Good afternoon, and welcome to the earnings conference call for the first quarter of 2022 of Unipar. Today are present with us Maurício Russomanno, Chief Executive Officer, Christian Schlosser, CFO and Investor Relations Officer, and the IR team. This event is being recorded and all participants will be only listening to the conference call during the presentation. After that, we'll start the Q&A session. The selection of slides will be controlled by you. The audio of this event will be available on the company's website after its conclusion. Participants will be able to register via webcast questions for Unipar, which will be answered during the Q&A session or after the conference ends by the IR team.
Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the business prospects of Unipar, projections, operating and financial goals are based on the beliefs and assumptions of the company's management, as well as on information currently available to Unipar. Forward-looking statements are not a guarantee of performance and involve risks, uncertainties and assumptions as they refer to future events, and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions, and other operating factors may affect the company's future results and lead to results that differ materially from those expressed in such forward-looking statements. I would like to give the floor over to Mr. Maurício Russomanno, who will start the presentation.
Thank you, Raquel.
Good afternoon, everyone, and welcome to the earnings conference call for the first quarter of 2022 of Unipar. Our financial and operating results in this period were very positive. Before going to the details of each index, I would present the global sectoral context that directly impacts the commercial variables of demand and price in the markets, which were very relevant in the first quarter of 2022. On slide two, the chemical segment, what we saw was a restricted supply of products in international markets. This was due to the closure of factories in the United States, operational problems in units of other companies and regions, increase in cases of COVID in Asia, and geopolitical conflicts. This scenario had a positive impact on international prices of caustic soda. It is also worth noting that demand remains high both in South America and globally for this product.
For this reason, we strongly focus on our operational excellence program, which aims to ensure the availability of products to meet the needs in the region and export to others. We had to face high prices of inputs, energy and services due to local and global inflation, which impacted the costs of production, distribution and services rendered in the quarter. Looking at the PVC segment, there was a recomposition of global inventories due to the return of production of plants that were undergoing maintenance, in addition to the reduction in the demand in civil construction in the Northern Hemisphere due to the winter. This led to a drop in the average PVC price internationally at the beginning of the year.
In the same period, we observed a deceleration of sales of construction materials in Brazil, a situation that's not repeated in Argentina, which recorded a high demand, mainly driven by public works. The imbalance of global logistics chains has posed the challenge of PVC exports from plants in the region to the global market. On slide three, analyzing the scenario for 2022, the expectation is that global uncertainties will persist throughout the year and will face challenges in the segments and markets in which we operate. We can say that they will continue with events that are difficult to predict, both in terms of duration and consequences, talking about war and COVID. 2022 is expected to remain a year of uncertainty regarding global growth, inflation, interest rates, and logistics chains.
We need to be aware of the demand in civil construction in Brazil and the continuity of public works in Argentina, in addition to advancing in the implementation of the sanitation framework by executing the auctions already contracted and holding new ones. Looking inside Unipar, we emphasize that the consistency in the implementation of our strategy allows us to continue advancing in the quality of our operations and commercial policy to take advantage of the favorable market scenario. The support is given by our strategic pillars. We continue to invest in the future, which is growth, sustainability, and team. Going to slide number five and details of the positive result, we reached historical levels in the use of our installed capacity. I emphasize the success of the operational excellence actions carried out in the three plants. In Bahía Blanca, we reached 82% of installed capacity utilization.
Santo André, 89%, and in Cubatão, again, 92%. The average utilization of the installed production capacity of the three plants was 88% in the first quarter of 2022. Given this favorable market scenario and operational progress, I would like to add that we have been focusing on improving actions in the commercial areas. We want to be the first choice of our customers, and for that, we have invested in an internal transformation. On slide seven, Unipar's commercial area has been challenged to boost sales with new models and take care of our current customers. This transformation has taken place in recent years and continues in 2022. 2020 was the year to ensure supply in the face of the pandemic.
We also increased direct communication and got closer to customers and started to restructure the portfolios by segment and also to reorganize the teams and structures. In addition, we started to look for new markets and products. In 2021, our focus was on innovation and the development of new applications and products. We expanded the team and created areas of innovation in both commercial lines. We started a new model of care and services. In chemicals, for example, we provide maintenance to our customers and asset recovery in addition to products. We created the Unipar Academy. This year, our focus would be on maintaining the chain and the spheres of customers. In addition, we want to continue our expansion in markets served both in South America and worldwide, as described previously.
On slide eight, shows that there has been a historical sales record for all products, and in a consistent and structuring way, the expansion of both chemical and PVC markets with increased customer confirmation. In addition to the strong operational commercial improvements, we continue to look inward and strengthen our culture to be prepared for opportunities and any adversities that may happen. In this quarter, we held a culture week, which was a milestone in our cultural transformation. Slide number 10. It was a four-day event with face-to-face and online activities and 100% engagement of employees. We disseminate our actions that guide a future with sustainable growth and promote technical content that helps in the training of people. We recognize the team, and this material was made available on a hot site for everyone to access.
We worked on our values as behaviors we want at Unipar, and sustainability was included as a new value. We also reinforced initiatives that highlight the sense of identity, responsibility, and the pride of belonging with conversation circles, playful and face-to-face activities. Our culture is centered on people who play a leading role, who develop and work in a high-performance environment, always promoting inclusion, respect, and recognition and trust. Slide 11. We also look outside Unipar. In line with our vision of sustainability, we have advanced in several actions, and I would like to shed some light on the themes of private social investment and social human development in this first quarter. We prioritize actions and projects with social impact in the community neighboring our factories.
We announced BRL 11 million for social projects to be carried out in the next 24 months, and we have already started to take this mobilization off paper this quarter to impact 850,000 people in the period. We invested in the following projects, Pescar, fishing, which seeks the empowerment and social inclusion of needy youth. Sabores Sustentáveis da Serra, Sustainable Mountain Flavors, which seeks to encourage income generation, environmental conservation with local producers. In Fazer Valer, something like Make It Happen, which encourages the socialization of young people through sports. At Me Empodera, Empowers Menstruations, with actions to combat menstrual poverty. At the Fraterno Home, Lar Fraterno, which welcomes and offers multidisciplinary care for the elderly with physiotherapy, occupational therapy, psychology, nutrition, infirmary, and doctors. We made progress in larger projects, but always with local developments.
We bet on the biannual art exhibit and its traveling exhibition that travels through the interior of São Paulo, amplifying art access. At SP-Arte, a festival that promotes the market of arts and welcome visits from professors and members of CCCs from our surroundings, which also promote art workshops in the communities of Santo André and Cubatão. Unipar also developed voluntary work for cleaning communities and training needy young people, as well as recycling activities. All these actions that I presented are part of Unipar's transformational movement to continue its trajectory of sustainable growth that generates value for all stakeholders with a vision of perpetuity. This quarter's results confirm that we have been moving in this right direction. I now give the floor to Christian, who will present the financial details of the quarter. Thank you. Good afternoon, everyone. I hope you are well.
In slide 15, I will talk more about the results for the first quarter of 2022, comparing them to the first and fourth quarters of 2021 and showing that results evolve firmly in the direction of sustainable growth. Consolidated net revenue in the first Q 2022 was BRL 1.9 billion, up 44% compared to 1Q 2021 due to higher international prices and sales volume. When compared to the fourth quarter 2021, we had a drop of 6% in revenue influenced by international prices that had reductions, as mentioned by Maurício. In the same slide, in the chart below, we see that the consolidated variable cost has remained around 80% of our total cost of goods sold, which recorded BRL 948 million in first Q 2022.
Despite the price pressure, we kept COGS under control. Regarding EBITDA and net income, it's important to emphasize that we had positive non-recurring effects in the previous quarter. When we consider the non-recurring effects, there was a decrease of 21%. Excluding these non-recurring effects corresponding to the price increase, there was a positive EBITDA of BRL 451 million. The net income also had a consistent growth of 60% when compared to the first quarter. It was 17% not considering non-recurring events. On the following slide, we show that the net debt continues negative, showing the recurring cash generation of the company had a positive variation of BRL 243 million when compared to December 2021. We ended the quarter with BRL 1.6 million invested in indexed instruments in Brazil.
I take this opportunity to comment on the share bonus that was passed in the special meeting, increasing the share capital of the company to BRL 928 million. I would like to congratulate our employees for the results of the quarter.
Let's open for the Q&A session. In the event it's not possible to answer the webcast questions, we'll get in touch with you to answer them later. Please hold while we collect the questions. The first question is from Daniel Francisco Bernardes.
Good afternoon. Within the macroeconomic scenario, is there a chance to decrease leverage? How does the company intend to operate in a complicated scenario such as inflation and elections and war?
I'll answer your questions. Thank you, Daniel, for your questions. The macroeconomic scenario is very challenging.
We have generated cash consistently, and the decrease in leverage will come and has. We're trying to remunerate stakeholders, and we paid BRL 1.5 billion in dividends in 2021. We had a share repurchase issue, and we have other vehicles to seek balance of capital. How does the company intend to operate in this complex scenario of elections, war, et cetera? As we mentioned, we make several studies to consider the feasibility of our actions. Of course, we have credit facilities that are pre-approved, and we always try to keep leverage low even after an acquisition, because if you have a downward cycle or any specific problem, we're not so affected. What are the prospects for Alban and Tucano? Well, the access to the input is something very important for us, which accounts for 80% of our variable cost.
The second point is having cleaner energy in Brazil, and that Tucano makes sense to our sustainability strategy. Alban, in the case where the gas is the energy matrix. It's a mix between having access to energy and being able to absorb benefits from high production and also owning assets in a positive scenario following the company's strategic direction.
We have another question from Johnny, shareholder.
Congratulations on solid results. About growth avenues, what makes more sense to Unipar today, growing through M&A or organically? Growing your current plants or building new plants?
Thank you for your question. Actually, we are studying these different paths or avenues, as you call them. There are some industry avenues, such as, for example, sanitation. Given the new legal framework for sanitation, this is one of the avenues to be considered. We already are in that.
Therefore, we are observing and keeping track where the auctions are and where are the greatest needs for inputs to build capacity. Or maybe allocate new plants or new assets closer to those locations where demand is. An example of that was the expansion approved in November last year of our capacity, of the total capacity of Santo André in 15%. We'll have a hydrochloric acid to make, for the treatment of water. We're also looking at other countries, for example, Argentina. On Argentina, there is an alkali project we're keeping track of. In terms of acquisitions, it will depend. We're looking at acquisitions that would complement our core business, that could also be located in different geographies.
Basically, there are some growth avenues that, as Christian mentioned in a previous answer, that we are assessing and waiting for the right time to make decision, approval, and implementation.
The next question, Lucy.
"Congratulations for the great management of the company and for the good results. Do you expect any shutdown for maintenance in the next three years? The new plant in the north, northeast will be built when?"
Hello, Lucy. Let's address the first part of your question. Our maintenance shutdowns. We do have recurring shutdowns, or they're mostly scheduled for preventive maintenance. We either do maintenance in our equipment to keep them new or to prevent some problems. For example, any ruptures due to fatigue or any other problems. Most of the shutdowns are with that in mind, preventive maintenance.
We also have tools that help us to assess the assets and decide on the best moment for maintenance shutdowns. As for the second part of your question, the new plant in the north, northeast will be built. We are now in the study phase. As soon as the variables and the business case make sense, everything is completed, we'll take it to our board of directors for approval, and if approved, then we'll announce it.
The next question is from Marconi.
"Good afternoon. Congratulations on these good results in another quarter. Could the company make another launch of shares given the three-digit results?"
I think this topic has been mentioned. In other calls, we have studies made, but so far we do not have any direction in to that topic.
Question from Jose.
"Good afternoon. Any intention or study to invest or produce ammonia?
Jose, I think this question is asked because of green hydrogen that's so we talk about in future, right? We are a company specialized in electrolysis. We already produce hydrogen, which is gray hydrogen, and that is produced when we process salt and water with electricity, and that hydrogen is reused. Now, looking towards the future, let's say 10 years from now, the green hydrogen is an area we are looking at because we do have the technology and the chemicals involved. But that is a medium to long-term project. We are studying how we could enter that, what would make sense, what are the markets of the future, but it's still too early.
For example, in Europe and Germany, that is the country where green hydrogen is being mentioned more often and a possible change of energy matrix in the future. There are many ways to be built. You need to build the pathways for transportation, the ports to receive it, and change the entire infrastructure of users of green hydrogen that could be delivered by ammonia or else, or in another form. We have to look into this in the medium and long term.
Two questions from Hélio Muno.
"Congratulations on the results. We noticed a significant price increase in the soda for the third quarter 2022 by Bloomberg. What about price transfer? Is there a delay?"
Let me answer the first one, and Christian will answer the second question. Well, this price transfer works the way you said.
There is a delay of one month plus one. This is how it works based on the agreements we have signed, but it's also the market standard.
As for the second part of your question. Well, the question is: Do you expect to make roadshows with investors? I'll answer that. We have carried out individual meetings. We've taken part in some events and specific roadshows when there is a mission or some involvement in the capital markets. For this year, there is a project to launch our sustainability vision for the second half of the year, and we'll certainly present that to investors and be close to them to talk about our plan.
Okay, thank you, Christian.
Next question, Flavio Cavalcanti Uemura.
"Then congratulations on the results. What's the main segment that buys products from Unipar, and what is the proportion of sales between domestic and international market?
Our main products at the company are chlorine, which is with direct application, and then chlorine is transformed and become hypochlorite or hydrochloric acid. For the chlorine segment, the segment that buys it the most is sanitation, either directly or hypochlorite or hydrochloric acid that is then transformed. These three products are used in sanitation. Hypochlorite, there's another area that it goes to, which is hygiene and cleaning because it's the basis of sanitary water and bleach. Most of the other item goes to construction, either for residential work for pipes and connections or infrastructure works that are higher diameter tubes. It goes to infrastructure and agricultural connections.
The third important area of the company, which is caustic soda, is much more spread out because it has applications in agriculture and plants, mining to help separate minerals. It also goes for cleaning and personal care products to manufacture soaps and shampoo. Differently from PVC and chlorine, caustic soda is more diversified. About the domestic market and the international market proportion of sales. Well, during the pandemic in the last two years, our product almost all stayed in the domestic market due to the high demand. In this first quarter, we started exporting more than we used to in the pandemic. We went back to historical levels of exports.
We have one more question from Frederico Fernandes from Argus Media.
"We've heard about an acquisition of Braskem by Unipar. Is that true? If so, what would be the synergies?
Good afternoon, Frederico. Thank you for your question. We do not comment on rumors, and we don't have much to say on this topic.
Since there are no further questions, this ends the Q&A session. One more question from Edson Sato.
Any ide a for how long the Sanitation Law will have effect?
Oh, Edson, thank you. Your question popped up in the very end. Yeah, well, the outlook is the following. There is a process for companies to be able to be part of the auctions. They have to win, make the winning bid, obtain the licenses, the permits, then acquire the equipment, build the infrastructure. So our products start to be purchased in a more advanced stage once the infrastructure has been created or after the chemical treatment and onward.
There is a delay from three to five years, depending on the size of the project. Although there are some short-term effects that are the companies that already operate with sanitation currently that are increasing their services network by implementing wastewater and drinking water structures.
The last question from Jose:
"Does the company see any good opportunities for growth in the agriculture irrigation market?
" Thank you for your question, Jose. Good afternoon. As I mentioned, our PVC basically goes to make pipes, and these pipes could have all sizes and diameter. The irrigation market has grown a lot along with the agricultural market.
With all the challenges we had in terms of rainfall lately. We have observed continuous investments in technology or in irrigation in crops in Brazil to prevent dependence on rainfall that's not been stable as it used to be in the past and as well as water scarcity.
Okay, just a second while we hold to check for more questions, please. Okay, so now we're ending the Q&A session. Maurício, please take the floor for your final remarks.
Thank you all very much for attending this call. Should you need any further clarification, please contact our investor relations team, Christian or myself. Before we finish, I would like to comment once more on the very positive, important results achieved by Unipar in this first quarter.
Despite the adversities, the increase in prices of inputs, the demand of PVC, the drop of international prices, the way the company operated in this quarter more than offset all losses and reduction that happened in the market in general. This is very important for the sustainability and continuity of the company, especially in a year of uncertainty as we have ahead of us with the several topics taking place worldwide. We'll continue to work with operational excellence, improving our competitiveness, productivity, and maintaining commercial allocation in international markets, South American markets, to continue to generate important results. I would like to take this opportunity to give my special thanks to our associates that build the everyday work at Unipar and who made this happen, such important results.
This team is what causes us to continue to advance in our upward trend of growth with a lot of responsibility and security. I thank you also, our business partners who have supported us in our journey. I would like to thank our board of directors, as well as the chairman of the company for his trust. We want to maintain.