Good afternoon, ladies and gentlemen. Welcome to Portobello Group video conference to discuss the results for the fourth quarter of 2024. This video conference is being recorded, and the replay can be accessed on the company's website at ri.portobello.com.br. The presentation is also available for download. To hear the audio in English, please click on Interpretation and select English. Please note that all participants will only be watching the video conference during the presentation, after which we will begin the question-and-answer session when further instructions will be provided. The presentation will be held in Portuguese with simultaneous translation into English. Before proceeding, I would like to emphasize that the forward-looking statements are based on the beliefs and assumptions of Portobello Group's management and the current information available to the company.
These statements may involve risks and uncertainties since they relate to future events and therefore depend on circumstances that may or may not occur. Investors, analysts, and journalists should take into account that events related to the macroeconomic environment, the segment, and other factors could cause results to differ materially from those expressed in the respective forward-looking statements. Here with us, we have Mr. John Suzuki, CEO, and Mrs. Rosângela Sutil, Vice President of Finance and Investor Relations. I would now turn the floor to Mr. John Suzuki, who will begin the presentation. Please, Mr. Suzuki, go ahead.
Good afternoon, everyone. You're all welcome to our presentation of the results for the fourth quarter of 2024. We will start with a market contextualization by Rosângela, and then we will approach Portobello Group's operational performance, and then we will talk about the different units who had consistent growth. Immediately after, I will come back to talk a little bit about the strategic projects and our outlook for 2025. We will end with a Q&A session. Rosângela, I turn over to you.
Good afternoon, everyone. It is a pleasure to present to you the results for the fourth quarter and close of 2024 to you. To start, we're going to evaluate the performance of the Brazilian market. According to publications, we had an increase of 0.6% when compared to the fourth quarter of the previous year. In 2024, when compared to 2023, we had a growth, and we can also see that Portobello Group had a growth above the market as we had throughout 2024. The company reached 12.4% of growth when compared to the fourth quarter of 2023. In the accumulated results for the year, we grew 17.6% when compared to 2023. This performance, with a more challenging market, represented a gain in market share for all businesses of the company. In the U.S., this market faced significant challenges.
In the first quarter of 2024, we had results disseminated by TCNA, and we can see an increase of 10% when compared to the same quarter the previous year, and a decrease of 2% in the accumulated results for 2024 when compared to 2023. The civil construction sector in the United States remains below its historic average, but we can see signs of resumption, especially with the recovery of housing starts in December 2024. Despite this adverse scenario, Portobello America had significant growth of 57.2% in the fourth quarter when compared to the fourth quarter of 2023. The unit with a national production on tiles in the United States consolidates its presence in this strategic market for Portobello Group.
Now, moving on to the operational and financial performance, we had an increase of 13.6% in net revenues when compared to the same period of 2023, totaling BRL 662 million in the quarter and BRL 2.4 billion in the accrued results for the year, with an advance of 9.9% when compared to 2023. All of the business units recorded growth in the quarter. Portobello America grew 48.3% in the fourth quarter of 2024 and 30.8% in 2024. Pointer advanced 29.9% in the fourth quarter of 2024 and 28.8% in 2024. Portobello Shop, our specialized area, had a growth of 13.8% in the fourth quarter of 2024, reaching 8.6% of growth in the year. Portobello, our productive unit, with some sales channels such as resales, engineering, and export channels, grew 3.8% in the fourth quarter of 2024, reaching 4.8% of growth in the year of 2024.
In terms of geography, the participation of the revenues went up to 22.3% in the accumulated results for the year, reinforcing our strategy to internationalize. In the fourth quarter of 2024, the company had operational optimization aiming at the efficiency of our businesses, guaranteeing a more solid base for growth. We had non-recurring impact on the following areas for the fourth quarter of 2024: gross revenue, BRL 28.2 million, resulting from the inventory adjustments generated by production costs in the ramp-up of the Portobello America unit; operational expenses with an impact of BRL 16.9 million, resulting especially from more efficiency in the group resulting from layoffs; and then we had a total impact of BRL 45 million. With the optimization, the company remains strong to capture efficiency and guarantee its position in the market, advancing with its long-term strategy. Now, we have the effects of the optimization.
The gross margin had 36.3% in the year. We reached BRL 894 million and a growth of 45% when compared to 2023. The operations in Brazil sustained the consolidated gross margin, reinforcing the resiliency of the business. Proforma expenses totaled BRL 195 million in 2024, totaling 31% of the net revenue. In the consolidated results for the year, we had BRL 700 million left, indicating our continued focus on operational efficiency. The Proforma EBITDA had a margin of 13.1%, a growth of 26.2% when compared to the fourth quarter of 2023. In the year, the Proforma EBITDA reached BRL 358.6 million and a margin of 14.9%. We closed the fourth quarter with a Proforma net debt impacted by exchange rates of BRL 639 million, with continued reduction of the cash conversion cycle via optimization of stocks, negotiations, and deadlines, strengthening of operational liquidity.
Also, in terms of our free cash flow, we had an increase of BRL 109.5 million, and this reinforces the operational reinforcement, and the investments totaled BRL 184 million, a decrease when compared to 2023. I would like to remind you that in 2022 and 2023, the company carried out significant investments according to its strategy to expand with Portobello America, whereas in 2024, the priority was only on maintenance investments and technological investments, which are essential for the continuity of our business model. Therefore, we closed 2024 with a net debt of approximately BRL 1 billion and a proforma leverage of 2.8x the net EBITDA, therefore maintaining our commitment with deleveraging. I now turn over to John, who will talk about our strategic projects.
Thank you very much, Rosângela.
As Rosângela mentioned, in 2024, we grew in all business segments, which was above the market, both in Brazil and the U.S. The year was challenging, but with a lot of resilience, capacity to adapt, and focus on our priorities, we were able to have a good performance and advance with our strategy. Now talking about the operations in the U.S., which is one of our strategic pillars, which had important advancements in 2024, the unit is getting close to the main assumptions, including costs. At the end of the year, we reached the break-even EBITDA. Our net revenue in dollar had a growth of 57% when compared with the same period last year, with 35% from the distribution channel. Production of 3 million sq m in 2024, reaching 85% of the utilized capacity, with quality.
We had eight launches produced at the PBA factory and four launches from the new special pieces line. Now talking a little bit about our outlook for 2025, we have some main challenges. In Portobello America, the main challenge is no longer the stabilization of the plant and is sales, especially with improvements of mix and channel products gaining market share in the U.S. market. It will be a year where we expect to collect some results. Portobello Shop will continue expanding through company-owned store and franchises with the maturation of the B2B channel to strengthen growth. We still have potential to grow, be it with diversification of channels and products or because of the efficiency leveraged by digital improvements.
We also take into account the recent successes we've had in the Portobello unit, which started 2025 with strong challenges and the impact by the January rains in the State of Santa Catarina. We will continue growing in different channels. We will move on with internationalization, increasing our market share. This unit has demonstrated good resiliency and capacity to adapt despite having faced the most challenging scenario. Here we also have positive expectations regarding launches. In Pointer, we are consolidating a very important strategy shift. With the competitiveness of the unit, we will have strong sale volumes, greater penetration through the dry route. Rosângela, can I talk a little bit more about perspectives from a financial point of view?
From the economic financial point of view, our expectation is to continue delivering the business strategy, capturing growth in the investments that have already been made, acting with discipline and productiveness, reducing costs, aiming at improving our operational results and cash generation. The investments have adequate levels to maintain quality, delivering products, innovations, and technological updates. Regarding leverage, we continue committed with reprofiling of our debt. We will focus especially on cash generation, leverage by operational productivity, running capital efficiency, and making maintenance investments only. Thank you very much.
We will now start the Q&A session for investors and analysts. In case you wish to ask any questions, please press the raise hand button. If your answer is answered, you just turn the button off. You can also write your questions in the Q&A box. The first question is from Daniela Chaves.
Good afternoon, everyone.
What is the reason for the decrease in the American market?
I understand that the question refers to the market and investments in ceramic in the United States. In the case of ceramic in the United States, we have the effect that we see not only in the U.S., but here in Brazil and in other parts of the world with increased interest rates, which result from inflationary pressure. The U.S. market is really feeling this. The real estate market depends on funding, and also their real estate leasing with very long terms. Also, the interest rate curve has increased, which makes some pressure for the construction of new homes. This is the main effect we felt. We've seen this in all different channels, going all the way to the distributors. Also, in the release of results of some important players, we can see the same effect.
This results from interest rates. I would like to add by talking a little bit about the structure of the U.S. market, which includes 30% of local production, 70% by imports. Many of these oscillations in the last few quarters, we have not really seen it like that. These market oscillations are more due to imported products than to the local production. Right now, and also because of the change in government in the United States, we see a scenario of strengthening of local manufacturers. For those who, like us, import products, the fact that we are manufacturing in the U.S. places us at an advantageous position with a more positive perspective for the United States, despite the scenario demonstrated by all of the indicators.
The next question is also from Daniela Chaves, BTG Pactual.
Could you talk a little bit more about the adjustments of the fourth quarter and detail a little bit more of the lines which had an impact? Also, could you talk about other quarters which did not have adjustments since the ramp-up of the plant in the United States, or the ramp-up of the plant in the United States has been taking place since 2023?
We had stock and inventory adjustments throughout 2024, and we've been talking about this from the very beginning of the year because of the ramp-up of the plant in the United States. In the beginning, they went through a phase with higher production costs because of the reasons we described in the past and that are related to the fact that we reached the desired quality level. Throughout the year, we carried these results until we reached the expected costs.
At the end of 2024, we had a stock with higher mean costs. At the end of the year, we made the decision to provision for these results to guarantee that throughout 2025, we will capture more consistent results, which are clean and take into account the current production process, which is more mature in terms of qualification and quantification. This is one of the effects. Another effect in the expense line, especially expenses with personnel, is related to layoffs. We reevaluated our team, aiming at productivity and efficiency, and decided to have a one-time so that we could start the year with a more efficient OpEx so that we could have cash generation throughout 2025. There was a second question. Could you repeat it, please?
Danielle asked to comment why there was no adjustment in the other quarters since the ramp-up has been taking place since 2023.
I think I somehow already addressed this question. I will reinforce. Throughout the year and in the other quarters, we were trying to reach this quality level, leading to more adequate costs, and also with an update of our stocks. That is why at the end of the year, we understood that it was the best moment to make this adjustment so that we could start the year with a more robust gross margin generation for Portobello America.
The next question is from Tiago Nascimento. Good afternoon. I would like to know what EBITDA margin you expect for PBG and Pointer.
Tiago, we only open our results to the level of gross margin.
What happens is that below the gross margin, some expenses are direct and others are distributed, and therefore we prefer not to open it. I would like to complement it here. We avoid giving this kind of guidance. This is part of our policy, but I would like to reinforce an important aspect that we commented during the presentation when we talked about the break-even. This is something very important in our project. When we talk about break-even, we are talking about EBITDA, even though we do not disseminate the results. We are already operating with a positive EBITDA in Portobello America. We were talking here about a plant which has been running for a year and a half, Greenfield. It is only natural. We have this impact by the plant. It is a little bit slower than we would like it to be.
Of course, this is not the same level that we were expecting from the project. We have only surpassed this break-even aspect. Now we expect to reach even better results. I can also comment that, structurally speaking, the U.S. market operates with superior margins, be it gross margin or EBITDA margin, when we compare to Brazil. Therefore, the expectation is very positive in this regard. I would like to remind you that to ask questions, press raise hand or write in the Q&A session.
The next question is from Thaís Malerman, Itaú Asset. Good afternoon. I would like to know how much investment the company expects to make this year and in 2026, and how much of these CapEx would be for maintenance.
Once again, I will comment about it. We do not have any guidance data, but we can qualify it a little bit.
Thaís, thank you very much for your question. I would like to mention that leverage is very important to us. This is a very important guide, and we commented about this in the perspectives of our commitment to deleverage the company moving to a healthier level. Even so, this is a very important aspect for us throughout this year. This means that we will be more careful with our investments. We refrained from investing last year. When compared to the previous year, this is only natural because we were making investments. We will probably not have a very different CapEx than what we had last year. 2026 will result from this moment when we are deleveraging. Our strategy is still aimed at growth, especially in the United States, but also here in Brazil because of our businesses, our stores, and digital investments.
Our priority right now is to deleverage the company. In 2026, I can tell you that we will not have huge opportunities for investment, but the level will be a function of the deleveraging. I would like to add something here about CapEx, reminding you that the CapEx is financial, and to cash this investment, the reported CapEx and what we expect to have for this year and for next year, a large part of it is of about 20%, which is aimed at the production of Portobello America investments. The other difference is related to the evolution of the required maintenance.
The next question is from Andrea Prates. When John spoke about the challenges for 2025, can we expect any changes in the gross margin?
This is what we are aiming at.
There is one effect that we've already seen in our operations, and I commented about them. We will turn the page of the plant stabilization with the we are aiming at lower costs and costs that are close to what we had in our business plan, and we are reaching now. This alone will give us better gross margins. My other comment was that we have another challenge, which is a new page and improvement of the mix. We have a long way to go in terms of the mix, be it in the field tile, looking for projects with better finishing, better design. Also, we still have another very important part of the special business line, which has less production but high added value. We're talking about products which will have average costs that are two or threefold higher. That has a direct impact on the gross margin.
Throughout 2025, we will see an expansion of the gross margin and consequently in the EBITDA.
The next question is from Fabio Amy in Portobello America. We see the production capacity of 85%, and the operation reached a break-even. When should we see more positive margins? Only when the next expansion of the plant is concluded.
Fabio, I think that is connected to Andrea's question. We will explore it a little bit more. You mentioned the third line of tiles, which are part of our plan. We do not depend on that to improve our current margin, as I mentioned in the previous question. We still want to try to obtain a little bit more support. When we have a new oven, of course, we will dilute the fixed costs of the plant, and we will also have more flexibility in terms of portfolio.
We want to improve our mix even further. We would have a potential margin which is still higher, but in 2025, we do not depend on that. The second oven, we have anticipated it for 2026, but this is also because of what Thaís mentioned in terms of leverage of the group. We have a situation where we will be able to resume our investment.
N ext question from Tiago Nascimento. Do you have an expectation for the outcomes of the anti-dumping study of Indian ceramic in the United States? Do you have any expectations or conditions to start the third oven in PBG? I would also like to know how you expect to face the amortizations of BRL 400 million in the debt in 2025.
Tiago, I will answer the first part, and Rosângela will deal with the second part. I just commented about the oven.
We will have an additional oven in 2026, probably in the second half of the year. We are very confident with this deleveraging level. If you analyze our results, you will see that we close at 2024 with significant growth, in special growth from Portobello America and Pointer, which had significant achievements in 2024. This is also a contribution despite the size of the plant, which is very important. We will see an evolution of the business and the margin in 2025 because of that. I have a there was a first question about anti-dumping. Our association of the sector in the United States is very strong. Our investigation process is ongoing. It is very difficult to anticipate these results. This was accepted because there are reasons for it.
Maybe we will have some influence on the part of the new government with stronger uncertainties. We can see this trend. Technically speaking, it is difficult to say. This is very important, of course, for the imports in the U.S. It grew a lot in the first quarter. We can see a mild decrease in imports. We will continue observing to see where it will take us. Rosângela will now complement it.
In terms of the amortizations, Fabio, we have well-structured actions, liability management. In the market, we have some of these actions which address the year 2024, but we are also addressing some for 2026. We have the continuation with operational results, strengthening of our cash generation with our structures, be it with running capital and the need of CapEx investments.
I would like to remind you once again that to ask questions, please click on the raise hand button or write your question in the Q&A. Next question from Daniela Chaves from GTI . Have all of the adjustments come from PBA?
Hello, Danielle. All of the adjustments related to gross revenue, which are stock adjustments, but the part of expenses refers to the whole group in all of the different areas.
Next question from Renato Cobo. Good afternoon. The company has market share gains, which is very positive, but in general, the liability assets, is not it heavy and expensive for the company's assets? Thank you very much.
This market share gain has been very important for all of the businesses. The compatibility of our debt has two factors. One of them is the moment the company is going through.
We could not see this scenario, but we have made important investments. We are still not collecting all of the results. There is some imbalance because of this. We are at a more critical part when we have concluded all of the investments. Now we are beginning to see the break-even. These things do not come at the same speed. We did not expect this level of interest rates. We have these more expensive accounts which have had an impact on our results. Yes, we do have a challenge to improve the profile of this debt. This is one of the operations that Rosângela commented about. We want to improve our debt and cost. This is something ongoing. It is something that we have to attack.
The Q&A session is now over, and we would like to turn over to Mr.
I would like to thank you all and make some additional comments. I would like to reinforce the aspect of Portobello America, which is going through a very important moment because when we reach break-even, we can see a positive contribution to our result. This is very important that our plans, on one hand, we had negative results, and we'll now begin to have more positive contributions, be it for the EBITDA margin and profit. We reinforced this throughout the whole presentation, this capacity to adapt the company to go through these moments where we want to deleverage the company and make all of these captures throughout the year, looking for operational results, things that we did not have until then.
We will now see this as one of the company's main indicators so that we can really share this message and the priority we give to these topics. We have the integrated market with very important strategies which have generated value for the company. We've gone through this moment. We have a clear path to follow. I would like to thank you all for your attention. The conference is now over, and we thank you all for your participation. Have a good afternoon.