Earnings Call: Q4 2021

May 6, 2021

Welcome to the Management's Comments on the results of the fourth quarter and year of 2020 of CAMUAlimentos. CAMU came to the end of 2020 reinstating once more its solid growth and the resilience of its business models even despite the very challenging scenario posed by the COVID-nineteen pandemic. We grew in the midst of so many challenges through actions focused on agility, safety and supply with a coordinated operation in the value ensure that there wouldn't be scarcity of food on the table of the population in the countries where we operate. Our sixty years of history allow us to be more experienced and together with our capacity to adapt, we can focus on being quick to adjust our liquidity, production and logistics and supply functions. This year, we were faced with a scenario of high cost of inputs and raw materials in our categories combined with the high demand in the sector in the early days of the pandemic when people rushed to the supermarkets followed by the normalization of inventories in the second half of the year. This volatility and additional charges related to volumes and supplies were part of our operations. We pursued an agile and coordinated strategy, adapting our business to this new reality and positioning ourselves early on with a focus on our value chain. This pricing scenario, combined with the results from the international operations, allowed us to reach a new level as a company, posting gross revenue of BRL8.5 billion in the year, up 36% year on year. In regards to ESG, we continue to strengthen our commitment to align our sustainable agenda for the years to come. In 2020, we introduced new management committees, including ESG and ethics, making our sustainable governance structure even more robust. We believe that given the magnitude of ESG discussions in the market, the materiality assessment strategy is the most assertive way to focus on topics that make an actual difference in our business and our surroundings. Through this strategy, we defined eight material topics in 2020 divided into working groups that act to implement actions related to the environment, social responsibility and corporate governance in all the countries where we operate. For 2021, we included ESG goals in the variable compensation of the management and reinforced our sustainable corporate strategic planning for the next five years, thus building an even more solid base for our sustainable development. With this backdrop, it's worth mentioning that there is something that is non negotiable for Camille and that is the safety of people. We reinforced the protocols for hygiene and sanitary barriers in the operating units. We carried out speeches and encouraged social distancing of people in the risk groups and followed all that all the guidelines of the Ministry of Health. As a food company, we also increased our contribution to fight the impacts of the pandemic in the communities where we operate by donating equipment and materials to the health agencies in the municipalities where we have production facilities. We also intensified our social investments and distributed more than 300 tons of food to the most vulnerable communities. Moving to the results and highlights of the period. The raw material price increase and the foreign exchange effect in the period led to the dilution of costs and expenses and the return to our normal annual historical profitability levels of BRL8.5 million a year. In volume terms, the quarter posted a decline in grain sales volumes of 3%, sugar minus 11%, fish 28% and international 34%. We experienced a normalization of inventories in the second half of the year after the spike in demand caused by the rush to supermarkets in the early days of the pandemic. In 2020, sales of rice increased 1%, beans 2%, sugar 8% and international 7%. Net revenue was BRL1.8 billion in the quarter, up 23% and BRL7.5 billion in the year growing 38%. Gross profit was BRL344 million, up 2% with a margin of 18% in the quarter. In the year, gross profit was BRL1.7 billion, up 33% with a margin of 22%. EBITDA was BRL146 million, growing 7% with a margin of 8% in the quarter. In the year, EBITDA was BRL787 million, up 78% with a margin of 10.5%. And finally, net income of BRL85 million in the quarter, up 2% with a margin of 5%. In the year, net income reached million, growing 93% with a margin of 6%. Now starting the analysis with our operating results. The rice category posted volume of 162,000 tons, down by 5% in the quarter and 750,000 tons in the year, up by 1% year on year. Both periods posted lower sales of the leading brands and growth of the lower pricing brands with irregularization of inventories of customers and retailers in the second half of the year. The average raw material price was 92 brls per bag in the quarter, up eighty six percent and eighty brls per bag in the year, up 77%. Camille's gross price was up 64% in the quarter and 46% in the year. It's worth mentioning that for the year beginning in March 2021, rice quotes in the market started high, but remained stable around to BRL90 per bag, which is different than the price volatility experienced in 2020. In the beans category, volume reached 23,000 tons, growing 14% in the quarter and 94,000 tons in the year, growing 2% year on year. Despite the high volatility of prices in the category, the company was able to grow volume boosted by increased sales of lower pricing brands. The average raw material market price was BRL273 per bag in the quarter, up 3534% and BRL254 per bag in the year, up 32%. Camille's gross price increased 30% in the quarter and 37% in the year following the flow of the market. In the sugar category, volume totaled 115,000 tons down by 11% in the quarter and 556,000 tons in the year up 8%. Both periods experienced a sales reduction from the leading brands and growth from the lower pricing brands with the regularization of inventories from customers and retailers in the second half of the year. In the quarter, the decline was characterized by the increase in the cost of raw material in the period coupled with a more competitive landscape that led to difficulties to transfer the full increase of prices in the category. The average raw material market price was 108 barrels per bag in the quarter, growing forty five percent and ninety barrels per bag in the year, up 34%. Cameo's gross price increased 17% in the quarter and 12% in the year. In the fish category, volume reached 11,000 tons, down by 28% in the quarter and 37,000 tons in the year, down 5%. This result reflects the increase in the acquisition cost of raw material and difficulties with origination of sardines in the period attributed to import difficulties in the exporting markets due to the effects of the COVID-nineteen pandemic. Cameo's gross price was up 20% in the quarter and 12% in the year. In the International segment, sales volume was 134,000 tons in the quarter, down 34% driven by lower sales in Uruguay with exports concentrated in the 2020 and lower sales in Chile and Peru. Chile countries affected by the challenging moment brought about by COVID-nineteen with the shutdown of the main consumer centers in Peru and price freezes by the main retailers in Chile. International volume in the year was 670,000 tons, growing 7% with increased sales in Uruguay and Peru. We posted a significant growth in the year and we continue to operate, reinstating our commitment to safety and to service our customers to make sure that there is no scarcity of food in the communities and regions where we operate. We continue to adopt all the proper measures to prevent the spread of COVID-nineteen and to ensure the continuity and growth of our business. It's clear to us that collaboration and resilience should increasingly be some of the points to be worked further by the company in challenging scenarios. To conclude, in view of this scenario, we cannot but offer our heartfelt thanks to our customers and consumers for their preference, our employees, shareholders and members of the Board and committees for their support and trust and to our suppliers and other stakeholders for another year of intense collaboration and partnership. With safety, social responsibility and agility, we grow increasingly confident that the company is in the right track to anticipate trends and strengthen its position in the food sector in South America. Now to elaborate on the financial performance of the quarter, I'll give the floor to Flavio. You may proceed, Flavio. Thank you, Luciano. Welcome to the comments on the results of the fourth quarter and year of 2020 of CAMIO Elementos. Initiating the analysis with the financial performance, gross revenue was BRL 2,000,000,000 in the quarter, up 22% and BRL8.5 billion in the year, up 36%. We reached a new level due to a combined effect that included higher prices, foreign exchange and volumes in the period. Net revenue was BRL1.8 billion in the quarter, growing 23% and BRL7.5 billion in the year, up 38% boosted by higher revenues in Brazil and international. Cost of sales and services in the quarter reached BRL1.5 billion, up 29% and BRL5.8 billion in the year, up 40% attributed to the higher cost of raw material and FX effect. Gross profit was BRL344 million, an increase of 2% with a margin of 18% in the quarter. In the year, gross profit was BRL1.7 billion, up 33% with a margin of 22. SG and A in the quarter was BRL249 million, up 2% and equivalent to 13.6% of net revenue in the period, representing a reduction of 2.8 percentage points in the share of net revenue year on year. This effect reflects dilution of costs and expenses and also initiatives to reduce SG and A implemented by the company in the last few years. The nominal increase in the quarter was mainly attributed to the 19% increase in SG and A international due to higher SG and A expenses in Uruguay, Chile and Peru, mainly as a result of the foreign exchange impact in the period. This result was partially compensated by a 5% decrease in SG and A Brazil as a result of lower sales expenses in the period due to lower sales volume in the quarter, partially compensated by the increase in general and admin expenses in Brazil. SG and A in the year was BRL1 billion, up 11% and the equivalent to 14.2% of the net revenue in the period, posting a reduction of 3.5 percentage points in the share of net revenue when compared to the previous year. The same effect reflects the dilution of costs and expenses in the period and initiatives to reduce SG and A implemented in the last few years. The nominal increase in the year was mainly attributed to the 37% increase in SG and A international resulting from the FX impact in the period. This increase was also driven by an increase of 0.5% in SG and A in Brazil, stemming from higher general and admin expenses with sales in the period. Other operating revenues totaled R9.4 million positive in the quarter and BRL 24,600,000.0 in the year stemming from non recurring effects. Taking all of these factors into consideration, EBITDA was BRL 146,000,000, growing 7% with a margin of 8% in the quarter. In the year, EBITDA was BRL787 million, up 78% and a margin of 10.5%. In regards to the financial result, we had expenses of $24,000,000 in the quarter and 79% up seventy nine percent and $85,000,000 in the year growing 37% mainly due to interest on financing transactions and the recognition of other financial expenses in the period. Income tax and social contribution was BRL5 million positive in the quarter and expenses of BRL75 million in the year with a tax rate of 14% of the result before taxes, mainly due to the exclusion of subsidies on investments related to ICMS credits and payment of interest on equity in the periods. Therefore, net income reached BRL85 million in the quarter, up 2% and a margin of 5%. In the year, net income was BRL463 million, growing 93 with a margin of 6%. The company's total debt position was BRL2.2 billion, an increase of 37% year on year due to the new funding and FX depreciation of the International segment. As part of the work we are doing to meet the commitments of the company that mature this new year, refinance the short term portion raised in early twenty twenty and cash rearrangement, we announced the conclusion of the ninth issue of the ventures in the amount of BRL350 million in the 2020 and as a follow-up event the approval of the tenth issue of the debentures amounting to BRL600 million. Net debt totaled BRL1.1 billion and net debt over EBITDA last twelve months was 1.4 times, down by one time year on year. CapEx was BRL79 million in the period, up 151% and BRL197 million in 2020, growing 45% vis a vis 2019. We continue to pursue our growth strategy through acquisitions and invested in two industrial plants, one in Rio Grande do Sul to receive in dry rice plus the acquisition of a plant in the state of Pernambuco, where the company already operates. Furthermore, we are investing in a new grains processing plant in Ozasco in the Greater Sao Paulo region. The acquisitions refer to strategic operations to strengthen the company's commitment to guarantee supply to grow and be more efficient. In addition to these investments, we revisited the projects that were scheduled for the first half, but had to be postponed because of the pandemic, including works to expand our storage production capacity conducted in the second half of the year. Working capital was higher year on year with increased inventories due to the company's initiatives to guarantee inputs during the COVID-nineteen pandemic and there was an increase in prepayments to suppliers. Both cases were impacted by the higher cost of raw materials and FX depreciation in the international segment. Accounts receivable also posted growth in the period with higher sales and there was also an increase in the suppliers line due to the higher cost of raw material. To conclude, I would like to reinforce a point mentioned by Luciano about the continuous adaptations and initiatives of the company in view of the COVID-nineteen pandemic. Since the beginning of the pandemic, we've been working on preventive mode to ensure the continuity of the business during this period, protecting our people, the operations and the liquidity of the business. Luciano, the IR team and I will be available to answer your questions about the results for the period on May 7 at 11AM Brazil time. The link for the webcast and connection information will be available on the Investor Relations website. Thank you very much.