increased in contrast with accounts receivable with higher raw material acquisition cost. Before concluding, I would like to stress a point made by Luciano regarding the adjustments and initiatives by the company to deal with the COVID 19 pandemic. Since the onset of the pandemic, we've been adopting proactive measures to ensure the continuity of our business during this period, And although the operations of the company has not been financially affected in any relevant way, we cannot, as tomato predicts the occurrence of future events related to the pandemic. Therefore, we've protected our people, operations, and the liquidity of the company and continue to closely monitor future financial impacts and evaluate possible actions looking forward. Luciano, our IR team, and I will be available to answer your questions on the results of the quarter on July 8th at 11 AM, Brazil time. The link for the webcast and connection information is available on the Investor Relations website. Also, it's worth mentioning that in compliance with the guidelines from the Ministry of Health, the company suspended all participation in corporate meetings and events and canceled all international and domestic traveling. At corporate headquarters, we are all working from home via telephone, video conferencing, or apps. Our IR team is available by phone, email, or online through our website. So to schedule a video or phone calls, you can get in touch with them. Thank you all very much.